The following is an excerpt from the new book Survival of the Richest: How the Corruption of the Marketplace and the Disparity of Wealth Created the Greatest Conspiracy of All by Donald Jeffries (Skyhorse Publishing, July 2017), available for purchase from Amazon, Indiebound and Skyhorse:
“The few own the many because they possess the means of livelihood of all. … The country is governed for the richest, for the corporations, the bankers, the land speculators, and for the exploiters of labor.” —Helen Keller
Most people shy away from the simple question; do those who are paid the most in our society deserve to be compensated like that? If a particular individual was the driving force behind a cure for all cancer, or instrumental in significantly increasing the human life span, I think most everyone would agree that their value to society would be such that they’d be entitled to millions, even billions of dollars. But the world’s wealthiest individuals do not, in fact, seem to have contributed in such a way that they have earned a distinction placing them above the masses, garnering more money in less than a year than what virtually everyone else earns in a lifetime. According to the Bloomberg Billionaires Index, which ranks the world’s richest three hundred people, these incredibly wealthy elite saw their net worth jump by $52.4 billion in 2013. On July 21, 2016, Bloomberg would recount how Amazon founder Jeff Bezos had surpassed Warren Buffet as the third richest person in the world, thanks to a tidy increase of $5.4 billion in his personal fortune in 2016. Meanwhile, the vast majority of workers, who desperately need a significant pay raise, are simply not getting one.
The wealthiest people in our society don’t appear to be improving any lives but their own, and they don’t seem to have special qualities or skills that explain why they’re being compensated so much more extravagantly than the rest of us. Warren Buffet, like so many very wealthy people, made his fortune with investments. Multi-billionaire Mexican Carlos Slim Helú is another whose occupation is investor. When we examine any list of the richest Americans, we find names such as notorious corporate raider Carl Icahn, whose more polite title is investor, George Soros, who is yet another investor, hedge fund managers John Paulson and James Simons, and plenty of financiers, bond mavens, chairmen, and others with predictable titles that assure us, whatever they do, they aren’t positively impacting the lives of the bulk of humanity. The very wealthy, in all reality, can generally be defined as those who are abnormally good at making money.
Bill Gates’s Microsoft was primarily known for creating an operating system with numerous flaws, charging excessive prices for all the unnecessary upgrades and new versions, and engaging in monopolistic practices. Apple founder Steve Jobs would declare that Gates had “shamelessly ripped off other people’s ideas.” Jobs had a right to feel that way; most people think that Microsoft stole many essential features from Apple. Of course, many believe that Jobs himself stole from Xerox. Gates acknowledges that advances in technology, including robotics, “will reduce demand for jobs particularly at the lower end of the skill set.” Senator Jeff Sessions, now President Trump’s attorney general, was a fierce critic of Gates’s call for increased foreign visa workers at the same time Microsoft announced plans to lay off eighteen thousand workers in 2015. The Heritage Foundation has estimated that the disastrous June 2013 immigration “reform” bill, which Gates and every other pillar of the establishment supported, would cost taxpayers some $6.3 trillion over the next few decades.
Like almost all modern corporate leaders, Jobs used cheap, if not slave, labor in foreign countries to build his beloved iPhones. Both Herbert Hovenkamp, a law professor at the University of Iowa, and Bill Black, author of The Best Way to Rob a Bank is to Own One, referred succinctly to Jobs as “a walking antitrust violation.” Walter Isaacson, author of a biography on Jobs, declared that the founder of Apple “always believed that the rules that applied to ordinary people didn’t apply to him.” Bill Gates is about as pedestrian a personality as one can imagine; in an interview with Christine Amanpour, he declared that “Clearly, you can’t raise the taxes we need just by going after that 1 percent.” In his 2014 annual Bill and Melinda Gates Foundation letter, Gates expounded upon his delusional misinformation, writing, “By almost any measure, the world is better than it has ever been.” Well, it’s certainly become a better place for him. If it could be demonstrated that either Gates or Jobs had single-handedly invented the personal computer, they might indeed be worth their fortunes. By any definition, that clearly isn’t the case.
