An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Pages
▼
Pages
▼
Saturday, June 29, 2013
David Ruccio — CEO-to-worker compensation ratio 1965-2012
Probably just a coincidence, but looks like the compensation ratio between CEOs and their workers was far smaller when the US dollar was still linked to gold. The divergence really shifts into overdrive though during the 1990s in tandem with the proliferation of all the different derivatives markets.
Money creation should be limited by ethical means, such as a stock holder's vote, not some stupid (literally!), arbitrary means such as the mining rate of gold.
It could be a coincidence, Ed, in that a lot of this had to do with the changing role of management in the transition to managerial capitalism from entrepreneurial capitalism.
This shift has huge implications since it is also coincident with a decline in technological innovation as the driver of capitalism in favor of financial innovation, with the increasing financialization of the economy,
No one argues that a gold standard as a price anchor tethers the economy in a way that monetary policy does not. The question is whether the increased space that a non-convertible floating rate system is worth it. If we look at real GDP growth. Checking, I see that US real GDP growth since 1966 has averaged about 3% with short periods over and under. We are, of course, under now in period of disinflation and reduced investment due to contraction and prolonged recovery.
The rise in CEO pay over that period dwarfs GDP growth, indicating that a lot of the increase was "mal-distributed," since it is difficult to argue that CEO were that beneficial to the economy.
Here is what former president Bill Clinton had to say on this subject in an interview with CBS's Bob Schieffer in discussing how the economy has evolved over the past four decades. Clinton said, "And ever since we went off the gold standard, which was necessary for economic management purposes... economic inequality has increased."
"The rise in CEO pay over that period dwarfs GDP growth, indicating that a lot of the increase was "mal-distributed," since it is difficult to argue that CEO were that beneficial to the economy." - Tom
Coupled with a lowering of the top marginal tax rates and taxes on capital gains.
Here is what former president Bill Clinton had to say on this subject in an interview with CBS's Bob Schieffer in discussing how the economy has evolved over the past four decades. Clinton said, "And ever since we went off the gold standard, which was necessary for economic management purposes... economic inequality has increased."
Again, correlation is not causation. There have been periods of extreme inequality in the US previously even though the country was on a gold standard. So the explanation is unlikely to ge gold.
And Clinton was an economic buffoon, putty in Rubin's hands. He has not recovered from that.
Coupled with a lowering of the top marginal tax rates and taxes on capital gains.
A factor in the mal-distribution, but not the only factor. Much of it was based on shifting power relationships, with shareholders no longer able to control companies with the rise of managerialism.
@Rombach - You have something there about going off the gold standard. But not in the way you think. These rich elite and bankers began the propaganda that Fiat money is somehow bad and that the government is not out of money. But all the time they cornered away all public good in the name of saving money for themselves.
James Galbraith: “Europe’s house is on fire. No time for complacency” June 28, 2013 by Merijn Knibbe http://rwer.wordpress.com/2013/06/28/james-galbraith-europes-house-is-on-fire-no-time-for-complacency/ from the blog of Yanis Varoufakis: the keynote speech of James Galbraith at the European parliament. He draws attention to increasing hunger in Europe and draws parallels with (former) Yugoslavia and the (former) Soviet Union, including the oligarchisation of the economy following the fire sales of state companies.
On June 27, James Galbraith keynoted a conference at the European Parliament entitled “Achieving Europe,” sponsored by the parliamentary socialists and social democrats. Listen http://utip.gov.utexas.edu/Speech/JG%20Brussels%20June%202013.mp3 here. Brief closing statement listen here http://utip.gov.utexas.edu/Speech/JG%20Brussels%20Closer%20June%202013.mp3
...with shareholders no longer able to control companies with the rise of managerialism. Tom Hickey
Or not wanting to as long as the share price went up?
But take away the government-backed counterfeiting cartel and companies must needs "share" with their workers since stealing their purchasing power would no longer be an option.
"@Rombach - You have something there about going off the gold standard. But not in the way you think. These rich elite and bankers began the propaganda that Fiat money is somehow bad and that the government is not out of money. But all the time they cornered away all public good in the name of saving money for themselves."
The departure from Bretton Woods gave rise to the financialization of the US economy as the Best & Brightest young mathematical minds migrated to Wall Street and like environments to cash on on the burgeoning markets in derivatives. The ugliest stage of this process was seeing the Wall Street banks bailed out at the expense of Main Street. How much of the $20 billion or more per year bonus pools distributed out to Wall Street operators would have been available if the Fed had not bailed out AIG, which was really a bailout of Goldman Sachs, Deutsche Bank & Societe Generale?
Well, it seems to me that it was merely a coincidence. As a personal suggestion to the CEOs, they must rethink about the compensation plans they have for the workers. During 1990s the employees' salary and bonuses weren't increased as per the rising prices of the goods.
If we want equity then why isn't money Equity? Hmmm?
ReplyDeleteepoiswe many
Probably just a coincidence, but looks like the compensation ratio between CEOs and their workers was far smaller when the US dollar was still linked to gold. The divergence really shifts into overdrive though during the 1990s in tandem with the proliferation of all the different derivatives markets.
ReplyDeleteMoney creation should be limited by ethical means, such as a stock holder's vote, not some stupid (literally!), arbitrary means such as the mining rate of gold.
ReplyDeleteIt could be a coincidence, Ed, in that a lot of this had to do with the changing role of management in the transition to managerial capitalism from entrepreneurial capitalism.
