CEO pay rising at an extraordinary rate

Title: CEOs' raises averaged 15% in U.S. last year
Source: Associated Press
Date: July 29, 2004

From the article:

The median pay for a chief executive officer in the United States rose 15 percent in 2003 and was up 22 percent among top executives at larger companies, according to a survey released Wednesday. The survey, by the Corporate Library, a research firm in Portland, Maine, showed increases in almost every category of executive compensation, including base salary, annual bonus, total annual compensation, restricted stock, long-term incentive payouts and the value realized from the exercise of stock options.

The only category to decline from 2002 to 2003 was the value of stock option grants.

Despite some calls for restraint in pay, it was a better year for the executives than 2002, when the median total compensation rose 9.5 percent.

'With statistics such as these, it would appear that any chance of reining in executive compensation has disappeared,' the report said.

It is true -- in the current environment, there is no hope of reining in executive compensation. When CEO pay is rising at a rate of 22% per year at larger companies, if means that the pay ofexecutives under the CEO is also rising just as quickly. They are getting higher salaries, higher bonuses, more stock, more options, more long-term incentives and more perks. If your pay is rising at a rate of 20% per year, then it only takes four years for your pay to double because of compounding.

All of that money is coming from you and me. We all pay highly inflated prices for everything we buy, and we all get paid less so that money can funnel to the executives. That is why pay for normal Americans is actually falling when adjusted for inflation -- all of the money is going to executives instead.

This is the insidious process of the concentration of wealth. More and more money flows to a small group. With that money, they buy government influence and legal protection, meaning that even more money flows to them. And the cycle repeats in an upward spiral.

We must break that spiral, or be imprisoned by it. The nation's wealth, instead of being concentrated in a few, needs to spread out to everyone for the benefit of all.

The standard of living is falling because of the concentration of wealth

Title: Alan Greenspan's bi-annual meeting with Congress
Date: July 20, 2004

Yesterday, Alan Greenspan met with Congress, as he does every six months, to report on the economy and answer questions. Here is one exchange from that meeting:

Senator: "[U.S. Workers] are seeing corporate profits go up dramatically, they are getting very little share of those corporate profits..."

Greenspan, interrupting: "I think what you are going to find is that their share will start to increase."

Senator: "Now one of the reasons you propose that their share increases in that labor force is because employees will spend more for health care and other benefits, which workers appreciate, but that still doesn't increase take home pay."

Greenspan: "I agree with that. What I am saying is that, as I indicated the last time I was here, that virtually all of the increase in productivity during the years starting in the first quarter of 2003 shows up not as real wages, but as increased profitability. That stopped sometime in the last several months, and what history tells us is that the shift now goes in the other direction, and you get with a delayed effect the increased productivity showing up as real wages overall, and I would think that while supervisory workers are going to share significantly, it will also be true of the 80 percent of payrolls which are non-supervisory workers as well."

There is a great deal to digest in this little exchange. Here are some of the high points:

• "virtually all of the increase in productivity during the years starting in the first quarter of 2003 shows up not as real wages, but as increased profitability." That is a direct statement that wealth is concentrating. Nearly all of the profit goes to shareholders and executives.
  
  
• "employees will spend more for health care and other benefits" -- that's because companies are cutting way back on benefits as a way to further concentrate wealth.
  
  
• "supervisory workers are going to share significantly." These workers are executives, and they will continue getting big salary hikes.
  
  
• "I think... it will also be true of the 80 percent of payrolls which are non-supervisory workers as well." 80% of the workforce -- the non-executives -- may get pay increases, if the upper 20% deigns them worthy.

Greenspan also says, "[the concentration of wealth] stopped sometime in the last several months, and what history tells us is that the shift now goes in the other direction."

Here's an important question: Is that true? Is "the shift now going in the other direction," as Alan Greenspan says?

Not according to this article from the NY Times:

Hourly Pay in U.S. Not Keeping Pace With Price Rises

From the article:

On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest decline since the depths of recession in mid-1991, came after a 0.8 percent fall in real hourly earnings in May.

Coming on top of a 12-minute drop in the average workweek, the decline in the hourly rate last month cut deeply into workers' pay. In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January, and is the lowest level of weekly pay since October 2001.

Alan Greenspan must have missed this report from the Bureau of Labor Statistics. Wages are going down, not up. Also:

Spending is still holding up, led by strong corporate profits as well as higher salaries and bonuses at the upper end of the income distribution. But the lagging earnings at the bottom end are making for a somewhat lopsided expansion.

