With this issue, we celebrate the fifth anniversary of Too Much as an online weekly. We’ve come a long way. Our handful of initial subscribers has become a sizeable — and international — community of activists, academics, journalists, and just plain citizens worried about how we distribute our world’s income and wealth.

So how has that distribution changed since 2004? The United States and most of the rest of the world have actually become more unequal. The silver lining? More and more people now see that inequality as a clear and present danger.

This week in Too Much, as a fitting fifth anniversary special, we spotlight a wonderful new book that promises to make that danger considerably more evident. In the weeks to come, we’ll be announcing a few new moves we hope will make Too Much an even more useful resource for you.

In the meantime, our thanks for your support. We count Too Much readers by the thousands now, not the dozens, and we owe that growth to your willingness to share Too Much with your friends and colleagues. Please don’t stop!

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Lobbyists for America’s awesomely affluent spent last week slipping in and out of congressional offices, doing their best to scuttle any move to tax the rich to pay for health care reform. But their work has suddenly become more complicated. On Tuesday, a brand-new group of high-net-worth Americans launched a campaign to raise taxes on people who share their high-net-worth status. The initiative announced last week — Wealth for the Common Good — is asking for an immediate repeal of the Bush-era tax cuts that benefit households making over $235,000 a year. Among the campaign’s supporters: Bill Collins, a former Connecticut lawmaker and Norwalk mayor who made his fortune in real estate. Says Collins: “Those of us who have the greatest ability to pay are not being asked to. I am not keen on being part of the freeloader class.”

The Houston Chronicle recently asked an assortment of big-time local CEOs to name the business person “you most admire.” Peter Kinnear, the chief exec at FMC Technologies, listed Peter Drucker, the founder of modern management science who passed away four years ago. A strange pick. Drucker went to his grave protesting excessive executive pay. He believed top execs should make no more than 20 or 25 times what their workers make. Pay above that level, Drucker wrote, “destroys mutual trust between groups that have to live together and work together.” Kinnear, the Chronicle reports, took home $14.5 million last year, or 725 times the compensation of a worker making $20,000 a year . . .

Calling Denny Hecker an auto dealer a few years ago would have been like calling Bill Gates a computer salesman. The Minnesota-based Hecker ran an auto sales and leasing empire that brought in as much as $6.8 billion a year. Hecker parked a good chunk of that revenue in his own pockets, and a bankruptcy hearing last month gave the Twin Cities public a look inside. Among Hecker’s collectibles: four personal watercraft, nine snowmobiles, and two $30,000 guard dogs. Authorities will later this month start auctioning off the $18.5 million of assets still in Hecker’s name. He owes $767 million. But you have to feel for the guy. Asked by a lawyer why he hadn’t originally listed his $30,000 guard dogs as assets, Hecker had a heartstring-tugging answer. He saw the dogs, Hecker explained, as family pets . . .

Has there ever been a better time to be rich? For the well-heeled, bargains seem to be everywhere. In the Chicago area’s North Shore, the owners of one 15-room manse that originally listed at $4.2 million are now asking just $3 million. Another custom-built stone home — complete with a two-story reception hall that features “a Brazilian cherry staircase, hand-carved travertine marble fireplaces, and a 1920s French chandelier” has dropped from $5.5 to $3.3 million. Overall, sales of North Shore million-dollar homes have dropped from 935 in 2005 to just 154 so far this year. Notes one local realtor, Caldwell Banker's Matthew Schneider: “Buyers are really out for the best deal. There are definitely people taking advantage of the situation.”

Desperate times, the folks at Rolls-Royce apparently believe, call for desperate measures. This desperate: The company has just announced a discount Rolls. The new Rolls-Royce Ghost will retail at just $245,000. The current Rolls workhorse, the Phantom, starts at $380,000. Rolls sold 1,212 Phantoms last year, but sales this year have dropped by over a third. So far, says Rolls, about 1,200 price-conscious afficionados of fine motor cars have pre-ordered the new Ghost. The auto’s V12 engine can deliver, Rolls people claim, an “ultra-quiet ride” at 155 mph, and Rolls is hoping that nifty performance will start attracting more first-time Rolls buyers. About 37 percent of current Rolls buyers, the company notes, already have at least one other Rolls sitting in their garages.

