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Ellebrock: Too big to fail is too big

Ellebrock: Too big to fail is too big

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Mike Ellerbrock

By Mike Ellerbrock

Ellerbrock is director of the Center for Economic Education at Virginia Tech, vicariate deacon for the Catholic Diocese of Richmond, and appointed member of the Virginia Governor’s Advisory Council on Environmental Justice.

In August 2019, the Business Roundtable, a prominent lobbying group of America’s most powerful Chief Executive Officers, declared its commitment to serve all stakeholders, pay employees fairly, eliminate workplace discrimination, support local communities, and implement sustainable practices for environmental protection. Signed by 181 CEOs, the comprehensive statement is compelling in its vision of economic justice for all citizens, current and future.

However, according to Robert Reich, the statement is a smoke and mirrors obfuscation of reality. Reich is Chancellor Professor of Public Policy at Berkeley, former U.S. Secretary of Labor, advisor in three presidential administrations, author of The Work of Nations, and co-creator of award-winning Netflix documentaries, including Inequality for All. In his latest book, The System, Reich traces the lopsided evolution of income, wealth, and power during the last four decades. Reich asserts that the widening gap between America’s elite and the rest of us is deliberate and indefensible.

Of course, there are many ways to assess and measure a nation’s economic performance and social health. In his view, Reich focuses on a variety of major factors that tell a consistent story. A few to consider …

Stakeholders vs Shareholders. From 1980 to 2020, corporate culture shifted its primary concern from all stakeholders in a company’s behavior to near exclusive focus on its shareholders, literally tying executive pay to the value of its stocks. CEO compensation skyrocketed from about 20 times the average worker’s pay to 300 times greater. During the financial crisis of 2007-08, the federal government used billions of taxpayers’ dollars to bail out giant banks deemed “too big to let fail.” CEOs used much of the money to buy back shares of their own company’s stock, artificially inflating their institution’s solvency, rather than investing the public’s funds in real job creation enterprises. Twenty-one of the 181 Roundtable companies paid no federal income taxes in 2018. Eighty percent of U.S. stock is now owned by the wealthiest 10 percent of America.

Workers’ Wages. Though the Unemployment Rate decreased, so too the quality, pay, benefits, and security of jobs. Household income of the richest one percent of Americans doubled, while the purchasing power earnings (adjusted for inflation) of the bottom 90 percent stagnated. Accumulated wealth of the ultra-rich top 0.1 percent doubled from ten to twenty percent. Today, they (160,000 families) possess as much wealth as the bottom 90 percent combined.

Workplace Justice. The Stock Market rose, while the majority of citizens saw little or no economic advancement, engendering cynicism and voters’ anger at “The System.” A charlatan appears and declares that only he can fix the system that he rigged. Hiding his tax returns, he “patriotically” boasts that some years he paid no taxes, claiming, “that makes me smart, a stable genius.” Adding $2 trillion to our children’s debt, he grants a massive tax cut (from 35 to 21 percent) for his rich friends and a minor cut for his working-class supporters. Hiring high-priced attorneys to survive repeated episodes of financial and moral bankruptcy, he claims to be a populist, promising to drain “The Swamp” in Washington.

Corporate Welfare. Deposits held by America’s five largest banks rose from 12 to 46 percent of total U.S. bank holdings, rendering them “too big to fail.” Taxpayers paid $50 billion to rescue General Motors in 2008, plus another $500 million in tax breaks in 2018; nevertheless, GM closed its mega-plant in Ohio. At its remaining plants, new workers receive about half the prevailing wage rates, with reduced retirement benefits.

Market Concentration. Approaching oligarchy, America’s economy and lifestyles are dominated by a few behemoths: four airlines (American, Delta, Southwest, United), five pharmaceuticals (Pfizer, Eli Lilly, Johnson & Johnson, Bristol-Meyers Squib, Merck), three cable companies (AT&T, Comcast, Verizon), five portal platforms (Amazon, Apple, Facebook, Google, Microsoft), and five banks (JP Morgan Chase, Bank of America, Citigroup Inc, Wells Fargo & Company, Goldman Sachs Group Inc). Anti-trust regulation is an anachronism; likewise, environmental protection, collective bargaining by unions, and corporate commitment to local communities, public schools, racial justice, affordable housing, and universal health insurance.

Civic Leadership. Investing enormous sums of money into political candidates’ campaigns, and dangling lucrative jobs in a revolving door for retiring politicians, corporate America influences Washington’s business far beyond the founding ideals of democracy. Power now rests overwhelmingly with an elite class of privileged white males. We can do much better.

Final Measure. Ultimately, divine justice calls us to account for how we treat our most vulnerable sisters and brothers. It’s the American experiment — a United System for All.

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