Is the US becoming a serf economy

[Toro]

A Pub DEPRESSION is not the time to raise taxes on the rich. Even the A-Holes that got us in this mess. Neither is O-care a serf thing.

I think this material shows that the wealthy in the US get an easier ride than they do in any other country on earth. Too easy.

I am pro-capitalist, pro-incentives and all for people earning the most they can in life, but I also believe wealthy people can pay a fair amount towards supporting the system that produces that wealth.

The average compensation of a CEO in 1980 was about 40 times that of the average worker in his company. Today it is more than 500 times.

For the US to create and grow - that needs to change.

Why does CEO compensation doesn't need to change so the economy will create and grow? There is no relationship between the two.

I will agree that CEO comp has gotten ridiculous. It wouldn't be ridiculous if there was an actual relationship between comp and performance. Unfortunately, there is little. There is no relationship between how well a CEO performs and how well he is comped. There is actually evidence that CEOs who are "stars" and brought in from the outside perform slightly worse than those who are promoted from within.

The other problem in America is weak corporate governance. Contrary to what those on the Left claim, corporations in America are not run to maximize profits. They are run to maximize the compensation of the top executives. That's simplistic but generally true. If there are corporate governance mechanisms that link the two, then executives will prioritize maximizing profits but that is often not the case. If you look at the roster of directors on the boards of the top 500 companies in America, very few are actual large owners of company stock, outside of founders. Also, the CEO is often the Chairman of the Board, which should clearly be a conflict of interest. That's not the case in the Nordic countries. The Nordics have the best corporate governance system in the world, where companies are controlled by the shareholders, unlike here in America. America should adopt the Scandinavian model of corporate governance.

 

[Toro]

Mr h.

What I have stated is fact, and there are a couple of American studies which confirm this.

This is probably why you find you can not reply to it sensibly.

And gosh darn it, you post the best kind of facts- with no links or reference.
I am stupified by your stupidence.

In recent years several large studies have found that vertical inter-generational mobility is lower in the United States than in most developed countries.[11] A 1996 paper by Daniel P. McMurrer, Isabel V. Sawhill found "mobility rates seem to be quite similar across countries."[12] However a more recent paper (2007) found a person's parents is a great deal more predictive of their own income in the United States than other countries.[4] The United States had about 1/3 the ratio of mobility of Denmark and less than half that of Canada, Finland and Norway.[1] France, Germany, Sweden, also had higher mobility, with only the United Kingdom being less mobile.[1]

Economic mobility - Wikipedia, the free encyclopedia

The question I would have about these studies, though, is how they calculated the income strata to determine mobility? Was it using medians, averages, quintiles/deciles, etc.?

America has a lot of extremely rich people, which will skew the distributions and may give a false impression about actual mobility. For example, if it is extremely hard to become a billionaire in Sweden and much easier in the US, it will make it appear easier to become "rich" in Sweden than in America, though the actual mobility in America may be higher given that the distributions of income are greater. I don't know. The researchers may have adjusted for this type of skew, but that's the first question I would ask.

 

[bripat9643]

Toro -

That is an excellent and interesting graphic.

Based on that, I agree that the lives of the poor in the US relative to the median is in keeping with international norms...it's how that compares to the very rich that bothers me.

In other words, you're not concerned about the welfare of the poor, envy is what motivates you.

I have no problem with rich people getting richer, providing that wealth isn't being concentrated into the hands of a tiny elite, and in the US I think it is.

You mean it's being concentrated in the hands of movie stars and professional athletes?

The top 1% of Americans control 35% of the wealth. The top 20% of Americans control 85% of the wealth.

This is extremely unhealthy, as it means 80% of Americans actually control very little.

"Controlling the wealth" and receiving the bulk of the income are two separate things. What you're actually complaining about is the later. Most people in the top income categories are only there for brief periods. For example, if someone in California sells his house, he may earn a capital gain and be in the $1,000,000 income level for one year. All the other years of his life he's in the less than $100,000 income level. All this babbling about income disparities is simply demagoguery intended to deceive people into supporting pernicious government policy.

