Between buybacks and dividends, there’s a lot more money being “distributed to stockholders” than the company reports as income. That’s the math problem.
Which is depressingly reminiscent of the business practices of the private equity industry, documented back in 2012. “Bain, and some other private equity companies …had companies paying dividends using borrowed money, not profits.” (Read “What Mitt Romney Taught Us about America’s Economy” here.)
Instead of cutting dividends to grow the business, Verizon has borrowed money – putting itself in debt at least through 2055.
Just this month, the corporation announced another increase in the dividend rate. While the corporation’s employees were working without a contract. Because Verizon wants givebacks from its employee unions.
Again: Verizon is increasing the amount of money paid to shareholders at the very same time it is insisting on employee givebacks.
Yes, there’s a morality problem here.
Anybody else see the Brookings study, earlier this week, “Would a significant increase in the top income tax rate substantially alter income inequality?”
As I see it, the researchers totally missed the point.
When you’re talking about the macroeconomic effects of tax rates, the big effect has nothing to do with the amount of revenue produced.
Instead, policymakers (and researchers) need to focus on how various tax rates influence decisions made on the micro level.
Anyone who lived through the Eisenhower era of 90% tax rates knows that CEOs make very different decisions when 90% of their income is going to the federal government. (For instance, they’re not anywhere near as likely to borrow money to pay themselves a stock dividend, if 90% of that dividend is going to the federal government.)
If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.
Jeff Smisek, the guy forced by scandal to resign last week as CEO of the world’s fourth-largest airline, is a major reason American workers can’t get a raise.
Smisek and his overpaid boardroom buddies nationwide have swindled American workers and American communities in a scam to amass wealth for themselves and well-heeled stockholders. They’ve extracted value from corporations and put it in their pockets and shareholders’ purses almost to the complete exclusion of investing in their corporations to create new wealth and prosperity.
CEOs like Smisek began sucking the financial lifeblood out of corporations in the 1970s. That’s when corporations stopped raising worker wages in tandem with rises in productivity and curbed research and development. Instead, corporations spent increasing portions of profit on dividends and stock buybacks. This goosed CEO compensation while squashing worker pay. Over four decades, it has degraded corporations and produced the worst income inequality since the Great Depression.
Smisek’s failed leadership at United Airlines illustrates exactly how this CEO self-dealing scheme works to the advantage of wealthy executives and shareholders while damaging workers, communities, customers and corporations.
Under Smisek, passengers, workers and taxpayers found the skies decidedly unfriendly.
Ever since United and Continental Airlines merged, at Smisek’s urging, the corporation’s computer system has failed repeatedly, inconveniencing United customers. Months of computer glitches ensued immediately after United combined systems with Continental in 2012, and since then problems plagued fliers six times, including one in July that temporarily grounded the United fleet globally, and one last week that delayed 4,900 flights for as long as 90 minutes.
This may help explain why United ranked dead last among major domestic carriers in this year’s J.D. Power airline satisfaction survey, which measures performance in seven areas including costs, fees, in-flight service and reservations.
In addition, in five years, Smisek failed to complete combined labor agreements with two major unions, the Association of Flight Attendants representing 21,000, and the Teamsters representing 9,000 mechanics. Smisek made sure he had a personal contract with United guaranteeing him a golden parachute worth millions no matter how badly he performed. But he didn’t do anything for the workers who make sure planes and passengers are safe.
It wasn’t so great for United. Or its workers. Or communities that support the airports from which United flies.
Smisek wouldn’t use a penny of that $3 billion to solve United’s problems with computers, on-time arrival, customer satisfaction or labor relations. He let those problems mount, weakening United as a corporation. He took out of the corporation billions that could have been used to fix them.
United workers denounced the move. Capt. Jay Heppner, chairman of the leadership council of the Air Line Pilots Association branch at United and a member of the United board of directors, wrote his fellow 12,500 pilots about Smisek’s lack of vision: “buying back shares of a company’s stock signals to investors that executive management cannot think of anything better to do with its excess cash.”
