Les Leopold: Fear and Looting in America
When Les Leopold, author of The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It, explains the underlying causes of the current economic disaster we’re going through, it actually sounds pretty straightforward. Trickle-down economics never quite worked the way it was supposed to: the theory is that when the people in the very top income brackets get to keep more of their money, they’ll reinvest it in the economy and the rising tide will lift blah, blah, blah.
Well, some of that investing did happen. But there was so much wealth concentrated at the top that, in order to get more obscenely wealthy, the rich had to put their money in riskier and riskier investments (Roads, schools, the environment? Sorry, not enough of a “return.”), in the process creating ridiculously convoluted and opaque “financial innovations” that weren’t tied to real goods or the real economy—a bubble just begging to burst. So how do we fix it?
Les Leopold has some ideas. From The Huffington Post:
“I’ve never quite been in this situation before of getting a massive pay cut, no bonus, no longer allowed to stay in decent hotels, no corporate airplane. I have to stand in line at the Northwest counter. I’ve never quite experienced this before. I’ll let you know a year from now what it’s like.”
– Bob Lutz, GM Vice-chairman after December 2008 auto industry bailout.
Poor Mr. Lutz finds himself in a strange land — America. He is being forced to go native. For the last 30 years, he along with the super-rich severed their social connections with the rest of us. Now, they no longer live anywhere near us (or if they do, it is behind well-protected walls, fences, and gates.) Their kids don’t go to our schools. They don’t ride on our buses and trains, and they’re not in line with us at the airport either. They don’t see our doctors or go to our hospitals. So they don’t suffer the indignities of our crowded services and collapsing infrastructure. And here’s why.
Take a look at the following graph compiled for The Looting of America. It shows how much the top 100 CEOs received per year in total compensation as compared to each dollar earned by the average American worker. It also provides a critical key to understanding the economic crisis.
No other nation in the known universe has so large a gap. (Using a larger pool of executives for international comparisons, the estimated gap in 2000 was 365 to 1 in the U.S. The next highest country was South Africa at 51 to 1. All of Western Europe, Japan, Canada and Australia were 25 to 1 and below.)
What does this have to do with the GM bankruptcy? Everything.
The rising CEO wage gap is a stark indicator of a destabilizing flaw in our economy: Since the mid-1970s, the top fraction of the top one percent has garnered the lion’s share of rising GDP. According to theory this was supposed to lead to vast increases in investment which in turn would lead to new industries, more jobs and rising wages for the rest of us. In reality, real average worker wages stalled throughout the past three decades instead of being lifted by the market-utopian rising tide.
Some of that elite money did go to new investments in the real economy. But so much money had drifted to the top that the super wealthy literally ran out of productive investments in the goods and non-financial service sectors. (Of course, crumbling schools, damaged highways and an environment in crisis went begging for investment dollars. But that’s to be expected when we slash taxes on the wealthy.)
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