ECONOMIC ANALYSIS & OPINION:

Gravy-Train Wreck Ahead?

by Marc Oliver

"The richest 1% of Americans now own 42% of the nation's wealth. That's a lot, compared to 19% in 1976. The top 1% now owns more than the bottom 90%."

-Rep. Bernie Sanders (I-VT)

The following is a compilation of selected data from the Wall Street Journal report on Executive Pay of April 9th and from the AFL CIO's PayWatch web site: (http://www.paywatch.org), with some opinions thrown in.

     Executive pay is up over 700% since 1980, whereas profits are up approximately 170%. Workers' wages for the period raised a scant 70%. After adjusting for inflation, workers did little better than tread water while CEOs had a true six-fold increase in earnings. Get the picture?
     Pay for performance is the oft- heard mantra of the nineties, but it's more lip service than reality as executive pay rises when earnings and stock prices fall, as well as when earnings fall-or go up as thousands of employees are laid off. It is a win-win situation if you're The King.
     Locally, USF&G's (last) CEO got a $44 million "exit package" for his "performance" for selling the company, while thousands of USF&G employees are being laid off.
     At Apple Computer, Gilbert Amelio presided as CEO for 17 months and the company lost $2 billion, but he walked away with $8.7 million in salary "bonus" and severance.
     At Disney, Michael Eisner had a payday of $575 million, as he cashed in stock options worth $565 million plus a salary and bonus of $10 million more.
     Indeed, it's good to be a King.
     In the 30 companies with the largest announced layoffs in 1996, CEOs saw a 67.3% increase in salary and other compensation.
     Rubber Stamp Boards are giving CEOs anything they want. Boards claim compensation is merit-based, but frequently evidence proves otherwise. Boards are also giving themselves more in stock options, so it seems a reciprocal arrangement is fulfilling everyone's greed.
     Everyone in the boardroom, that is. Welfare of employees seems of least concern.
     CEOs are a new class of celebrity, now "making" 209 times the average worker salary.
     It is in the capitalistic model to get all the money you can. So some may say that being upset with what CEOs make is just sour grapes. But I know in my bones that this excess is a symptom of a sickness that will come to harm most of us.
     Underlying the surge in CEO pay is a huge change in business fundamentals: those who best leverage free trade and maximize market-share and profits win. And in this pursuit American (and Western European) workers must take pay cuts (in real wages) to be competitive with the best and least-paid African, Latin and Asian workers.
     America's CEOs (and stockholders) now profit by minimizing American worker costs, manufacturing overseas instead and then exporting to America (or anywhere) at less cost of production and with lower taxes.
     The proof: Even though oil import volume and prices are at historic lows, our trade deficit is at historic highs. For the first two months of this year the deficit is running at an annual rate of $142 billion(!).
     The extent of trade imbalance has been further heightened by the decline in currency valuation of most Asian currencies, making their (our?) exports even cheaper. Japan's net exports accounted for $5.3 billion of our $12.1 billion trade deficit for February.
     But the problem is not just cheap, high quality goods. Rather the larger problem for American workers stems from American corporations making new plant and equipment investments in Asia and elsewhere instead of here, and as remaining plant and equipment here age, our plant workers become less competitive.
     Bill Gates donates copies of Microsoft software to America's public libraries and schools, calls it charity, and takes a tax deduction, appearing to be helpful. But this is obviously to gain in eventual sales to new users, while Microsoft makes its largest investments in plants and new employees in India and China. Get the picture?
     Similarly General Motors, Ford, Phillips Electronics and United Technologies-to name just a few-are all building new plants in Northern Mexico instead of in the U.S. Job expansion is happening where workers' rights, pay, and business restraints (as in pollution control) are least.
     This change is happening at a breakneck pace. Over 115,000 new border-factory jobs were created just last year in Mexico. In ugly contrast, how many modern plants or factories were opened in the Baltimore area last year? How about in all of Maryland? In all of the U.S.? Any new Microsoft or Intel facilities here?
     Laid-off and over 40? Need a good job? Maybe you can sell stuff (made elsewhere) at the ballpark, like former City Council President Wally Orlinsky. Or maybe you could be a bellhop at one of the city's hotels.
     How does this situation play out? Will the increasingly marginalized majority ever wake up and take back their country? Or is the class war (a) unnecessary, or (b) over?
     One or the other seem to have occurred, because the media are silent. Or are the media cowed into silence by advertisers and corporate owners?
     America's class inequality is worsening. The rich are wielding more and more political power, which is where inspired ideas like flat-tax come from.
     A solution to this is up to you, and it is past due. Will the non-rich find a political party that listens and fights for a fair society that serves most of its citizens? Or is something less peaceful going to happen?
     In the mean-time, keep a watchful eye on the excessively rich in those gated and guarded communities. Their homes are huge and modern with every convenience. Their kids go to the best private (separate) schools. They eat the best (natural!) foods and water, which you cannot afford. They dine at restaurants where your week's pay would not buy the wine. They have the very best dental and health care without restriction. They have cosmetic surgery by the best surgeons to look simply mah-velous at resorts all over the world.
     In South America, where inequality of wealth and income is even more institutionalized, bandits with automatic weapons rob, kidnap for ransom and/or murder the rich. Is this what we want here?
     So let us find a political solution to this undiscussed problem before it is too late.


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This story was published on May 6, 1998.