While corporate politicians consider cuts to essential programs like Social Security, the ultra-rich continue to exploit dodgy tax loopholes for their own personal gain.
Behind last week’s record-smashing $2 billion sale of the Los Angeles Dodgers, a global economy that’s enriching only the world’s super rich.
By Sam Pizzigati
The Los Angeles Dodgers didn’t win all that many baseball games in the eight years owner Frank McCourt signed the team’s player paychecks. But McCourt has now won plenty. The mega-rich developer last week emerged as the biggest financial winner in the history of professional sports.[pullquote]Frank McCourt’s windfall helps define and dramatize just how incredibly unequal our world has become.[/pullquote]
On Tuesday, in a special bankruptcy auction, a group of deep-pocketed bidders agreed to pay $2.15 billion for the Dodger franchise, an all-time record for a U.S. pro sports team, nearly double the previous high-water mark, the $1.1 billion football’s Miami Dolphins fetched in 2009.
Out of that $2.15 billion, McCourt will have to pay off the $706 million in debt that his widely derided incompetence and greed saddled on the Dodgers. After that debt settlement, analysts estimate, he’ll walk away with a crisp $1 billion profit.
The Dodgers rate as one of the world’s most iconic pro sports franchise, and last week’s sale spurred an endless and predictable stream of commentary about Dodger history and the economics of contemporary sports.
But last week’s sale amounts to much more than a sports story. McCourt’s windfall helps define and dramatize just how incredibly unequal our world has become — and how that inequality is turning our 99 percent into squeezed spectators of games only the super rich can afford to play.
What makes these games so expensive? Three powerful trends loom large behind last week’s record Dodger sale.[pullquote]The world’s rich don’t know what to do with all their money.[/pullquote]
The first: The ranks of the world’s super rich have expanded enormously since the Great Recession first hit.
The latest evidence for this enormous increase comes from the sixth annual Wealth Report from Citi Private Bank and the Knight Frank consultant firm. This latest global wealth tally, released last Wednesday, counts “63,000 people worldwide” worth at least $100 million.
The total global “centa-millionaire” population, Knight Frank and Citi calculate, has soared 29 percent since 2006. All combined, the world’s centa-millionaires hold an astounding $39.9 trillion in assets, an average of $620 million each.
The second key global wealth trend: The world’s rich don’t know what to do with all their money. In “normal” times, the super rich park a chunk of their hefty change in stock and commodity markets and another significant chunk in bonds that guarantee smaller but still healthy returns.
But today’s super rich see stocks as sucker bets, given all the world’s ongoing economic instability, and commodities have been alarmingly “volatile.” Yields on safe and secure government bonds, meanwhile, have sunk to record lows.
And things could get even dicier for the awesomely affluent. Global deep pockets are paying close attention to the Occupy movement, and they fear, observes Citi Private Bank senior political analyst Tina Fordham, that “dissatisfaction with income inequality” may “gain momentum.” In response, the super rich worry, governments will likely ratchet up tax rates on high incomes. [pullquote]No one with a heart that thumps gets kicks spending multi millions on office buildings in London. [/pullquote]
“It’s going to be a tougher playing field for the rich,” laments Citi Private Bank chief economist Willem Buiter.
In sum, the super rich face a world where fewer and fewer safe yet lucrative investments beckon. To “preserve wealth” in this world, Citi’s Luigi Pigorini noted last week, the ultra wealthy are plowing ever larger stashes of cash into property that sits in nations that respect “the rule of law and stability.”
“Those markets considered ‘safe-haven’ locations continue to attract private investors looking for both prime residential and commercial property,” explains Wealth Report editor Andrew Shirley. “Political and economic uncertainty across the world is only helping to exacerbate the trend.”
London has been this trend’s single biggest beneficiary. The super rich are buying up office and apartment buildings in the city’s ritziest neighborhoods at a frenetic pace. Other cities are also feasting off the super-rich investing spree, most notably Miami. The value of “prime property” in Miami — the penthouses and manses the super rich covet — leaped 19 percent in 2011.
The third trend driving the global uber rich: “Preservation of wealth” investment strategies can get awfully boring. No one with a heart that thumps gets kicks spending multi millions on office buildings in London.[pullquote]The higher the cost to own pro sports franchises, the tighter the squeeze on sports fans. [/pullquote]
In this climate, many of the world’s wealthiest have concluded that if we’re not going to be making much of a return from our investments, we might as well be getting some fun out of them.
The global wealthy, says the new Knight Frank-Citi Wealth Report, “are increasingly looking to combine their investments with something they can also enjoy.” This attitude has spurred a major uptick in “investments of passion,” everything from fine wine and art to fine athletes.
Pro sports leagues have traditionally “frowned upon ownership by consortiums of investors,” notes Knight Frank and Citi. But pro sports leagues today are doing less frowning, and pro sports ownership has become, as a consequence, much more inviting to far wider circles of super rich.
Billions are now flowing into sports ownership, all over the world. In South Asia, cricket’s new Indian Premier League sold its first eight franchises in 2007. Their total original value: $750 million. Their current value: nearly $4 billion.
The world’s biggest sports marketplace remains, of course, the United States, home to the world’s greatest concentration of wealth and income. In North America, says the new Wealth Report, a stunning 61 percent of individuals with at least $25 million available to invest now hold a pro sports ownership stake.
These rich all hope to preserve their wealth and have a little fun at the same time. That means less fun — in sports — for the 99 percent. The higher the cost to own pro sports franchises, the tighter the squeeze on sports fans.
Prices rise for tickets and ballpark beer. Cable companies that telecast our games charge higher monthly cable fees. And even 99 percenters who care zilch about sports end up paying more — as super rich franchise owners play off one city against another and demand lucrative government subsidies and tax breaks.
The alternative to this dismaying pro sports status quo? In the short term, notes sports writer Dave Zirin, we need more community controlled franchises, along the model of football’s Green Bay Packers.
And over the longer haul? We need in sports exactly what we need in every other facet of our lives. A much more equal world.
Sam Pizzigati, the co-editor of Inequality.Org, also edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.