We hear regular, nonsensical references in the mainstream media about the difficulty of finding suitable executive talent and thus the need to compensate them extravagantly in order to beat the competition. It is never explained just what talent one requires to be an executive in a large corporation. One can’t quantify this kind of talent in any measurable way, the way one can assess the skills of an athlete, a musician, or an artist. Many powerful corporate leaders attain their positions in the most traditional manner, through simple nepotism. Sam Walton’s children, for example, exhibited no talent whatsoever in inheriting their father’s fortune. The Koch brothers inherited an oil refinery firm from their father. Fidelity’s Abigail Johnson is merely continuing the family tradition of running the company her grandfather established. Donald Trump began life as the son of a multimillionaire, which made the arduous climb to billionaire a bit easier. Bill Gates did not come from a “middle-class” family; his parents were quite wealthy, and his father was on the board of Planned Parenthood. Warren Buffet’s climb up the corporate ladder was undoubtedly aided by the fact he was the son of a United States congressman. Nike founder and chairman Philip Knight’s father was a newspaper publisher. Hedge fund magnate James H. Simons grew up the son of a factory owner. Any present-day Rockefeller, Rothschild, Carnegie, Mellon, Morgan, etc. invariably succeeded because of their names and their inherited wealth, while Facebook cofounders Mark Zuckerberg, Dustin Moskovitz, Eduaro Salverin, Chris Hughes, and Justin Rosenstein all came from wealthy families and met at the ultimate breeding ground for the elite, Harvard University. Horatio Alger stories, if they ever existed to any great degree, are clearly a thing of the past.
Amazon founder Jeff Bezos spent much of his childhood on a 25,000-acre Texas ranch with his maternal grandfather, who was a regional director of the US Atomic Energy Commission. Liliane Bettencourt, presently estimated to be worth more than $33 billion, earned her riches by inheriting L’Oreal, one of the world’s biggest companies, from her father. Google founder Larry Page’s father Carl was a pioneer in computer science and artificial intelligence. Forest Mars Jr., worth some $21 billion, achieved his success through inheriting the giant candy company from his father, who had inherited it from his grandfather. His siblings, John and Jacqueline, are also worth $21 billion each. They mirror the work ethic of Sam Walton’s children, yet undoubtedly many Americans, from all income levels, would argue that they earned this incredible wealth. When he uttered the statement, “You didn’t build that,” Barack Obama inadvertently tapped into the strong personal belief most Americans possess, that they have attained whatever success they’ve achieved solely through hard work or their own brilliance. Those who make it almost always have been fortunate in different ways. They might have been born into a supportive, financially stable family. They might have known someone who opened the right doors for them. They might have been blessed with a set of genes that made them physically attractive enough that others want to help them. They might simply have been in the right place at the right time. For whatever reason, human beings seem to blanch at the notion that they’ve been lucky. Senator Elizabeth Warren echoed Obama’s comments, saying, “There is nobody in this country who got rich on his own.”
Author Chrystia Freeland, in her 2012 book Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else, explored the attitudes of these unfathomably wealthy people. She found that each of them felt strongly that they’d earned their great wealth. Just as unanimously, though, they all thought that at least some of their billionaire brethren hadn’t earned theirs. Oddly, this attitude seems just as prevalent among the upper middle class, the middle class, and even many in the lower middle class. I can’t tell you how many times I’ve heard working-class people moan that “I worked hard for what I got,” or “nobody helped me.” When talking about redistributing the wealth, I’ve often been met with fierce opposition from those who have no wealth to share, and thus would benefit in some way from such a proposition. They love to counter with statements such as, “How do you define rich?” or “I guess rich means anyone who has more than you.” Another perennial favorite, from those who’ve made it as well as those who haven’t, is, “If you divided up all the money in the world evenly, in a few years, the same people would have it all again.” This is, of course, a very convenient defense for those who have hoarded all the wealth. Why should society even bother to distribute the wealth more fairly, when everyone knows the money would just magically gravitate back to them?
Slightly below this lofty top level of multibillionaire investors and the like are entertainers and athletes. By 2016, the average salary for a Major League Baseball player had risen to $4.4 million a year. In the NBA, it was an even more incomprehensible $5.2 million annually. NHL players average $2.5 million, and NFL players “only” $2.1 million each year. The biggest movie stars are in the “$20 million club,” indicating they command that kind of salary per picture. Tom Hanks hauled in as much as $49 million from The Da Vinci Code. Often these figures don’t factor in the considerable residuals that can result from a huge box office hit. Tom Cruise made $290 million from his four Mission: Impossible films alone. Keanu Reeves, meanwhile, piled up $262 million from the three Matrix movies. Reeves is an unusually generous sort and gave up some profits from his back-end points in order to help finance the special-effects team and costume designers for the sequels. By the end of the long-running Friends television show, each of the six cast members was garnering a million dollars per episode. Even if one accepts categorically that these athletes and entertainers are that exceptional and wildly talented, can anyone maintain they deserve to be so lavishly compensated?
