Too Much a commentary on excess and inequality
Too Much a commentary on excess and inequality

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June 2015

This Month

The struggle to overcome our contemporary new Gilded Age may finally be reaching a really pivotal third stage.

In the first stage, starting back in the 1980s, egalitarians had to establish that the United States was indeed becoming far more unequal. That battle has been won. We still have silly denialists running around, but these days even GOP White House hopefuls are acknowledging our inequality.

The second stage: helping people see that inequality endangers just about everybody. We’re nearing victory here, too, at least among the wonk set, as we detail in our coverage this month of the latest report out of the OECD, the developed world’s official economic research agency.

The third stage? Getting serious proposals to share our nation’s wealth onto America’s political center stage. Have you noticed that stage lately? It’s brimming this spring with inequality-busting agendas. In the June Too Much before you, lots more on this encouraging upsurge.

 

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Images of Inequality

East Hampton rentals

Two years ago, Wall Streeters could snag the plushest summer rental out in the Hamptons, on Long Island’s East End, for under a million. Not anymore. This East Hampton home is renting this summer for $1.6 million. Overall, a dozen East End properties are renting for over $1 million this summer. But no one, truth be told, actually has to pay seven figures to rub shoulders with the summering super rich. Only half of this year’s Hamptons summer rentals are going for over $45,000.

 

Greed at a Glance

A new career opportunity serving the super rich: sneaker concierge. A New York hotel is offering VIPs a service that locates and buys $550 pairs.

The basement in London's most costly home sports a 70-foot swimming pool, a cinema, massage rooms, sauna, gym, servant digs, and a 25-car garage.

On Manhattan’s Upper East Side, anthropologist Wednesday Martin reports, hedge fund managers and investment bankers now reward their stay-at-home wives with “performance-based” bonuses.

Inequality by the Numbers

June infographic

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Stats of the Month

The richest 5 percent of Americans, NYU economist Edward Wolff calculates, hold 63 percent of the nation’s wealth. The poorest 60 percent hold 3 percent of that wealth.

Low-income Americans give three times more of their income to charity, the Chronicle of Philanthropy estimates, than high-income Americans.

Between 2003 and 2012, new IRS stats show, the average income tax rate paid by America’s bottom 99 percent rose from 9.6 to 10.4 percent. In the same years, the tax rate paid by the top 0.001 percent — Americans making over $62 million in 2012 — fell from 20.6 to 17.6 percent.

Want a better shot at hitting a lottery windfall? Sit in a CEO’s office. The top 12 U.S. chief execs last year pulled in $654 million, USA Today reports, just $2 million shy of the world’s highest lottery jackpot, the $656 million three Mega Millions winners shared in 2012.

What we get when we let wealth concentrate: The median home price in San Francisco has now hit $1,225,000. The city, says a new Brookings study, has the nation’s fastest-growing income inequality. 

Americans worth over $10 million constitute 0.01 percent of the nation’s population and 18 percent of political donors. Americans worth under $250,000 make up 69 percent of the nation and only 8 percent of donors.

 

 

 

The Too Much Interview

This Enterprise Manufactures Equality

In the United States, top corporate execs sometimes make more in an hour than their workers can make in a year. At Mondragon, one of Spain's largest companies, no execs can make more in an hour than their workers make in a day.

Sky-high corporate CEO pay, the Nobel Prize-winning economist Joseph Stiglitz notes in a new report, “creates social norms” that drive up levels of inequality far beyond corporate payrolls.

Those “social norms,” cheerleaders for our current corporate order insist, simply reflect economic reality. In a globalized world where corporations tally profits in the many billions, their argument goes, no modern major business could possibly survive — let alone thrive — without shelling out top executive pay that stretches into the many millions.

Josu UgarteThe owners of one of the largest businesses in Spain would definitely beg to disagree.

Their nearly 60-year-old enterprise — named Mondragon for the Basque town in northern Spain that gave it birth — has nearly 75,000 employees working in everything from heavy industry and retail to banking and education. A big-league business, in other words, by any metric.