A truckload of United cash – $8.4 million now, and as much as $13.2 million more later – will leave the corporation with Smisek, despite his failures to resolve the airline’s problems and the fact that he remains the subject of a federal corruption investigation. A huge chunk of those payments depends on stock price – which, of course, Smisek manipulated with his $3 billion buyback.
“As a result, the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies’ profits to uses that will increase their own prosperity—with unsurprising results.”
This reversed historical trends. After World War II, until the late 1970s, Lazonick’s research found, companies retained earnings and reinvested them to build corporate capabilities and worth, including decent pay raises for workers whose labor made the firms competitive. Lazonick calls this value creation. At that time, the share of U.S. income taken by the top 0.1 percent of households stood at the lowest point in the past century.
In the 1970s, corporations began allocating increasing portions of profits for stock buybacks and dividends. Lazonick calls this value extraction. CEOs withdraw value, serve themselves and leave corporate shells.
To support value extraction, many corporations also suck communities dry, demanding tax breaks, free installation of infrastructure like roads and rail spurs and tax-supported worker training. They threaten communities that don’t comply.
United made such demands of the Port Authority of New Jersey and New York.
By then, though, Smisek’s corporation had already gotten most of what it wanted out of the government agency that is supposed to serve the public. The Port Authority paid for what Smisek wanted – although United clearly has plenty of dough to cover its own costs – at least $3 billion anyway.
The Smisek-Samson dealings are the subject of a federal corruption investigation. But what’s more corrosive to workers, communities and corporations is CEOs spending more and more on stock buybacks and dividends and investing less and less in research, development and workers.
Lazonick, director of the Center for Industrial Competitiveness, says it best:
“If the United States is to achieve growth that distributes income equitably and provides stable employment, government and business leaders must take steps to bring both stock buybacks and executive pay under control. The nation’s economic health depends on it.”
(Washington, DC) – As Americans rally behind a robust raising wages agenda for working families, CEO pay for major U.S. companies has skyrocketed. According to the new AFL-CIO Executive PayWatch, CEO pay increased nearly 16 percent in 2014.
The Executive Paywatch website, the most comprehensive searchable online database which tracks CEO pay, showed that in 2014, the average production and nonsupervisory worker earned approximately $36,000 per year, while S&P 500 company CEO pay averaged $13.5 million per year – a ratio which has grown to 373-to-1.
“America faces an income inequality crisis because corporate CEOs have taken the raising wages agenda and applied it only to themselves,” said AFL-CIO President Richard Trumka. “Big corporations spend freely on executive perks and powerful lobbyists to strip rights from workers, but when it comes to lifting up the wages of workers that make their companies run, they’re nowhere to be found. Too often workers are seen as costs to be cut, rather than assets to be invested in. Americans deserve better from those who have earned so much off the backs of working men and women, and we must start by adding transparency to the CEO pay process and requiring companies disclose their CEO-to-median employee pay ratios.”
Mega-retailer Walmart, highlighted in this year’s PayWatch, represents one of the most egregious examples of CEO-to-worker pay inequality. CEO Douglas McMillon, the nation’s largest employer, earns $9,323 an hour compared to $9 for a beginning employee salary. A new employee would have to work for 1036 hours just to equal the pay McMillon earns in one hour. PayWatch also highlights the wealth of the six Walton family members who have more wealth than 43 percent of America’s families combined.
“In 2013, I earned about $12,000 as a full-time employee, which at Walmart isn’t always 40 hours each week,” said Tiffany, a former Walmart worker who has worked in both Maryland and Louisiana for the company. “These poverty wages force my family to receive public assistance. Walmart doesn’t value me. I believe in working hard and that my work should be valued. This is why I will not stop fighting until Walmart commits to raising wages and begins valuing all of its workers.”
More information about Walmart’s massive CEO-to-worker pay disparity and inequality among S&P 500 companies can be found at www.paywatch.org.
What is the meaning of the alarming growth in income inequality throughout the world? According to a recent report issued by the charity organization Oxfam, “by next year, the world’s wealthiest 1% will control as much of the planet’s assets as the other 99%.” About this, Winnie Byanyima, Oxfam’s executive director, asks…
“Do we really want to live in a world where the 1% own more than the rest of us combined? The scale of global inequality is quite simply staggering, and… the gap between the richest and the rest is widening fast.”
