Sunday, February 29, 2004

Court cases give peek at execs' amazing perks

Title: Court cases give peek at execs' amazing perks
Source: New York Times
Date: February 29, 2004

From the article:
    The details of the personal expenses that executives put on the company tab often are not known because loopholes in federal disclosure rules let publicly traded companies generally avoid disclosing the perks they give executives along with pay and stock options. But the recent trials of Martha Stewart and other executives have revealed the lavish benefits some re- ceive.

    During Stewart's criminal trial, James Follo, the chief financial officer of Martha Stewart Living Omnimedia, testified that she had asked the company to reimburse her $17,000 annually for her weekend driver as well as for trips to her hairdresser, coffee and other items.

    The trials of L. Dennis Kozlowski and Mark H. Swartz, two former top executives at Tyco International, a manufacturing conglomerate, has revealed that Tyco paid an array of their expenses. The bills included tuition to private schools for Swartz's three children and $1 million for a birthday party in Sardinia for Kozlowski's wife. And then there was the infamous $6,000 shower curtain and a $15,000 umbrella stand.
    The average chief executive at a big public company now makes well over $10 million a year, including stock options, almost 20 times the level in 1981 and 500 times the average worker's salary.
The thing we fail to realize is that we all pay for these amazing salaries, bonuses and perks. Companies charge us higher prices in order to fund these extravagances.

Saturday, February 28, 2004

Concentrating wealth by cutting social security benefits

Title: Greenspan Urges Cuts to Social Security to Rein In Deficit
Source: The NY Times
Date: February 25, 2004

From the article:
    Alan Greenspan, the Federal Reserve's chairman, called on Congress and the Bush administration today to cut spending and rein in Social Security programs to narrow the record budget deficit and protect the "vigorous expansion" now under way in the American economy.
    The White House anticipates a shortfall of $521 billion this year, and the administration contends that it can reduce the deficit by half over the next five years by cutting back on domestic spending not related to the military.
This is a fascinating development -- a systematic concentration of wealth for a small minority of citizens supported by the government.

Here is the progression of steps that got us here:
  • In 1998 and 1999 there were budget surpluses
  • Clearly there was nothing "wrong" with the tax system at that time -- the tax system in place in the late 1990s brought us a booming economy and record investment. Unemployment was low, the mood was optimistic.
  • A new president was elected in 2000.
  • The new president ordered large tax cuts, with the money from those tax cuts flowing primarily to the rich
  • There were more tax cuts with even more money flowing to the rich.
  • A half-trillion dollar deficit materialized very quickly.
Now, to decrease the deficit, Alan Greenspan recommends that social security benefits be cut. In this way, the rich get much richer (fewer taxes) while the majority of ordinary citizens (particularly the elderly) get poorer.

What is especially interesting about this development is the fact that social security spending and the deficit are not correlated. Social security taxes support social security benefits, not the general operating budget of the government. Social security taxes are generating a surplus of revenue right now, which is supposed to be creating a fund that will cover the baby boomers in their retirement. Unfortunately, that surplus revenue is being spent instead of saved. Since the contribution of the wealthy to social security is zero once their income exceeds the cap, they are contributing nothing to the system.

Instead of government by the people for the people, we have government by the wealthy for the wealthy. The concentration of wealth accelerates with the government leading the way.

[See also - The Unlocked Box - How Bush is plundering Social Security to close the deficit]

Grasso's $140 million pay check

Title: Grasso Refuses To Pay Back $139.5 Million
Source: Washington Post
Date: February 27, 2004

From the article:
    Former New York Stock Exchange chairman Dick Grasso is refusing to return any of the $139.5 million paid to him last year by the exchange and may seek over $50 million more that he believes he is owed, according to Grasso's attorney.
    Critics said Grasso's pay was exorbitant for an executive who serves as a frontline regulator of the securities industry. The NYSE is a "self-regulatory" organization charged with monitoring and disciplining its member firms, which include Wall Street's biggest brokerage houses and trading firms. Donaldson is paid $142,500 as chief of the SEC.

The wealth of the top 1%

Title: Social Impact: Good Or Bad, It All Depends On How You See It:
Source: Financial Express
Date: February 27, 2004

From the article:
    "Even more striking has been the sharp increase in the share of the top 1 per cent of income earners in the United States, United Kingdom and Canada. In the United States the share of this group reached 17 per cent of gross income in 2000, a level last seen in the 1920s. This increased concentration in wealth has been the prime factor in the rise in income inequality in the United States; the declining share of the bottom decile of wage earners has been in reverse since 1995. "

$19 million for one executive.

Title: Freddie Mac pays former chief $19m
Source: Financial Times
Date: February 27, 2004

From the article:
    "Freddie Mac paid Gregory Parseghian, the former chief executive, more than $19m in 2003. Mr Parseghian stepped down in December over his role in the company's accounting, which US regulators are now investigating.

    The housing-finance company also disclosed that it awarded Richard Syron, Mr Parseghian's successor at the top post, $8.8m in restricted stock."
    Mr Parseghian's package included a $1m base salary, a $3.94 million bonus and $14.4m in "other compensation" - much of that total coming from termination clauses in his employment contract.
"Normal" people do not receive 14 times their base salary when they leave their jobs -- why should executives? See this article for details.

The only thing that will stop this type of wealth concentration is either legislation or taxation.

A look at a shanty town

Title: Portland tent city declared legal
Source: CNN
Date: February 27, 2004

The article describes a one-acre tent city in Portland, OR that houses 60 people in tents and shacks. There are many people who support the tent city because it offers a sort of rudimentary housing to people who previously did not have housing. There are also many people who are quite opposed to it.

