A “Perfect Storm” of Pain for the Average Worker. Some critics want to destroy Capitalism. Here’s what needs fixing.
A Human Capitalism has emerged over the past fifty years. As discussed in the prior post, that has helped some companies succeed far beyond those who don’t value the human ingredient. However, there is much pain on the part of the average worker, which has led to a Great Economic Disconnect. Some leaders even say they want to destroy Capitalism, the latest being William Ayers. In this post, we’ll examine what’s hurting the average worker and why the Human Capitalism movement has some “unfinished business” to attend to.
Over the past 50 years, HUMAN CAPITALISM has steadily advanced, fueling business prosperity – and senior executive compensation. Meanwhile, employee prosperity has lagged. These two opposite trends have led to a Great Economic Disconnect (see chart) and beg the question: Whither Capitalism?
This piece is about the (R)Evolution of Human Capitalism. It is broken into three parts:
Part II: An Ailing Capitalism – the Great Economic Disconnect: The increasing Pain of the average Worker and what the Occupy Movement is telling us about Capitalism, which some critics want to destroy – the subject of this post.
Part III: Toward a Full HUMAN CAPITALISM: the Role of Forward-thinking CEOs in fixing Capitalism and completing its transition to HUMAN CAPITALISM – which will be posted soon.
In this blog post, we address the second part: An Ailing Capitalism and The Great Economic Disconnect.
William Ayers, speaking a few days ago to a gathering of people in the Occupy Movement, said “I get up every morning thinking … today I’m gonna end Capitalism.” Read more. There has always been a fringe part of society that believes that Socialism or Communism, or even anarchy is better than Capitalism, and would end the supposed pain caused by Capitalism, but it’s more prevalent now than it has been in many decades.
Why? Consider what the average worker has endured over the past few decades:
A “Perfect Storm” of Pain for the Average Worker
Kalle Lasn, founder of a Canadian anti-consumerist magazine, is credited with sparking the Occupy Wall Street (OWS) movement in 2011 to protest the disproportionate power of the corporate elite. Later he predicted “the killing of Capitalism”.
Average workers have increasingly suffered especially from two trends which seem unfair to them:
The “Financialization” of Business: In the 1990’s, the financial side of business became the single focus of shareholders and senior executives. This led to restructuring and massive layoffs – all benefiting the shareholder and senior executives. The equation seems simple: fewer employees mean lower costs which mean higher profits. Lower morale and unemployment, however, is another result, and often lower revenues. Yet employees with “pink slips” are left wondering: “Why did they need to let me go? Just to raise the stock price a bit for investors? That seems unfair.”
“Unfair” senior executive compensation, aided by government policies (called Crony Capitalism). Some senior executives and some companies emerge from the financial melt-down fine while the average employee suffers. The ratio of senior executive pay to lower level pay spirals from 24 in 1965 to 194 in 2005. Even Fortune asks in a 2003 cover story article, “Have They No Shame?”
(Click on the chart to see a larger version.)
Additional painful, seemingly unfair forces include:
1. Globalization and Outsourcing – leading to downward pressure on hourly wages, including whole professional fields being decimated in this country to take advantage of cheaper wages abroad.
2. Tax Policy favoring the Investor vs. the Employee – (at least in terms of taxes on capital gains vs. wages). Warren Buffet decries the fact that his secretary pays a higher tax rate than he does.
3. Some Companies paying little or no Taxes – primarily because of a highly complicated tax code which, though originally set up to encourage certain behavior, ends up rewarding companies, while most individuals enjoy no such tax benefits
4. Unprecedentedly high Unemployment – and high long-term unemployment especially for youth and minorities, even while company profits seem healthy.
5. High Debt – individual and government (which will become even more onerous as we experience the inevitable rise in interest rates). A sizable percentage are “under water” – owing more on their homes than they are worth.
6. The Destruction of Wealth – many people have seen their wealth diminished by falling home prices, lack of income, falling values of stock portfolios – from before the economic downturn.
No wonder that people are hurting and angry – and that they are listening to people like William Ayers and Kelly Lasn, calling for the end of Capitalism.
If these pains are not addressed, people may grow increasingly negative toward the economic system that they believe caused these ills. What then can be done to fix these ills (and Capitalism itself), and who should do it? That’s exactly the subject of the third and last part of this series on Human Capitalism. Stay tuned.
I welcome your comments on this post.
Darwin Gillett is author of NOBLE ENTERPRISE:
The Commonsense Guide to Uplifting People and Profits,
a consultant and speaker and founder and
director of The Institute for Human Economics.