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||August 4, 2014|
This week, we're pleased to note, marks the tenth anniversary of our first online Too Much. We started out with a few dozen weekly subscribers. Over 10,000 readers now receive Too Much in their email inboxes every Monday — and thousands more catch Too Much articles in a variety of online news outlets.
Too Much is making a difference. We’re bringing the pioneering work of inequality researchers to wider audiences. Journalists are taking story leads from Too Much and lawmakers ideas for legislation. Activists are taking inspiration.
The other side of the ledger? We — all of us — haven’t done nearly enough. Inequality has actually grown over the last decade. And if that growth continues, what then? An apt question for this tenth anniversary issue. More below on it.
Our thanks, before this anniversary issue begins, to all those readers who’ve dropped a line to us over the years. We appreciate your comments. Please keep them coming! And please also keep sharing the word about Too Much with your friends and colleagues. We couldn't have grown without you!
A final note: Our annual summer break starts next week. We'll be back soon.
|GREED AT A GLANCE|
Why do corporations borrow? To invest in innovation, the textbooks inform us. In real corporate life today, the latest stats suggest, corporations borrow to feather executive nests. In 2013, Wall Street watchdog Pam Martens notes, corporations in the United States borrowed $782.5 billion. They also bought back $754.8 billion worth of their own shares of stock. All told, U.S. corporations have spent $4.14 trillion on “buybacks” over the past eight years. These buybacks have one and only one purpose: to raise the value of corporate shares. CEOs love buybacks: Their “performance pay” typically rises as their shares gain in value. CEOs in other nations apparently haven’t caught on yet to buyback magic. The top execs of global corporations based in India, one analysis last week observed, only make one-tenth of what their U.S. counterparts rake in . . .
Plenty of corporate execs run outfits that profit off the misery at the bottom of America’s economic ladder. But count Family Dollar CEO Howard Levine among the few execs who fail at that profiting and still lavishly fill their own pockets. Dollar- store retail, overall, has soared since 2008 as the ranks of Americans in poverty have jumped by almost 40 percent. But management blunders have kept Family Dollar the only dollar-store “Big Three” corporation with drooping sales over the past year. Last week, Dollar Tree — a top Family Dollar rival — announced an agreement to buy Levine’s troubled retail empire for a price well above over Family Dollar’s share value. Levine will report to Dollar Tree's CEO once the deal finalizes, if he chooses to keep working. He may not. His likely take-home off Family Dollar's sale: $130 million . . .
America’s top 1 percenters, Too Much related last week, are spending record thousands to assure their kids spots in the nation’s most sumptuous summer camps. Not included in those thousands: the big bucks wealthy parents are now spending to pack their kids up for summer camp. Barbara Reich of New York’s Resourceful Consultants charges $250 an hour to fill trunks with “delicate touches like French-milled soaps and scented candles.” A typical job runs four hours. Two years ago, Reich had one packing order, last year five. This year she had 10 orders before Memorial Day. Her fellow packer Dayna Brandoff of Chaos Theory says well-heeled parents want the trunks she packs to help “recreate their child’s bedroom so they can feel completely at ease in air-conditioned bunks.”
Quote of the Week
“If wages reflect merit, why do they seem so arbitrary? Are the richest executives 50 or 100 times better at their jobs than their predecessors were in 1980? Are they 20 times more skilled and educated than the people immediately below them, even though they went to the same business schools?”
|PETULANT PLUTOCRAT OF THE WEEK|
Four of America’s biggest banks — Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Citigroup — have grabbed nearly $556 million in fees helping U.S. corporations merge into offshore companies, news reports last week detailed. This merging maneuver — “inversion,” as they call it in tax avoidance circles — will save American firms $19.5 billion off their U.S. corporate tax bills over the next decade. But JPMorgan Chase CEO Jamie Dimon says he sees nothing wrong with helping companies sidestep their federal taxes. Insisted Dimon last week: “I’m just as patriotic as any American.” Dimon’s brand of patriotism pays. The JPMorgan Chase top exec pocketed $20 million for his labors last year.
|IMAGES OF INEQUALITY|
How do you park into a narrow harbor a super yacht nearly the length of a football field? You back it in, of course. Very carefully. Yachtsman Andy Wheeler enlisted a drone last month to make a video of his Chopi Chopi backing into the harbor at Corsica’s port of Bonifacio. Wheeler’s yacht, the largest ever built in Italy, launched last year. Analysts at that time valued the boat at $107 million.
