Amazon and Apple: Wall Street’s Trillion Dollar Babies

By Dean Baker

Source: CounterPunch

Last month Amazon joined Apple, becoming the second company in the world to have a $1 trillion market capitalization. Amazon’s accomplishment didn’t cause quite as much celebration as Apple’s – it pays to be number one – nonetheless this was treated as a milestone that all of us should view as good news.

Actually, the celebratory coverage of both events demonstrated the incredibly ill-informed nature of much economic reporting in the United States. A big run-up in share prices is good news for the people who own lots of stock in the company; it is not especially good news for anyone else.

In principle, the value of a stock is supposed to represent the expected future earnings of the company. I said “supposed” because stock prices fluctuate wildly in response to all sorts of things that are not obviously connected to future earnings, but in the textbook definition, it is the discounted value of future earnings that determine stock prices. To be clear, this is not the socialist textbook, this is the capitalist textbook that is taught in business schools.

What does it mean that Amazon and Apple have market valuations of more $1 trillion? Presumably, it means that investors are now more optimistic about the companies’ future profit potential. It’s difficult to see why the rest of us should celebrate this outcome.

Apple obviously makes products that consumers value, and in that sense, it is contributing to the economy and generating wealth. But, suppose instead of one huge company we had 10 little (or littler) Apples that sold iPhones, computers, and the other items that comprise Apple’s product line? Would we be any poorer as a society in that case, even if the market cap of our leading tech company was just $100 billion?

Or, even with Apple as our dominant tech company, suppose the surge over the $1 trillion barrier was due to a victory in an antitrust case, which would allow Apple to charge higher prices going forward. That’s great for Apple’s stockholders, but what exactly would the rest of us be celebrating? Paying more money for our iPhones?

In the same vein, in the past, Apple has been caught conspiring with other Silicon Valley companies, agreeing not to compete for workers. Apple, along with its co-conspirators, ended up paying a substantial settlement as a result.

Suppose Apple found a legal way to fix wages or bought a judge to make it legal. The prospect of a lower wage bill would also be good for Apple’s stock price, but not especially good news for those of us who are more likely to make our living from working than owning Apple stock. Again, there is not much in this story for most of us to celebrate.

The celebration for Amazon is even more peculiar. Amazon is clearly an innovative company that has sped the development of Internet retailing. It also has specialized in tax avoidance, eliciting investment incentives from state and local governments, and abusive labor practices.

Perhaps the crossing of the $1 trillion threshold was associated with investors’ confidence that Amazon’s CEO had developed a new and more effective tax avoidance scheme. Again, great news for Amazon stockholders, but pretty bad news for the folks who will have to make up the revenue shortfall.

What is notably different about Amazon is that, unlike Apple, the company does not have huge profits. While Apple earned $48.4 billion in after-tax profits in 2017, Amazon’s profit was just over $3 billion. That gives the company an incredible price-to-earnings ratio of more than 300-to-1.

There are two stories we can tell here. One is that investors expect Amazon’s profits to increase enormously. This would be a case where it takes advantage of its market power to increase its profit margins hugely. Ordinarily, this would be the basis for antitrust action, but given the corruption of the political system, it is certainly possible the company could get away with it. Again, is a future of higher prices something the rest of us should really be celebrating?

The other possibility is that Amazon’s stock price is driven by fantasy, like the Internet stocks of the late 1990s or Bitcoin today. Presumably, at some point reality will reassert itself, but should the rest of us celebrate ill-informed investors being taken for ride?

It is striking that so many would see economic or social progress as being in some way captured by stock valuations. In 1953 Jonas Salk developed the polio vaccine. This eventually led to the near eradication of a disease that had killed or crippled tens of millions of people.

Salk didn’t try to patent his invention. A private charity funded the research. But, what if there had been a Salk Inc. that had the patent on a vaccine that could save tens of millions of lives? Surely the market cap would be an order of magnitude larger than either Apple’s or Amazon’s. Was it a loss to society that the vaccine was made available for pennies rather than tens of thousands of dollars a shot?

