Archive for the ‘Inequality’ Category

Wall Street versus the American worker

May 1, 2017

American Airlines agreed this week to do something nice for its employees and arguably foresighted for its business by giving flight attendants and pilots a preemptive raise, in order to close a gap that had opened up between their compensation and the compensation paid by rival airlines Delta and United.

Wall Street freaked out, sending American shares plummeting. After all, this is capitalism and the capital owners are supposed to reap the rewards of business success.

“This is frustrating.  Labor is being paid first again,” wrote Citi analyst Kevin Crissey in a widely circulated note. “Shareholders get leftovers.”

Indeed, major financial players were so outraged by American’s decision to pay higher wages that they punished airline stocks across the board.  American itself took it hardest on the chin, of course, but the consensus among stock analysts was that higher pay at American could signal higher pay at other airlines too, with negative consequences for the overall industry.

Source: Matthrew Yglesias -Vox

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The case against the Internet

March 29, 2017

Double click to enlarge. Source: Visual Capitalist.

Andrew Keen’s book, The Internet Is Not The Answer (2015), which I recently finished reading, is a good antidote to cyber-utopians such as Kevin Kelly.

Keen says the Internet is shaping society in ways we the people don’t understand.  Some of them are good, some of them are bad, but all are out of control.

Like Kelly, he writes about technology as if it were an autonomous force, shaped by its own internal dynamic rather than by human decisions.  Unlike Kelly, he thinks this is a bad thing, not a good thing.

He does not, of course, deny that the Internet has made life easier in many ways, especially for writers.   But that is not the whole story.  He claims that—

  • The Internet is a job-destroyer.
  • The Internet enables business monopoly
  • The Internet enables surveillance and invasion of privacy.
  • The Internet enables anonymous harassment and bullying.
  • The Internet enables intellectual property theft

Keen quotes Marshall McLuhan’s maxim, “We shape our tools, then our tools shape us.”

What he doesn’t quite understand is that the “we” who shape the tools is not the same as the “us” who are shaped by them.

Or to use Marxist lingo, what matters is who owns the means of production.

Technology serves the needs and desires of those who own it.  Technological advances generally serve the needs and desires of those who fund it.

Advances in technology that benefit the elite often serve the general good as well, but there is no economic or social law that guarantees this.   This is as true of the Internet as it is of everything else.

Let me look at his claims one by one—

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Wall Street bonuses outweigh minimum wage pay

March 20, 2017

Most Wall Street activity is devoted to diverting money from one person’s pockets to another person’s pockets.   Most minimum wage workers do things that are directly beneficial to people.

The past financial crash was worse because Wall Street bankers and financiers took risks with other people’s’ money.   The coming financial crash will be worse for the same reason.

The Wall Street bonus system is an incentive to take risks, because the managers get to keep the bonuses when they win and they do not have to give them back when they lose.

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Eight people own as much as 3.6 billion do

March 14, 2017
Double click to enlarge

Double click to enlarge

This is old news, I guess, but worth keeping in mind.  In the years right before the French Revolution, did eight aristocrats own as much as the poorest 50 percent of the French peasants?

LINKS

Visualizing a Disturbing Truth: 8 Billionaires Own As Much as 3.6 Billion People for howmuch.   Explains who the eight billionaires are.

Income share for the bottom 50 percent of Americans is collapsing, new Piketty research finds by Steve Goldstein for MarketWatch.

400 years of poor white people in America

January 17, 2017

When I was a boy in western Maryland in the 1940s, I sometimes heard people say things like, “The Negroes aren’t so bad, compared to the poor white trash.”

The underlying meaning was that it was part of the nature of things for black people to be poor and marginalized, but there was something deeply wrong with white people who let themselves sink to the same status.

9whitetrash-iisenberg780670785971I just finished reading a book, WHITE TRASH: the untold 400-year history of class in America by Nancy Isenberg (2016), that tells how these attitudes go back literally to the first settlements at Plymouth Rock, Jamestown and before, and persist today.

