Is the Facebook initial public offering -- one of the largest IPOs in history -- a symbol of American prosperity? In some sense, yes. A technological innovation that began as an extracurricular obsession of a brilliant college student has now become a global "social utility" with 900 million users. In important ways, Facebook has transformed how people interact with each other and demonstrated yet again the dominance of American ingenuity.
And yet, Facebook's success also dramatically illustrates deeply troubling problems with the U.S. economy that threaten core American values. Six troubling features of the Facebook IPO stand out:
Growing Inequality
Facebook's IPO will contribute to the extreme concentration of wealth. As a result of the IPO, CEO Mark Zuckerberg will have a net worth greater than the combined bottom fifth of all U.S. households. Facebook's founders and investors have scored historic gains in recent years even as most U.S. households have been flat and their wealth assets have declined.
Disconnect Between Corporate Success and Job Creation
Facebook has a far smaller number of employees than any company of comparable value. Facebook's high valuation and relatively tiny labor force shows that building successful companies no longer necessarily means creating many jobs that grow the middle class.
Insider Advantages
Beyond its founders, early employers, and family members, the biggest winners from Facebook's IPO will be well-connected insider investors who parlayed their wealth and contacts into a piece of Facebook equity -- a common story in today's unequal economy. Ordinary investors have been largely excluded from this opportunity.
Lottery Economy
While Facebook's founders and key employees have displayed tremendous creativity and vision, many of those getting fabulously rich have not demonstrated outstanding skills and simply happened to be in the right place at the right time. The IPO showcases a "lottery economy," where there is a growing disconnect between wealth and merit, with individuals reaping outsized gains from pure luck.
Tax Avoidance
While Mark Zuckerberg's large tax bill has drawn much attention, Facebook will get a huge tax deduction thanks to the stock-option loophole. In addition, some of the company's largest shareholders have moved to shelter some of their gains from estate and gift taxes. Most egregiously, Facebook co-founder Eduardo Saverin renounced his U.S. citizenship earlier this year, a move that will save him hundreds of millions in taxes.
Civic Inequality
The new wealth created by the IPO will empower Facebook stockholders to exercise significant sway over American politics, policy, and culture through campaign donations and philanthropy -- further tilting influence over U.S. life to wealthy elites and exacerbating civic inequality.
So, no, not all of us are celebrating Facebook's IPO. This is just the latest episode that shows how even the most spectacular business breakthroughs do not always translate into gains for ordinary Americans -- and, in fact, can reduce the relative influence of such Americans over the direction of U.S. society and generate strong doubts, if not outright cynicism, about whether the social contract works any longer in America.
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The pathetic whining of our country is out of hand.
I'm presently in New Zealand and a company just made a huge profit and decided to increase the dividends to 'shareholders'. Sounds great. Who are the 'shareholders'? 51% is owned by the family so they racked in a personal profit of 28billion$!
Do you think the other 'shareholders' were you or your ma/pa or grandparents? Very little, very little. The vast majority of the 'profit' went to the Big Guys as stated in the article.
And then what? The company announced 'lay-offs'!
Also, I think saying some people don't deserve their new found wealth because they simply were in the right place at the right time is so much sour grapes.
It was on that day that Democracy died in America.
Those laws were The Federal Reserve Act, The Foundation Act and The Graduated Income Tax Act.
Control over currency was handed over to a Private Central Bank.
The Foundation Act permitted the Wealthy Elites to shield their money from Federal Taxation while controlling key segments of U.S. Society using their Foundation(s).
The Graduated Income Tax Act enabled the government to place a siphon into the pockets of every citizen in order to pay for The Federal Reserve and enable those Foundations to grow in influence.
Now, after 100 years of assault by high powered Law Firms working exclusively for the Wealthy and Corporate Elites, the IRS tax code grew from two pages, denoting the single Federal tax rate for persons and business, to now over 5000+ pages of Tax Avoidance Scams and Welfare for those elites which has now led to the 1%/99% divide of today.
So, Facebook is only a symptom of the problem.
The core of the problem is 1913.
Until The Reserve, The Foundations and that Tax Code are rescinded, your democracy will never return and will destroy itself entirely and shortly!