Archive for the ‘Labor’ Category

Class War: A Perspective on Wealth

weaalth distribution in U.S.A.

Source: Bing Images

©2016 By Bob Litton

WEALTH
1a. An abundance of valuable material possessions or resources, riches
1b. The state of being rich, affluence
2. Goods and resources having value in terms of exchange or use
3. A great amount, a profusion
The Free Dictionary (online)

* * * * * * * *

As long as I have been aware of societal divisions into classes I have hated the whole idea of a caste system and not strictly because of any income gaps. No, I am repelled by the notion that somebody could believe that he or she is irreversibly superior to me by divine right or other source such as a congressional appointment. I got my first taste of the totem pole culture while in the air force when I learned that I was expected to be always the first to salute and that I must always surrender place when even the spouse of an officer picks up mail at the postal window. That very much offended me and I still bridle a little when memories of those incidents come to mind.

Nor do I have any appreciation for the terms “upper class”, “middle class” and “working class”. I guess we are supposed to be thankful that the words “peasant” and “slave” are no longer generally descriptive of people in the United States and most other countries, but that is not enough: the whole class system must be erased entirely. (Sadly enough, slavery— or “involuntary servitude”— is still irritatingly present, although illegally, in my fatherland.) In the United States, class distinctions are not generally based on bloodlines as they have been in Europe and in Asia but on wealth, although family connections were more noticeably determinate up through, perhaps, mid-20th century.

During the last couple of decades the topic of “income inequality” has often appeared in newspaper and magazine articles and columns. Repeatedly the image of a very small portion of the U.S. population—the so-called “one-percenters”, those whom Thorstein Veblen called “the leisure class”— has accumulated more than a third of the nation’s wealth, and the next 19 percent possess more than 50 percent, leaving the remaining 80 percent of our citizens with only 15 percent of our national treasure. How did that happen?

Now the conservatives like to argue that the super-affluent obtained their riches through hard work, thrift, and prudent investments. To a limited degree that is true for some of the rich but not, I believe, for all of them. With the exception of “prudent investments”, those attributes cannot logically account for the vast wealth gained by the one-percenters. A person would have to enjoy an extremely high hourly wage to get wealthy through “hard work” (a phrase I handily contemn). Of course, most of us are aware of the ridiculously high “salaries” and bonuses lavished on corporate executives, even when their companies are losing money and are letting the CEOs go with “golden parachutes”.

In an April 24, 2014, column Harvard economist and regular The New York Times contributor Paul Krugman wrote that the primary route to riches for most of the one-percenters is not by way of “hard work”. Krugman applauded a recently published economics book by French economist Thomas Piketty, Capital in the 21st Century, in which the author asserts that the affluent don’t get rich from enterprise but from assets gained mostly through inheritance. Piketty calls for “progressive taxation as a way to limit the concentration of wealth”, wrote Krugman. Conservative critics have responded with ad hominem attacks, calling Piketty a “communist”, Krugman noted, because they cannot come up with any substantively valid arguments to refute him.

Some roads to riches, however, do involve initiative and energetic endeavor—along with considerable native intelligence. Two of the richest men in the U.S., for instance, started their eventual capitalistic enterprises while still in school, with assistance from classmates. Microsoft co-founder Bill Gates wrote his first computer program at age 13 while in prep school and went on to refine his geek skills, with college classmates, to a point where he could start-up Microsoft. Mark Zuckerberg launched Facebook working with four college classmates in their dorm rooms. More about those two later.

Many young people of our time, though, seek to win fame along with fortune in either entertainment or sports. The most worrisome thing about this trend, for me, is that only a very small number attain the stature and earnings they had hoped for. And the “earnings” of those who do seem as ridiculously out of proportion as those of the corporate executives.

Harrison Ford, for example, reportedly received from $10 million to $25 million (different sources cite different amounts) upfront for his final appearance as Han Solo in The Force Awakens (2015), along with .5 percent of the film’s gross earnings. Contrast that with the $500,000 his contracted base pay was for Return of the Jedi (1983), the $100,000 for The Empire Strikes Back (1980), and the $10,000 for Star Wars (1977). The .5 percent on gross sales of course significantly augments those figures.

