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

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July 2015

This Month

If Americans knew how unequal America has become, would America keep becoming more unequal? The young Harvard economist Maximilian Kasy apparently doesn’t think so.

Kasy has placed online a “Wealthometer” to help Americans see for themselves just where they rank within the nation’s wealth distribution. You start the Wealthometer by estimating where you think you rank, then you insert your asset and debt totals to see where you actually do.

The results can be eye-opening. If you have a net worth of $100,000, for instance, you're holding a larger personal fortune than 73 percent of your fellow Americans.

Kasy supplies the same Wealthometer service for five other nations. He and his colleagues clearly have an agenda here: The more that people understand inequality, these analysts believe, the less they’ll stand for it.

Here at Too Much, of course, we believe that, too. Read on!

 

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Images of Inequality

White Pearl

Shipyard workers in Germany have begun installing the masts on the White Pearl, the soon-to-be-completed longest sailing yacht in the world. The 482-foot mega yacht will be Russian billionaire Andrey Melnichenko’s second. His first stretches a mere 394 feet and moves only by motor. Melnichenko plans on keeping both boats once the White Pearl launches, reports CNBC’s Robert Frank, “so he'll be able to use his sailing or motoryacht, depending on his mood.” The cost of building the White Pearl will run over $300 million. Staffing the boat will take a crew of 66.

 

Greed at a Glance

Two resorts along the Mexico coastline are offering teens of means throughout in North America a new “Billionaire’s Birthday Package” that includes everything from private jet transport to welcome bags with edible gold popsicles. Three nights for party groups up to 10 will run a sweet 16 a sweet $2 million.

China’s second-generation rich — the fuerdai — do love their social media. Wang Sicong, the son of one prominent Chinese billionaire, recently posted a photo of his Alaskan husky with a special edition gold Apple iWatch on each front paw. The retail price for the watches: over $30,000.

Inequality by the Numbers

July infographic

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Stats of the Month

The share of America’s income cascading to the nation’s top 1 percent jumped to 21.2 percent in 2014. In 2013, IRS data crunched by UC Berkeley economist Emmanuel Saez show, the top 1 percent collected 20.1 percent of the nation’s income.

Disney CEO Robert Iger pulled in $46.5 million last year, or $248 a minute assuming a 60-hour week. Iger rakes in the price of a single-day Disneyland pass every 25 seconds. His lowest-paid workers, analyst Scott Klinger notes, can’t afford the cost of entry after a full day’s work.

Less than a third of Americans worth at least $3 million — just 32 percent — feel “the wealthy have a moral obligation to share their good fortune with those less fortunate,” a new U.S. Trust survey reports.

The top banking executive in Japan took home $2.65 million last year. In the United States, the top Goldman Sachs banking exec last year pulled down $24 million.

Taxing “carried interest” — the profit share that hedge and other fund managers take on the money they manage — at the same rate as ordinary income would raise $180 billion for the U.S. Treasury over the next decade, ten times more than earlier estimates, a New York Times analysis concluded last month.

 

 

 

The Too Much Interview

Getting Beyond Shop-Til-We-Drop

Inequality has our planet down, the veteran analyst Juliet Schor believes, but not out. She’s seeing more and more of us working for alternatives to mindless consumerism — and the failing economic system that so relentlessly generates it.

Juliet SchorOver the past quarter-century, Boston College sociologist Juliet Schor has probably done more than anyone else in the world to bring grand conceptual constructs like income distribution down to the nitty-gritty of ordinary everyday life.

In her two biggest best-sellersThe Overworked American: The Unexpected Decline of Leisure and The Overspent American: Upscaling, Downshifting and the New Consumer — and in a wide variety of articles and appearances, Schor has vividly exposed how inequality unleashes dynamics that have us consuming ever more and enjoying life ever less.

“Somebody needs to be for quality of life,” as Schor has put it, “not just quantity of stuff.”

And everybody, she’s emphasizing in all her work today, ought to be worrying more about how inequality is endangering our increasingly fragile planet.

Too Much editor Sam Pizzigati spoke more about that danger — and inequality overall — with Schor last month.

Too Much: The conventional wisdom among progressive economists holds that our top-heavy distribution of income and wealth leaves average Americans with too few dollars to buy and consume what they need. But you don’t seem to feel that getting everyone an adequate income will solve our consumption problem. Why?