Let's ignore that debate, and instead ask a question. Is this the start of a trend? As the concentration of wealth accelerates and unemployed people are unable to find jobs, people at the low end of the income scale find it harder and harder to afford any sort of "traditional" housing. Simple economics says that one of six things will happen:
  • The government will create a system to provide housing subsidies or housing vouchers to the bottom 30% of households.
  • The goverment will start building and operating welfare dormatories (as is already happening in NYC)
  • Individuals and families will start doubling up, tripling up, etc. in single-family dwellings.
  • The concentration of wealth will be reversed through taxes and/or legislation so that wealth in this nation is distributed more equitably across the population.
  • The number of homeless people and families will rise.
  • Shanty towns like this will start to become common, as they are in third-world nations today and as they were during the Great Depression.
If the concentration of wealth leaves so little money for the bottom end of wage earners that they can no longer afford traditional housing, then some cheaper form of housing must arise for them. Shanty towns are the cheapest housing possible short of living on the street.

Tech execs look to expand--outside U.S.

Title: Tech execs look to expand--outside U.S.
Source: CNET
Date: February 27, 2004

From the article:
    Tech companies are seeing a rebound in business, but top executives said this week that any jobs added to meet growing demand will likely be in countries where labor is cheaper than the United States.

    Executives speaking at the Reuters Technology, Media and Telecommunications Summit in New York said they see increased hiring in countries like India and China, but few jobs will be added in the United States.

    Michael Jordan, chief executive of technology services provider Electronic Data Systems, said the company's employees in low-cost locations like India will rise from 9,000 now to 20,000 by 2006.

    Bruce Claflin, chief executive of network products maker 3Com, said the company's joint-venture with Huawei Technologies of China will add 1,000 engineers, all supplied by Huawei.

    Anne Mulcahy, chief executive of Xerox, which has about 40 percent of its 60,000 employees outside the U.S., expects little hiring. "I don't really think we'll be adding people the way we used to,'' she said. Xerox has already handed over manufacturing of most printers to Flextronics International of Singapore.
The article From programming to delivering pizza describes the same trend. This trend is in the process of completely eliminating the industry of computer programming from the employment landscape in the U.S..

Economically, this makes sense. If there is a new source for labor that costs one-tenth as much as an existing source, companies are going to gravitate toward that cheaper source. However, this is also the reason why wealth is rapidly concentrating. In an environment where automation and outsourcing are building up a large pool of unemployed workers, supply and demand dictate that wages fall. And wages do fall for everyone other than the wealthy. The wealthy use the cheaper labor to increase their salaries/dividends. So the concentration of wealth accelerates.

Friday, February 27, 2004

Rush Limbaugh's prosecution shows the benefits of wealth

Title: Rush Limbaugh in pill probe
Source: New York Daily News
Date: October 2, 2003

Back in October, Rush Limbaugh's house keeper broke the story that Mr. Limbaugh was hooked on painkillers. According to the article, "Wilma Cline, 42, says Limbaugh was hooked on the potent prescription drugs OxyContin, Lorcet and hydrocodone." Limbaugh was allegedly taking massive quantities of the drugs: "She also gave the Enquirer a ledger documenting how many pills she claimed to have bought for him - 4,350 in one 47-day period - and E-mails she claimed Limbaugh sent her." The way it started was on a much smaller scale:
    "He asked me casually, 'Is he [Cline's husband] getting any pain medication?' I said, 'Yes - he's had surgery, and the doctor gave him hydro-codone 750,'" Cline said. "To my astonishment, he said, 'Can you spare a couple of them?'" Cline said she gave Limbaugh 10 pills the next day and agreed to give him 30 of her husband's pills each month.
Now move forward to January...

Title: Prosecutors refuse Rush Limbaugh's plea offer
Source: USA Today
Date: January 23, 2004

One fascinating quote from the article is this:
    Limbaugh, who has admitted that he became addicted to prescription painkillers while being treated for a back injury, has not been arrested and no charges have been filed.
There is also this:
    In an attempt to head off charges, Limbaugh's attorney, Roy Black, wrote prosecutors on Dec. 11 to suggest that his client enter a court-sponsored drug intervention program without a guilty plea.
Rush Limbaugh makes something in the neighborhood of $30 million per year from his radio show. He is extremely wealthy. The question is, how would he have been treated if he were not wealthy? To answer that question, the following article is helpful:

Title: A prescription for prison
Source: Port Clinton News Herald
Date: February 20, 2004

From the article:
    Within a span of six months in 2002, Bonnie Reaper lost her brother to drugs, a daughter to a condition during pregnancy and her Rocky Ridge home to fire.

    The tragedies led the 33-year-old on a year-long prescription drug binge that temporarily masked the pain, but eventually cost Reaper more than she bargained for -- her freedom.

    "I really didn't think 10 morphine pills would cost me 17 months of my life," she said recently in a face-to-face interview at the Marysville Reformatory for Women in Marysville, Ohio, where Reaper is serving a 17-month term for theft of a dangerous drug.
From the same article:
    It's in Port Clinton, where Erika E. Gregg of Clyde was sentenced Ottawa County Common Pleas Court this week to 15 months in prison for trying to illegally obtain oxycodone with a photocopied prescription at the Kroger pharmacy.
So, we have Bonnie Reaper, who stole 10 pills and was sentenced to 17 months in prison. We have Erika Gregg, who photocopied one prescritpion and was sentenced to 15 months in prison. That is what happens to normal people. Then we have Rush Limbaugh, who was allegedly buying thousands of pills per month. He "has not been arrested and no charges have been filed."

This is the power that wealth gives you in America today. If you have enough money, you can in many cases manipulate the judicial system in ways that are extremely unjust.

