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How to Be a 1 Percenter

To secure their privilege, the richest Americans resort to a range of maneuvers beyond the evasion of taxes and financial regulation.

George Zornick

October 26, 2011

One of the chief complaints emerging from the 99 percenters camped in New York City and around the world is the sense that the top 1 percent have gotten away with something—that no amount of malfeasance on their part could endanger their status.

The movement began, of course, on Wall Street, where this phenomenon is glaringly typified. By now, the chutzpah of the bankers, who are batting away even the gentlest attempts to regulate their behavior after they ruined the economy and got trillions in taxpayer bailouts, is well-known.

But financial professionals are only the third-biggest slice of the 1 percent. Executives of nonfinancial companies make up the largest share of 1 percenters. What maneuvers do they use to secure their advantage and protect themselves from any conceivable concession to the 99 percent?

Sometimes they find that manipulating the legal process meets their needs most efficiently. Take, for example, the recent eviscerations of class-action lawsuits. When Wal-Mart v. Dukes was before the Supreme Court earlier this year, big businesses rushed to the defense of the company. The megastore, run by the Walton family—one of the wealthiest in the world, with a collective fortune of $90 billion—was being sued by a class-action group of women charging gender discrimination at stores nationwide. The US Chamber of Commerce’s litigation center filed an amicus brief on the company’s behalf, as did a wide array of large corporations, from Altria to Bank of America to General Electric.

The Court decided against the women, saying they must sue individually and cannot act as a class in action against Walmart. The legal logic the justices applied limited many class-action suits going forward and means that “the bigger the company, the more varied and decentralized its job practices, the less likely it will have to face a class-action claim,” according to longtime Supreme Court reporter Lyle Denniston.

A similar but less noticed case two months earlier, AT&T Mobility v. Concepcion, goes much further—it “entirely kills most class actions,” according to SCOTUSblog. AT&T, the fourteenth-largest company in the world, argued that cellphone customers suing for fraud must do so individually, rather than as a class, because an arbitration clause in the company’s contracts forbids class-action suits. Lower courts found this company-imposed ban on all class actions unconscionable, but the Court disagreed—and in the process eliminated most consumer and employment class-action suits. “Without minimizing Wal-Mart v. Dukes, getting upset about that case is like flipping out over a brief thundershower a few weeks after having slept through Hurricane Irene,” SCOTUSblog noted.

Although they have no particular interest in AT&T’s cellphone activities, several big business groups eagerly petitioned the Court in amicus briefs supporting the company. The American Bankers Association, the Financial Services Roundtable—a giant shill for Wall Street that spent almost $7.5 million on lobbying last year—and the US Chamber of Commerce all filed briefs.

The effect of these cases, which few Americans are aware of, is that megacorporations, and by extension the executives who staff them for lavish salaries, cannot be held accountable even if their products defraud or damage customers. Nor can they be held accountable for discriminating against their employees—their fortunes are protected regardless of their actions.

Medical professionals make up the second-biggest share of the 1 percent. They, too, know how to use the political process to limit their liability.

The American Medical Association is one of the largest lobbying forces in Washington. In 2009, as healthcare reform was being debated, the AMA spent more than $20 million to influence the outcome. One of the top items on its agenda was limiting the damage from malpractice suits. The industry claimed that such lawsuits were driving up medical costs. A study by the actuarial firm Towers Perrin, however, revealed that medical malpractice tort costs—for all cases, justified and otherwise—is an insignificant 1–1.5 percent of total medical costs.

But the name of the game was to protect medical professionals who may have made an error from having to pay out a lot of money. The AMA’s efforts to get malpractice limits in the healthcare reform bill were unsuccessful, as was President George W. Bush’s earlier attempt to limit all noneconomic damages to $250,000. But twenty-four states have enacted such laws as a result of similar lobbying—and some limit what patients can recoup for medical expenses and lost wages.

The enormous influence of the top 1 percent can also be seen in the two most recent major actions by Congress—patent reform and the approval of three free-trade deals.

More than 800 lobbyists were registered to work on the patent reform bill, which passed the Senate 89–9 and was signed into law by President Obama in September. The stated goal was to streamline the patent process to “make it easier for entrepreneurs to patent a new product or idea,” in the words of Obama. But as Zach Carter meticulously demonstrated in the Huffington Post, the real idea was to protect the patents of megacorporations. “The patent bill looks like a scorecard tallying points for powerful corporations,” he wrote.

The United States already has some of the strongest patent protection laws in the world, which means “we pay more, especially for drugs, and the rents generally go to the top 1 percent,” says Dean Baker, co-director of the Center for Economic and Policy Research.

The trade deals with Colombia, Panama and South Korea, which passed in October with bipartisan support, serve essentially the same protective purpose for the top 1 percent. Our trade policy “is designed to depress the wages of ordinary workers by subjecting them to direct competition with the lowest paid workers anywhere in the world. Our highest paid professionals, e.g. doctors and lawyers, many of whom are in the 1 percent, are largely protected from competition,” Baker notes.

The list goes on: lax antitrust enforcement of market-owning corporations; federal labor laws tilted toward the rich and against aggrieved workers; corporate governance rules that give undue power to executives and not enough to shareholders; a tax system that offers breaks for capital gains generally available only to the wealthy, and that allows huge fortunes to pass from generation to generation at low tax rates; and so on.

The common denominator, aside from maneuvering in unwieldy policy areas invisible to most Americans, is the money that the top 1 percent spends to influence the policy outcomes. The country’s campaign finance system, wherein billions are spent each year on lobbying and electing federal officials, gives the 1 percent their greatest advantage: in Washington, theirs is the loudest voice of all.

Also in This Forum

Sam Pizzigati: “OWS Revives the Struggle for Economic EqualityRinku Sen: “Race and Occupy Wall StreetTamara Draut: “Occupy CollegeSarah Anderson: “The Costs of Wall Street GreedGordon Lafer: “Why Occupy Wall Street Has Left Washington Behind

George ZornickTwitterGeorge Zornick is The Nation's former Washington editor.


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