ReplyDeleteThis shift has huge implications since it is also coincident with a decline in technological innovation as the driver of capitalism in favor of financial innovation, with the increasing financialization of the economy,
No one argues that a gold standard as a price anchor tethers the economy in a way that monetary policy does not. The question is whether the increased space that a non-convertible floating rate system is worth it. If we look at real GDP growth. Checking, I see that US real GDP growth since 1966 has averaged about 3% with short periods over and under. We are, of course, under now in period of disinflation and reduced investment due to contraction and prolonged recovery.
The rise in CEO pay over that period dwarfs GDP growth, indicating that a lot of the increase was "mal-distributed," since it is difficult to argue that CEO were that beneficial to the economy.
Here is what former president Bill Clinton had to say on this subject in an interview with CBS's Bob Schieffer in discussing how the economy has evolved over the past four decades. Clinton said, "And ever since we went off the gold standard, which was necessary for economic management purposes... economic inequality has increased."
ReplyDeletehttp://www.youtube.com/watch?v=nlDwqLOOwJk&feature=player_embedded
Silly gold worshiper.
ReplyDeleteHow is backing someone's favorite shiny metal with the taxation authority and power of government in any way, shape or form ethical?
Shall we return to our folly like dogs to their vomit?
Just because the debt-pushers are wrong does not that mean that a previous error should be returned to.
"The rise in CEO pay over that period dwarfs GDP growth, indicating that a lot of the increase was "mal-distributed," since it is difficult to argue that CEO were that beneficial to the economy." - Tom
ReplyDeleteCoupled with a lowering of the top marginal tax rates and taxes on capital gains.
BTW, note that the massive jump in inequality pretty much started with the Clinton Administration…can anyone say NAFTA?
ReplyDeleteSlick Willie and the Rubinites meet Wall Street deregulation.
How is backing someone's favorite shiny metal with the taxation authority and power of government in any way, shape or form ethical?
ReplyDeleteShall we return to our folly like dogs to their vomit?
Just because the debt-pushers are wrong does not mean that a previous error should be returned to.
Here is what former president Bill Clinton had to say on this subject in an interview with CBS's Bob Schieffer in discussing how the economy has evolved over the past four decades. Clinton said, "And ever since we went off the gold standard, which was necessary for economic management purposes... economic inequality has increased."
ReplyDeleteAgain, correlation is not causation. There have been periods of extreme inequality in the US previously even though the country was on a gold standard. So the explanation is unlikely to ge gold.
And Clinton was an economic buffoon, putty in Rubin's hands. He has not recovered from that.
Coupled with a lowering of the top marginal tax rates and taxes on capital gains.
ReplyDeleteA factor in the mal-distribution, but not the only factor. Much of it was based on shifting power relationships, with shareholders no longer able to control companies with the rise of managerialism.
@Rombach - You have something there about going off the gold standard. But not in the way you think. These rich elite and bankers began the propaganda that Fiat money is somehow bad and that the government is not out of money. But all the time they cornered away all public good in the name of saving money for themselves.
ReplyDelete
ReplyDeleteJames Galbraith: “Europe’s house is on fire. No time for complacency”
June 28, 2013 by Merijn Knibbe
http://rwer.wordpress.com/2013/06/28/james-galbraith-europes-house-is-on-fire-no-time-for-complacency/
from the blog of Yanis Varoufakis: the keynote speech of James Galbraith at the European parliament. He draws attention to increasing hunger in Europe and draws parallels with (former) Yugoslavia and the (former) Soviet Union, including the oligarchisation of the economy following the fire sales of state companies.
On June 27, James Galbraith keynoted a conference at the European Parliament entitled “Achieving Europe,” sponsored by the parliamentary socialists and social democrats. Listen
http://utip.gov.utexas.edu/Speech/JG%20Brussels%20June%202013.mp3
here. Brief closing statement listen here
http://utip.gov.utexas.edu/Speech/JG%20Brussels%20Closer%20June%202013.mp3
"A factor in the mal-distribution, but not the only factor."
ReplyDeleteHence the term "coupled"
...with shareholders no longer able to control companies with the rise of managerialism. Tom Hickey
ReplyDeleteOr not wanting to as long as the share price went up?
But take away the government-backed counterfeiting cartel and companies must needs "share" with their workers since stealing their purchasing power would no longer be an option.
"@Rombach - You have something there about going off the gold standard. But not in the way you think. These rich elite and bankers began the propaganda that Fiat money is somehow bad and that the government is not out of money. But all the time they cornered away all public good in the name of saving money for themselves."
ReplyDeleteThe departure from Bretton Woods gave rise to the financialization of the US economy as the Best & Brightest young mathematical minds migrated to Wall Street and like environments to cash on on the burgeoning markets in derivatives. The ugliest stage of this process was seeing the Wall Street banks bailed out at the expense of Main Street. How much of the $20 billion or more per year bonus pools distributed out to Wall Street operators would have been available if the Fed had not bailed out AIG, which was really a bailout of Goldman Sachs, Deutsche Bank & Societe Generale?
Well, it seems to me that it was merely a coincidence. As a personal suggestion to the CEOs, they must rethink about the compensation plans they have for the workers. During 1990s the employees' salary and bonuses weren't increased as per the rising prices of the goods.
ReplyDeleteRegards,
Jimmie Menon
Payroll Providers Guelph