The stark human costs of increasing income inequality include millions of people in the U.S. forced to work two or even three low-paying jobs just to stay afloat, and often still not able to afford sufficient food and medical care. As the New York Times reports (Jan. 26), “Since 2000, the middle-class share of households has continued to narrow, the main reason being that more people have fallen to the bottom.” Today wages are stagnant for most people lucky enough to have a job. Meanwhile, the so-called drop in our unemployment rate is, according to Forbes Magazine, “simply misleading….Despite the significant decrease in the official U.S. Bureau of Labor Statistics (BLS) unemployment rate (6.2%), the real rate is over double that at 12.6%.” This statistic is mirrored in the shameful fact that 48 million Americans—more than one in seven—were living in poverty in 2014 (U.S. Census Bureau). Union jobs were once an entry into the middle class, enabling men and women to live with economic security: to buy a home, educate their children, take a vacation. Many of these jobs have been eliminated as corporate America has moved much of manufacturing overseas, and as some states and cities are privatizing public services that are essential for the well-being of millions, including children and the elderly.
Income Inequality and Profit Economics—the Link
In an earlier post for Unions Matter! I wrote: “Income inequality is the inevitable by-product, the direct result of an economic system based on profit….” What I didn’t say then is something I’ve seen since: that this inequality is not a “by-product” of profit economics, but is essential to its very existence! In our profit economy, wealth coming from the labor of many persons doesn’t go to the workers who created this wealth, but instead to corporate executives and shareholders, who do no work at all for their dividends. In her commentary to an issue of The Right of Aesthetic Realism to Be Known, Ellen Reiss, Aesthetic Realism Chairman of Education, describes the basis of the profit system, which bothcreates and depends upon growing income inequality:
“In the last years, I have been describing the following fact: those who insist that the profit way must be the basis of our economy have been trying to do the one thing that can now keep it going. That one thing is: make Americans work for less and less pay, so more and more of the money they earn with their labor can go into the pockets of the owners, who don’t do the work. Only by increasingly impoverishing the American people can the profit system now go on. Of course, to pay people less and less, to impoverish them successfully, one must try to annihilate unions. Unions—which have fought for and won better economic lives for people over the decades, are one of the biggest embodiments of ethics as a force.”
Ellen Reiss is right and what she’s describing is compelling evidence that income inequality is needed for the profit system to continue.
Income Inequality and Economic Growth
A recent article in The Atlantic Monthly, “17 Things We Learned about Income Inequality in 2014,” states:
“Inequality could also impair growth if those in the middle and at the bottom have no money to spend…. Research by the International Monetary Fund argues that high inequality is correlated with low economic growth.”
Clearly, for economic activity to continue and grow, the daily labor of men and women is indispensable. It is their ability to provide services, to produce and transport the goods we all need—and to have the money to pay for them—that drives our economy. After all, as Eli Siegel, the founder of Aesthetic Realism, once pointed out with humor the central role of labor in economics: “You can bring $100,000 to a tree, but it won’t grow toothpicks.” Mr. Siegel used literature, history, economic data, and current events to document his statement below, which I see as indisputably true—and I’m proud it’s the motto of this blog:
“The most important thing in industry is the person who does the industry, which is the worker. That…never can change. Labor is the only source of wealth. There is no other source, except land, the raw material….Every bit of capital that exists was made by labor, just as everything that is consumed is.“
This is why unions are so important: they have persistently and courageously fought for respect, for dignity, for workplace safety, for decent wages in the pockets of working men and women. Related to this is the vitally important question, asked by Eli Siegel, which must be answered for people’s lives to fare well: “What does a person deserve by being a person?” The answer is, every person deserves—as a beginning point—these things: a roof over one’s head, nutritious food, guaranteed medical care, an education, a good paying job, and—not least—the right to join a union.
What Do the American People Hope for in 2015?
