Posted by: James Atticus Bowden | February 6, 2009

Class Warfare Always Gets Worse

The Have have more in the Information Era

The Haves have more in the Information Era

Take a look at this graph of income distribution. When I was leading the Army 21 futures study for 2005-2015, this is precisely what the economists from the Library of Congress (under our contract) predicted. No surprise to me that there is a “wage gap.”

The reason for the gap today – again predicted in 1990-92 – is the changes the transformation to the Information Era would make. This includes the growth of the global economy.
The graph indicates the “Have Nots” – as we characterized them in our study – would not gain much. The pressures on wages in a global economy suppress wages for the lower skills earners.
 
The Haves have a lot more. That is why you see the McMansions, etc around Virginia. There is more demand and opportunity for folks to earn more if they have key skills or talents. I can add another graphic that shows that most of the wealth of top earners comes more than ever from wages – not dividends or interest.
 
So, what, if anything, should be done about the wage gap?
 
In the early 90s I wrote (for myself) thoughts about a “greed cap.” The greed cap would be the ratio of highest to lowest earnings (from all sources and perks) in a business. It should be set by collective bargaining (Yes, this Republican means unions) at whatever they see as fit – and doesn’t kill the golden goose that creates capital. It could be 7:1 or 12:1 or whatever.
 
More dollars could be paid above that ‘cap’. But for every dollar that is paid to the executive above the cap another dollar is paid into a common pot that supports everyone’s retirement, health, legal, etc benefits.
 
The principle behind the idea is this: The profit of a company is directly attributable to the management and the workers. Much profit can be traced to management decisions, but all profit comes from everyone doing their jobs. Hence, separating workers from the profit sharing and letting it all go to the top of the organization is fundamentally an inequitable distribution of gain. Workers know the risk if the company goes down or under. They share in risk and should share in profit.
 
Except, I don’t want the damn government dictating this to anyone. I see it as a future strength of the unions – a meaningful purpose, if they can clean up their own management to gain some integrity back.
 
Where government can help with the wage gap is to use the forced savings of wage earners to create the INDIVIDUAL savings accounts FDR promised. If the Feds won’t do it, then Virginia should move ahead (see my pieces on Virginia Trust Accounts). The lower 505, Have Nots, get by and will get by. But, their retirement, health and unemployment risks can be provided by individual savings.
 
Fast forward to 2009. The government bailing out any business and taking ownership – and dictating wages is feel good class warfare in its earliest phases. It is awful for what it does to the economy. It is worse for what it does to our Constitutional Republic.
 
It portends worse if it is allowed to go further.
 
When you read Ayn Rand’s “Atlas Shrugged” you see the same language today about fairness, greed, etc. Actually, you are reading the fictionalized version of what she saw after the Bolsheviks took over in Russia. Now, you see the same signs of class warfare, dressed up in Obama’s rhetoric, in America.
 
Class warfare always gets worse. Consider the French Revolution and the successor Russian, Chinese Communist and Cuba revolutions, Communist takeovers in Vietnam, Laos, Cambodia, and Nicaruaga, and the Nazi takeover in Germany. Everytime the Human Secularists engage in class warfare – whether their preceding adjective is Communist, Nazi, Socialist or Liberal – it goes badly sooner or later for liberty. For individual rights. For the rule of law – if it ever existied. For economic freedom and opportunity.
 
Search the U.S. Constitution for the power of the federal government to do what it did this fall under Bush and now seeks to do under Obama. Not there.
 
Search the economic data for proof that government spending and taxing and regulationg wages improves the economy. Not there.
 
Search the history of class warfare since the French Revolution. Awful things happen.
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Responses

  1. I am not sure why salaries for top execs increase so much in the information age, but regardless of why, your predictions were accurate. The government seems to excel at bread and circus provisions for the masses. That should slow the revolt.
    This service economy worries me. Don’t we need to make widgets?

  2. Thanks Willohroots. It’t not just the execs. The top 50% makes more. The execs make bundles – because they can.

    The U.S. still produces agriculture and mineral products. There is a new, smaller steel industry that is competitive. You are right the engine of capital involves production – and services.

  3. Reminds me of Edward Dewey’s studies of cycles (great book w/lots of charts similar to yours) … ah, if only the blind could see … but if that were the case, it would be denying in inerrancy of Scripture: “What has been is what will be, and what has been done is what will be done, and there is nothing new under the sun.” Ecclesiastes 1:9 … all said, this doesn’t excuse “us” from trying to make life as it is better for “them”

  4. Why don’t stock holders have some authority to limit these high salaries and percs, it means less return for investments, doesn’t it?

  5. JAB:

    Great stuff. Is there a central repository on “futurist” reports that you could point me to for research to feed the brain? Thanks, Wayne

    P.S. I would have liked to ask you to refer me to a ‘credible futurist’ repository, but that is an oxymoron…and if I ever find a credible futurist, I may do an extaordinary rendition and take that person to Vegas with me.

  6. Anon: Thanks. There is truth out there…

    Willohroots: Compensation is part of the cost of doing business. Shareholders can do what they like, if they actually organize, focus and set priorities.

    Wayne: Thanks. I can write more – simple, bottom line stuff on futures – if you think there is an audience on the blog or in an email to you.
    There isn’t a single repository that I know about.

    I focused our early 90s work on Virginia in the late 90s and did a very long presentation that included the methodology. Showed it to a couple of our pols and their eyes rolled back.

  7. I definately think there is an audience on futures….please do post on the blog, thanks


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