The Federal Reserve chart of CEO pay history serves as well to illustrate the suppression of America’s middle class. When the corporate boss takes a larger share, less remains for others. And today, corporate bosses take some six times more than they once did, while the middle class struggles to stay afloat. The rich are becoming richer and the United States is devolving back toward a two class society; putting the housewives to work has not been enough. The question is, why?
For clarity: We are not blaming CEO greed alone for middle class dissolution; the corporate bosses simply serve with excellence as canaries in out economic coal mine. They are in fact, only one of our list of suspects and not the most important. But they are guilty, and very visible.
Another obvious suspect is government: It spent less than 10% of GDP early last century; it now approaches 40% of GDP. Nor does government create wealth with the money it extracts from (mostly middle class) taxpayers. That extraction leaves the taxpayers with less and the debt-financed deficits are a mortgage upon future taxpayer earnings as well. Nor is government’s role limited to spending.
Government has taken control of what was a relatively economically free market, imposing political goals that limit productivity as they replace economic ones. Promoting labor union power to the point of driving U.S. industry offshore, for one example. The imposition of costly regulation is another. And this government effect is magnified when you appreciate the inclusion of government spending in calculating GDP.
But these changes are not prime causes; they are only effects themselves, symptoms of larger societal shifts that have produced them. The United States is shifting back toward the historic economic norm because its culture has shifted back toward historic social values. Economics only reflects human behavior, as does government. When behavior changes, so does its economic result.
The Americans who designed and built the United States were 18th century liberal politicians who led a post- Renaissance, post Reformation, mostly Anglo-Saxon society. A society that accepted the once famous “Protestant work ethic” and its underlying Christianity. Those cultural values produced the least corrupt societies extant; that is a large factor in the rise and fall of a middle class. Today, those productive if uncomfortable values are diluted by socialism’s intrinsic dependence and entitlement. A glance at a world history map of socialism should illuminate the present U.S. trends.
It is a simple proportionality: Middle class prosperity is inversely proportional to government power and corruption. As those latter two have increased, the former has decreased. Simple. It should not be unexpected either; most unusually productive human societies have been disciplined and usually, that discipline has worn off, returning that society to the less prosperous human norm. The Romans will serve as example, but they are but one of many. And now, we are making it our turn in the United States where CEOs trade favors from politicians and that success is rewarded by their directors. .
But maybe there is hope; last century’s Great Depression ended a similarly dissolute era, the Roaring Twenties. The financial crash that ended that era led immediately to reform, reduced corruption and a return to earlier values until World War II interfered. But that was a time of much less government than we accept no; the Federal government was weak enough that its employees expected to work for less pay than was available from the private sector, though their positions were more secure. That has changed as dramatically as has CEO pay. In the 21st century, big government pays its workers more than they can expect from private employment and that gap is widening.
Having found independence, personal responsibility and Christian rectitude stressful, Americans have given them up for dependence and entitlement instead, an apparently easier path. That the increased ease carries an increased cost only reflects the realities of our universe. That so many apparently do not understand that reflects an inevitable outcome of public and so, politicized education.
A general turn Right toward the Founders’ vision or Left toward more of the present trend probably awaits the next financial crash to be identifiable on the public stage. And we know that the final decision will be taken by the young. Is anyone feeling prophetic?