Six on History: "our" Economy
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"In this Commonwealth of haves and have-nots, throngs of millionaires inconspicuously live among us. Massachusetts had about 18,000 residents whose annual income was more than $1 million in 2017.
That’s wealth accumulated through windfalls generated by innovations in biotech, startups scaling to maturity, venture capital partners deploying capital, and full-fledged technology companies churning out cash and stock options — all part of an ecosystem that derives from and feeds off of the state’s research universities and other leading institutions. Wealth also abounds from our world-class financial services firms. Then there are the corollary services — real estate developers and law firm partners — and less flashy wealth in manufacturing firms and family-owned businesses you’ve never heard of that quietly earn millions.
Massachusetts is rich beyond most folks’ comprehension. So why, with all the abundance, is there heavy resistance to a simple concept that those who earn a lot more should pay a little bit more proportionally in state taxes?
That’s the fundamental concept behind the so-called millionaires tax, an initiative likely to reemerge and make it to the ballot in the 2022 election. It is a surtax on incomes exceeding $1 million: Any extra dollar earned beyond $1 million would be taxed at an additional 4 percent — in effect 9 cents on that extra dollar when the state’s 5 percent tax rate is added.
If you’re less fortunate, you could muddle through making only $999,000 in a year and still be taxed at the 5 percent state rate.
Having the very rich pay a higher percentage in income taxes than the poor, working, and middle class isn’t exactly a radical concept. It’s what happens every year with federal taxes. And many states have graduated rates that rise as income increases.
Massachusetts’ flat income tax — which is baked into the state Constitution — actually translates into lower-income residents paying more as a proportion of their income than the rich. The state’s wealth leaves us with one of the widest gaps between the rich and poor in the nation, the latter now coming out of the coronavirus pandemic in far worse shape than going in. Extra revenue could pay for improved public transportation, reduced state college tuition and fees, and extra support for struggling school systems, to name a few.
The first millionaires tax effort, called the Fair Share Amendment, was struck from the ballot in 2018 because it stipulated — unconstitutionally, as it turned out — where the anticipated taxes would be directed. But the process to get it on the ballot in 2022 is in motion.
“Working families here in the Commonwealth are tapped out, with the high cost of housing, health care, transportation, child care, and other day-to-day expenses,” said state Senator Jason Lewis at a virtual event about the Fair Share Amendment held in early May by supporters of the tax. Lewis is a cosponsor of the proposal in the Legislature. Advocates believe that if state lawmakers initiate the fair share constitutional amendment this time, it might circumvent the legal issue that struck down the earlier effort.
Critics are already launching their attacks. We’re told the extra taxes might scare away the rich. They could go to Florida, for example, which has no state income tax. But other states with similar millionaires taxes are doing just fine. An exodus of millionaires is an oversimplification; in reality, the decision to move involves other factors, such as family and community ties. It’s why some millionaires in New Jersey, where the tax was approved recently, are staying put. And California, for one, is sporting a massive budget surplus.
And we’re told we don’t need the revenue, given the COVID-19 federal stimulus dollars raining down on us. That is, of course, short-term thinking. The extra $1 billion-plus that the millionaires tax would generate would continue long after the stimulus money has been spent. There is, of course, the long shadow of the “Taxachusetts” moniker and the idea that raising taxes is an immoral idea that would render the state uncompetitive for businesses. But the facts show that Massachusetts taxes on businesses fall in the middle range.
Those who have been blessed with financial success at a level that most of us can only dream of ought to pay more for the common good so that many more people would have more opportunities. It’s why a MassINC December poll found overwhelming support — 72 percent — for the Fair Share Amendment among voters. In a post-pandemic era when disparities between the fortunate and the less fortunate are widening, a surtax on the wealthy makes perfect sense."
But union membership plunged, especially in the private sector, during the 1980s, and has continued to fall ever since.
Why did this happen? I often encounter assertions that the decline was inevitable in the face of automation and globalization — basically, that unions couldn’t deliver higher wages once employers had the option of replacing uppity workers with robots or moving production overseas. But the evidence suggests otherwise.
Although we talk a lot about robots these days, technological progress was actually faster during the high tide of unionization than it has been in recent years; output per worker hour rose almost twice as quickly from 1947 to 1973 as it has since 2007. That didn’t stop unions from having a big influence on wages.
The impact of globalization is also often overrated. Around three-quarters of employment in advanced countries is in “nontradable” activities that can’t be moved overseas, a proportion that hasn’t changed much over time.
