Hundreds of migrant farmworkers marched in Miami this past Friday to protest a Florida tomato grower maneuver that will cut some tomato picker wages by 40 percent.
The growers are refusing to honor deals the state’s top farmworker group has cut with McDonald’s and Taco Bell to pay pickers a penny a pound more for the tomatoes they pick.
Fast-food chains just happen to be the biggest market for Florida’s tomatoes. But one fast-food giant — Burger King — has resisted the penny increase, and that resistance, says analyst Eric Schlosser, “has encouraged tomato growers to cancel the deals already struck.”
Why is Burger King so up in arms against a penny wage hike? Here’s a hint: The farmworkers started their protest Friday at the Miami office of Goldman Sachs, the Wall Street colossus whose power suits will shortly be divvying up as much as $22 billion in annual bonuses.
We have more in this week's Too Much.
Aras Agalarov, the Russian developer behind the annual “millionaire fair” that ended in Moscow last week, says his country has become just “like the rest of the world.” Explains Agalarov, who’s now busy building a walled rural residential complex of 150 second homes that start at $2 million each: “In other countries, you have poor people and rich people and now in Russia we have poor and rich people, too.” True enough, but only in Russia can a deep-pocket sip java on a coffee table propped up by Siberian mammoth tusks. The price for that table at this year's millionaire fair: $270,000. Also on sale at the fair: the ideal Mercedes accessory, a $2-million matched set of diamond-studded wheel covers and grille . . .
Mammoth tusks have been somewhat hard to find in the UK, and that’s one likely reason why Britain’s Thorp Design is using a bare graphite pedestal for its new “Ultimate Tub.” This $300,000 bath, “carved from a solid piece of teak,” features a computer touch-panel to control the water temperature. Meanwhile, Britain’s leading authority on households able to afford solid-teak tubs is floating a new prediction on when the world’s super-rich will reach the next personal wealth milestone, the trillion-dollar fortune. Today's largest personal fortune sits at about $63 billion, notes Philip Beresford, the founding compiler of the British Sunday Times Rich List. A trillionaire would have to have 1,000 billions. We won’t see a personal fortune that size, Beresford forecasts, “for at least 50 years.”
Back in 1990, Indian Nobel prize winner Amartya Sen and three other distinguished economists developed the global benchmark of population well-being that has become the UN’s annual Human Development Index. The latest index, released last week, rates Iceland, a nation with “a remarkably even distribution of income,” the world’s most desirable place to live. Norway, another of the world’s most equal nations, ranks second. The index rates nations by life expectancy, education levels, and gross domestic product per capita. The world’s two wealthiest countries — Luxembourg and the United States — rank 18th and 12th on the overall well-being index . . .
The CEO cronies that currently pack corporate boards of directors can breathe a little easier, at least for another year. The top federal corporate watchdog, the Securities and Exchange Commission, opted last week not to change the current rules that govern corporate board elections. 
Shareholders have the right, under these rules, to elect board members, but incumbent boards don’t have to print the names of candidates nominated by dissident shareholders on the official proxy ballots that go to all shareholders. That forces shareholders unhappy about excessive CEO pay to mount expensive campaigns to get their candidates visibility. Only one of the four current SEC commissioners, Annette Nazareth, voted last week to change the status quo. Noted Nazareth: “Responsible management need not fear its shareholders.” FedEx helped lead the corporate charge against changing the current proxy rules. Frederick Smith, the FedEx top exec, has pocketed $60.5 million over the past five years . . .
Two Israeli lawmakers aren’t waiting for shareholders to rein in ballooning executive compensation. They’re promoting bills that one critic is labeling “maximum wage” legislation. Shelly Yechimovitch of the Labor Party, a popular political talk show host now serving her first term in Israel’s Knesset, has introduced legislation that would deny corporations tax deductions on any executive pay that runs over 50 times the pay of a company’s lowest-paid worker. The bill, similar to legislation recently introduced in the U.S. Congress by Rep. Barbara Lee, has passed its first Knesset reading. Another Labor Party legislator, Dani Yatom, is backing a measure that would limit top executive salaries in government-owned enterprises to ten times the Israel minimum wage.
Quote of the Week
“There is the reinforcing myth that in our capitalistic-market society we must create and cherish the wealthy few because their capital creates businesses and jobs. Somehow, in the minds of too many, 1,000 $1,000 investments don't provide the same investment kick as a rich man's $1 million.”
Bill Roy, retired physician and former member of Congress, Topeka Capital-Journal, December 1, 2007
New Wisdom
on Wealth
James Hannaham, Fantasies in black and white, Salon, November 28, 2007. Explains why “unearned income and equity” generate much more of the “immense economic gap between whites and blacks” than rap and absent fathers and explores how denying that reality “distorts everybody's perception of economic inequality.”
Nomi Prins, Barbarians at the Capitol: Private Equity, Public Enemy. Mother Jones, November/December 2007. A former Goldman Sachs operative explains how the private equity industry funnels wealth up the economic ladder.
Elisabeth Eaves, America's Greediest Cities, Forbes, December 3, 2007. Assesses levels of urban greed by calculating the number of Forbes 400 billionaires per 100,000 population. The greediest city? Silicon Valley's San Jose metro area.
Wall Street power suits don’t tend to make much money picking tomatoes — or flipping burgers. They flip companies. And that flipping, maybe more than any other factor, is driving the Burger King battle over pennies now raging in Florida’s tomato fields.
The flipping at Burger King, the second-largest U.S. fast-food chain, has been going hot and heavy ever since 1989, the year Grand Met, a British company, bought out Pillsbury, Burger King's corporate owner. Just eight years later, Grand Met merged with Guinness to create a totally new corporation that became known as Diageo.