New Economy Transition Discussions/ Think we deserve an economy that delivers more than concentrated wealth and environmental destruction? This just-opened new site offers an intro to cutting-edge thinking on how we can go about centering a new economy around ecological balance and equitable distribution.
|PROGRESS AND PROMISE|
French economist Thomas Piketty’s call for a global tax on grand fortune may not yet have won support from any major political party. But support for wealth taxation is bubbling at the political fringes. The UK Green Party, for instance, has just endorsed the notion of a 1 or 2 percent tax on private wealth over £3 million, the equivalent of just over $5 million. Such a tax applied to the UK, the Greens calculate, would impact about 300,000 households and raise, at the 2 percent level, the equivalent of $73 billion a year. The Greens are also calling for “company-wide maximum pay ratios” that would limit CEO compensation to no more than 10 times the salary of a company’s lowest-paid employee.
Walgreens is trying to work a tax avoidance maneuver that will cost the rest of us $4 billion. Tell CEO Greg Wasson to stop — or lose your business.
|inequality by the numbers|
Stat of the Week
The tenth-largest fortune in America last year belonged to New York's Michael Bloomberg. His net worth: $31 billion, or six times the inflation-adjusted fortune of America’s richest man — shipping magnate Daniel Ludwig — back in 1982, the year Forbes published its first annual list of America’s 400 richest.
Inside Our Profoundly Unequal ‘New Normal’
Wealth's current tilt to the top sometimes seems almost eternal. But can our economy ‘self-correct’? A provocative new paper out of the developed world's official research agency contemplates our future.
The Commerce Department released some revised figures on America’s economy last week. Previous numbers, Commerce researchers noted, had overestimated the share of the nation’s income going to workers and underestimated the share going to America’s asset-rich.
“Everything’s coming up roses for people who own a chunk of American capital,” observed Brookings Institution economist Gary Burtless after the new stats emerged. “What we’ve seen in the economic recovery is inequality on steroids. The market is giving wealthy people a very good run.”
That “very good run” has actually been lasting a very long time. Since 1982, the income share of America’s top 1 percent has more than doubled, from 10.8 percent in 1982 to 22.5 percent in 2012.
Americans down below those top 1 percent heights, meanwhile, haven’t been on much of a run at all. They’ve been falling. The wealth of the typical American household has dropped nearly 20 percent since 1984, says a new Russell Sage Foundation study.
As of June 2014, adds a new analysis of private sector wages, average American worker real wages have dipped 16.2 percent since 1972, their record high point.
Fabulously good times for the ultra affluent. Struggling times for most everybody else. This bifurcated reality has essentially become America’s “new normal.”
How long can this “new normal” last? Can the “old normal” — those years right after World War II that saw a much more equal America — make a comeback? And if this “new normal” does continue, what’s going to happen to us?
Questions like these are finally gaining some serious air-time. Credit economist Thomas Piketty in part. His Capital in the Twenty-First Century bestseller has shoved wealth’s concentration into our political discourse. Current trends, he details compellingly, have us well on the way to recreating levels of top-heavy wealth distribution not seen since the eve of the French Revolution.
Other economists are digging even deeper into the future. One of them, Lars Osberg from Canada’s Dalhousie University, has just had some thoughtful — and deeply disturbing — reflections published by the OECD, the international economic research agency for the world’s developed nations.
Osberg’s provocative new OECD working paper dives into decades of data from the United States, Canada, and Australia and explores whether our “new normal” might run out of steam on its own — and what will happen if it doesn’t.
Osberg has prepared this OECD paper for his fellow economists, and his discussion at times can get too technical for general readers. But the paper’s dramatic takeaways, even so, stand out clearly.
The first: Our world’s deeply unequal market economies have no automatic “self-correcting” mechanism.
Osberg invites us to consider, for instance, the situation with soaring corporate executive compensation. The conventional explanation for this executive excess posits that top CEOs are making so much more these days because generous incentives have them working harder.
Now if top CEOs are indeed making so much more because they’re working harder, notes Osberg, then “at some point” executive pay would self-correct and stop escalating so much faster than worker pay.
“After all,” as his OECD paper points out, “individual ‘effort’ — both hours of work and work intensity per hour — cannot increase without limit.”
But in the real world, Osberg observes, executive paychecks aren’t increasing because today’s execs are working harder than their counterparts a generation ago. Rising CEO pay reflects instead the grander scale of today’s global markets — and the capacity of top execs to exploit their hierarchical rank.