Another major Hollywood figure, Carole Lombard, was the highest paid cinema star of 1937, during the Great Depression. Of course her earnings that year ($485,000) did not come anywhere near Harrison Ford’s, but we must allow for inflation. She did earn $150,000 for each picture, definitely exceeding the amounts Ford initially received for his first two Star Wars films. The main reason I mention Lombard here, though, is the interesting tidbit I picked up from an August 25, 1938, article in The Mercury. She paid four-fifths of her 1937 earnings on taxes; after that amount plus various incidental expenses such as her press agent’s fee, her net income was about $20,000, according to Mercury.  “‘But I have no kicks,’ she [said]. ‘I am pretty happy about the whole thing, and 20,000 dollars a year is plenty.’ She added: she was glad the government was spending the rest on public improvements….’”

Then there is the music industry. I recall viewing the film The Glenn Miller Story in 1954. It starred Jimmy Stewart as Miller and June Allyson as his wife Martha. I now can recall only three scenes from it, and even those only vaguely. The scene related below is the only one pertinent to this essay. (I transcribed the dialogue from the film as I viewed it recently on YouTube):

Miller’s parents come to visit him, Martha and their infant child in their new home — a mansion for the times. While Glenn and Martha lead his parents up the wide stairway, his father inquires about how his son has managed to pay for the house on a musician’s earnings:
Pop: “Paid for, is it?”
Glenn: “O yeah, yeah, all paid for.”
Pop: “Must be doing pretty well.”
Mom: “O yes, he’s doing pretty well. Don’t we hear him on the radio every night?”
Pop: “That’s only 15 minutes. Don’t suppose they pay very much for that.”
Mom: “Well, there’s the records, and he’s playing at the Hotel Pennsylvania.”
Pop: “How much do they pay for playing on one of those records, son?”
Glenn: “We get three cents a record.”
Pop: “Three cents, huh? Have to sell a heap of records to make it worthwhile, don’t you?
Mom: “But they do, dear.”
Pop: “How many copies of a record do they sell, son?”
Glenn: “O, of ‘Moonlight Serenade’ we sold about 800,000.”
Pop: “Did you say 800,000?”
Glenn: “That’s right.”
Pop: “O! Heh, heh, heh.”
Now, if you suppose that Glenn Miller’s orchestra spent a full 8-hour day producing “Moonlight Serenade”, then they grossed $24,000 on that one record. Of course not all of that went to Glenn, there were the members of his band and presumably a studio rental and sound technicians to cover, not to mention some income tax. Still, that was just for one record; when you consider similar days for a whole work week, Glenn still came out pretty well.

The above scene brings to the fore an important question. We may be amazed and even disgusted at the huge amounts recording artists make from their records and live performances; but when we look at it a little more objectively, three cents is a really paltry amount on a single record. It is only when we multiply it by the 800,000 purchasers that the earnings jump significantly. And the world’s consumer market has increased tremendously since the 1930s, when Miller was just starting out. How can we begrudge some musician three cents on a single record?

As far as record sales go, the gain hasn’t increased all that much since Miller’s time. From what I have been able to gather online, the most popular musicians of today—the “rock stars”—receive only 75 cents to a dollar on an album. No, most of their wealth comes from live performances and T-shirts. An average box office “take” for a live performance was noted as between $150,000 and $200,000; but the fee for venue rental can be as high as $50,000, and there are the truck drivers and “roadies” wages to pay. Still, one source claims that each member of the rock band Metallica has had from $5 million to $10 million in the bank from their start-up to the present.

The earnings of major sports have become similarly ludicrous. In December 2015, basketball star LeBron James signed a lifetime contract with Nike to act as their brand-enhancer. The exact amount was not revealed, but ESPN reporter Darren Rovell estimated it could be worth $1 billion. In 2014, James joined the Cleveland Cavaliers for $22 million a year. And, Rovell wrote, James “ranks as sixth on Forbes 2015 list of highest paid athletes.” James’ total wealth—from endorsements and business ventures as well as from playing basketball—has been estimated at $64.8 million.

During the same month (December 2015) that James contracted with Nike, pitcher David Price finalized a $217 million, 7-year deal with the Boston Red Sox. According to Jimmy Golden of the Associated Press, the terms of the contract are that Price be paid $30 million a year for 2016-2018, $31 million in 2019 and $32 million in each of the final three years.