 

[Toro]

It does.

I don't think the Democrats can point the finger too much on this, because their party is also far too dependant on the interests of Goldman Sachs that they can claim to really represent the ordinary working American.

Not stating it is/was right...but....what other choice was there?

With TARP - not a lot, but I've been disappointed that the Obama administration seem to enjoy such a cosy relatonship with merchant banks. I'm not saying they should be an enemy, but I don't think executives from Goldman Sachs are ideal employees for the White House.

The ironic thing about Goldman is that it has been known as a place where you were expected to perform some sort of public service. Even though Goldman has a cut-throat culture, it's top executives generally believe that once you've made your fortune, you should give back to the community, including serving in government. In that sense, there has always been a higher calling at Goldman than at the other Wall Street firms. That's a big reason why you see so many Goldman alums in Washington, compared to other Wall Street banks like Morgan or Merrill.

 

[Saigon]

I'm Canadian and have lived and traveled extensively in Europe, and there is definitely a difference in the American mindset. Unlike those places, there is much less resentment or suspicion of the wealthy here in America. There is a saying in Britain that when the boss left the plant in his car, the workers wanted to put a bomb underneath the car. In America, when the boss left the plant in his car, the workers wanted to be the boss. There was a poll about a decade ago which asked Americans if they thought they were in the top 2% of income in the country. 20% of the people thought they were and another 20% said they weren't but it was their goal to get there. That's a big reason why class isn't big issue here. The term "spread the wealth" is a loaded term in America, unlike most other Western nations. To me, the adulation of those who are successful is a reason why America is so great. Americans don't care if the rich get richer, or inequality rises, or the Gini co-efficient increases, or whatever, if they are advancing too. That's why Americans didn't care if the rich got richer faster under Reagan. The broad swath of Americans also advanced. It's a problem today because the average American hasn't advanced over the past decade. That's one reason why polls over the past few years have consistently shown support for increasing taxes on the wealthy.

Interesting thoughts, Toro!

But I feel there is an element of past tense about all of this.

The US led the world in innovation and in economic mobility in 1955 - now it does not.

And I think the change which began under Reagan plas a significant role in all of this. Paying workers well and offering them the chance to work themselves up in a system motivates and inspires them.

Offering workers barely stable income while they watch the CEO's income literally doubling and trebling in a decade creates frustration and strips workers of their motivation.

Why does CEO compensation doesn't need to change so the economy will create and grow? There is no relationship between the two.

I didn't say that - but logically there is a relationship between the rate that the conpany's turnover is increasing at, the CEO salary and the average salary in that company.

They need not be the same, but if my company is doing well and my CEO's income just doubled, as a good worker, I'd like to see some kind of benefit for me too.

 

[Saigon]

"Controlling the wealth" and receiving the bulk of the income are two separate things. What you're actually complaining about is the later. Most people in the top income categories are only there for brief periods. For example, if someone in California sells his house, he may earn a capital gain and be in the $1,000,000 income level for one year. All the other years of his life he's in the less than $100,000 income level. All this babbling about income disparities is simply demagoguery intended to deceive people into supporting pernicious government policy.

While I take your pint about the house sale, your points are not backed up by reality.

We also need to distinguish wealth from income. Income is what people earn from work, but also from dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income. (But it's important to note that for the rich, most of that income does not come from "working": in 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries. See Norris, 2010, for more details.)

Who Rules America: Wealth, Income, and Power

btw, I find the idea that discussing the Gini Index and distribution of wealth is necessarily "envy" both insulting and chronically stupid. It is used purely and simply to shut people up and end discussion. It suggests that workers have no right to even know what an executive gets paid, and certainly no place to discuss it.

 

[editec]

WE live in a capitalist society.

What does that really mean?

It means that it takes EXPENDABLE CAPITAL to invest either in existing means of production or emerging means of production.

