re: #116 lawhawk

Companies were quite profitable when the ratio of typical worker salaries to those of the CEO were 10-1 or 20-1. In the 1980s, it was 58-1.

Now? The ratio is over 1000-1 or more in many instances. And in some cases, it’s for companies that the CEO has essentially run into the ground (like JC Penny).

[edited to add] Note that the 1980s was in the middle of the Reagan years, when tax rates were still higher than they are now. The top tax rate was 50% until the tax act of 1986, which reduced the top rate to 38.5% beginning in 1987 and then down to 28% in 1988.

To me this is indicative of the delusion I’ve pointed out before. It’s a two part delusion on the part of upper management in large businesses and many others as well.

The first part of the delusion is that upper management are capitalists. They are not. They are employees just like the rest of the company’s workforce. Executive employees, but employees nonetheless.

The second part of the delusion is that all capitalists are wealthy, obscenely wealthy. Which is demonstrably not true. Most capitalists lose their shirt. A few manage to make a living. Very, very few become wildly successful.

At its heart capitalism is about risk. It’s a risky endeavour. A capitalist invests capital; intellectual, physical and fiscal; into manufacturing a product. If the product is needed and wanted by consumers then the capitalist will sell enough to make a profit. Otherwise he’s fucked and he loses his shirt.

Upper management risk nothing. They’ve rigged the game so that no matter how badly they fuck up they do not suffer at all. They’re almost as far away from actual capitalism as Marxists. In fact they agree with Marx on how a capitalist society works. They just disagree with Marx’s conclusion that this is a bad thing. They also disagree with Marx on who will win the class war that Karl claimed would be the result of this behaviour.

As long as this delusion persists we are always going to have trouble reconciling business with society.