Today’s poor rural Southern white people of today may literally be lineal descendants of the convicts, debtors, beggars, orphans, homeless vagrants and unemployed vagrants who were shipped to England’s North American colonies in the 17th century.

Many were victims of the enclosure movement, in which wealthy landowners privatized common lands formerly used by small or tenant farmers, leaving them without an obvious means of livelihood.  These displaced poor people were regarded as useless—much as workers replaced by automation are regarded by economists and corporate executives today.

The prevailing attitude then was that families were “the better sort” or “the meaner sort,” that they were “well-bred” or “ill-bred”.   Today we think of “good breeding” as applied to individual persons as meaning the person has been taught the proper way to behave.   Back then, roughneck poor people were regarded as inherently inferior.

Our American tradition is that the seeds of our nation were planted by freedom-seeking New England Puritans and adventurous Virginia Cavaliers.  This is true, but only a half-truth.    The ships that brought them to the New World also brought penniless, landless English poor people, who were regarded as surplus population.

What set the English poor white colonists apart was that they were not given land.  They were intended to be servants and field workers.  When black African slaves turned out to be more efficient and exploitable workers than indentured English servants, they lost even this role.

Even so some of the poor whites acquired property and a measure of social status.   White Trash is about the descendants of the ones that didn’t.

They fled to the western frontier of settlement.   But the wealthy and well-connected had already obtained title to most of the frontier land.  Poor whites became squatters.  They contended that clearing, improving and planting land gave them the right to have it; title-holders disagreed.  This was the source of much conflict both in the colonies and the newly-independent United States.

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The guaranteed incomes of the top 0.1 percent

January 14, 2017

notwork11

Hat tip to occasional links and commentary.

Radicals propose a universal guaranteed income for all, regardless of whether you are gainfully employed or not.   But as Matt Breunig pointed out, it already exists in the top 1 percent and 0.1 percent income bracket.   They receive income from their financial assets regardless of whether they work or not.

There is a strong argument for a guaranteed.  It is that the reason that the national wealth today is greater than in the past is largely due to the inventiveness and effort of our ancestors, not to anyone living today, and that therefore all of us are equally entitled to the fruits of their effort.

This was the philosophy of the social credit reform movement, which provided the background for Robert A. Heinlein’s great utopian science fiction novel, Beyond This Horizon.

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How much equality do we want?

January 9, 2017

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Grant that extreme economic inequality is a bad thing.  Grant that ever-increasing economic inequality is a bad thing.

Grant that complete equality of incomes is not feasible and maybe not desirable.  How much equality is enough?

The economist Friedrich Hayek wrote in The Road to Serfdom (as I recall) that it is impossible that people could reach a consensus on what each and every person deserves.   Once you reject complete equality, he  wrote, the only acceptable distribution of income is what results from the impersonal working of the free market.

A democratic government could never determine a distribution of income that is satisfactory to everyone, or even a majority, Hayek thought; if it tries, the result can only be gridlock and a breakdown of democracy.

But there are ways to reduce inequality that neither set limits on any individual’s aspirations nor give some group of bureaucrats the power to decide who gets what.   Some that come to mind immediately are:

  1. Prosecute those who get rich by lawbreaking.
  2. Set limits on unearned income.
  3. Break up monopolies.
  4. Empower labor unions and cooperatives.
  5. Provide good public services to all, regardless of income.
  6. Provide decent jobs for all who are willing and able to work.

What are your ideas?

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How much inequality is too much?

January 7, 2017
incomedistribuiton2014-5-0

This chart from Vox shows how each $100 in Americans’ income was divided among the five main income groups in 2014, and how their shares have changed since 1989

It’s a bad thing when the rich get richer and the poor get poorer.

But suppose the rich got richer, but the poor didn’t get poorer. What would be wrong with that?

Is the problem with economic inequality in and of itself?   Or would extreme differences between rich and poor be bad even if they poor did have enough—whatever your definition of “enough” happens to be.