In her commentary, Ellen Reiss explains:
“The thing needed to replace the profit system is….an economy based on ethics and aesthetics: an economy based on seeing that the way to be truly selfish, the way to express yourself, be yourself, is to be just to people, things, the world into which we were all born.”
As a person who worked for, benefitted from, and loves unions, I believe that only an economy based on ethics and aesthetics will eradicate income inequality, and meet the hopes of people. It is necessary for every union official to study what this means to be an effective force for economic justice for everyone.
Most of the discussion I’ve seen of wealth and income inequality has focused on trends in the USA. Now comes the annual report from Credit Suisse, one of the world’s largest financial institutions, on wealth and inequality worldwide. The picture looks familiar: a small number of individuals control most of the globe’s wealth.
The number of millionaires worldwide is likely to increase from 35 million to 53 million in the next five years;
The USA is “the undisputed leader in terms of aggregate wealth;”
The USA, Switzerland, and Hong Kong are the most unequal “developed countries;”
Countries labeled as “emerging markets,” especially China, can be expected to grow their shares of global wealth in the next five years. But there, too, inequality is rising.
Credit Suisse, which no doubt wants to handle those millionaires’ accounts, also finds that the USA leads the world with 14.2 million millionaires, 41% of the members of the worldwide millionaire club. Credit Suisse refers to them as ‘high net worth” or “HNW” individuals.
Above the HNWs on the ladder are the UHNWs, the “ultra high net worth individuals,” those with with more than $50 million in net assets. The Global Wealth Report says this group has 128,200 members, 49% of whom live in the USA.
“The number of HNW and UHNW individuals has grown rapidly in recent years, reinforcing the perception that the very wealthy have benefitted most in the favorable economic climate,” the report says. Indeed.
“HNW and UHNW individuals are heavily concentrated in particular regions and countries, and tend to share more similar lifestyles, participating in the same global markets for luxury goods, even when they reside in different continents,” the authors observed.
Here’s more numbers:
The poorest 50% of the global population owns less than 1% of the world’s wealth.
The wealthiest 10% (those with more than $77,000 of net worth) owns 87% of the world’s wealth.
The top 1% (more than $798,000 of wealth) owns 48.2% of the world’s wealth.
The world now has 35 million millionaires, less than 1% of the population. Together they own 44% of the wealth.
Figures such as these demonstrate that the world’s wealth is in the hands of a very small group of individuals. The figures don’t, by themselves, tell us anything about trends in wealth distribution. But this topic has finally gotten the attention of policy makers and bankers, even those whose clientele is ultra-rich.
“The changing distribution of wealth is now one of the most widely discussed and controversial of topics, not least owing to Thomas Piketty’s recent account of long-term trends around inequality. We are confident that the depth of our data will make a valuable contribution to the inequality debate,” the report’s introduction says.
Credit-Suisse also says, “During much of the last century, wealth differences contracted in high income countries, but this trend may have gone into reverse.”
It may be significant that the Global Wealth researchers find that while the top 10% has seen its share of the global pie rise from 67% in 1989 to 72% in 2007 and topped 75% in 2013, the share in the pockets of the top 1% has “shown little upward movement for the past two decades.”
For the USA, however, they find that shares held by the top 10% and the top 1% have held steady, at about 75% and 38% respectively. This finding contrasts with that of Emmanuel Saez and Gabriel Zucman, who recently wrote
“Wealth inequality [in the USA] has considerably increased at the top over the last three decades. By our estimates almost all of the increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012.
The conflict may result from differences in methodology or from Saez and Zucman’s attention to the top 0.1%, a smaller sliver than Credit Suisse studied. Nevertheless, both reports add to a body of evidence that the economy is doing just fine for a tiny class of people while just about everyone else is getting left behind.
It wasn’t long ago that economists generally avoided discussion of the distribution of wealth. Even if they now differ on some fine points, it probably represents progress when economists working for an institution like Credit Suisse are adding their weight to a call for a change of direction.
“In mature economies,” they conclude, “policies to address wealth inequality are receiving increased attention and can hopefully be designed to avoid unwanted effects on growth or economic security. Among emerging markets, policy makers would be advised to study countries, such as Singapore, which have tried to ensure that wealth gains are broadly shared, and which have succeeded in keeping wealth inequality in check.”