If we want to talk about value to society, the anti-smoking crusaders of the last four decades have saved tens of thousands of lives and improved the health of millions more by reducing smoking in the United States and around the world. The people who led this fight, most of whom were women, won’t be featured on the covers of business magazines, but they did much more to enhance society’s wealth than Jeff Bezos.

Anyhow, congratulations to Apple and Amazon’s stockholders on their stock gains. They have been fortunate. The rest of us, not so much.

Posted in Corporate Crime, culture, Economics, elites, Financial Crisis, Inequality, media, Oligarchy, society, Technology | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

Taxpayers Are Footing the Bill for Sky-High CEO Salaries

Billions in taxpayer funds go to CEOs who pay their workers peanuts. We can change that.

By Sam Pizzigati

Source: Other Words

Politicians often gab about the “private sector” and the “public sector,” as if these two categories of economic activity operated as two completely separate worlds.

In reality, these two sectors have always been deeply intertwined.

How deeply? Every year, the federal government spends about half a trillion dollars buying goods and services from the private sector. State and local government contracts with private-sector enterprises add hundreds of billions more.

And private-sector companies don’t just receive contracts from our governmental entities. They receive all sorts of subsidies — billions upon billions of dollars in “corporate welfare.”

Where do all these dollars come from? They come from us, America’s taxpayers. Without the tax dollars we provide, almost every major corporation in the United States would flounder. Some would simply cease to exist. The defense contractor Lockheed Martin, for instance, takes in almost all its revenue from government contracts.

This private sector reliance on public tax dollars gives us, as citizens, some leverage over the behavior of our largest and most powerful corporations. We could, if we so chose, deny those dollars to corporations that engage in behaviors that undermine the values we hold dear.

On other fronts, we already do this denying. For over a generation now, we’ve leveraged the power of the public purse against companies with employment practices that discriminate on the basis of race and gender. Companies that discriminate can’t get government contracts because we’ve come to a consensus, as a society, that we don’t want our tax dollars subsidizing racial and gender inequality.

Unfortunately, our tax dollars are still subsidizing — in a big way — economic inequality, as a new Institute for Policy Studies report on CEO pay details quite vividly. Billions of our tax dollars are annually going to corporations that pay their top executives more in a week, or even a day, than their typical employees can make over an entire year.

The late Peter Drucker, the founder of modern management science, believed that no corporate enterprise that pays its CEO over 25 times what its workers are earning could operate efficiently and effectively over the long haul. In 2017, every single one of the federal government’s 50 largest private contractors paid its chief executive over 25 times more than its most typical workers.

In fact, most paid their top execs well over 100 times more.

And at one, DXC Technology, the CEO pulled down over $32 million in 2017 pay — over 800 times the compensation of the firm’s typical employees.

Let’s add a little context here. The president of the United States earns $400,000 a year. The CEOs of the 50 private companies with the largest federal contracts last year averaged over $13.5 million. The CEOs of the 50 largest recipients of federal subsidies last year averaged over $12 million.

Our tax dollars, in other words, are helping a lucky few become fabulously rich.

We do live, as our politicians like to point out, in a “free country.” Corporations can pay their top execs whatever they want. But we taxpayers have freedom, too. We can freely deny our tax dollars to enterprises that are making our society ever more unequal.

Some lawmakers are starting to step in that direction. Five states have begun considering legislation that would make it harder for companies with wide CEO-worker pay gaps to get government contracts and tax breaks. And one city — Portland, Oregon — has already enacted legislation that taxes corporations with wide CEO-worker pay gaps at a higher rate than corporations with more modest gaps.

We need more Portlands.

Posted in Corporate Welfare, culture, Economics, elites, Financial Crisis, Inequality, Social Control, Social Engineering, society, Sociology, wasted taxpayer dollars | Tagged , , , , , , , , , , , , | Leave a comment

Moscow blames downing of Russian plane near Syria on Israeli “provocation”

By Bill Van Auken


Tensions remain high in Syria after the downing of a Russian Il-20 electronic intelligence plane and the killing of all 15 crew members aboard during a major Israeli airstrike against the Syrian port city of Latakia Monday night.