By the end of 2013, the distribution of wealth in America had become so unequal that we no longer could be classed among the First World, developed nations in this category. According to the Credit Suisse Global Wealth Databook, 75.4 percent of all wealth in the United States belongs to the richest 10 percent of the people. Comparable nations (none of them as bad as the United States) in terms of wealth disparity include Chile, Indonesia, and South Africa. The bottom 90 percent of American citizens own only 24.6 percent of the aggregate wealth, while the norm for developed countries is around 40 percent. Meanwhile, under Obama, who was often accused of being a socialist, the wealthiest 1 percent of Americans received 95 percent of the income gains during the alleged economic “recovery.” During his 2016 presidential run, Bernie Sanders would embrace this issue with statements such as “something is profoundly wrong when the twenty richest people in our country own more wealth than the bottom half of the American population—150 million people.” FactCheck.org claimed that the situation for the 40 percent at the bottom of the ladder has grown even more dismal, declaring that by early 2016, they actually had a combined negative financial worth. Every statistic on income and wealth disparity supports the notions of Ferdinand Lundberg, who postulated in his 1937 book America’s Sixty Families that, “The United States is owned and dominated today by a hierarchy of the richest families, buttressed by no more than 90 families of lesser wealth.”
While millions of Americans have lost their homes and were financially devastated by this undeclared Depression, the wealthy continue to be rescued from their own mistakes, time and time again. The 2008 Banker Bailout was one of America’s most disgraceful acts. With foreclosures and bankruptcies at all-time highs, the criminal banks who orchestrated it all were given the kind of security net denied to those suffering individuals across America. When individual Americans experience a terrible financial setback, they are told it’s their own fault and to try harder and pull up their bootstraps. Helping them somehow is a handout most Americans resent giving. But when the wealthiest groups in our society—the big banks, General Motors, etc.—make bad decisions and should ostensibly suffer the consequences, they aren’t penalized at all. They don’t feel the wrath of the vaunted marketplace, as powerless individual citizens do.
The liberal political advocacy group Common Cause would report that the banks bailed out by the taxpayers certainly didn’t stop lavishing excessive benefits on their top executives. Lloyd C. Blankfein, CEO of Goldman Sachs, was given over $70 million in total compensation in 2008, despite his company having been gifted $10 billion in the bailout. J. P. Morgan Chase’s James S. Dimon earned nearly $28 million, while his company had taken $25 billion from the taxpayers. The list goes on, as huge conglomerates such as American Express, Bank of America, and Capital One bestowed millions on their CEOs, only months after begging for handouts from the unwashed masses who were struggling to make ends meet, and to whom were still being told to sacrifice for the good of the country. All told, nine banks that begged the struggling taxpayers to bail them out awarded cumulative bonuses of nearly $33 billion in that same year of 2008, including $1 million each to some five thousand employees. Exposing the lie that these economic excesses are connected to the ironclad manifestations of an all-knowing marketplace, six of the nine banks paid out more in bonuses than they earned in profit. The Obama administration reacted to these shameful figures with a statement by Robert Gibbs, “The president continues to believe that the American people don’t begrudge people making money for what they do.” Citigroup, which received about 25 percent of the bailout money going to the nine banks, bestowed an incredible $98.9 million in compensation on Andrew Hall, head of their energy-trading unit Phibro LLC, which dwarfed the $38 million they paid CEO Vikram Pandit in 2008.
As has been widely reported, only a few relatively small fry—loan officers and the like—were ever prosecuted for crimes related to the 2008 financial crash. By comparison, the much smaller Savings and Loan crisis of the 1980s resulted in over thirty thousand criminal referrals and one thousand felony convictions by the Department of Justice. In contrast, only one banker—the Egyptian-born Kareem Serageldin—was ever sent to jail for the 2008 financial crisis. Despite that even the judge admitted that others at Credit Suisse were guiltier and that Serageldin was merely “a small piece of an overall evil climate within the bank and with many other banks,” he nevertheless sentenced him to thirty months behind bars. The overall lack of prosecutions related to the worst banking crisis in American history reflected a disturbing trend. From 1995–1997, the percentage of federal white-collar prosecutions was 17.6 percent. In the period from 2010–2012 however, this figure dipped to only 9.4 percent. As multiple sources within the banking industry told the New York Times, federal authorities appeared to lack the courage to go after powerful corporate figures, part of an overall change within the Justice Department of seeking settlements in lieu of prison sentences.
