Income inequality is increasingly cruel

Private jet travel is "way over the top" this year at Aspen.  Molly Briggs/Aspen Daily News

Christopher Ingraham of The Washington Post highlighted late last year the extraordinary statistic that if Amazon executive chair Jeff Bezos gave all his employees a US$105,000 bonus he would still have more wealth than he did at the start of the pandemic.

That factoid came from an Oxfam report that arose from observing around the world, but most starkly in the United States, that  “windfall” profits flowed to a small number of very large businesses whose products and services have been in high demand during the pandemic.

Oxfam saw this phenomenon aggravating the inequality evident everywhere: 

The worsening inequality crisis triggered by Covid-19 is fuelled by an economic model that has allowed some of the world's largest corporations to funnel billions of dollars in profits to shareholders. At the same time, it has left low-wage workers and women to pay the price of the pandemic without social or financial protection.

That economic model is not inevitable - it's a result of decisions taken by those who hold corporate and political power. 

Bloomberg writer Anders Melin has been tracking the short-sighted corporate behaviour furthering inequality (see here and here), He reports the reaction to last Wednesday's action by senators Bernie Sanders and Elizabeth Warren to lodge a bill that would use a tax mechanism to discourage companies from "paying CEOs lavishly and workers feebly":

The proposal is a long shot given Washington’s political gridlock and broad disagreement about how income inequality should be addressed—or whether it’s even a matter in need of fixing. But if enacted, it would hit most of the biggest U.S. companies.

The typical CEO among the 1,000 biggest publicly traded firms in the country receives 144 times more than their median employee, according to data compiled by Bloomberg. 

Walmart Inc., for instance, has a CEO-to-worker pay ratio of 983:1, with the median person receiving $22,484.

At Coca-Cola Co., the ratio is 1,621:1; GameStop Corp., the company at the center of  this year’s stock trading frenzy, has a ratio of 1,137:1 with its median worker getting $11,129.

Sanders said at a Congressional hearing Wednesday that anybody who works 40 hours a week shouldn’t have to live in poverty.

“It has always been true, of course, that CEOs make more than their employees,” he said. “But what has been going on in recent years is totally absurd.”

Ingraham picked up some of the key points from Oxfam:

The Oxfam report identifies mechanisms by which major companies have “exacerbated the economic impacts” of Covid-19.

Chief among them is the long-standing tendency of many large companies to prioritise shareholder payouts over employee wages, which has continued even as millions of workers have been laid off during the pandemic.

From 2010 to 2019, companies listed in the Standard & Poor's 500 index spent US$9.1 trillion on payouts to their wealthiest shareholders – equalling more than 90 per cent of their profits over the same period, the report said. “Several companies not only paid out all of their profits to shareholders, they sometimes went into debt or used reserves to pay their rich investors.”

Because the wealthiest 10 per cent of Americans own more than 80 per cent of the stock market, these massive payouts are a key driver of the skyrocketing wealth inequality in this country. They also set many companies up to have little financial cushion to soften the blow of the coronavirus recession, contributing to the mass layoffs and even to the shortages of medical and personal protective equipment that have plagued the US response.

"Decision-making by corporate managers has become disconnected from any sense of community or national obligation"

Oxfam said the payouts are continuing even during the public health crisis. Focusing on recent earnings statements for the 25 most profitable S&P Global 100 countries, they found that they are expected to distribute a “shocking” 124 per cent of their net profits to shareholders this year [2020]. And many companies continue to funnel cash to shareholders even as they lay off their workers.

The continued flow of shareholder payouts during the economic and public health crises “underscores the degree to which decision-making by corporate managers has become disconnected from any sense of community or national obligation,” said Oren Cass, a former senior fellow at the Manhattan Institute and the director of American Compass, a think tank advocating for what Cass calls a “pro-worker conservatism”.

According to the report, the 32 most profitable companies globally – including Apple, Google, Facebook, Amazon and others – are expected to collectively pull in profits totaling US$109b above their average annual haul, according to the companies' earnings statements. In July [2020], the chief executives of all four companies were peppered with questions about their profits and business practices during a House antitrust hearing.

The state of the business world mirrors the moral state in most societies. The "absurd" imbalance in pay levels show how the values of a few decades ago that stressed the importance of a sense of community have deteriorated, and business people have grown casually cruel out of habit - perhaps Gordon Gekko's "greed is good" code has fully taken hold.

In that light, Amazon's anti-union efforts besmirch a company I find very convenient in buying from. I will take my business away if instances of such efforts continue to surface. Of course, Amazon is not alone in fighting to prevent workers gaining a platform for securing a bettter deal with pay and benefits.

I think this is where progressives in advanced economies have got on to a morally bankrupt path by pursuing culture issues like "white privilege" and "human rights" that satisfy loud campaigners dealing with sexual matters that ignore reality and, in fact, run heavily against the family. 

Here's a statement I came across recently in a book dealing with China's struggle in the early 20th Century to modernise. I see weak-minded Western progressives very clearly in these words:

If you demand political rights you will not be met with much opposition, whereas if you speak about the equal distribution of wealth you will find yourself up against real enemies.

John Harwood of CNBC has some pertinent remarks:

The rise of income inequality and the struggles of so many families to get ahead have shaken American politics across the spectrum.

President Donald Trump invokes the plight of “the forgotten people.” Liberals call for massive new government programs.

Wall Street titan Jamie Dimon proposes “a Marshall Plan for America.” Ideological conservatives warn of a socialist uprising that would ruin American capitalism.

But economists who study the issue say it need not come to that. With bold and targeted steps, they argue, government can increase opportunity and incomes for many more people in ways that strengthen, not weaken, American capitalism.

He goes on to list five ways to fight wealth inequality. It's well worth a read to get an insight into the possibilities available for lifting millions out of a decidedly stressful condition in life. Action is well overdue, and public support at all levels is needed in order for the common good to be achieved. The US infrastructure legislation is a necessary first step and it needs to be replicated widely. But social welfare programmes are also essential.  

Read Harwood's solutions to our predicament that entraps a horrendous number, and see an earlier post titled "Morals and markets and outlandish CEO pay" (here), as well as the related post "Morals and markets and the common good" (here). 

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