Pay no attention to the Lying Liars of the Right -- inequality of economic opportunity was NOT always the law of the land

The sainted Ronald Reagan bequeathed Americans the right to revel in their ignorance, bigotry, and savagery even as they were being so carefully lined up in the bent-over position.


"What [William Lazonick] has uncovered is a shift in corporate conduct that transformed the U.S. economy -- for the worse. From the end of World War II through the late 1970s, he writes, major U.S. corporations retained most of their earnings and reinvested them in business expansions, new or improved technologies, worker training and pay increases. Beginning in the early '80s, however, they have devoted a steadily higher share of their profits to shareholders."

-- Harold Meyerson, in his Washington Post column
"In corporations, it’s owner-take-all"

by Ken

Last night I shared Jen Sorensen's lovely Daily Kos comic strip that neatly and crucially made the connection between the institutionalized social inequality on display in Ferguson and the institutionalized economic and legal inequality on display in Bankster America. And as I said, while I was focusing yesterday on the social-inequality side of this coin, tonight I planned to flip the coin over to the economic-inequality side, noting that they are the twin legacies of the sainted Ronald Reagan.

When it comes to Saint Ronnie, I write a lot (to whoever said "incessantly," was that really helpful?) about his disastrous sociopolitical legacy, the benediction he bestowed that whatever you believe to be, or even wish to be, reality is the real thing -- assuming, of course, that it's compatible with an ultra-right-wing way of looking at, or not looking at, the world. I guess that's the side of the Reagan Legacy that usually makes me crazy, since the consequences are incalculable.

That benediction, after all, comes with an official Seal of Good Americanism for every crackpot chemical impulse flits through a person's brainm such that if it feels right, or just feels good, to you, then it's for real -- again assuming it's compatible with ultra-right-wing doctrine. Not to put too fine a point on it, the "it" here includes every species of ultra-right-wing hatred, savagery, bigory, and urge to violence. If you feel it, preached Saint Ronnie, and if it's real American (translation: compatible with ultra-right-wing doctrine), it's real.

It's called, you know, "Morning in America."

But I tend not to dwell on the other branch of the Reagan legacy, the more nuts-and-bolts kind. For while Saint Ronnie was bestowing upon Americans without access to the levers of power this blessing of unlimited ideological insanity, to those Americans manning the levers of power he was bestowing the country itself, tied in a bow -- again, assuming that those lever-manners subscribed to the ultra-right-wing vision of "free-market capitalism" wherein the mission of government is to force Americans without power to their knees, bent over, ready to receive what ever might be shoved up their posteriors.

It's possible to construct a working model whereby either branch of Reaganism can be seen as providing "cover" for the other. But the power of money being what it is -- which is to say the power of money -- if you were a betting person, you would probably want get behind the view that the crackpot, emotionally exhilarating savagery of Ronnie the empowerer of the masses was providing cover for the rape of those masses by followers of Ronnie the phony free-market capitalist.

One of the crucial elements of the permanent institutionalizing of crackpot ultra-right-wing reality, of course, was Saint Ronnie's open war on labor unions. And doggone if his folksy, largely reality-free or even reality-defying schmoozing skills weren't perfectly suited to turning large numbers of Americans against the only institution our economy has (or rather had) to resist the pulverizing will of the Economically Empowered. He pulled the trick of making the Great American Masses feel empowered while joyfully positioning themselves in the Great Bend-Over.

Now, it has probably always been true that if you tried to talk about equality of economic equality, the right-wing powers who depend so heavily on inequality of opportunity cried, "Class warfare!" And who would know better than the people who had made class warfare a way of life, except on their terms, which are roughly the class-war equivalent of the military-war C-in-C Reagan waged on Grenada. Make sure they're bent over for optimal insertion.

However, over the last decade or two, as the War on Equality of Opportunity has become the American Way, a wrinkle has been added: pretending that the way things are now is the way things have always been, so shut your pieholes, you whining "takers." Don't you know it's Morning in America?

