Sunday, March 07, 2004

The cost of supporting the wealthy

The previous post points out that Cingular Wireless will be charging each one of its 46 million subscribers $1.86 in extra fees, and then giving the resulting $87.5 million to a tiny handful of executives.

One way to think about it is, "$1.86 is not that much money in the grand scheme of things -- it doesn't really matter." The thing we all need to recognize about these fees is that they do matter. We are constantly paying them to hundreds of corporations every year in the form of inflated prices on everything we buy. When you add them all up, it works out to more than $1,000 for every American citizen every year. That means two things:
  • The hundreds of billions on dollars collected in this way flow to a tiny percentage of the American population. In the process, this money is making this tiny percentage of people unbelievably wealthy and powerful.
  • If these inflated prices were eliminated, every American would have more than $1,000 per year in his or her pocket to spend on the things he or she needs, on average.
Keep in mind that the top 10% of Americans own nearly 90% of all the corporate stock in America, and the top 1% own half of it [ref]. What this means is that, when any corporation pays a dividend, 90% of the money goes to the top 10% of Americans, and half of it goes to the top 1% of Americans.

For example, Wal-Mart pays an annual dividend of approximately $1.3 billion dollars. There are about 300 million people in America. So to raise $1.3 billion for its dividend, Wal-Mart overcharges each American, on average, over $4 per year. Then almost all of that money flows to the top 10% of Americans, and half of it flows to the top 1%.

As another example, the top five drug companies in America pay approximately $10 billion per year in annual dividends (even though the 5 companies together are smaller than Wal-Mart in terms of revenue). $10 billion represents approximately $34, on average, for every American citizen.

Kellogg -- the cereal company -- pays over $400 million per year in dividends, or $1.33 per American citizen. Campbell Soup pays nearly $1 per American citizen. And so on.

Then factor in the unbelievable executive compensation paid by these companies every year. With the average CEO making more than $10 million per year, and the other people on their "executive teams" making millions more, it adds up very quickly. Every American citizen -- every man, woman and child in America -- pays at least $1,000 per year in inflated prices to cover these executive salaries and dividends.

All of that money is flowing out of the pockets of normal Americans and into the pockets of the wealthiest Americans, and the wealthy represent a tiny percentage of the American population.

The problem with these wealthy Americans is that, as their wealth grows, so does their power. They then use their power to cut social security benefits, cut wages, ship jobs overseas, corrupt the legal system, corrupt the government, and so on. We are all feeling the effects of their wealth, and their wealth is growing.


Post a Comment

<< Home