Yet Mondragon doesn’t shell out millions to any of its top executives. No executive in the Mondragon network makes anything close to even a single million.

How could that be? Mondragon just happens to operate as a cooperative and may be, many analysts believe, the world’s most significant worker-owned business.

Josu Ugarte, the president of Mondragon International, spent a chunk of last month touring the United States, as part of the co-op’s ongoing outreach to people and groups looking for alternatives to corporate business as usual. What alternative for corporate compensation does Mondragon offer? Too Much editor Sam Pizzigati caught up with Ugarte in Washington, D.C. and explored that question with him.

Too Much: How long have you been with Mondragon?

Josu Ugarte: I’ve worked at Mondragon for 27 years ago, and I’ve been the president of Mondragon International, our global operation, for seven years.

‘We want to transform our society. We want to have a more equal society.’

Too Much: How are manager-worker pay differentials determined within the various Mondragon cooperative enterprises?

Ugarte: We have limits in all our co-ops. No manager within any co-op can make more than six times the salary of any worker in the co-op.

We have another limit between co-ops, with the maximum difference between one co-op’s compensation and another’s at 38 percent.

Too Much: So the top executive at one Mondragon enterprise cannot make over 38 percent more than the top executive at another coop?

Ugarte: Yes, the maximum difference could be 38 percent. But the maximum pay differential inside any individual co-op can be no more than one to six.

Read the rest of the full Too Much interview . . .

 

Quotable

“If you’re rich and you’ve got a lovely house, you need to have nice things to hang on the wall.”
Andrew Shirley, luxury analyst, after a Picasso expected to fetch $140 million in auction sold for $179 million, May 12, 2015

“Life is too short for bad coffee.”
Richard Hardwick, the marketeer of a brew made from Sumatran beans that retail at $500 a cup, New TV series on billionaire cuisine, Express, May 13, 2015

“Some argue that in taking steps to reduce inequality, governments would be picking winners and losers. The thing is, governments already do that. The people sitting on billions today ended up where they are thanks to public policies that allowed that to happen.”
Andrew MacLeod
, Seven Things You Need to Know about Inequality, The Tyee, May 19, 2015

“If you ain’t cheating, you ain’t trying.”
A chat room comment by a Barclays bank v-p in New York, quoted by federal prosecutors announcing that five major banks have pled guilty to currency fraud felonies, May 20, 2015

“By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth.”
OECD Secretary-General Angel Gurría, at the launch of the report In It Together: Why Less Inequality Benefits All, May 21, 2015

“We’re looking at a populist moment in this country. Economic inequality has become the crisis of our time.”
Katrina vanden Heuvel, The Nation, May 22, 2015

“The challenge of journalism today is to survive in the pressure cooker of plutocracy.”
Bill Moyers, speaking at the Helen Bernstein Book Awards for Excellence in Journalism, New York Public Library, May 26, 2015


Petulant Plutocrat of the Month

Warren BuffettBillionaire investor Warren Buffett has over recent years won lots of kudos for candidly noting that America’s richest moguls pay taxes at lower rates than their receptionists. But now the oracle of Omaha seems a bit worried that public anger at his fellow rich is getting a little out of hand. In a new Wall Street Journal op-ed, Buffett insists that the “poor are most definitely not poor because the rich are rich.” Any big boost to the minimum wage, he then asserts, “would almost certainly reduce employment in a major way.” Buffett’s “better answer” to poverty? Up the earned income tax credit, the tax code provision that uses tax dollars to supplement the pay of workers that Walmart and other low-wage employers refuse to compensate at an adequate level. Most of America’s rich, Buffett adds, “have contributed brilliant innovations or managerial expertise to America’s well-being.” Does the refusal to pay adequate wages — a widespread practice the Economic Policy Institute details in a new paper — count as a “brilliant innovation” or an example of “managerial expertise”?

More petulance: Former Lehman Brothers chief Richard Fuld, in his first public appearance since his Wall Street banking giant folded seven years ago, has denied any personal responsibility for the firm’s collapse. His smiling response to one listener who asked why he just doesn’t ride off into the sunset: “Why don’t you bite me?” . . . JPMorgan Chase CEO Jamie Dimon, Wall Street’s most lavishly paid banking exec, ended his month of May berating shareholders who voted against his latest pay package as “lazy.” Dimon’s diatribe came a week after his bank pled guilty to conspiring to manipulate currency prices.