In fact, Amazon is a case in point: While many of the goods you can buy online are imported, Amazon’s market position rests on a huge system of warehouses — like Bessemer — that employs hundreds of thousands of workers. And those warehouses can’t be moved overseas; their whole purpose is to maintain inventories close to major markets, so that Amazon can deliver things in a matter of days. ... "
The photo of billionaire life aboard a 454 ft., $590 million yacht inspired plenty of outrage, and even a parody song by singer John Mayer titled “Drone Shot of My Yacht.” As an example of conspicuous consumption, the post highlighted stark global inequalities in wealth and opportunity, and didn’t land well with the millions of people stuck at home in lockdown or risking their health and lives performing essential work.
But when it comes to wealth inequality, a billionaire’s yacht is a sideshow, says Chicago Booth’s Amir Sufi. After all, a yacht is rooted in the real economy. A good chunk of the money originally spent on the yacht went to pay workers and buy equipment, and had a multiplier effect as it circulated in the broader economy. The real problem could be that much of the money owned by billionaires and other wealthy people never makes it that far. “People get angry about seeing the rich consuming a lot,” Sufi says, “but that’s better than what they’re actually doing.”
What’s happening, he says, is that disparities in income and wealth have fueled ever more saving by the top 1 percent. But while many economists think more saving leads to productive investment, Sufi, Princeton’s Atif Mian, and Harvard’s Ludwig Straub make a different argument. They find that these savings are largely unproductive, being remade by the financial system into household and government debt. And their research outlines a cycle whereby the savings of the top 1 percent fuel the debt and dissavings of the lower 90 percent, which in turn leads to more savings at the top.
From the 1980s through 2007, the top 1 percent financed a large portion of the overall rise in household debt for the lower 90 percent, according to the researchers. And as the rich have accumulated capital, the less wealthy have accumulated fewer assets, which means they experience less financial stability overall. Thus, the work argues, the savings glut of the rich, and its role in financing unproductive debt and dissavings of the nonrich, leads to instability not only for the less economically privileged but also for the broad economy.
Whose savings glut?Inequality, in terms of income and wealth, has been a hot topic for the past couple of decades, but it has been unclear what role saving plays in it, whether as cause or effect.
In March 2005, then Federal Reserve governor and future Fed chief Ben Bernanke gave a speech before the Virginia Association of Economists calling attention to a global savings glut. Bernanke argued that the US account deficit, which at the time was more than 6 percent of national income, wasn’t due to American profligacy but instead to the rest of the globe’s frugality.
Countries such as China, Korea, and Venezuela were increasingly saving money rather than using their savings to invest domestically. Those savings were then being put to work in industrialized countries such as the United States, through activity including massive purchases of government bonds. These foreign inflows helped inflate stock prices and depress long-term interest rates, said Bernanke—and this in turn encouraged borrowing, particularly for real estate, where prices were skyrocketing at the time. Foreign inflows were also strengthening the dollar, thus discouraging exports while boosting imports, and contributing to a US trade imbalance. ... "
The analysis suggests that the top 1 percent of households in the US have just as much influence as emerging-market economies in fueling the debt of the bottom 90 percent.
"Re “All the news that’s fit for wealth” (Social Studies, May 9): A synopsis in last Sunday’s Ideas section discussed recent political science findings that newspaper reporting on the economy “was correlated with gains and losses for the rich but largely disconnected from [those] for the working class.” The researchers concluded that this was “because aggregate economic performance, which gets most of the coverage, had increasingly aligned with gains and losses for the rich.”
I would say, rather, that what we have been accustomed to think of as measures of “economic performance” have never been more than measures of returns to investors. We hear news reports daily, if not hourly, on the indices of the stock market. There is no analogous index for how working people fare from day to day or year to year — no Dick and Jane Average to compare with the Dow Jones Industrial Average, no index of living Standards of the Poor 500 to measure alongside the Standard & Poor’s 500.
Some enterprising economics or political science student should take on the project of constructing measures of the economic lives of ordinary people. As the saying goes, if you can’t count it, it doesn’t count.