Our politics has been blind to the connections between inequality and climate change

Schor: Everyone, of course, absolutely needs an adequate income. I fully support that. I actually think that we are rich enough in the United States to offer everyone a guaranteed basic income.

But the issues we have as an economy, as a society, and, perhaps even more importantly, as a planet go far beyond trying to prop our economy up with consumption demand.

I see catastrophic climate change as the key issue that we’re facing today, and most of the discourse on inequality has been really blind to this problem — and also blind to the connections between inequality and climate change.

I’m working now with some colleagues on models that directly estimate the impact of income inequality on greenhouse gas emissions. The economist James Boyce has done some pioneering work on this, but it’s not yet a well-understood subject.

In the United States, Boyce has shown, states with more income inequality have weaker environmental protections, more pollution, and generally worse environmental outcomes.

We get wasteful consumption whenever income and wealth concentrate at the top.

The link between inequality and climate change has both economic and political dimensions. Most of us can more easily understand the political dimension, the political power that’s flowing from concentrated economic power into the hands of a small number of people like the Kochs and a small number of fossil-fuel companies like Exxon that have been impeding action of climate change for decades now.

Too Much: You’ve been exposing the hazards of wasteful consumption for quite some time. Yet that waste is getting even more outrageous. We now have exceedingly rich people renting private jet flights to transport their pets. In Beverly Hills, a new mansion has a master bedroom suite three times the size of a standard three-bedroom home. Do you get discouraged? Is our consumer culture simply too powerful to overcome?

Schor: I don’t think so at all. In fact, I’m actually optimistic on the cultural side. Those outrageous examples you’ve cited all emanate from our extraordinary concentration of income and wealth. But that’s a long-standing story. Whenever you have wealth concentrated at the top, you get this sort of wasteful “competitive consumption.” Thorstein Veblen was writing about this dynamic 115 years ago.

I don’t think competitive consumption at the top represents what’s going on today across the consumer culture more generally. I see much more questioning of the shop-til-you-drop mindset, of mindless consumerism.

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

 

Quotable

“Outsized CEO pay packages take from most of us — whether through higher prices at checkout, pushing down workers’ wages and benefits, or not paying taxes toward the common good — and redistribute the money to a privileged few. It doesn’t have to be this way. We have a minimum wage — why not a maximum wage?”
John Burbank, executive director, Economic Opportunity Institute, What if we set a maximum wage for CEOs? Everett Herald, June 3, 2015

“Obsession with a consumerist lifestyle, above all when few people are capable of maintaining it, can only lead to violence and mutual destruction.”
Pope FrancisLaudato Si’ Encyclical Letter, June 18, 2015

“The 2016 presidential field has so far divided into two camps: the very wealthy, and the less so.”
Rebecca Ballhaus, Wall Street Journal, June 18, 2015, in an analysis of the divide that stretches from former CEO Carly Fiorina’s $59 million to the much less than $1 million of U.S. Senator Bernie Sanders

“In the absence of voluntary restraint, the government can use taxation as a way to introduce restraint in executive remuneration. Exorbitant salaries can simply be taxed at exorbitant tax rates to reduce after-tax income to more acceptable levels.”
Jannie Rossouw, School of Economic and Business Sciences at Wits University, South Africa, Investigate executive salaries to close the wage gap, Mail & Guardian, June 19, 2015

“Americans are segregating ever more by income in terms of where we live. Thirty years ago most cities contained a broad spectrum of residents from wealthy to poor. Today, entire cities are mostly rich (San Francisco, San Diego, Seattle) or mostly impoverished (Detroit, Baltimore, Philadelphia).”
Robert Reich, Economic Apartheid in America, Alternet, June 29, 2015


Petulant Plutocrat of the Month

Paul LePageMaine governor Paul LePage hates income taxes. He has even, Politico reports, likened the IRS “to the Gestapo.” Earlier this year, LePage called on state lawmakers to eliminate the Maine income tax. The lawmakers balked. LePage proceeded to threaten to veto every bill Democrats sponsor — and then extended that threat to Republicans, too. That didn’t surprise one GOP legislator who opposes LePage. Explains senator Tom Saviello: “The governor is a businessman, a former CEO whose method is to do what he wants.” And what LePage wants appears to be a return to the original Gilded Age. The governor doesn’t just oppose taxing rich people’s income. He also wants the state working age dropped to 12, a move that would essentially wipe out a century worth of laws against child labor.

