Saturday, February 03, 2007

The Celebrity Industrial Complex (CIC) holds together the two Americas

As presidential candidate John Edwards pointed out during his 2004 campaign, there are two Americas. My take on his idea is that one America allocates capital – defined broadly as money, technical brainpower, or celebrity charisma -- the other helps operate its machinery.

The capital allocators are benefiting hugely from this administration’s economic policies. Specifically, 36.7% worth of the $1.3 trillion worth of tax cuts went to the top 1% of families. Meanwhile, the ratio of the net worth of the top 1% of families to that of the median family in the US hit 190 in 2005, up from 131 in 1983.

These capital allocators wear many hats. They’re traders at Goldman Sachs who got their share of $16 billion in bonuses. They’re hedge fund managers, the top 100 of whom earned an average of $363 million in 2005. And they’re general partners in private equity firms – many of whom are listed on the Forbes 400 list of the wealthiest Americans. They’re CEOs like Bob Nardelli who decide how to spend shareholders’ investments – and often get rewarded for failure.

Meanwhile the machinery operators face stagnant income and rising expenses – making up the difference through borrowing. Earlier this week, a report was released which indicated that – at -0.7% -- the US savings rate was the lowest it’s been in 74 years – during the depths of the Great Depression.

The reason that these households keep their head above water is debt. And just as the poor seem to be more overweight than the rich, so do the rich use less debt as a proportion of their assets. Specifically, the top 1% of householders hold 30% of the assets and 7% of the debt, while the bottom 50% hold a mere 6% of assets but a disproportionate 24% of the debt.

With 1% of the US population thriving and the other 99% not doing quite as well, a reasonable question to ask is whether our democracy is doing a good job of allocating the wealth of the economy. And if not, why don’t the majority of Americans who are falling further behind do something about the inequitable economic distribution.

In my view, the reason is simply – the celebrity industrial complex (CIC). The CIC is a modern version of the Roman concept of Bread and Circus or Marie Antoinette’s concept of letting them eat cake. The CIC is a collection of TV programs, gossip magazines, and web sites that make the other 99% feel like they have a shot at making the big time.

TV shows like American Idol reinforce the idea that anyone in America – if they have the talent – can go from being an average person to a star. TV shows like Access Hollywood, co-hosted by presidential distant cousin Billy Bush, give viewers insight into the personal foibles of Hollywood celebrities. And the New York Times, Wall Street Journal, Vanity Fair, and many others cover the wealth of the capital allocators.

The CIC cleverly serves a triple purpose:

  • It keeps the public mesmerized by celebrities – thus increasing the odds that they’ll buy tickets to their movies
  • It afflicts celebrities by highlighting their weaknesses – thus making people feel less uncomfortable with their relatively weak position
  • It gives them a glimpse of celebrities’ wealth – which fuels their desire to accumulate more. And deludes them into thinking they can make it into the top 1%.
The CIC is not sufficient to keep the majority voting for politicians who implement policies that favor the top 1%. But it does play an important role in allowing the two Americas to coexist without tearing apart.

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