Professional sports teams that used to be filled by white men only are now predominately black. I don’t know what happened to the white guys: Are they physically unable to compete anymore or are they too racist to engage in the try-outs? As for the blacks, professional sports teams have become the equivalent of the 1840s gold mines; they apparently dream from childhood on of becoming sports heroes; sports has become their pathway to success and financial security. And the team owners are playing this longing to the hilt: I read an article not long ago that related how scouts have been venturing to a certain country in Africa (which one I don’t recall) to recruit youngsters to come to the USA and show their stuff; unfortunately, a large percentage of youths who venture westward cannot make the grade, not because they aren’t talented enough but because there aren’t that many positions open.

Another source of over-the-top income is gambling, either in the stock market or in the lotteries.

Oprah Winfrey, for instance, bought 6.4 million shares of Weight Watchers stock in October 2015 for $43 million. Almost as soon as this newsy item was out, Weight Watchers stock skyrocketed by 90 percent, according to ABC News. Winfrey said she invested so heavily in the company—which was “struggling with declining sales and a looming debt of $144 million” (ABC)—because Weight Watchers had helped her and millions of others with their weight issues. (The prestige derived from her joining the board of directors very likely helped them, too.) In February 2016, however, Weight Watchers stock declined 29 percent, according to USA Today (Feb. 26, 2016), and as of that date Oprah had lost about $29 million on her investment.

Then there is the much less admirable mode of gambling in which a hell of a lot of poor people engage: the lotteries. As far as I am concerned, this is a national sin. Yet the fact that lottery winnings are so absurdly astronomical testifies to the willingness of many of my compatriots to be gulls. I recall a news story from 1987 about a New York City janitor who won $5 million in a lottery, went to work the next day and, as he was about to climb a ladder to screw in a light bulb, another bulb lit up (in his head). “What am I doing this for?” he wondered, “I’m a millionaire.” Fifteen months later, according to a 1992 New York Times story by Alessandra Stanley, the lottery winner died in an automobile accident; and, since he left no will, his family had to spend a lot of time and money on lawyers and accountants plus income and estate taxes before they could extricate themselves with an estimated $400,000. Many other lottery winners’ stories have reportedly ended in similar Dickensian tragedies, according to what I have seen on the Internet.

But the most ridiculous money-grubbing story I ever read about concerns that silly little ditty known as “The Birthday Song”. If you live in the English-speaking regions, you probably know the words to the song. (I won’t dignify them by calling them “lyrics”, as some people do.) And if you don’t know the words, they are absolutely simple to learn; no memorizing necessary. It goes like this: “Happy birthday to you/Happy birthday to you/Happy birthday dear Nancy (or whoever)/Happy birthday to you.” It is usually sung at birthday parties; Marilyn Monroe sang it to John F. Kennedy at a celebration for him, but it is a universal tradition for anybody’s birthday in my country.

The ditty, you will note, contains only four words with an additional two stuck in as the addressee. And when it was supposedly composed by two sisters in Kentucky in 1893 no thought was taken as to copyright. The two ladies, Patty and Mildred J. Hill, used the ditty simply as a tool for teaching young children to sing. It reportedly first appeared in print in 1912, still without credits or copyright notices. Then, in 1935, the Summy Company registered a copyright. That company was bought by Warner/Chappell Music in 1988, when “Happy Birthday” had an estimated value of $5 million. Groups larger than small gatherings of relatives and friends had to pay royalties to the company for the opportunity to chirp the nonsense. For one such opportunity, in February 2010, the royalties reportedly amounted to $700. According to the Wikipedia article where I read up on this farce, “the song is the highest-earning single song in history, with estimated earnings since its creation of $50 million.” In addition, legal battles over the copyright issue went on for decades until February 8, 2016, when Warner/Chappell accepted a final judgment declaring the ditty to be in the public domain. For an entertaining summary of the lurid history of “Happy Birthday” I refer you to the Wikipedia article.

So, what can we do to “level the playing field” in economic, not sports, terms? Not a whole lot, I’m afraid, for greed and thievery will always be part of the human makeup. There are some proposals and movements, though, that seem promising to a small extent.