 

Plutocrats at Play

Those hardworking CEOs: New research from the University of Tennessee and the University of Alabama finds that some top corporate execs play over 100 rounds of golf a year.

“Glamping,” the hip tag for “glamorous camping,” has come to Washington State. Parks in the underfunded state system are now fashioning luxury cabins to tap new revenue sources. On Orcas Island, the new Wanderlust Camp runs $440 for a two-night stay, with coffee delivery $9 extra.

The ultimate buddy move in San Diego: Former Hewlett-Packard chairman Ralph Whitworth invited 400 of his pals to a private show performed last month by none other than the legendary Rolling Stones. The band just happened to be in town for a public concert at the local ballpark. The private affair set Whitworth back a reported $2 million.

Antidotes to Inequality

With 2016 Awaiting, an Agenda Explosion

Will the 2016 Presidential primary campaigns see a serious debate about specific proposals for reducing inequality in America? That outcome now seems a real possibility.

This spring has brought pressure for a meaningful debate over inequality from national economic justice advocacy groups, think tanks, a smattering of prestigious pols, and even some Presidential candidates.

New York City mayor Bill de Blasio has been the moving force behind the most visible of these gameplans, a 13-point “progressive agenda to combat income inequality” that aims to “lift the floor for working people, help working parents, and champion a tax system that rewards work instead of just wealth.”

Several pols are backing plans to lift the income floor and push down the ceiling.

“The rich get richer, while everyone else falls behind,” de Blasio and U.S. Senator Elizabeth Warren from Massachusetts noted last month in a nationally syndicated op-ed boosting the new agenda. “The game is rigged, and the people who rigged it want it to stay that way.”

De-rigging that game, agree dozens of national civic and political leaders who have endorsed the de Blasio agenda, will require steps that range from hiking the minimum wage to $15 to closing the loopholes that pump up the fortunes of hedge fund billionaires and corporate CEOs.

New York’s de Blasio is taking care, for his part, to emphasize that no agenda will go forward without a movement behind it, and that movement is stirring. In April, four national advocacy groups with grassroots operations in 32 states — National People’s Action, the Campaign for America’s Future, the Alliance for a Just Society, and USAction — outlined a broadly themed equality agenda of their own.

Among the proposals this “Populism Platform” advances: a curb on “perverse CEO compensation policies that give executives personal incentives to plunder their own companies,” a financial speculation tax, and a break-up of the nation’s biggest banks.

The new agendas are shoving ideas for distributional change into the 2016 campaign mix.

Five other national advocacy groups — the Center for Community Change, the Working Families Organization, Leadership Conference on Civil and Human Rights, Center for Popular Democracy, and Jobs With Justice — have released a new “Putting Families First” agenda.

A key part of this gameplan: “Taxing concentrated wealth.” We need, the agenda explains, to fund needed new investments “by taxing those who benefit most from the current economic model — investors, financiers, wealth managers, and individuals in the highest income brackets.”

All these related agendas share a common political goal: to force concrete ideas for distributional change into the 2016 campaigning.

At least one candidate, Vermont senator Bernie Sanders, says he’ll be making that change the centerpiece of his White House effort. Among his specific proposals: a plan to finance tuition-free public higher ed with a speculation tax on banks, hedge funds, and other high-finance players.

The tax — 0.5 percent on stock trades, 0.1 percent on bonds, and 0.005 percent on derivatives — would annually raise in the hundreds of billions.

If more proposals along this order start emerging from other candidates in the 2016 race, this could get really interesting fast.

 

Peasants
with Pitchforks

In this year’s graduation season, no university may be honoring plutocrats more lustily than NYU. The university last month made a special tribute to hedge fund billionaire John Paulson, a big-time NYU donor who made $1 billion conspiring with Goldman Sachs to rig a 2007 subprime mortgage deal

A group of some 400-odd faculty at NYU are charging that school administrators have “lost touch with the moral, educational, and student needs of the university” and “are running NYU as a tyrannical slush fund for privileged interests.”