The upper echelons of consumer spending, at places like Saks Fifth Avenue, Neiman Marcus and Nordstrom department stores, are reporting gangbuster business. "I'm surprised by how well we've sold high-priced fashion at this stage," said Pete Nordstrom, president of Nordstrom's full-line stores.

But at the other end, sales at stores open at least a year at big-box discounters like Target and Wal-Mart have disappointed, while sales of used cars are declining year over year, government figures show. "We're not seeing the traffic, not even the same volumes of sales calls," said Richard Cooper, a sales manager at Jones Ford in Charleston, S.C. [See this post for details]

What we see here is remarkable. Salaries for the top 20% are growing so fast that "Spending is still holding up", but the bottom 80% are seeing "the steepest decline [in wages] since the depths of recession in mid-1991." That is a very strong testament to the concentration of wealth occurring today.

Later in the session, Greenspan says this:

Greenspan: "We are in a global economy and increasingly so, and it has been to the advantage of the United States to be in this global economy and indeed in the position of leadership that we have been in, and it has led in my judgment to a very significant increase in the standards of living of the average American."

Let's ask this again: Is that true? Is the standard of living increasing for most Americans?

To answer the question, let's look at the two most expensive items most Americans purchase: houses and cars. And let's look at them by comparing prices for houses and cars in the 1970s and today.

Cars

In 1971, the average cost of a car in the U.S. was $3,430.

In 2000, the average cost of a car in the U.S. was $24,730.
(this article is the source of this data. Its source is the National Automobile dealers' Association.)

Adjusted for inflation to the year 2000 (using this calculator), the car in 1971 cost about $14,700.

So the price of the average car in 2000 is 7.2 times greater than the
price of the average car in 1971 in absolute dollars, and about 1.7
times greater in inflation-adjusted dollars.

There are two ways to look at what has happened to wages.

1. In 1971, the minimum wage was $1.60. In 2000 it was $5.15. So it rose
   by a factor of 3.2 in absolute dollars. In inflation-adjusted dollars,
   the minimum wage actually fell. Since the minimum wage acts as the foundation of the wage scale for the 80% of Americans who work in non-supervisory jobs, this is important. If the minimum wage is not rising, chances are that their wages are not rising either.
   
   
2. If you look at the "Average hours and earnings of U.S. production workers" in the World Almanac (whose data came from the U.S. Dept. of Labor), the average wage of a production worker was $127.31 per week in 1971, and $456.78 in 1999. In absolute dollars it rose by 3.58 times (roughly the same as minimum wage), but in inflation-adjusted dollars it also fell.

If you multiply $127 by 52 to get an annual wage in 1971, an average worker in 1971 made $6,620, or roughly two average cars per year.

If you multiply $456 by 52 to get an annual wage in 2000, a worker in
2000 made $23,750, or roughly one average car per year.

In other words, if cars are the measure, an average worker in 2000 can
buy only one half of what an average worker in 1971 could, in terms of
cars.

If cars are the measure, the standard of living of a typical American worker -- 80% of the population -- fell by 50%.

Houses

By looking at this report from the census bureau(page 720) and this report, you can see that the median sales price of a home in 1971 was $24,800. The average annual wage in 1971 was $6,620 (see previous section). So it took 3.74 years of labor for the average worker in 1971 to buy the average home.

The median sales price of a house in 1999 was $133,300. The average annual wage in 1999 was $23,750. So it took 5.61 years of labor for the average worker in 1999 to buy the average home.

The amount of house that a worker can buy with his/her labor is falling, not rising. The standard of living in America, in terms of housing, is also falling by this measure.

A bit more distressing is the fact that median home prices in 2003 had moved up to $169,900. In other words, between 1999 and 2003, prices rose by 27%. Wages for the average worker certainly did not rise by 27% during the same period -- in June they actually fell.

So the "average worker" is able to buy less and less house as time goes by, and home prices are rising quickly right now. Things seem to be getting worse for the average worker today when compared to 1970, not better.

When Alan Greenspan says that there has been a "very significant increase in the standards of living of the average American," what is he talking about? Over the last 30 years, it appears that the standard of living for average Americans has fallen significantly in terms of housing and transportation.

