Nick Hanauer is one of the richest men in America, and he’s written a compelling letter to all the other super rich people out there about the state of America’s income inequality, which was published in Politico. You might think he’s writing to all his rich friends to warn them about Democrats talking more and more about wealth redistribution, or about U.N. initiatives to prevent privatizing things like fresh water. You might think he’s one of the people behind calls to start making plans to go hide in New Zealand. This letter could read like that, if you don’t read the whole thing, but it turns out, he’s a rich person who gets it.
Rich people aren’t always the best, brightest, hardest workers
Hanauer starts off his “memo” talking about how he got super rich. Then he says:
But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code.
Right off the bat, he acknowledges that not all the super rich got that way through the sweat of their brow, or because they were unusually intelligent. Yet we hear all the time from Republicans that higher taxes on the rich punishes people for hard work – the backbone of American culture. They never talk about the real backbone of America, which is the middle class, and how they’re punished not just by policy, but also by the super rich.
What’s in store for the super rich, if things keep going the way they are?
Hanauer believes that what sets him apart from others is his ability to see the future. That enables him to know what risks to take, and when, and he profits off them. What does he see for the future of the super rich? He said:
I see pitchforks.
There are pitchforks, and possibly torches, because while he and his super rich friends are “thriving beyond the dreams of any plutocrats in history,” the other 99.99 percent of America is struggling. The French Revolution, the Russian Revolution, even Arab Spring, had their roots in extreme inequality of one type or another. Hanauer warns his friends:
I know you fellow .01%ers tend to dismiss this kind of argument; I’ve had many of you tell me to my face I’m completely bonkers. And yes, I know there are many of you who are convinced that because you saw a poor kid with an iPhone that one time, inequality is a fiction.
Here’s what I say to you: You’re living in a dream world. 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.
He goes on to say that “revolutions, like bankruptcies, come gradually, and then suddenly.” He’s right, too. One moment it’s a few disaffected people, with movements that seem to fizzle. That can go on for years, like what’s happened to the Occupy movement, and what people believe will happen to the movements wrought from Ferguson and Baltimore. But then the masses are increasingly disaffected, and increasingly angry about having no voice. When they figure out how to find that voice, they will take it, quickly, painfully, and violently if they have to. History has bore this out repeatedly.
What should we do? What should the rich do, besides run away?
In the face of this, what does Hanauer recommend we do? Is he really, quietly recommending that all the rich people get the hell out of Dodge so they don’t have to face the consequences? No, actually he’s not. He wants us to adjust our policies so they’re more favorable to everybody, not a select, rich few. He says:
The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren’t only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they’d be able to afford his Model Ts.
What a great idea. My suggestion to you is: Let’s do it all over again. We’ve got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too. [emphasis mine]
He also points out one salient fact that those who tout labor costs as a market price subject to the laws of supply and demand tend to ignore: Pay for CEOs, hedge fund managers and other investment banker-types, and people in those sectors has skyrocketed, and yet, we have more of them, not less. If rising wages and salaries mean less employment, then why do we have so many more of these people than we used to?
Guess the “fact” that rising wages means less employment only applies to the unwashed masses, and not the super rich in their ivory towers. The unwashed masses, he says, are the engine of the economy, not the super rich. Yet, the Republican-pushed trickle-down theory would have us believe that the rich getting richer is good, while the poor getting any richer at all will destroy us. It’s flat-out wrong, and Hanauer knows it. More of the super-rich need to know it, too, and stop lobbying Congress to shrink government by letting the “free market” work, and gutting the social safety net.
Republican cries for shrinking government would be part of a sound solution, if they were interested in shrinking it the right way.
How does the size of the government fit into Hanauer’s ideas? Do we need more, or less, or is the current size good? Republicans want to shrink the government, and he actually agrees. Before you burn him at the stake as a sham, though, consider this: He says you shrink the government the way you shrink an industry – by reducing demand for it. Why do we have so much government that the Republicans hate? Because we have so much need for it, but all that demand is not going to the right places. Therefore, calls to shrink it are not going to the right place, either. Hanauer says:
The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit. [emphasis mine]
He does blast Democrats for pushing the message that we need to treat workers better because we feel sorry for them. He’s right when he says that doesn’t help the conversation. What can help convince the plutocrats to give it a rest is looking at it from business and economic standpoints. The proper standpoints are correctly defining who creates the jobs, and who boosts the profit margins, around here. It’s not the rich. It’s the middle class.
Hanauer’s warning to other greedy billionaires:
Hanauer says, to his super rich friends: “Capitalism left unchecked tends toward concentration and collapse.” Unchecked, unfettered capitalism, this idea that the so-called “free market” can take care of everything if we’d just let it, is catapulting us toward ruin, not prosperity.
The super rich, and their Congressional Republican friends, would do well to learn this, and learn it soon. Or, as Hanauer puts it, “We could sit back, do nothing, enjoy our yachts. And wait for the pitchforks.” What he didn’t say is, “Your choice.”
You can watch his TED Talk here:
Featured image via YouTube screen capture