by Alan Briskin | Conscious Capitalism
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Thirteen, Part Two
My Own Little Tea Party II
Talking about the Concentration of Wealth
Time Range: Present Times
The issue of taxes appears to be quite a touchy subject. The people at my party feel they have good reason to be concerned. They made extraordinary gains regarding cutting their tax burdens over the past half-century. As recently as 1960, the top bracket for the very wealthy was 91%. Even in the 1970s, the top bracket was 70%. With rates like that, it was necessary to pay accounting professionals to find every possible loophole, even if it meant paying lobbyists in Washington to create them.
In comparison with these past rates, the Buffett Rule, recently championed by President Obama, is relatively meek. It would affect approximately 450,000 households (1%) who earn at least $1 million. Under the rule, they would pay an effective tax rate of at least 30%, almost double what Buffett and presidential candidate Mitt Romney paid in taxes, but still less than the 35% paid by Buffett’s secretary. And some analysts have taken it even further.
Robert Reich writes that Yale professors Bruce Ackerman and Anne Alstott have proposed a 2% surtax on the wealthy. This would be for the richest one-half of 1% of Americans who have more than $7.2 million of assets. They estimate that the tax would generate approximately $70 billion a year, or nearly $750 billion over the decade. This is equivalent to about 50% of the savings that the unsuccessful Super Committee of Congress had sought as a goal for reducing the deficit. (source)
Some at my party are becoming quite agitated. What about all those people who pay no federal taxes? One man in particular is incensed by the fact that the bottom 50% of the nation, whose collective assets are roughly equal to those of the 400 people drinking Earl Grey tea with me, pay no federal taxes. How dare they? Some of those sympathetic to Buffett’s way of thinking argue that it’s because this group has no money, but to others at the party, this still sounds like a free ride, and it makes them upset. “The poor need to find themselves jobs, and they need to share some of the responsibility,” grouses one.
An argument ensues, with one person from the Buffett side saying that the half who pay no federal income tax do pay sales taxes, federal payroll taxes, state and local taxes, and — if they own a home — property taxes. And the total of those taxes can actually be more than what the very wealthy pay on a percentage basis. “Bull” is the response, and “That’s pathetic,” says another. “What about the 50% of us who do all the heavy lifting in this country and foot all the bills?” says a third. A fourth says we need to cut spending and broaden the tax base so that there is not an unfair tax burden on the shrinking minority who are taxed. I offer everyone cookies, but the party spirit has dissipated, and some look like they will be going home early.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
I end up talking with one of the staff catering the party. She is 62 years old and has been in the food services business for 35 years.** She has no medical insurance and not enough savings to retire on. She had not anticipated working into her 60s, but she is not alone in having to change her plans. She tells me that she was recently at a workforce center in her town and was struck by how many older workers seemed lost and bewildered. And she has had to emotionally support her daughter, who lost a well-paying job at a pharmaceutical company when it was bought up by a larger corporation.
“Things are what they are,” she says with a mixture of resignation and resolve. She notes that even having an education is no security. She has a master’s degree. What she won’t accept, however, is a lack of respect. Her last job offer, a catering position at an upscale yacht club, was actually for a position she previously held but had to reapply for after they went through a restructuring. The new job offer came with a provision that she would accept a pay cut to minimum wage and have 40% of the staff’s catering tips taken off the top for management. Meanwhile, customers would be asked to pay a “service charge” of 20%, up from 18%. She refused the offer but then was denied unemployment benefits. “What did you do?” I asked. “Found a lawyer.” Sometimes our patience just runs thin.
* Based on industrial companies with about $500 million in sales. Source: “Effects of Excessive CEO Pay on US Society,” Towers Perrin & Finfacts.
**Based loosely on the article “After a Lifetime of Hard Work, the Indignity of a Layoff,” Huffington Post, March 24, 2012.
FLASH POINTS
Glad to Pay Uncle Sam
“They’re rich. They’re angry. And they want to pony up more money to Uncle Sam.
