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1. The Invisible Leverage of the Top 1 Percent: Absentee Debtors and Their Hedge Funds

Author:
Stefano Sgambati
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The existing literature on finance, debt and inequality depicts economic elites as a creditor class. According to a popular thesis, over the past four decades, the rich and ultra-rich households in the top 1 percent have experienced a saving glut (excess income), which they have invested in the debts of the poor and their governments. While it is undeniable that the rich have expanded their income share at the expenses of the poor, to refer to them as ‘creditors’ or ‘lenders’ is a misrepresentation of how they actually expand their wealth and income shares by financial means. For it conceals the fact that a great deal of their investments is leveraged, that is, carried out with borrowed money. This article shows that the debts generated by individuals and households in the top 1 percent easily surpass those of all other households and even exceed those of the most indebted states in the world. However, these debts are hard to estimate, and indeed they are not accounted for in statistics on household debt. This is because households in the top 1 percent do not borrow from banks, like normal households do, but they are instead absentee debtors who borrow through the hedge funds, private equity firms, personal investment trusts, and big banks of which they are dominant shareholders and ultimate beneficiaries. To gain an insight into their invisible leverage, the article looks at how much hedge funds borrow, and why their leverage matters.
Topic:
Debt, Political Economy, Inequality, Finance, Elites, Hedge Funds, and Leverage
Political Geography:
Global Focus

2. Top Wealth and Its Historical Origins: An Analysis of Germany’s Largest Privately Held Fortunes in 2019

Author:
Daria Tisch and Emma Ischinsky
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
Rising wealth inequality is both a topic in recent policy discussion and in the social sciences. Despite the general interest in wealth concentration, we know only little about the largest privately held fortunes. To help fill this gap we analyze the historical origins of Germany’s 1,032 largest fortunes in 2019. In particular, we identify the share of entrenched fortunes – fortunes which date back to the beginning of the twentieth century – and ask to what extent they differ from more recently established ones. Furthermore, we examine in an exploratory way if entrenched fortunes are connected to fortunes with more recent origins through family lines. We use a journalistic rich list published by the manager magazin in 2019, which we link with both rich lists from 1912/1914 and Wikidata. We find that about eight percent of today’s fortunes can be traced back to fortunes held by the same families in 1913. Regression analyses show that entrenched fortunes rank on average higher on the rich list than the remaining ones. Descriptive network analyses indicate that some of today’s largest fortunes are intertwined through marital lines, hinting at social closure at the top. Our findings indicate that the accumulation and perpetuation of fortunes over many generations is an important feature of top wealth in Germany.
Topic:
Inequality, Family, Elites, Wealth, Inheritance, and Network Analysis
Political Geography:
Europe and Global Focus

3. Starr Forum: Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity

Author:
Daron Acemoglu and Fotini Christia
Publication Date:
10-2023
Content Type:
Video
Institution:
MIT Center for International Studies
Abstract:
A thousand years of history and contemporary evidence make one thing clear: progress depends on the choices we make about technology. New ways of organizing production and communication can either serve the narrow interests of an elite or become the foundation for widespread prosperity. Today, digital technologies and artificial intelligence threaten jobs and democracy through excessive automation, massive data collection, and intrusive surveillance. Will the next decades bring shared prosperity or a further move in the direction of two-tiered societies? Join us for this important discussion with Daron Acemoglu, the co-author of Power and Progress.
Topic:
Science and Technology, Communications, Inequality, Elites, Prosperity, and Production
Political Geography:
Global Focus

4. The Rise of a Rule-Based Transgressor Elite

Author:
Ronen Palan
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Transnationally organised, rule-based transgressor elites are the wealthiest and most powerful elites today. The core of this group comprises managers of large multinational corporations and related ‘born global’ corporations, such as Tesla, eBay and the like, large investment houses, such as Blackrock, Blackstone and Vanguard, leading international investment banks and elite legal, consultancy and accounting firms. This elite core is joined by several ancillary groups. Arguably the most significant of those are midsize corporate groups, many of which are privately held. Numbering in the hundreds of thousands, perhaps even millions, they employ tactics perfected by large corporations to arbitrage rules and ensure corporate and other forms of taxation, rules specifying personal or group liabilities or other regulations, including protection of shareholders and the like, are either partially or fully avoided. To these, Ricardo de Soares adds another group; he argues elites from development countries latch onto existing institutional and professional providers serving those other elites; once they achieve their goal of transferring capital out of their own countries, they participate actively in the process of wealth and power concentration described in this paper (Soares, 2021) .
Topic:
Political Economy, Multinational Corporations, Elites, and Capital Accumulation
Political Geography:
Global Focus