One is that old one FDR applied during the Great Depression and to which I referred when discussing Carole Lombard’s patriotic attitude: raising tax rates on the rich. Such is not going to happen, however, as long as the Republicans dominate Congress. Anyway, to me it seems a Sisyphean solution, attacks the symptom, so to speak, rather than the problem, and would certainly aggravate the tensions between rich and poor. But it might stabilize the income gap until a more satisfactory solution can be instituted.

A sort of obverse to that approach is what has been termed a universal basic income (U.B.I.), which New Yorker staff writer James Surowiecki wrote about in his June 20, 2016, column. The tactic here is to pay every U.S. adult a stipend of, say, $10,000 a year (children would receive a smaller amount). An experiment on this idea was tried in Dauphin, Manitoba, Canada, in the mid-nineteen-seventies, and, although a conservative government buried it quietly in 1979, later research indicated that while the guaranteed basic income was in force hospitalization rates had fallen, more teenagers had stayed in school, and work rates had only barely dropped.

New experiments on U.B.I. are currently underway or planned in Finland and in Oakland, California, Surowiecki reports. He writes: “In the U.S., the new interest in the U.B.I. is driven in part by how automation will affect workers. Bhaskar Sunkara, the publisher of the socialist magazine Jacobin, told me, ‘People are fearful of becoming redundant, and there’s this sense that the economy can’t be built to provide jobs for everyone.’”

I’m all in favor of a U.B.I., but even it might leave a certain discontent in people’s minds—the yearning to be useful and creative. I am too cynical to believe that every adult in the U.S. has enough imagination and energy to discover and develop a creative purpose or function or vocation on his/her own just to preserve his mental health. I can only hope I am wrong.

As long as we have businesses and industries that still employ people and that hope to retain their work force for a long period, another approach might fit: Employee Stock Ownership Plans (ESOPs). Actually, ESOPs have been around for years now, becoming popular in the mid-nineteen-seventies. According to the National Center for Employee Ownership, by 2014, seven thousand companies had ESOPs covering 13.5 million workers. I will let NCEO describe the system themselves, for they can do it more clearly than I:

“Similar to Profit-sharing plans, the ESOP is a trust fund into which the company contributes new shares of its own stock or cash to buy existing shares….Shares in the trust are allocated to individual employee accounts. Although there are some exceptions, generally all full-time employees over 21 participate in the plan. Allocations are made either on the basis of relative pay or some more equal formula. As employees accumulate seniority in the company, they acquire an increasing right to the shares in their account, a process known as vesting. Employees must be 100% vested within three to six years, depending on whether vesting is all at once (cliff vesting) or gradual.

“When employees leave the company, they receive their stock, which the company must buy back from them at its fair market value (unless there is a public market for the shares). Private companies must have an outside valuation to determine the price of their shares. In private companies, employees must be able to vote their allocated shares on major issues, such as closing or relocating, but the company can choose to pass through voting rights (such as for the board of directors) on other issues. In public companies, employees must be able to vote on all issues.”

There is more and important information in the NCEO statement that might interest you, but I will have to refer you to NCEO’s website (www.nceo.org) to read it, for my essay is already too long and I have a bit more to write.

All the media coverage over the huge disparity between the incomes of the super-rich and the rest of society apparently has had some impact: The Giving Pledge. According to its Wikipedia article, the Giving Pledge’s goal “is to inspire the wealthy people of the world to contribute the majority of their net worth to philanthropic causes, either during their lifetime or upon their death. The Pledge is a moral commitment, not a legal contract.” In June 2010, billionaires Bill Gates and Warren Buffett formally announced “the Giving Pledge campaign” and began recruiting members. By August, forty people had pledged $125 billion. As of March 2016, one hundred forty-two individuals or couples had pledged an aggregate total of $731,860,000,000.

A year or two ago, before I had even heard of The Giving Pledge, I read a comment by Melinda Gates (Bill’s wife) in some news article to the effect that she didn’t need a billion dollars to live on and was planning to give some of her wealth away. I have long been suspicious of Bill because of his viciously aggressive business tactics, but I was also pleased by his reported charitableness: he reportedly has donated many, many computers to children in Africa. I realize that could be a subtle business tactic, too, since it might lead to future purchases of his Microsoft products in the future, but why “look a gift horse in the mouth”? (Come to think of it, the Trojans might have done well to have done just that!)