Armed with placards reading ‘Please Raise Our Taxes’ and colorful budget charts, about 75 well-dressed middle-aged folks assembled on the steps of San Francisco City Hall at noon on Tuesday — tax day.
‘Like millions of Americans, today was not fun — it was more like a root canal,’ said real estate developer John Stewart. … ‘But I was the beneficiary of Bush-era tax cuts that put more bucks in my pocket.’
‘Those cuts for wealthy people caused today’s deficit’, he said. That’s why his group, which identifies as ‘5 percenters, not 1 percenters,’ seeks tax increases for themselves and other top earners.”
~ Carolyn Said, San Francisco Chronicle, April 18, 2012
Featured in the New Yorker: Super-Rich Irony. The real meeting of the .01 percent at the Belagio in Las Vegas, Nevada
Next Week: Chapter Fourteen: Moving From Duality to Wisdom, Part One
“There is so little of the world that we are able to take in without cognitive dissonance,” writes colleague Elizabeth Doty, “our blind spots are so big, and our worldviews so often fragile.”
How might we then proceed? How might we begin to navigate beyond our small islands of understanding toward something larger and genuinely collective? If we are to do so, we will need to strengthen capacities for tolerating ambiguity and paradox while still embracing action.
We will need to draw on wisdom traditions and spiritual knowledge without negating the impact of history, social institutions, economic arrangements, or the value of the individual. In other words, we will require a capacity to hold opposites together personally and in our social interactions to such a degree, and with such fierce intent, that something new is born.
by Alan Briskin | Conscious Capitalism, Politics
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Thirteen, Part One
My Own Little Tea Party
Talking About the Concentration of Wealth
Time Range: Present Times
If I had 400 people come over my house for tea and they happened to be the wealthiest 400 people in the United States, their accumulated wealth would be equal to the wealth of the bottom half of the entire US population, or approximately 150 million people. This would be true with or without my personal financial assets included. How did so few come to have so much, and conversely, how did so many come to have so little? Disparity in wealth has grown rapidly in the United States over the past half-century. What are some of the factors? Wouldn’t it be fun for my guests to discuss this?
From 1940 through 1970, the ratio of CEOs’ pay to their workers’ average hourly wages held steady. However, during approximately the next 30 years, wages for workers slowed to a halt, and the earnings for the top 5 to 10% of senior executives went through the roof. From the 1970s to the 1980s, the compensation gap between incomes of CEOs and hourly wage earners escalated from 11:1 to 42:1. From the 1980s to the 1990s, it climbed further to 85:1. In 2000, the gap was 531:1.*
To put this in perspective, if an average worker made about $20,000 a year, the chief executive would make about $11 million a year, or more than $45,000 a day. As difficult as this is to comprehend, the numbers seem in line with those in a study done of the average compensation among CEOs of 367 US firms in 2004. The average compensation for CEOs was $11.8 million. Among the top 100 firms, the figure is even higher.
The surplus value of labor was being shared with senior executives and top-end professionals but no further. The Christian injunction to never envy another’s wages if it does not affect the wages you have agreed upon for yourself was now being put to the stress test. The wealth disparity was even more evident in pension funding.
As journalist Ellen Schultz documented in The Retirement Heist, legal maneuvers have allowed retirement savings for modest-income individuals to be shifted to senior executives. In one of many examples, she noted how GE addressed corporate profitability as being adversely affected by out-of-control factors such as a large number of retirees, poor stock market returns, and foreign competition for cheap labor. GE argued that adjustments in new employee medical benefits and retirement plans were necessitated by such market forces. What they neglected to say was a $4.4 billion obligation was dedicated to senior executive pensions. Some things just don’t seem worth mentioning.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
What about the stock market? Certainly this appears a more participatory institution involving tens of millions of people directly or through such things as annuities and retirement plans. This is true to a degree, but 90% of the nation’s financial assets, including stocks and pension fund holdings, are owned by the wealthiest 10% of American households. The top 1%, including the 400 individuals I invited for tea, own 38%. So, for example, when the market goes up in value by $1.46 trillion, as it did in the fourth quarter of 2011, $1.3 trillion goes to the 10%. And the 1% would make out with $554.8 billion. With that kind of money, what is a few million here and there to promote political agendas and politicians who share your passion for liberty and freedom? Meanwhile, most Americans, whose financial assets are mostly in their homes, realized a loss in value.
