Enrichment for the Few

Former AT&T Broadband CEO Leo Hindery recently acknowledged that executive pay in America has gotten completely out of control, and that it has caused a "structural breakdown of the meritocracy of our nation."

Hindery says it is "born out of cronyism." Well, yes, shameless cronyism is certainly a defining feature of American corporate culture, but who are the cronies and how do they get that way? Cronyism is an American way to avoid the obvious Marxian reality that corporatism in America is and always has been class-based and is intended to be an enrichment mechanism for the well-placed and the wealthy. It is all about enriching the upper class and not Americans in general.

All the same, Hindery's disgust is fully merited. In a recent interview;

Hindery observed that, even as CEO pay has skyrocketed in recent decades, it has not "trickled down" to workers, who must increasingly borrow money to finance their spending. That dynamic helped set the stage for the most recent recession and helps explain today's sluggish recovery.

That's exactly it; rich CEOs are not directly the problem, but more of a symptom. The real problem is how little of the country's growth in the last 30+ years has gone to the middle and working class and instead has gone to those at the very top, the 1/10th of 1%, a class of individuals who were already rich when inequality was merely significant instead of obscene. 

The problem is that too many of us must hunker down just to pay the basics. There is nothing left in a growing number of paychecks for families to buy groceries, pay the rent, pay or save for education, and put away some for retirement. So at the end of the week, something must go. A low-wage economy, which America now is, means increasing numbers of us have nothing left for an occasional splurge on just the products corporations want so much to sell us. Neoliberal politicians, some Democrats, mostly Republicans, have forgotten that one company's employee is another company's customer.
  
As Hindery states; "The only time the U.S. economy and any of the developed economies prosper is when there's a vibrant middle class that grows from the bottom up...We've trashed that whole principle."

To make matters much worse, the figures on inequality generally do not include assets CEOs and their investor class enablers are able to shield from taxation. And that means many billions of dollars leave the US and end up in foreign banks accounts. That does nothing for the US economy, though it is quite beneficial for places such as Bermuda, the Cayman Islands, and Switzerland. It isn't the middle class that sends these huge sums offshore. It is the very wealthy, who quite literally have more money than they know what to do with. While some of that wealth continues to be productively employed, an increasing amount is pumped into the political process--overtly creating a plutocracy--or is frittered away on ostentatious displays; the hyperwealthy's version of crass consumption.

Recent evidence of the astronomical sums the super-wealthy hide or send abroad, you know, people like Mitt Romney, demonstrates we have been seriously underestimating the amount of wealth that has left the United States. 

In a recent article in Slate, Jordan Weissmann shares the findings:

Economists Emmanuel Saez, of the University of California–Berkeley, and Gabriel Zucman, of the London School of Economics, are out with a new set of findings on American wealth inequality, and their numbers are startling. Wealth, for reference, is the value of what you own—assets like housing, stocks, and bonds, minus your debts. And while it certainly comes up from time to time, it has tended to play second fiddle to income in conversations about America’s widening class divide. In part, that’s because it’s a trickier conversation subject. Wealth has always been far more concentrated than income in the United States. Plus, research suggested that the top 1 percent of households had actually lost some of its share since the 1980s. 

That might not really have been the case. 

Forget the 1 percent. The winners of this race, according to Zucman and Saez, have been the 0.1 percent. Since the 1960s, the richest one-thousandth of U.S. households, with a minimum net worth today above $20 million, have more than doubled their share of U.S. wealth, from around 10 percent to more than 20 percent. Take a moment to process that. One-thousandth of the country owns one-fifth of the wealth. By comparison, the entire top 1 percent of households takes in about 22 percent of U.S. income, counting capital gains.

This is hideous, not because a few people are hyperwealthy, but because they helped create the deeply unfair and unsustainable economy that allowed them to attain that wealth. Now they dominate society, law, commerce, media, banking, and the democratic process to ensure their interests are protected and a Dixified, socioeconomic heirarchy is ever more institutionalized.

Say good bye to democracy. 

The Road to Plutocracy

The United States once generally adhered to economic policies that were pretty common sense on their face: We believed in economic democracy, not oligarchy, we believed that severe maldistribution of wealth was not just fundamentally unfair, but unsustainable and dangerous. For generations we properly regulated banks and we had few banking issues as a result.

When the US fought wars, we paid for them in part with steeply progressive--and temporary--tax rates. It was obvious to us and to our trading partners that manufacturing and a modern infrastructure were the bases of economic strength; banks should only play a supportive role. Moreover the US generously supported public universities, which returned the favor by providing us with scientific and technological preeminence. Economic doctrine and history both informed mainstream policies.