Price is set for Avastin

Title: FDA Approves Genentech's Avastin Colon Cancer Medicine
Source: LA Times
Date: February 27, 2004

From the article:
    At a cost of $4,400 a month, Avastin would also be one of the most expensive cancer treatments available, analysts said. The addition of Avastin to standard chemotherapy would raise the annual cost of treatment to $60,000 to $80,000.
    The price set for Avastin is more than double the predictions for the drug on Wall Street, which ranged from $1,500 to $2,000 a month.

    Ian Clark, general manager of Genentech's cancer drug business, said the price reflects the value the drug provides to patients including "a significant survival benefit."

    "We feel the price we fixed is a fair one and we think customers will see it that way," Clark said.
As mentioned in a previous post on Erbitux, "The pharmaceutical industry is the most profitable industry in the U.S. The reason for this profitability lies in a distinct advantage that drug companies have when they sell their products. If you have a disease such as colon cancer and you are going to die shortly, you will pay any amount of money for drugs that offer some chance of survival. Therefore, a drug company can charge any amount it wishes." Thus, the price of Avastin is double the predictions of analysts (and they would have already been padding their predictions based on the predatory nature of drug companies). The drug company can set the price to anything -- a person who is dying has no choice but to pay it. It is a very effective tool for concentrating wealth.

Thursday, February 26, 2004

Raising money, concentrating wealth

Title: New Gov Raises Funds Faster Than Davis
Source: LA Times
Date: February 15, 2004

According to the article:
    Gov. Arnold Schwarzenegger is collecting money to promote his March 2 ballot measures at a clip of $121,313 a day — far outpacing Gray Davis at the height of the former governor's fundraising. Schwarzenegger has raised $5.2 million since the start of the year, much of it in five- and six-figure chunks, to campaign for Proposition 57, a $15-billion bond issue that would allow the state to restructure its debt, and Proposition 58, to limit future debt.

    Because the contributions are not going to his reelection account, they are not subject to restrictions on the size of donations, one of several ways the fundraising illustrates gaps in the laws regulating donations and disclosure. Schwarzenegger aides are soliciting contributions of as much as $500,000 to attend a private dinner with the Republican governor later this month. The event will be held in New York City, headquarters for the bond industry, which would vie for the right to underwrite and market California's $15-billion deficit- restructuring bond. Schwarzenegger's aides say he is seeking money from donors outside the municipal finance industry.
Here we have the concentration of wealth at work in the worst possible way. We have the governor of California in New York accepting contributions in the form of $500,000-per-plate dinner tickets. By paying this money, wealthy New Yorkers are able to buy direct access to the governor.

Why would they pay that much? If the bond referendum is successful, the investment bank(s) chosen to underwrite the $15 billion in bonds will make hundreds of millions of dollars in fees. The article the underwriting spread explains all the different ways that money is extracted from bond deals like this.

The taxpayers of California will be handing hundreds of millions of dollars to extravagantly wealthy people in New York. The governor is setting himself up as the channel for that gift. The concentration of wealth continues.

Price Is Set for Erbitux

Title: Price Is Set for Erbitux
Source: NY Times
Date: February 24, 2004

From the article
    "ImClone Systems Inc. said yesterday that its Erbitux colon-cancer treatment, which may reach patients as soon as tomorrow, will cost about $10,000 a month. ImClone and a partner, the Bristol-Myers Squibb Company, will begin shipping Erbitux today, after winning regulatory approval on Feb. 12.
    Erbitux will cost $2,400 a dose."
Bristol-Myers Squibb pays approximately $2 billion in dividends per year to its wealthy shareholders. This is where the $2 billion comes from.

The pharmaceutical industry is the most profitable industry in the U.S.. The reason for this profitability lies in a distinct advantage that drug companies have when they sell their products. If you have a disease such as colon cancer and you are going to die shortly, you will pay any amount of money for drugs that offer some chance of survival. Therefore, a drug company can charge any amount it wishes.

Add to that the army of lobbyists that the pharmaceutical industry hires. This army sees to it that congress does not impose any limits on drug prices, nor does the United States government use its power in the marketplace to drive down prices.

As a result, the top 5 drug companies pay over $10 billion in dividends every year. That means that, on average, every single household in the U.S. pays approximately $100 to fund drug company dividends. That money is a tax that flows out of every American household into the pockets of America's wealthiest citizens. And the concentration of wealth accelerates.

One way the wealthy get access

Title: Bring On The Cash!
Source: Time
Date: February 16, 2004

From the article:
    So how does the Bush team raise all that money, and where does it come from? First, there are the well-heeled big donors who give $2,000 apiece. The Bush-Cheney campaign wrangles them through its Rangers — fund raisers who are required amass at least $200,000 (that is, they round up 100 people who will give $2,000 each). The system is so well-organized that each fund raiser is assigned a number, and that number is put on donors' checks. If the fund raisers make their quotas, they get benefits like a visit to Bush at his ranch.
In this way, the wealthy -- and only the wealthy -- gain direct access to the President. This sort of thing happens in the House and Senate as well. Because of this sort of direct access, the entire political structure of the country aligns with the wealthy and serves their needs, at the expense of everyone else. The concentration of wealth accelerates.