Of course, not everyone at my tea party agrees with each other. At this gathering of the very wealthy, Warren Buffett is seen as somewhat suspect, at least when he is not being asked for stock tips. Why? Buffett went around his office and asked approximately 20 people—secretaries, clerks, and assistants—what they paid in taxes.
He found that he paid a lower tax rate than any of them. And he didn’t think this made a lot of sense. “I have never had it so good,” he said on national television, sitting next to his secretary, who pays double the percentage of taxes that he does. “What has happened in recent years,” he noted, is that “we were told a rising tide would lift all boats, but the rising tide has lifted all yachts.”(source) Recalling those lines, some at the tea party grumbled about how much he actually paid his secretary (quite a bit), and others thought it was poor judgment to be seen sitting next to her. Many shared with each other the belief that if he wanted to write a check to the government, he was free to do so.
FLASH POINT
Buffett Rule Vote: Tax Measure Fails in Senate
“WASHINGTON — Democrats’ attempt to pass a Buffett Rule tax on the super wealthy failed Monday in the Senate, as Republicans blocked the measure in a sharply partisan debate.
Democrats cast it as a bid for fairness that would end the circumstance in which billionaires like Warren Buffett pay a lower percentage of their income in taxes than their secretaries.
Republicans cast it as a political gimmick and an attempt by President Barack Obama to give more Americans a ‘free ride.’”
~ Huffington Post, April 16, 2012
Next Week: Chapter Thirteen: My Own Little Tea Party, Part Two
The issue of taxes appears to be quite a touchy subject. The people at my party feel they have good reason to be concerned. They made extraordinary gains regarding cutting their tax burdens over the past half-century.
by Alan Briskin | Community, Conflict, Conscious Capitalism, Photography, Politics
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Twelve
Occupy Wall Street
Time Range: September 17, 2011
FLASH POINTS
“[T]he American working class had accumulated a level of debt that was unsustainable. People could not make payments. They were exhausted: exhausted financially, exhausted physically by all the work, and exhausted psychologically because the family had been torn apart by everyone working.”
~ Richard Wolff, interview in The Sun, February 2012
“I have a feeling that right now, this human experiment on planet Earth is hitting the wall!”
~ Kalle Lasn, Estonian-born former adman lamenting the environmental and psychological costs of modern capitalism. He suggested in his magazine, Adbusters, that a September 17 occupation of Wall Street might be a good idea.
Some ideas just seem to catch on. The Occupy Wall Street movement began more as a sentiment than a plan, but that didn’t inhibit the national media from holding its collective breath waiting for demands. Somehow income inequality, the increasing concentration of wealth, and the effects of problematic externalities fostered by corporate persons never rose to the threshold of news. Certainly an annual piece on rising CEO pay or some poor neighborhood protesting corporate pollution might appear in newspapers, but these things were isolated from any larger context. Suddenly, and with just a slight reframing, Occupy Wall Street was rebranding our economic institutions as unjust, especially financial and insurance companies seemingly impervious to the havoc they helped wreak.
I imagine some of the financial analysts and brokers heading to work on September 17th wondered who these troublemakers were. Couldn’t this protest just be a new bunch of whiners and complainers, as if the ghosts of the Red Lion Pub had decided to go outside for a picnic? Yet the movement’s slogan, “We are the 99%” had a certain ring to it.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
FDR spoke of not being content if “one-third or one-fifth or one-tenth — is ill-fed, ill-clothed, ill-housed, and insecure.” Fifty years prior, the journalist Jacob Riis illustrated with photographs “how the other half lives”; and some 20 years after FDR’s warning, Michael Harrington pointed out that poverty constituted an “other half” that was becoming increasingly invisible. Obviously, one-tenth, one fifth, one-third, or even one-half is not a tipping point.
