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Market Value and Human Values: the War on the Poor
by Dr. Emanuel Paparella
2014-04-13 11:02:14
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Pope Francis serving the poor

“The current crisis is not only economic and financial but is rooted in an anthropological and ethical crisis. The idols of power, profit, money, over and above the value of the human person, have become a basic mode of operation and decisive criterion in organization. It is forgotten that above the business logic and parameters of the marketplace, there is the human being and there is something which is due to man, by virtue of his profound dignity: the opportunity to live with dignity and participate actively in the common good”
                                                                                                                    --Pope Francis

There is currently a debate in America on the concept of “money is speech” by which the entrepreneurs of our brave new world mean that they should be able to finance at their heart content any political campaign they decide to support; after all, it’s their money and they should be allowed to spend it the way they see fit. The myopia in all this, as Leah Sellers has already elucidated in her article titled “When Money Talks Democracy Walks,” is that it utterly ignores the damage that such a concept does to any vibrant democracy. Indeed the concept of “money talks” comes quite close to the concept of “might is right.”

And yet, on the extreme right of the Republican party which is slowly assuming all the characteristics of a fascist leaning party, one ears contrary arguments such as these: we are not Europeans, we do not believe in free lunches, here people work hard and succeed and if they don’t they only have themselves to blame for. One is led to wonder where are those social principles derived from? The answer is not too difficult to find: they landed on Plymouth Rock with the Puritans who carried with them a Calvinistic theology proclaiming that God favors the industrious entrepreneur who is destined to heaven and condemns the lazy and shiftless who is destined to hell. In other words, if one is afflicted by poverty, it is one’s fault, the fit survive, the unfit deserve to perish.

Of course the Calvinistic theology is no longer visible in a secular society. What is visible are the philosophies of Ayn Rand (objectivism or the “virtue of selfishness”) and that of Herbert Spencer (social Darwinism), two authors who have been revived with a vengeance lately, to the point that even a Catholic such as Paul Ryan will propose drastic cuts to the social programs for the poor and continue to go to Church on Sunday and consider himself a good Catholic. He says that even his bishop approves of his budget cuts to the poors’ social programs and tax cuts to the wealthy. Considering the above quote, one is bound to wonder what his Pope would think of his cuts. He certainly did not think much of the multi-million dollar mansion of the archbishop of Atlanta who is now selling the mansion.


Paul Ryan: champion of cuts to the social programs

But let’s proceed with scientific social evidence and statistics which are indisputable facts. Here is a quote from a Nobel winner in economics, Joseph Stiglitz, from his recent book (2012) The Price of Inequality: "America has the least equality of opportunity of any of the advanced industrial economies. In short, the status you're born into — whether rich or poor — is more likely to be the status of your adult life in America vs. any other advanced economy, including 'Old Europe'. In fact, this sounds airily as what was the situation in medieval times as described by Karl Marx, wherein the status you were born into was your destiny and even the will of God. It is no wonder that Marx branded religion as “the opium of the people.” That may of course surprise a Paul Ryan who is sure that the economy of “old Europe” is retrograde and that of America is progressive. In point of fact, the opposite seems to be the case even if we accept Mill’s “laissez faire” philosophy and reject Marx’s critique of capitalism.

What Stiglitz is saying basically is this: not to promote a more dynamic economy and a fairer distribution of wealth, more consonant with the principles of a free market, is ultimately detrimental to everybody including those at the top who have done very well in the last thirty years or so. Paradoxically we have ended up with “socialism for the rich and capitalism for the poor” apparent in the fact that an entrepreneur like Mit Romney ends up paying far less taxes to the government than his secretary. This can easily be checked.


Joseph Stiglitz receiving the Nobel Prize in Economy (2001)

There is no doubt that the environment of misery, greed, and crime Americans live in today is caused first of all by the permeation throughout American society of a perverted corporate ethic which distorts human nature, discourages compassion and cooperation amongst people, and encourages competition and ultimately, violence. Giant American corporations are today major causes of poverty, exploitation, community destabilization, discrimination, ill health and environmental destruction in the United States and even around the world. People here, all of them, are locked into an economic, social, and political system dominated by Corporate America. It directly and indirectly affects their mentality, their livelihood, their well-being and their prospects for the future. It operates in accordance with its own unwritten code of behavior, to which everything here is subordinated.

