Monday, October 3, 2011

Money, money, money

I have recently begun some new corresponces centered on discussing economics.  In today's heated political environment, a chasm exists between the two camps as to the best method of circumventing our current economic malaise.  Even the prospect of the Super Committee to draft a proposal that will be palatable to both sides while still actually accomplishing something seems remote.  In my corrresponces, I have played the role of defender of government intervention to stimulate the economy.  I unquestionably believe it is the government's role to provide money/stimulus when the private sector is unable (as in the case of the Great Depression) or unwilling (as I believe is part of our problem today). 

There seems a strange juxtaposition of morality prevalent in today's discourse.  We have those who honor the sanctity of life by advocating the elimination of abortion in our society but who don't seem to extend that same honor to those whose only crime was to be born in a country other than America.  We have those who would stand at attention in an airport as a group of soldiers passed by in recognition of their bravery yet would hurl hateful epitaphs at the funeral of one who died for the very freedoms that they cherish merely because of who that person chooses to love.

And then there is money.  I am sure that most of us would seek justice against those who would steal lunch money from smaller schoolmates yet at the same time we frequently repeat sayings such as "Let the buyer beware" when faced with the sad story of someone who invested their savings unwisely or purchased an advertised product that was faulty.  We seem all to willing to admire those who are materially successful regardless of how they accomplished such success.  In the ultimate example of greed over man, there are many who have no qualms with the thousands of Wall Street derivative brokers who made untold millions of dollars pedaling financial instruments that held no value.  Even when the buyers of these worthless funds turned out to be the pension funds of working Americans resulting in the net loss in the billions to these retirement accounts, there were those who fought every and all regulation changes designed to try to prevent such future occurences.  Their belief in capitalism and the right for an individual to attain wealth seems to completely obliterate their examination of the methods one might use to become wealthy.

And then, of course, is the obvious teachings of Christ who equated the chances of a rich man to reach heaven with those of a camel to pass through the eye of a needle.  Do we just not believe that particular parable, or do we believe that God has altered the game so that those with the most money get the best seat in heaven?

Anyway, I would certainly prefer that the movers and shakers of this world, those with the best brains and the most ambition, the real job creators among us, would voluntarily come to the conclusion that a sustainable economic system builds from the bottom up and that no amount of trickle down will work if the tricklers are too consumed by attaining wealth, and those to be trickled upon believe that they might one day be a trickler so let there be no restraint.  In that  vein, I thought it relevant to reprint my story The Change for any new reader of my blog who has not encountered it as of yet.   

                                                                          The Change

Strangely enough, the change had begun from the actions of an athlete. Not one of those athletes who points to the sky whenever he performs admirably but clearly one whose spirituality matched his athletic prowess. He was twenty-eight years old, just in the midst of his prime, as he was reminded incessantly when he first proposed his idea. In the previous three years, he had led the league or been close to the top in every category that mattered, and it was expected that the negotiations for his next contract would set a new standard for compensation. When he first mentioned the plan to his agent, she immediately appealed to the his wife, mother, and teammates, even going as far as bringing in star athletes from other sports to talk some sense into him. But to no avail. He was adamant that it was time for someone to make a stand and who better but someone who could maximize the effect.

The process, as all significant social and economic changes are, was gradual and not readily noticed by the populace. In fact, at first the trend was a positive one. Starting after the second of two great world wars, there was impressive growth. And for the first 40 years or so, this growth penetrated virtually all levels of society. Within two generations, the ideas and ambitions of the best of the population helped drive the development of a thriving middle class whose labor made those ideas and ambitions come to fruition. This symbiotic relationship, while not completely inclusive of all people, for the first time bridged many of the gaps that had excluded women and minorities.

But the growth was unsustainable. In retrospect, it seemed obvious that a slowdown or a time of flat growth was inevitable after such a meteoric rise. But expectations had risen as well and so rather than taking a breath and revising expectations, the country's leadership continued to stoke the belief in unfettered progress. When natural resources seemed to be straining, new technologies were developed to enhance the processes. When investments could no longer rely on new ideas and hard work to produce the required gains, new financial vehicles were created which traded on expectations, opinions and trickery. When people working together for a common goal no longer resulted in enough profit, influences were popularized that inflamed class warfare and class envy even as jobs were moved to areas and countries where labor was cheaper and profit could be maintained.