Academics, economists, and politicians all missed an obvious marketing point of view. If being identified with the “other half” is unpleasant and to be avoided, who really wants to be associated with it, other than the poor, who don’t have a choice, or philanthropists, humanitarians, or social/political climbers who make it their business. Everyone else wants to be identified with the middle class or the well off.
The language of 99% cleverly shifted the perception of two halves and brought together a majority theoretically inclusive of nearly everyone. Occupy Wall Street was a counter-movement to its sociological twin, the Tea Party, which championed reducing the nation’s deficit and getting government out of the picture almost entirely. Occupy Wall Street championed addressing wealth distribution and the undue influence of corporations.
The Occupy Wall Street movement, which included spontaneous activities and protests in hundreds of cities around the world, accomplished something rarely seen after fruitless decades of discussing poverty, welfare, and safety nets. The taboo against talking about wealth distribution and capitalism had, for a brief moment, been lifted.
FLASH POINT
How American Corporations Transformed from Producers to Predators
“In 2010, the top 500 U.S. corporations — the Fortune 500 — generated $10.7 trillion in sales, reaped a whopping $702 billion in profits, and employed 24.9 million people around the globe. Historically, when these corporations have invested in the productive capabilities of their American employees, we’ve had lots of well-paid and stable jobs.
That was the case a half century ago.
Unfortunately, it’s not the case today. For the past three decades, top executives have been rewarding themselves with mega-million-dollar compensation packages while American workers have suffered an unrelenting disappearance of middle-class jobs. Since the 1990s, this hollowing out of the middle class has even affected people with lots of education and work experience. As the Occupy Wall Street movement has recognized, concentration of income and wealth of the top ‘1 percent’ leaves the rest of us high and dry.”
~ William Lazonick, The Huffington Post, April 3, 2012
Next Week: Chapter Thirteen: My Own Little Tea Party
If I had 400 people come over my house for tea and they happened to be the wealthiest 400 people in the United States, their accumulated wealth would be equal to the wealth of the bottom half of the entire US population, or approximately 150 million people. This would be true with or without my personal financial assets included. How did so few come to have so much, and conversely, how did so many come to have so little? Disparity in wealth has grown rapidly in the United States over the past half-century. What are some of the factors? Wouldn’t it be fun for my guests to discuss this?
by Alan Briskin | Collective Folly, Conscious Capitalism, Photography, Politics
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Eleven
Booms and Busts
Time Range: 1985-Present
The bull market of the 1980s saw greater numbers of people investing and realizing larger returns. A whole new financial investing industry was growing up alongside corporate growth. Workers were working longer hours and taking on second jobs, but day traders could get rich in an instant. As we headed into the ’90s, the political focus was on the economy, stupid. A new president argued that government could smooth out the economy’s rough edges, and by playing by the rules and working hard, we might finally see an end to capitalism’s wild gyrations.
Dot-Com Crash, Silicon Valley, March 2000
On March 20, 2000, the NASDAQ Composite index, tracking stocks heavily weighted with technology companies, peaked at 5,132.53. On average, stock prices for these companies had more than doubled from a year earlier. Venture capital investment provided companies with high levels of cash, giving birth to what became known as “burn rates.” Stock analysts saw no limit to profits soaring, and MBA programs were hotbeds of “flipping” business ideas into cash and then getting out.
Over the next 18 months, however, the market value of these technology companies dropped by $5 trillion. In the fallout, which included several bankruptcies, unethical practices and wild excesses were made public at companies such as WorldCom, NorthPoint Communications, and Global Crossing. Americans were shocked and alarmed by stories of greed and excess. However, the notion arose that a few rotten apples shouldn’t upset the whole apple cart.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
Many rushed in to affirm the capitalist system itself was a good one, only those who acted illegally should be punished. Some, such as Henry Blodget, argued that excesses are built into the system due to human nature and busts are simply the price we pay for the vitality of capitalism. REALLY? Capitalism’s roots lay in a belief that human destiny was malleable, yet the belief that human nature is unchanging persists.
