The Driving Force Behind America's Warp Speed Decline into an Unequal Society

I found this article very consise and interesting. It is reporting on a study of the causes of the huge wage gap between the average worker and CEOs. There findings are interesting:

www.alternet.org...

Runaway inequality is destroying the American Dream. Is it too late to save it?

That depends on what is really driving inequality. In the 1960s the gap between CEOs and the average worker was 20 to 1. By the 1990s it was nearly 350 to 1. What happened?

To find answers, the International Labor Organization produced an eye-popping study of 71 countries in its Global Wage Report 2012/13 [4]. They test the relative significance of possible causes of wage inequality such as globalization, new technology, and cutbacks in government support for workers and unions. They also add another possible explanation which they call financialization: how much of a nation's economy is devoted to Wall Street-like financial activities. Using statistical techniques they measure the degree that each causal factor contributes to wage stagnation. For example, do countries with more global trade have more or less inequality? Does having more advanced technology account for declining or increasing worker wages? Do countries with large labor movements have higher wages than those with smaller labor movements?

The chart below summarizes the ILO's startling results for developed economies. Occupy Wall Street apparently had it right: Financial activities are the dominant cause of rising inequality.

And that my friends is the Democrats main source of campaign financing. However, the Repulicans started this slide, good ole St. Ronnie Raygun began that 'gold rush' with deregulation of the industry.

Let us review:

Until the 1980s, the basic philosophy of corporate America was "retain and reinvest." Corporate survival and prosperity depended on plowing back most of a corporation's profits into increased worker wages and training, research and development, and new plant and equipment. Banks provided loans for expansion and for mergers, but stringent New Deal regulations kept high finance in check. From WWII until 1980, there was no wage premium to be gained by working on Wall Street, and the wage gap between CEOs and the average worker hovered at about 20 to 1.

Then came financial deregulation, and Wall Street escaped its New Deal shackles. Almost immediately a new crop of financiers emerged who raised large sums of money to buy up companies. Instead of creating new value within the corporation, the fundamental goal of these corporate raiders (now called private equity and hedge fund managers) was to extract value awayfrom the corporation and into their pockets.

What they did was nothing short of revolutionary What they did also should have been outlawed. They transformed the corporate ethos of "retain and reinvest" into "downsize and distribute."

The actual mechanism for the above change is cited, well cited, in the article. Big Business is all about big finance today. I remember when GM just sold cars, now their profits come from their 'finance wing'; same is true of many big companies. It is all intertwined.

To play this game, worker wages, R&D and new plant and equipment are cut to the bone. Older plants are eliminated. Production is outsourced to low-wage areas. Temporary workers replace permanent employees. Benefits like healthcare and pensions are reduced or eliminated. Unions are undermined. And bankruptcy is sometimes used to break contracts to further reduce these costs. The fees for all this "financial engineering" go to Wall Street. The stock-option-loaded CEOs become part of Wall Street—its onsite, wealth extraction overseers. Nearly all corporations whether raided or not, soon followed this lucrative model. Strip-mining the corporation becomes its fundamental activity. Good-bye American Dream.

I have a question.
More than 50% of employees work for small businesses. That is companies with less than 500 employees.
Add to that government jobs (state and federal). These employers don't usually have multimillion dollar ceo's. That leaves a small amount of corporate jobs.
So my question is,
How does a CEO salary effect the pay of people that don't work for the big corporations?
I make about twice as much as my employees do. Is that to much?

originally posted by: FyreByrd
And that my friends is the Democrats main source of campaign financing.

I hope I don't feel too stupid for asking this, but can you explain this a little more? What is Democrats' main source of campaign financing? Wall Street? Sorry, I'd love to understand this better.

I absolutely agree with the article, I just don't really understand what "Financialization" is...

a reply to: Benevolent Heretic

One word, Unions.

Hell, the teachers union alone spent 60 million on the damn mid-term elections.

Typical lefties will scream "Koch brothers", while ignoring that Unions are the biggest political supporters.... They're for the people though! SMH

originally posted by: Benevolent Heretic

originally posted by: FyreByrd
And that my friends is the Democrats main source of campaign financing.

I hope I don't feel too stupid for asking this, but can you explain this a little more? What is Democrats' main source of campaign financing? Wall Street? Sorry, I'd love to understand this better.

I absolutely agree with the article, I just don't really understand what "Financialization" is...

If you look at major donors, at least the above the boards stuff that you can find on the internet, Democrats always have the big Financial institutions as major contributors. I'm running out the door - so don't have time to point you to a site but there are many - just google it.

