Monday, May 31, 2004

Veterans and the concentration of wealth

Title: 23 percent of homeless are veterans of military
Source: Los Angeles Times
Date: May 29, 2004

From the article:
    After the homecomings are over and the yellow ribbons packed away, many who once served in America's armed forces may end up sleeping on sidewalks.

    This is the often-unacknowledged postscript to military service. According to the federal government, veterans make up 9 percent of the U.S. population but 23 percent of the homeless population. Among homeless men, veterans make up 33 percent.
Also:
    It is impossible to know exactly how many U.S. veterans are on the streets, but experts estimate that about 300,000 of them are homeless on any given night and that about half a million experience homelessness at some point during the year.
300,000 homeless vets is a startling number.

You would think that veterans would be a protected class of citizen. People in the U.S. military literally put their lives on the line for the rest of us. Veterans serve their tour of duty, in many cases they are physically or psychologically damaged by that service, and then they are discharged. At that point they are often forgotten by the country they served. Politicians and other members of the corporate elite, especially during a war like the current war with Iraq, love to talk about how important the troops are. "We must support our troops," is an extremely common phrase.

But when it comes to actually spending money to help vets once they come home, the support wanes. Vets are, of necessity, supported by taxes. People concentrating wealth are opposed to taxes. The vets are collateral damage.

See also this article:
    The future looks even worse: A House Budget Committee is now proposing to cut VA spending by $15 billion over 10 years, starting with $463 million slashed from next year's budget. Legislators claim they're cutting fraud, waste, and abuse. But Joe Fox Sr., head of Paralyzed Veterans of America, who calls the cuts "an in-your-face insult to the veterans of this country," says the reduction will slam the poorest disabled veterans and cut GI Bill benefits for soldiers who are currently serving in Iraq. The plan could also mean the loss of 9,000 VA physicians in a short-handed VA system, he says.

    For decades, vets say, they've watched their benefits fade in tandem with the diminishing national consciousness of their earlier sacrifices. "Pressures on the VA health care system," warns Joe Violante, legislative director for the Disabled American Veterans, "have escalated to a critical point that can no longer be ignored by our government." He and others recently told the House Veterans Affairs Committee that the VA is underfunded by almost $2 billion. But, in the midst of a stagnant economy, the proposed Bush tax cut, and the Bush war, where would more money come from? Apparently not from George W. Bush.

    A week ago, the president summoned leaders from veterans groups to attend his live-TV speech urging on the troops in Iraq. "People serving in the military are giving their best for this country," Bush said earnestly, "and we have the responsibility to give them our full support. . . . " But while the president's $62.6 billion supplemental funding would provide fuel and supplies for the troops and benefits for the people of Iraq, Bush didn't mention that his agenda includes a $150 million aid cut to schools attended by military dependents, and support for billions in VA reductions.
This duplicity is the real danger that we all face. Politicians are extremely adept at saying one thing and then, behind the scenes, doing something completely different. If this is how today's government treats veterans, it is easy to imagine how the government plans to treat the rest of us.

Wednesday, May 26, 2004

Bank of America and the concentration of wealth

Title: BofA exec takes $25 million in severance
Source: The Charlotte Observer
Date: May 25, 2004

From the article:
    "After less than two months on the job, Bank of America Corp.'s president on Monday announced plans to resign next month, and he'll take a $25 million severance package with him.

    The Charlotte company said Monday that Eugene McQuade, 55, plans to resign June 30 to pursue 'new challenges.' "
Also:
    Under the agreement, he was eligible to receive his severance package if he was terminated other than for "cause," death or disability, or if he left for "good reason." A Bank of America spokeswoman said his departure was deemed "good reason."
This is, of course, absurd. Every Bank of America customer pays for such absurdity through higher fees. This sort of thing is happening in thousands of corporations, and costs you and I thousands of dollars per year.

Monday, May 24, 2004

Don't expect a big raise

Title: Experts: Don't expect a big raise
Source: Miami Herald
Date: May 7, 2004

From the article:
    Last week, the Labor Department said that in this year's first quarter, salaries rose just 0.6 percent. Meanwhile, the Commerce Department's latest report on national economic output showed inflation running an annual rate of 3.2 percent.