[Note: There’s a link to the Global Wealth Report on the Credit Suisse publications page, but the link did not work for me. Instead, I contacted the bank’s New York press office, where I found someone to send me a copy.]
Photo by Gawain Jones via Flikr Creative Commons License
Janet Yellin is not the only one with a new analysis of the growing chasm between the ultra-rich and everyone else If you can handle some dense economics (or like me willing to skip past the fancy equations), take a look at anew paper by Emmanuel Saez and Gabriel Zucman on “Wealth Inequality in the United States since 1913.”
It seems that reliable data on wealth is not easy to come by. So Saez and Zucman had to do some fancy calculation to figure out who owns how much and how the proportions have changed over time. They find
wealth inequality has considerably increased at the top over the last three decades. By our estimates almost all of the increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012.
That’s a level of inequality comparable to the early 1900s, before the Progressive Era.
Occupy movement, if you’re still out there, take notice.
“Wealth concentration has followed a U-shaped evolution over the last 100 years,” they write “It was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then.”
The top 0.1% is just 160,000 families whose wealth rose at 5.3% per year from 1986 to 2012. In the same period the bottom 90% saw its wealth stagnate.
The key factors driving the wealth gap, Saez and Zucman conclude, is a surge in labor income among those at the tippy top and a decline in savings for those in the middle class. That leads the authors to a set of recommendations.
First and perhaps most obvious, they recommend progressive income taxes and estate taxes.
“Yet tax policy is not the only channel,” they say.
Other policies can directly support middle class incomes—such as access to quality and affordable education, health benefits, cost controls, minimum wage policies, or more generally policies shifting bargaining power away from shareholders and management toward workers. [emphasis added]
It’s good to see a solution that deals with the cause of the problem. Janet Yellin take notice.
Janet Yellin, who chairs the Board of Governors of the Federal Reserve System, delivered an unusual and important speech two days ago about the growing gap between the richest Americans and everyone else.
Speaking at a conference at the Federal Reserve Bank of Boston, Yellin offered “Perspectives on Inequality and Opportunity from the Survey of Consumer Finances.” She said,
It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.
It’s fair to assume that was a rhetorical question and the answer is, no, the widening gap between the ultra-rich and the rest of the population is a threat to democracy and the economic futures of most people.
While the trend of wage stagnation for working Americans goes back to the 1970s, Yellin focused on the most recent period of economic history, 1989 to 2013. This is useful because it includes the recent economic meltdown as well as the so-called “recovery.”
Yellin illustrated her talk with an obligatory set of graphs (she’s an economist after all), including this one depicting changes in net worth (i.e. wealth) for the wealthiest 5% of Americans, the next 45%, and the bottom half of the population.
As the chart makes obvious, the wealthiest 5% of Americans saw their share of the nation’s wealth climb from about 55% to about 65%, while the next 45% saw its share go from from 45% to 35% and the share held by bottom 50% approaching zero percent.
It’s good to know the nation’s top economist is alarmed.
The second half of Yellin’s speech concerned what she called “four building blocks of opportunity,” access to early education, access to higher education, ownership of private businesses, and inheritance. The first three could be useful ways for individuals and families to do better in a time of widening inequality, but do not affect tax policy, deindustrialization, political and business attacks on organized labor, and the growth of the finance sector’s share of the economy, i.e. the factors driving the equality gap to historic highs.
For a more incisive analysis of what went wrong, I recommend the latest issue of Dollars and Sense, especially an article by Gerald Friedman on “What Happened to Wages?” He writes,
From the dawn of American industrialization in the 19th century until the 1970s, wages rose with labor productivity, allowing working people to share in the gains produced by capitalist society. Since then, the United States has entered a new era, in which stagnant wages have allowed capitalists to capture a growing share of the fruits of rising productivity.
I recommend examining Friedman’s charts alongside Yellin’s. And try to follow Yellin’s fourth piece of advice: inherit a fortune.