Quote of the Week

“How do you hand $100 million to a guy who may have profited because gas hit $4 a gallon?”
David Segal, on Andrew Hall, the Citigroup oil commodity speculator now due to receive $100 million from a bank that has already collected $45 billion in taxpayer bailout dollars, New York Times, August 2, 2009

New Wisdom
on Wealth

Jill Schlesinger, Wall Street: 5 Lessons Not Learned, CBS News, July 27, 2009. A former options trader looks at how rapidly the financial industry has gone back to “revolting” business as usual.

Larry Samuel, Rich: The Rise and Fall of American Wealth Culture, Wall Street Journal, July 31, 2008. Tracking America's wealthiest.

Arul Menezes, Why I should pay more taxes, The Progressive, August 1, 2009. A Microsoft principal architect explains why he credits his ample good fortune to the public investments that previous generations paid taxes to support.

Paul Krugman, Rewarding Bad Actors, New York Times, August 2, 2009. On our political system's reluctance to recognize that “we’ve become a society in which the big bucks go to bad actors, a society that lavishly rewards those who make us poorer.”

Wading Outside the Pay Reform Mainstream

Barney Frank, the colorful Massachusetts Democrat, may be the most caustic quipster in Congress. Ask the nation’s excessively overpaid CEOs. They’ve felt the Frank sting. Why do executives already making millions of dollars a year, as Frank asked in one typical aside back in 2005, need bonuses on top of those multiple millions?

“Are our top executives of such weak moral fiber,” the veteran lawmaker went on to wonder, “that they can't do their duties unless they're substantially bribed to do the right thing?”

“An average CEO,” Frank would observe a year later, “makes more before lunch on his first day of work than a minimum wage earner will make all year.”

In 2007, Frank gained a new position that gave him an opportunity to actually rein in that over-the-top executive excess. The new Democratic majority in Congress, elected the previous November, made him the chair of the powerful House Financial Services Committee.

Frank moved quickly, as chair, to take on executive pay. But he moved cautiously, too. In public statements, the outspoken legislator suddenly seemed to place more emphasis on empowering shareholders than curbing outrageously massive executive windfalls.

“We need to find some way to legislate greater shareholder involvement in setting CEO salaries,” Frank told a “regulation summit” early in 2007.

And if shareholders should then bless a massive executive reward, so be it. After all, as Frank noted after news reports revealed a $210 million severance package for outgoing Home Depot CEO Robert Nardelli, “the shareholders own the company.”

“If the shareholders want to pay Nardelli that kind of money,” Frank added, “then they have a right to do that.”

In the typical U.S. corporation, of course, that shareholder right to impact executive pay has been next to impossible to exercise. Corporate boards and top execs routinely make cozy sweetheart deals that keep CEO pay spiraling ever up, in good times and bad — and shareholders have no say whatsoever.

Mandating that shareholders get a say, many executive pay reformers believe, would discourage that insider dealing — and keep corporate boards from lavishing windfalls on undeserving CEOs. Over recent years, this “say on pay” notion has emerged as the most mainstream — and politically safe — executive pay reform.

Lawmakers who support “say on pay” get the best of all possible worlds. By backing a mandate that gives shareholders the right to take advisory votes on executive pay, they can demonstrate to voters angry about CEO compensation that they’re “doing something” to fix the problem. At the same time, talking about shareholder rights helps them avoid coming across as “anti-business.”

But “say on pay,” as a strategy for actually curbing executive pay outrages, has a bit of a problem. Other nations have implemented “say on pay” laws, and these laws haven’t done much at all to end executive excess.  