The attack on Latakia, a government stronghold and the site of Russia’s major military base in the country, represented a dangerous escalation of the war in Syria, which the Israelis almost certainly carried out in consultation with Washington.

Tel Aviv claimed that its strike was motivated by intelligence that weapons located there were being transferred from Iran to the Lebanese Shia movement Hezbollah. A more powerful underlying motive, however, is the frustration of US imperialism and its allies, Israel and the NATO powers, over the increasing consolidation of control over Syria by the Russian-backed government of President Bashar al-Assad and the failure of the Al Qaeda-linked militias that they backed in a proxy war for regime change.

The Russian Ministry of Defense Tuesday acknowledged that its plane had been hit by Syrian anti-aircraft fire, but placed blame for the incident squarely on what it termed a “provocation” and “hostile” act on the part of Israel.

The Russian turboprop plane was returning to the Russian-run Hmeymim airbase, when it went off the radar screens in the midst of an attack by four Israeli F-16 fighter jets against Syrian defense industry facilities in Latakia.

“The Israeli pilots were using the Russian aircraft as a shield and pushed it into the line of fire of the Syrian defense,” Igor Konashenkov, the Russian defense ministry spokesperson, said on Tuesday.

Russia’s Interfax news agency quoted Konashenkov as describing Israel’s military strike as “hostile” and “an act of provocation,” warning, “We reserve the right to take commensurate measures in response.”

This response was echoed by Russian Defense Minister Sergey Shoigu, who declared that the “blame for the downing of the Russian plane and the deaths of its crew members lies squarely on the Israeli side.” He added, “The actions of the Israeli military were not in keeping with the spirit of the Russian-Israeli partnership, so we reserve the right to respond.”

Later the same day, Russian President Vladimir Putin demonstratively backed away from this sharp response and implicit threat of military retaliation.

Speaking in Moscow at a joint press conference with Hungarian Prime Minister Viktor Orban, Putin drew a distinction between Latakia and the 2015 incident in which a Turkish warplane had shot down a Russian S24 jet, after which Moscow imposed severe sanctions against Ankara.

The Turkish military, he said, had “deliberately downed” the Russian plane, while the Latakia incident “looks like a chain of tragic circumstances, because the Israeli plane didn’t shoot down our jet.”

Subsequently, Putin took a telephone conversation from Israeli Prime Minister Benjamin Netanyahu, who reportedly expressed condolences over the deaths of the Russian plane crewmembers, while reiterating Tel Aviv’s determination to continue carrying out strikes against targets in Syria that it claims are linked to Iran and Hezbollah.

Israeli government officials had placed the entire blame for the downing of the plane on Iran and Hezbollah, while stating that its immediate cause was “extensive and inaccurate Syrian anti-aircraft (surface-to-air missile) fire.”

The Kremlin’s readout of the phone conversation had Putin adopting a somewhat tougher line, reportedly telling Netanyahu that Israeli operations like the one in Latakia “violated Syrian sovereignty” and “agreements around the prevention of dangerous incidents.” The Kremlin added, “The president of Russia urged the Israeli side not to allow such situations from now on.”

Israel earlier this month acknowledged that it has carried out at least 200 airstrikes against Syria over the past 18 months, dropping some 800 munitions on targets across the country. Each of these was also a violation of “Syrian sovereignty.” They have been carried out, however, with the tacit permission of Moscow, which has received advance notice of these operations on an Israeli-Russian “deconfliction” line set up three years ago, and has thus far refrained from using its advanced antiaircraft systems deployed in Syria against Israeli warplanes.

Whether Russia will now deny Israel a green light for airstrikes in Syria, and for how long, remains to be seen.

The shifting tone in the response from Moscow to the deaths of its military personnel may reflect divisions within the Kremlin, or between Putin’s administration and the Russian military command. It almost certainly also expresses fears that the situation in Syria could quickly spill over into a wider military confrontation, including one involving the world’s two major nuclear powers, the US and Russia, as well as the region’s only nuclear-armed state, Israel. Washington would almost certainly respond militarily to any Russian retaliation against the Israeli action in Latakia.