New Dealers in the 1930s thought that increased incomes for the poor would be good for everybody, including the rich.  If poor people had more money to spend, that would increase demand for goods and services, and get the economic going.

The “supply-siders” in the 1980s thought that increased incomes for the rich would be good for everybody because that would make more capital available for investment.  That turned out not to be true, for reasons I came to understand later, but suppose it had.  Would that be bad?

I think it would be.  I didn’t always think so, but I think so now.

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Wealth and income inequality in the USA

September 2, 2016

wealth-share

These two charts, courtesy of Prof. David F. Ruccio, show the changing distribution of wealth and income in the USA.  Please keep in mind that while the chart below refers to the top 1 percent of income earners, the chart above refers to the top 1/100th of 1 percent of wealth holders.

wagesincomedistributiondownload2

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Race, economic inequality and the 2016 election

August 31, 2016

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During the presidential primaries, Clinton supporters were prone to downplay the importance of economic inequality.

Black people, they said, were only concerned about racism and racial discrimination, not the gap between rich and poor.

But a Pew Research Center survey indicates that economic inequality is in fact the top issue among African American voters.

The survey indicates that 77% of American black voters view the gap between rich and poor as a very big problem, followed by crime (68%), with relations between racial and ethnic groups coming in third (61%).

Black Americans are much more concerned about crime than white Americans, which should not be surprising, because, as a group, they are much more likely to be victims of crime.

Interestingly, black Americans are less worried about immigration than white Americans, or even Hispanic Americans, are.

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USA is on the brink of …… something

August 19, 2016

A blogger named Fred Reed sees parallels between the United States today and France on the eve of the French Revolution.

I know three young women of exceptional intelligence and talent, all of them mature and disciplined.  They cannot find jobs.  It is not from lack of trying, far from it.  One of them is married to a hard-working man in a highly technical field usually associated with wealth.  He is paid a low hourly wage and forced to work on contract, meaning that he has neither benefits nor retirement.  His employers know that if he leaves, they can easily find another to take his place. They have him where they want him.

[snip]  In numbers that a half century ago would have seemed impossible, the American young live with their parents, being unable to find jobs to support themselves.  Waitressing in a good bar pays better in tips than a woman with a college degree can otherwise earn, assuming that she can earn anything at all.  Employers having learned to hire them as individual contractors, they move into their thirties with no hope of a pension for their old age.

Desperation and hatred are close cousins.

Meanwhile, Jeffrey Bezos of Amazon makes spaceships and buys the Washington Post as a toy and the newspapers have reported that a Croesus of Wall Street has bought a Modigliani, it may have been, for $55 million dollars.

[snip]. The homeless in San Francisco are now described as “a plague.”  There seem to be ever more of them.  But not to worry.  Never worry.  The stock market remains exuberant.  In nearby Silicon Valley, a man buys a new Lamborghini every year.

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Highest-paid CEOs are mostly below-average CEOs

July 27, 2016

CEOpayvsstockholderreturenp1-by114-payper-16u-20160724183306

I always thought, based on long-ago conversations with compensation expert Graef Crystal, that the relationship between chief executive officer pay and corporate profitability was random.

But a new study indicates that there is a relationship—a negative one.  The higher-paid CEOs actually deliver less for stockholders than the lower-paid CEOs do.

What’s odd about this is that CEO compensation packages are structured so as to reward them for gains in stock prices.

It’s an example of Goodhart’s Law in operation.   All other things being equal, the rise and fall of a company’s stock price, relative to other companies in the same business, is a measure of how well a company is doing.  But there are ways for a CEO to manipulate the stock price that has nothing to do with company performance.

One is stock buy-backs.  These increase the price of the remaining shares.  But often the money might be better spent on making improvements in the company’s operation.

Another is layoffs or shifts to low-wage locations.  These immediately boost a company’s profitability by reducing the expense of wages.  But sometimes it costs the company in the long run to have the work done by workers who are low paid, but also less skilled, less well-trained and less loyal to the company.