Ergo, when there is a seachange in the amount of expendable capital that any class or group has, their ability to invest that EXPENDABLE capital into wealth production increases.

So the old saw that people are conplaining about income and wealth inquity because they do not understand that capitalism is not a ZERO SUM GAME is really a straw man argument designed to lie about the complaint that people are really making


CAPITAL is used to buy the resources to create new wealth and to buy the existing means of production, too.

And since ALL CAPITAL is competing against all other capital for control over the existing means of production and also to gain control over emerging means of production, a significant change in expendable capital IS going to have a significant impact on weath and income distribution.

The old adage that it takes money to make capital is true.

But what that really means is that it takes EXPENDABLE CAPITAL to make more capital.

And increasing as the middle class incomes have stagnated over the last 40 years, the amount of expendable income the middle class has to compete with the increasing amounts of expendeable capital the WEALTHIER CLASSES have to invest HAS FURTHER EXACERBATED that wealth and income divergence.

 

[Unkotare]

They need not be the same, but if my company is doing well and my CEO's income just doubled, as a good worker, I'd like to see some kind of benefit for me too.

I know the groundskeeper at Fenway works hard and does a damn good job. I'll bet he'd like to make as much per year as John Lester. When Carl Crawford was given a ridiculous contract, do you think the groundskeeper got a ridiculous increase in his salary? A proportionately equivalent increase? Maybe not.

 

[Saigon]

One of the things I think we may ask ourselves here is this:

An executive earned 40 times the average wage in 1980.

An executive earned 500 times the average wage in 2000.

Which of those figures do you think is more realistic?

Because it can't be both.

 

[Bfgrn]

(Before you conservatives start banging the thread for "spreading the wealth", understand that there's a very compelling reason to actually want better than the bowl of thin gruel we're told is better than anything on earth.)

Exactly.

All companies need entrepreneurial thinking, and that thinking requires rewards and incentives.

I think a lot of US companies have lost ground, because people see that the CEO's salary has risen 400% faster than theirs have, and they realise that there is little point in creativity.

We've all seen stories where a CEO is earning $10 million a year, while laying off staff earning $50,000 a year as part of cost cutting.

That makes no economic sense to me at all. I do not call that effective capitalism.

Here is a 2006 Op-Ed written by Senator Jim Webb.

Past Featured Article
ELECTION 2006


Class Struggle

American workers have a chance to be heard.

by JIM WEBB

Wednesday, November 15, 2006 12:01 A.M. EST


The most important-and unfortunately the least debated-issue in politics today is our society's steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes.

Incestuous corporate boards regularly approve compensation packages for chief executives and others that are out of logic's range. As this newspaper has reported, the average CEO of a sizeable corporation makes more than $10 million a year, while the minimum wage for workers amounts to about $10,000 a year, and has not been raised in nearly a decade. When I graduated from college in the 1960s, the average CEO made 20 times what the average worker made. Today, that CEO makes 400 times as much.

In the age of globalization and outsourcing, and with a vast underground labor pool from illegal immigration, the average American worker is seeing a different life and a troubling future. Trickle-down economics didn't happen. Despite the vaunted all-time highs of the stock market, wages and salaries are at all-time lows as a percentage of the national wealth. At the same time, medical costs have risen 73% in the last six years alone. Half of that increase comes from wage-earners' pockets rather than from insurance, and 47 million Americans have no medical insurance at all.

Manufacturing jobs are disappearing. Many earned pension programs have collapsed in the wake of corporate "reorganization." And workers' ability to negotiate their futures has been eviscerated by the twin threats of modern corporate America: If they complain too loudly, their jobs might either be outsourced overseas or given to illegal immigrants.

This ever-widening divide is too often ignored or downplayed by its beneficiaries. A sense of entitlement has set in among elites, bordering on hubris. When I raised this issue with corporate leaders during the recent political campaign, I was met repeatedly with denials, and, from some, an overt lack of concern for those who are falling behind.