This new company knew plenty about beer, not much about burgers. By 2002, Burger King had become a basket case. That’s when three American big-money powers — Wall Street’s Goldman Sachs, Boston's Bain Capital, and Fort Worth's Texas Pacific — partnered to shell out $1.5 billion to take Burger King off Diageo’s hands.
Actually, the three partners did a good bit more borrowing than shelling. They spent only $325 million of their own money to buy Burger King. That’s standard procedure. Private equity firms typically borrow huge sums to buy up a hurting company, then tap the company’s cash flow to pay off the resulting debt.
But, wait, if that cash is going to pay off the debt the new owners of hurting companies run up to buy the companies, how are those new owners going to make the investments in marketing or customer service needed to make their dysfunctional companies functional?
Now firms like Goldman, Bain, and Texas Pacific could always borrow still more money to pay for these needed corporate improvements. But those improvements could take years to show up in the bottom line of a company like Burger King.
Private equity wheeler-dealers don’t have much interest in waiting years for results. But they have nothing against borrowing. So they do borrow — but not to make lasting improvements in the companies they buy. They borrow to line their own pockets.
Last year, for instance, Burger King borrowed $350 million in February and then paid out $367 million in dividends to the company’s owners, the good people at Goldman, Bain, and Texas Pacific.
Four months later, Goldman, Bain, and Texas Pacific unloaded a quarter of their Burger King ownership stake in an initial public offering of company shares that brought in $425 million. The three partners, once the dust settled, had nearly doubled their original out-of-pocket investment.
Burger King, meanwhile, remains a troubled company, deeply indebted, with per-restaurant revenues, notes Business Week, “just a little more than half the sales of a typical McDonald’s.”
But Goldman, Bain, and Texas Pacific aren’t finished yet. They last month began selling even more of their Burger King shares, with none of the proceeds going back into the company.
To make these sales as lucrative as possible, Burger King, naturally, needs to show top-notch, short-term operating profits. And that brings us back to Burger King’s hard-line against penny-per-pound wage hikes for Florida's tomato pickers.
The more pennies for those pickers, Burger King execs clearly understand, the fewer millions for Goldman, Bain, and Texas Pacific.
Last year, analyst Eric Schlosser points out, the over $200 million in holiday bonuses that went to the top 12 executives at Goldman over doubled the combined annual wages of southern Florida’s 10,000 tomato pickers.
This year, those top 12 Goldman execs will reportedly walk off with even more in their pay envelopes. Florida’s tomato pickers, courtesy of Burger King, can now look forward to a future with even less.
Michael Schwalbe, Rigging the Game: How Inequality Is Reproduced in Everyday Life. New York: Oxford University Press, 295 pp.
Inequality, Michael Schwalbe believes, may be our society’s “most consequential feature.” After all, this North Carolina State sociologist notes at the outset of his intriguing new book, inequality impacts “every aspect of our individual lives.”
“An unequal distribution of resources,” he explains, “produces an unequal distribution of experiences — of health and illness, of pain and pleasure, of security and insecurity, of opportunity and despair.”
We have, in our world today, an abundance of articles, studies, and books about just how unequally distributed our resources have become. Given our astoundingly high levels of contemporary inequality, that abundance shouldn’t surprise us.
Most of this work zeroes in on the “how much” of inequality. That’s important, to be sure. We need to know how much more some have than others. But we need to know more. We need to know the “how,” not just how did we become unequal, but how do we stay that way. How is inequality, as sociologists put it, “reproduced.”
That’s the question that sociologist Michael Schwalbe takes on, in distinctly unorthodox scholarly fashion. Schwalbe doesn’t throw numbers at us, not a single correlation coefficient. Nor does he overwhelm us with sociological jargon.
Yet Schwalbe respects the insights the sociological tradition has to offer. He shares those insights with us, in a conversational style that communicates, above all, through metaphor.
Analysts, to make sense of society, use metaphors all the time. These days, more often than not, they make the “market” their metaphor of choice — and explain daily life “as a series of transactions” for everything from money to approval.
Life certainly does sometimes take on the character of a market, but Schwalbe chooses a different metaphor: the game. In the game of life, people “compete with each other for money, status, and power” in contests guided by rules and people “whose jobs are to make, interpret, and enforce the rules.”
Games can be fair. Games can be unfair. We have the latter. We play today by rules rigged to reinforce inequality, and Schwalbe helps us see how these rules operate. But he also delves into deeper questions. Why do people so often resign themselves to continue playing games rigged against them? And what makes people demand, as we know they sometimes do, new rules?
Schwalbe’s answers point us toward a more equal society, to a “culture of solidarity” where “people support each other in raising questions, discovering how the world works, and thinking about how to create a new world.”
Can we reach that new world? Schwalbe exudes a reasonable optimism. We already understand, he notes, that power corrupts. That’s why we seek to limit “the political power than any individual or group can acquire.” And most of us also understand “that as wealth concentrates, power tends to concentrate along with it.”
Perhaps someday, speculates Schwalbe, we’ll go on to recognize “that preserving what's good about society requires limiting wealth for the same reasons that we limit political power.”
Stat of the Week
The U.S. housing industry may be imploding, but CEO pay at the nation’s 12 largest homebuilders last year averaged $14.2 million, well over the $8.6 million average of similarly sized companies in other economic sectors, say researchers at Moody’s. A just-released Moody’s study links CEO pay to the risky lending and massive overbuilding that now afflict the housing industry. Big annual CEO bonuses, notes Moody’s, leave executives “motivated to focus” more on short-term performance than on long-term “sustainability.”
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Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.
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