CEOs are not only given wildly excessive salaries and “performance” bonuses; they are often given parting “gifts” that boggle the mind. ConocoPhillips CEO James Mulva, for example, was gifted an unbelievable $260 million from the company when he left them in June 2012. Evidently the $141 million total compensation package he’d accrued in 2011 wasn’t enough. Mulva’s package paled in comparison to the more than $417 million doled out to John Welch, in honor of his twenty-year tenure at General Electric. But perhaps Welch was deserving of such an honor, considering General Electric paid no taxes at all in 2010, according to the New York Times and numerous other mainstream media outlets. In 2015, Citizens for Tax Justice claimed that GE had again paid no taxes, along with fourteen other Fortune 500 companies. These lucrative deals, often called golden parachutes, are extended to overpaid executives even when they fail miserably at their jobs. The magazine Mother Jones calculated that the average golden parachute for these CEOs was an amount equal to forty-nine lifetimes’ worth of work for a median income employee. In the case of Welch, this would rise to 203 lifetimes’ worth of work.
Some executive pay rates are so astronomical that they defy belief. John Hammergren, CEO of drug giant McKesson, made $54.4 million in 2010. This works out to $210,000 a day, and that daily salary would be more than nearly 99 percent of Americans make annually ($250,000 a year is generally considered the basement level for the top One Percent). Health Care pays its executives extremely well, too, which goes a long way toward explaining the spiraling, out of control medical costs in this country. Anthem Blue Cross and Blue Shield paid CEO Larry Glasscock a $42.5 million bonus in 2004, which nicely dwarfed his $3.6 million compensation for the year. As an anonymous wit on a conspiracy forum noted in outrage over this, “At my former salary, I would have to work 1,214 years to make $42.5 million. That’s over twelve centuries.” To show just how rapidly, and drastically, the gap between upper management and workers is growing, during the 1980s, executives made about forty times what average workers did. By 2015, the ratio of CEO to worker pay was 204 to 1. During the Clinton years, the average pay for CEOs increased more than 400 percent.
While paying no tax at all in 2010, GE, citing merely one example of corporate tax “fairness,” paid an average of just one-eighth of a percent in taxes between 2002 and 2011. In response to these astonishing statistics, GE CEO Jeff Immelt termed the US tax system, “old, complex, and uncompetitive.” Uncompetitive with what, one wonders. Immelt exemplifies everything wrong about present-day America; since he took over as GE’s CEO, the company’s stock lost 50 percent of its value, and GE had closed thirty-one factories and laid off nineteen thousand workers. For this dazzling performance, Immelt earned over $12 million a year. Forbes magazine ranked Immelt as the fourth worst CEO in America in its May 2012 issue. Perhaps Immelt possesses that indistinguishable executive talent we’ve heard so much about.
One could fill a good-sized book with the excesses of CEO compensation alone. The figures are mind-boggling. Angelo Mozilo was the cofounder and longtime CEO of Countrywide Financial. During one eight-year period alone, Mozilo earned $521.5 million from his company, according to compensation research firm Equilar. Mozilo became the first executive to be penalized for the losses incurred by millions of investors during the mortgage collapse when he agreed to settle with the Securities and Exchange Commission in a civil fraud case. Of the $67.5 million Mozilo was assessed, Countrywide agreed to pay $20 million as part of the indemnification agreement he had with the company. Mozilo, like many of the highest-paid corporate leaders, received innumerable, valuable perks along with his millions. For instance, his compensation package covered annual country club and golf course dues. Mozilo knew how to take care of his influential friends, too; Senator Christopher Dodd, for example, was given a $75,000 reduction in mortgage payments at below-market interest rates, that in real terms worked out to be a sweetheart deal worth over a million dollars. Other luminaries who benefited financially from being “friends of Angelo” included members of Congress Kent Conrad and Barbara Boxer, as well as Nancy Pelosi’s son, Fannie Mae CEO Jim Johnson, and Democratic Party figures Richard Holbrooke and Donna Shalala.