As to Financialization, first read the whole article (it isn't long) it will explain it better then my chopped up quotes and comments ever could. And then google that.

originally posted by: Hoosierdaddy71
I have a question.
More than 50% of employees work for small businesses. That is companies with less than 500 employees.
Add to that government jobs (state and federal). These employers don't usually have multimillion dollar ceo's. That leaves a small amount of corporate jobs.
So my question is,
How does a CEO salary effect the pay of people that don't work for the big corporations?
I make about twice as much as my employees do. Is that to much?

I'm happy to reply but cannot do it until later. And no - it isn't the Unions as unions rarely affect small businesses.

The supreme concentration of wealth and main contributor to inequality has been facilitated by one main entity and that entity is call the Federal Reserve bank which since 2008 has spent over 27 trillion dollars to prop up the rich elite.

a reply to: Hoosierdaddy71

FTA:

Until the 1980s, the basic philosophy of corporate America was "retain and reinvest." Corporate survival and prosperity depended on plowing back most of a corporation's profits into increased worker wages and training, research and development, and new plant and equipment. Banks provided loans for expansion and for mergers, but stringent New Deal regulations kept high finance in check. From WWII until 1980, there was no wage premium to be gained by working on Wall Street, and the wage gap between CEOs and the average worker hovered at about 20 to 1.

This is stating that CEO's wages were kept in check by the need for strong wages and reinvesting in the company / corporation, not that CEO's getting higher wages cut everyone else's wage.

As for the questions about your personal business that is getting off topic and is also asking for opinions.

It used to be that our government tailored policies beneficial to the nation in accordance with the Constitution and reined in unethical banking and business practices as seen above.

The unethical Judas's among us wanted complete Freedom to Rape and Pillage the nation and to sell us out to Commie China if it meant one more copper coin in their pockets.

In 1970, there were less than 200 lobbying offices in DC

Today, there are well over 2000 lobby offices.

Washington DC does the bidding of Corporate and Banking Lobbyists and not what is best for the nation anymore.

All that matters to the elite is Wall Street and Multinational Corporations.

The Nation and country does not matter to them unless they need some useless eaters to go fight for them.

originally posted by: AlaskanDad
a reply to: Hoosierdaddy71

FTA:

Until the 1980s, the basic philosophy of corporate America was "retain and reinvest." Corporate survival and prosperity depended on plowing back most of a corporation's profits into increased worker wages and training, research and development, and new plant and equipment. Banks provided loans for expansion and for mergers, but stringent New Deal regulations kept high finance in check. From WWII until 1980, there was no wage premium to be gained by working on Wall Street, and the wage gap between CEOs and the average worker hovered at about 20 to 1.

This is stating that CEO's wages were kept in check by the need for strong wages and reinvesting in the company / corporation, not that CEO's getting higher wages cut everyone else's wage.

As for the questions about your personal business that is getting off topic and is also asking for opinions.

Maybe I worded the question wrong.
Most people dont work for million dollar CEOs. Therefore their pay has nothing to do with the pay of a big wig in a large corporation. Just because a CEO is overpaid does not mean that everybody else is underpaid. Are ford employees underpaid? Or is their CEO overpaid? The answer is an opinion.

a reply to: Hoosierdaddy71

Once again the article is not saying the high pay for CEO's is the cause of lower worker wages, rather it is stating their pay ballooned when workers wages and reinvestments dropped.

America never has been an "equal" society--ever. That "all men are created equal" does not assure success. Further, people often mistake "equality of opportunity" for "equality of achievement." What we ought to concentrate on is providing that opportunity, which needs a lot of work. But just taking from the rich and giving to the poor to make them "equal" doesn't work any more than dumbing down the educational system so EVERYONE can say they passed does not create equality. That TRILLION dollars a year going into poverty programs of one sort or another (MORE than the defense budget) hasn't worked in 50 years of social engineering. It just creates more dependency, bigger government, and more socialism, the exact OPPOSITE of creating opportunity.

a reply to: FyreByrd


What I am going to say will sound outlandish but it is the cold hard truth. Back in the 1970s the PTB started instilling progressive ideals into the Black culture this was possible because of the killing of Mr. King. The following decades showed TPTB that this will indeed work. The Black culture slipped deeper and deeper into despair and poverty.



TPTB are now trying to use this on the entire population and slowly over time it will work. The progressive mindset leads to apathy and denial.

a reply to: FyreByrd

So based on all the facts and figures,

what is the magic solution to this outrage?

originally posted by: xuenchen
a reply to: FyreByrd

So based on all the facts and figures,

what is the magic solution to this outrage?

The problem I see with the USA and most EU economys is simply they cant decide what there route is, they are neither capitlist ir socislist . Just a basterdised hybrid that results in corperate facism.

The solution?

Pick a model that works and stick with it.