We once understood that a strong middle class was essential to overall prosperity as well as the foundation of democracy and free elections. As part of the social contract, industry generally worked with labor, offering wages that were in line with ever-rising productivity. There was little vilification of labor unions at a time when membership was far higher. Corporate dividends and government interest were paid overwhelmingly to Americans and not to neo-mercantilists in Asia and shadowy investors in the Cayman Islands. While the wealthy have always benefited the most, dividends and interest payments in the past were mostly pumped back into local communities. In other words, debt and equities were held almost entirely by Americans. Recipients spent this unearned income within the US, largely in their own communities. That which they saved went into a local banks and credit unions, not Wall Street. This whole process helped grow the economy and stabilize neighborhoods.

We would have been aghast at the idea that massive, intractable trade deficits would arrive and be accepted with surprisingly alacrity. That banks would be allowed to once again trade in securities, take wild, highly-leveraged bets with other people's money, dominate the political process, and virtually insulate themselves from legal accountability. Because of compliant politicians who now have all the money they need to stay in office, the big banks and other stars of Wall Street have been able to maximize gains to themselves, and spread losses onto others, primarily tax payers. This includes companies that have been propped up by taxpayers. It's a sweet deal for the investor class; get the middle class to foot the bill, while dividends and capital gains go overwhelmingly to the investor class. It is, at its simplest, a rigged financial system that has privatized the gains and socialized the costs.

It is all coming undone, though not by the middle class, not by local banks, not by unions, and certainly not by gays, secularists, feminists, immigrants, or Democrats trying to rein in a bloated defense budget. But we have been assured repeatedly that minimal regulations are good because unfettered financial markets will make the best decisions, that they allocate capital most efficiently. Neo-liberalism fetishizes minimal regulations, free and unmonitored movement of capital, low taxes, and free trade.That same neo-liberalism has been a cheerleader for policies that have hollowed out our industrial base, turned the economy over to a rapacious financial system, have put us into deep debt to Japan, China, and elsewhere. In the process, dividends and interest payments that used to stimulate the American economy now stimulate theirs.

Now we are told to spend freely, with few admonishments to save more. Our economic system is now deeply dependent on middle class consumers willing to endlessly consume, a process that is far less beneficial than in decades past because so much of what we buy is imported. Part of the massive earnings enjoyed by our trading partners is now used to finance US debt. The Reagan administration set us on this course of indebtedness because it knew foreign governments had piles of US dollars, and because conservatives in our own government refused to allow a level of taxation that would pay the bills. The 1% are now able to avoid taxation on income that would have been taxed in the past; taxes that would have helped to pay for the Iraq war, which has gone unpaid, and such things as maintaining a modern infrastructure.

Most of the middle class is in serious debt. Families will not and should not spend freely if their job security is in question. Many have experienced wage reductions as they move from one employer to another. An ever-growing proportion of American families realize they cannot simultaneously save enough for retirement, pay for basics, including health care, rising food and energy prices--especially in the face of no commensurate wage increases-- and also set aside for their children's needs, including college tuition. This is not a sudden condition; it has been building for decades.

The right wing and other intellectual thugs want you to believe that it started with President Obama. They hope you don't notice the policies they are espousing are the same ones that have been largely in place for most of the last 30 plus years.

It is, in any event, a laughably ignorant concept to argue that Obama is even in a position to have anything more than a modest effect, for good or bad. The conditions that most people and the government are now in are far larger and intractable for any president to handle. It has taken America 30+ years to get here, it cannot be turned around in four years, not when Bush handed Obama a shit storm and two unpaid wars, not when Republicans oppose him on every substantive point, and not when those same Republicans are able to exploit what we now see are serious shortcomings in the structure of our system of government.

It has taken the US decades to drift into the present condition. During this time the wealthy have garnered ever more of the wealth, paid ever decreasing taxes for it, run corporations that have earned more, paid lower wages, have been taxed less, and have more freedom to move capital around the world, and fewer obligations to middle class families. This is as the wealthy have always wanted it, and it is what today's Republican Party wants. Their biggest concern is that President Obama would do something to stop this inexorable trend towards plutocracy.

Moyers on Plutonomy

Here is Bill Moyers taking a page from the late Edward R. Murrow when he says having a bias is not a bad thing as long as you don't try to hide it.

Their bias is my bias: Plutocracy and democracy don't mix. Moyers explains how we have now arrived at plutonomy and why it matters.




For teabaggers inclined to obsess over what our founding fathers and past patriots had to say about wealth inequality, I offer some insights.