Wednesday, February 25, 2004

The rich help the rich

Title: Bush Family Values: War, Wealth, Oil
Source: LA Times
Date: February 8, 2004

From the article:
    "Over four generations, the Bush family has been involved with more than 20 securities firms, banks, brokerage houses and investment management firms, ranging from Wall Street giants like Brown Brothers Harriman and E.F. Hutton to small firms like J. Bush & Co. and Riggs Investment Management Corp. This relentless record of handling money for rich people has bred a vocational hauteur. In their eyes, the economic top 1% of Americans are the ones who count. Investors and their inheritors are favored -- A good explanation of why George W. Bush has cut taxes on both dividends and estates, where most of the benefit goes to the top 1%. Over the course of George H.W. Bush's career, he was close to a number of the merger kings and leveraged-buyout specialists of the 1980s who came from Oklahoma and Texas: T. Boone Pickens, Henry Kravis and Hugh Liedtke. 'Little guy' economics has almost no niche in the Bush economic worldview."
When the rich control the government, the entire economy becomes a machine designed to further concentrate wealth at the expense of everyone else.

Tuesday, February 24, 2004

Only the wealthy can run for office

Title: Wealthy Candidates Tout Populist Message
Source: Fox News
Date: February 19, 2004

From the article:
    John Edwards and John Kerry are trying to appeal to the common man with their populist notions and messages on the campaign trail, but the two multi-millionaires don't live like most Americans.

    The top Democratic presidential hopefuls both own mansions in tony Georgetown (search), the Washington, D.C., neighborhood known for its prime real estate and high-end fashion boutiques.

    On one historic cobblestone street lives Edwards, whose 184-year-old, 13-room home is valued at $3.8 million. About a block away is the residence where Kerry lives, a 104-year-old, four-story home with 23 rooms that is conservatively estimated to be worth $4.3 million.
When you look at George Bush and his cabinet, you see the same thing. It would appear that we have come to the point where only the wealthy can run for president.

Sunday, February 22, 2004

Welcome to the 60 hour work week

Title: Overtime overhaul worries workers
Source: The News and Observer
Date: February 21, 2004

From the article:
    New "white-collar exemptions" could shift nurses, cooks, architects, paralegals, dental hygienists, secretaries and millions of other workers who are now paid time-and-a-half after 40 hours into the group of workers who can't get overtime pay, labor organizations warn.
These white-collar exemptions are scheduled to go into effect in March, 2004.

This is part of a growing trend. The article 40-hour week eludes millions of workers discusses the problem. From the article:
    For many if not most professionals today, Balak said, working in excess of 40 hours a week "is expected. You don't have an option."
Once these new overtime rules go into effect for white collar workers, the next phase will be to extend it down to everyone else. No one in the U.S. will get overtime pay. As that occurs, here's what will likely happen:
  • Imagine a worker working in a retail store earning $7 per hour, 35 hours a week, or roughly $250 per week.
  • Overtime pay is eliminated.
  • The store now requires employees to work 50 hours a week. "If you don't, we fire you."
  • 50 hours a week has one benefit -- the employee now earns $350 per week.
  • Since the employee is earning more, the employer now cuts pay to $5.50 per hour. "If you don't like $5.50/hour, we fire you."
  • 50 hours a week becomes the new "norm" in the industry.
  • Then it rises to 60 hours per week.
  • Then pay falls again.
Meanwhile, the people at the top take the money saved in wages and give a good portion of it to themselves. The concentration of wealth accelerates.

I came across a fascinating article entitled, Economic Possibilities of Our Grandparents: A Retrospective on Keynes's 'Economic Possibilities for Our Grandchildren'". Keynes published his paper in 1930. In it Keynes predicted what would happen economically in the future. According to the article:
  • [Keynes] correctly observed that economic productivity had already lifted the average person in Europe and the United States well above subsistence.
  • [Keynes] correctly predicted that average living standards would rise by another four- to eightfold in the next hundred years.
  • Therefore [according to Keynes], we should soon free ourselves from the struggle for subsistence, transforming the central problem of humanity from the struggle for survival into the challenge to find meaningfully use for our abundant leisure time. The little work that needed to be done would be spread out among the population in portions of perhaps 15 hours per week.
Keynes -- a world renowned economist -- got his prediction completely wrong because he did not forsee the concentratation of wealth.

Keynes assumed that wealth would be spread somewhat equally through the population -- Everyone would participate in the benefits of technological innovation and productivity increases. Instead, wealth is concentrating dramatically, and we are headed toward a 60-hour work week instead of a 15-hour work week.

Some might argue that the 60-hour-per-week situation we find ourselves in today has nothing to do with the concentration of wealth. Instead, they would argue, people could live on 15 hours per week of labor if they were willing to live a 1930s lifestyle. The rebuttal to that involves this simple question: Could anyone in America live a "normal" life on 15 hours per week of labor today? To test that question, imagine the following.

Assume an engineer with a spouse and 2 children earning $25 per hour. Imagine this person trying to survive on 15 hours per week of labor. At 15 hours per week the person earns $1,400 per month or so (and will get no benefits). Taxes will eat a portion of that. In Raleigh, where I live, A small 3-bedroom apartment costs $800 per month at least. Food for four -- even on a Thoreau-esque diet of rice and beans -- is $200-$300 per month. Clothing for the children, even if purchased from the Salvation Army... but we are already about out of money. We are not allowing this "typical American family" the "luxury" of any electricity, any heat in the winter (never mind A/C), any running water or hot water, any telephone service, any transportation (and certainly no car), any furniture/linens/utensils/pots, any cleaning supplies, any entertainment of any sort, any luxury items of any sort, any medical treatment of any sort, any vacation of any sort, etc., etc.... and yet the engineer is already out of money. And if you can find a $25 per hour engineering job that would allow the worker to come in only 15 hours/week, it would be surprising. And if the job exists, it is quite likely about to go offshore.

Never mind attempting to do this on a far-more-common $10/hour job -- that would be completely impossible, even with both spouses working.