All CEOs of big companies are well-paid—and should be.  Maybe what the chart tells us is that there are those who spend time negotiating or manipulating even higher pay that they should have spent tending to their businesses.

Maybe the best plan is to hire or promote a good person to be CEO, pay that person adequately and leave them alone.  A CEO who needs an extra incentive to do a good job shouldn’t be a CEO.

LINK

Highest-paid CEOs run worst-performing companies, research finds by Peter Yeung for The Independent (UK)

Neoliberal US colleges prefer rich foreigners

July 1, 2016

I came across an article in the Washington Monthly from a few years back as to how many U.S. universities are recruiting rich Chinese and other foreigners who can pay high tuition that middle-class and working-class Americans cannot afford.

This fits the neoliberal philosophy, which measure merit in terms of revenue (in this case, tuition X enrollment) and profit.

LINKS

International Students: Separate But Profitable by Paul Stephens for the Washington Monthly (2013)

How Chinese Students Saved America’s Colleges by Justin Fox for Bloomberg News.

Equality vs. group equality

June 13, 2016

Paul Krugman wrote that the defeat of Bernie Sanders in the Democratic primaries shows the fallacy of trying to appeal to a majority of Americans on the issue of inequality.

History shows that Americans don’t care about individual inequality; he wrote; what we care about is “horizontal” inquality—disparities between racial, ethnic and other groups.   Politicians need to realize this in order to be successful.

Paul Krugman

Paul Krugman

Defining oneself at least in part by membership in a group is part of human nature.  Even if you try to step away from such definitions, other people won’t.  A rueful old line from my own heritage says that if you should happen to forget that you’re Jewish, someone will remind you: a truth reconfirmed by the upsurge in vocal anti-Semitism unleashed by the Trump phenomenon.

So group identity is an unavoidable part of politics, especially in America with its history of slavery and its ethnic diversity.  Racial and ethnic minorities know that very well, which is one reason they overwhelmingly supported Hillary Clinton, who gets it, over Mr. Sanders, with his exclusive focus on individual inequality.   And politicians know it too.

Indeed, the road to Trumpism began with ideological conservatives cynically exploiting America’s racial divisions.

Source: Paul Krugman – The New York Times

Adolph Reed explained the problem with this kind of thinking in an interview on the Benjamin Dixon show.

Adolph Reed Jr.

Adolph Reed

We have a national politics now that has for 20 years at least, longer, given us two choices. And one of them is a party that’s committed to Wall Street and to neoliberalism and is deeply and earnestly committed to a notion of diversity and multiculturalism, and a party that’s committed to Wall Street and neoliberalism, and is deeply opposed to multiculturalism and diversity.

So, if we have to choose between those two, obviously for most of us who are committed to the ideals of justice and equality, the one that’s committed to multiculturalism and diversity is less bad than the one that’s opposed to them. 

But the deeper problem is that they’re both actively committed to maintaining and intensifying economic inequality, and … that ideal of a just society is one in which one percent of the population can control ninety percent of the stuff, but it would be just if twelve percent of the one percent were black, fourteen percent Latino, and half of them were women, and whatever percentage were gay, and what that means, then, is that most Black people, and most Latinos, and most white people, and most Asian Americans would would be stuck holding like the end of the stick with the stuff on it that I assume I can’t call by its right name.

Source: Adolph Reed | naked capitalism

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A reason for Americans to be angry

June 6, 2016

mediannetworth1998vs2013Screen-shot-2016-06-06-at-8.17.24-AM-624x681Chart via nerdwallet.

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Dean Baker on white privilege

June 6, 2016

violentTrump-RallyThe rise of Trump has provoked a considerable outpouring of commentary from the pundits.  Most of it centered on the chief complaint that the white working class is upset about losing its privileged position and see Trump as the ticket to setting things right.

There is considerable truth to this story.  Trump’s strongest support comes from white men without college degrees, although he also does quite well among small business owners.  But before we condemn these workers as hopeless Neanderthals, it is worth stepping back a bit to consider what led them to support Donald Trump’s candidacy in the first place.