Supreme Court Justice Louis Brandeis once said, “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few; but we can’t have both.”
We as a nation are facing a problem. A same problem we have faced and overcome in the past. Income inequality is once again dividing our great nation from the have’s and have not’s.
Early in the 1900’s the United States had a vast income inequality. Workers slaved for sixteen hours a day in dangerous factories. The majority of a workers income went to paying their employer for room and board, while the factory owners collected absorbent amounts of money.
Former AFL-CIO President Thomas Donahue once said, “The only effective answer to organized greed is organized labor.”
As workers fought to get a fair share of the profits, wealthy Americans began using their vast wealth to influence the political system. Using their political influence they blocked legislation that provide workers with better safety regulations, better working conditions and the opportunity to bargain collectively with their employers.
As massive workplace tragedies like the Triangle Shirtwaist fire ripped through the headlines workers had had enough. Workers began to organize and form unions. As workers fought and died, the union movement began to gain traction.
It would still be decades before Congress would pass the National Labor Relations Act that gave workers the legal right to organize. As workers began organizing and negotiating for fair wages the entire country saw the gap between the poor and the wealth slowly start to close.
Unions became a powerhouse against corporate greed by ensuring that all workers were paid fairly, had a voice in their workplace and could retire with dignity.
With the addition of Social Security and the Minimum Wage people began to lift themselves out of poverty and what emerged was a vibrant middle class that would lead the nation through decades of economic prosperity.
In the late 1960s, corporations were looking for ways to weaken the power of unions to increase their profits. The answer was something they knew all along, to elect politicians who would put the interest of the corporations above the interest of the workers. They began a massive lobbying campaign to change regulations, slash workers rights and elect politicians who would vote for their corporate interests first.
As the power of the corporations began to rise again, unions began to fall. Massive anti-union campaigns blocked workers from organizing. President Reagan fired 15,000 air traffic controllers in the 1981 PATCO strike and that drove a stake right through the heart of organized labor. President Reagan showed the nation that it was acceptable for an employer to ignore the demands laid out by the unions and when the time comes, fire them all and rehire new workers. Corporations began using this principle to break unions thereby hiring new workers are drastically reduced wages.
As workers began to lose their voice, income inequality began to rise again. By the 1980s Wall Street was booming. Corporate profits were skyrocketing. CEOs began making obscene amounts of money while the everyday worker saw their wages stagnate.
By 1983 the ratio between the average worker and the CEO was 46:1. This is double what it was only ten years earlier (23:1). The more wealth Wall Street and greedy CEOs acquired, the more workers suffered.
Corporations continued to use their power in Washington to change the rules of the game for their own benefit. They changed banking regulations that allowed corporations to file for bankruptcy on their pension obligations. After thirty years with a company workers are left with nothing. All the money they contributed to their retirements, gone. Corporations began closing factories and shipping their jobs overseas. Millions of workers lost their jobs and their retirements as factories were chopped up and sold in shady Wall Street deals that paid executives boatloads of money.
As union membership began to decline inequality between workers and CEOs grew by leaps and bounds. Now the ratio between the average worker and the CEO is over 400:1. This is eight times higher than the next highest country, Venezuela at 50:1. That is obscene.
Now over forty percent of the nations wealth is held by only a select few. Income inequality in America now is worse than it was in the 1920s.
Now that we have identified the problem, how do we fix it to rebuild the middle class and narrow the gap between the average worker and the ultra-wealthy?
The heart of the problem lies in the myth that if we give more money to the ultra-wealthy — or as the Republicans like to call them — job creators, then that money will trickle down to the rest of us. This failed idea continues to shape the political debate in Washington as millionaires and billionaires use their political lobbying groups, like the Americans For Prosperity, to push legislators to give more tax breaks to high-income earners.
Groups like the Americans For Prosperity continue to say that if we take anymore from the wealthy job creators they will just stop creating jobs. The fact is no matter how much money the job creators are given, they still are not creating any jobs. This feeds into the myth that we must give them more money.
The Americans For Prosperity also work to destroy unions, and fight against any progressive measures like raising the minimum wage. They demonize workers who want a living wage, while greedy corporations rake in more profits than any other time in history.