Deborah Roher, New Bedford"
- Gates does not appear to count his farming investments as the nation’s largest farmland owner as part of his broader strategy to save the climate.Data gathered by The Land Report and NBC News show that their land holdings range from 70,000 acres in north Louisiana, where their farmland grows soybeans, corn, cotton and rice, to 20,000 acres in Nebraska, where farmers grow soybeans. They bought and later sold an additional 6,000 acres in Georgia, NBC News found. In Washington, the Gateses own more than 14,000 acres of farmland that includes potato fields so massive that they are visible from space and some of which are processed into french fries for McDonald’s. And in Florida, farmers grow carrots on their property. These land holdings are separate from their previous investments in companies that support large-scale farming like Monsanto and the tractor manufacturer John Deere.
"They own the soil where the potatoes in McDonald’s french fries grow, the carrots from the world’s largest producer and the onions that Americans sauté every night for dinner. But they’re far better known for their work in tech and in trying to save the climate.
Bill and Melinda Gates, who recently announced they’re getting divorced and are dividing their assets, are deeply invested in American agriculture. The billionaire couple, in less than a decade, have accumulated more than 269,000 acres of farmland across 18 states, more than the entire acreage of New York City. The farmland was purchased through a constellation of companies that all link back to the couple’s investment group, Cascade Investments, based in Kirkland, Washington.
But Gates, known for his philanthropic work solving some of the world’s most pressing public health and climate problems, has suggested that he does not treat his American farmland investments as part of his broader plans to save the planet.
“My investment group chose to do this,” Bill Gates said on Reddit in March when asked about his farmland purchases while promoting his latest book, “How to Avoid A Climate Disaster.” “It is not connected to climate.” He did acknowledge that more productive farming techniques can help reduce deforestation in other parts of the world.
Though the Gateses are major owners of American farmland, the couple’s holdings only represent a fraction of the 283 million acres of farmland that is owned and rented out by nonfarmers. But that could soon change. About 40 percent of farmland is owned by seniors 65 or older, according to 2014 estimates by the U.S. Department of Agriculture, meaning more farmland is expected to come on the market soon.
That could spell an opportunity for young farmers hoping to get their start, but for savvy investors scrambling for more places to put their money, it also represents an opportunity. Financial titans like Prudential and Hancock have divisions specifically for investors looking to make money on farmland portfolios.
The trend worries young farmers who cannot compete with the likes of Bill Gates when buying land, according to Holly Rippon-Butler, a farmer in upstate New York and the land campaigns director at the National Young Farmers Coalition.
“If you’re looking at what this means for farmers on the ground looking to access land, there’s significant competition from nonfarmers, and that really affects young farmers because it means that the price that they’re trying to compete with on the marketplace is driven and determined by people who are not dependent on a farming income,” Rippon-Butler said.
Adjusted for inflation, average farm real estate values have generally risen since 1993, growing from less than $1,500 an acre in the mid-’90s to over $3,000 an acre in 2020, according to the USDA. The agency further found that over 50 percent of cropland is rented to farmers who don’t own their land.
“The attraction that people have to investing in farmland is that it tends to be countercyclical to the stock market. It’s a hedging strategy,” said Daniel Bigelow, a professor of agricultural economics at Montana State University, who previously served as a USDA research economist. In other words, when the economy is struggling, the value of farmland generally doesn’t depreciate.
Cascade Investments declined to comment on its interest in acquiring so much American farmland, but a spokesperson for the firm, Charles V. Zehren said it is “very supportive of sustainable farming.” He pointed out that in 2020, the acreage that Bill Gates’ firm owns was all enrolled in a sustainability program. That program ensures agriculture on the land is audited to meet standards, like soil health and water management, created by the nonprofit Leading Harvest, which counts one of the subsidiaries of Gates’ investment firm as a partner.
“Leading Harvest requires farmland owners to work to continuously improve soil health, biodiversity, and water, air and crop quality on their farms as well as contribute positively to local communities, comply with regulations, and provide a safe and respectful working environment for employees,” Zehren said.
“Shell of a shell of a shell”Public records suggest Cascade Investments has bought its farmland through a web of at least 22 limited liability shell companies across the country. These shell companies have made it difficult to find out where and how much farmland the Gateses own even for local farmers, like John S. Quarterman, a farmer and landowner who grows okra, corn, squash and other vegetables in Lowndes County on the southern edge of Georgia.
That’s where the Gateses began buying land in 2013 through two limited liability corporations registered to an address in Kirkland by Derek Yurosek, then head of agriculture operations for Cascade.