Some said it was a purposeful slide, orchestrated by the haves to keep the have-nots in line and confused about their degrading state. But if the truth be told, it was everyone, rich and poor, liberal and conservative, who let it happen. Rather than looking in the mirror in acknowledgement of individual responsibility, they continued to buy when they should have saved, to waste when they should have conserved, and to believe the easy answers rather than demanding that someone tell them the hard truth. And so, a mere four generations after the biggest surge in opportunity and standard of living ever experienced in history, the trend began to reverse.

Where once school age children could by a ticket for a ball game on a sunny summer's day, now only the well-connected or lucky employees of a large corporation could afford to attend. Where once anyone could attend a college, even if just the local community college, now only those with status or money could attend an institute of higher learning. Where once, everyday people visited other parts of their country or even foreign lands, now only the rich even had vacations, let alone the money to spend on one.

"I don’t want the money, at least not just for me”, the star athlete began. “I expect you to spend the hundred million dollars you are offering me but I only want fifty of the hundred million. The remainder you must split amongst all the non-players in this organization, all the people who work at the stadium, all the faceless workers who set the stage for this sport”.

It took the organization a few months, but eventually they executed his request through direct bonuses and a trust fund to disperse the money over the course of the next four years as the contract stipulated. The owners and CEO did their best to keep the news a secret, but the secrecy did not last long. Surprisingly however, there was no need for the concern that drove their desire to keep the news from reaching the public. While there was certainly discord from many camps, the fans of the city quickly expressed their support. And the workers who had benefited from this unusual arrangement, displayed a new energy and pride in their jobs.

Later that year, two other athletes in a different city demanded a similar contract but went even further. One of them took the same tact with regards to splitting the money but the contract of athlete number two required the “excess” money to be applied to a lowering of the ticket prices. As a result, a few Sundays after the contracts were signed, a standing room only crowd included thousands of fans who had not seen a game in person in their lifetime.

From there, the trend spread to all of the other major sports. While competition on the field was still as intense as ever, the competition for innovative ways to share the wealth was just as feverish. Days featuring free food for all children in attendance, then games with free attendance for the children and their parents from entire elementary schools, then sporting events with no money changing hands at all. This is not to say that profit was removed from athletics. Business was still conducted, profit and loss still evaluated. But the idea that this was a game, played to entertain the everyday citizens who made the city work, became just as important.

Due to the overlap of friendships among many star athletes and those in the entertainment business, the change next penetrated that industry. The first star to embrace the notion reduced the face value of the tickets for his 20 city tour by 50% over the previous tour. When some scalping was reported by some fans at the third stop of the tour, the entertainer made a 30 second commercial asking those responsible to stop while also asking his fans to stop paying the extra money. For the most part, his plea worked and three other big name acts matched his 50% reduction of tickets.

Of course, at this point the movement was still a minor ripple. But as even the smallest pebble will create a wave that while tiny will still reach as far as the eye can see, news of these actions reached all levels of society. In the next year, a weekly series TV star took a 50% pay “diversion” which was passed along to the innumerable people who toil behind the scenes of every successful TV show. This same decision was quickly copied in short order by three movie stars, a radio talk show host, two television news anchors, and even an author who needed all her creativity to match the generosity of those who came before her.

But the tipping point occurred when the CEO of one of the most profitable and influential companies in the country called for a press conference one beautiful spring afternoon. With press from all over the world in attendance, he calmly walked to the podium and made the following announcement.

“Friends, family, members of the press, and those of you watching me live on the internet. As you know, in the past 2 years there have been some recent decisions by some high salaried individuals to share their compensation. This was accomplished in various ways, sometimes by strictly improving the salaries of the various support staffs, sometimes by passing along the difference to their fans and customers, sometimes a combination of both. Regardless of the method, the intent was the same; to reverse a trend that had led to an ever increasing income inequality in our country”.