The only way to reverse this trend is to end the concentration of wealth. See also:

• Robert Reich on the Concentration of Wealth
• The Haves and the Have Mores
• The new model -- wages never rise
• The GI Bill and the unconcentration of wealth

CEO pay continues to increase

Title: CEO pay continues to increase despite debate and regulations
Source: Knight Ridder News
Date: July 2, 2004

From the article:

"Much has been said in the past couple of years, but in effect, little has been done about the increasingly high incomes of the nation's chief executive officers.

Last year, CEOs of S&P 500 companies earned a median of 27.16 percent more in total compensation than in 2002, when the median CEO earned 11.48 percent more than the previous year."

Examples given in the article include:

• Reuben Mark, CEO of Colgate-Palmolive, brought home the highest earnings - $141 million...
  
  
• In San Antonio, SBC CEO Edward E. Whitacre Jr. received the greatest total compensation - $19.5 million, a 93 percent increase over his 2002 compensation package...
  
  
• Valero CEO William E. Greehey came in a close second, with an $18.8 million compensation package, a 152 percent increase over his pay package the previous year.

See also: Executive compensation is "seriously off-track".

Shocking executive payouts for mergers

Title: No Wonder C.E.O.'s Love Those Mergers
Source: NY Times
Date: July 18, 2004

This article tries to describe the ridiculous amounts of money CEOs and other executives receive when two companies merge. It comes to the conclusion that they "can become truly, titanically, stupefyingly rich." In other words, mergers have become a grotesque method for concentrating wealth.

From the article:

Wallace R. Barr, the chief executive of Caesars Entertainment, is the latest to line up for his barrel of bucks. Last week, Harrah's announced it would acquire Caesars for $5.2 billion. Thanks to accelerated vesting of options and stock awards, Mr. Barr stands to receive almost $20 million under so-called change-of-control provisions in his contract. And if Mr. Barr resigns from Caesars "for good reason," the contract says, he is entitled to an additional $6.6 million after the two companies merge.

Also:

Then there was Wachovia's proposed acquisition of the SouthTrust Corporation last month.... Wallace D. Malone Jr., the chief executive of SouthTrust [will receive] $59 million in termination awards, stock awards and options over the next five years if he leaves the bank. He also appears to be entitled to an annual pension of about $3.8 million.

Also

The California Public Employees' Retirement System, the big pension fund known as Calpers, voted against last month's merger of two health care companies, Anthem Inc. and WellPoint Health Networks, citing excessive pay. Executives stood to receive bonuses, severance payments and vested stock options totaling approximately $200 million in the deal. Leonard D. Schaeffer, WellPoint's chief executive, was entitled to $47 million in severance, stock options and enhanced retirement benefits, an Anthem spokesman said. [See also Unbelievable executive payout in California for details.]

How much money are we talking about, in general? The amounts are stupifying:

First comes the executives' severance pay, almost always nearly three times salary and bonus. Accelerated vesting of stock options and stock awards quickly follows; sometimes the options are granted with their full terms remaining - up to 10 years - giving them tremendous value.

Then there are the three additional years of pension credits that get tacked on to an executive's pay, as well as the 401(k) match, years of health care benefits and the cash value of perquisites at the time of termination - such as use of the corporate jet, country-club memberships, allowances for financial planning advice, office space and secretarial services. All in one delightfully fat lump sum.

AND don't forget that executives' pensions are often based on the unusually high severance pay, which ratchets the numbers way up.

Of course, one downside to these enormous payments is that they generate stunning tax bills for executives. Good thing their contracts almost always require the companies to pay. And how!

The so-called excise tax gross-up provisions can be so colossal that, according to one pay expert, a major merger was scuttled because the cost to cover executives' tax bills exceeded $100 million.

These payouts are grotesque because they are theft. The executives write their own contracts, so they write in these massive payouts. The article states it this way: "few people, beyond the executives themselves and maybe the company's compensation committee, know how costly these pay deals are."

They are also a grotesque form of theft because the executives should be doing this work as a normal part of their job, under their "normal" pay. Keep in mind that executives are already receiving millions and millions of dollars every year in "normal" salaries, bonuses, stock options, stock grants, benefits, retirement packages, perks, jets and so on. They should be doing the work of a merger as part of their everyday job. The article tries to justify these merger payouts with this logic:

Tim Ranzetta, the president of Equilar: "[merger payouts] encourage executives to act in the best interests of shareholders in transactions that they anticipate will increase shareholder value, which at the same time may harm their own careers. But empirical research seems to indicate that most companies underperform relative to the market after a merger while executives benefit from these large, one-time payouts."

