equity funding

The poorest half of Americans have nothing left, so now the 1%'s growth comes from the upper middle class

The Fed’s latest figures on American household wealth paint a rosy picture – in the aggregate. US households now own a record-breaking $107T worth of assets!

But drill into those figures and you’ll notice that almost all of this new wealth has landed in the pockets of the top 1% of households. That’s not unusual: America has been on a glide-path to oligarchy since the Reagan years. What’s also not new is that the share of wealth owned by the bottom 50% of American households has continued to fall, while their debts have continued to rise: the bottom half own 6.1% of all US wealth, while they are burdened with 36% of America’s debts. When you subtract debts from assets, the bottom half of US households account for only 1.9% of America’s assets.

What that tells us is that the top 1%’s growth can no longer come from the bottom half, the people whose political woes and economic anxiety do not provoke regulators or lawmakers to actions.

And indeed, when you look at the Fed’s quarterly figures, you see that the biggest decline in household wealth is now coming from the upper middle class, the 50%-99% of households, who are, basically, the last people left in America with piggybanks for oligarchs to empty.

There’s lots of ways in which wealth-transfers from the upper-middles to the super-rich are effected: while upper-middles might own stocks, they don’t get to buy into private equity funds or VC funds, where table-stakes are $5m. Meanwhile, the most common assets for the middles – CDs, savings accounts – have been stagnant for more than a decade, thanks to the Fed’s low-interest policies.

Meanwhile, the things that define middle-class life – quality health care, post-secondary education, decent housing – have soared in costs, far, far ahead of the modest gains experienced by the 50-99%. Those increased costs are largely due to market-cornering and price-gouging by companies that have been bought up by the private equity sector whose beneficiaries are almost exclusively the super-rich.


American health care's life-destroying "surprise bills" are the fault of local, private-equity monopolies

Surprise billing – when your urgent or emergency medical care results in massive bills that your insurer won’t cover – are a life-destroying phenomenon for an increasing number of Americans, who not only can’t shop around for an emergency room from the back of an ambulance, but who also have no way to learn in advance whether their visit will generate five- or even six-figure bills.

Here’s how that happened: private equity funds have been on a purchasing spree, buying up the private doctor’s groups that ERs, hospitals and urgent care centers contract with (part of the MBA-driven mania for hollowing out all social institutions into procurement systems that buy everything from outside contractors).

Once a private equity “roll up” strategy has cornered the urgent/emergency medical care providers in a city or region, they just…raise prices. Seriously, it’s that simple: corner the market, raise prices.

This is happening up and down the health-care stack: two thirds of air ambulances are now owned by three private-equity-backed funds, and while the number of air ambulances has gone up, while demand has remained flat, the price of an air ambulance has doubled in a decade. The helicopter that takes you to a hospital today might cost $56k, of which your insurer will expect you to pay $44k.

In 2018, private equity did about 800 health-care acquisitions, totalling more than $100b, leaving 22% of US physician markets in a “highly concentrated” state.

But just because the deals totaled to more than $100b, that doesn’t mean that PE firms spent that much. As is common with PE deal, the majority of these were debt-financed: PE funds borrow money against the firms they’re buying, and use that money to buy those firms (!), then pay themselves huge dividends and leave the firms in a state of financial distress, which is why so many PE-backed firms end up bankrupt, to the detriment of their suppliers, workers and customers.

PE-backed health-care firms are already experiencing the first waves of bankruptcies, like Manorcare, a chain of nursing homes that the Carlyle Group bought for $6.1b in 2007, borrowing $4.7b against Manorcare’s assets at the time. After the deal closed, Carlyle extracted $1.3b cash from Manorcare, then cut costs to balance the books. What followed was a decade of horrific health-care drain-circling, as the elderly people under Manorcare’s roofs experienced neglect and abuse so that the chain could keep up its debt payments. Finally, the company filed for bankruptcy.

Watch for more of the same in lucrative, PE-cornered markets like dialysis, dominated by two PE firms, who have 77% of the market between them. One of these funds, Davita, had to pay $895m last year after a whistleblower leaked data showing that it had been gouging the US government on dialysis bills.

Even dying provides no escape: the funeral industry is also now highly concentrated, thanks to private equity rollups of small chains and independent firms, and prices are skyrocketing.

That’s the bad news. Here’s the good news: extractive monopolies are now affecting so many people, in so many ways, that the politicians who are willing to say the problem’s name aloud – monopolies – can draw supporters from across a wide range of constituencies: eyeglass wearers, pro wrestling fans, people with severe allergies, people with diabetes, renters, screenwriters, and Disney fans.

Before the term “ecology” was coined, there were a number of fragmented campaigns to save whales or owls, preserve fresh water or fresh air, fight ozone depletion or preserve forests. But there was no coherence to these struggles, no common cause. The term “ecology” welded together these disparate causes into a single movement, one that is filling city streets with millions of partisans today.

The rise and rise of monopolies backed by private equity has been a catastrophe for prosperity, growth, equality, and the majority of peoples’ chances to survive and thrive in America. All of those people are angry about the tentacle of monopoly that has wrapped itself around their throats. Once we create a political movement that traces all those tentacles back to the same rapacious monster, we can come together to slay it.


One of the world's largest private equity firms just bought one of the world's largest library ebook companies

KKR is one of the largest private equity funds in the world. Overdrive is one of the largest e-lending suppliers to the world’s libraries, supplying 43,000 libraries in 75 countries.

Now, KKR owns Overdrive, having purchased it for an undisclosed sum. Private equity firms’ business model is to buy profitable, productive companies, load them up with debt (paying themselves out of the money that was borrowed), cut costs by slashing wages and degrading the quality of their products and services, then allowing the company to go bust, stiffing the creditors, workers, and suppliers (that is, libraries, publishers and writers).

Gary Price notes, “Worth noting. In 2018, KKR acquired RBMedia/RBDigital and Audiobooks.com providers of audiobooks and other materials to libraries and consumers.”