5. Challenge Paper: Inequality and Exclusion

Author:
CIC
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center on International Cooperation (CIC)
Abstract:
Inequality and exclusion are among the most pressing political issues of our age. They are on the rise and the anger felt by citizens towards elites perceived to be out-of-touch constitutes a potent political force. Policy-makers and the public are clamoring for a set of policy options that can arrest and reverse this trend. The Pathfinders’ Grand Challenge on Inequality and Exclusion seeks to identify practical and politically viable solutions to meet the targets on equitable and inclusive societies in the Sustainable Development Goals. Our goal is for national governments, intergovernmental bodies, multilateral organizations, and civil society groups to increase commitments and adopt solutions for equality and inclusion.
Topic:
Civil Society, Inequality, Sustainable Development Goals, Multilateralism, Elites, and Exclusion
Political Geography:
Global Focus

6. The Phenomenon of “Global Russia”

Author:
Emil Avdaliani
Publication Date:
12-2019
Content Type:
Commentary and Analysis
Institution:
The Begin-Sadat Centre for Strategic Studies (BESA)
Abstract:
As Russia increases its geopolitical involvement across the globe, the concept of “Global Russia” has been gradually taking hold. Though Russia is inherently weak, it is likely that Moscow will continue its global initiatives throughout the 2020s. Only by the end of that decade and into the next is there likely to be a gradual decline in Russia’s adventurism abroad.
Topic:
International Affairs, Geopolitics, Grand Strategy, and Elites
Political Geography:
Russia, Eurasia, and Global Focus

7. The Diffusion of Protest following the 2007-2008 Global Crash

Author:
Cristina Flesher Fominaya
Publication Date:
09-2019
Content Type:
Journal Article
Journal:
Brown Journal of World Affairs
Institution:
Brown Journal of World Affairs
Abstract:
In the wake of the 2008 global financial crisis, hundreds of protests spread across the world. Remarkably, despite the diversity of polities, regimes, and socioeconomic status across countries, these protests share two core demands to a varying degree: greater, more meaningful, or “real” democracy; and greater economic justice. While these are two distinct demands, they cannot be sepa- rated from each other. Although initially (and understandably) the protests were interpreted in direct relation to the global economic crash, especially in those countries hit hardest by the crisis and austerity politics, it soon became clear that the protests also reflected a crisis of representative democracy. Financial crises provoke legitimation crises when elites are perceived as having caused and benefited from them. Activists in the global wave of protests following 2008 worked to channel the grievances relating to these crises and to transform the public’s interpretive frameworks of them by contesting dominant narratives about their causes and solutions. Protesters challenged the idea that economic crises were the result of abstract, global capitalist forces and instead placed the blame squarely on economic and political elites. In so doing, they argued that the origin of the crisis was political; austerity policies were not inevitable, but rather the result of collusion between financial and political elites who not only failed to protect citizens against the worst effect of the crisis but also forced them to assume the losses of private capital speculation. While in Europe these protests can best be characterized as pro-democracy and anti-austerity, other movements such as the Arab Spring or Occupy Wall Street might better be characterized as pro-democracy and economic justice. The protests revealed an interesting paradox: despite a strong decline in trust and satisfaction with representative politics and political parties, the belief in and support for democ- racy as a value and the demand for its regeneration were core characteristics of protester demands.
Topic:
History, Social Movement, Inequality, Protests, Global Financial Crisis, and Elites
Political Geography:
Global Focus

8. The Pipe Dream of Undemocratic Liberalism

Author:
Sheri Berman
Publication Date:
07-2017
Content Type:
Journal Article
Journal:
Journal of Democracy
Institution:
National Endowment for Democracy
Abstract:
Over the past decade illiberal democracy has spread across the globe. Many analysts argue that democracy itself is to blame. Democracy is all about empowering the people, but, according to this line of argument, the people can be moved by passions and self-interest, and their unchecked rule can lead to tyrannical majoritarianism. While illiberal democracy is certainly worrying, many of its critics fundamentally misunderstand how democracy has traditionally developed and what its historical relationship with liberalism has been. Rather than the norm, liberal democracy has been the exception. Moreover, illiberal democracy is most often a stage on the route to liberal democracy rather than the endpoint of a country’s political trajectory. In addition, although democracy unchecked by liberalism can slide into tyrannical majoritarianism, liberalism unchecked by democracy can easily deteriorate into elitist oligarchy.
Topic:
Democracy, Liberal Order, Elites, and Illiberal Democracy
Political Geography:
Global Focus

9. Do Politicians Serve the One Percent? Evidence in OECD Countries

Author:
Pablo Torija
Publication Date:
01-2013
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Present social movements, as “Occupy Wall Street” or the Spanish “Indignados”, claim that politicians work for an economic elite, the 1%, that drives the world economic policies. In this paper we show through econometric analysis that these movements are accurate: politicians in OECD countries maximize the happiness of the economic elite. In 2009 center-right parties maximized the happiness of the 100th-98th richest percentile and center-left parties the 100th-95th richest percentile. The situation has evolved from the seventies when politicians represented, approximately, the median voter.
Topic:
Economics, Political Economy, Politics, Democracy, Representation, Elites, and Occupy Wall Street
Political Geography:
Global Focus