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February 1, 2010 |
| THIS WEEK | |
Remember that best-seller from back in the 1980s, All I Really Need to Know I Learned in Kindergarten? Well, in a sense, everything you — or anybody else — ever learned from kindergarten, you owe to Felix Adler, the philosopher who introduced the kindergarten construct to the United States back in the 1870s. Adler holds another first. In 1880, amid the starkest inequality America had up until then ever seen, Adler became the nation's first public figure to call for a “maximum wage.” He proposed “an income tax graduated up to 100 percent on all income above that needed to supply all the comforts and refinements of life.” The maximum wage has percolated on our political margins ever since. But last week this notion took a leap toward the mainstream, at Davos of all places, the Swiss burb that hosts the world’s largest annual confab of corporate potentates. We have that surprising story this week in Too Much. Also this week: We spotlight a fascinating new book that advances a maximum wage antidote for our income divide. The author: economist Moshe Adler. We checked. No relation to Felix. |
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| GREED AT A GLANCE | |
Back in 1930, voters in Oregon approved a state income tax. They haven’t voted, statewide, for a tax increase ever since. Until last week. Oregon voters on Tuesday gave healthy majorities to two initiatives that will hike taxes on the state’s corporations and wealthy. Affluent Oregon couples will see their tax rate on income over $250,000 rise by 1.8 percent. Oregon millionaires, even with the increase, will still be paying state and local taxes at a lower overall rate than the poorest fifth of Oregon households. But the children in those households will now be attending public schools spared the cutbacks that would have been inevitable without last week’s tax-the-rich triumph. Notes Karen Kraut, an organizer with the Boston-based United for a Fair Economy: “The remaining 49 states would be wise to follow in Oregon's footsteps.” State governments are currently projecting a $102 billion budget shortfall for the upcoming fiscal year . . .
At McKesson, the San Francisco-based health care info technology company, members of the corporate board now have a little less decision-making responsibility. Last June, angry shareholders passed a resolution that urged the company to require explicit shareholder approval for any future “golden coffin” agreements with McKesson’s top executives. Last Monday, the company agreed. But that won’t be any skin off the back of current McKesson CEO John Hammergren. Under his current “golden coffin” deal, Hammergren’s heirs will grab a $3.43 million cash death benefit and six months of additional salary, worth close to another $800,000, should Hammergren keel over during his current CEO contract. In 2009, Hammergren took home $29 million in total pay. He currently has $79.7 million sitting in his executive benefit retirement plan . . .
At Chanel, the Parisian fashion house, designers twice a year proudly present the ultimate in haute couture, a collection of fine gowns and accessories at a price range that “excludes all but the super rich.” In fact, notes South Florida fashion editor Rod Stafford Hagwood, only 2,000 women in the entire world can likely afford to shop regularly for true haute couture. At Chanel, a gold button can run $1,000, and skirts, jackets, and blouses typically start at $20,000. Chanel unveiled its latest collection last week. The most over-the-top offering: a pink satin and chiffon cape that, says Chanel, took 700 hours to embroider. |
Quote of the Week “The GDP mystifies and masks the gap between rich and poor. I don't think there's ever been such a large disconnect between the GDP and what ordinary people are experiencing.”
Stat of the Week Could the world's big bankers have funded their own bailout? Andrew Haldane, the Bank of England executive director for financial stability, last week pointed out that British bankers, if they had cut bank compensation by 10 percent from 2000 through 2007 and lowered bank dividends by a third, “would have generated more capital” than UK taxpayers eventually had to shell out for the bailout.
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| IN FOCUS | |
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At Davos 2010, Tough Talk on Greed Labor leaders at last week's Alpine assembling of global CEOs came with a simple pledge: We're going to fight to cap your pay.At Davos, the Swiss resort where global corporate and financial execs assemble every winter at a glittery “World Economic Forum,” gentility typically reigns. The notables and experts who show up to address this annual bacchanalia of cogitation don’t speak truth to power. They flatter it. Not this year. Among the 2,500 power suits high in the Alps last week for the 2010 forum: over a dozen international trade union leaders who came to demand an end to the global economy’s “vicious cycle of recklessness and greed.” The union leaders trekked up the Alps on behalf of the International Trade Union Confederation, the global group whose affiliates represent 175 million workers in 155 countries. The top leader at one of those affiliates, Philip Jennings, carried the group’s single boldest proposal to a packed session on the forum’s first day. Jennings, the general secretary of the global union federation that unites telecom and other workers, called for a cap — at 20 times worker pay — on all corporate and financial sector executive salaries. “The people at the top have done a very good job at looking after themselves,” Jennings told the bankers and CEOs assembled at Davos. “Trickle down has not worked. The compensation system is a racket. It is corrupt.” “Working people are angry,” added Jennings, who hails from the mining towns of Wales. “What we are seeing is obscene.” The Jennings remarks, another speaker quickly replied, had violated Davos decorum. His stark exclamations, charged Mark Mactas, the CEO of corporate consulting giant Towers Watson, would only serve to “raise the temperature.” “I see it as my job to raise the temperature,” Jennings shot back. “Sorry.”