Putin’s government represents the interests of the Russian oligarchs who consolidated their power in the wake of the Moscow Stalinist bureaucracy’s dissolution of the Soviet Union. It has sought to promote Russian interests in the oil-rich Middle East, not only through backing the Assad government—alongside Iran—against the Western-backed Islamist militias employed as proxies in a war for regime change, but also by forging close ties with Israel, with which Russia has established military, trade and investment links.

This complex and conflicting set of relations also includes the attempt by Moscow to cement closer ties with Turkey, which has backed a range of Islamist militias in Syria, while joining the Astana talks together with Moscow and Tehran in search of a ceasefire in the Syrian conflict.

The attack on Latakia came within hours of the announcement Monday by Putin and Turkish President Recep Tayyip Erdogan of an agreement reached in the Russian Black Sea resort city of Sochi to establish a jointly patrolled “demilitarized zone” between Syrian government troops and the Western-backed “rebels” concentrated in Syria’s northwestern Idlib province.

For weeks there had been predictions that a Russian-backed Syrian government offensive in Idlib was imminent, along with mounting threats by Washington and its allies, including Britain, France and Germany, to carry out a sustained military retaliation against an advance on the last major redoubt of the Al Qaeda-linked “rebels.”

The deal reached between Moscow and Ankara calls for the DMZ separating Syrian government forces from the Islamist militias to consist of a 15 to 20-kilometer buffer around the province. All “radical”, i.e., Al Qaeda-affiliated, militias are supposed to be removed from the area.

Turkey’s Foreign Minister Mevlüt Çavuşoğlu told reporters Tuesday that Ankara will deploy more troops to Idlib in the coming days to patrol the border areas. Turkish tanks and other military vehicles had already been dispatched to the south of the province, an area where Russian and Syrian airplanes had carried out strikes.

Asked where the Al Qaeda-affiliated militias would go, Çavuşoğlu said that Ankara and Moscow were still working on the issue.

The US has signaled that the more than 2,000 American troops presently deployed in Syria will remain indefinitely, not merely to complete their supposed mission of combating the Islamic State of Iraq and Syria (ISIS), but to roll back Iranian and Russian influence in both the country and the region and to deny Damascus control of the economically vital oil fields now under US control.

Washington has no interest in seeing the agreement between Moscow and Ankara over Idlib succeed. At a UN Security Council meeting Tuesday on Syria, where UN Special Envoy on Syria Staffan de Mistura called for a speedy implementation of the Russian-Turkish agreement, the US Special Representative for Syria Engagement, James Jeffrey, insisted that, “The only way forward is a genuine and inclusive political solution,” Washington’s euphemism for regime change. To this end, the US and its allies, Israel chief among them, are prepared to push the country and the region into a potentially world catastrophic war.

Posted in culture, Empire, Geopolitics, History, imperialism, news, State Crime, war, war on terror | Tagged , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Two for Tuesday


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For Economic Truth Turn To Michael Hudson

By Paul Craig Roberts


Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, “The Failure of Laissez Faire Capitalsim.” This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson’s books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. “J is for Junk Economics” is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. “Killing the Host” and “The Bubble and Beyond” will explain how an economy run to maximize debt is an economy that is self-destructing. “Super Imperialism” and “Trade, Development and Foreign Debt” will show you how dominant countries concentrate world economic power in their hands. “Debt and Economic Renewal in the Ancient Near East” is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world’s reigning economics. Russia is suffering much more from neoliberal economics than from Washington’s economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin’s. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. A handful of banks has been provided with free money—in addition to the money that the Federal Reserve created in order to take the banks’ bad derivative investments off their hands—to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current “recovery” are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China’s love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.

Posted in Corporate Crime, culture, Economics, elites, Environment, Financial Crisis, Labor, Neoliberalism, Privatization, Social Control, Social Engineering, society, Work | Tagged , , , , , , , , , , , , , , , , , , | 2 Comments

Why do corporate boards so overpay US CEOs?

By Sam Pizzigati

Source: Nation of Change

Back in 1999, near the dizzying height of the dot-com boom, no executive in Corporate America personified the soaring pay packages of America’s CEOs more than Jack Welch, the chief exec at General Electric. Welch took home $75 million that year.