    Despite the overall recovery, ''wages have been just barely keeping up with inflation and now are getting somewhat below inflation,'' said Lawrence Mishel, president of the Economic Policy Institute, a liberal-leaning research group. ``That is the slowest wage growth we have had in decades.''

    Few see relief on the way.
Executive salaries are skyrocketing. Dividends are increasing. Profits for many companies are way up this year. Because of automation and robotics productivity is increasing rapidly. Yet workers get none of it. Instead, the wealth is concentrating.

Saturday, May 22, 2004

What does it cost to live a life?


What does it cost to live a life in America today?

I live in Raleigh, NC, so let's use it as an "example city." Raleigh is one of the top-50 cities in America in terms of size, but it still has a reasonable cost of living compared to NY, LA, Chicago, SF, etc. Here's what it costs to live a life in Raleigh for a family of four:
  • A family of four needs a three-bedroom apartment. Sure they could all cram into a one-bedroom apartment, with the parents and kids bunking together in that single bedroom. But this is America, not the slums of a third-world nation, so three bedrooms for four people. You can spend anywhere from $800 to $1,200/month for a decent three-bedroom apartment in Raleigh right now. Let's call it $1,000 and assume renter's insurance is a part of that.

  • A family of four needs health insurance. If the employer is not providing it, it costs something like $600 to $800/month for a family of four. Let's call it $800 and assume all the co-pays, prescriptions, etc. are a part of that.

  • A family of four needs two cars. Again, this is America, not a third-world nation. Very few cities provide the public transit network to make car ownership optional, and the rents there will be a lot more than $1,000/month. According to the federal government, a car costs 37 cents per mile to operate right now. If it is a new car, you are paying for the car payments. On a used car you pay a lot more for repairs. There's gas, oil changes, insurance, inspections, etc., etc. That's $370/month + $370/month (two cars) if you assume 1,000 miles per month. $740/month total.

  • Food, cleaning supplies, etc. for a family of four might run $300 per month if great care is taken on shopping. $500 to $600 would be normal.

  • Electricity/gas might run $200 per month.

  • Telephone, water/sewer, etc. - let's call it $50 per month.

  • Clothing - $100 per month

  • Furniture, linens, etc. - $100 per month (we are taking an average here -- obviously there is a lot of furniture to buy when you first move in)

  • School supplies, field trip fees, bake sales, science fair supplies, year books, etc. - $30 per month

  • Property taxes, income taxes, sales taxes, etc. - $150
Right there we are at $3,470 per month, or $41,640 per year.

Now, do we allow this family of four any luxuries? For example:
  • A cell phone? ($30/month)
  • TV with cable? ($40/month)
  • An occasional movie or dinner out? ($100/month)
  • A vacation once a year? ($100/month)
  • A video game system? ($20/month)
  • A computer? ($20/month)
  • Internet access? ($15 to $50, depending on the speed)
  • A camera and/or video recorder to record the kids growing up? ($20/month)
  • Saving for college? ($500/month)
  • Saving for retirement in a 401(k) ($400/month)
  • Child care if both spouses need to work (likely) ($400 to $800/month per child depending on child's age)
  • Diapers for small children ($100/month if both kids are in diapers)
  • Chistmas presents?
  • Dental expenses?
  • Pets?
  • Bicycles for the kids? Toys? Books?
  • Magazine subscriptions?
  • The morning paper?
  • Hobbies?
If you factor in college, retirement and one week of vacation per year that adds $1,000 per month. If you allow such things as a cell phone and diapers it easily reaches $1,500/month without ever considering child care.

At this point annual income needs to be somewhere between $50K and $60K, which means we are well into the range of real income taxes every year, so tack on another $1,000 per month or more to cover income taxes.

At this point, you can see that a normal American family of four, living a normal and certainly-not-extravagant-by-American-standards lifestyle, in a normal, relatively inexpensive American city, needs something like $60,000 to get by. Yes, you can cut out things like cell phones, retirement savings and college savings and get down to $40,000 per year. You can cut out health insurance and get it down to $30,000 per year. But what, exactly, do you do when someone in the family gets sick? You have to pay for it, and it probably works back out to costing the same as health insurance anyway (assuming you are lucky enough to avoid a major medical expense like a heart attack, cancer, child birth, a car accident, etc. -- then it will cost far more than insurance, making the avoidance of health insurance penny-wise but pound-foolish).

In other words, it costs $40,000 per year minimum for a family of four to live a life in America. Far more if we allow the family to save for college and retirement, have an occasional vacation and buy Christmas presents. The article is completely accurate in its estimates of a "living wage" in America.

Right now, the minimum wage is $5.15 an hour, or roughly $800/month. America's largest employer pays $7.50 per hour on average, or roughly $1,200 per month. The average factory worker makes about $2,000 per month, and that is considered a good wage for Americans. None of these wage scales comes close to allowing a family of four to live a life.

This is where the concentration of wealth has gotten us. Executives are making millions of dollars per year. But more than half of the jobs in America do not pay enough to support a family. By de-concentrating the wealth, we would allow a majority of Americans to raise families, buy homes, send their kids to college, etc. In other words, we would allow Americans to live normal lives in America.

Thursday, May 20, 2004

How the concentration of wealth is affecting middle class Americans

Title: Though Far From Poor, a Family Struggles Daily
Source: LA Times
Date: May 18, 2004

The article discusses an increasingly common scenario for middle-class Americans. Although they make far more than minimum wage and are well above the official "poverty line", it is increasingly difficult to live a middle class life in America because of the concentration of wealth. Especially in any large city. Wages simply do not keep up with inflation. The article talks about it this way:
    Policymakers still measure progress in the war on poverty using the federal poverty level, despite decades of quarrels over its shortcomings. Developed in the 1960s, the poverty level is based on a food survey from 1955.

    It tells only how much is too little to live on, not how much is enough to get by on.

    "What it means is there are a lot more people without an adequate income in California than the federal poverty level would indicate," said Diana Pearce, director of the Center for Women's Welfare at the University of Washington and a pioneer in calculating self-sufficiency.

    By the federal benchmark, 13% of Californians are poor, according to the Census Bureau (news - web sites). By the self-sufficiency standard, 30% don't make enough to get by.

    In California, the definition of "enough" varies widely. A family of four with young children could get by on $39,318 in Fresno County. In the Bay Area, the same family would need $69,000, according to a report by Pearce and the National Economic Development and Law Center. The center is an advocacy group based in Oakland that is lobbying to reorient social policy along lines of affordability, not poverty.

    One reason why the wage-earning middle class increasingly can't afford California is that wages, adjusted for inflation, have been stagnant for two decades. In the same time, the percentage of income needed to pay for rent, healthcare and child care has spiraled.

    Economists call this "alligator economics," because wages are a horizontal or falling line, while costs rise like an alligator's upper jaw.

    The Basurtos, and many thousands of others, live in that jaw.
Wages for most Americans have been stagnant for two decades, but (as described in many of the posts in this blog) wages for executives have skyrocketed. See this article for details. Instead of being spread out to everyone, the wealth from productivity gains is now concentrating in a small percentage of wealthy Americans. What this means is that the majority of Americans get poorer every year.

Monday, May 17, 2004

The true cost of Wal-Mart's concentration of wealth

Title: The hidden price we all pay for Wal-Mart
Source: U.S. House of Representatives
Date: February 16, 2004

From the article:
    The retail giant Wal-Mart has become the nation’s largest private sector employer with an estimated 1.2 million employees. The company’s annual revenues now amount to 2 percent of the U.S. Gross Domestic Product. Wal-Mart’s success is attributed to its ability to charge low prices in mega-stores offering everything from toys and furniture to groceries. While charging low prices obviously has some consumer benefits, mounting evidence from across the country indicates that these benefits come at a steep price for American workers, U.S. labor laws, and community living standards.
Also:
    With not a single Wal-Mart store in the United States represented by a union, the company takes a pro-active role in maintaining its union-free status. Wal-Mart has issued “A Manager’s Toolbox to Remaining Union Free,” which provides managers with lists of warning signs that workers might be organizing, including “frequent meetings at associates’ homes” and “associates who are never seen together start talking or associating with each other.” The “Toolbox” gives managers a hotline to call so that company specialists can respond rapidly and head off any attempt by employees to organize.
Also:
    By keeping unions at bay, Wal-Mart keeps its wages low – even by general industry standards. The average supermarket employee makes $10.35 per hour. Sales clerks at Wal-Mart, on the other hand, made only $8.23 per hour on average, or $13,861 per year, in 2001. Some estimate that average “associate” salaries range from $7.50 to $8.50 per hour. With an average on-the-clock workweek of 32 hours, many workers take home less than $1,000 per month. Even the higher estimate of a $13,861 annual salary fell below the 2001 federal poverty line of $14,630 for a family of three. About one-third of Wal-Mart’s employees are part-time, restricting their access to benefits.
Also:
    In 2002, 43 million non-elderly Americans lacked health insurance coverage – an increase of almost 2.5 million from the previous year. Most Americans receive their health insurance coverage through their employers. At the same time, most of the uninsured are working Americans and their families, with low to moderate incomes. Their employers, however, either do not offer health insurance at all or the health insurance offered is simply unaffordable. Among these uninsured working families are a significant number of Wal-Mart employees, many of whom instead secure their health care from publicly subsidized programs... The Wal-Mart plan itself shifts much of the health care costs onto employees. In 1999, employees paid 36 percent of the costs. In 2001, the employee burden rose to 42 percent. Nationally, large-firm employees pay on average 16 percent of the premium for health insurance. Unionized grocery workers typically pay nothing... In the end, because they cannot afford the company health plan, many Wal-Mart workers must turn to public assistance for health care or forego their health care needs altogether. Effectively, Wal-Mart forces taxpayers to subsidize what should be a company-funded health plan. According to a study by the Institute for Labor and Employment at the University of California-Berkeley, California taxpayers subsidized $20.5 million worth of medical care for Wal-Mart in that state alone. In fact, Wal-Mart personnel offices, knowing employees cannot afford the company health plan, actually encourage employees to apply for charitable and public assistance, according to a recent report by the PBS news program Now With Bill Moyers.

    When a giant like Wal-Mart shifts health insurance costs to employees, its competitors invariably come under pressure to do the same. Currently engaged in the largest ongoing labor dispute in the nation, unionized grocery workers in southern California have refused to accept higher health care costs resulting from cost-shifting on health insurance premiums by their grocery chain employers – cost-shifting, the grocers say, inspired by the threat of Wal-Mart competition. Beginning on October 11, 2003, 70,000 grocery employees of Vons, Pavilions, Ralphs, and Albertsons have either been on strike or locked out. The companies want to dramatically increase workers’ share of health costs, claiming that the change is necessary in order to compete with Wal-Mart’s incursion in the southern California market. E. Richard Brown, the director of the Center for Health Policy at the University of California, Los Angeles, told the Sacramento Bee that, if the grocery chains drastically reduce health benefits, the trends toward cost shifting and elimination of health coverage will accelerate. Following the grocers’ lead, more employers would offer fewer benefits, would require their workers to pay more, and may even drop health benefits altogether.
The conclusion:
    Wal-Mart’s success has meant downward pressures on wages and benefits, rampant violations of basic workers’ rights, and threats to the standard of living in communities across the country. The success of a business need not come at the expense of workers and their families. Such short-sighted profit-making strategies ultimately undermine our economy.

    In the past few years, Wal-Mart has been subjected to dozens of class-action suits seeking backpay for hundreds of thousands of shortchanged workers, dozens of unfair labor practice complaints by the U.S. government for violations of workers’ right to organize, and other legal actions stemming from the company’s employment practices. At the same time, it has managed to keep its wages low and put suppliers on a downward spiral to cut their own wages. To keep up with Wal-Mart’s low-cost demands, U.S. manufacturers have found it increasingly difficult to remain in the U.S. Cuts in health care benefits to Wal-Mart employees are pushing other U.S. grocers to do the same.

    Wal-Mart’s current behavior must not be allowed to set the standard for American labor
    practices. Standing together, America’s working families, including Wal-Mart employees, and their allies in Congress can reverse this race to the bottom in the fast-expanding service industry. The promise that every American can work an honest day’s work, receive an honest day’s wages, raise a family, own a home, have decent health care, and send their children to college is a promise that is not easily abandoned. It is, in short, the American Dream.
See also these posts on Wal-Mart:

Sunday, May 16, 2004

Politics and the concentration of wealth

Title: Nader's advice to Kerry
Source: William Raspberry in the Washington Post
Date: May 11, 2004

William Raspberry is a syndicated columnist for the Washington Post. The article is a recent column of his, and what is so interesting is that nearly all of the advice in it is related in one way or the other to the concentration of wealth. For example:
  • "Democrats have become... too indentured to the same money the Republicans are dialing for. Kerry's consultants and handlers are telling him to tone it down, and he has." Campaign contributions from the wealthy really do affect candidates, in this case causing Kerry to edit what he says to avoid offending the wealthy donors providing all of his campaign cash.
  • "the issue isn't redistributing wealth in the old-fashioned sense but stopping the redistribution that's already going on through corporate welfare." This redistribution through corporate welfare is a primary vehicle for concentrating wealth.
  • "Kerry should propose a living wage — and act as though he means it. Huge numbers of Americans — 10 million households — earn less than $10,000 a year. Those workers would be substantially better off if the minimum wage had simply been indexed for inflation — "like congressional salaries" — over the last 35 years." If Wal-Mart, for example, paid a living wage instead of concentrating wealth, a million families would be much better off.
  • "Go after corporate crime. 'This would attract a lot of conservatives to his cause — certainly as many as there are Reagan Democrats. I'm talking about people whose 401(k)s have been destroyed by what Enron and the others have done through corporate greed.'" See for example this post on Enron.
  • "Repeal the Bush tax cuts for the wealthy. The prospective yield turns out to be "almost exactly what the American Society of Civil Engineers said last year it would take to restore America's deteriorating infrastructure" — roads and bridges, schools, libraries, water and sewer systems, public buildings."
  • "Protect the poor. Low-income Americans have no legal protection for many of their ordinary transactions — either because the appropriate legislation hasn't been enacted or because of "a congealed lawlessness that goes unprosecuted." Nader's list includes check-cashing businesses for people who don't have access to bank accounts, tax-refund loans at usurious rates, rent-to-own schemes, dumping of tainted meat and shoddy merchandise in inner-city outlets, bank redlining and all manner of predatory lending." See, for example, this post on bank fees targeted directly at the poor.
  • Kerry should demand reform of a tax code that taxes work more than it taxes wealth... and support a reversal of policies that 'make it almost impossible to form a union in the private sector any more.'"
The reason so many of Raspberry's proposals deal with the concentration of wealth is because the concentration of wealth is having such a large effect on normal Americans today. If these proposals were enacted, tens of millions of Americans would be better off.

You must ask yourself: Why will it be so hard to enact proposals that would help tens of millions of Americans? Because the concentration of wealth also is a concentration of power, and that power is nearing the point where it is unstoppable.

Monday, May 10, 2004

The concentration of wealth on Wall Street

Title: It pays to be the boss
Source: Newsday
Date: May 9, 2004

From the article:
    Combined pay for 10 top executives at New York City's brokerage and financial firms was up a striking 68.3 percent in 2003 over the previous year as the leading men -- yes, they are all men -- took home more than $231 million, a review of corporate filings shows
Also:
    The huge rise in top executive salaries comes as Wall Street continues to limit hiring and pursue layoffs, especially in the "back-office" ranks.... Wall Street employment has been the hardest hit, plummeting 21 percent in the same period, according to industry figures. The latest available data show that securities industry employment in New York City fell by 900 jobs during the first two months of this year, according to a report from the Securities Industry Association. Wall Street employs about 158,000 people in New York."

Sunday, May 09, 2004

Lucent and the concentration of wealth

Title: Lucent Throws A Pay Party
Source: Forbes
Date: May 6, 2004

From the article:
    "Lucent Technologies may be a shadow of its former self, but there is one place where this company still puts world-class numbers on the board, and that's executive compensation.

    In two years since becoming chief executive, Patricia Russo has received compensation worth more than $44 million."
In addition, four top executives -- Frank D'Amelio, William O'Shea, Janet Davidson and James Brewington -- have received:
  • $10 million in "retention bonuses"
  • $2.4 million in salary
  • $2.8 million in bonuses
  • 3.75 million options
  • $3.5 million in long-term bonuses
For what? According to the article: "Lucent's share price has dropped 40% since Russo took over in January 2002--from $5.87 to $3.50--and the company has lost $10 billion in market value, falling to $15 billion... In fiscal 2003 Lucent reported a net loss of $1.2 billion on sales of $8.5 billion. This year Lucent is expected to report a net profit, but there's a catch: The profit is being delivered by an accounting credit from a pension fund surplus, without which Lucent would post a net loss of several hundred million dollars this year."

See this post for additional details.

Thursday, May 06, 2004

The concentration of wealth at AT&T

Title: Dorman: $17.5M Compensation In 2003
Source: Forbes
Date: March 26, 2004

David Dorman is concentrating wealth as fast as he can at AT&T. In 2003 he received $17.5 million:
  • $1.27 million salary
  • $2.6 million bonus
  • $2.8 million stock
  • $5.8 million stock options
  • $3.3 million other compensation
For what? "Slammed by shrinking revenue and profit, the firm expects to ax some 8% of its labor force this year, approximately 4,600 workers."

Corporate Perks

Title: Corporate perks are alive and well
Source: Washington Post
Date: May 2, 2004


CEOs get paid millions in salary, bonuses, stock grants and stock options. Apparently that is not enough, so they also get innumerable perks to add to the wealth. The article lists a number of examples:
  • "The most popular perks included free personal rides on corporate jets"
  • "Companies also picked up $6.6 million of personal tax bills and paid $575,989 for executives' personal financial planning."
  • "David W. Dorman, AT&T Corp.'s chairman and CEO, gets a $12,000 a month housing allowance from the company." (Note in this post that he already receives $17 million per year.)
  • "Bristol-Myers Squibb Co. spent $1.5 million to relocate Andrew R. Bonfield, its chief financial officer."
  • And so on - there are many more examples in the article
This quote is interesting:
    Alan Johnson, a New York compensation consultant, said some companies pay for the CEO's health club membership, "as a nudge, just so he takes care of himself."
Couldn't the same be said of every employee in every company? In fact, every citizen in the nation? Wouldn't it benefit us all -- from a cost standpoint, a productivity standpoint and a general welfare standpoint -- if everyone was in good physical shape? Why not give everyone the nudge?

Why doesn't the CEO pay for his/her own health club membership - like everyone else? Because it provides a way to concentrate even more wealth.

Wednesday, May 05, 2004

Microsoft and the concentration of wealth

Title: Is Microsoft A Slowpoke?
Source: Time magazine
Date: May 2, 2004

Here are four facts from the article:
  • Microsoft "is still by far the largest software maker in the world, with a healthy $56 billion in the bank and revenue conservatively expected to rise 5% next year, to about $38 billion."

  • "The next version of Windows, code-named Longhorn, has been delayed so much that it has acquired the nickname Long Wait. Gates recently warned that we would have to cool our heels until 2006 before we would see it — five years after the release of Windows XP — and even that date isn't certain."

  • "One reason for the delay is that Gates' "trustworthy computing" plan has pulled programmers off Longhorn to work on fixing Windows XP, patching the kinds of security holes that led to record-breaking viruses like the Blaster worm."

  • "The Longhorn delay is causing an industry logjam both in Redmond and down in Silicon Valley. Since 95% of the world's computers run on Windows, practically all software makers tie their development process to the life cycle of each new version. But nowhere is the long wait for Longhorn more damaging than at Microsoft. After all, you can't have the new Longhorn version of Microsoft Office until Longhorn ships."
One additional fact: If you look at Microsoft's financials, you can see that Microsoft earned $32 billion in 2003, made a gross profit of $26 billion and a net income of $10 billion.

Think about the remarkable concentration of wealth that Microsoft represents. There are approximately 100 million households in America. The $56 billion in cash that Microsoft is sitting on represents $560 per household. The $10 billion in net income Microsoft made last year represents $100 per household. Your household -- you -- paid Microsoft $100 of your hard-earned money last year. That is $100 that you could not spend on something you needed.

You might be thinking, "I don't even own a computer -- I didn't pay Microsoft a dime." That is incorrect. Every corporation that you buy products from is filled with PCs and servers running Microsoft's code. Those companies paid Microsoft, and then raised the prices of their products (toothpaste, soap, hamburgers, gasoline, automobiles, whatever) to cover the cost of the software. You did actually pay Microsoft $100 last year whether you wanted to or not. You have no choice in the matter.

Because Microsoft owns 95% of the market, an entire industry is now held hostage by Microsoft. As the article points out, companies tie their products to the release of code by Microsoft. They have no choice. But Microsoft is delaying the code for this reason: "One reason for the delay is that Gates' trustworthy computing plan has pulled programmers off Longhorn to work on fixing Windows XP."

Pulled programmers off???? Why not hire new programmers? Assume that an American programmer costs $100,000 per year. With $10 billion per year in net income, Microsoft could hire 100,000 new programmers. Microsoft only has 50,000 total employees now. So the company could triple in size without even touching the $56 billion in cash. If Microsoft tapped into the cash, it could support another 100,000 programmers for a minimum of five years -- more like 7 or 8 years when you consider interest earned by the money.

The concentration of wealth is a triple-edged sword here:
  • You, personally, are paying Microsoft $100 per year out of your pocket and you have no choice.
  • By concentrating wealth instead of hiring programmers, Microsoft holds an entire industry hostage. Innovation is stifled.
  • Other companies are unable to compete with Microsoft. When they do, Microsoft uses its money to reach out and crush them. Even if Microsoft gets sued for it, Microsoft has plenty of cash to pay the suit and move on.
This is how the concentration of wealth works against the best interests of an industry, and the nation. As the article points out, "Sam Palmisano, CEO of IBM, wants his company to be Windows-free by 2006. The governments of South Korea, China and Japan — usually not the greatest of allies — have teamed up to create their own flavor of Linux, which could well flood the Asian market." No wonder. Because of Microsoft, America will lose its strategic advantage in yet another industry.

How to solve this problem? As pointed out in Robotic Freedom, an extreme concentration of wealth like Microsoft's could be taxed. Instead of going to the government, the tax revenue would be returned to every American citizen through a central account. In this way, the $100 per year taken out of the pockets of every American household would simply be returned to every American household each year. Americans would spend the money. The economy would grow, instead of being stifled by the concentration of wealth. See Robotic Freedom for details.

Tuesday, May 04, 2004

Pay has little to do with performance of executives

Title: IHT: Shareholders gain little from chiefs' raises
Source: International Herald Tribune
Date: April 5, 2004

From the article:
    The escalating excess that passes for everyday pay at corporations in America has long been justified this way: If executives are not paid outsized amounts, they will flee to greener pastures. Shareholders will lose. But a new and comprehensive academic study shows, once and for all, that increases in executive pay do not, on average, translate into subsequent gains for shareholders. Not in the next year, not in three years, not in five.
Also:
    The study found that a 1 percent increase in total compensation for each of the top five executives at companies predicted a 0.22 percent decrease in average shareholder return over the next year and a 0.12 percent decline over three years. The effect over five years was statistically insignificant.
The billions of dollars being wasted on executives and shareholders in their desire to concentrate wealth could be spent in many different ways. For example, Pfizer gives out billions of dollars in dividends and executive pay/perks. It could instead be spent hiring tens of thousands of researchers. Or the money could be spent lowering drug prices. At Wal-Mart, the money could be spent to increase the pay of rank and file workers and provide them with health benefits. And so on. The concentration of wealth in America is now hurting the nation in obvious ways.