A new report from the group, The Art of the Gouge, reveals that skyrocketing tuition and fees “have some students sleeping on park benches while the university buys lavish condos.”

 

Take Action
on Inequality

Tell the U.S. Securities and Exchange Commission to lift up the veil and require corporations to disclose the ratio of their CEO to median employee pay.

 

 

Reports

A look at major new studies released over the past month

OECD reportIn It Together:
Why Less Inequality Benefits All

Organization for Economic Cooperation and Development, Paris
May 21, 2015

The most important insight from the last quarter-century of work by egalitarian-minded researchers — that most everyone suffers when economies grow more unequal, not just the poor — has now gone mainstream.

This new report from the OECD, the economic research agency funded by the governments of the developed world, essentially makes that mainstream status official. The report’s title, In It Together: Why Less Inequality Benefits All, could hardly deliver a more direct message.

The particulars inside this sweeping 332-page study reinforce that message at every turn. Our problem, the report emphasizes, goes beyond poverty. Our contemporary concentration of income and wealth is fouling everything from our social cohesion to our economic futures.

And what should we do about that concentration? The report doesn’t shy from the R-word. Redistribution, the OECD contends, needs to move onto the public policy top shelf. That redistribution, the report suggests, can take many forms, from higher tax rates on high incomes to much more serious crackdowns on individual and corporate tax avoidance.

This data-heavy volume doesn’t always make for the easiest of reading, but the OECD researchers behind it have thoughtfully provided a colorful interactive tool — What’s your share of the pie? — to help readers relate the report’s stats to the life experiences of actual households.

Stiglitz reportRewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity
Roosevelt Institute, May 2015
Joseph Stiglitz, lead author

“This is not about the politics of envy,” Nobel Prize winning economist Joseph Stiglitz announces at the outset of this invaluable new study. “The evidence of the last 35 years and the lessons of stagnation and low-wage recovery since the 2008 financial crisis show that we cannot prosper if our economic system does not create shared prosperity.”

Why isn’t America’s economy creating that shared prosperity? Our most powerful, Stiglitz goes on to explain in engaging detail, have changed the rules that structure our economy and political system.

The good news: We can change rules, too, and fashion an American economy that begins to work for workers, not just CEOs, that shares the wealth we all create and opens doors to a brighter future.

The new rules Stiglitz and his co-authors propose target the “behaviors that unduly reward those at the top” and aim to “restore the rules and institutions that ensure security and opportunity for the middle class.”

Rewriting the Rules abounds with specific proposals. Some have been bouncing around for decades. Others — like the notion of pegging corporate tax rates to the ratio of CEO to median worker pay — have just begun inching their way into the nation’s legislative chambers.

Also new last month: The annual Executive PayWatch CEO compensation report from the AFL-CIO finds that chief execs last year took home 373 times the paycheck income that goes to the average American worker, up from 331 times in 2013 . . . A year-long study by the London-based High Pay Center concludes the corporate executive “performance pay” doesn’t “encourage or reward good business performance.” What does performance pay do? Nothing more than “make executive pay packages more complex, less aligned with the interests of the company, and much, much bigger.” . . . Researchers at the Federal Reserve Bank of Boston show in a new paper that the policies of some U.S. states like Tennessee reduce the anti-inequality impact of federal policies by as much as a third. Other states like Minnesota are boosting the anti-inequality impact of federal policies by nearly 20 percent.

 

New Wisdom
on Wealth

Michael Hiltzik, The right way to measure CEO pay has nothing to do with ‘shareholder value,’ Los Angeles Times, May 4, 2015. Judging CEOs by what they deliver shareholders only serves to make current CEO pay excess seem rational.

Glenn Altschuler, The best way to nab your dream job out of college? Be born rich, Quartz, May 6, 2015. New research exposes how our class ceiling operates.

Jeff Vogel, Religious Extremists Beyond Compare, Tikkun, May 9, 2015. Our corporate CEOs worship money and wreak havoc in the process.