 

Plutocrats at Play

The deep pockets who live in Southern California’s ultra wealthy enclave of Rancho Santa Fe don’t much appreciate their state’s drought-crisis water use restrictions. In April, water consumption in Rancho Santa Fe actually went up 9 percent after the governor called for a 25 percent cut. Rich people, says Rancho Sante Fe resident Steve Yuhas, “should not be forced to live on property with brown lawns, golf on brown courses, or apologize for wanting their gardens to be beautiful.”

Antidotes to Inequality

The Long, Long Wait for CEO Pay Reform

This month marks five years since the passage of the landmark Dodd-Frank Act Wall Street Reform and Consumer Protection Act. But the federal agency responsible for enforcing the act’s CEO pay reforms still hasn’t issued the regulations that would let these reforms go into effect.

The Securities and Exchange Commission, in fact, didn’t even propose regulations for the last of the reforms until earlier this summer. All SEC regulations, once proposed, go through a public comment period before the agency’s five commissioners can vote them into final form.

Federal regulators have been dragging their feet on the rules needed to limit CEO pay.

The SEC foot-dragging has been frustrating CEO pay reformers, and nowhere more so than on the boldest of the Dodd-Frank executive pay provisions, a mandate that publicly traded corporations annually reveal the ratio between their CEO and median worker compensation.

The SEC proposed regulations to enforce this mandate in October 2013, and over 100,000 Americans wrote in to support the draft regs. But corporations protested, and the initial October 2014 deadline for finalizing Dodd-Frank’s ratio disclosure mandate came and went without action.

This past spring, the SEC indicated that a final vote may not come until April 2016, a move that guarantees no actual firm-by-firm public disclosure of pay gaps between CEOs and their workers before 2017.

The AFL-CIO, a leading force in the CEO pay reform movement, has had enough. The labor federation, backed by host of public interest groups, is filing a freedom-of-information request for the SEC records around the agency’s handling of the pay ratio disclosure mandate.

CEO-worker pay ratio disclosure could spark a legislative firestorm.

These records figure to show the massive pressure Corporate America has applied to get the SEC to limit the information about corporate pay rates that companies will have to start revealing.

“Many corporate CEOs would prefer to keep this information secret,” as an executive pay reform movement letter in support of the AFL-CIO freedom-of-information request notes.

What has Corporate America so spooked? Pay ratio disclosure would open the door to legislation that rewards firms that maintain a modest gap between their CEO and worker pay rates — and penalizes companies that pay their top execs unconscionably more than their workers.

That sort of legislation has already started emerging at the state level. In California last year, a bill to subject corporations with wide pay gaps to higher tax rates won a Senate majority. Rhode Island senators last year passed a bill that would give companies with small pay gaps a leg up in winning government contracts.

Bills like these would likely proliferate as soon as corporations had to start disclosing their internal pay ratios.

Not all corporate chiefs are resisting moves to limit the executive-worker pay divide.

Not all CEOs are resisting the growing worldwide movement to limit the pay gap between executives and workers. The latest top exec to stand up for common-sense compensation: Sacha Romanovitch, the new chief exec of the giant British accounting firm Grant Thornton.

Romanovitch has announced that she will limit her personal pay to no more than 20 times the average salary at her 4,500-employee enterprise.

UK top execs, the London-based High Pay Centre reported last August, make 131 times more than average British workers. In the United States, big-time corporate CEOs currently average over 300 times the pay of American workers, in the latest calculations from both the AFL-CIO and the Economic Policy Institute.

That may be one reason why a New York Times/CBS News poll released last month found that Americans now favor, by a 50 to 45 percent margin, “capping the income of top executives at large corporations.”

 

Peasants
with Pitchforks

Hundreds of clergy and other activists with Fair Economy Illinois converged last month on the Chicago office of hedge fund billionaire Ken Griffin. Their mission: to protest the latest proposed budget cuts of Griffin-bankrolled Illinois governor Bruce Rauner.

This “Moral Monday” show of strength ended with a civil disobedience action in Griffin’s office lobby.

Chanted the demonstrators: “Love thy neighbor as thyself. Tax the rich and share the wealth.”

 

Take Action
on Inequality

Why has the Securities and Exchange Commission done so little to enforce Dodd-Frank Act checks on CEO pay excess?

One reason: Most SEC commissioners have far too close ties with Wall Street.

Join the campaign that’s urging President Obama to avoid Wall Street insiders when he fills the two SEC commissioner slots soon to be open.