What explained the enormity of that compensation? Welch didn’t claim any genius on his part. He credited his success, instead, to the genius of the free market.

“Is my salary too high?” mused Welch. “Somebody else will have to decide that, but this is a competitive marketplace.”

Translation: “I deserve every penny. The market says so.”

Top U.S. corporate execs today, on average, are doing even better than top execs in Welch’s heyday. In 1999, notes a just-released new report from the Economic Policy Institute, CEOs at the nation’s 350 biggest corporations pocketed 248 times the pay of average workers in their industries. Top execs last year averaged 312 times more.

What explains this growing generosity to America’s top corporate chiefs? Today’s apologists for over-the-top CEO compensation, like Jack Welch a generation ago, point to the market.

One leading critic of these apologists, the Dutch management scientist Manfred Kets de Vries, neatly summed up this market world view earlier this year: Big CEO pay packages “reflect market demands for a CEO’s unique skills and contribution to the bottom line.” Mega-million executive paychecks “merely represent the market forces of supply and demand.”

Or, as the University of Chicago’s Steven Kaplan puts it, “The market for talent puts pressure on boards to reward their top people at competitive pay levels in order to both attract and retain them.”

In the world that CEO cheerleaders like Kaplan inhabit, impartial, unbiased markets determine executive compensation. Corporate boards simply play by market rules. They pay their execs what the market says their execs deserve. If they don’t, they risk losing their executive talent.

American corporate leaders take scarcity – of CEO talent – as a given. How else, in a market economy, to explain rapidly rising CEO pay? If quality CEOs abounded, executive compensation would not be soaring. But that compensation is soaring, so qualified CEOs obviously must be few and far between – and totally deserving of whatever many millions they receive. Simple market logic.

And simply wrong. American corporations today confront no scarcity of executive talent. The numbers of people qualified to run multi-billion-dollar companies have never, in reality, been more plentiful. These numbers have been growing steadily over recent decades, in part because America’s graduate schools of business have been graduating, year after year, thousands of rigorously trained executives.

America’s first graduate school for executives, the Tuck School of Business at Dartmouth, currently boasts an alumni network over 10,000 strong. MBAs in the equally prestigious Harvard Business School alumni network total over 46,000. Add in the alumni from other widely acclaimed institutions and the available supply of executives trained at America’s top-notch business schools approaches several hundred thousand.

Just how many of these academically trained executives have the skills and experience really needed to run a Fortune 500 company? Let’s assume, conservatively, that only 1 percent of the alumni from the “best” business schools have enough skills and experience to run a big-time corporation.

That arithmetic would give Fortune 500 companies that go looking for a new CEO at least several thousand eminently qualified candidates. No supply shortage here.

Indeed, today’s business world is overflowing with eminently qualified CEO candidates, once you add in the grads from business schools abroad. INSEAD, perhaps the most prominent of these international schools, now has over 56,000 active alumni.

In the past, to be sure, American corporations seldom looked beyond the borders of the United States for executive talent. That tunnel vision made some sense. Executives inside the United States and executives outside worked in different business environments. Foreign executives could hardly be expected to succeed in an unfamiliar American marketplace, even if they did speak flawless English.

But today, in our celebrated “globalized” economy, that distinction between domestic and foreign executives no longer matters nearly as much. In dozens of foreign nations, in hundreds of foreign corporations, executives are competing in the same global marketplace as their American counterparts. They’re using the same technologies, studying the same market data, and strategizing toward the same business goals. Together, taken as a group, executives from elsewhere in the world constitute a huge new pool of talent for American corporations.

Pay consultants in the United States, for their part, do acknowledge the reality of this global marketplace for executive talent. In fact, they cite global competition as one important reason why executive pay in the United States is rising. American companies, the argument goes, now have to compete against foreign companies for executive talent, the argument goes. This competition is forcing up executive pay in the United States.

Really? What ever happened to market logic? If corporations all around the world paid their executives at comparable rates, market competition would certainly force up executive compensation worldwide. But corporations don’t all pay executives at comparable rates.