John Maynard Keynes was not a lightweight, nor a fool -- he remains one of the best known economists in the world today. He was not assuming that people would be working 15 hours/week and living in abject poverty. He assumed that they would be working 15 hours/week and would be living a better lifestyle than in the 1930s because of technological progress.

In the words of Wilderquist:
    For the last 30 years the benefits of economic growth have been concentrated heavily on the people in the top 10 to 20 percent of the income distribution. The mistake in Keynes’s prediction stems from the belief that more capital and technology inherently increases wages. It might increase wages, but recently the benefits of growth have been concentrated on the owners of capital and on the upper end of the increasingly hardworking professional class. There is no level of national wealth, no matter how high, that necessitates some of that wealth trickling down to the common wageworker. This fact can be shown by the commonly cited thought experiment: what would happen to wages if capital became so productive that it could produce all goods with no aid from labor? Wages would become zero, and laborers would have no other means of survival but the charity of capital owners. When we read “Economic Possibilities for Our Grandchildren” today, we cannot dismiss Keynes’s vision as far off or fanciful, but neither can we simply wait for the inevitable to arrive. The possibilities are there for us now; they may have been there for our grandparents when average living standards were already substantially above subsistence. But society will have to make a conscious effort to free workers from the struggle for survival, if they are ever going to be able to take advantage of the possibilities our economic growth has already made real.
At some point, in other words, "We, the People" need to decide that enough is enough. We need to halt the run-away concentration of wealth, so that everyone can benefit from the fruits of progress and technology.

Tuesday, February 17, 2004

Even when there is no profit, wealth concentrates

Title: Non-profits' executives avoid scrutiny, valid reforms
Source: USA Today
Date: February 12, 2004
From the article:
    At a time when efforts to reform the corporate world are getting all of the attention, there is another group of chief executives who remain insulated from the effects of scandals at Tyco, WorldCom and the like. They are America's not-for-profit profiteers: the executives who cash in at universities, foundations and other tax-exempt organizations.

    A review of media accounts and public information reveals that many of the same questionable transactions detailed in the corporate scandals are occurring in the world of non-profits. University and foundation presidents are using tax-free dollars for luxury apartments and cars, personal loans and other perks. These abuses occur because non-profits are getting a pass from some promising corporate-accounting and conflict-of-interest reforms.
The News and Observer ran an article on February 9, 2004 that talks about the problem at the local level. It states:
    When the president of FirstHealth of the Carolinas Inc. needed money to supplement his $350,000 annual salary, the nonprofit board for the hospital and health care network came up with a $25,000 personal loan. In Durham, the headmaster of the private Trinity School received at least a $40,000 loan from its nonprofit board of prominent community leaders. Urban Ministries of Durham, a charity that feeds, clothes, shelters and counsels the needy, loaned two of its executives $10,000 each to help them buy homes, with the condition they don't have to pay the loans back until they leave the job, move out or sell the houses.
Wouldn't it be nice to get a low-interest or no-interest loan from your employer? Especially one that may never have to repay? Unfortunately, these loans are available only to wealthy executives. The concentration of wealth continues.

Saturday, February 14, 2004

Martha Stewart's Handbag

Title: Martha Stewart's bag overloaded with baggage
Source: Miami Herald
Date: January 28, 2004

From the reports of Martha Stewart's court wardrobe: She arrived carrying a Hermés Birkin handbag, which according to the Miami Herald "carries a price tag of $6,000 to $85,000."

Source: Miami Herald

Wealth has concentrated to the point where a person can carry a $10,000 purse. Quite a few people, it turns out. According to the article: "The bag has a waiting list that has grown to the absurd length of 2 ½ years, so the French company has closed it. Now there is a wait to get on the waiting list. Unless, of course, one is a celebrity with all of the privileges that affords."

Meanwhile, more than 3 billion people on the planet are living on less than $1,000 per year.

At some point, we as human beings will realize that it is time to re-balance the wealth of the planet. The system as it stands now has clearly grown absurd.

Tuesday, February 10, 2004

Amazing amounts spent on corporate extravagance

Source: New York Post
Date: February 10, 2004

From the article:
    Call it the Richard Parsons Project.

    Though Time Warner cost shareholders billions of dollars with its disastrous merger with AOL, the Time Warner chairman is about to move into the swankiest, and priciest, office space in the city.

    Parsons' suite of offices at the twin-towered Time Warner Center, is being built out at a cost of some $25 million and is to be completed next month. The raw space alone would be worth $20 million on the open market.
    The floors will be marble and the paneling made from rare woods, and the office suite will have concierge services, a real estate source said.

    Time Warner has bought 800,000 square feet on 15 floors of the 2.7 million-square-foot complex at Columbus Circle - considered the most expensive building in the world, at a price of more than $1.8 billion.
Instead of concentrating those billions of dollars on needless extravagance for a handful of executives, the money could be returned to consumers -- cable TV subscribers and AOL subscribers -- in the form of lower subscription prices. Or it could be used to pay rank-and-file employees more. Instead, it is spent on the elite few for no reason, and the concentration of wealth increases.

Enron represented a pinnacle of corporate extravagance, but thousands of corporations spend untold billions of dollars in their attempt to outspend Enron. These expenditures have no value to anyone but the powerful elite. If that money was instead returned to consumers in the form of lower prices, the price reductions would be substantial -- several thousand dollars per household.

Wealth and position beget privilege for the children of power

Title: An Absence in Alabama
Source: Time
Date: February 8, 2004

This article from Time magazine describes Bush's military experiences. In the process it offers insight into the ways in which the wealthy and well-positioned are able to manipulate the system.

