Broadly speaking, the role of an establishment economist is to come up with new ways of saying, "actually, your boss is right." In other words, the world we're living in is the best possible world, and the fact that you got contact burns from collapsing on the scorching sidewalk outside of the grocery store where you couldn't afford your weekly shopping is unfortunate, but unavoidable.
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reshared this
sleepfreeparent
Unknown parent • • •Nicole Parsons
in reply to sleepfreeparent • • •@sleepfreeparent @CptSuperlative
If #KochNetwork can provide funding that so thoroughly corrupted the study of economics, that it became a shield for status-quo apologetics for the Leisure Class, what else has that funding corrupted?
So far that money has thoroughly corrupted:
mainstream media, climate science, elections, the judiciary, policing, taxation, national defense, civil rights, warfare in Afghanistan, Israel, & Ukraine, and national defense against domestic terrorism.
Cory Doctorow
in reply to Cory Doctorow • • •If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2024/09/09/low-wage-100/#executive-excess
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Pluralistic: America’s best-paid CEOs have the worst-paid employees (09 Sep 2024) – Pluralistic: Daily links from Cory Doctorow
pluralistic.netCory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/3
I once had an economist send me an email to explain how misguided it was to focus on executive pay. Sure (he wrote), executives might be taking home eye-popping sums, but these weren't really coming at the expense of their workers' wellbeing.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/4
Just do the math: take those whopping CEO pay-packages and parcel them out to the hundreds of thousands of workers at Fortune 100 companies, and you'll find that each worker's paycheck is just a few dollars larger. Hacking away at CEO pay is an act of spite, not justice.
Meanwhile (the economist continued), just look at where those giant paydays are coming from: stock grants, not salaries.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/5
In the bad old days, CEOs' millions came in the form of cash. That incentivized short-term thinking, since anything the CEO did to goose the quarterly numbers would translate into a cash bonus, even if it set the company up for failure in the years to come. But if a CEO's payout comes long after their decisions - if their stock grants don't vest for three or four years - then the CEO's incentives are aligned with long-term sustainability, which is good for everyone.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/6
It's all nonsense, of course - every bit of it.
Take the question of whether controlling CEO pay is useful as a matter separate from the impact it has on workers' wages. In our society, money is power, and the more money any individual is allowed to amass, the more power they amass. This power is then mobilized to acquire more money, and thus more power. Before you know it, the ultrawealthy are perverting every democratic institution we have.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/7
They buy the Supreme Court:
https://pluralistic.net/2023/04/06/clarence-thomas/#harlan-crow
They fill our elite universities with their doltish offspring:
https://pluralistic.net/2021/11/18/bipartisan-consensus/#meritocracy
They set the planet on fire:
https://pluralistic.net/2024/09/04/deferred-gratification/#selective-foresight
And they bankroll fascists:
https://pluralistic.net/2023/06/02/plunderers/#farben
So even if controlling wealth acquisition had *no* impact on workers' wages, it would be worth doing.
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Pluralistic: 18 Nov 2021 – Pluralistic: Daily links from Cory Doctorow
pluralistic.netCory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/8
But of course, cutting executive pay *does* have an impact on workers' wages. It's true that simply dividing a CEO's pay among their workforce yields pennies, but that's the wrong way to do the math (and economists know it).
Every year, the Institute for Policy Studies publishes a report called "Executive Excess," in which they track the gap between the compensation offered to corporate leaders and to the workers who generate all that money.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/9
This year's is a banger:
https://ips-dc.org/report-executive-excess-2024/
The report zeroes in on one weird trick that CEOs use to goose their compensation: stock buybacks. Buybacks are an illegal form of stock manipulation that is nevertheless widely practiced, thanks to the SEC's policy of stretching Rule 10b-18 of the Securities Exchange Act of 1934 to creates a "safe harbor" for conduct that violates the plain language of the SEA.
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Executive Excess 2024 - Institute for Policy Studies
averyr (Institute for Policy Studies)Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/10
Buybacks divert a company's profits to buy its own shares on the open market, reducing the supply of outstanding shares, which makes each outstanding share worth more. Say a company is worth a billion dollars and has issued a million shares. Each of those shares is worth $1,000 (because $1,000 times one million is $1 billion). The company uses its profits to buy half of those shares, so now the remaining 500,000 shares are worth $2,000 ($2,000 times 500,000 is $1 billion).
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/11
So buybacks increase the value of a company's shares - *without* increasing the value of the company. This is the opposite of the notional goal of paying CEOs with shares (long-term sustainability). Companies that buy back their own stock do so at the expense of R&D, or competitive price-cutting, or (of course) paying their employees more. Unlike a dividend - in which companies pay shareholders some of their profits directly - buybacks manipulate the price of shares directly.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/12
Why would CEOs prefer buybacks to dividends? Because CEOs sit on *tons* of shares. Even if only some of those shares have vested, a CEO who uses this ruse to increase share prices can cash those shares out, borrow against the rest, *and* count on a big stock grant from shareholders who are grateful for their windfall.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/13
That means that the *true* cost of a CEO pay package isn't the value of the shares they're awarded - it's the cost of the stock buyback that leads to that award. And this is where the numbers get truly, obscenely, *huge*.