Corporations have gained enormous influence over government in America, which is now largely serving their needs at the expense of the majority of people. Every year, an estimated $150 billion -- in the form of direct federal subsidies and tax breaks that specifically benefit businesses -- is funneled to American corporations. And the dollar amount has been growing substantially in recent years. In fact, federal aid to corporations is a major contributor to the budget crisis in the United States. These $150 billion for corporate subsidies and tax benefits eclipses the annual budget deficit of $130 billion. The Cato Institute -- a libertarian think-tank in Washington, D.C. -- considers corporate welfare to be the 125 programs that provide direct subsidies to individual industries. In a fairly recent report, it estimates that the federal government currently spends roughly $75 billion a year on direct subsidies to American private corporations. And that is the conservative estimate.

Ralph Nader's Center for the Study of Responsive Law offers a more expansive definition that includes federal tax breaks, many of which are designed to funnel money to specific industries. Add in bail-outs and government research conducted for the benefit of private business, and the total corporate aid figure rises to a high of $167 billion annually. That's $1,388 per individual taxpayer! This give-away to Big Business contrasts sharply with the total costs of all federal welfare programs for individuals, including help for the blind and deaf, assistance to the handicapped and elderly, care for the mentally retarded, children's vaccination and immunization programs, and so on. The cost of Aid to Families with Dependent Children and other forms of social welfare, including food stamps, housing assistance and child nutrition, was $50 billion in 1995.

Corporate welfare continues to expand, penetrating every corner of the American economy. As a special report in Time magazine says, "It has turned politicians into bribery specialists, and smart business people into con artists." Advocates of such generous assistance to corporations claim that it spurs economic growth, creates jobs, and levels the playing field between American and foreign competition. In reality, it does none of the above. Nor, indeed, is this the kind of argument used either by American officials or those of the International Monetary Fund when they seek to roll back third world governments' efforts to assist their own domestic corporations.

While governments in such developing countries as South Korea, Taiwan, Hong Kong, etc., may well have felt justified in providing initial "lift-off" in the absence of sufficient private capital accumulation, such a rationale is hardly applicable to the American situation, where corporate subsidy functions more as pay-off than as lift-off. In the American situation, corporate welfare does not create jobs. It only creates huge monetary losses, both for the government itself and for the people who must pay extra for the cost of products whose prices are raised by the companies the government is protecting.

Corporate defenders are quick to shift the blame for all that is happening today to American workers to foreign competition in a newly-globalized economy. While there may be some truth in this, it is also true that American corporate executives have fuelled that ostensibly foreign competition by transferring production away from American workers to cheaper labor in third world countries, and that American business dominates the determination of those international rules and guidelines by which global trade and global finance is governed -- rules which demand social sector disinvestment, and maximize the overall profit of American corporations, in particular.

While American workers' welfare may have been negatively influenced by foreign competition, this is not reflected in the profits of U.S. corporations, which are soaring. The rich, rather than sharing the wealth, are getting richer, and letting labor suffer. During the period from 1980 to 1995, corporate revenues rose 129.5 percent, corporate profits rose 127 percent, and executive pay rose 182 percent. In the 1990s, corporate profits have totaled $4.5 trillion -- a sum equal to the cumulative paychecks of fifty million working Americans who earned less than $25,000 a year, for those eight years.

Because of phenomenal growth in profits in recent decades, the operations of many American corporations are now larger than the economies of many countries. Of the hundred largest economies in the world, fifty-one are now corporations and only forty-nine are countries. General Motors -- the twenty-second largest economy in the world -- has a larger economy than Denmark, larger than Thailand, and larger than Turkey. Ford Motors is larger than South Africa, larger than Saudi Arabia, and larger than Norway. Exxon is larger than the economy of Finland and Wal-Mart is larger than the economy of Greece.

