The CEO and the New Feudalism

[JohnyCanuck]

Typical leader of a top 100 firm makes in three days what average worker must toil a year to earn.

By Murray Dobbin

Few developments in our era of savage capitalism are so powerfully symbolic of the new feudalism than the obscene compensation paid out to the new economic elite, the CEOs of the most powerful corporations in the country. The Canadian Centre for Policy Alternatives's Hugh MacKenzie now reminds us yearly of this economic and social sickness by identifying exactly when the average CEO (of the 100 largest firms) has earned as much as the average worker makes in a year (this time around it was by 2:30 p.m. on Jan. 3). The average total compensation for Canada's 100 highest paid CEOs was $6,643,895 in 2009.

The social and political implications of this grotesque overcompensation are more important than the actual dollars. Socially, in terms of class, it represents the ruling elite's deliberate and conscious declaration that they will take as much money as they want out of the system simply because they can. It is the most powerful way that the elite can make clear that they have nothing in common with the rest of us. Their excess compensation has little to do with their value to a firm, their contribution or their ability.

Yet, says MacKenzie, the disparity between CEO compensation and the average worker's pay continues to grow: "In 1995, the average pay of Canada's highest paid 50 CEOs was $2.66 million, 85 times the pay of the average worker. In 2009, the average pay of the highest paid 50 CEOs had skyrocketed to 219 times the pay of the average worker." The ratio for the top 100 went from 104 times in 1998 to 155 times in 2009.

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The flip side of the excess CEO compensation coin is the push by these same CEOs for so-called labour flexibility. Historically, this set of policies -- which have had the effect in Canada of flatlining real wages since 1980 -- are a reversal of Fordism, the principle established by Henry Ford whereby he paid his workers enough to allow them to purchase the cars they made. This reversal -- with workers receiving almost none of the productivity gains for two generations -- has resulted in the accumulation of unsustainable debt by Canadian (and American) working families. Government and corporate obsession with globalization and trade has allowed the domestic economy to erode. The geniuses in the economics departments and financial firms thought trade would grow forever. Now that it is faltering and they need the domestic economy to fall back on, planned inequality has critically weakened it.

http://thetyee.ca/Opinion/2011/01/17/NewFeudalism/?utm_source=mondayheadlines&utm_medium=email&utm_campaign=170111

[JohnyCanuck]

1. The myth of 'American exceptionalism' implodes

Until the 1970s, US capitalism shared its spoils with American workers. But since 2008, it has made them pay for its failures

One aspect of "American exceptionalism" was always economic. US workers, so the story went, enjoyed a rising level of real wages that afforded their families a rising standard of living. Ever harder work paid off in rising consumption. The rich got richer faster than the middle and poor, but almost no one got poorer. Nearly all citizens felt "middle class". A profitable US capitalism kept running ahead of labour supply. So, it kept raising wages to attract waves of immigration and to retain employees, across the 19th century until the 1970s.

Then everything changed. Real wages stopped rising, as US capitalists redirected their investments to produce and employ abroad, while replacing millions of workers in the US with computers. The US women's liberation moved millions of US adult women to seek paid employment. US capitalism no longer faced a shortage of labour.

US employers took advantage of the changed situation: they stopped raising wages. When basic labour scarcity became labour excess, not only real wages, but eventually benefits, too, would stop rising. Over the last 30 years, the vast majority of US workers have, in fact, gotten poorer, when you sum up flat real wages, reduced benefits (pensions, medical insurance, etc), reduced public services and raised tax burdens. In economic terms, American "exceptionalism" began to die in the 1970s.

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Since the 1970s, most US workers postponed facing up to what capitalism had come to mean for them. They sent more family members to do more hours of paid labour, and they borrowed huge amounts. By exhausting themselves, stressing family life to the breaking point in many households, and by taking on unsustainable levels of debt, the US working class delayed the end of American exceptionalism – until the global crisis hit in 2007. By then, their buying power could no longer grow: rising unemployment kept wages flat, no more hours of work, nor more borrowing, were possible. Reckoning time had arrived. A US capitalism built on expanding mass consumption lost its foundation.

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/17/economics-globalrecession