A troubling arrogance is in the air among the nation's most fortunate. Some shrug off large-scale economic and social dislocations as the inevitable byproducts of the "rough road of capitalism." Others claim that it's the fault of the worker or the public education system, that the average American is simply not up to the international challenge, that our education system fails us, or that our workers have become spoiled by old notions of corporate paternalism.

Still others have gone so far as to argue that these divisions are the natural results of a competitive society. Furthermore, an unspoken insinuation seems to be inundating our national debate: Certain immigrant groups have the "right genetics" and thus are natural entrants to the "overclass," while others, as well as those who come from stock that has been here for 200 years and have not made it to the top, simply don't possess the necessary attributes.

Most Americans reject such notions. But the true challenge is for everyone to understand that the current economic divisions in society are harmful to our future. It should be the first order of business for the new Congress to begin addressing these divisions, and to work to bring true fairness back to economic life. Workers already understand this, as they see stagnant wages and disappearing jobs.

America's elites need to understand this reality in terms of their own self-interest. A recent survey in the Economist warned that globalization was affecting the U.S. differently than other "First World" nations, and that white-collar jobs were in as much danger as the blue-collar positions which have thus far been ravaged by outsourcing and illegal immigration. That survey then warned that "unless a solution is found to sluggish real wages and rising inequality, there is a serious risk of a protectionist backlash" in America that would take us away from what they view to be the "biggest economic stimulus in world history."

More troubling is this: If it remains unchecked, this bifurcation of opportunities and advantages along class lines has the potential to bring a period of political unrest. Up to now, most American workers have simply been worried about their job prospects. Once they understand that there are (and were) clear alternatives to the policies that have dislocated careers and altered futures, they will demand more accountability from the leaders who have failed to protect their interests. The "Wal-Marting" of cheap consumer products brought in from places like China, and the easy money from low-interest home mortgage refinancing, have softened the blows in recent years. But the balance point is tipping in both cases, away from the consumer and away from our national interest.

The politics of the Karl Rove era were designed to distract and divide the very people who would ordinarily be rebelling against the deterioration of their way of life. Working Americans have been repeatedly seduced at the polls by emotional issues such as the predictable mantra of "God, guns, gays, abortion and the flag" while their way of life shifted ineluctably beneath their feet. But this election cycle showed an electorate that intends to hold government leaders accountable for allowing every American a fair opportunity to succeed.
http://www.opinionjournal.com/editorial/feature.html?id=110009246

Jim Webb - A 1968 graduate of the U.S. Naval Academy, Webb served as a Marine Corps infantry officer until 1972, and is a highly decorated Vietnam War combat veteran. During his four years with the Reagan administration, Webb served as the first Assistant Secretary of Defense for Reserve Affairs, then as Secretary of the Navy.

 

[GreatDay]

Yes it is and this guy does a great job of explaining it:

Jeff Faux: "The Servant Economy" | The Diane Rehm Show from WAMU and NPR

 

[Toro]

I'm Canadian and have lived and traveled extensively in Europe, and there is definitely a difference in the American mindset. Unlike those places, there is much less resentment or suspicion of the wealthy here in America. There is a saying in Britain that when the boss left the plant in his car, the workers wanted to put a bomb underneath the car. In America, when the boss left the plant in his car, the workers wanted to be the boss. There was a poll about a decade ago which asked Americans if they thought they were in the top 2% of income in the country. 20% of the people thought they were and another 20% said they weren't but it was their goal to get there. That's a big reason why class isn't big issue here. The term "spread the wealth" is a loaded term in America, unlike most other Western nations. To me, the adulation of those who are successful is a reason why America is so great. Americans don't care if the rich get richer, or inequality rises, or the Gini co-efficient increases, or whatever, if they are advancing too. That's why Americans didn't care if the rich got richer faster under Reagan. The broad swath of Americans also advanced. It's a problem today because the average American hasn't advanced over the past decade. That's one reason why polls over the past few years have consistently shown support for increasing taxes on the wealthy.

Interesting thoughts, Toro!

But I feel there is an element of past tense about all of this.

