The very wealthiest 1% in the United States possess more wealth than the bottom 40%, the top 20% possess more than the lost and dying middle class. (See well-documented report here.) Any suggestion that policy redistribute this inequality draws cries of anti-American socialism, most loudly from those barely hanging on in the sinking tiers of America wealth. This is simply a symptom of ignorance. A full 1/3 of Americans believe they are among the top 10% of American income earners and nearly all still believe the United States is the land of upward mobility and economic security.
Those are problems of understanding and conditions of cognitive dissonance. But there is another layer to inequality and it resides mostly on the upper tiers of wealth distribution. It is the idea that the very wealthiest somehow earned and deserve their growing wealth. This view is supported by the idea that without competitive compensation — as unfair as it might seem — we would be worse off because “talent” would not be attracted to the complicated careers of corporate management and high finance.
There is a simple one word answer to this (although you still sometimes see it written in its more archaic two-word form): Bullshit.
This is where the obligatory apology and reassurances need to enter any polemic about capitalism and its rewards. Most people, myself included, do not want to live in a world where people are not awarded for their talents and efforts, we don’t want to take away the benefits of good fortune, but increasingly talents, efforts, and even good fortune play an ancillary role to strategic regulatory and market regulation. While most of us work hard to earn a living and pay our way, a very elite few employ others to work even harder for them to change the rules that favor their privileged interests.
How else do you explain public policy that gives breaks to high incomes, subsidizes profitable industry (cf. fossil fuels, mercenary wars, industrial agriculture, etc.), and dismantle social structures that distributed opportunity more equally (cf. education, health care, social security).
The fact is, in an era when we invested more of our wealth in our common interests, we all did better, rich and poor alike. In fact, in the second half of the 20th century right, high-priced talent and corporations produced enormous wealth for this country, indeed for large parts of the world. American society was the envy of the world, It was the source of innovation and creativity and we made political decisions to foster those characteristics.
If we returned to those days, does anyone really think a wealthy capitalist — a “job creator” — would stash his wealth in a mattress somewhere in the Cayman Islands? (That, by the way, is another policy-enabled issue that we should address.) If the potential for profits exists to be taken, someone will take it. If today’s titans are unwilling to take risks, others will follow. Someone on the sidelines today — squeezed out perhaps because of the enormous comparative advantage that those with great wealth enjoy — might be happy to invest for a single-digit margin where today’s robber barons expect double-digit.
Would we be any worse off if that happened?
Eventually money would return to the market. Think of a reverse auction. Investors would jump in if they thought opportunities were being usurped. Likewise, for every CEO unwilling to spare his talents for anything less than tens of millions, there are talented people willing to take the helm. Perhaps economies of scale enable tremendous compensation, but it need not be this way. We didn’t pay CEOs 350 times the average compensation of his employees to attract his talent 30 years ago, why is that necessary today?
Today corporate profits rise — dramatically rise, to record levels — and worker compensation lags, even declines, and the trend is for the worst.
The myth of fair high compensation is perpetuated by those who profit from it. They sustain it to keep complaints away. Once we believed kings ruled by divine right. The time to pull back the curtain is long overdue.
Moreover, looking at so-called talent, it isn’t so rare. What’s the difference between a hot shot hedge manager in New York versus someone with similar talent and ability in Mumbai? The answer is Wall Street. One has access, the other does not. Likewise a kid raised in Manhattan’s wealth stands to gain much more than a kid raised in rural poverty. We created this wealth, no one did it alone. One depends on the other. It is time we put credit where credit is due.
But most importantly, if unrealized opportunity exists, it will be exploited. It is absurd to think that we need to sustain an economic system that disproportionately favors the few at the expense of the majority. It isn’t talent that matters, it is access to power that matters. If our democracy is protected — something which itself is in doubt (cf., Citizens United) — citizens can regain control of that power.
We accomplish by voting wisely, that starts with turning against the regressive Republican Party. We are not talking socialism, we don’t even need the redistribution that sustained the 50s and 60s in this country. We simply need parity, both economic and political parity, along with the safety nets — social security, health care, education — that gives a strong society a solid foundation.
The truth is the world is changing. The economy is changing…rapidly. It is a global one. Someday — which is really yesterday — we need to find a way to remain competitive in the global market. What is happening instead is we are allowing a slim minority of people harvest the capital of generations and make off like bandits. In the long run, even those of us who are better off will lose in this game. It is time we wake up and get our accounts in order.
Filed under: Economy, Politics | Tagged: CEO, Chief executive officer, Compensation, economics, Investment, Myth, Politics, Power, Republicans, United States, Wall Street, Wealth, Wealth Inequality | Leave a Comment »