The story, at first, sounds heartbreakingly familiar. At the Salinas Valley Memorial Hospital, two hours south of San Francisco, 400 health care workers have lost their jobs since January 2010. Now management wants to cut another 100. Nurses used to cover 10 patients per shift. Now they cover nearly twice as many.
An unavoidable hardship, given our awful economy? Not quite. Life’s just fine in the hospital’s executive suites. This past April, the Salinas Valley CEO retired with$5 million in benefits. His fellow executives, news reports indicate, have been averaging annual pay hikes up to 30.8 percent for the past five years.
But here’s where the familiar starts breaking new ground. Last Tuesday, workers at Salinas Valley staged a one-day walkout to protest executive looting. Explained striker Ester Fierros-Nuñez: “They want to cut folks at the bottom so they can pay more to people at the top.” On Friday, workers raised the ante. With area media watching, they picketed the home of a key hospital board decision maker.
Corporate kingpins today hardly ever get this sort of in-your-face attention. They can typically go 24/7 almost totally cordoned off from the chaos they create. That cordon has consequences. We explore them this week in Too Much.
|GREED AT A GLANCE|
Last month’s arrest of International Monetary Fund chief Dominique Strauss-Kahn, on sexual assault charges, has placed an unexpected spotlight on New York’s mega rich world of opulent hotel suites. Strauss-Kahn’s lodgings at New York’s Sofitel Hotel ran $3,000 a night. In elite circles, that almost qualifies as a bargain accommodation. In Manhattan’s Mandarin Oriental on Columbus Circle, relates a recent Slate survey, the 53rd-floor presidential suite carries a $16,000 rack rate. The suite comes with a full-size private kitchen, complete with chefs. At the Four Seasons, $35,000 will get you an evening at the Four Seasons Ty Warner penthouse. You get nine rooms — and the hotel will throw in a private butler and a chauffeur-driven Rolls Royce Phantom or Maybach . . .Good news at Gannett! The giant newspaper chain has just announced plans to lop off another 700 jobs, about 2 percent of its workforce. What makes layoffs “good news”? Ask Gannett CEO Craig Dubow and chief operating officer Gracia Martore. Last year, notes the MediaPost trade journal, the duo took in $3 million in cash bonuses “for implementing cost-cutting measures, including layoffs.” Dubow collected $9.4 million overall in 2010, twice his 2009 pay, after axing hundreds of workers and imposing wage cuts “on thousands more.” We won’t know how much “good news” the new layoffs will bring Dubow and his fellow execs until next spring . . .
The House Financial Services Committee last week proudly did battle against“excessive government regulation” — and for outrageously overpaid CEOs. The panel last week voted, by a 33-21 margin, to repeal the most cutting-edge executive pay reform in last year’s Dodd-Frank financial reform act. The reform, known as 953(b), requires all major publicly traded U.S. firms to annually reveal the ratio between their CEO and median worker pay. The “Burdensome Data Collection Relief Act” that Financial Services has now endorsed will almost certainly pass the GOP-controlled House. But the bill will need to gain more Democrats to win Senate approval. Shareholder activists who’ve been fighting for CEO-worker pay gap disclosure for years will be watching closely. In 2010, theWashington Post’s Peter Whoriskey reported Friday, shareholders advanced pay disparity disclosure proposals at at least ten corporations . . .One of Ireland's most prominent journalists, Vincent Browne,asked last week on his daily TV political talk show why Ireland is suffering such austerity cutbacks for the poor when the country remains “richer than France on a per capita basis”? The answer, of course, boils down to Ireland’s deep-seated maldistribution of income and wealth, and Browne, also an Irish Times columnist, wants that to start changing. His policy of choice? Suggested Browne earlier this month: “As well as a minimum wage, there should be a maximum wage.” The formerSunday Tribune editor wants no one earning more than five times anyone else. We need, sums up Browne, “greater respect and status” for all people . . .
Ferretti, the luxury Italian yacht maker, wants more money from Brazil’s rich. So does the CUT, Brazil’s largest labor federation. Who wins may well decide Brazil's economic trajectory for the next generation. Ferretti is doubling down on the Brazilian luxury market, going all out to hike sales 15 percent annually on boats that run up to $110 million each. What makes Brazil so attractive to yacht makers? Try a coastline that snakes 4,600 miles and a tax system that subjects income over $44,918 to just a 27.5 percent income tax rate. Brazil also taxes capital gains at only 15 percent, just like the United States. The CUT labor fed is pushing for substantially higher top-bracket income tax rates, a tax on personal fortunes and inheritances, and a new financial transaction tax to curb speculation. By reducing the tax burden on the working class, says CUT’s Quintino Severo, “we would boost domestic consumption capacity.” Except for yachts.
|INEQUALITY BY THE NUMBERS|
Our 'Double Bubble' of Economic Trouble
'Asset bubbles' have been roiling our economy ever since America's wealthy started supersizing three decades ago. But another bubble, this one enveloping those wealthy, may be just as essential to understand.
