"Austerity": the price we've gotta pay to keep the World's Greediest rollin' in dough

by Ken

From today's Washington Post:

Special Report: Breakaway Wealth
With executive pay, rich pull away from rest of America


By Peter Whoriskey

It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.

Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas’s office sat on the second floor of a milk distribution center, Engles’s stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company’s $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal.

The evolution of executive grandeur — from very comfortable to jet-setting — reflects one of the primary reasons that the gap between those with the highest incomes and everyone else is widening.

For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent. But economists had little idea who these people were. How many were Wall street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled.

Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.

The largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms, according to a landmark analysis of tax returns by economists Jon Bakija, Adam Cole and Bradley T. Heim. These are not just executives from Wall Street, either, but from companies in even relatively mundane fields such as the milk business. . . .

We've spent a fair amount of time here at DWT pondering this business of barely precedented economic inequality -- not so much the fact of it (except occasionally to set out some numbers to document it) as the fact that it goes on, and multiplies, with barely a whimper from the rest of us.

So I don't know that there's all that much in this WaPo "special report" on "breakaway wealth," except for (1) its appearance in the house organ of Village complacency, and (2) some additional nuts 'n' bolts documentation of the phenomenon.

PROJECTS FOR HOME STUDY

(1) Write a brief essay on the topic: Is it possible to run a dairy company from a domicile less exalted than a Dallas-market $6 million one? You may wish to consider what the absolute rock-bottom-price home is necessary for running a dairy company.

(2) Step 1: Find out the average salary for such sucker professions as schoolteacher, policeman, and firefighter and calculate the applicable compensation multiple for running a dairy company Dean Foods-style. Step 2: Write a brief essay on the topic: What makes running a dairy company Dean Foods-style worth XX [fill in the applicable figures from Step 1] more than schoolteaching, policing, and firefighting?


COMING UP: You can't have a bitchin' "austerity" movement without an International Conspiracy of Dunces -- meet David Brooks


Coming up in my 6pm PT post. Oh, quit moaning. There has to be a reason why he continues to write the stuff he continues to write -- and get paid, and taken "seriously."


SUNDAY CLASSICS SCHEDULE NOTE

The post on Berg's Wozzeck will appear at 2pm PT. It just worked out better for me schedule-wise that way.

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