When Quarterman first heard about Gates’ firm buying land in the area, he began digging through local property records, linking addresses and business records from registered owners to Kirkland-based companies, until he was able to piece together that the companies buying multiple tracts of land in the Suwannee River Basin were all a “shell of a shell of a shell company investing for Bill Gates.” NBC News’ independently confirmed that there were, in fact, shell companies tracing back to Gates’ firm that purchased 6,021 acres across four counties in Georgia.
In Georgia and Florida, NBC News independently confirmed through research of property records that the Gateses’ investment firm owns more than 7,000 acres through two limited liability companies, Lakeland Sands and Lakeland Sands Florida, LLC. Both companies were founded in 2012 with the same address as Cascade Investments in Kirkland, which later changed its mailing address to a Louisiana post office box assigned to Oak River Farms, another subsidiary of Cascade.
NBC News also found that another 6,500 acres in north Florida are owned by yet another company, Suwannee River Terra, which was also started with an address in Kirkland and an email address from the Bill and Melinda Gates Investment Firm, which is now registered to the current chief counsel of Oak River Farms with a mailing address in Kansas, according to property records.
In every state where the Gateses own land, a tangled web of locally registered limited liability companies follow. While those companies don’t explicitly name Cascade Investments as the owner in their public records, they do share the address of Cascade in Kirkland, Washington, or the address of a Cascade subsidiary, list the names of Cascade employees who registered the companies and sometimes even email addresses from the Bill and Melinda Gates Investment Group.
Algae bloomBut some farmers whose land is adjacent to that of the Gateses have expressed disappointment that despite the couple’s wealth, they have not done more to preserve the environment. Quarterman also serves as the Suwannee Riverkeeper and advocates for conservation of the intricate network of springs and rivers in the region, where water from the swamps of Georgia flow into Florida before they release into the Gulf of Mexico. He said that this is where large tracts of rich farmland is used to raise livestock and grow many of the vegetables that end up in grocery aisles up and down the East Coast.All that farming has led to large water withdrawals from Florida's aquifer system and requires fertilizer, which leaches through the ground into waterways, emptying nitrogen that has led to destructive algae blooms and severe loss of fish and marsh habitats.He hoped Gates would have invested in different farming techniques that could help turn around the ecological damages from big agriculture.
“Well, you’d think, if you're looking for somebody with enough capital to try that, he would go first. Right? But he didn't,” Quarterman said. “He never did anything that different from before he got here and what other farmers were doing nearby."Quarterman guessed that may be because Bill Gates isn’t the one doing the farming. He’s the landlord, or rather, the companies owned by his investment firm are the landlords. And not all the renters are local.
But Zehren of Cascade noted that the firm has been working in Florida and elsewhere to promote ecologically conscious agriculture and that it plans to continue to evaluate its farmland portfolio to improve its overall sustainability.
“In enrolling in Leading Harvest, Cascade has implemented new initiatives on its farmland holdings ranging from adding additional pollinator habitat in Nebraska to planting wildlife-friendly trees on dry pivot corners in Florida to hosting grain bin safety rescue training for the local community in Louisiana to converting numerous diesel power units to electric to reduce carbon output, to name a few,” Zheren said.
Carrots, onions and french friesA survey of the Gateses’ farmland holdings shows that a broad range of the vegetables that Americans eat can be traced back to his land and that some of this land has also been owned by other billionaires. Starting in 2012, Gates’ investment firm began buying family farms in South Georgia. One of those farms, Stanley Farms, specialized in Vidalia onions, and another, Coggins Farms, focused on growing carrots. In 2014, Cascade Investments combined both of those companies and the land into Generations Farms, which continued to grow vegetables.
Some of that land, including nearly 300 acres, was sold in 2019 to the California-based Grimmway Farms, the world’s largest carrot producer. Another 5,500 acres was sold to Generation Land Georgia, a company that shares an address with Miami-based Optimum Agriculture, which bought Generations Farms in 2019. Members of the Stanley family now work for Generations.
In north Louisiana, the Gateses’ investment firm owns about 70,000 acres of land through at least three other shell companies. There farmers primarily grow soybeans, rice, corn and cotton. One of the largest plots of land owned by a subsidiary of the Gateses’ investment arm in Louisiana, Angelina Plantation, was previously owned by former WorldCom CEO Bernard Ebbers, who died last year, a month after being released from prison. That land is now largely rented out to various farmers.
Along the Columbia River border between Washington and Oregon, the Gateses purchased 100 Circles Farm, a 14,500-acre plot of land, for $171 million in 2018, according to property and business records. There, on Gates’ parcels, an industrial farm grows potatoes for McDonald’s french fries. Cascade declined to comment on its specific land holdings.