America’s corporations, the latest stats show, have been upping what they spend to protect their top executives by about 15 percent a year since 2006. A host of companies — the World Protection Group Inc., the 360 Group, the Steele Foundation — are now making millions keeping CEOs and their buddies secure.
But where are all these millions for executive security actually going? Even the most elaborate and expensive residential security system, after all, only needs to be installed once. So what are companies getting when they routinely lay out six figures a year — and more — to keep their honchos whole?
Consider this mystery solved. Corporations that shell out small fortunes for security, the July Mother Jones reveals, aren’t just buying their execs fancy alarm systems or even bodyguards. They’ve essentially providing armed servants.
The highly trained staffs that executive security firms supply aim to please. These security staffs carefully plot out, in excruciating advance detail, each day’s executive itinerary. The goal: to make sure executives never have to wait for an elevator or a car — or have anyone untoward ever get in their faces.
In effect, these security details are creating protective bubbles around America’s top executives. Inside the bubble, life’s daily inconveniences need never intrude. Top execs can glide through their days, week after week, year after year, without ever confronting just about anything distasteful.
In fact, you could even say that the millions upon millions that Fortune 500 corporations lay out every year for executive security have helped inflate a “bubble economy.” We have physically isolated our economy’s most powerful actors from life’s humdrum hard knocks — and, in the process, benumbed these powerful actors to the consequences of what they do.
This “bubble economy” notion could help explain Corporate America’s continuing cluelessness on CEO pay, as showcased once again this past spring in the annual executive pay reports that most all major daily papers publish.
These surveys, capsulized on Inequality.Org's new Too Much Executive Pay Scorecard, tell an incredibly shameful story: At a time of economic calamity for average Americans, power-suited Americans are raking in pay packages that have jumped all the way back to pre-Great Recession levels — and then some.
A few examples. In the real estate industry, the Great Recession’s epicenter, executive pay levels at the nation’s top 100 real estate companies are now running 13 percent over their previous 2006 record peak. In metro Las Vegas, the urban area left most devastated by the housing collapse, the top 10 local corporate executives last year averaged $12.2 million each.
Not too far away, over in Silicon Valley, high-tech execs saw their pay shoot up 37 percent in 2010. The Silicon Valley average worker wage, meanwhile, rose a paltry 1.6 percent last year, barely enough to offset higher gasoline prices.
Back east, in distinctly non-tech Buffalo, 25 local corporate execs took home over $1 million last year, the area’s highest number ever. Annual earnings for average Buffalo workers, by contrast, shrunk $19 to $35,006. The typical Buffalo worker, reporter David Robinson notes, “would have to work until 2039 to earn as much as the typical local CEO took home last year.”
In North Carolina, the state’s 50 top CEOs ended last year with over a quarter billion in personal compensation, up 25 percent from the year before. Average North Carolina workers with jobs saw their weekly earnings rise 1 percent in 2010. They felt lucky. Just under 10 percent of state workers had no jobs.
Did corporate executives in North Carolina even notice? Or care? Do corporate executives, anywhere in the United States, understand how obscene their enormous good fortune appears?
Former U.S. labor secretary Robert Reich has noted that we are, in America today, witnessing a “secession of the successful.” Our most affluent have essentially withdrawn from the ebb and flow of messy normal life. They live in private compounds, fly private jets, send their kids to private schools, and luxuriate in private clubs. They need never rub elbows with the hoi polloi at all.
The bubble around America’s top corporate execs simply takes this secession to an even higher level of isolation. These execs can wreak havoc with people’s everyday lives. They can downsize and outsource. They can pound away at worker pensions and cheat on their corporate taxes — and never see the resulting pain. They can cause suffering and never, in their gut, ever sense it.
Some analysts, to be sure, might not want to fix the “bubble economy” label on this phenomenon, for a good reason. We already have a “bubble economy” theory — based on a totally different set of economic phenomena.
This older “bubble economy” notion started gaining currency in the 1980s when modern American “asset bubbles” first began to pump up and pop.
Asset bubbles start inflating whenever wealth starts concentrating at the top. In these situations, economically productive opportunities for investment start getting scarce because ordinary people don't have the wherewithal, with wealth concentrating, to buy what a healthy economy could be producing.
The wealth of the wealthy, in quick order, ends up chasing a series of speculative assets instead. Prices on these assets inflate. And then they pop.