“When I first became aware of these individuals and their actions, I was skeptical. I had become so used to gauging everything by profit and loss that these actions seemed ludicrous. But, as you all know from my history, I am nothing if not interested in new ideas, new trends, new ways to improve my company. So, about three months ago, I held a weekend long meeting with the top minds in business today. We started with the premise that this trend might be bad for our companies and business in general. We studied the available numbers for those companies which had been affected by the change and found very little difference in profit. Salaries, which are always a significant percentage of a company’s expenses, had only changed by distribution, not quantity. But the biggest surprise was that in some cases, profits had inched upwards. How could that be? These companies were paying well beyond market value for all but one position yet profits were not affected”.

The CEO stopped, took a short sip of water, then smiled.

“So we went beyond the numbers and talked to the people involved. Those that had given back some salary were proud of their achievements. A few of the individuals told me that they still had plenty of money but were experiencing much more satisfaction from their lives. It wasn’t more money they needed, just more happiness, a feeling that they had made a difference. And on the other side, those everyday employees who had been taken for granted, felt more appreciated. They knew the support nature of their roles but had grown frustrated that no matter how hard they worked, they couldn’t get comfortable. There was always a lagging bill, always something out of reach. But now, they had that extra buck to get to a movie or replace an old appliance or spend a Sunday at the beach”.

“And then we discovered something completely unexpected. The communities where these people lived were also experiencing an upswing in business. All that money that had gone exclusively to the top earners in the past was very rarely spent in the local area of the company. But a huge percentage of that diverted money was now staying in the communities. In short, it seemed to be a win-win situation and it made us reevaluate our original premise that perhaps those companies were not paying salaries beyond the market value of the work but were investing in their employees and the communities in which they worked and lived”.

At this point, about a dozen men and women approached the podium. For those familiar with business, they were witnessing an unprecedented gathering of the movers and shakers of the industry. They exuded confidence and comfort. They seemed relaxed while still possessing an understanding that they were about to expand the change into a country wide movement.

"Behind me you see many faces that you recognize. They are the faces of people who have accomplished a great deal in their lives. By any current standard of success, whether you use wealth, influence, power or possessions, they would be considered some of the most successful people in the country, if not the world. Together however, we have concluded that we may have missed the boat in some respects. We placed too much emphasis on personal wealth and the profitability of our companies, and not enough on the welfare of our employees and the communities in which we operated. We bought into the rationalization that we were providing jobs and forgot that if the jobs did not provide our employees with an acceptable standard of living, then we were not providing enough. In short, our bottom line focus sacrificed people for profit".

"As you know, our influences extend beyond the direct holdings of our organizations; we sit on the boards of dozens of other corporations across a wide spectrum of industries. After hours of meetings with these boards, we are here to publicize a few simple changes to the operations of those businesses. A list of these companies and these alterations is being passed around now so you can see how widespread the change will be and so you can publish the names in hopes that those businesses not on the list will seek to follow our example. As you can see, the change will include a reduction of our personal compensation so everyone will know that we are so confident in this strategy that we are starting with our own salaries".

The CEO stepped to the side of the group and raised his arm in their direction.

"We have accomplished a great deal during our business careers. But too much of it has centered on ourselves at the expense of our fellow man. Today, we chart a new course where our accomplishments are shared more equitably with the people doing the work. A course which values the welfare of all our employees on a more equal footing with that of the corporation, and values the people of the community in which they live as an extension of those employees."

With that, the CEO and the group of individuals with him departed the room. And while there was no instant revolution, the pendulum had been stopped. Over the next twenty years, the income gap between the top and bottom salaries began to diminish. The definition of rich no longer just included material possessions. While wealth still existed, excess wealth was definable, and avoided. Not because of a law but because it did not lead to the advance of the community. Business schools began teaching the concept of equitable compensation not just because it was fashionable but because it created a more motivated employee who produced a better product or service. Those in the entertainment industries accepted less compensation, not because they did not value their work but because they valued it as they valued other public servants; teachers, firefighters, police officers, and social workers. And so it didn't come as a big surprise when just three generations later, the definition of success had evolved from making a million to making a difference.


  1. Thoughts on reducing the corporate income tax rate? (maybe to 25%?)

  2. Anonymous,

    I am not all that interested in reducing the corporate income tax rate. Now that the Supreme Court has granted them personhood, corporations should pay the top personal income rate.


  3. Could you please have a blog about the corruption in your home town court, the Montgomery County Ophan's Court. The residents of Montgomery County have the right to know the about the corruption going on in their backyards.