The UK, for instance, has had “say on pay” on the books since 2002. Despite this “say on pay” mandate, a Yale business school expert acknowledged at a 2007 Financial Services Committee hearing, British executive pay hikes have continued “to exceed inflation and average workforce wage increases.”

This lackluster track record hasn’t dimmed the political appeal of “say on pay.” Reform-minded lawmakers in Congress, led by Barney Frank, have over recent years continued to champion shareholder empowerment as the single most essential antidote to executive excess.

So reformers who favor a more direct approach to fighting executive excess weren’t expecting much last week when the House Financial Services panel met to mark up Barney Frank’s latest executive pay reform legislation.

The bill, as expected, carried a provision mandating “say on pay” at publicly traded corporations and various other corporate governance reforms meant to discourage insider dealings between CEOs and corporate boards.

But the bill, in a surprise, didn’t stop there. The legislation Frank brought forth didn’t just empower shareholders. The bill gave federal regulators the authority to prohibit any financial industry “incentive-based payment arrangement” that encourages power-suits to take risks that “could have serious adverse effects” on the nation’s “economic conditions or financial stability.”

In other words, under Frank’s legislation, federal regulators would have the power to ban the sort of pay deals that encouraged the reckless behaviors that nearly collapsed the U.S. economy last September.

Frank’s bill, after winning a Financial Services panel green light Thursday, passed the House by a 237-185 margin Friday.

The bill, as currently written, will now likely get no further. Business press reports see the Frank legislation’s prohibition against “perverse incentives” dying next month in the Senate. But the House passage, even so, does represent a breakthrough, and a significant one at that.

A House majority, for the first time, has recognized that all Americans, not just shareholders, have a stake in limiting the rewards at the top — because those rewards, if large enough, give execs at that top an incentive to engage in behaviors that can wreck an entire economy.

“Our nation is in the worst economic crisis since the Great Depression,” as Rep. Elijah Cummings from Maryland put it before Friday’s House vote, “in large part because of the reckless, risky decisions that were taken by executives incentivized by excessive compensation packages.”

The executive pay debate, in effect, has undergone something of a seismic shift. The top mainstream reform legislative goal  — to help shareholders deny windfalls to executives who perform poorly — now seems distinctly inadequate and outdated. Barney Frank has waded out of that mainstream and convinced a majority of his House colleagues to go along.

That’s not near enough yet to beat back corporate greed. But that’s progress.

A Self-Help Book for Societies

Richard Wilkinson and Kate Pickett, The Spirit Level: Why More Equal Societies Almost Always Do Better. The Penguin Group: Allen Lane, 2009, 331 pp.

Huge numbers of people in the United States hold prescriptions for anti-depressants. Huge numbers of other Americans “self-medicate” — through illegal drugs and alcohol. Huge numbers of Americans, in other words, are feeling plenty of pain. Why? What's causing all this anguish?

Our conventional wisdom blames the grind of our always-on-the-go modern existence, the stresses and strains of life in the fast lane. The conventional wisdom, suggests this splendid new book, has that half-right. Stress is indeed doing us in. But that stress doesn't come from “modern life.”

That stress comes from inequality, the vast gaps in income and wealth that so divide us.

How can the authors of The Spirit Level, Richard Wilkinson and Kate Pickett, be so sure? They've crunched the numbers. All of them, you might say.

These two distinguished epidemiologists have identified nearly every social problem where reliable data let us compare how well — or poorly — the major nations of the developed world are delivering a decent quality of life.

Epidemiologists study the health of populations, and Wilkinson and Pickett have, naturally enough, included in their comparisons all the basic health yardsticks. In which developed nations, they ask, do people live the longest? What nations show the highest levels of obesity? Where in the developed world do people suffer the most mental illness?

But the comparisons don't stop there. In which nations, Wilkinson and Pickett wonder, do children do the best in school? Where do people born at the bottom of the economic ladder have the best shot at climbing up? Which nations send the most people to prison? Have the most teenage moms? Exhibit the highest levels of trust? Tally the most homicides?