We’ve been popping along, as a nation, for several decades now, first with the commercial real estate bubble that ushered in the late 1980s savings and loan debacle, then the dot-com bubble of the late 1990s, then the housing bubble, and now we appear be back in tech stock bubble territory.
Asset bubbles, in other words, remain a real and constant companion of our staggeringly high levels of inequality. They’re not going anywhere.
And neither are Corporate America’s armies of executive security personnel. They’re still creating bubbles of isolation around our power-suited finest.
So we have, in effect, a “double bubble economy.” Our asset bubbles reflect the toxic marketplace dynamics that inequality inevitably generates. The isolation bubbles that surround our most financially favored are, in the meantime, creating toxic psychological dynamics — and ensuring ever more brazen CEO looting.
Both these bubbles will continue to inflate until we take away the pump. Other nations have done that. We could, too, if we worked at becoming more equal.
The Global Debt? Give the Big Boys the Bill
World Wealth Report, Capgemini SA and Merrill Lynch Global Wealth Management, June 2011.
Sober central bankers the world over — and their political pals — have been hyperventilating the last few months about the debts of the world’s most notorious deadbeat nations.
Over in Old Europe, we have Greece with a standing debt of some $485 billion. Over here in the New World, meanwhile, the United States owes some $9.4 trillion to the outside investing public.
“Crushing” debts like these, the debt hawks squawk, have only one remedy. The average people of deadbeat nations must swallow hard and accept austerity. They must shut down their libraries and overcrowd their classrooms — and start selling off their public assets as well. Anybody want to buy the Parthenon?
Amid all this debt hysteria, we might want to slow down a bit, unless we relish the possibility of having Donald Trump ending up the owner of the Acropolis. We need a little perspective, the sort we can get from the 15th annual World Wealth Report, a joint effort from Merrill Lynch Global Wealth Management and Capgemini, a Paris-based corporate and financial consultancy.
This latest World Wealth Report, released just last week, calculates — among other fascinating numbers — the total investible wealth of everyone in the world who now has at least $30 million available to invest.
Remember, we’re not talking total wealth here, only investible assets. The Capgemini-Merrill Lynch tallies don’t include the residences wealthy people call home, their diamonds, their luxury cars and yachts, or any other personal luxury goods and collectibles that sit in wealthy households.
The world now hosts, reckon Capgemini and Merrill Lynch, 103,000 individuals with $30 million sloshing in their investment accounts. Together, these “ultra-high net worth individuals” hold $15 trillion in investible wealth.
Cogitate on that total a moment. If the world’s ultra-high net worth folks had a hankering, they could totally pay off the Greek and U.S. debts, and still have almost $50 million each, on average, left to invest, on top of their mansions, Bentleys, and jewels. And the Greeks would get to keep the Acropolis!
The folks over at Capgemini and Merrill Lynch would never, of course, want to suggest for even a moment that the world’s “ultra-highs” — about 40 percent of whom, incidentally, live in the United States — either ought to have this hankering or be taxed into it. They've put together this World Wealth Report to impress the wealthy into becoming their clients, not to scare them.
But the rest of us remain free to suggest whatever we want — after we thank Capgemini and Merrill for providing all this wonderfully suggestive inspiration.
Quote of the Week
“If you believe, as the corporate crowd apparently does, that this market for corporate talent is competitive and efficient, then you must also believe two things: First, that none of these guys (and the vast majority still are guys) would do the same job for a nickel less. Second, that the value of the chief executive went up 18 percent last year while the value of average workers in their companies changed very little. And if you believe that you are a fool and an ideal candidate for an open seat on an S&P company board of directors.”
Steven Pearlstein, Why they’re winning on CEO pay, Washington Post, June 24, 2011
Stat of the Week
New Jersey governor Chris Christie and the state lawmakers who back him are refusing to extend their state’s “millionaire’s income tax surcharge.” If that tax lapses, couples that make $750,000 a year will realize a $4,800 tax savings. New Jersey public school teachers who make $65,000 a year, by contrast, will have to shell out over $4,800 more for benefits under Christie’s budget cut plans.
Vincent Browne, Golfer drives home the message of social justice, Irish Times, June 22, 2011. A riff on U.S. Open winner Rory McIlroy, hoop superstar Wilt Chamberlain, and the "social cooperation" that creates all wealth.
David Callahan, The Upside of Playing Fiscal Chicken,American Prospect, June 22, 2011. The federal budget crisis may offer an opportunity to shoehorn in change that actually makes the tax system more progressive.
Garret Keizer, Public or Private, It’s Work, New York Times, June 25, 2011. We would do well to “commit to a model similar to the one proposed by George Orwell 70 years ago, with the nation’s highest income exceeding the lowest by no more than a factor of 10.”