With Labor Day approaching, Harold Meyerson -- bless his soul -- is here to tell us that uh-uh, this is not how it has always been, and what's more, there was a time in the not-so-distant past when this was understood by almost as many Republicans as Democrats. I provided a link last night to Meyerson's Washington Post Labor Day-themed column. For those who haven't already read it, and perhaps even those who have, it begins: "Labor Day -- that mocking reminder that this nation once honored workers -- is upon us again, posing the nagging question of why the economy ceased to reward work."

He ticks off a couple of frequently proposed culprits, globalization and technological change, but then directs "anyone seeking a more fundamental answer" to the article "Profits Without Prosperity" by William Lazonick in the September Harvard Business Review, which he later says "does nothing less than decode the Rosetta Stone of America’s economic decline."

Like Thomas Piketty, Lazonick, a professor at the University of Massachusetts at Lowell, is that rare economist who actually performs empirical research. What he has uncovered is a shift in corporate conduct that transformed the U.S. economy — for the worse. From the end of World War II through the late 1970s, he writes, major U.S. corporations retained most of their earnings and reinvested them in business expansions, new or improved technologies, worker training and pay increases. Beginning in the early ’80s, however, they have devoted a steadily higher share of their profits to shareholders.

How high? Lazonick looked at the 449 companies listed every year on the S-and-P 500 from 2003 to 2012. He found that they devoted 54 percent of their net earnings to buying back their stock on the open market — thereby reducing the number of outstanding shares, whose values rose accordingly. They devoted another 37 percent of those earnings to dividends. That’s a total of 91 percent of their profits that America’s leading corporations targeted to their shareholders, leaving a scant 9 percent for investments, research and development, expansions, cash reserves or, God forbid, raises. [Emphasis added.]

"As late as 1981," Meyerson writes, "corporations directed a little less than half their profits to shareholders." But then came Morning in America.

[T]he shareholders’ share began rising in 1982, when Ronald Reagan’s Securities and Exchange Commission removed any limit on corporations’ ability to repurchase their own stock and when employers — emboldened by Reagan’s destruction of the federal air traffic controllers’ union — began large-scale union-busting. Buybacks really came into their own during the 1990s, when the pay of corporations’ chief executives became linked to the rise in the value of their company’s shares. From 2003 through 2012, the chief executives of the 10 companies that repurchased the most stock (totaling $859 billion in aggregate) received 58 percent of their pay in stock options or stock awards. For a CEO, getting your company to use its earnings to buy back its shares might reduce its capacity to research or expand, but it’s a sure-fire way to boost your own pay.

And it gets better, Meyerson notes. "With companies lavishing virtually all their net income on shareholders and executives, the way many of them cover their actual business expenses -- their R-and-D, their expansion -- is by taking on debt through the sale of corporate bonds." And better still:

A number of companies, however — most prominently, IBM — borrow specifically to increase their payout to shareholders. And IBM is not alone. Friday's Wall Street Journal reported that U.S. companies are currently incurring record levels of debt, much of which, the Journal noted, “is being used to refinance existing debt, being sent back to shareholders as dividend payments and share buybacks, or banked in the corporate treasury as executives consider how to potentially deploy funds as the economy expands.” Many of the companies that have spent the most on buybacks, Lazonick demonstrates, have also received taxpayer money to fund research they could otherwise afford to perform themselves.

"What Lazonick has uncovered," Meyerson writes, "is the present-day American validation of Piketty’s central thesis that the rate of return on investment generally exceeds the rate of economic growth."

Indeed, Lazonick has documented that wealth in the United States today comes chiefly from retarding businesses’ ability to invest in growth-engendering activity. The purpose of the modern U.S. corporation is to reward large investors and top executives with income that once was spent on expansion, research, training and employees. To restore a more socially beneficial purpose, Lazonick proposes scrapping the SEC rule that permitted rampant stock repurchases and requiring corporations to have employee and public representatives on their boards. [Emphasis added.]

"The lesson for Labor Day 2014 couldn't be plainer," Meyerson says. "Unless we compel changes such as those Lazonick suggests to our model of capitalism, ours will remain a country for investors only, where work is a sucker’s game."

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