To begin to close the inequality gap we must rely on proven measures that have worked for previous generations. Policies like increasing the minimum wage, ensuring that the ultra-wealthy are paying their fair share in taxes and expanding Social Security. These three policies pushed America out of the Great Depression and into the most prosperous generation in American history.
It sounds simple, but given that too many of our politicians are bought and paid for by corporations and wealthy hedge fund managers, changing these policies have created the gridlock we are currently experiencing on Capitol Hill. Progressives want to move the country forward, while the Conservative majority who want to take us backwards.
There is one more change that we need to enact if we ever want see real change in America. We must get the corporations out of our political system. We need to get their dirty money out of Washington D.C. Their corruptive influence is blocking any meaningful legislation from moving forward. Politicians vote for what their corporate sponsors tell them to, no matter how much the voters disagree.
Across the country, in nearly every poll, voters overwhelmingly agree that it is time to raise the minimum wage. Despite this overwhelming voter support for raising the minimum wage, conservative politicians still oppose the increase.
As Senator Bernie Sanders says, “our democracy is turning into an oligarchy,” and that will eventually destroy America, as we know it.
Writing in the New York Times, Thomas Edsall assembles an impressive array of facts that illuminate the realities of wealth inequality in America.
Citing Federal Reserve figures, Edsall reports that household net worth, corporate profits, and the value of real estate have been going up at an impressive pace. If you think that sounds like evidence of recovery you’d be mistaken, at least if you equate “recovery” with economic conditions that are improving for most workers.
“The September Federal Reserve Bulletin graphically demonstrates how wealth gains since 1989 have gone to the top 3 percent of the income distribution,” he writes. “The next 7 percent has stayed even, while the bottom 90 percent has experienced a steady decline in its share.”
It’s not just wealthy individuals getting wealthier; it’s also the corporations they own and run. Citing statistics from Goldman Sachs, Edsall says corporate profits rose five times faster than wages last year. And he quotes an article from Business Insider that stated,
“America’s companies and company owners — the small group of Americans who own and control America’s corporations — are hogging a record percentage of the country’s wealth for themselves.”
Edsall asks, “Why don’t we have redistributive mechanisms in place to deploy the trillions of dollars in new wealth our economy has created to shore up the standard of living of low- and moderate-income workers, to restore financial stability to Medicare and Social Security, to improve educational resources and to institute broader and more reliable forms of social insurance?”
It’s the right question.
For answers he turns to a bunch of economists, who provide data about tax rates, labor force participation, the declining growth of well-paying jobs, globalization, and the reduction of labor’s share of profit relative to capital in a time of rising productivity.
My answer is a bit more straightforward: America’s companies and company owners — the small group of Americans who own and control America’s corporations — are hogging the political system. This is nothing new, but in the legal environment created by recent Supreme Court decisions (Citizens United and McCutcheon in particular) it is becoming easier for corporate interests to wage class war and win. Simply put, the people who make the laws and set the policies have their receptors tuned to the frequency where the corporations are broadcasting.
Edsall notes survey data that reveal corporations are not so popular in the USA and other so-called “advanced countries.” He asks if the legitimacy of free market capitalism in America is facing fundamental challenges.
My gut response is to say “I hope so.” But the dynamics described by all those economists are not the workings of “the invisible hand.” The market is operating under a set of rules established by those who already have more than their fair share of power, wealth, and privilege. The legitimacy of our corporate-directed political system that must be challenged as well.
Stand In Solidarity With Verizon Workers
Never miss another post! Subscribe to Blog via Email
DON’T Forget To Like Us On FACEBOOK!
Please help keep the NH Labor News Going
If you would like to help keep the NH Labor News going please give us a donation. Money goes to keeping the website running and more.
Search The NH Labor News Older Posts
Advertise on the NH Labor News
NHLN Supported Charity
The Second Wind Foundation is a non-profit charity that donates 100% of their earnings. The organization is run by retired union activist and friend of the NHLN. Click the image above to go directly to their site to learn more.