Home > Uncategorized > Where has all the surplus gone?

Where has all the surplus gone?

from David Ruccio

CEOs

Where did all the capitalist surplus in the United States go last year?

Well, as in recent years, a large portion was paid to the Chief Executive Officers of the nation’s largest corporations, the ones that make up the S&P 500.

According to the Wall Street Journal, median pay of the CEOs of those corporations reached an astronomical $13.1 million, setting a new record for the fifth year in a row. Most S&P 500 CEOs got raises of 8 percent or better during the year—compared to the increase in median household income of only 3.34 percent.

The top 10 list goes from Comcast CEO Brian L. Roberts’s $36.4 million (where median employee pay was $78.9 thousand) to Alphabet’s Sundar Pichai’s $280.6 million (where employee pay was $258.7 thousand).

For purposes of comparison, the American workers who produced that surplus took home, on average, only $40,437.20 in 2019.

The ratio of CEO to worker pay ratio last year was therefore an astounding 324 to 1.

  1. Ahmed Fares
    June 5, 2020 at 2:24 am

    Let’s look at Comcast as an example.

    If you took the CEO pay of $36.4 million and divided it by Comcast’s 190,000 employees:

    $36.4 million / 190,000 = $192

    Not exactly going to make a big difference to that $78,869 median income.

    $192 / $78,869 = 0.24% (yes, a quarter of 1%)

    Let’s run the numbers for Walmart which is not on this list:

    CEO pay = $24 million

    Number of Walmart employees = 2.2 million

    $24 million / 2.2 million = $10.90

    That’s about the cost of a meal at McDonald’s.

    • Boz Styne
      June 8, 2020 at 1:49 pm

      Add up all remuneration for the entire board and Chief executives and you’ll find more than a McD’s meal in there

  2. John Hermann
    June 5, 2020 at 3:16 am

    The overwhelming part of the surplus goes to corporate and company shareholders, and other investors, rather than to CEO salaries and bonuses. Nevertheless, I agree that the ratio of CEO to worker remuneration of 324 to 1 is grossly inappropriate and signifies a deep flaw in the American model of capitalism. I say “signifies” because taxing away a large part of CEO income would – in itself – do virtually nothing to address the problem of social inequality and the austerity imposed on a large proportion of the population, who are entitled to a decent standard of living. Only the federal government can (and should) tackle the social and environmental problems we face by engaging in an appropriate program of deficit spending. The deficit should be allowed to rise to whatever level is necessary, consistent with keeping a lid on inflation.

  3. yok
    June 5, 2020 at 1:28 pm

    Hermann, deficit spending won’t do it. You create justice by allowing the working people to empower themselves. The govt should support and defend unionization, throughout the economy. Places like Walmart, Amazon, should of been unionized long ago.

  4. Robert Locke
    June 8, 2020 at 4:12 pm

    The only way to deal with the problem is to give employees a voice in firm governance, including emolument distribution.

    • June 8, 2020 at 4:41 pm

      I very largely agree with this, but I’m thinking a bit more specifically. Of a basic wage based primarily on subsistence but upped by fitness, training and study making one more useful, with the manager’s bonuses being rewards chosen by their staff to reflect actual achievement – not only in meeting targets but in providing interesting and/or worthwhile work and decent working conditions.

      • John Hermann
        June 9, 2020 at 8:15 am

        I agree with this, however it is unlikely that this can be achieved without substantial deficit spending.

      • June 9, 2020 at 11:14 am

        My argument is than in a “credit card” economy all spending is deficit spending. The point then become how to do you pay back the deficit, which I say is by achieving the results which the credit was given for. Most fundamentally this is sowing and harvesting next year’s crops and maintaining as well as developing the wealth and health we already have.

      • June 9, 2020 at 11:21 am

        These flipping typos! At ‘than’ I intended ‘that’ and ‘become’ should have been ‘becomes’ and somehow a ‘to’ has got left in. Apologies. “My eyes are dim …”?