Take Lowe's: over the past five years, CEO Marvin Ellison spent *$43 billion* on stock buybacks, netting $18 million for himself in the process.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/14
Now, Lowe's has 285,000 employees, half of whom earn less than $33,000/year. Divide Ellison's $18m among those workers and each of them would net a paltry $126/year. But if you were to share out the $43 billion Ellison had to piss up against a wall on stock buybacks among those workers, you'd be able to give *every worker a $30,000 bonus, every year*:
https://www.counterpunch.org/2024/09/02/the-low-wage-corporations-that-blew-half-a-trillion-dollars-to-inflate-ceo-pay/
Lowe's leads the "Low-Wage 100," IPS's index of the worst paying 100 companies out of the S&P 500.
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The Low-Wage Corporations That Blew Half a Trillion Dollars to Inflate CEO Pay - CounterPunch.org
Sarah Anderson (CounterPunch.org)Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/15
Over the past five years, the Low-Wage 100 has spent more than *half a trillion dollars* on stock buybacks. As with other companies, the CEOs of the Low-Wage 100 timed mass sell-offs of their shares to coincide with the buybacks:
https://www.sec.gov/newsroom/speeches-statements/speech-jackson-061118#_%20ftn22
The largest 20 companies in the Low-Wage 100 spent nine times more on stock buybacks than they spent on worker retirement plan contributions.
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SEC.gov | Stock Buybacks and Corporate Cashouts
www.sec.govCory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/16
Chipotle spent $2b on buybacks - that's 48 times what the company put into its workers' 401(k)s. That's because 92% of Chipotle employees *can't afford to have a 401(k)*.
The economists who campaigned to pay CEOs in stock were wrong about nearly everything. CEO compensation *does* come at the expense of a living wage for workers, and it *doesn't* build sustainable businesses focused on long-term value.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/17
The billions that Boeing spent on buybacks are billions that Boeing *didn't* spend on airworthiness:
https://ycharts.com/companies/BA/stock_buyback
But those economists were right about one thing: incentives matter. In incentivizing CEOs to keep share prices high above every other consideration, establishment economists set the stage for a corporate America where CEOs were punished for investing in a living wage, a dignified retirement, or even a non-lethal product.
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Boeing Stock Buybacks (Quarterly) Insights | YCharts
ycharts.comCory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/18
Instead, we have a business environment that boils down to a competition to see who can eat their seed-corn the fastest.
Contrary to those economists' insistence that this is the best possible outcome, this all represents a (disastrous) choice. Lowe's doesn't need stock buybacks to thrive: we know this because from 2000-2004, Lowe's spent *zero* dollars on stock buybacks. In that period, CEO pay ran about 40 times median worker pay.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/19
Today, Ross Stores CEO Barbara Rentle makes *2,100 times more* than her median employee.
What should we do about this? Well, for starters, the SEC should re-establish enforcement of the prohibition on stock buybacks and drop the absurd fiction that buybacks satisfy the safe harbor requirements of Rule 10b-18.
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/20
We should end preferential tax treatment of capital gains, the money you get from owning something, which is taxed at a fraction of wages, the money you get from *doing* something. This would also have the side benefit of killing the "carried interest tax loophole," a rule designed for 16th century sea-captains (!!) that lets private equity looters duck billions in taxes:
https://pluralistic.net/2021/04/29/writers-must-be-paid/#carried-interest
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Cory Doctorow
in reply to Cory Doctorow • • •Content warning: Long thread/21
On top of this, the IPS recommends:
* Taxing stock buybacks (the 2024 Democratic platform proposes quadrupling the existing tax on buybacks);
* Increase taxes for excessive CEO pay (a rule already in place in San Francisco and Portland and proposed in several federal bills);
* Ban companies that have absurd pay gaps from doing business with the US government (something a sitting president can do at the stroke of a pen).
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Susan Noakes
in reply to Cory Doctorow • • •Content warning: re: Long thread/21
GhostOnTheHalfShell
in reply to Cory Doctorow • • •Micheal Hudson is a remarkable economist. His chief contribution, the study of debt and money since earliest human civilization. The basic math regarding usury vs real production is the former grows exponentially without limit, everything else plateaus.
The financialization is the banking sector doing to the domestic economy what the U.S./IMF has done to the world; a giant Ponzi scheme, neoliberalism helped legitimize. Deep history is rhyming with a climate+debt collapse
🧵
⏚ Antoine Chambert-Loir
in reply to Cory Doctorow • • •^^ Must read (QLPTTTR — Quite Long, Please Take Time To Read) text by @pluralistic
“We should end preferential tax treatment of capital gains, the money you get from owning something, which is taxed at a fraction of wages, the money you get from *doing* something.”
Danny Boling ☮️
in reply to Cory Doctorow • • •Cory Doctorow
in reply to Danny Boling ☮️ • • •Pluralistic collages
Cory Doctorow (Flickr)Danny Boling ☮️
in reply to Cory Doctorow • • •Marius Fortuna_3
in reply to Cory Doctorow • • •Establishment Economists explaining the Central Bank setting interest rates at 20%, causing massive unemployment, collapse in the housing market, widespread small business failures, and suicides among small business owners and unemployed;
"Well last months M1 and M2 Money Supply numbers combined with high employment were at levels economists and Central Bankers consider potentially inflationary so they had to do it."
#USPolitics #cdnpoli #ukpolitics #capitalism #economics
OddOpinions5
in reply to Cory Doctorow • • •I guess "broadly" allows a lot of wiggle room but there are a lot of establishment econs doing good stuff eg
Aaron Sojourner
@aaronsojourner.org
Andrew Bridges
in reply to Cory Doctorow • • •