Capitalism is devouring itself. The greatest threat to entrepreneurship is the savage neoliberal global economic order which has developed.
No longer does financial opportunity exist for the one who builds a better mousetrap. Our current neoliberal order suffocates the entrepreneurial spirit capable of lifting individuals toward greater financial rewards and a higher economic class. What we have now is the fortification of ceilings, which prevent upward mobility, and porous floors, which facilitate downward spirals.
If we ignore sexism and racism for a moment, there was a time in the 1950s in the U.S. when a one-income household was sufficient to buy a house, take a yearly vacation and put one’s children through college. Today, a multi-income household is not enough to buy a house and if children do go to college, they are burdened with crushing student loan debt. What went wrong?
Back in 1960, the CEO of American Motor Association—George Romney, father of the Mitt—declined a $100,000 annual bonus by claiming he already made too much money, informing his board of directors that no executive should be paid more than $225,000 a year ($2.1 million in today’s money). During this time, John O. Ekblom, CEO of Hupp Corporation, was offered a $110,000 bonus to his $42,000 salary. He too refused stating, “The total sum of $152,000 far exceeds my needs and my appetites.”
Still, by the mid-1970s, the average CEO was making forty-four times as much as the average factory worker.
All this began to change during the early 1980s thanks to CEOs like Roberto Goizueta of Coca- Cola and Michael Eisner of Disney. They convinced stockholders to link their compensation to company stock prices.
This act resulted in the increase of CEO salaries to 70-times that of the average worker by 1985. By 1990, CEO salaries rose to 100-times that of employees’ annual income.
When the 2008 Great Recession hit, CEOs were earning 299-times as much as the average worker. The economic pain of the recession was not evenly spread. While many employees lost their jobs, often outsourced, others, like today’s striking autoworkers, were forced to take pay cuts. CEOs’ income, on the other hand, increased to 325-times the average worker two years later in 2010.
The 2020 COVID pandemic may have been deadly to millions, but it was profitable for a few. The collective wealth of U.S. billionaires soared by more than 70 percent ($5 trillion dollars).
Consider the 10 richest men in the world. They witnessed their wealth double during the first two years of the pandemic.
Some experienced historically unprecedented increases in their net worth. Take, for example, Elon Musk, CEO of Tesla Motors, whose economic worth of $27 billion at the start of the pandemic increased to $294.2 billion by January 2022 (up 1,016%).
Or Jeff Bezos, founder and former CEO of Amazon, who saw his wealth increase during this same period to $202.6 billion from $113 billion (up 67%). These uber-rich replaced yachts with spaceships as the ultimate conspicuous consumption symbol. Meanwhile, almost everyone else’s income dropped during this same period, forcing some 160 million more U.S. citizens into poverty.
Today, the average CEO makes 670-times the average worker’s wage, with some companies, like Amazon’s former CEO, being paid 6,474-times the company’s median pay. Meanwhile, workers’ wages nationwide failed to keep up with the average 4.7 percent inflation.
Minimum wage laws have not changed since 2009, still stuck at $7.25 an hour. Yet, according to a 2021 report by the Congressional Budget Office, increasing the minimum wage to $15 would lift 900,000 Americans out of poverty and raise the wages of some 10 million other workers.
By 2030, it is expected that some 3.3 billion people on our planet will be living on $5.50 per day. If the ten richest men were to lose 99.999% of their wealth tomorrow, they would still be richer than 99% of all the world’s inhabitants.
To be clear, I am neither a capitalist nor a Marxist, despite rumors to the latter. As a former entrepreneur who started a company when I was 19 years old and successfully ran it for over a decade, I strongly believe in the importance of entrepreneurship if we want to see economies grow. Unfortunately, I do think Karl was correct about the internal contradiction of capitalism.
As CEOs pursue paying the lowest possible wages to increase corporate profits and their salaries, growth is maintained by creating more demand for products by providing more goods. But because most can’t afford said goods due to low wages, corporate profits are jeopardized.
In response, easier credit is provided to those who will have difficulty repaying. Falling wages and rising debt contributes to massive defaults (think subprime mortgages that preceded the 2008 Great Recession).
As massive defaults spread, financial institutions crumple (think Bear Stearns and Lehman Brothers, which triggered the Great Recession). As financial institutions crash, capitalism will be undone.
Greed is not good, despite fictitious Gordon Gekko’s proclamation. Unless we begin to tax the rich and redistribute those funds to the lower and middle class—as opposed to our current reverse-Robin Hood tax laws—we will witness our economic order succumbing under its own weight.
I believe the Great Recession was the first of the death pangs, a warning of what is to come. Add to this the degradation of our ecology, the increase in wars and the rise of fascist tendencies that will only exacerbate the situation.
Can we economically reorganize ourselves through tax laws? Anything is possible.
Will we? Not as long there is profit to be made in the destruction of humanity. Then you wonder why I am so hopeless.
Professor of Social Ethics and Latinx Studies at Iliff School of Theology in Denver, Colorado, and a contributing correspondent at Good Faith Media.