Inequality in the United States now exceeds the previous peak set in the “Gilded Age” of the 1920s, just before the Great Depression.
The richest 10% of Americans — and especially the richest 1% of Americans — are now capturing all of the income growth in the country, while the rest of America, some 300 million people, are treading water or losing ground.
That’s obviously not good for the 300 million Americans who are getting shafted. But it’s also actually not great for the handful of Americans who own and control everything.
Because the 90% of Americans who are struggling are the customers of the companies owned by the other 10% of Americans. And, as any smart business-person will tell you, when your customers are hurting, it’s hard to grow your business.
This is the real reason our economy has grown so slowly in recent years.
Most of the “customers” in our country — the 300 million Americans in the 90% — are strapped.
And they’re strapped not because of “our lousy education system” or “technology” or “globalization,” or the other factors-beyond-our-control that America’s executives and investors often invoke to justify this state of affairs. They’re strapped because the handful of folks who own and control everything have gotten so greedy that they’re keeping all the loot for themselves.
Don’t believe it?
Look at these two charts:
First, profits as a per cent of the economy. They’re at the highest level in history. The folks who own and control America’s big companies are taking a bigger percentage of the fruits of the country’s labour than ever before.
Second, wages as a per cent of the economy. They’re at the lowest level in history. The folks who own and control America’s big companies are sharing less of the country’s wealth with the people who create it than ever before.
You can talk all you want about how the free market is supposed to fix this, how people need to take responsibility for themselves, and how investors and executives have their own careers and performance reviews and lifestyles to worry about.
But it doesn’t change the fact that the reason America isn’t working for most Americans is because members of America’s ownership class are hoarding all the loot for themselves.
Fortunately, there’s finally reason to hope.
For years, the most successful and richest Americans have pretended that they bear no responsibility for this state of affairs.
But now, a handful of rich and successful Americans have begun to speak out.
Billionaires like hedge fund manager Paul Tudor Jones and Salesforce.com entrepreneur Marc Benioff are talking publicly about what’s going on and what will happen if we don’t change course (revolution, taxes, or war, Mr. Jones said this week) . Hecto-millionaire Nick Hanauer is warning his fellow 0.1%-ers to brace for an onslaught of torches and pitchforks.
Specifically, these folks are cutting through all the rationalizations and BS and explaining the simple way to fix the problem:
Pay people more.
Yes, that’s right. Pay people more. Voluntarily share more of the value that successful companies create with the people who create it — the rank and file workers who dedicate their working lives to the company and its customers and, in so doing, to increasing the wealth of the senior executives and investors who own the company.
When confronted with this simple and obvious solution, most rich executives and investors still assume you are joking (“What are you — a socialist?”). Or they will argue, effectively, that there’s a law of economics that forces them to pay their employees as little as possible.
But there isn’t a law of economics that forces companies to pay their employees as little as possible. The owners and senior managers of companies can pay their employees as much as they can afford to while still keeping their company financially healthy.
The idea that there’s a law of economics that you have to pay people as little as possible is just an excuse designed to make senior executives and investors feel better about taking almost all of the company’s value for themselves. It’s not a law. It’s a choice.
So, it’s encouraging that so many rich executives and investors are finally talking about this. The next step will be helping more rich, successful Americans understand where this unchecked pursuit of self-interest will eventually take us and what can be done about it.
The solution is simple.
Pay people more.
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