Who in this country has more than they deserve? Wealthiest 1%

Here's some commentary that appeared in a recent edition of the Minneapolis Star-Tribune.

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John Verant: Who in this country has more than they deserve? Wealthiest 1%

JOHN WILLIAM VERANT
Last update: July 14, 2010 - 6:59 PM


Once upon a time, there was a myth called the divine right of kings. Under the logic of this doctrine, if a man had wealth and power totally disproportionate to any apparent contribution he had made to his fellow man -- i.e., if he was king -- it must be God's will. How did we know that it was God's will? Well, because he did. The circularity of the argument did not seem to bother anyone.
Today we believe in rational discourse and critical reasoning. We certainly do not base our political philosophy upon myths that cannot withstand five minutes of serious reflection. Or do we?

Recently, the press announced that the top 25 hedge fund managers in America collectively received $25 billion in compensation last year, an amount equivalent to that paid to 658,000 schoolteachers responsible for the education of 13 million students. Astonishingly, Wall Street pundits defended this disparity as fair, maintaining that it is the result of the operation of a free market.

The problem with this argument, as even Adam Smith knew, is that the "free market" is an objective measure of value only when parties have relatively equal bargaining strength. When bargaining strength is grossly disproportionate, as is usually the case in employer-employee relationships, the market is a compass that indicates nothing more principled than He Who Has the Power.

The past 30 years have witnessed the largest redistribution of wealth in the history of America. When Ronald Reagan came to power, the richest 1 percent of Americans held 20 percent of the total wealth. When he left office, that figure was 36 percent. Today it is 43. The distribution of income has similarly skewed. Since 1980, the wealthiest 1 percent of Americans had their share of all income increase 2 1/2 times. And the top 0.1 percent had their share of our national earnings increase an amazing six times. (I am indebted to Dr. Emmanuel Saez of the University of California, Berkeley for my figures.)

I suppose a free-market theorist might argue that the superrich are working six times harder, or that their business decisions are six times more astute. The truth is far simpler. Our leaders changed the rules of the game.

They changed the tax code so that Warren Buffet now pays income tax at a rate slightly less than one-half that paid by his secretary. They permitted businesses to use tactics in labor negotiations that in Europe would be criminal. They permitted corporations to undergo reorganizations in which they extinguished their obligations to employee pension funds, while their obligations to banks were held sacrosanct. As a direct consequence, today the richest 1 percent of Americans own as much as the bottom 95 percent, a disparity greater than at any time in our history. Money is power, and having a tiny minority holding the bulk of the power is contrary to the most fundamental premises of a democracy.

The CEO of one of Minnesota's health insurance companies receives compensation equal to that of about 1,600 nurses. If you think he deserves it, I am anxious to hear your case. But if you believe that it is the consequence of some natural or divine law, you are reasoning on the level of a peasant who believes his king was selected by God.

John William Verant is a lawyer in Maple Grove.