Excerpts from the article:
  • "From the start, Bush's military record shows evidence of favoritism, beginning with the way he won a coveted spot in the Texas Air National Guard in May 1968."
  • "After graduating from Yale, Bush leaped to the top of a 500-man Texas Guard wait list, despite scoring poorly on a pilot aptitude test. At the time, Bush's father was a G.O.P. Congressman from Houston, and Ben Barnes—who was speaker of the Texas House in 1968—testified in 1999 that he had put in a good word for Bush with Guard officials at the request of a Bush family friend."
  • "Bush got into the Texas Guard's "champagne unit" (along with the sons of other Texas politicians, like John Connally and Lloyd Bentsen)."
  • "After spending more than a year in training, Bush was obligated to report for duty one weekend a month at Houston's Ellington Air Force Base, protecting the Gulf Coast of the U.S. from aerial attack."
  • "The Texas Guard immortalized Bush's first solo flight in an F-102, issuing a press release at the time celebrating the patriotism of the freshly minted jet jockey."
  • "Bush applied to perform "equivalent" service with the Alabama National Guard during the campaign. But Bush, a self-admitted carouser in his younger days, apparently played some hooky: no official record of his Alabama service has ever surfaced."
  • "There is no official record that Bush performed Guard drills during the next six months."
  • "In May 1973, Bush's superiors in Houston wrote that they could not give Bush his annual evaluation because he had "not been observed at this unit during the period of this report""
  • "Also in May 1973, the Texas Guard issued two "special orders" directing Bush to report for duty. Over the next three months, Bush returned to his original Texas Guard unit and crammed in 36 days of active duty, apparently fulfilling the Guard's demands."
  • "In October 1973 he received an honorable discharge—nearly eight months early—so he could attend Harvard Business School."
Yale, a "champagne unit" in the Texas Guard, then Harvard Business School. That is the level of privilege offered by the concentration of wealth and power.

Monday, February 09, 2004

Wealth concentrated in corporations empowers slavery

Title: UK retailers blamed for rise in slave labour
Source: Guardian Unlimited
Date: February 9, 2004

From the article:
    Big-brand fashion and food retailers are accused of contributing to appalling employment conditions around the world in a new study by Oxfam published today.
    Using their power at the top of global supply chains, companies with ruthless buying practices are squeezing their suppliers to deliver faster and more cheaply, the aid agency says. The effect is to drive down wages and compromise the welfare of the workers.

    "There is a widening gap between the rhetoric of global corporate social responsibility and the reality of corporate practice," Oxfam's policy director, Justin Forsyth, said.

    The report, Trading Away Our Rights, gathers research from 12 countries and inter views with more than 1,000 workers, factory owners, global brand owners, importers, exporters, and union and government officials.

    It adds to concerns aired by the government's food and farming tsar, Sir Don Curry, that the impact of price wars is being unfairly felt by those at the bottom of the chain.
    At one US-owned factory in Kenya where jeans are made for Wal-Mart, price pressure has led to hourly production targets that are almost impossible to reach. The factory rules allow unions, but in April 2003, when workers went on strike to demand decent pay, most union members were fired.
    Overtime is long and underpaid, and fear of being fired reportedly stifles complaint.

    In Thailand a garment manufacturing company supplying big brand-name companies closed down overnight, leaving 900 workers without pay.
    Factories supplying Wal-Mart, Toys R Us and Tommy Hilfiger were found to have false documents on hours and wages and to coach workers on how to answer inspectors' questions.
Wealthy corporations have the power to crush workers in third world nations when they choose to do so. The basic equation is simple. A large corporation goes to a poor country and says to its impoverished people, "We will pay you 10 cents an hour for your labor. And really, what choice do you have? Work for us at that wage or starve." It is an incredible abuse of power.

Meanwhile, those same corporations have left behind millions of unemployed workers when they moved their factories off-shore.

Sunday, February 08, 2004

Concentrating wealth leads to startling extravagance

Title: Extravagance makes comeback on Wall St.
Source: The Wall Street Journal
Date: February 8, 2004

From the article:
    A year ago, Bret Grebow, a 28-year-old who runs hedge fund HMC International, was taking cheap flights on JetBlue Airways and keeping a lid on his spending. But his fund's investment portfolio surged nearly 40 percent last year, and Grebow says he's confident that the market has regained its footing. So two months ago he bought a new $160,000 Lamborghini Gallardo. He says it was his first "treat" in months.

    These days when Grebow and his girlfriend travel between his Highland Beach, Fla., home and his New York office, he charters a catered plane with a bar, paying as much as $10,000 for the three-hour flight. Last weekend he spent more than $12,000 to fly himself and some friends on a Learjet 55 to the Super Bowl.
    In recent weeks, Wall Street firms have begun paying what's expected to total $10.7 billion in bonuses - the bulk of the compensation for most on Wall Street - for 2003. That's almost a 25 percent increase from 2002, though still less than the $19.5 billion bonanza of 2000. Also fattening wallets: Stock prices of most securities firms are at their highest levels in three years.
    One apartment drawing interest is the Fifth Avenue co-op of L. Dennis Kozlowski, former chairman and chief executive of conglomerate Tyco International Ltd. His $15,000 poodle-shaped antique umbrella stand, $6,000 shower curtain and $38,000 backgammon table became symbols of 1990s excess. Now several Wall Street professionals are showing interest in buying Mr. Kozlowski's apartment, according to Sharon Baum, a real-estate broker at Corcoran Group involved in showing the place. With 11 rooms, including a master bedroom with Central Park views and staff quarters, the apartment is listed at around $28 million.
Where does all of this money come from? Quite a bit of it comes from people like you and me investing money for retirement, or from pension funds. See this post for an explanation.