Pick either the sucessfull free market system or hong kong or singapore

Or

Pick the sucessfull socilist system of Norway/sweden or finland.


I dont care what one you guys pick in the USA thats up to you, but get your fingers out your arse kick the corperate lackys of BOTH partys you have in office and pick a route and go down it.

a reply to: FyreByrd

Why?
The repeal of Dod/Frank and the ratification of NAFTA.....

Clinton did this!

originally posted by: Hoosierdaddy71
I have a question.
More than 50% of employees work for small businesses. That is companies with less than 500 employees.
Add to that government jobs (state and federal). These employers don't usually have multimillion dollar ceo's. That leaves a small amount of corporate jobs.
So my question is,
How does a CEO salary effect the pay of people that don't work for the big corporations?
I make about twice as much as my employees do. Is that to much?

I did what to response to you because your question is a very good one and I didn't have time when I first read it. I looked into some statistics from the Census and the numbers I'm going to present first are from 2008 the most recent numbers for easily.

www.census.gov...

The data I refer to is in table two.

Your statement that over 50% of employees work for small (under 20 employees) firms is correct when you are only speaking about companies that have employees.

The first interesting thing I found was that out of all firms in the US 27 million plus 21 million plus of them have no employees whatsoever. So a whopping 78% of all US firms have no employees. Only partners or other companies. This is a huge part of the problem. These are shell companies, capital firms (private equity firms where everyone is a partner and god knows what else. These companies had revenues for 2008 of (stated on census documents - so somewhat downplayed I would imagine) of $962,791,527,000 - thats $9.6 Billion in Sales to companies with no employees - just try to wrap you head around the implications of that.

Now the 5.9 million firms that have employees 4.6 have less then 20 employess. I do predict that the number is much less then today 5 years and a depression away.

Big businesses tend to buy up smaller firms to stifle any competion and either integrate them into the company while laying off people or sell off the assests to raise cash and the immediate bottom line.

Big Businesses make a lot of their revenues through various loans. Used to be the local car dealer would carry their own paper - no more.

Big Businesses can destroy towns and or whole industries. Walmart comes to mind. I recall when the Walmart moved into a small town in Oregon a prosperous middle class town with plants for two large nationwide firms. They underpriced all the local suppliers of clothing, housewares, even food closing the groceries and mom & pop shops and business. The crafts were'nt able to survive either as the big box would bring in labor from out of town if the local firms wouldn't meet their price for work (which most could not and pay their people and taxes).

Speaking of taxes. Big firms ensure that the tax structure is unfair, they get special deals where as the little guy has to follow the rules and pay full price.

At to financializtion - again I'd read the article referenced in the OP. It's not long and explains it very well. The whole idea of business has changed since the "Dawn of the MBA" (as my father predicted when he taught MBA students). They haven't come up through their businesses, they just 'think' they know how to 'manage' anything and it just ain't so. Hospitals should be administered by Doctors that find they like the work, Auto companies should be managed by auto workers to like administration, etc.

What is very disheartening to me is that small businesses, the former 'backbone' of the American Dream try to run their businesses like they were fortune 500 companies and they fail sometimes very badly.

originally posted by: KawRider9
a reply to: Benevolent Heretic

One word, Unions.

Hell, the teachers union alone spent 60 million on the damn mid-term elections.

Typical lefties will scream "Koch brothers", while ignoring that Unions are the biggest political supporters.... They're for the people though! SMH

I'm afraid that the 'link' to pay inequity between the average worker and CEO pay is beyond my comprehenion. I didn't know that Unions determine executive compensation. They do in Germany as Union representation is required on the Board of all German firms but not in the US. They do attempt to bargain for better (higher) wages for their members but that doesn't seem to narrow the ever growning gap at all.

originally posted by: SubTruth
a reply to: FyreByrd


What I am going to say will sound outlandish but it is the cold hard truth. Back in the 1970s the PTB started instilling progressive ideals into the Black culture this was possible because of the killing of Mr. King. The following decades showed TPTB that this will indeed work. The Black culture slipped deeper and deeper into despair and poverty.



TPTB are now trying to use this on the entire population and slowly over time it will work. The progressive mindset leads to apathy and denial.

I know, off-hand, of only one Black CEO. Ken Chenault of American Express and I know a bit about him and he is left of right but no more then that.

And 'installing liberal policies in Black culture' totally irrelevant to a discussion of CEO pay compared to average worker pay and the reason thereof. I'm sure their are other Back "C" levels in finance but it's laughable to call it some sort of 'black liberal' conspiracy.

And to other posters, thank you for your time. I would suggest reading the article here:

www.alternet.org...

It isn't long and has pictures --