The International Trade Union Confederation leaders at Davos detailed the Jennings call for a corporate “maximum wage” the next morning at a news conference where they unveiled a white paper on the reforms the labor movement sees as critical to global economic recovery. That recovery won’t come, the labor paper argues, unless nations reject corporate greed and the banker push to get the global economy back to “business as usual,” complete “with multi-billion dollar bonus packages.” Corporations and banks, noted the labor paper, have already begun “adding risk and deepening inequality” with a new round of leveraged buyouts that are eliminating jobs and lavishing huge rewards on wheelers and dealers. “This needs to change,” urged the union statement. And no single change would stop this return to business as usual more than “a strictly regulated upper limit on corporate bonuses and CEO pay,” a real “ceiling of no more than 20 times average earnings for the salaries of CEOs and a limit of bonuses to 100 percent of salary as an absolute maximum.” In a bank or corporation where workers averaged $30,000 a year, this “maximum wage” formula would limit total executive pay to $1.2 million a year. Why an executive pay cap set at 20 times worker pay? At last week’s Davos labor news conference, Philip Jennings pointed out that the founder of modern management science, Peter Drucker, had advocated a 20-to-one executive-to-worker corporate pay ratio for years before his 2005 death. The next stage in the labor struggle for a maximum wage? The union leaders at Davos pledged to continue their campaign against “unsustainable” executive pay at this summer's upcoming G20 economic summit. That summit will bring together the leaders of the world’s top economies. One of those leaders, French president Nicolas Sarkozy, also spoke at Davos last week — and his remarks added to the pay-cap momentum. Sarkozy called current levels of executive compensation “morally indefensible.” “We can't allow a tiny minority,” he pronounced, “to skew the system.” |
New Wisdom Colbert Platinum: Estate Tax Repeal. Comedy Central's faux “news” host explains why heirs-to-be might want to start waxing the banisters at the home of their frail rich uncle. Sam Pizzigati, Sustaining Inequality, UN Decade of Sustainability Speaker Series, Michigan State University, January 27, 2010. A presentation on the impact of income gaps by the editor of Too Much. Sarah Weinman, Casey Johnson and Ruth Lilly: A Tale of Two Heiresses, Tax Loopholes, and Tequila, Daily Finance, January 28, 2010. A look at the moral chaos that the one-year repeal of the federal estate tax has triggered. Jeremy Warner, Capitalism has forgotten to share the wealth, Telegraph, January 29, 2010. A pundit at Davos explores how a “small elite has captured — and kept for itself — all the spectacular benefits that capitalism is capable of producing.” Ben Leet, We Can Double Millions of Workers' Incomes, January, 2010. Explores what America could afford if the nation enacted a 90 percent tax rate on income over $400,000, the rate in effect for most of the two decades through 1963.
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| In Review | |
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Must the Rich Rock On Forever? Moshe Adler, Economics for the Rest of Us: Debunking the Science that Makes Life Dismal. New York: The New Press, 2010, 217 pp.
Then maybe you’ve been wondering, over recent years, why the bands you adore seem to be touring less these days — and charging more for the concerts they do give. Or maybe you worry more about Social Security checks than concert tickets. And maybe you wonder why the average Social Security check today doesn’t reach what an elderly person needs to pass the poverty line. Or maybe you wonder why the CEO at the company where you work makes more in a morning than you make in a year. You have questions. In his new Economics for the Rest of Us, Moshe Adler has answers. Good ones. And his answers all revolve, sooner or later, around our world’s increasingly unequal distribution of income and wealth — and power. Adler teaches economics at Columbia University. The vast majority of his colleagues in faculties of economics don’t just oppose any moves to make that distribution more equal. They tout, Adler notes, “a theory that justifies the process that creates inequality to begin with.” Economics for the Rest of Us blasts away against that theory — and all the other contortions economists go through to make the case that “what's good for the economy” must always be what’s “good for the rich.” In fact, as Adler explains with entertaining examples, growing concentrations of income and wealth at society’s summit make our lives far more “dismal” than they would be if we distributed resources and power more equitably. Take those rock concerts, for instance. Back in 1980, in a considerably more equal United States than we have now, 73 percent of rock concerts in large venues charged the same ticket price for all seats. To get a good seat, a dedicated fan only needed to show up early. Fast forward a generation. By 2003, only 26 percent of concerts charged the same price for all seats. And the best seats had increased the most in price. Nothing strange, notes Adler, in any of this. In a relatively equal society, with little difference in income between the rich and everyone else, monopolistic vendors have “little to gain from selling only to the rich.” But that all changes when the rich go mega. Vendors can charge more for their wares — and not worry if their less affluent customers can’t afford the freight. The end result of this rising inequality: Average-income rock fans, observes Adler, “must now content themselves with fewer live concerts because rock stars can now make more money charging higher prices and performing less.” To add insult to injury, a growing number of the gigs rock stars do perform come before audiences open to rich people only. Elton John charges $1.5 million for a 90-minute performance at a private party. The Rolling Stones: up to $10 million. In the grand scheme of things, of course, our world can survive the shenanigans of ungrateful and greedy rock-and-rollers. But the same dynamics of inequality that aggravate rock fans help explain why so many people can’t afford AIDS drugs or stay in college or buy a home. So what do we do? We need to ditch the “pseudoscience” that mainstream economics so often propagates, Economics for the Rest of Us advises, and press for new economic rules and regulations that can “check the unfair distribution of the fruits of our labor.” One such rule, suggests author Adler, could “set a maximum ratio at any given company between the highest executive compensation and the lowest worker's wage.” Most economists won’t like that notion at all. After spending some time with this invigorating new read from Moshe Adler, you most likely will. |
Inequality Links Working Group
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| About Too Much | |
Too Much is published by the Institute for Policy Studies: Ideas into action for peace, justice, and the environment. 1112 16th St. NW, Suite 600, Washington, DC 20036. (202) 234-9382. E-mail: editor@toomuchonline.org. Unsubscribe. |
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