Those global markets will be expanding for decades to come, Osberg's paper shows, in everywhere from China to sub-Saharan Africa. And for the execs who direct that expansion, compensation remains “the marker that indicates who is ‘winning’ or ‘losing’ in the race for success.”
Few CEOs want to lose that race. This combination of market and organizational dynamics will keep shoving CEO rewards ever higher. No self-correction here.
A second major takeaway from Osberg’s new OECD working paper: An unbalanced economy — an economy where rewards at the top are multiplying much more rapidly than rewards below — generates ever-growing social pressures for still more imbalance.
Consider, for instance, the interplay between great wealth and social mobility. For wealthy elites, Osberg reminds us, real mobility constitutes a threat. They can only move down — and the greater the gap between the wealthy and most other people, the greater the “drop from the top” — and “the more important it becomes for rich parents to give their own children every possible advantage.”
“Increasing inequality,” Osberg goes on, “thus accentuates the reluctance of the elite to pay the taxes that can partially equalize opportunity by funding public expenditure on the human capital of all children — because their own children have the most to lose from such spending.”
The third key takeaway from Osberg's new OECD paper: Unequal economies can’t “self-correct.” But people within those economies can correct them.
How can Osberg be so sure? He points, for starters, to today's “diversity of inequality levels” among developed nations. Different societies have made different social and political decisions. These decisions have produced significantly different levels of income inequality, and that “in turn implies that choices can be made about future inequality levels.”
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Those choices — more progressive income and wealth taxation, more robust investments in public goods, and the like — will be difficult in a globalized world of offshore banking and highly mobile capital. Real progress on any of these fronts will require serious international cooperation.
We can either forge that cooperation, Osberg suggests, or live the greater economic, social, and political instability that growing inequality will inevitably bring. Our “new normal,” in effect, could become our new nightmare.
Simon Wren-Lewis, If minimum wages, why not maximum wages? Mainly Macro, July 28, 2014. What makes the idea of setting a maximum wage outlandish among mainstream economists?
Max Schindler, Why is Stephen Colbert ranting about a 'poor door'? Christian Science Monitor, July 29, 2014. All about the New York luxury high-rise that will have a front-door entrance only for well-heeled residents and leave a back-door for rent-controlled tenants.
Andrew Ujifusa, Raise Taxes On Wealthy for K-12, Pa. Gubernatorial Candidate Says, Education Week, July 29, 2014. New support for confronting concentrated wealth, California-style.
Eduardo Porter, Income Inequality and the Ills Behind It, New York Times, July 30, 2014. A riff on those apologists for grand fortune who tell us we need to stop obsessing about inequality.
Harold Meyerson, Market Basket isn’t just a company, it’s a community, Washington Post, July 31, 2014. The story of a CEO who won both employees and shoppers by delivering the kind of goods that most CEOs feel compelled to subordinate to the gods of shareholder value.
Kevin Short, The Richest Person In Each State, Huffington Post, July 31, 2014. Only four states lack a billionaire to call their own.
Alan Pyke, Executive Order Will Make It Harder for Federal Contractors to Violate Workers’ Rights, Think Progress, July 31, 2014. What we need next: an exec order that gives a preference to contractors with CEOs who make less than 25 times what their workers take home.
Robert Prasch, What’s Wrong with 'Congestion Pricing'? New Economic Perspectives, August 1, 2014. The not-so-obvious reasons Lexus lanes appeal to the plutocratic perspective.
Re-energize yourself this summer with Too Much editor Sam Pizzigati's gripping new history of the triumph over America's original plutocracy. Check out the introductory chapter online, then take advantage of the publisher's discount.
|new and notable|
The Obstacle the 99 Percent Must Hurdle
The 1 percent can only prevail if the 99 percent can’t get their act together. What makes that getting so difficult?
Veteran Massachusetts economic justice activist Betsy Leondar-Wright sees class-culture differences as one prime — and typically overlooked — obstacle.
“We are the 99 percent” makes “an admirable basis for class unity,” she notes in her new Missing Class, “but what vast differences in life experiences it obscures between, say, the 10th and 80th percentiles.”
And those differences turn up in all sorts of ways that can bedevil cross-class efforts at coalition — and trust — building.
This eminently readable just-published work walks us through how those differences play out. Only activists who “draw on the best of each class culture,” Missing Class helps us see, will have a real shot at building the “powerful cross-class movements” that creating a more equal tomorrow will require.
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: email@example.com | Unsubscribe.