The unfathomable salaries CEOs regularly give themselves are, for all intents and purposes, tax subsidies from the government. Congress, in 1993, capped the tax deductibility for executive pay at $1 million but still allowed US corporations to profit from deducting so-called performance-based pay, including stock options. Thanks to this provision, corporations regularly use these stock options to lower their taxes, making large executive bonuses in effect tax free. The total yearly cost to taxpayers from all these shenanigans is some $7 billion, according to the Economic Policy Institute. The fast-food industry has been especially noteworthy in this regard; the Institute for Policy Studies found that fast-food CEOs had deducted about $183 million of this performance pay, which decreased their tax liability by $64 million over two years. These are the same folks who are claiming no one will be able to afford their putrid food if they were forced to pay their employees a living wage. McDonald’s CEO James Skinner, for example, received a performance bonus of $23 million in 2012, while David Novak, CEO of Yum! Brands (which includes Taco Bell and KFC), was given more than twice that amount, with a $48 million “performance” bonus.
While these CEOs are earning unconscionable amounts of money, their workers are often forced to make ends meet on $20,000 annually or less, with decreasing benefits every year. Walmart has become notorious in this regard; their employees are even given instructions on how to apply for welfare and food stamps during their orientation. The fact that some of these companies are paying their workers so little that they qualify for government subsidies seems to have largely escaped the attention of the public, who have been trained to focus their anger on the poorest individuals, benefiting from some nominal form of government assistance. In the minds of many Americans, it’s fraud for a decidedly poor person to be on government assistance and still have what appears to be too good of an automobile or television for someone of their lowly lot in life, but it’s okay for huge corporations to be given unlimited handouts from taxpayers to subsidize the shameful pittances they pay their employees.
During the 2013 holiday season, Walmart launched a canned-food drive for its own employees. Somehow, I don’t expect Sam Walton’s children to reexamine their priorities, despite all the attention and criticism this campaign received. No less ironic was the incredible boast from Walmart’s CEO Bill Simon, the month before, during a presentation about the opportunities at his corporation, that 475,000 Walmart associates earned salaries of at least $25,000. There are about a million Walmart employees, so this means that less than half of them are paid even this kind of paltry salary. The Committee for Better Banks surveyed bank tellers in New York and found that 39 percent of them were on some form of public assistance, because their salaries were so low. By the end of 2012, the top ten CEOs each were making over $100 million a year. Facebook CEO Mark Zuckerberg led the way, with $2.28 billion. Almost all of Zuckerberg’s earnings came through stock options, which meant a very low tax bill.
The results of a study published in the New York Times on July 22, 2013, confirmed that whether you’re born poor or born rich you tend overwhelmingly to stay that way. Nationally, a Pew poll found that 43 percent of Americans born in the bottom fifth of the economic ladder never move up at all, while 70 percent never reach the middle rung. Even students from wealthy families with lower test scores are more likely to graduate from college than poor students with higher test scores. So few people control the marketplace that, according to the Institute for Policy Studies, the top One Percent own half of all the stocks in this country, while the bottom 50 percent own only .5 percent of them. Sociologist and author G. William Domhoff revealed, in an illuminating report on his Who Rules America? website, that the One Percent has only 5 percent of the collective personal debt, while the bottom 90 percent has 73 percent. When we contrast the distribution of income and debt, it becomes obvious just how difficult economic upper mobility is in present-day America. Joseph Stiglitz went over much of this material in an excellent article in the May 2011 Vanity Fair, titled “Of the 1%, by the 1%, for the 1%.” There is probably no truer saying than the chestnut, “The rich get richer and the poor get poorer.”
As Ambrose Bierce once defined it, a corporation is an ingenious device whereby individual profit is obtained without individual responsibility. Those who suggest that top executives are indispensible and crucial to the success of the company should try a simple experiment; allow a week to go by without any executives reporting to work (or even telecommuting, one of their countless perks). Then go a week without the janitorial staff. It will be crystal clear to everyone just who is doing the important work.
Donald Jeffries is the author of The Unreals, a novel lauded by the likes of multi-award-winning author Alexander Theroux and Night at the Museum screenwriter R. Ben Garant, and the nonfiction book Hidden History. Jeffries lives in Fairfax County, Virginia.