American executives take home far more compensation than their foreign counterparts, on average over triple the pay of execs in America’s peer nations. By classic market logic, any competition between highly paid American executives and equally qualified but more modestly paid international executives ought to end up lowering, not raising, the higher pay rates in the United States.

Why, after all, would an American corporation pay $50 million for an American CEO when a skilled international CEO could easily be had for one-fifth or even one-fiftieth that price?

We have here, in short, a situation that a deep, abiding faith in the “market” does not explain. In the executive talent marketplace, American corporations face plenty, not scarcity, yet the going rate for American executives keeps rising.

Has someone repealed the laws of supply and demand? How else could executive pay in the United States have ascended to such lofty levels?

Some analysts do have an alternate explanation to offer. Markets, they point out, still operate by supply and demand. But markets don’t set executive pay.

“CEOs who cheerlead for market forces wouldn’t think of having them actually applied to their own pay packages,” as commentator Matthew Miller has noted in the Los Angeles Times. “The reality is that CEO pay is set through a clubby, rigged system in which CEOs, their buddies on board compensation committees and a small cadre of lawyers and ‘compensation consultants’ are in cahoots to keep the millions coming.”

“CEO compensation,” agree Lawrence Michel and Jessica Schieder, the authors of the new Economic Policy Institute executive pay report, “appears to reflect not greater productivity of executives but the power of CEOs to extract concessions.”

If CEOs earned less, the pair add, we would see “no adverse impact on output or employment.” Instead, they go on, lower executive paychecks would mean higher rewards for corporate workers, since the huge paydays that go to CEOs today reflect “income that otherwise would have accrued to others.”

How could those “others,” the rest of us, best go about lowering CEO compensation? Michel and Schieder offer a variety of promising proposals, ranging from higher marginal income tax rates to higher corporate tax rates on companies with excessively wide CEO-to-worker compensation ratios.

And what might a reasonable CEO-to-worker pay ratio be? The new Economic Policy Institute research suggests one plausible goal. Back in 1965, Michel and Schieder calculate, America’s top execs only pulled down 20 times more pay than the nation’s average workers.

Posted in Corporate Crime, Corruption, culture, Economics, elites, Financial Crisis, Inequality, Social Control, society | Tagged , , , , , , , , , , , , , , , , | Leave a comment

Essential Taoist Wisdom for Living in Politically Charged and Chaotic Times

By Dylan Charles

Source: Waking Times

There’s an old saying, rumored to be an ancient Chinese curse, but it’s been a favorite in the West for some time now.

“May you live in interesting times.” 

Political figures like to use it when they want to emphasize just how screwed up things are. For example, Robert Kennedy is quoted here from a speech in 1966:

“There is a Chinese curse which says “May he live in interesting times.” Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.” [Source]

Sounds pretty much like today, as the times are indeed interesting. Shocking and unbelievable things are happening all around us, and with information technologies we can choose to internalize struggles, tragedies and disasters that are far outside of our sphere of personal experience or control. It’s easier than ever to take on the weight of the world.

The burden of doing so is quite heavy, though, manifesting as stress, anxiety, depression, self-abuse or the abuse of nature, conflict big and small, anger, disease, uneasiness, unhappiness, and most insidious of all, fear. In short, absorbing the world’s problems is self-destructive. To resolve this within ourselves, however, it most often only takes a shift in perspective.

Lao-Tzu, the Old Master of Taoism, condensed the human struggle into the prose of the Tao Te Ching. It’s not a religious text, as it doesn’t hail a deity or command you to construct a belief system on its behalf. It’s a simple book of observations about the nature of nature, something that after 2500+ years still manages to serve as a salient guide to living well. For those who understand it, it offers a way of being that helps keep the madness of change at bay.

In times such as these, when uncertainty and chaos seem to be rising against the established order, and when so much discourse is focused on politics and untouchable events and circumstances, it really is up to the individual to create peace, harmony and balance within themselves.

But as humans, we have a tendency to try to control that which is beyond our control, in turn contributing evermore to the development of chaos and disorder. In truth, it is far easier to navigate such discord than we believe, and the way is far simpler than we imagine it to be. Consider for a moment the Taoist view regarding such interesting times.