Shouldn't an executive who is making $10 million to $50 million per year ALWAYS be looking out for the "best interests of shareholders in transactions that they anticipate will increase shareholder value?" Isn't that their job? Why in the world should they receive tens of millions more for doing their normal job? And then, the statistics show that mergers are not effective for the shareholders in most cases. So the executives fail to do their jobs AND they get paid enormous amounts of money. That is grotesque.

The reason these merger payouts exist is because they represent an extraordinarily good way to concentrate wealth. The billions of dollars being paid to these executives during mergers is coming from you and me -- the money comes from the consumers who buy products from these companies at highly inflated prices. If we eliminated these absurd executive compensation packages, prices in America would be much, much lower, and everyone in this country would be much better off.

Robert Reich on the Concentration of Wealth

Title: Re-slicing The Pie
Source: Robert Reich on NPR
Date: July 15, 2004

This article contains a remarkably clear statement of how the concentration of wealth works in America today. From the article:

The American economic pie is growing at a solid pace. The odd thing is how the pie is now sliced between the portion going to profits and the portion going to wages. According to the commerce department, the wage slice is now smaller than it's been in 38 years, while the slice going to after-tax corporate profits is bigger than it's been since the government began tracking profits back in 1947. This wage squeeze is hurting middle-class families who, even if they own shares of stock, depend mainly on wages.

To repeat:

•  The wage slice is now smaller than it's been in 38 years
• The profit slice is bigger than it's been since the government began tracking profits back in 1947

The profit slice goes to America's wealthiest. 86 percent of American stock is owned by the richest 10 percent of America's population, so nearly all of the profit (in the form of executive salaries/bonuses and dividends) is going to America's top 10 percent, while wages fall for everyone else.

Why is this acceleration in the concentration of wealth occurring? According to the article:

advances in telecommunications now enable many more companies to outsource to places like India and China, where wages are far lower. Or they can easily substitute computers and software for employees who might otherwise expect a raise. If these trends weren't enough to keep wages down, consider that big corporations are bigger and more powerful than ever. Think of Wal-Mart, now employing more Americans than the entire U.S. auto industry. Employers with this kind of clout can keep wages low just by refusing to raise them.

Add to that the fact that corporations can spend billions of dollars on congressional lobbyists and campaign contributions. Through these forms of well-financed persuasion, Congress has seen to it that the minimum wage has not risen since 1997. In that same period, executive pay has skyrocketed -- for example:

• executive receives $78 million severance package
• executive receives $25 million for 2 month's work
• 10 top executives at New York City's brokerage and financial firms get $231 million
• executive at Lucent gets $44 million
• And do on...

This massive concentration of wealth will only increase as computers and robots get more and more capable. See Robotic Nation for details.

Here is the other important question to ask: Where is all of the money for rising profit coming from? It comes from consumers -- it comes from you and me. We pay for it through highly inflated prices. Take, for example, this article mentioned in the Liberal Hyperbole blog:

Bank of America Profit Up 41 Percent

From the article:

Bank of America Corp., the No. 3 U.S. bank, on Wednesday said quarterly profit rose 41 percent, helped by the purchase of FleetBoston Financial Corp. and higher consumer and commercial lending.

The Charlotte, North Carolina-based company said second-quarter net income rose to $3.85 billion, or $1.86 per share, from $2.74 billion, or $1.80 per share, a year earlier.

$3.85 billion in net income in one quarter is a lot of money. There are approximately 100 million households in America. That works out to $35 per household per quarter, or $140 per household per year, on average. It means that even if your family does not use Bank of America, your household still will pay $140 this year to support the profit of this single corporation. That is $140 that you cannot spend on the things that your family needs. Nearly every bit of your $140 will flow into the pockets of the richest 10 percent of the American population. That is how the concentration of wealth works.

Bank of America is just one bank. See also:

• Wells Fargo's Kovacevich paid $36.4 million
• The juiciest pay bonanzas
• Bank Fees

How do we end the remarkable concentration of wealth that is taking place right now? Robert Reich offers this perspective: The American middle class must demand its fair share of the pie. That is the only way. I would suggest that we do it through a mechanism called Robotic Freedom.

