Harold Meyerson: Money made at others’ expense

Harold Meyerson
Opinion Writer January 28

“Sore winners” was the phrase critic John Powers came up with to describe the George W. Bush administration, but the term seems more lastingly applicable to those members of the 1 percent who decry the broad economic populism across the land. The most notoriously sore winners are those mega-wealthy investment bankers who have likened critics of economic inequality to the Nazis — most recently, Tom Perkins, founder of the venture capital group Kleiner Perkins Caufield Byers, who last week equated “the progressive war on the American one percent” to Kristallnacht.

Perkins’s parallel was quickly disavowed by sentient bankers, but there’s a less-unhinged version of 1 percenters’ resentments out there as well. In a Los Angeles Times op-edlast month, Richard Riordan (former L.A. mayor and leveraged-buyout whiz) and Eli Broad (the city’s leading multibillionaire philanthropist) admitted that “the facts on income inequality are stark and disturbing” but also insisted that it isn’t “a sin to be rich.”

Harold Meyerson writes a weekly political column that appears on Thursdays and contributes to the PostPartisan blog. View Archive

Indeed, it’s not. And when wealthy individuals are understood to have bettered most people’s lives — as, say, Steve Jobs was — they win acclaim and even veneration. But the paths that many of today’s wealthiest Americans have taken on their road to riches have not bettered most people’s lives. Many have actually hurt most people’s lives. Their riches have come at most other people’s expense.

Since the recession officially ended in June 2009, for instance, the wages for all private-sector jobs have fallen, on average, by 0.5 percent. The wages for jobs in financial services, however, have risen by 5.5 percent. Inasmuch as the recession was brought about by the financial services industry, it’s understandable that this disparity would strike most people as unjust.

Or consider the mechanisms by which some CEOs earn huge salaries. Last week, the board of directors of JPMorgan Chase voted to raise chief executive Jamie Dimon’s annual pay to $20 million — up from $11.5 million — despite the fact that the bank paid the federal government around $20 billion last year to settle charges stemming from its multiple misdeeds. What could these directors have been thinking? Perhaps a better question: Who are these guys?

As Occidental College politics professor Peter Dreier has documented, a number of CEOs sit on JPMorgan’s board. They include Stephen Burke of NBCUniversal, who was paid $23.6 million in 2011; William Weldon, retired chief executive of Johnson & Johnson, paid $26.8 million in 2011; and Lee Raymond, retired chief executive of ExxonMobil, whose exit package came to at least $398 million. When CEOs are heavily represented on other CEOs’ boards, voting one another stratospheric pay packages can be the order of the day.

It wasn’t always thus. CEO pay before the 1980s didn’t exceed the median pay of their employees by factors in the hundreds. Reginald Jones, chief executive of General Electric in the 1970s, made just a small fraction of what his successor, Jack Welch, raked in, though the company’s growth rate under Jones exceeded that under Welch. But Welch changed the company’s culture completely, laying off more than 100,000 workers and focusing on raising GE’s share value, which his compensation reflected. Welch’s way became the norm for CEOs, so much so that laying off workers and depressing their pay has become the key factor in boosting corporate profits in recent years. As Jan Hatzius, chief economist for Goldman Sachs, noted in predicting the continued growth of profits in 2014, “the key reason is the continued slack in the US labor market and the resulting weakness of nominal wage growth.” With profits at a record high as a share of the nation’s gross domestic product and wages at a record low, it’s entirely proper that Americans question the legitimacy of the 1 percent’s wealth.

Many in that 1 percent argue that the root cause of this inequality is the nation’s deficient schools. Granting that our schools could be improved, that hardly explains why the pay of bankers and CEOs has soared, or why corporations would rather buy back their own shares than give their employees raises. If the voluble members of the 1 percent wish to reclaim some legitimacy, they might become active in campaigns to raise the minimum wage and make it possible for workers to form unions without fear of being fired. After all, some CEOs have unions of their own devoted to boosting their pay: They’re called corporate boards. Until and unless corporate leaders back their workers’ efforts to form unions, here’s some advice on what to say when their fellow Americans question the propriety and legitimacy of their wealth: nothing. One percenters, just shut up.

Read more from Harold Meyerson’s archive or follow him on Twitter.

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