Editorial: An Economy Built On Cruelty

from ASR 86

CEO compensation at the 350 largest publicly traded U.S. companies rose by an inflation-adjusted 1,460% between 1978 and 2021, according to the Economic Policy Institute, with CEOs now raking in nearly 400 times as much as the typical worker.
Federal Reserve Chair Jerome Powell has repeatedly spoken of his desire to get wages down to control inflation; he’s not talking about the skyrocketing pay of corporate executives or Wall Street bankers. Instead, he’s bemoaning the fact that during the pandemic many workers won modest pay hikes that helped blunt the edges of rampaging inflation. In response, the government is pursuing policies designed to drive up unemployment so that workers will have less power and be forced to accept lower wages. This, they claim, will reduce inflation because workers will have less to spend and the bosses will spend less on wages.
Although pundits (and bankers) blame price hikes on rising wages, the reality is that wages lagged inflation all last year, and the average worker today earns about as much (after inflation) as they did 50 years ago. Taking into account the decimation of pensions and higher costs for health care, millions of U.S. workers earn less than their parents would have made in the same jobs. As a result, last year workers’ savings declined to the lowest rate in 17 years.
Inflation is a real problem, of course. The official inflation rate understates the real cost of living for many workers, assuming that we pay out an unrealistically low amount for housing and transportation. (It’s not at all uncommon for workers to spend two-thirds of their take-home pay on rent.) These costs skyrocketed as companies took advantage of shortages (caused by war, refinery shutdowns during Covid, and by a Covid-related slowdown in construction and renovation) to boost prices. It costs about the same to pump oil out of the ground today as it did five years ago, but the oil companies can charge a lot more for it now that travel is rebounding and Russian oil is largely off the market. Those higher prices aren’t going into workers’ wages or new exploration (not that the planet can afford any more oil drilling) – let alone into developing renewable energy sources or developing more resilient infrastructure to survive global warming – they’re fueling higher profits, stock buybacks and skyrocketing salaries for fat cats already drowning in their obscene wealth.
Inflation, economists claim, is the result of too much money chasing too few goods. Workers can’t be causing inflation because we don’t have the money, and we don’t have the goods. Rather, prices are going up because decades of union-busting, monopolization, and neoliberal “reforms” have left those who own the necessities of life with the power to charge what they will. They’re raising prices because they can, and because they want more money.
Nearly two-thirds (63%) of American workers live paycheck to paycheck. Growing numbers are buying groceries with “buy now, pay later” services that allow them to pay in small installments over several weeks. When workers inevitably fall behind on the payments (they would have paid for their groceries up front if they had the cash), they wrack up large late fees. Others are charging groceries and other essential expenses to credit cards, and balances are slowly growing – adding to the banks’ enormous profits with their usorious interest rates.
In a recent study of trends in the distribution of family wealth from 1989 to 2019, the Congressional Budget Office found:

Wealth became less equally distributed over the 30-year period. The share of total wealth held by families in the top 10 percent of the distribution increased from 63 percent in 1989 to 72 percent in 2019, and the share of total wealth held by families in the top 1 percent of the distribution increased from 27 percent to 34 percent over the same period.… By contrast, the share of total wealth held by families in the bottom half of the distribution declined over that period, from 4 percent to 2 percent.

Nonetheless, the Fed remains determined to keep hiking interest rates to “cool” the economy – a euphemism for driving up unemployment and decreasing workers’ bargaining power. Most mainstream economists ignore the role of supply chain chokeholds, monopoly power and sheer greed in price hikes, instead attributing any sustained inflation to wages (whether they’re going up or going down) and too many workers holding jobs.
The Wall Street Journal put it this way:

[D]ynamics [of a tight labor market] are driving wage growth, adding to inflationary pressures. Strong gains in wages and hiring are pumping more money into Americans’ bank accounts, propping up demand as inflation erodes spending power for many. Meanwhile, higher labor costs stemming from worker shortages are prompting many employers to raise prices.

This is wrong in nearly every regard. Wages are falling, millions are still searching for decent jobs, most workers have less money in the bank… The only thing that’s true here is that the bosses are raising prices. They will keep raising prices, slashing benefits and despoiling our communities and our planet just as long as they have the power to do so. If you want to stop inflation, dump the bosses off your back.

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