But farmer advocates say the Gateses’ large-scale farm purchases don’t make room for smaller farmers to break into the market. After all, few can out-bid Bill Gates.
“Farmers just aren't owning the assets anymore. Someone else is owning that asset, whether it's rented equipment or land. Someone else is building that equity on their back,” said Johnathan Hladik, the policy director at the Center for Rural Affairs, who is also a farmer in Nebraska. “When Bill Gates, or whatever other investment arm owns the land, a farmer still needs to farm it. But they're just renting it. So if now the best farmers can do if you want to stay in farming is rent this land, you're not going to get the benefits that come with land ownership.”
Fake meatWhile the Gateses are best known for their philanthropic work tackling large-scale societal problems, like funding the coronavirus vaccine and controlling malaria via the Bill and Melinda Gates Foundation [no mention of his expertise in Education?] , they have also invested in some companies rethinking food production and have endorsed the use of genetically modified seeds as one way to increase farming productivity and feed more people globally.
In 2010 the Gates Foundation Trust invested about $23 million in Monsanto, the genetically modified seed and chemical company, though it sold its shares the next year following outcry from environmental groups.
Bill Gates was also an early investor in fake-meat companies aiming to combat the environmental harms of raising livestock by creating more convincing, plant-based alternatives. He backed Impossible Foods, which relies on genetically modified soybeans, and also held shares of Beyond Meat through the Bill and Melinda Gates’ Foundation Trust, though SEC filings show those shares were sold in 2019. In May, Bill Gates also transferred about $850 million in shares of the agricultural machinery company John Deere to his wife after the two shared publicly their plans to divorce.
Besides the enrollment of their landholdings in Leading Harvest, the Gates Foundation in 2020 also created an agricultural nonprofit, Gates Ag One, which focuses on bringing affordable solutions to small-scale farmers in sub-Saharan Africa and South Asia to improve crop productivity. The Gates Foundation said in a statement that its agriculture efforts do not extend to farming in the U.S.
But those working on projects with both investors and farmers to create ecologically sustainable farming methods and support diverse and disadvantaged farming communities say rethinking agriculture and working to avert a climate crisis go hand in hand. They add it will take those with large parcels of land, like the Gateses’ U.S. farmland holdings, to do it.
“We know that one of the best ways to sequester carbon is through the soil. And that it’s going to take big swaths of land, like what Bill Gates has taken, to do that,” said Konda Mason, the founder and president of Jubilee Justice and Potlikker Capital, which funds and supports regenerative agriculture projects owned by people of color.
Mason notes that trying to draw hard lines between one’s philanthropic work and one’s investments does not work.
“Now you have a foundation where the mission on one side is to save the world and to do all these wonderful things surrounding climate, and on the other side they’re investing in the exact same things that are causing the harm that the mission side is trying to protect,” Mason said. “It makes no sense.”
- " ... Let’s start by talking about why union membership declined in the first place, and why it’s still possible to hope for a revival. America used to have a powerful labor movement. Union membership soared between 1934 and the end of World War II.During the 1950s roughly a third of nonagricultural workers were union members. As late as 1980 unions still represented around a quarter of the work force. And strong unions had a big impact even on nonunion workers, setting pay norms and putting nonunion employers on notice that they had to treat their workers relatively well lest they face an organizing drive.
But union membership plunged, especially in the private sector, during the 1980s, and has continued to fall ever since.
Why did this happen? I often encounter assertions that the decline was inevitable in the face of automation and globalization — basically, that unions couldn’t deliver higher wages once employers had the option of replacing uppity workers with robots or moving production overseas. But the evidence suggests otherwise.
Although we talk a lot about robots these days, technological progress was actually faster during the high tide of unionization than it has been in recent years; output per worker hour rose almost twice as quickly from 1947 to 1973 as it has since 2007. That didn’t stop unions from having a big influence on wages.
The impact of globalization is also often overrated. Around three-quarters of employment in advanced countries is in “nontradable” activities that can’t be moved overseas, a proportion that hasn’t changed much over time.
In fact, Amazon is a case in point: While many of the goods you can buy online are imported, Amazon’s market position rests on a huge system of warehouses — like Bessemer — that employs hundreds of thousands of workers. And those warehouses can’t be moved overseas; their whole purpose is to maintain inventories close to major markets, so that Amazon can deliver things in a matter of days. ... "