The “privilege” that these working class whites are looking to defend is middle-class factory jobs paying between $15 and $30 an hour.  These jobs generally came with decent health care benefits and often a traditional defined benefit pension, although that has become increasingly rare over the last two decades.

Trump-Iowa-supporters-Getty-640x480This is certainly a privileged position compared to billions of people in the developing world who would be happy to make $15 a day.  It is also privileged compared to women, whose pay still averages less than 80 percent of their male counterparts.  And, it is privileged compared to the situation of Americans of color who have frequently been trapped in the least desirable and lowest-paying jobs.

But these factory jobs and other blue collar occupations are hardly privileged when compared to the high flyers in the financial industry, the CEOs and other top level managers, or even professionals like doctors and dentists.  These groups have all seen substantial increases in their pay and living standards over the last four decades.

If you want to see “privilege,” look to the CEO making $20 million a year as they turn in a mediocre performance managing a major corporation.  Or talk to a cardiologist, an occupation with a median annual salary of more than $420,000 a year.

The pundits all know about these disparities in pay, but they want us to believe that they have nothing to do with privilege; rather, they reflect the natural workings of the market.  And they tend to act really ridiculous when shown evidence otherwise.

Source: Dean Baker | truthout

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Matt Taibbi on the political problem

June 2, 2016

America … is a place where a huge plurality of the population is underemployed, pissed off, in debt and barely keeping their heads above water.  A good 15 percent or so are not even doing that well, sitting below the poverty line, living in homes without adequate heat, sanitation or food.  That portion of America doesn’t appear anywhere in campaign coverage, not even as background.

It would have made more sense to have different labels.  If there was a Poor Peoples’ Party, a Disappearing Middle Class Party, and a Minimum Six-Figure Income Party, and all of them were described as legitimate and reasonable options in the press, people would have no problem pulling levers for the candidates who actually represented them.

Source: Matt Taibbi | Rolling Stone

The race card and the economic issue.

May 23, 2016

Barbara Fields, co-author of the newly-published Racecraft: the Soul of Inequality in Amerian Life, had this to say about racism and inequality:

Barbara J. Fields

Barbara J. Fields

Racism and inequality have the same central nervous system.  They’re a part of the same process.  People should not think, for example, Bernie Sanders isn’t addressing the problems of black people because he doesn’t have a black label on it, with a bow tied around it, saying this is for black people.  But, when he speaks for a new minimum wage and for higher-education to be within everybody’s reach, these are the inequality problems that plague everyone.

And they’re one of the reasons why racism, not race, is intense and resurgent in this country.  We have a white working population that, by and large, expected to be taken care of, to be treated fairly, so long as they abided by the rules.  And now, with good reason, they feel left out.  Not just since the crash but, in years probably going back as far as the 1970s (certainly from the 80s), they’re watching the situation deteriorate.

The same has been true for black working people, if anything, to a more intense degree.  Of course the difference is black people never expected fairness.  So they don’t react to unfairness in the same way.

Source: VersoBooks.com.

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In 15 years, most Americans became poorer

May 16, 2016

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Americans are discontented because the majority of us are poorer than we were 15 years ago.

The exception consists of the 10 percent minority who had the most to begin with.

Your net worth is what you own minus what you owe, and Americans in all but the highest income brackets owe more than they did 15 years ago.

That’s especially true of a middle class person who has a home mortgage, is making car payments and is paying off a student loan.

Declining net worth means that a majority of Americans have less of a cushion if something drastic goes wrong in their lives—a layoff, a factory closing, a business downsizing.  It’s no wonder that voters turn to candidates who say they can do something about this.

Declining net worth means that sensible Americans are ceasing to go into debt to buy things they don’t really need.  This means trouble for a free market capitalist economy that depends on continual growth in consumer demand to fuel economic growth.  It’s no wonder that so many younger Americans are beginning to have doubts about whether capitalism works.

