Friday, November 14, 2008

Excessive Compensation

by DM

I am a proponent of working hard and earning well.

There seems to have developed, however, a disconnect between the two over the past 28 years.

From the end of the World War II through 1980, the golden era of American capitalism, the average executive compensation was between twenty and forty times that of an organization's average worker's earnings. That is, if the average worker earned $20,000, the chiefs of the organization earned between $400,000 and $800,000.

Industry boomed, the rich got richer and the poor moved into the middle-class, and America was humming along.

In the late 1970s, although America was still a strong, vibrant economy (the strongest and most vibrant economy), we were mired in a short-term post-War recession. Inflation was high and to combat inflation, interest rates were high. If the market had been left to correct itself, we would have moved out of recession and inflation, and our economy would have adjusted to a post-War market.

In 1980, however, it was decided that we could not get out of our situation through patience and hard-work (virtues that had built America), that there had to be a gutting of the Federal government, a redistribution of tax dollars upward, and a shift in the distribution of profits within industry to a more top-heavy paradigm. We were promised that the money sent up would trickle down, and the economy would be the envy of the world.

Since 1980, executive compensation has sky-rocketed while average worker earnings have stagnated. Industry chiefs now earn an average of 200 - 400 times that of an organization's average worker's earnings. So, if the average worker earns $35,000, the chiefs of the organization now earn between $7,000,000 and $14,000,000.

Our economy is no longer vibrant, nor is it the envy of the world. It's a bit of a shambles.

I can't help but think that it is not the salary of the average Joe over the past twenty-eight years that has caused the economic problems we are facing. Executive compensation is absurd. Chiefs who drive companies into the ground have press conferences where they say that the company is no longer viable because of union contracts, health costs, and pensions, and as the company disappears they float away with golden parachutes and bonuses of 8- and 9-figures.

Still we hear the conservatives who have promoted this economic plan deride the value of the worker, accuse unions of extorting business, and call for further gutting of the government. (Which government, by the way, IS the people of the United States.)

I understand why the rich defend these practices and continue to vote for officials who believe that the theory of supply-side economics is a success and promote a so-called conservative agenda. What I don't understand is why working people defend these practices and continue to vote for officials who promote these theories and a conservative agenda. And the odd part is that the areas with the most poverty, the poorest of the poor, are the areas and people who most stridently support the conservative agenda.

Perhaps I should just ignore it all and enjoy the fruits of my labor (which are not insubstantial); but, this stuff eats at my conscience. I wonder how any working-class . . . er, excuse me, middle-class person can conclude that Reaganomics has succeeded and that we are better-off with a conservative agenda.

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