The US led the world in innovation and in economic mobility in 1955 - now it does not.

And I think the change which began under Reagan plas a significant role in all of this. Paying workers well and offering them the chance to work themselves up in a system motivates and inspires them.

Offering workers barely stable income while they watch the CEO's income literally doubling and trebling in a decade creates frustration and strips workers of their motivation.

Why does CEO compensation doesn't need to change so the economy will create and grow? There is no relationship between the two.

I didn't say that - but logically there is a relationship between the rate that the conpany's turnover is increasing at, the CEO salary and the average salary in that company.

They need not be the same, but if my company is doing well and my CEO's income just doubled, as a good worker, I'd like to see some kind of benefit for me too.

You are of a European mindset. That element of thinking is much less prevalent here. There are legitimate criticisms about offshoring and what that is doing to the middle class, but the concept of "This guy is wealthy and he should give me more because he's wealthy and I'm not" really isn't deeply embedded in the American psyche like it is in Europe.

The US still does lead the world in innovation. Roughly a third of all patents filed around the world are in the United States. There are more great technology and biotech companies here than anywhere else.

 

[Toro]

btw, I find the idea that discussing the Gini Index and distribution of wealth is necessarily "envy" both insulting and chronically stupid. It is used purely and simply to shut people up and end discussion. It suggests that workers have no right to even know what an executive gets paid, and certainly no place to discuss it.

The answer from the Left, though, is to tax the rich more and give it to the less well off. People see that as the politics of envy. But if someone is able to convince their boss to pay them much more in a free and fair transaction, nobody begrudges that person. They might wonder why that person gets paid more than they do, but it doesn't affect anyone's taxes, and it isn't the government using the law to redistribute income.

Envy is a powerful emotion. It shouldn't be discounted as a driving political force.

 

[squeeze berry]

the guy in the middle will be paying for those less fortunate while getting gouged by the guys at the other end.

Most of us are getting screwed from both ends

 

[alan1]

Alan -

That economic mobility is lower in the US than in many other countries is a fact.

I think it has thus been proven that Mr H's statement is not true.

The economic mobility in the US is also greater than in many other countries.
I would say virtually every US citizen has opportunity to better their economic situation. That doesn't mean it's easy though.

 

[alan1]

Regardless, I'd much rather be poor in the US with a car, computer, a home and all the rest than sitting on a dusty street corner attempting to sell the milk from my one goat in order to buy my family food for the day.
.

So would I.

I was in Liberia last month, and saw people selling plastic buckets at traffic lights to get by...many looked like they hadn't eaten in days.

But the US and EU should hold loftier goals - if people work hard and use their money wisely, they should have a fair chance of owning that home, of becoming manager of their team at work, and maybe get their kids through university.

How many immigrants can say that is a realistic goal?

I know this is merely anecdotal, but I know quite a few Vietnamese "boat people" that arrived in the US with virtually nothing and they managed to put their children through college. Two of the ones I know even own businesses.

 

[IGetItAlready]

Regardless, I'd much rather be poor in the US with a car, computer, a home and all the rest than sitting on a dusty street corner attempting to sell the milk from my one goat in order to buy my family food for the day.
.

So would I.

I was in Liberia last month, and saw people selling plastic buckets at traffic lights to get by...many looked like they hadn't eaten in days.

But the US and EU should hold loftier goals - if people work hard and use their money wisely, they should have a fair chance of owning that home, of becoming manager of their team at work, and maybe get their kids through university.

How many immigrants can say that is a realistic goal?

I know this is merely anecdotal, but I know quite a few Vietnamese "boat people" that arrived in the US with virtually nothing and they managed to put their children through college. Two of the ones I know even own businesses.

Right.
Dude pretty much missed my point on ILLEGAL immigration skewing the data he cited.
And then doubled down by refusing to recognize a difference between the US and Europe in regard to ILLEGAL immigration.
Oh well...

