CALAMITY HOWLER/A.V. Krebs
A Rising Tide Lifting All Yachts
Terming the growing disparity of wealth in the U.S. "a problem of distributive
justice that has not been given the attention it deserves by the leaders
of global capitalism," consumer advocate Ralph Nader has called upon
Microsoft's Bill Gates, as the world's richest person, to sponsor, plan
and lead a conference of billionaires and multi-billionaires on the subject
of National and Global Wealth Disparities and What to Do About It.
Nader in a July 27 letter to Gates cited Professor Edward Wolff of New York
University, a wealth economics specialist, who has estimated that Gates
net wealth is greater than the combined net worth of the poorest 40 percent
of Americans (106 million people). That includes their home equity, pensions,
mutual funds and 401(k) plans, but excludes their personal cars.
However, when Professor Wolff made his analysis, Gates net worth was only
$40 billion. On July 30 Gates was worth $61.613 billion.
Putting this staggering figure into perspective if Gates was a country he
would rank between 37 & 38, a public corporation between sixth and seventh,
a bank between seventh and eighth, and a state between eighth and ninth.
If one assigned themselves the task of spending all of Gates' fortune over
a 30-year span, 60 minutes an hour, 24 hours a day, seven days a week they
would have to spend it at the rate of $234,289.64 an hour.
Habitat for Humanities has estimated that to build a house for a family
of four costs $30,000 (labor volunteered). With Gates' fortune housing could
be built for 9,242,023 people. Likewise, such a fortune could afford a four-year
scholarship, room and tuition fully paid to Harvard University for 533,062
In his letter Nader also points to Warren Buffett, possibly the world's
number two working rich person with assets exceeding $33 billion, reminding
Gates that Buffett is "your dear friend and fellow card player"
and with "the dual sweep of the Gates-Buffett hands, the serious and
consequential plight of humanity would become a matter of high alert for
those business colleagues and acquaintances of yours who aspire to move
from success to significance."
Apart from the more than medieval size gap between Gates' wealth and the
rest of the country, Nader observes, "it is more than a little worrisome
that tens of millions of Americans have so little net property worth, some
after a lifetime of labor."
He cites Jeff Gates, an author of the new book, The Ownership Solution:
Toward a Shared Capitalism for the Twenty-First Century (Perseus), who
has written that: "Capitalism is very good at creating capital but
terrible at creating capitalists." Meanwhile, the U.S. now has the
sharpest wealth disparity of any western nation.
The wealth of the top 1 percent is greater than that of the bottom 90% of
Americans. As author Gates observes: "The implications attending inaction
are staggering fiscally, socially, politically and even environmentally."
Likewise, on a worldwide plane, wealth disparities are staggering. According
to the United Nations Development Program, the assets of the world's 358
billionaires are greater than the combined incomes of countries with 45
percent of the world's people (about 3 billion human beings)!
"All these chasms," Nader declares, "are widening against
a background of modern and accelerating technology, declining trade barriers,
mobility of capital, medical advances and presumably a greater awareness
of what history's most tragic mistakes, avarice, monopolies and cruelties
Nader recalls seeing a T-Shirt being distributed at a conference recently
with the message: "A Rising Tide Lifts All Yachts." "A telling
phrase for our times" he concludes in his letter to Gates.
Responding to Nader in an August 4 letter, Gates said that he regarded himself
as a "steward" of great wealth, and on a number of occasions he
had acknowledged "what a great privilege and responsibility it will
be to return it to society." He also stressed that, "later in
my career I will give away the bulk of whatever wealth" his work has
created "in a way that does the most good possible" and that he
will "encourage everyone I know to participate in philanthropy."
However, he added, "philanthropy is very personal. I think people should
give because they want to give, and not because of pressure from a conference
or anyone who claims they have all the answers in this area."
Nader commented on Gates letter, "my letter was not addressed to his
philanthropy. It requested that he and Warren Buffett convene a conference
of billionaires on the structural issues of wealth inequality in our country
in order to explore, without any pre-judgment, the best experience and ideas
for addressing this problem. ... I hope Mr. Gates will focus on the specific
invitation to convene" this conference.
The Urge to Merge Surge
It is not surprising that as corporate America and professional sports rush
to form a common bond that the terminology of the two become interchangeable.