This is the sort of thing that happens as the concentration of wealth gets out of control. Take Kozlowski for example since he is mentioned above. He is "charged with stealing $600 million from the company," according to this article. The article states:
    Local officials were under the impression that Tyco Plastics and Adhesives would be expanding its Macedon facility soon.

    However, with Wednesday’s announcement that the plant would close, those same officials are shocked and dismayed.

    “Six months ago, there was a news story about Tyco hiring new people,” Macedon Mayor Jim Hoteling said. “There were Tyco people in the village office getting paper notarized for the Empire Zone (application).

    “This has come as a terrible, terrible shock.”

    Hoteling said part of the reason for the Macedon plant closure can be traced to legal problems regarding former Tyco chief executive L. Dennis Kozlowski and former financial chief Mark H. Swartz. In September, they were charged with stealing $600 million from the company. They currently are on trial in New York City.

    “Those guys crippled the company, and we aren’t the only small community that will be affected,” Hoteling said. The Macedon plant will close July 2, leaving 173 workers without jobs.
In this case, the concentration of wealth by executives at Tyco has led to plant closings and cutbacks across the country.

Because of their immense wealth, Kozlowski and other Tyco executives have money to manipulate the legal system, to hire lobbyists and to make generous campaign contributions. For example, this article from the Atlanta Journal states:
    Defense attorneys for Tyco International Ltd.'s former top executives asked a judge Wednesday to dismiss an indictment against them, saying prosecutors failed to prove their case after nearly four months of trial testimony.

    The arguments came a day after New York prosecutors rested their case against L. Dennis Kozlowski, Tyco's former chief executive, and Mark H. Swartz, its former financial chief. The former executives are charged with stealing $600 million from the Bermuda conglomerate in unauthorized pay and illicit stock sales.
For example:
    Prosecutors voluntarily dismissed a grand larceny count related to a $2 million bonus paid to former Tyco general counsel Mark Belnick, and a count that alleges the falsification of business records.
Belnick is off free and clear on these charges, and the concentration of wealth continues.

In a corporation, how can there be "unauthorized pay and illicit stock sales"? Every check of any significant size, along with any stock grant, would need to go through the board of directors, the CFO, the controllers, the auditors, the payroll system, the IRS, the SEC, etc. All of these systems, unfortunately, are being corrupted by the concentration of wealth.

Executives concentrate wealth secretly

Title: Executive Pay, Hiding Behind Small Print
Source: New York Times
Date: February 8, 2004

From the article:
    INVESTORS have been understandably irate over executive pay recently. But because disclosure in the area is so woeful, they don't know the half of it.
Examples from the article include:
  • Wyeth's former chairman who is a consultant, earned $1.6 million in above-market interest alone on deferred compensation. A Wyeth spokesman declined to say how much Mr. Stafford has in total.
  • Robert J. Ulrich, chief executive of the Target Corporation, a retailer, earned $688,218 based on deferred pay in 2002, the most recent year for which data is available; four top colleagues there made a total of $470,000.
  • Last month, Hercules Inc., a chemical maker, restated third-quarter 2003 results to account for a $4.7 million pension benefit paid to William Joyce, former chief executive.
  • MONY executives will receive $98.2 million - more than 6 percent of the $1.5 billion transaction.
The article concludes: "Shareholders are paying these bills. They have a right to know the costs in plain, shocking English." That assessment is nearsighted. For example, the $4.7 million given to William Joyce could have just as easily been given to rank and file employees, or could have been returned to consumers in the form of lower prices. The $1.6 million paid to John R. Stafford is one tiny example of why medical prices are spiraling out of control. His actions are mimicked by tens of thousands of executives throughout the medical industry. Their greed comes at the expense of consumers, taxpayers and employers who are paying billions of dollars in extra medical expenses to fund these extravagances.

The executive compensation process is currently out of control. It is allowing executives of large corporations to concentrate remarkable amounts of wealth at the expense of other employees, consumers and tax payers. It will not stop without legislation.

Vice President takes supreme court justice on vacation

Title: High Court Justice A Cheney Guest
Source: CBS
Date: February 5, 2004

From the article:
    Supreme Court Justice Antonin Scalia was Vice President Dick Cheney's official guest aboard a jet that served as Air Force II for a trip to Louisiana, the Los Angeles Times reports.

    The two men, who are longtime friends, went duck hunting last month at a camp owned by an oil industry executive. The trip was made three weeks after the high court agreed to take up the vice president's appeal in lawsuits over his handling of the administration's energy task force.

    Several experts in legal ethics questioned the timing of the trip and said it raised doubts about Scalia's ability to judge the Cheney case impartially....

    "If the vice president is the source of generosity, it means Scalia is accepting a gift of some value from a litigant in a case before him," New York University law professor Stephen Gillers told the Times. "It is not just a trip with a litigant. It's a trip at the expense of the litigant. This is an easy case for stepping aside."

    Scalia had previously indicated that there was no need for him to step aside in the case. "I do not think my impartiality could reasonably be questioned," he said...

    Cheney aides said the vice president was entitled to travel to vacation locations at government expense and take along guests, the newspaper said.
In this case, a wealthy oil industry executive invites the vice president of the United States to his private hunting preserve. The Vice President accepts, and invites along a supreme court justice who will be hearing a case against the vice president. The reason the vice president is being sued is because of his relationship with energy companies, exemplified by the oil industry executive who extended the invitation.

Neither vice president Cheney nor supreme court justice Scalia see anything wrong in what they are doing because this is business as usual. This is how the concentration of wealth works. Wealthy individuals are able to gain direct access to government officials in a wide variety of ways.