 

[CrusaderFrank]

the more threads like this I see the more I know redistribution sucks and is for losers

 

[Bfgrn]

btw, I find the idea that discussing the Gini Index and distribution of wealth is necessarily "envy" both insulting and chronically stupid. It is used purely and simply to shut people up and end discussion. It suggests that workers have no right to even know what an executive gets paid, and certainly no place to discuss it.

The answer from the Left, though, is to tax the rich more and give it to the less well off. People see that as the politics of envy. But if someone is able to convince their boss to pay them much more in a free and fair transaction, nobody begrudges that person. They might wonder why that person gets paid more than they do, but it doesn't affect anyone's taxes, and it isn't the government using the law to redistribute income.

Envy is a powerful emotion. It shouldn't be discounted as a driving political force.

You are right, envy shouldn't be discounted as a driving political force. Envy of people getting something they don't get pretty much explains the rights attack on what they call 'entitlements'.

The term "entitlement" originally referred to aristocrats. Aristocrats had titles, and they thought that they were thereby entitled to various things, particularly the deference of the common people. Everyone else, by contrast, was dependent on the aristocrats.

Social Security and Medicare are not an 'entitlement', they are social insurance programs beneficiaries pay into during their working life.

Another example of envy is the right's attack on teachers in Wisconsin. Teachers created a model health insurance trust that maximizes coverage with very low operating overhead. Teachers opted to take pension and health insurance plans as deferred wages.

But that didn't stop Republicans from cutting the wages of people making a 2009 average salary of $48,267.

 

[alan1]

A Pub DEPRESSION is not the time to raise taxes on the rich. Even the A-Holes that got us in this mess. Neither is O-care a serf thing.

I think this material shows that the wealthy in the US get an easier ride than they do in any other country on earth. Too easy.

I am pro-capitalist, pro-incentives and all for people earning the most they can in life, but I also believe wealthy people can pay a fair amount towards supporting the system that produces that wealth.

The average compensation of a CEO in 1980 was about 40 times that of the average worker in his company. Today it is more than 500 times.

For the US to create and grow - that needs to change.

Why does CEO compensation doesn't need to change so the economy will create and grow? There is no relationship between the two.

I will agree that CEO comp has gotten ridiculous. It wouldn't be ridiculous if there was an actual relationship between comp and performance. Unfortunately, there is little. There is no relationship between how well a CEO performs and how well he is comped. There is actually evidence that CEOs who are "stars" and brought in from the outside perform slightly worse than those who are promoted from within.

The other problem in America is weak corporate governance. Contrary to what those on the Left claim, corporations in America are not run to maximize profits. They are run to maximize the compensation of the top executives. That's simplistic but generally true. If there are corporate governance mechanisms that link the two, then executives will prioritize maximizing profits but that is often not the case. If you look at the roster of directors on the boards of the top 500 companies in America, very few are actual large owners of company stock, outside of founders. Also, the CEO is often the Chairman of the Board, which should clearly be a conflict of interest. That's not the case in the Nordic countries. The Nordics have the best corporate governance system in the world, where companies are controlled by the shareholders, unlike here in America. America should adopt the Scandinavian model of corporate governance.

Toro, you make some good points.
I certainly can't comment on all Fortune 500 companies, as I have not done the research, but I can tell you about the CEO salary of the company I work for. I observe his salary because I work for the company and keep up with the annual reports. Where I work, the CEO's salary is largely dependent upon his bonus. His bonus is based primarily upon company growth and company profit. About 80% of his salary is bonus and 90% of his bonus is based upon company performance as opposed to 20% of my bonus being based upon company performance.
A couple years ago, the company actually hit 150% of it's profit plan/goal, so everybody in the company had their company portion of the bonus calculated at 200% (for every 1% point above plan, the company pays 2% points above the bonus, for every 1% point below plan the company cuts 2% points off the bonus) Of course, that made the CEO's compensation huge that year. One of the differences between my bonus and the CEO's bonus is that mine is paid in cash, a lot of his is paid in stock grants, which is even more incentive for him to grow the value of the company.