Certainly in the urge to merge surge that has characterized the former,
the latter's expression that one can't tell the players without a program
has become most apropos. Some of the more significant events in that surge
(ogonek) Wells Fargo & Co. and Norwest have announced plans to create
the nation's sixth-largest bank with branches in 21 West and Midwest states
through a stock swap that values Wells Fargo at about $34 billion. The merger
will form a company with about $191 billion in assets, more than 90,000
employees, about 20 million customers and 5,777 financial-services outlets
The new company will retain the Wells Fargo name. The 148-year-old Wells
Fargo bank, which once ran the westernmost leg of the Pony Express, whose
name and stagecoach emblem are icons in the business world, has strategic
agreements with Safeway and other retailers; and is presently well-positioned
in the critical California market. The combined company would have offices
nationwide for mortgage and consumer lending in addition to having outlets
in Canada, the Caribbean, Latin America and other countries.
Other major combinations in the banking industry recently include Citicorp
and Travelers Group, BankAmerica and Nationsbank, and First Chicago NBD
and Banc One.
(ogonek) The soft drink wars are about to open up on a second front as PepsiCo
Inc. has agreed to buy Seagram Co.'s Tropicana Products Inc., agreeing to
pay $3.3 billion for the big juice marketer. The purchase sets off a new
rivalry between Pepsi and Coca-Cola Co., whose Minute Maid brand is the
No. 2 orange juice in the U.S. Tropicana holds nearly a 40% share of the
market for chilled orange juice, while Minute Maid accounts for 19.4% of
The sale of Tropicana is strategically important to Seagram. Proceeds from
the sale are expected to help Montreal-based Seagram finance its acquisition
of PolyGram NV. The PolyGram transaction would make entertainment, not liquor
sales, the main focus of Seagram for the first time in its 74-year history.
Tropicana had 1997 revenues of nearly $2 billion and its operating income
has grown at a compounded annual rate of about 15% over the past five years.
PepsiCo said Tropicana will be a new division of PepsiCo. PepsiCo, which
consists of Pepsi-Cola Co. and Frito-Lay Co., had 1997 revenues of $21 billion.
Shortly after the announcement of the purchase by Pepsi, Ocean Spray Cranberries
Inc. indicated it may attempt to challenge the acquisition of Tropicana.
Pepsi has a three-year agreement to distribute single servings of Ocean
Spray drinks through its vast bottling system. Executives at Ocean Spray,
a growers' cooperative based in Lakeville, Mass., believe that the Tropicana
deal would violate its agreement with Pepsi. Pepsi's plans to promote single-serving
packages of Tropicana could detract from the company's distribution of Ocean
Ocean Spray's sales last year totaled $1.44 billion, including $225 million
derived from the sale of single servings of Ocean Spray drinks distributed
by Pepsi's company-owned bottling operations and independent Pepsi bottlers.
While Ocean Spray is best known for its cranberry juice, it also makes orange
juice and while its orange juice is a small portion of company's overall
business, it is the No. 1 seller in Ocean Spray's single-serve segment.
(ogonek) Creating the nation's single largest supermarket company Albertson's
Inc. has agreed to acquire its larger but weaker competitor American Stores
Co. for an estimated $8.4 billion in stock.The combined companies would
operate more than 2,470 stores in 37 states, principally in the Midwest,
California and Texas. Their combined sales will total about $36 billion,
enabling Albertson's, headquarted in Boise, Idaho, to forge ahead of Kroger
Co., which has $27 billion in annual sales.
The Albertson's-American Stores merger is the latest in a string of mergers
and acquisitions that analysts believe signals that more can be expected
in the $426 billion-a-year grocery industry. In recent months, Fred Meyer
Inc., Portland, Ore., bought Ralphs Grocery Co. and Quality Food Centers
in a double deal. Last year, Safeway Inc., Pleasanton, Calif., bought Vons
In recent years supermarket chains have been aiming to bolster their buying
and marketing clout anticipating an invasion into their territory by Wal-Mart
Stores Inc. as the giant discount retailer which is rapidly becoming one
of the nation's top grocery companies.
While American Stores had 1997 sales about 20% greater than Albertson's,
its net income was only about half that of Albertson's. American Stores
operates the Acme, Jewel and Lucky chains.
(ogonek) Royal Ahold NV, the biggest foreign owner of a U.S. grocery store
business, has now become the nation's fourth-largest supermarket operator
with the announcement that it will purchase the Giant Food Inc. supermarket
chain for $2.6 billion.
The acquisition adds a 177-store chain with revenues of $4.2 billion to
Ahold's growing domestic franchise. Ahold, based in the Netherlands, currently
operates 830 domestic supermarkets, including Stop and Shop of Quincy, Mass.
The U.S. stores contribute $14.3 billion to Ahold's $26 billion in annual
"This represents a significant opportunity for Ahold to basically take
a well-positioned U.S. food chain and bring it to a new level," Edward
Comeau, an analyst who follows supermarket companies for Donaldson, Lufkin
& Jenrette, told the Washington Post.