How human it is to live too comfortably with our contradictions.
FLASH POINTS
Housing Bubble Popped, December 2008
“Well, we did it again. Only eight years after the last big financial boom ended in disaster, we’re now in the migraine hangover of an even bigger one — a global housing and debt bubble whose bursting has wiped out tens of trillions of dollars of wealth and brought the world to the edge of a second Great Depression…
“Predatory lenders did bamboozle some people into loans and houses they couldn’t afford. The SEC and other regulators did miss opportunities to curb some of the more egregious behavior. Alan Greenspan did keep interest rates too low for too long (and if you’re looking for the single biggest cause of the housing bubble, this is it). Some short-sellers did spread negative rumors. And, Lord knows, many of us got greedy, checked our brains at the door, and heard what we wanted to hear.
“But most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational — or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people.”
~ Henry Blodget, “Why Wall Street Always Blows It,” Atlantic Monthly
Henry Blodget was the tech-stock analyst at Merrill Lynch vilified for his role in the dot-com crash. His comments in the Atlantic Monthly article suggested that bubbles in free-market capitalism were a natural consequence of human nature functioning with competing economic incentives. He pointed out that immediate economic self-interest naturally generated individual decisions removed and often at odds with collective consequences. Due to human nature, he seemed to suggest, be warned, but on the other hand, get used to it.
Next Week:
Chapter Twelve: Occupy Wall Street
“I have a feeling that right now, this human experiment
on planet Earth is hitting the wall!” ~ Kalle Lasn, Estonian-born former adman lamenting the
environmental and psychological costs of modern capitalism. He suggested in his
magazine, Adbusters, that a September
17 occupation of Wall Street might be a good idea.
by Alan Briskin | Collective Folly, Conscious Capitalism, Photography, Politics
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Ten
Corporate Persons
What Does Not Serve Me Shall Not Be My Concern
Time Range: 1985-Present
Who even knew that corporations had legal rights as if they were actual persons? In a strange twist of legal gymnastics, the originating idea of a corporation being birthed and legitimized by a government grant had been transformed into a corporate body beholden to no one but its owners.
Economic self-interest was the law of the land, and the corporate persons cultivated in such an environment could be as sweet as your dear auntie or as self-serving and weird as the guy down the block wearing just a raincoat. However, both would be legally obligated to prioritize their shareholder economic interests over other concerns such as the corporation’s effect on human beings or the earth’s resources. Economists even have language for this. Externality is the effect on others, positive or negative, by corporate action that is not calculated into the cost of the goods or services.
“An externality,” wrote the economist Milton Friedman, “is the effect of a transaction … on a third party who has not consented to or played any role in the carrying out of that transaction.” He offers a relatively benign example of a man who must clean his shirt more often due to smoke emissions from a local power plant. He tends to minimize the effects by calling them “neighborhood effects” or “spillovers.” In a free market, positive and negative externalities theoretically cancel each other out or are eventually internalized by the corporation. However, a less cheerful view might look something like this: persons who dissociate their actions from their effects on others are called sociopaths.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
Sociopathic corporate persons would not hesitate to market cigarettes or foods high in toxic chemicals, trans fats, sugar, and salt. They would simply point to positive externalities such as jobs being created or the social benefits of smoking and snack foods. They would feel unjustly picked on, pointing out that government intervention is a slippery slope leading to arbitrary interventions. What next, they would ask, bread with too many carbohydrates? The same logic would be offered as a defense of corporations generating air and water pollution, battling safety regulations, depleting fish stocks, wiping out forests, or underfunding pension funds. Why pick on us?
Marx’s warning that capitalism would spawn a consciousness of immediate economic self-interest takes on darker shading when extrapolated through corporate externalities influencing climate change, epidemic rates of diabetes and obesity, international instability, and increasing numbers of retirees without adequate access to basic needs of food, housing, and health care. The point is not that these things are easily fixed or that government will always get the balancing act right, but that corporate sociopaths, with society’s legal approval, have a built-in incentive to muddy the water.