Robert Reich on the concentration of wealth

Title: Reich’s Reprimand
Source: Newsweek
Date: February 4, 2004

From the article:
    We now have more national income and national wealth concentrated in fewer hands than we’ve had since the gilded age of the late nineteenth century. This poses a fundamental threat to democracy.
    Throughout the post-war era, at least up until the 1980s, we had a very strong social contract in this country. We all assumed that anyone who worked full time should earn enough to bring his or her family out of poverty. We assumed that corporations owed their employees at least some duties, particularly if the companies were profitable; corporations should keep employees on and give them a share in the increasing profitability. Our state university systems of higher educations became the best in the world....

    Jobs are less secure today than they have ever been before. More than 40 million Americans have no health insurance, but over 140 million Americans are facing soaring health costs in terms of their employer-provided benefits as the shift more and more of the costs onto employees. Retirement savings are at a historic low. And most of the giant baby boom is unprepared for retirement. Time and again polls show that education, health, jobs, retirement income are issues that are at the top of everyone’s agenda. The failure of the Democratic party to use the surpluses of the late ‘90s to respond to these needs and to allow the Bush administration to essentially give most of the surplus away in the form of tax breaks for the wealthy is one of the most significant political failures of our time.

Wealthy manipulate legislation with payments

Title: Kerry Blocked Law, Drew Cash
Source: ABC News
Date: February 5, 2004

From the article:
    John Kerry intervened in the Senate to keep open a loophole that had allowed a major insurer to divert millions of federal dollars from the nation's most expensive construction project, then received tens of thousand of dollars in donations from the company during the next two years, documents show.

    American International Group paid Kerry's way on a trip to Vermont and donated at least $30,000 to a tax-exempt group Kerry used to set up his presidential campaign. Company executives also donated $18,000 to his Senate and presidential campaigns, according to records obtained by The Associated Press.
This is a classic tactic for the wealthy:
  • A wealthy corporation diverts millions of dollars from a federally funded project.
  • An investigation reveals the fraud and legislation is proposed to punish the perpetrator and end the fraud.
  • The corporation provides thousands of dollars in campaign contributions to get the legislation changed or eliminated.
  • Taxpayers end up paying for it.

Saturday, February 07, 2004

Microsoft gets to regulate itself

Title: Microsoft lawyer to chair U.S. antitrust committee
Source: AP
Date: February 6, 2004

From the article:
    Microsoft associate general counsel Richard J. Wallis takes over later this year as chairman of the American Bar Association's antitrust section, an unusual role for a corporate lawyer.

    The panel has already begun organizing opposition to a congressional plan that would require more aggressive oversight by the courts of such antitrust settlements.

    The debate over how aggressively U.S. federal judges should scrutinize these settlements is pivotal in the next major ruling in Microsoft's long-running antitrust case. That decision could come as early as Friday.

    Microsoft's effort in the legal community illustrates how the world's largest software company is moving to protect its interests in venues where it has found itself challenged. It also has increasingly participated in the political process in Washington and in technology standards organizations.
Obviously Microsoft's general counsel would have an interest in leniency for Microsoft. Microsoft has been found by the government to be in a monopoly position. Making Microsoft's general counsel the chairman of the antitrust committee gives him great leverage to favor Microsoft's needs over the needs of the citizens.

Wednesday, February 04, 2004

Wealthy get paid when they get fired

Title: UNC hospital chief to resign
Source: News and Observer
Date February 3, 2004

From the article
    The state-supported UNC Health Care System, which lost $3.7 million on its hospital business last year, will spend $768,476 to buy out the contract of its second in command.

    On Monday, Eric B. Munson said he will leave his position as president and chief executive of UNC Hospitals at the health system board's request. Under the terms of a 1995 employment agreement, Munson gets a two-year buyout worth at least $384,238 a year and will remain as a senior adviser.
How many non-wealthy people get a deal like this? The board wants to fire Munson, so he gets paid to leave. State taxpayers are the ones who will pay the $768,476.

Monday, February 02, 2004

The pace of concentration

Title: Has Your Life Become Too Much A Game of Chance?
Source: Time
Date: January 25, 2004

From the article:
    In case you haven't noticed, over the past two decades the people in Washington who write the laws have turned your life into a spin of the roulette wheel—actually, an endless series of spins of the wheel that begin with day care and end with retirement (if you can afford it), and affect everything in between. Overall, Washington has structured the game just as any gambling house would, so there are a few winners but a lot more losers.

    It's why many of us are falling further behind the harder we work, why our debt dwarfs that of our parents, why some of us receive world-class medical care and others almost none, why some can afford college but for others it has been priced out of reach, and why the wage gap between rich and poor has started growing again. In 1992 the 400 individuals and families with the highest income in the U.S., according to tax returns filed with the irs, received on average $12.3 million in "salaries and wages."

    By 2000, the latest year available, that figure had more than doubled, to $29 million.

    More significant, in 1992 it took the combined wages of 287,400 retail clerks at, say, Wal-Mart, to equal the pay of the top 400. By 2000 it required the combined pay of 504,600 retail clerks to match the pay of the top 400.
    That's the way Congress runs it. They rig it, which is why 44 million people have no health insurance, why tens of millions who do have insurance don't have a clue what it covers until it's too late, and why you pay more for your prescription drugs than do people anywhere else in the industrialized world.
This is a classic description of the effects of the concentration of wealth. Since the wealthy control congress, the courts and the president, normal citizens increasingly lose out. The laws of the nation, its policies, its taxes and its spending all skew to benefit the wealthy, at the expense of everyone else.

As mentioned in the article, wealth is increasing in concentration. This gives the wealthy even more power.