With the purchase of Giant, which is based in Landover, Md., Ahold added
164 stores in Virginia, the District of Columbia and Maryland as well as
13 Super G stores in New Jersey, Pennsylvania and Delaware. The 28,000-employee
chain, founded in 1936 as a single store, will retain its name, headquarters
and management team.
* On August 5 CNBC reported that the Chicago Board of Trade and the Mercantile
Exchange were engaged in merger talks and that top officials from both exchanges
began meeting the previous week to explore an electronic trading system,
but that the CBOT was pressing to discuss a full-blown merger.
Responding to the CNBC report that linked the Chicago Board of Trade and
the Chicago Mercantile Exchange in merger talks, one Merc official said
she had nothing new to report on any specific plans to unite the two exchanges.
"All news reports this week are speculation on the part of reporters,"
responded Ellen Resnick, vice of corporate communications at the Chicago
"We have no new announcements," she added. She also said the Merc
continues to explore various strategies for working with other stock exchanges
in the future. "We've been approached by a number of entities and have
had discussions on multiple fronts," Resnick said.
While the CBOT is a principal trader in commodity futures the Merc, aside
from cattle futures, is a principal trader in financial currency.
The Increasingly Bad Practices Company
IBP, the nation's largest meat packer and which some have branded the nation's
number one "corporate outlaw," has been blocked from practicing
"right of first refusal," which the U.S. Department of Agriculture
now claims is anti-competitive.
Right of first refusal refers to the practice whereby companies enter into
agreements with feedlots that allow companies like IBP to obtain livestock
by matching the highest previous bid without going higher. Small producers
have long complained that they are being harmed by such practices.
IBP's failure, according to the ruling, to offer the same terms of its beef
marketing agreement to other feedlots in Kansas "is a discriminatory
practice" that gives members of the pact a competitive advantage
"It is vitally important that small and medium-size producers get a
fair shake in the marketplace," Agriculture Secretary Dan Glickman
After complaints as far back as 1994 that IBP was entering into a right
of first refusal agreement with nine feedlots the USDA's Packers and Stockyards
Administration investigated and found that IBP had violated the P&SA
A USDA judicial officer also decided that in order for the government to
prove a company is unfairly hurting competition, it must show that the company
is simply harming its competitors, instead of being required to prove the
higher standard of harm to competition in the entire marketplace.
This decision, Glickman noted, "confirms that USDA has broad powers
to protect all producers against unfair, anti-competitive practices and
that our enforcement focus should be on harm to competitors." The recent
order also upheld the authority of the Secretary to examine agreements between
packers and feedlots and to impose sanctions.
Meanwhile, in the Pickett v. IBP case currently being tried in Montgomery,
Alabama, the Canadian National Farmers Union (CNFU) has filed a class action
"friend of the court" brief in behalf of U.S. cattle ranchers
who are contending that the Dakota City, Nebraska company is violating antitrust
laws by using large purchases of captive supplies of cattle -- rather than
bidding on open auction markets -- to unfairly depress prices paid to producers.
IBP currently controls more than a third of U.S. beef packing and last year
processed more than nine billion pounds of beef and pork. The company's
total sales last year were $13.2 billion.
As severe as is the crisis faced by the U.S. Beef industry, it is evident
that Canadian cattlemen are suffering from an even more concentrated beefpacking
situation, Nettie Wiebe, president of the CNFU declared."We have filed
this Brief because the U.S. cattlemen's fight for survival is also our fight,"
she stated." The use of 'captive supplies' to depress prices in the
U.S. also depresses prices in Canada.
"Like our American counterparts, Canadian cattlemen have faced too
many prolonged and unjustifiable periods of low prices for their cattle."
Wiebe pointed out that two firms, IBP and Cargill, presently control 66%
of Canadian beefpacking capacity, and it's increasing.
Lack of price discovery mechanisms combined with these "captive supplies"
acquired by packers leave many cattle producers unable to determine what
their cattle are actually worth, forcing sales at a loss.
Additionally, concentration in the meatpacking industry has enormously increased
the power of packers relative to producers. "These two developments,"
Wiebe said, "allow packers to gain a great deal of influence over cattle
prices to the detriment of producers. The case before the Court will go
a long way toward solving this problem for U.S. cattle producers and, by
extension, for Canadian producers, as well."
The CNFU is the only voluntary, direct-membership national farm organization
in Canada. It represents farmers across Canada, many of whom are cattle
A.V. Krebs is author of The Corporate Reapers: The Book of Agribusiness
News | Current Issue
| Back Issues | Essays
About the Progressive Populist | How
to Subscribe | How to Contact Us
Copyright © 1998 The Progressive Populist