FLASH POINTS
Big
Tobacco says that smoking is about freedom and choices. But a battalion of
experts at Emory is showing that better choices can be made—and that not much
about tobacco is free…
“Industries like gambling, alcohol, and tobacco are ‘societal cancers,’ says [Ray] Gangarosa, that cause ‘exceptional social harm, including death, disability, addiction, and secondhand injury, on the scale of a commercial holocaust . . . (and have) escaped society’s usual controls by shifting blame for harmful commerce to their consumers, and then shifting associated downstream costs onto society. We must hold these harmful industries accountable for their costs.’
Gangarosa, who is working toward a PhD in epidemiology at RSPH [Rollins School of Public Health], was disappointed in the Master Settlement Agreement, in which he feels ‘some terrible compromises were made.’ But he acknowledges the complexity of the issue. ‘The tobacco industry doesn’t make enough money to pay for the social harm that they do. We would bankrupt them,’ says Gangarosa. ‘But if we don’t ask them to pay the social cost, then they are effectively being subsidized.’”
~ Public Health, Spring 2002
“After getting called out by an environmental group, General Motors has pulled support from the Heartland Institute, a Chicago-based nonprofit well-known for attacking the science behind global warming and climate change.
The automaker told the Heartland Institute last week that it won’t be making further donations, spokesman Greg Martin said. At a speech earlier this month, GM CEO Dan Akerson said his company is running its business under the assumption that climate change is real.”
~ Huffington Post, March 30, 2012
“Corporations Are Not People”
“Can grassroots victory in Green Mountain state spark national movement?
“With some results still yet to come in, reports confirm that at least 55 towns in Vermont approved municipal resolutions calling for an end to big money’s dominance in US politics and calling for a Constitutional amendment to reverse the Supreme Court’s ‘Citizens United’ decision that has opened the floodgates for secretive, unlimited campaign spending in US elections.
“The initiatives called on the Vermont Legislature and the state’s congressional delegation to support a constitutional amendment that clarifies that ‘money is not speech and corporations are not people.’”
~ Common Dreams, March 7, 2012
Next Week:
Chapter Eleven: Booms and Busts
The bull market of the 1980s saw greater numbers of people investing and realizing larger returns. A whole new financial investing industry was growing up alongside corporate growth. Workers were working longer hours and taking on second jobs, but day traders could get rich in an instant. As we headed into the ’90s, the political focus was on the economy, stupid. A new president argued that government could smooth out the economy’s rough edges, and by playing by the rules and working hard, we might finally see an end to capitalism’s wild gyrations.
by Alan Briskin | Business, Conscious Capitalism, Consciousness, Leadership
A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines.
Chapter Nine
Wages Decline, Credit Expands, Rapidly
Time Range: 1978-1985
What I did not know, setting my sights on creativity and meaning, was that the economic rocket ship we were on was about to sputter and go sideways. For 150 years, capitalism in the United States had functioned, despite its busts and booms, to move in an upward spiral. Working people, on average, saw their real wages rising decade after decade.
Until the 1970s, every generation had a reasonable chance to expect a better life than the previous one. Imagine if my father had not believed that. If he had believed that his sacrifices would make little positive difference for his children’s circumstances. Yes, he was disappointed in me and likely wondered if my crazy talk would ever lead anywhere, but I was in college. I would have a degree that was never an option for him. Anti-Semitism was on the decline. He had no reason to fear that roads would be blocked in front of me. And they were not, but wages for the average worker hit a wall.
From 1978 to 2011, real wages after adjusting for inflation went flat, nada, nothing. I’ll say it again. As best as we know from our economic models, there have been no wage increases for the average worker since the year I finished working at St. Johnsbury prison in 1978. This means that many of the inmates who found jobs in lumber mills, retail services, maintenance, and construction would be earning exactly the same amount today, once adjusted for inflation, as when they began. Or they might be unemployed. How did this come about?
