One of the features of the Reagan/Thatcher neoliberal revolution over the last 30 plus years – in New Zealand called Rogernomics – is growing inequality. The rich are getting richer at the expense of the poor getting poorer. This is expressed in two measures. The income gap, for example between the lowest paid worker and the highest paid executive of the same company. And the wealth gap, which measures the increase of net wealth at the top (top 1% or top 0.1%) compared to bottom 50% or even 80% who are getting poorer.
On a global scale this inequality has reached such an obscene level that comedian Russel Brand in his book “Revolution” is joking about the one diamond crusted fun-bus the richest 85 billionaires could ride owning as much as 3.5 billion people, half of humanity.
This growing inequality is not only a matter of fairness. It is threatening to wipe out the middle class in the process and is widely seen as a very bad thing. Countries with higher inequality do worse in all sorts of indicators from economic performance to life expectancy, health, educational achievement and social indicators like participation in democracy. This applies across the board for the poor and the better off alike.
Over the 30 plus years of this revolution we have been fed the “trickle down” theory :
George Orwell would have marvelled at this use of language to manipulate the mind of the ordinary punter. “Trickle down” we know from leaky buildings and we associate it with water, which of course follows the law of nature i.e. gravity. So it sounds all plausible that money and wealth will follow the law of gravity, which is of course total bollocks.
Money does not follow any law of nature. Our neoliberal economics is an artificial man made system, which favours the people at the top who created it. We should rather talk about the “cream theory” where money and wealth rises to the top like cream in a bottle of full milk.
This week the NZ Herald created a problem for itself publishing surveys following the incomes of New Zealand’s top corporate executives with headlines like this:
“Salaries interactive: What CEOs of top NZ companies earn“(16 June) or”CEO Pay Survey: Bosses’ pay up 325pc in decade“(17 June), which is even understating the magnitude of the problem as according to the “marathon men” figures the salary increase in that sample was over 10 years between 228% and a whopping 528%.
The problem for the Herald has become so embarrassing that Monday’s (15 June) front page headline “Meet NZ’s best-paid bosses” and corresponding business section article “Top Bosses pocket 10 per cent pay rises – While average wage earners gain 3 per cent, some executives’ net rises range from 70 to 170 per cent” cannot be found on-line anymore. The corporate media instinct is in full damage control mode.
It started with Liam Dann’s (15 June) piece “Chief executive salaries merely keeping pace with buoyant market“. Under this apologetic headline we find more morsels from the neoliberal prayerbook like :
There will always be outrage from some quarters about the seemingly exponential scale of executive salaries. But we live in a free and global market where supply and demand set the pricing for talent.
Whenever I hear the “market” as an excuse for the exponential scale of executive salaries I want to scream.
If Dann was a serious journalist he would check the facts and find that executive pay has nothing to do with “the market” and nothing with personal performance.
There are countless studies, which show that CEO pay is at best unrelated to the company’s performance. Just one study analysed by Forbes lately carries the headline :
“The Highest-Paid CEOs Are The Worst Performers, New Study Says”
Professor Cooper (Utah) and two professors, one at Purdue and the other at the University of Cambridge, have studied a large data set of the 1,500 companies with the biggest market caps, supplied by a firm called Execucomp. They also looked at pay and company performance in three-year periods over a relatively long time span, from 1994-2013, and compared what are known as firms’ “abnormal” performance, meaning a company’s revenues and profits as compared with like companies in their fields. They were startled to find that the more CEOs got paid, the worse their companies did.
I could be cynical and say that we may here already have half the explanation for dairy giant Fonterra’s bad performance and negative outlook.
If Dann was a serious journalist he would have debunked the myth that the free global market where supply and demand set the pricing for talent determines executive pay. You only have to look at other professions where there is undersupply of “talent” like specialist medical staff or even foreign construction workers brought into Christchurch and Auckland. If the – “the market” – would determine their pay it should also rise on the same exponential scale of executive salaries.
But Dann is blinded by his own ideology not to be able to spot the difference. The medical specialists and construction staff do the actual work and their salaries are seen as just an expense to the organisation to be held down at all costs. Their only chance is to band together and go on strike to achieve any pay increases. In their case free and global market only puts downward pressure on their pay and conditions.
The CEOs on the other hand don’t need to band together and go on strike for better pay. They are already institutionally banded together to write their own pay cheques. Unlike with the workers’ pay the people who determine the executive pay – be it company boards or renumeration committees – have the perverse opposite incentive to increase pay as much as they can get away with as they directly benefit. If they increase the CEO’s pay their own pay will in due course increase too. They are not stupid to just play the system.
As Mr. Dann’s effort in damage control was obviously not enough the Herald had to back it up with next day’s editorial (which also is hidden from the on-line edition) under the headline : “Judge bosses on results, not size of salary”
The editorial again perpetuates the myth that the outrageous and widely criticised executive salaries in this case of Theo Spierings of giant dairy co-op Fonterra, which has been doing poorly recently under his leadership could be justified by “results”.
This cartoon reminds me of another Russel Brand quote of how “are profits hurtled with thoughtless expedience into the pendular pockets, swinging like a velor scrotum, of the thumb-twiddling plutocrat“.
I have to say on all the above evidence that the NZ Herald – as an example for our corporate media – does not just do sloppy journalism but is engaging full bore in neoliberal corporate propaganda.
by Dr. Hans B. Grueber