From verse 16:

When society changes
from its natural state of flux,
to that which seems like chaos,
the inner world of the superior man
remains uncluttered and at peace.
By remaining still, his self detached,
he aids society in its return
to the way of nature and of peace.
The value of his insight may be clearly seen
when chaos ceases.

Here we are informed of the value of tending to the inner world first, which requires the gumption to detach and allow things to be as they are. We are encouraged to let go of personal expectations in order for muddled waters to clear.

From verse 17:

The sage does not expect that others
use his criteria as their own.

It is virtuous to allow others to hold whatever insane beliefs and ideas they choose to, and disengage from the struggle to enforce our opinions and values onto others.

From verse 18:

When intellectualism arises,
hypocrisy is close behind…

When the country falls into chaos,
politicians talk about ‘patriotism’.

From verse 57:

Govern your country with integrity,
Weapons of war can be used with great cunning,
but loyalty is only won by not-doing.
How do I know the way things are?

By these:

The more prohibitions you make,
the poorer people will be.
The more weapons you possess,
the greater the chaos in your country.
The more knowledge that is acquired,
the stranger the world will become.
The more laws that you make,
the greater the number of criminals.

Therefore the Master says:

I do nothing,
and people become good by themselves.
I seek peace,
and people take care of their own problems.
I do not meddle in their personal lives,
and the people become prosperous.
I let go of all my desires,
and the people return to the Uncarved Block.

Doing nothing, as advised in the Tao Te Ching, runs in opposition to the cultural zeitgeist, but just imagine how quickly things would change if more people chose to withdraw and not participate in the insanity all around us.

Final Thoughts

As individuals we face the same challenges as all of those who’ve come before us. We’ve always had to survive and procreate while striving for progress. That’s the human journey in nutshell, and while it isn’t always pretty, it’s always the same story, no matter how complex things become.

Our role, then, is the role of the sage, which is to act in accordance with nature rather than to resist nature.

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Saturday Matinee: Metamorphosis

(In memory of Terence McKenna, November 16, 1946 – April 3, 2000)


By Richard Kadrey

Source: Wired

METAMORPHOSIS – A video “trialogue” featuring Ralph Abraham, Terence McKenna, and Rupert Sheldrake – is part shamanic journey and part New Physics 101. It’s mostly talk, with touches of simple computer graphics and music adorning the presentation. But what talk it is. We’ve got Abraham, a mathematician and the godfather of chaos theory; McKenna, a shamanologist, ethnopharmacologist, and psychedelic philosopher; and Sheldrake, a radical biologist and originator of the idea of “morphic resonance,” a memory embedded in all natural systems. Their free-form discussion ranges from drug experiments to the anima mundi (world soul), chaos and complexity, and the effects of language and imagination on the shape of the universe – all in search of a new field theory that encompasses art, science, and philosophy.

In this particular chaotic system, McKenna is the strange attractor around which Abraham and Sheldrake orbit. The three unite in a quest for knowledge and an exchange about the sciences they’ve studied. Sheldrake talks passionately about trying to redefine biology in terms of living organisms, not the abstract dead things found in textbooks and labs. Abraham, not surprisingly, explains how protests over the Vietnam War lead him to leave his sheltered academic life, pursue meditation in the Himalayas, and study chaos theory.

With McKenna as the ringleader (and biggest talker), imagination and chaos are the principal themes. Chaos, as McKenna describes it, is a science to study, an opportunity to reshape the world by looking through the lens of nonlinear processes, and a metaphor to help us think about our place in the universe. In McKenna’s words, chaos “is telling us that the intimation of mysticism, the intimation of a possibility of transcendence, is all firmly grounded in science.”

This is heady stuff. Though you half expect the psychedelic proselytizing to drift off into some kind of Birkenstock-and-bean-sprout dead end, the rigor, intelligence, and wit of these three minds keep the ideas sharp and fast. For anyone interested in the edge of science, this video is both entertaining and inspiring.

Posted in Art, culture, Film, Philosophy, Saturday Matinee, Science, society, Spirituality, Video | Tagged , , , , , , , , , , , , , , , | Leave a comment