Twitter Wealth in a Walmart Economy
The events of yesterday nicely summed up American economic life: a tiny sliver of people, mostly tech and finance insiders, got fabulously wealthy from Twitter's IPO while 64 people were arrested protesting the poverty wages paid by the largest U.S. employer, Walmart.
Despite sluggish growth, the U.S. economy still generates enormous wealth. Yet according to a recent analysis by the Social Security Administration, 53 percent of American workers earn under $30,000 a year, while a third of households have a net worth under $10,000, according to the Census. Nearly a fifth of Americans have a negative net worth.
In other words, vast swaths of the country earn chump change and are broke -- even as the economy generates $16 trillion a year in wealth.
Why is that? Twitter and Walmart provide two answers, and illustrate the different ways that ordinary people are cut out of the wealth creation machine.
As of this writing, Twitter has a market cap of $23 billion. That's a lot of wealth that has suddenly materialized in the U.S. equities market. But it's wealth held mostly by a very small group of insiders who were positioned to get a piece of that pie. The New York Times has a story today about a guy named Suhail R. Rizvi who runs a very well-connected private investment fund which managed to scarf up a 15 percent stake in Twitter.
Both Rizvi and most of his clients were very wealthy before yesterday. Now they are even richer. Ditto for Peter Fenton and the partners and investors at Benchmark Capital, one of Twitter's major investors.
Sure, some of Twitter's employees will do great as well, but mostly Twitter's IPO has dropped big money on people who already had big money -- which is why they were positioned to get in on Twitter and make even more big money.
So that's one face of contemporary inequality: the insider economy where the rich get richer. The other face is the outsider economy: a place where millions of Americans have so few options and so little education that they have to take whatever jobs they can find -- including jobs at Walmart that don't actually pay enough money to make ends meet.
This part of the story is very familiar, the age-old exploitation of the powerless by the powerful -- an exploitation, of course, that capitalism made possible on a far grander scale than the feudal model that came before.
It's not clear how, exactly, to reform or dismantle the insider economy showcased by Twitter's IPO. Or even, really, whether that feature of inequality is so terrible.
But reducing exploitation is more straight foward, and there are proven ways to sand down the harsh edges of capitalism and get the best out of that dynamic system: lots of wealth creation, but in a shared fashion.
The most successful of these ways is for workers to organize and force capital to share more of the profits. And that's what Walmart's workers are doing right now, along with other low-wage workers in the retail and restaurant industries. Let's hope they succeed.
