Bill Knight - October 29
Macomb, IL – A bailed-out Wall Street is showing big profits, passing out executive bonuses like it was free junk on Spoon River Drive and engineering the Dow Jones Industrial Average to top 10,000 again. So what?
Wealth continues to float to the top faster than Asian carp on a feeding frenzy, and consumers no longer can use credit and the illusory values of homes to borrow to buy since paychecks go about as far as a Milton Bradley autographed baseball.
It's only been a year since the financial crisis cost U.S. families $15 trillion, and little has been done to prevent future losses, thanks to lobbying by Big Business and a majority Democratic Party that seems to have lost its spine like a bent hanger at a Baghdad laundromat.
Meanwhile, something much more significant occurred last month at a top-level meeting organized by The Aspen Institute, which issued a report criticizing the immediate-gratification mindset that corporate America continues to embrace. The conference wasn't just a predictable group of eggheads and whiners, either. The group included new AFL-CIO president Richard Trumka, a progressive, plus billionaire investment guru Warren Buffet, a moderate, and Republican Pete Peterson, a fiscal conservative now with the Blackstone group.
The consensus was that investment tricksters', greedy money managers' and corporate big shots' focus on short-term rewards - some would say the hunger of meth-heads dropped in a national forest - has virtually eliminated "patient capital" from the economy. Such funds used to make up a vital resource, a way to create ongoing economic growth, the means to - well - produce goods and services.
This handful of concerned Americans, any one of whom seems to have more sense than any 12 tea parties, issued four key recommendations:
* disclosure by private investment funds of their holdings and compensation,
* a new definition of the responsibility of mutual-fund managers and pension bosses to serve their investors and link their compensation with their performance,
* a new tax on security trades and higher taxes on short-term trading profits,
* a limit on voting on corporate-governance issues and boards of directors to long-term shareholders.
Steve Pearlstein of the Washington Post wrote, "The more fundamental problem, as the Aspen panel reminds us, is that the components of modern finance - the securities, the trading and investment strategies, the financing techniques, the technology, the fee structures, and the culture in which they operate - are all designed to work together to maximize short-term results. In such a self-reinforcing system, it is very difficult to change any one feature without changing all the rest."
But what's needed is change, and that doesn't mean a pocketful of coins or the financial equivalent of a diaper.
The situation has been soiled since the dreadful "Greed is good" heydays of the 1980s, when hostile takeovers became so commonplace that junk bonds were held up as normal instead of vicious. As underscored in the new "State of Working America 2008-2009" report from the labor-backed Economic Policy Institute, the consequences of the Me/Screw You Decade have been colossal and sinister - especially for regular working people.
Report co-author Lawrence Mishel said, "This recession is far beyond the numbers of unemployed and underemployed."
Indeed, in the executive suites and elite echelons of the economy where the number 10,000 means more of the already-rich get to build wings on their golden-toilet versions of Unca Scrooge's money bins, inequality is prosperity. Average CEO pay was 275 times that of regular workers in 2007 - more than 10 times the difference in 1975, the report notes, stating, "In other words a CEO earned more in one workday than a typical worker earned all year," adding that average CEO pay went up 167 percent since 1989 while workers' average wages stayed flat.
A Bureau of Labor Statistics report released on October 16 shows that the U.S. average weekly wage fell by 2.5 percent in the first quarter of this year - the largest over-the-year drop since quarterly data were first comparable, in 1978 - a few years before the Awful 80s.
In Illinois, the number of employers fell 4.2 percent from the previous year, and the average weekly wage dropped 3 percent.
Thomas Palley, a fellow at the New America Foundation, writes, "The economic crisis represents the implosion of the economic model that ruled U.S. and global growth for the past 30 years. It was based on consumption fueled by debt and by asset price inflation, and it is done: Toast."