Tuesday, March 15, 2011

Hervé Kempf: Salary Ceiling, a Lever for Change

Salary Ceiling, a Lever for Change
by Hervé Kempf

Over the last 30 years, disparities in income have exploded. While a big company CEO earned about 35 times the average salary of one of his employees during the Trentes glorieuses [the French appellation for the period of glowing economic prosperity from 1945 to 1975], today, he earns 300 times as much. Faced with this reality, the idea of a maximum salary is making its way in public debate. Let us review the arguments in favor of such a measure:

The idea is developing slowly - too slowly, undoubtedly, but surely - in sync with the awakening of the collective consciousness: a maximum acceptable income (MAI) is a necessity to repair societal connections and to institute environmental and social policy. Should it be called "allowable," "admissible," "acceptable?" That's not important. The principle is clear: too great inequality is not acceptable. Earning ten or thirty times more than others is perhaps admissible, earning three hundred times or a thousand times more is simply senseless. And in the period since Patrick Viveret and his research group relaunched the idea of a MAI at the beginning of the 2000s, it has become an essential element in policies of change.

I shall first show why the MAI is necessary from an environmental perspective. As we know, the increase in inequality over the last 30 years constitutes the central characteristic of capitalism's recent evolution. Numerous studies document this upsurge in inequalities. One of them, conducted by two economists from Harvard and the Federal Reserve Board, is among the most telling. Carola Frydman et Raven E. Saks [1] have compared the relationship between the salaries earned by the three top executives of the 500 biggest American companies and the average salary of their employees. This indicator of the progression of inequality remained stable from the 1940s, when the study's observations begin, up to the 1970s: the bosses at the companies included earned roughly 35 times the average salary of their employees. Then, starting in the 1980s, there's a discontinuity and the ratio increases constantly until it reaches over 300 in the 2000s.

Thus did capitalism experience a major turning point after the period known as the "Trente Glorieuses" in France [1945-75]. During that period, the collective growth in wealth allowed by the continuous rise in productivity was rather equitably distributed between capital and labor, such that the ratios of inequality remained stable. After the 1980s, a complex of circumstances, which are not appropriate to analyze here, led to an ever more pronounced discontinuity between the holders of capital and the mass of citizens[2]. The share of salaries (earned income) in Gross Domestic Product (GDP) sharply declined in favor of returns to capital. The European Commission's economic database, Ameco, elucidates the phenomenon [3]: in France, for example, salaries' share of GDP went from an average of 63 percent during the 1960s and 1970s to 57 percent during the 2000s, a drop of six points.

Consequently, the oligarchy is accumulating income and wealth to an extent not seen for a century. It spends its wealth in a frenzied consumption of yachts, private planes, immense residences, jewels, exotic trips: a flashy jumble of sumptuary squandering.

Why is this behavior a powerful motor of the environmental crisis? To understand that, we must turn to the great economist Thorstein Veblen. What did Veblen say? That the tendency to compete is inherent to human nature. We all have a propensity to compare ourselves to one another and we seek to demonstrate a little superiority, a symbolic difference compared to the people among whom we live, by such and such an external trait.

Veblen subsequently observed that several classes ordinarily exist within any given society. Each class is governed by the principle of competitive ostentation. And within each class, individuals take as their model the behavior pertaining in the class above, the conduct of which indicates what is good, what is chic, to do. The imitated social class itself takes its example from the class immediately above it on the scale of fortune and so on from the bottom to the top, such that the class located at the summit defines the cultural model of what is prestigious, of what extends to others.

What happens in a highly unequal society? It generates enormous waste because the material squandering that characterizes the oligarchy - itself prey to competition in conspicuous consumption - serves as an example to the whole society. Each at his own level, to the limit of his income, seeks to acquire the most attractive goods and symbols. Media, advertising, films, soap operas, magazines, celebrities are tools for the diffusion of the dominant cultural model.

Consume Less to Share Better

So then, how does the oligarchy block the developments necessary to prevent aggravation of the environmental crisis? Directly, of course, through the powerful - political, economic and media - levers it enjoys and which it exploits to maintain its privileges. Indirectly - and just as importantly - by this cultural model of consumption that impregnates the entire society and defines normality for it.

Now, preventing the aggravation of the environmental crisis and even beginning to restore the environment resides in the rather simple principle: humanity must reduce its impact on the biosphere. Achieving that goal is also simple in principle: it means reducing our extractions of minerals, wood, water, gold, oil etc. and reducing our green house gas emissions, as well as chemical, radioactive, packaging, and other wastes. In other words, reduce our societies' overall material consumption.
Who is going to reduce their material consumption? The 20 to 30 percent of the world's population that consume close to 70 percent of the resources extracted annually from the biosphere. Therefore, it's from these 20 to 30 percent that the change must come, which essentially means from the peoples of North America, Europe and Japan, as well as from the rich classes of emerging countries.

However, within these overdeveloped societies, we are not going to suggest that the poor, that those with modest income, reduce their material and energy consumption. Nor is it the hyper-rich only who must effect this reduction: there are not enough of them for that to sufficiently change the collective environmental impact. In fact, a reduction in material consumption must be suggested to the aggregate of Western middle classes.

To Read the Rest

No comments: