LOS ANGELES — In the early 1980s, in a book called American Journey, I calculated that American corporate chief executive officers were making 30 to 40 times as much as they paid average production workers. Looking back at that, I see that I was surprised to learn that that ratio had increased from 25-to-1 in 1970 — and that in other developed countries the ratio was closer to 10-to-1.
It seems now that I was easily shocked in the good old days. Today that compensation ratio goes from 300-to-1 to almost 1,000-to-1 in the United States, if you count various perks, including stock options and pensions.
Massaging those numbers produces rather startling results, as recorded in a new book, Winner-Take-All Politics: How Washington Made the Rich Richer — And Turned Its Back on the Middle Class by Jacob S. Hacker and Paul Pierson, professors, respectively, at Yale and the University of California, Berkeley.
Their numbers include:
From 1979 to 2005, the top 1 percent of American earners received 36 percent of gains in household incomes.
During that same period, the top one-tenth of one percent, the 300,000 Americans who are the richest of the rich, received 20 percent of those gains.
The 180 million people in the bottom 60 percent received just 13.6 percent of those gains.
“Winner-take-all,” they conclude, “has become the defining factor of American life.”
They also assert that some of the 0.1 percent, hedge fund managers, pay lower tax rates than their secretaries. Well, we all knew those things, didn’t we? The United States middle class, probably our greatest contribution to the prosperity and to the economic and political stability of the American way, is being systematically crushed as the country moves toward becoming a land of rich and poor.
There is not much original there, but what makes Hacker and Pierson different is that they argue for 350 pages that “winner-take-all economics” is caused by our “winner-take-all politics.”
“Step by step and debate by debate,” they write, “America’s public officials have rewritten the rules of American politics and the American economy in ways that have benefitted the few rather than the many … a transformation that has fundamentally changed what government does, and whom it does it for.”
They describe this process as a “30-year war” in which the two parties, the Republicans and Democrats, have been affected by the financing and pull of the nation’s super-rich. They credit the mobilization of the rich and of business to a 1971 confidential memo written by a Virginia business lawyer named Lewis Powell, who would later become a Supreme Court justice, who said:
“Business must learn the lesson … that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination — without embarrassment. … Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort.”
“Businessmen of the World, Unite!” is a headline in the Hacker-Pierson book.
And they did, pouring money and lobbyists in the Capitol — and discovering that victors, Democrats and Republicans, took all the spoils they could get. Their most important target was “moderate Democrats,” a group that included President Bill Clinton (“an Eisenhower Republican,” the authors call him) and Sen. Max Baucus of Montana — and even liberals like Charles Schumer of New York. The tactic was frontal assault by state and local business interests — in Schumer’s case, the finance industry in New York, Wall Street.
Some politicians cried out. One, in 2008, said: “We’ve lost some of that sense of shared prosperity. Now, this loss has not happened by accident. It’s because of decisions made in boardrooms, on trading floors and in Washington. … We encouraged a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy.”
The original article can be read on RealClearPolitics.