LINK

Americans Are Pissed—This Chart May Explain Why by Liz Weston for nerdwallet.  (Hat tip to Mike the Mad Biologist.)

The financialized U.S. economy

May 6, 2016

WallStIncomeVsRest-1x-1

Wall Street is still doing much better than Main Street.  And while salaries for financial sector workers are leveling off, the salaries and bonuses of Wall Street CEOs are still rising.

A Fortune magazine writer reported that average Wall Street CEO compensation rose nearly 10 percent last year, while the wages of average American workers rose only 1.6 percent.

Healthy and honest financial markets are necessary for a free enterprise capitalist economy, but I don’t see any justifiable reason why Wall Street should prosper while the rest of the country doesn’t.

LINKS

Wall Street Wages Double in 25 Years as Everyone Else’s Languish by Jennifer Surane for Bloomberg News.

The Only Thing Up on Wall Street is CEO Pay by Stephen Gandel for Fortune.

Hillary Clinton’s core message for America

March 15, 2016

Corey Robin, a blogger and political science professor, said Hillary Clinton’s core message should be taken seriously.

Amid all the accusations that Hillary Clinton is not an honest or authentic politician, that she’s an endless shape-shifter who says whatever works to get her to the next primary, it’s important not to lose sight of the one truth she’s been telling, and will continue to tell, the voters: things will not get better. Ever.

At first, I thought this was just an electoral ploy against Sanders: don’t listen to the guy promising the moon.  No such thing as a free lunch and all that.  But it goes deeper.  The American ruling class has been trying to figure out for years, if not decades, how to manage decline, how to get Americans to get used to diminished expectations, how to adapt to the notion that life for the next generation will be worse than for the previous generation, and now, how to accept … … low to zero growth rates as the new economic normal.

Clinton’s campaign message isn’t just for Bernie voters; it’s for everyone. Expect little, deserve less, ask for nothing.  When the leading candidate of the more left of the two parties is saying that — and getting the majority of its voters to embrace that message — the work of the American ruling class is done.

Source: Corey Robin

Not all white people are ‘privileged’

March 15, 2016

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Via George Chidi and Mike the Mad Biologist

Trump, Sanders and the 1 percent

March 6, 2016

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Hat tip to Too Much.

Corporate feminism and the cult of micro-lending

March 1, 2016

Thomas Frank, with his usual incisiveness, explains in the current issue of Harpers why so many rich liberals such as Hillary Clinton and Melinda Gates endorse micro-lending.

It is a way of identifying the interests of American women who aspire to be corporate executives or partners in law firms with Third World women basket-makers and market-place vendors.

Merely by providing impoverished individuals with a tiny loan of fifty or a hundred dollars, it was thought, you could put them on the road to entrepreneurial self-sufficiency, you could make entire countries prosper, you could bring about economic development itself.

What was most attractive about micro­-lending was what it was not, what it made unnecessary: any sort of collective action by poor people coming together in governments or unions.

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How rich is Donald Trump, really?

February 26, 2016

Many multi-billionaires would just as soon not call attention to their wealth.  But Donald Trump thinks it important to not only be rich, but seem rich.  He regards his reputation for being rich as an important business asset.

He once sued a biographer for $5 billion for underestimating his net worth.  Tim O’Brien, author of Trump Nation, estimated Trump’s net worth at $150 million to $250 million in 2005.  Trump said his true net worth was $5 billion.

O’Brien and his publisher won the lawsuit, but legal costs probably ate up any profit they might have made from the book, and then some.

He once sued a biographer, Tim O’Brien, author of Trump Nation, for $5 billion for unde estimating his net worth in 2009 at $150 million to $250 million.  TrumpHe lost the lawsuit, but legal expenses ate up any profit the author of publisher may have made on the book.

But how rich is he, really?

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Source: Bloomberg Politics.

Trump is on record as favoring “truthful hyperbole”.   Whatever that means, I suppose it applies to his net worth along with everything else.

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