Extensive government subsidization of corporations began in the 1980s, when the U.S. tax code was rewritten to drastically reduce corporate income taxes. Corporate tax breaks carry a lower political profile than direct subsidies to businesses for programs such as the one that helps McDonald's Corp. sell Chicken McNuggets overseas. But they cost about as much. "The tax code is a major source of corporate welfare," says Congressman Lane Evans of Illinois. In 1954, American corporations paid seventy-five cents in federal taxes for every dollar paid by individuals and families; in 1994 they paid only about twenty cents in taxes for every dollar paid by individuals and families.

In fact, the U.S. corporations pay the lowest rate of corporate taxes in the world. In other advanced nations, corporate taxes are up by sixty percent as a share of gross domestic product (GDP) since the 1960s. In the mid-1960s, corporate income taxes in the United States and Japan were almost the same -- each about four percent of GDP. Since then, Japanese corporate taxes have almost doubled, while U.S. corporate taxes have fallen to about two percent of GDP. Since the 1970s, corporate income tax payments as a share of national output have fallen by forty percent.

This decline occurred in part because of a reduction in legislated tax rates, and in part because of a shift in the manner in which investment was financed: investment in the 1980s was increasingly financed by debt rather than equity. Corporations have succeeded in reducing their share of the tax burden, in part, through a provision in the government rules that permit a virtually unlimited deduction for interest on debt. Since interest paid by a company is treated as an expense and not taxed, the higher share of interest in total capital income in recent years has contributed to a decline in the tax rate on all capital income. Some tax laws add insult to injury -- literally. For example, after testing faulty medical products on unwitting hospital patients, C.R. Bard Inc. paid $61 million in penalties in 1993 and got to take half the fine as a tax deduction!

Two investigative reporters at the Philadelphia Inquirer, Donald L. Barlett and James B. Steele, have documented how the U.S. Congress has shifted the tax burden from corporations onto the middle class and the working poor. They document, for example, that Chase Manhattan Corporation, the parent corporation of Chase Manhattan Bank, in the two-year period 1991 and 1992 had net income (after expenses but before taxes) of $1.5 billion. Chase paid only $25 million in federal taxes, for a tax rate of 1.7 percent, even though the official corporate tax rate at the time was thirty-four percent. Texaco, the oil company, with a before-tax net income of $2.7 billion in 1991 and 1992, paid $237 million in U.S. taxes, a tax rate of 8.8 percent.

At the state level, corporate taxes also have dropped considerably during the last thirty years. The difference now has to be made up from property taxes, sales taxes, wage taxes, and other levies that strike hardest at the middle class and the working poor. For example, in New York State in 1961, corporate income taxes accounted for thirteen percent of all tax revenues; by 1991, it had fallen to seven percent. In Wisconsin in 1961, corporate income taxes accounted for thirteen percent of the state's total tax revenues; in 1991 it was only six percent. In 1961, South Carolina derived nine percent of its total tax collection from corporate income tax; by 1991, it derived less than four percent.

Many companies pay no taxes at all. According to historian Howard Zinn, "five of the top twelve American military contractors in 1984, although they made substantial profits from their contracts, paid no federal income taxes." More than that, as Zinn notes, "The average tax rate for those twelve contractors, who made $18 billion in profits for 1981, 1982, and 1983, was 1.5 percent," while middle-class Americans paid fifteen percent. The theory behind these tax cuts was that corporations would take the money they saved in taxes and invest it back into their businesses. But in reality this never happened.

In 1986, Citizens for Tax Justice surveyed America's 250 largest and most profitable corporations. The survey found that 130 -- more than half! -- managed to pay absolutely nothing in federal income taxes in at least one of the five years from 1981 to 1985. These 130 companies, ranging alphabetically from Aetna Life & Casualty to Xerox, earned a combined total of $72.9 billion in pretax domestic profits in the years they did not pay federal income taxes. Of this group of 130 corporate tax freeloaders, seventy-three had at least two years of paying nothing in federal income taxes from 1981 to 1985. Forty-two of these companies paid nothing in total federal income taxes over the entire five years! All had reduced their capital spending and reduced their work forces. The extra money instead went for higher stock dividends, higher pay for chief executives (CEOs), and to pay for corporate mergers and acquisitions. That same pattern continues today.