 

 

Reports

A look at major new studies released over the past month

Capgemini report coverWorld Wealth Report 2015
Capgemini Financial Services and Royal Bank of Canada Wealth Management, June 2015

Capgemini has been in the wealth-tracking business longer than most global financial services outfits, and this latest annual Capgemini study tells a story its analysts have been sharing for quite some time now.

The first part of that story: The United States remains the statistical center of the rich people universe, with almost as many people holding at least $1 million in investable assets as the world’s next three most rich people-heavy nations combined.

The story’s second part: The global gap between “ultra high net worth individuals” — affluents with at least $30 million available to invest — and the rest of the world’s millionaires continues to widen.

In 2014, Capgemini and RBC Wealth Management detail, the 1,393,000 folks worldwide with over $30 million to invest made up just 1 percent of our planet’s population of millionaire investors. But this elite group held a whopping 34.7 percent of the world’s millionaire investor wealth.

Causes and Consequences of Income Inequality:
A Global Perspective

International Monetary Fund, June 15, 2015
Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, and Evridiki Tsounta

Still another report from the mainstream of the economics profession has concluded that letting the rich get richer has no redeeming social value.  

This new IMF study looks at “159 advanced, emerging, and developing economies for the period 1980–2012” and finds that the more income concentrates at the top, the more the overall economy sputters — and the lower the pretax incomes of low- and middle-income class households.

In short, the report bluntly sums up, “when the rich get richer, benefits do not trickle down.”

Also new last month: The latest edition of the Change Readiness Index, a joint effort of Oxford Economics and KPMG, shows that “nations that prioritize the fair distribution of wealth” do a much better job handling natural disasters and crises . . .

Which developed nations have done a better job prioritizing wealth’s “fair distribution”? The OECD, the developed world’s official economic research agency, compares a host of nations in its June Statistics Brief. Spoiler alert: The United States gets predictably low marks . . .

Consumers prefer doing business with companies that sport moderate gaps between their CEO and worker compensation, concludes Paying Up for Fair Pay, a new Harvard Business School working paper from Bhavya Mohan, Michael Norton, and Rohit Deshpandé . . .

The wealth of households worth between $20 million and $100 million rose by 34 percent globally in 2014, reports the new Boston Consulting Group study, Global Wealth 2015: Winning the Growth Game . . .

In Billionaires’ Bluff: How America’s Richest Families Hide Behind Small Businesses and Family Farms in Effort to Repeal Estate Tax, Public Citizen details how just nine of the wealthy American families bankrolling the ongoing estate tax repeal campaign stand to save $25.7 billion off their taxes if they get their way on eliminating estate taxation.

 

New Wisdom
on Wealth

Dave Zirin, The People of Oakland Need to Occupy Their Sports Teams, Nation, June 8, 2015. Our sports reveal a society where the desires of the “haves” violently out-prioritize the needs of the “have-nots.”

Ken White, Welcome to the Future: Talking Resilience with Chuck Collins, Resilience, June 15, 2015. Our community mutual aid muscles are atrophying amid extreme inequality.

David Roberts and Javier Zarracina, Rich people are jerks, explained, Vox, June 16, 2015. An entertaining analysis of how much the policy preferences of the 1 percent diverge from general public perspectives.

Gretchen Morgenson, Tech Companies Fly High on Fantasy Accounting, New York Times, June 18, 2015. How CEOs pump up their compensation.

Pablo Eisenberg, How Foundations Can Win the Fight Against Inequality, Huffington Post, June 25, 2015. By doing what they have so far been reluctant to do: fund advocacy that can transform society.

Peter Dreier, Is Bernie Sanders Too Radical for America? American Prospect, June 30, 2015. Most Americans worry with Bernie that government has been captured by the powerful and wealthy.

Retorts

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

The claim: CEOs make so much because they perform so well.

The reality: Corporate flacks regularly play the “pay for performance” card whenever the mega millions their bosses collect come under fire. Michael Fries, the chief exec at cable giant Liberty Global, took in $112.2 million last year. He earned every penny, a firm flack told the Wall Street Journal, because shareholder return at the firm is rising.

“Our compensation plans,” the spokesman explained, “are structured to heavily weight long-term equity performance.”

Performance explains next to nothing about why CEOs make as much as they do.