As for Warren Buffett, he has been one of my favorite people for several years now—ever since he urged Congress to make his tax rate higher than his secretary’s. If he approves of Bill Gates enough to associate with him in this Giving Pledge organization, then I guess I’ll have to accept Gates as okay, too.

The top five donors on The Giving Pledge roster are Bill and Melinda Gates ($77.3B), Warren Buffett ($66.7B), Larry Ellison ($49.3B), Michael Bloomberg ($37.2B), and Mark Zuckerberg and Priscilla Chan ($35.7B).

According to the Wikipedia article, “The pledge does not involve pooling money or supporting a particular set of causes or organizations. The pledge asks only that the individual give the majority of their wealth to philanthropic causes or charitable organizations either during their lifetime or in their will….The pledge encourages signatories to find their own unique ways to give that inspire them personally and benefit society.”

I don’t know whether my curiosity derives from good old-fashioned journalistic instinct or from dirty old cynicism, but I wonder what these people’s motives are. Could they be reacting to the threat of a possible new revolution of the French sort? (You might recall that one year later the “Occupy Wall Street” movement began in New York City.) Could they be honestly sensitive to the inequity of the wealth disparity? Could they have concluded that a hyper-tax is looming ahead and want to determine for themselves where and how their contributions are to be spent? I can’t answer those questions, and I don’t think it is necessary that I do so. Although the Giving Pledge is not likely to benefit me individually or directly, if it reduces the number of solicitations for contributions that show up in my mail box each December, then I will be pleased.

Finis

 

 

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The Dismal Science: A.K.A Economics .001, Part I

© 2015 By Bob Litton. All rights reserved.

Dear readers, I originally had intended to make this essay a single exposition. However, as I got into it the ideas, emotions and resultant words multiplied like the sorcerer’s apprentice’s mops, so I decided I had better break it into at least two, and possibly more, essays. I wanted to get the rocks out of my gut. As I write this preamble, I am nearly through with Part I. The composing procedure I have adopted is thus far slightly rambling; as you know, I have a tendency to write “off the top of my head”. But rest assured the substance is not fluff: I have been observing and pondering the economic scene in my homeland for many years now. O God, please help her!

I wrote in one of my newspaper columns decades ago that I have an aversion to economics, which has been dubbed “the dismal science”. But, like nearly everyone else on this globe, I cannot escape its various impacts on my life. I was thinking of excluding among the victims the Inuit in the Arctic and the forest dwellers in the Amazon jungle, but we have read recently of how climate change is melting away the tundra ice and thereby eliminating the surface on which some Inuit have their homes, and how some greedy gold, oil and farmland seekers are invading the Amazonians’ habitat; so, even those reclusive tribes are not excludable from the modern economic seine.

Over the past few years I have tried to organize in my mind the little I know (or think I know) about our capitalist economic system. I tried back in my early manhood to read a textbook designed for Economics 101 courses. I don’t think I got past the first chapter; any academic field that employs graphs and mathematical symbols is over my head. I just checked and saw that Wikisource has produced an apparently accessible English translation of Karl Marx’s Das Kapital, which I will probably at least scan while working on this blog post, but I don’t want such reading to interfere much with my lifetime’s impressions.

That connotation-rich appositive above, “the dismal science”, evokes in my mind two images: (1) the candle-lit laboratory of the mad scientist or wizard, and (2) an above-ground intellectual field so dense and counter-intuitive as to be depressively hindering to the mathematically challenged person (me). I really believe that both meanings are appropriate, even though most people would say that the second is the one intended.