Remember the robber barons of 19th-century America? Here they are again. Even such a mouthpiece of the American capitalist class as Business Week calls CEO pay "out of control" in a recent article on the income of America's top corporate executives. Corporate chief executive officers enjoyed their richest years ever in 1996 and 1997, according to Business Week's annual Executive Pay Scoreboard survey which examines the pay of the highest-paid executives at 365 of the country's largest companies. Their salaries, bonuses and other forms of income in 1996 rose a record fifty-four percent after a thirty percent jump in 1995.

In 1997, among 365 major U.S. companies, CEO pay climbed another thirty-five percent. Average CEO pay that includes salary, bonus, and long-term compensation such as stock options, skyrocketed to an average of $7.8 million, in 1997, up from $5.8 million in 1996, according to these Business Week's executive pay reports. That breaks down to $650,000 a month, $152,941 a week, or $21,369 a day. Every day, these CEOs made the equivalent of the yearly income of an average worker. Figured at a standard work-year of 2,000 hours, this would mean a pay rate of $3,900 an hour, or nearly $65 a minute! Think about it. By the way, the salary of the president of the United States is $200,000.

The pay disparity between CEOs and U.S. workers is increasing to ridiculous levels. In 1965, CEOs made forty-four times the average factory worker's salary. Today, CEOs make 326 times the average factory worker's pay. That's the ratio of the top to the average, not to the bottom. The current minimum wage gives a full-time working person a yearly income of $10,712 a year. This is not enough for a family with children to live above the poverty line. To place this salary in comparison to executive pay, the average CEO makes 728 times more than a minimum wage worker in the United States. If the minimum wage had risen at the same rate as executive pay, it would now stand at nearly $41 an hour as opposed to $5.15.

As Executive Excess Report by the Institute for Policy Studies and United for a Fair Economy suggests, "To get a good picture of the incredible expanding CEO-worker wage gap, imagine the Washington Monument. If the real 555-foot Washington Monument reflects the average 1997 CEO paycheck, then a scaled-down replica representing average worker pay would be only twenty-one inches tall. It's shrinking fast. A Walgreens cashier would have to work 217 years to match the 1997 pay of Walgreens CEO C. Walgreen. A Wal-Mart clerk would have to work 312 years to match the 1997 pay of Wal-Mart CEO Daniel Glass. A K-mart clerk would have to work 423 years to match the 1997 pay of K-mart CEO Floyd Hall.

The attack by Big Business on workers -- the transfer of jobs overseas by corporations, dramatic downsizing and layoffs, and the fierce opposition to employees' right to union representation -- has dramatically shifted all power in America toward corporations. That's the main reason why the bosses' income is "out of control" and this whole nation sharply divided between winners and losers. This is why the richest one American -- Bill Gates -- owns more wealth than the bottom 100 million Americans. Bill Gates' fortune rose at a rate of over $2.1 million an hour in 1997, which is much, much more than the absolute majority of Americans can make over a lifetime.

A Philadelphia Inquirer survey of twenty Fortune 500 corporations -- in industries ranging from tractors to computers, from soft drinks to soap -- shows that the salaries and bonuses of the highest-paid executives ballooned an average of 951 percent between 1975 and 1995, or five times the inflation rate. Average CEO pay grew by 152 percent between 1978 and 1995, more than five times as rapidly as productivity.

After reflecting on the above data the question remains: has solidarity and the war on poverty been replaced by the war on the poor? It appears that what is in place nowadays is socialism and tax cuts for the rich and savage capitalism for the poor. This is certainly not something that St. Francis of Assisi would approve of, never mind the present Pope who also finds the situation scandalous.


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