Wilkinson and Pickett answer all these questions — and many more. And their answers fascinate. The nations of the developed world, so alike on the trappings of daily life, turn out to differ enormously on the markers that measure how well we lead our lives.

People in some developed nations, the data show, can be anywhere from three to ten times more likely than people in other developed nations to be obese or get murdered, to mistrust others or have a pregnant teen daughter, to become a drug addict or escape from poverty.

And the nations that do the best, on yardstick after yardstick, all turn out to share one basic trait. They all share their wealth.  

“If you want to know why one country does better or worse than another,” as Wilkinson and Pickett note simply, “the first thing to look at is the extent of inequality.”

The United States, the developed world’s most unequal major nation, ranks at or near the bottom on every quality-of-life indicator that Wilkinson and Pickett examine. Portugal and the UK, nations with levels of inequality that rival the United States, rank near that same bottom.

Japan and the Scandinavian nations, the world’s most equal major developed nations, show the exact opposite trend line. They all rank, on yardstick after yardstick, at or near the top.

And we see the same pattern within the United States. America’s most equal states — New Hampshire, Minnesota, North Dakota, and Vermont — all consistently outperform the least equal, states like Mississippi and Alabama.

People in more equal societies simply live longer, healthier, and happier lives than people in more unequal societies. And not just poor people in these societies, Wilkinson and Pickett emphasize continually, but all people.

If you have a middle class income in an unequal society, you’re going to be more stressed and less healthy — mentally and physically — than someone with the same income in a more equal society.

So what makes inequality so potent a curse? Wilkinson and Pickett explore the impact of inequality from all sorts of angles. Sociologically, for instance, they explain how “the stresses of a more unequal society — of low social status — have penetrated family life and relationships,” how inequality undercuts the sense and reality of community and fosters, in their place, suspicion and fear.

“We tend to choose our friends from among our near equals and have little to do with those much richer or much poorer,” the two authors note. “And when we have less to do with other kinds of people, it's harder for us to trust them.”

The wider the economic gaps between us, The Spirit Level helps us understand, the more social status matters. The more social status matters, the more likely we will be to feel shame and humiliation. The more stress these emotions evoke in us, the weaker we get.

“Chronic stress,” The Spirit Level observes, “wears us down and wears us out.”

Want the biochemistry behind that wearing down? The Spirit Level has it for you, in passages you don’t have to be a biochemist to comprehend. Wilkinson and Pickett can speak academese as well as anyone. But they don’t speak that here. They’ve attempted instead to make a generation’s worth of scholarship on inequality accessible to the general public. And they’ve succeeded.

The Spirit Level appeared earlier this year in Britain. Wilkinson and Pickett, one British daily noted, may have produced “the most important book of the year.” They have. Anyone can order the British edition, right now, online. An American edition will appear the end of this year.

“In the past,” Wilkinson and Pickett note as they close this remarkable book, “when arguments about inequality centered on the privations of the poor and on what is fair, reducing inequality depended on coaxing or scaring the better-off into adopting a more altruistic attitude to the poor.”

But that’s all changed, the authors point out, now that “we know that inequality affects so many outcomes, across so much of society.” Reducing inequality, they add, has become “a project in which we all have a shared interest.”

If you share that interest, get this book. Give this book to others. We need a movement to make the world more equal. This book can help create it.

Interested in getting a more in-depth sense of what Richard Wilkinson and Kate Pickett have to offer? Check out the Equality Trust, a new Web portal on inequality that highlights their data and insights.

Stat of the Week

Nine of the nation's largest banks, New York Attorney-General Andrew Cuomo reported last week, together handed out bonuses of at least $1 million last year — the worst in modern financial history — to 4,793 different individuals. At least 836 of these took in over $3 million in bonus. The banks have received $175 billion from TARP, the main federal bailout program.

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.