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article imageWealth gap: U.S. descending into feudalism warns plutocrat

By Robert Myles     Jun 28, 2014 in Politics
Seattle - An American plutocrat has warned that the United States will descend into feudalism and could face social upheaval as the gap between super-rich and the rest widens.
Nick Hanauer, one of Seattle’s super-rich, is an entrepreneur who remains a partner in Seattle-based venture capital operation Second Avenue Partners that he co-founded in 2000. He gave his warning that increasing wealth and income disparity in the United States is the stuff of which revolutions are made in an article published this month in Politico.
Nick Hanauer may not be one of those plutocrats who’s often mentioned in the same breath as the Koch Brothers, George Soros or Mark Zuckerberg but what he lacks in celebrity, his CV speaks for itself.
After gaining a degree in philosophy from the University of Washington, Hanauer got his start in business with the Hanauer family-owned Pacific Coast Feather Company, where he continues to serve as co-chair and CEO to this day. But his big break in business came when he spotted the potential of the Internet in the early 1990s, a time when connecting to the web was always heralded by a serious of screeches and squawks from a low-bandwidth modem.
But Hanauer foresaw an age when shopping online became the norm and invested in two start-ups. One failed. It sold high end luxury goods; a market online buyers weren’t ready for 20-odd years ago. But the other start-up that caught Hanauer’s eye sold a basic commodity.
Hanauer told a then unknown Jeff Bezos that he’d like to invest in Bezos’ small Internet enterprise that had started selling books online. That business minnow was Amazon. Hanauer was on the road to super-riches.
In his Politico article, Hanauer describes himself as “a proud and unapologetic capitalist,” one of the top 0.01 percenters that have come to own an ever-increasing slice of American wealth. He now owns multiple homes, a private jet, a yacht and a bank. Hanauer accepts he’s been rewarded “obscenely” for his success, enjoying a lifestyle undreamt of by 99.99 percent of Americans.
But Hanauer doesn’t regard himself as much different to anyone else, describing himself as neither the hardest of working nor a particularly exceptional student. What sets him apart, he says, is “a tolerance for risk and an intuition about what will happen in the future.”
That being so, Hanauer sees himself as reasonably well-qualified to issue a warning on where American society is headed: to the barricades, according to Hanauer or as he puts it “pitchforks”.
Making his case, Hanauer highlights the chasm that hasn’t just opened up between America’s super-wealthy and the rest but points to a gap in riches that is becoming more and more unbridgeable at an accelerating rate.
According to Hanauer, the dichotomy between America’s rich and poor went from the top 1 percent controlling about 8 percent of U.S. national income in 1980. Back then, the bottom 50 percent had call on about 18 percent of national income.
But today, the comparable figures are the top 1 percent hogging about 20 percent with the bottom 50 percent just managing to scrape together 12 percent.
Hanauer says the problem isn’t merely one of inequality, arguing that in any properly functioning capitalist society, some inequalities will always exist. The predicament America faces today, he says, is that inequality has reached such historically high levels that society is looking less like a capitalist society and more like a feudal one.
By inference, capitalism in America, as it’s practised today, isn’t working. To such an extent, Hanauer draws a comparison with the French Revolution of 1789. Hanauer’s contention is that the evisceration a middle class in modern day America will leave a society indistinguishable from a feudal one where the masses, revolutions by their nature being unpredictable, will at some point rise up.
It doesn’t take a huge leap of the imagination to gauge that, in that event, given the US’ love affair with guns, the only pitchforks are likely to of the metaphorical variety.
Hanauer concludes with a plea to his “fellow filthy rich” to get out of their “gated bubble worlds” and realise the present economics of the US are unsustainable. He calls for steps to be taken to fix what he terms “glaring inequities” in the economy.
Failing that, Hanauer foresees the proverbial pitchforks as being the inevitable result of gross inequality, drawing on the lessons of history. In the absence of change, neither of Hanauer’s suggested outcomes hold much appeal. History, he says, points to wild inequalities leading either to a police state or an uprising.
Such social upheaval won’t follow a predictable path, argues Hanauer. As he puts it, “What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time.”
But Hanauer sees a way to avoid all this. What he calls for is a Franklin D. Roosevelt-type solution of helping the 99 percent non-plutocrats. Such an approach would “pre-empt the revolutionaries and crazies, the ones with the pitchforks.”
Ironically, by improving the lot of America’s middle classes and giving them the wherewithal to live more prosperously, such prosperity won’t just save the skins of the plutocrats, it would also “most certainly” make the super-rich even richer.
This week’s Politico article isn’t the first time Hanauer has put forward such controversial arguments. In 2012, a talk in which he argued that that rich people like himself weren't job creators was reportedly censored. Hanauer had said that rather than rich people creating jobs, better employment numbers were the result of an “ecosystemic feedback loop animated by middle-class consumers”. When middle-class consumers thrived, so Hanauer’s argument ran, businesses grew and hired labor — and business owners profited.
His conclusion was that taxing the rich to pay for investments that benefit all was a good deal for both the middle class and the rich.
Hardly the stuff of revolution.
More about wealth gap, Politico, Nick Hanauer, US economy, Economics
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