The usual wizard of folklore favors “black magic” that is intended to harm others, and he often is secretive, hiding either in some secret cave or in a vacant castle, in its dungeon or in its tower. According to a PBS program I saw decades ago, Leonardo da Vinci, probably the historical human being who epitomizes such a scientist, reportedly built, in secret, a very large telescope in a tower. Of course, he did not build it to harm anyone; he built it to satisfy his insatiable curiosity about one of his many interests: the stars and planets. The Church, however, did not see it that way; they preferred to view the whole enterprise (when they found out about it) as diabolical. Curiosity has for centuries been a bugbear. (The fact that Leonardo was left-handed did not help either.) A much more homely wizard, the king of Id’s magician, quite often makes mistakes that temporarily harm or at least embarrass him. And the ancient Chinese sorcerers experimented with many plants in their search for the elixir that would spark an eternal — or at least an extended — lifespan; their experiments yielded some poisons, for which some paid with their lives, but they also contributed a good deal to modern pharmacology. So, I see all that as indicating there is no way to avoid the bad in any science, no matter how good the intention and the final result might be. (Examine all the side effects on your medicine labels.)

And now some few words on the second image. There are many out-spoken economists these days, some of whom regularly contribute op-ed articles or columns to our magazines and newspapers. Years ago, I used to enjoy watching John Kenneth Galbraith argue with William F. Buckley Jr. on the latter’s PBS show, “Firing Line”, although I did not completely follow what either said. The two economists I follow now, whenever I happen to notice their columns, are James Surowiecki in The New Yorker and Paul Krugman in The New York Times. Both are, I believe, liberals: Krugman acknowledged as much. Although I do not grasp the thought processes that lead them to their conclusions, I agree with both men most of the time (I cannot recall any instance when I balked at one of their conclusions, although there might have been such an occasion.) They are pretty good at speaking to my level of comprehension. Some of that stuff is bound to have sunken in.

Still, there are some economic facts which I have never understood and have been disinclined, until now, to research. The oldest such matter concerns the old, hot debate regarding the “gold or silver standard” of the 1890s. From my easy chair vantage point, I could not fathom what difference it made which standard was adopted; and, since it had been settled long before I was born, I did not really give a damn. Yet, a related question continued to nag at me: Why do we marry our currency to some pretty but basically lifeless metal anyway? A barter system — what Marx called the “exchange value” of products and services — although complicated to institute, would be much more natural and true to life.

Now I would like to present my overall view of how economics rules our lives.

The world is divided into two classes of people: capitalists and workers. The former invest their money in some enterprise, either a start-up company or an existing company. Usually, the money is bet on an existing company that has already proven it can float; however, venture capital placed in an experimental or innovative effort is not unheard of; and, since the investors are “getting in on the ground floor”, when the cost of “shares” is lowest, has the best chance of “earning” a large “return” on their investments.

Just as with the wizard’s experiments, any number of hazards can cause problems for the capitalists: the company might be part of a Ponzi scheme, a CEO’s errors in judgment can diminish or even destroy the company, the company could be swallowed in a “hostile takeover”, faulty or inferior products might cause the company to lose out on desired governmental contracts or have to recall products, an extended employee strike could squeeze productivity and thus profits, and so on. Some capitalists these days, e.g. Donald Trump, Warren Buffett and Mark Zuckerberg, have gained small fortunes in a single day’s stock market activity and can afford to lose the same amount without missing a step. But for many other investors — the much smaller ones — a comparable loss can eliminate their life savings. Those are the people who define themselves as “the creators of jobs”.

So, who assumes the jobs? Who actually gets the work done? That’s the workers. What I hate most about this separation into “capitalists” and “workers” is that it has been extended from the situation at the factory to that in social spaces: homes, restaurants, theaters and even churches. Of course, social class distinctions in the latter places have been moderated somewhat during the past century, but they still exist in hardly less apparent ways, what with the current movement toward “gentrification” of neighborhoods, the robotization of an increasing number of occupations, and the constant media attention on celebrities — the vast majority of whom are wealthy entertainers, athletes, foreign royalty, and entrepreneurial billionaires. Now we are debating the fairness of income inequity and slicing up social classes into one-percenters, (vanishing) middle class, and working class. Yet the working class and those even lower on the social ladder are reluctant to revolt against this pernicious system because they view the elites as models of what they might become, if only they can get that football or basketball “scholarship” or get an agent to notice them on “open mic nite” at the local bistro or if one of the lottery tickets they are buying today with half their paltry paycheck will just vault them over the rung where hangs that middle-class person. They don’t want to destroy those privileged positions, because they want to attain them.

Finis

NEXT (I hope): A more detailed look at the two major classes.

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