Store sales point to the concentration of wealth

Title: Wal-Mart vs. Neiman Marcus - In the war between the "Two Americas," the rich folks are winning.
Source: Slate
Date: July 12, 2004

This is an incredibly interesting article that uses standard statistics normally associated with stock analysts to point out the growing concentration of wealth.

Here is the gist of the article. If you look at "discount stores" like Wal-Mart and Target, sales are off. According to the article: "At Wal-Mart, U.S. same-store sales rose just 2.2 percent in June. The discounter-friendly Target chain likewise reported same-store sales growth of 2.2 percent." Wal-Mart and Target are stores frequented by the American middle class.

Now compare that with sales in stores frequented by wealthier Americans. The article states: "The more luxe the chain, the more same-store sales rose in June: Nordstrom, up 5.7 percent; Saks, up 8.5 percent; extreme consumption emporium Neiman Marcus, up 13 percent."

The article points out similar findings in consumer confidence numbers:

The Conference Board shows the same split. In its most recent month, May, the index for over-$50,000 demographic was 112.1, the highest it's been since June 2002. But for those making under $50,000, confidence not only remains below its levels of July 2002, it has been falling in 2004.... It's axiomatic that rich people are likely to be more optimistic and confident than those with less money, so the raw differentials aren't that surprising. But in the past few years, the readings for all income groups have generally moved in the same direction. If the economy were undergoing a broad-based expansion, if a rising tide were lifting all boats equally, you might expect that trend to continue. But the views of the rich and poor are moving in opposite directions. The split results—the growing pessimism of the poor and the growing optimism of the rich—suggest the economy's improvement isn't helping everyone.

It is a fact that the "economy's improvement isn't helping everyone". Instead, the wealth of this nation is rapidly concentrating. For examples, see the following posts:

• More evidence of today's concentration of wealth
  
• The new model - Wages never rise
  
• Harvard and the concentration of wealth
  
• The Haves and the Have Mores

Halliburton and the concentration of wealth

Title: New Halliburton waste alleged
Source: MSNBC
Date:: July 1, 2004

The article opens with this sentence: "The Pentagon has already awarded Halliburton Co., the controversial military contractor, deals worth up to $18 billion for its work in Iraq." $18 billion represents approximately $180 per American household -- it is a very large amount of money. What has been happening with the money? From the article:

DeYoung audited accounts for Halliburton’s subsidiary KBR. She claims there was no effort to hold down costs because all costs were passed on directly to taxpayers. She repeatedly complained to superiors of waste and fraud. The company's response, according to deYoung was: "We can be as dumb and stupid as we want in the first year of a war, nobody’s going to care."

DeYoung produced documents detailing alleged waste even on routine services: $50,000 a month for soda, at $45 a case; $1 million a month to clean clothes — or $100 for each 15-pound bag of laundry.

"That money could have been used to take care of soldiers," she said.

DeYoung also claims people were paid to do nothing. Mike West says he was one of them. Paid $82,000 a year to be a labor foreman in Iraq, West claims he never had any laborers to supervise. "They said just log 12 hours a day and walk around and look busy," he said. "OK, so we did."

See also this post.

Treating employees like human beings at IKEA

Title: IKEA's ideas
Source: Pioneer Press
Date: July 11, 2004

The article discusses IKEA's many innovative employee policies. The basic idea is to treat employees like valuable members of a team. The contrast to Wal-Mart is unbelievable. For example:

1. "The tight-fisted retail industry has been shaped by cutthroat price competition and constant Wall Street pressure that tends to keep wages low and benefits skimpy. Ikea's approach stands out. The company is guided by a philosophy that workers whose basic needs are taken care of tend to be more productive and ultimately more engaged in what they do. Ikea also embraces an egalitarian culture, where executive perks are shunned, everybody's called co-worker, and store managers and sales assistants alike dress in the same uniform: a bright yellow shirt and blue pants."
   
   
2. "For Jones, who landed a logistics coordinator job in March as one of 450 workers hired by the Swedish retailer, it's the first time he's qualified for long-term and short-term disability pay. He has paid health care coverage, life insurance and three weeks of paid time off during his first year on the job. Then there's the company cafeteria, where he pays one price for anything on the menu: $2. As he ticks off his list of benefits, he nearly shouts his amazement."
   
   
3. "Ikea operates 198 stores in more than 30 countries and has global revenue of $12.2 billion. Though it doesn't publish profit data, Geoff Wissman, a vice president at Retail Forward, estimates that its profit margin is around 6 percent, about double what's typical for furniture retailers."