Paul Buchheit, The psychology of greed: Three attitudes that explain the worst behaviors of the 1 percent, Salon, May 12, 2015. Narcissism and more.

Scott Klinger, Subsidizing the Idle Rich While Poor Kids Go Hungry, OtherWords, May 13, 2015. Pols are slashing taxes for folks who dine on caviar while making it harder for the needy to put food on the table.

Bill Bigelow, The Koch Brothers Sneak into School, Rethinking Schools, Spring 2015. Right-wing billionaires are buying their way into the social studies classroom.

Gar Alperovitz, We need a new economic system, Aljazeera America, May 20, 2015. Overcoming our massive inequality will take a commitment to nurturing worker-owned enterprises.

Farhad Manjoo, A Tech Boom Aimed at the Few, Instead of the World, New York Times, May 20, 2015. New high-tech services help people on the lowest rungs of the 1 percent live like the 0.1 percent.

Ade Kearns, Support for redistribution will likely be weakened with ever greater residential separation of rich and poor, London School of Economics, May 21, 2015. The richer you are, the research shows, the more your attitudes will be governed by self-interest.

Gretchen Gavett, The Factors That Lead to High CEO Pay, Harvard Business Review, May 22, 2015. Nations that empower workers limit CEO pay.

Christopher Mims, How Everyone Gets the ‘Sharing’ Economy Wrong, Wall Street Journal, May 24, 2015. Uber and its ilk as “remarkably efficient machines for producing near minimum-wage jobs.” Billionaires, too.

Peter Cai, The economics of wealth and sadness, Business Spectator, May 29, 2015. A refugee from elite ranks reflects.

Retorts

Handy rejoinders to the apologists for our top-heavy status quo

The claim: Executive bonuses make enterprises more productive.

The reality: Executive bonuses, notes a new Chris Dillow discussion of the research literature, undermine enterprise productivity on a variety of fronts, starting with the intense pressure they put on people to produce at all costs. Some crack under that pressure, others resort to manipulation.

Excessive executive pay serves to bribe CEOs not to steal their firm’s assets.

Corporate boards, some analysts believe, do have one rational reason for lavishing bonuses on execs: CEOs who can’t be monitored effectively “must be bribed handsomely not to steal their firm’s assets.”

The claim: People don’t create inequality. Robots do. Modernity makes inequality inevitable because ever more sophisticated technologies are rapidly disappearing middle class jobs.

The reality: Automation scares, economist Robert Kuttner noted last month, have been popping up regularly for generations. In the late 1930s, many analysts blamed high unemployment “on machines taking human jobs.” But jobs magically reappeared a few years later, amid the massive public investments of World War II.

A modern society, adds Kuttner, always has plenty of work to be done. We could today be doing more “nurturing and educating children, caring for the elderly, replacing and modernizing decayed public infrastructure, expanding research, and transitioning to a green economy.”

Imagine the constructive work humans could do if we had more robots.

“Imagine all of the constructive work that humans could be liberated to do,” Kuttner asks, “if machines displaced even more jobs.”

A preoccupation with job-stealing robotics, adds economist Dean Baker, distracts us from the real political choices that are driving our economic divide, everything from trade policies that whack the middle class to a system of labor-management relations skewed against workers.

The claim: More marriages will cure inequality.

The reality: An increasingly loud cohort of analysts is blaming inequality on the breakdown of the traditional family. Single-parent households, the thesis goes, are generating a vast class divide between dual and single-earner households.

More marriages, the case continues, would ease the income divide. Some take this argument to an anti-single-parent extreme. They oppose any increase in safety net programs for single women, on the grounds that such assistance gives single moms an incentive to stay single.

Reducing inequality to marital status takes us down public policy deadends.

But reducing inequality down to marital status, Rachel Cohen points out in a new survey of the debate around family structure and income gaps, ignores some obvious realities.

Over 15 million children within two-parent married households, for instance, currently live in poverty. And in many other developed nations single-parent status doesn’t doom families to economic hardship.