Dr. Richard Wolf is an economist with an impeccable professional pedigree. He received his undergraduate degree at Harvard, his master’s at Stanford, and his doctorate at Yale. He was educated at institutions with a reverence for capitalism but supplemented his studies with a curiosity about its critics, most notably Karl Marx. He argues that beginning in the 1970s, there were at least four trends that help us put today’s circumstances in perspective.
HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.
The first was the introduction of new technology, accelerating the use of computers to replace labor. Imagine, for example, the use of scanning devices to replace people physically counting business inventories. Human beings count slowly and get distracted. Forget jobs that are repetitive and can be automated. Gone.
Second was the increasing use of offshore factories for manufacturing. Recall that surplus value is enhanced when the cost of labor decreases. Finding workers on other continents who could be paid less was the perfect marriage of increasing profit while simultaneously creating new markets.
Third was downward pressure on wages as an increasing number of women and immigrants entered the workforce. This was the period when corporations began to deal with the visible reality of diversity, but the economic effect of a greater labor supply was far less visible or obvious. Women were consistently paid less than their male counterparts, and the greater overall labor supply meant more competition for jobs, thus creating a labor market in which supply outstripped demand.
The fourth trend was a response to the first three, increased use of personal debt. As the earning power of workers was eroding, the rapid rise of credit cards began to supplement income, but at a huge cost. Will Rogers’s famous aphorism that when you find yourself in a hole, stop digging, became instead a search for bigger shovels. And there was no bigger shovel than credit cards and eventually mortgage debt. All these developments were slow moving and never in a straight line, but we can now see where they were leading.
Other social and economic forces were operating as well. In roughly the same 30-year period when workers’ wages were slowing down to a crawl, Fortune 500 companies saw corporate profit increasing as they grew in size and complexity. Amid this growth, fascination with the organizational leader (CEO) became quasi-cultish, symbolized by life-sized cutouts of Chrysler’s CEO, Lee Iacocca, filling bookstore windows. His autobiography was the best-selling hardcover nonfiction book in both 1984 and 1985. And just two years earlier, the birth of popular management books began with the hugely successful In Search of Excellence, attributing success to management savvy.
The success part turned out to be illusory, but the fascination with heroic leadership and management techniques became a major industry. Meanwhile, no one paid attention to the calculus of surplus value, how limiting wages was a driver of capital profits. In academia and professional consulting, we may have become more conscious of organizations as systems and the need for strategy, discipline, and leadership, but as citizens, we for the most part did not question the economic institution we operated within. We were, to put it simply, unconscious of capitalism and its myriad influences.
FLASH POINT
San Francisco, 1984
In a friend’s San Francisco apartment, I dictated my doctoral dissertation from handwritten notes to a typist working with one of the first home computers. For someone who had never mastered the typewriter and whose handwriting was virtually illegible, this was a technological event with great personal meaning. Advances in technology literally gave me an opportunity to pursue my life’s work.
The subject of my dissertation, however, was somewhat off the beaten trail of society’s progress. I was researching the parallel historical conditions of social institutions such as prisons, mental institutions, public schools, and workplaces. My thesis was that surveillance and control had become dominant characteristics of these institutions, resulting in the institutionalization of the soul. We were losing a fundamental relationship with both nature and our own inner world. We were losing a spiritual connection to the transcendent, a perspective larger than just our own self-interest.
What I had not considered was another kind of person who was gaining greater and greater freedoms. This was the corporate person. I don’t mean the organizational man of the ’50s and ’60s. I’m talking about a corporate entity with the legal rights of a person and whose sole legal concern was self-interest.
Next Week:
Chapter Ten: Corporate Persons: What Does Not Serve Me Shall Not Be My Concern
Who even knew that corporations had legal rights as if they were actual persons? In a strange twist of legal gymnastics, the originating idea of a corporation being birthed and legitimized by a government grant had been transformed into a corporate body beholden to no one but its owners.
Economic self-interest was the law of the land, and the corporate persons cultivated in such an environment could be as sweet as your dear auntie or as self-serving and weird as the guy down the block wearing just a raincoat.