      • John Hermann
        June 9, 2020 at 11:47 am

        For a monetary sovereign government the deficit never needs to be paid back. It can be maintained in perpetuity without any difficulty whatsoever. As can any interest payments. As a matter of fact, to attempt to “pay back” the deficit is not a good idea, because it amounts to destroying the money supply. And it is an historical fact that regimes of federal budget surplus are followed by recession.

  5. Robert Locke
    June 9, 2020 at 10:06 am

    In Rhineland’s capitalism we have in the two board system, Supervisory Board, which appoints the firm’s managing board and sets its members salaries, we have had employee representation for over sixty years. Perhaps this has something to do with the lower gap between ceo and workers pay in Germany (in 2018 136) in the us 2018 265, the highest globally.

  6. ghholtham
    June 9, 2020 at 2:21 pm

    A deficit is a flow – so many dollars per year, or quarter. Cumulated deficits amount to a stock – the debt. You cannot repay a deficit and you may not have to repay a debt if people are happy to hold it as their asset. If your debts get too big relative to your income, however, people may think they are no longer a safe investment. They won’t want to hold any more debt. Then you have a problem financing your deficit. At the limit they might not want to hold your debt at all and try to pass it to someone else. All sorts of problems then ensue. Welcome to Argentina. And it doesn’t matter in the end whether your debt is bonds or cash – either way you can have too much of a good thing. It will often be true that “a” deficit can be maintained in perpetuity, depending on saving and investment decisions of citizens and foreigners. You are surely ok if citizens want to save as much as the deficit. But you can’t maintain “any deficit you like” in perpetuity.

    • John Hermann
      June 11, 2020 at 6:20 am

      It depends. A monetary sovereign (which creates and distributes the nation;s currency) operates under quite different budgetary principles than does everyone else (who are the users of that currency). In a nutshell, the idea that the creator of a currency can be in debt with regard to that currency is ludicrous. .

  7. Ken Zimmerman
    June 23, 2020 at 3:43 pm

    The struggles over poverty, resource distribution, and economic justice in America in the 20th and 21st centuries still reflect the “two souls” of the English Poor Law of 1601. One soul to provide relief for the poor and downtrodden in the locales where they live. Sufficient relief for life to continue. But not so generous that the poor became averse to work. And to force the poor into work—or jail or other punishment—if they do refuse work. The other soul to control the poor, in their own best interest for the benefit of society and the existing distribution of resources. The “two souls” are visible in nearly every debate on economic inequality in the US from the street corner and church to the US Congress. Politically today most Republicans tend to focus on the “forcing and control” while most democrats tend to focus on the “relief and rescuing from poverty.”

    More interesting still is that the American/British Poor Law stands in direct contradiction to the principles set down in the Constitution by America’s first Treasury Secretary, Alexander Hamilton and endorsed by Washington, Franklin, and most of the other founders. Principles that have proved successful in making America what it is today. With America declining only when it deviated from them, as has been the case most recently beginning with the triumph of neoliberal principles during the time of government control by Ronald Reagan and Margaret Thatcher. Economists Stephen S. Cohen and J. Bradford DeLong argue in “Concrete Economics” that to make America great again, our economic policy needs more government direction and regulation. Starting with the brilliant, all-encompassing strategy of Alexander Hamilton—government plotted the route of the economy in deliberate, concrete, and specific ways. One could tell exactly what the results of these changes would be before making a commitment to them. It is not a new strategy. It is common to most economies since before the invention of money. Yes, there is an “invisible hand,” and enormous entrepreneurial innovation and energy. But the invisible hand has been repeatedly lifted at the elbow by government and re-placed in a new position from where it could go on to perform its magic. Government signaled the direction, cleared the way, set up the path, and—when needed—provided the means. And then the entrepreneurs rushed in, innovated, took risks, profited, and expanded that new direction in ways that had not and could not have been foreseen.
    The new or newly transformed sectors grew, often quickly. In growing they pulled other new activities into existence around them. The effect was to reinvigorate, redirect, and reshape the economy. Practical, specific, and highly successful. Little need for theory or ideology. That alone makes it preferable to what we have seen in the US since the 1980s.

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