Those nations recognize that all families need support, everything from higher wages and universal child care to quality public transportation that reduces long commutes and lets parents spend more time with their kids.

“Let’s fix our distribution policies first,” notes Cohen, “and then perhaps we’ll be in a better place to think about family structure.”

 

What to Watch

The documentary based on the landmark bestseller, The Spirit Level: Why More Equal Societies Almost Always Do Better, will be making its world premiere this month. Check out upcoming screenings — or organize one of your own.

Building economic democracy one worker co-op at a time: a short doc with worker-owners talking about the new economy model.

Consider yourself a visual learner? You can learn plenty from the new Robert Reich video series, The Big Picture: 10 Ideas to Save the Economy.

Watch Phoenix tax attorney Bob Lord dissect the billionaire’s loophole, the four arcane tax code provisions that every year save America’s super rich tens of billions.

 

Now featured on
Inequality.org

Nick Michalesko on the latest student activist push for a maximum wage

Sarah Anderson on a weak new SEC CEO pay rule

Nick Galasso on measuring our global inequality

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on Inequality.org postings

 

 

 

 

 

 

Books

Sixteen for ’16: A Progressive Agenda for a Better America
Salvatore Babones
(Policy Press/University of Chicago Press, 156 pp)

“Our country doesn’t need any more crazy conservative schemes that promise to fix problems by ignoring them, outsourcing them, or relying on the ‘magic of the market’ to solve them,” sociologist Salvatore Babones observes early on in his new book Sixteen for ’16.

Sixteen for 16We need instead, he goes on, “sound government based on established social science, underpinned by a basic sense of human decency.”

And we could have that sound government if the U.S. President elected in 2016 took to heart the wide-ranging “core policies” that Babones lays out — with considerable pizzazz — in these enlightening pages.

Babones, an American who now teaches in Australia, rates as one of the world’s top experts on inequality, and, as you might expect, many of the 16 policy ideas he outlines here either directly or indirectly speak to narrowing the economic gaps that divide us.

All the policy ideas presented here, whatever their immediate focus, “reflect principles that no reasonable person of the future will question.” And most all of these initiatives would find, in our here and now, a welcome reception among average American voters.

In one chapter, for instance, Babones lays out a compelling case for upgrading to a 10-10-10 economy — by annually guaranteeing every worker 10 paid sick days, 10 paid holidays, and 10 paid vacation days.

Enormous differences in income create enormous differences between people.

The Sixteen for ’16 chapter that deals most directly with inequality ends up endorsing a 90 percent federal income tax on income over $1 million, but not just for the reason most people would suspect.

Sure, notes Babones, we certainly do need more tax dollars from the rich to help rebuild our crumbling infrastructure. But we need more from an income tax than revenue. We need help tilting the field “so that earning an after-tax dollar means just as much to a CEO as a fast food worker.”

For that fast food worker, Babones explains, spending $20 to eat out at a restaurant meal requires a real sacrifice. CEOs would begin to feel at least a little taste of that sacrifice with a 90 percent top marginal tax rate in effect. For a CEO facing that stiff a tax, Babones points out, a $20 restaurant meal would actually cost $200 in before-tax income.

People who drink expensive imported bottled water or fly in private jets, as Babones observes in Sixteen for ’16, tend to care little about the poisoning of underground aquifers or congestion at public airports.

“Enormous differences in income,” he reminds us, “inevitably create enormous differences between people.”

Sixteen for ’16 just might be able to help us, in the coming election season, slim those differences down to democratic size.

 

 

Not long after World War II, the president of General Motors, then America’s most powerful corporation, asked Congress to lower the tax rate on income over $200,000 to 50 percent. Congress would not oblige.

The nation’s top tax rate would float over 90 percent throughout the 1950s.

That 90 percent rate today seems unimaginable. What made it imaginable — and possible — in the middle of the 20th century? Too Much editor Sam Pizzigati tells the fascinating story in The Rich Don’t Always Win, his gripping history of the triumph over America’s original plutocracy.

Learn more about the book. Read the intro chapter online. Check the video.

Rich Don't Always Win

 


About Too Much

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