That’s what all companies like to say when their shareholders are doing well. What changes when shareholders aren’t do so well? Not CEO pay levels. Plenty of execs are hitting pay jackpots, a new Wall Street Journal survey shows, even when their shareholders are hurting.

Last year, for instance, General Electric chief Jeff Immelt pocketed $37.2 million, an 88 percent raise over his previous year’s pay. The G.E. shareholder return for the year? That fell 6.7 percent. But Immelt, G.E.’s flacks insist, remains worthy. He “exhibited strong leadership” in 2014. The proof? Profits in one of G.E.’s divisions went up.

What do corporate flacks do when they simply can’t find any instance of “high performance” to cherry pick? They spout pure gobbledegook.

IBM flacks have mastered this particular defense. Their CEO, Virginia Rometty, saw her pay jump 39 percent to $19.3 million last year while IBM’s revenues, profits, and shareholder returns were all sinking.

Rometty’s overall pay, the company flacks explained, “takes into account the shortfall in financial results relative to expectations balanced against the substantial strategic actions taken to reposition the company.’’

Got that? In other words, heads CEOs win, tails the rest of us lose.

The claim: CEOs don’t make hundreds of times what workers make.

The reality: Chief executive pay at major American corporations, both the AFL-CIO and the Economic Policy Institute report, last year outpaced worker pay by over 300 times. That’s highly misleading, claims the American Enterprise Institute’s Mark Perry. CEOs in America are only averaging, argues the conservative analyst, four times worker pay.

How does Perry get all the way down to just a four-times gap? For starters, notes EPI’s Larry Mishel, the sample of chief executives he uses includes execs at governmental agencies and nonprofit organizations that range from advocacy groups to churches!

 

What to Watch

In America’s last Presidential election, 40 percent of all political contributions came from the nation’s richest 0.01 percent, households worth at least $110 million each. What can we do to end the reign of Big Money in politics? Robert Reich offers ideas — and lots of good quips — in the latest addition in his how-to-save-our-economy video series.

 

Now featured on
Inequality.org

Josh Hoxie and Ben St. Clair on honoring America by breaking up grand fortunes

Jim Hightower on White House hopefuls talking a good game about inequality while making it worse

Sarah Anderson on inequality in our digital age

Bob Lord on the red herring in the inequality debate

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Books

Danny Dorling Injustice coverInjustice: Why Social Inequality
Still Persists

Danny Dorling
(Policy Press, 473 pp.)

We live in a trickle-down world, or so insist our world’s richest and those who cheer them on. The grand fortunes our rich amass, their story goes, eventually trickle down and benefit us all. University of Oxford social geographer Danny Dorling agrees — up to a point.

We do live, as he relates in these pages, in a trickle-down world. But what’s trickling down brings most of us no benefit.

The reason? Wealth isn’t trickling down from above. Myths are. Myths that rationalize our young century’s colossal concentration of riches and power. Myths — Dorling calls them the “ideologies of inequality” — that aim to justify injustice.

For Dorling, our world’s staggeringly unequal distribution of income and wealth has become the “disease behind injustice,” a disease that binds the elitism, exclusion, prejudice, and despair that define our epoch.

Why do we let this inequality define us? We have simply, Dorling believes, imbibed too many myths from those who lord over us.

A century ago, amid the struggle for social insurance to protect workers injured on the job, men of wealth and power argued that workers insured against disability would cut off their own limbs to reap the rewards disability protection would provide.

Injustice exposes the myths that rationalize our income and wealth concentration.

Today’s rich and their hired hands seldom get that crude. They spin much more sophisticated myths. In Injustice, Dorling examines — and exposes — them all. Sometimes with figures and charts. Sometimes with history. Sometimes with unrelenting logic.

A word of warning for American readers: Injustice invites you — expects you — to take a leap out of your comfort zone. The book includes plenty of material about the United States. But its pages also abound with stories and stats from the UK, that proverbial “other side of the pond.”

Dorling is, in effect, betting that Americans can learn as much from the UK experience as the British can learn from what’s happening in the United States. A reasonable proposition from a readable book.

 

 

The most well-known moments of Franklin Roosevelt’s Presidency? Most would cite his “First Hundred Days.” But FDR actually made his greatest impact on America’s distribution of income and wealth closer to his final days in office. Too Much editor Sam Pizzigati has that story in The Rich Don’t Always Win, his gripping history of the triumph over America’s original plutocracy. Learn more.

Rich Don't Always Win

 


About Too Much

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