What IKEA gets in return for its investment is important to the company's financial health:

1. "When it comes to turnover, Ikea North America beats the industry as a whole. At 37 percent, its employee turnover falls below the retail industry rate of more than 60 percent. Some service companies see employee turnover of 100 percent, according to Towers Perrin, a management-consulting firm. "From a customer service perspective, certainly there's an argument to be made that having a stable work force results in a more stable face to the customer," said Don Hay, a principal in the executive compensation practice at Towers Perrin in Chicago."
   
   
2. "The popular assumption is that in exchange for low wages, retailers will find minimally qualified people who can satisfactorily perform the duties of the job, said John Remington, a professor of human resources and industrial relations at the University of Minnesota's Carlson School of Management. "Ikea has recognized that by keeping turnover down, they not only stay cost-competitive but that builds a committed work force," he said."
   
   
3. "Though it doesn't publish profit data, Geoff Wissman, a vice president at Retail Forward, estimates that its profit margin is around 6 percent, about double what's typical for furniture retailers."

By treating its employees like human beings, the profit at IKEA is twice that of other retailers. If Wal-Mart doubled the pay of its employees, it might also double its profit. Amazing. The implication is simple: by treating its employees in such a radically poor way, Wal-Mart may actually short-change its investors by a factor of two on profit margin.

Another company that operates this way -- treating its employees like human beings -- is Costco. See this post for details.

Unbelievable executive payout in California

Title: Anthem, WellPoint resist $400 million payment
Source: Indianapolis Star
Date: July 3, 2004

This is a complex article to read because there are several threads in it, but this part of the article is fascinating: California is balking at a merger between two large healthcare companies because of the executive payout triggered by the merger. From the article:

McCarty said any deal Anthem and WellPoint make to... exclude California policyholders from paying for $147 million to $356 million in compensation due WellPoint executives could amount to a "material change" in the merger conditions that Indiana and other states have approved or reviewed.

Essentially, California is saying, "we do not want our policyholders having to pay this outrageous amount of money to these executives for, essentially, doing nothing."

This is exactly the position every state, and every citizen, should take to the concentration of wealth occurring today. These massive payouts are theft. Executives in this case are stealing hundreds of millions of dollars. This form of theft occurs throughout the American economy. See, for example, this post on Harvard.

Quote of the week

Title: Kerry's strategy may come up short if economy improves
Date: July 4, 2004

"Federal Reserve Chairman Alan Greenspan warned the Senate recently about 'an increasing concentration of incomes in this country. And for a democratic society, that is not a very desirable thing to allow to happen.'"

The concentration of wealth and the orchestra

Title: The Plight of the White-Tie Worker
Source: NY Times
Date: July 4, 2004

It is the same pattern seen by workers in every corner of America:

In the musicians' locker rooms, frustration is building as the salaries of orchestra executives and conductors skyrocket, while the players' salaries stagnate.

The frustration is driven by this disparity:

In 2003, the most recent year for which tax documents are available to the public, the [New York Philharmonic] orchestra paid its music director, Lorin Maazel, $2.28 million for 14 weeks with the orchestra and an annual tour.

Meanwhile:

over the last decade, as pay increases for symphony leaders have soared, the players' annual raises dropped from 3.9 percent in 1993 to 1.7 percent in 2003

Executive pay skyrockets while worker pay stagnates. In this case, worker pay is actually declining, since it is not even keeping up with inflation. It is a classic formula for concentrating wealth. Every segment of society is seeing this same trend.

Drugs and the concentration of wealth 2

Title: AARP: Drug costs rise faster than inflation
Source: Associated Press
Date: July 1, 2004

From the article:

Drug makers raised prescription prices by nearly triple the rate of inflation in the first three months of this year - just before Medicare began its pharmacy discount card program - negating much of the savings the government promised to seniors, according to an AARP survey released Wednesday.

The thing about drug prices is that there is no limit to them. If you have a debilitating or fatal disease, and there is a drug keeping you alive, and the drug manufacturer raises the price, what are you going to do? Take less of the drug? Obviously not. You have no choice but to pay the higher price. It is a perfect way to concentrate wealth.

As a result of this process, the top five drug companies are able to pay over $10 billion per year to their shareholders. They are able to pay their executives billions of dollars more. Their hundreds of highly paid lobbyists are able to convince congress to eliminate price competition. And so on.

See also this post and this one.