'Neoliberal' Economic Policies Widen Gap Between Rich, Poor EthicsDaily.com (9/17/03)

As the middleclass becomes an endangered species, CEO salaries, ironically, have increased at the expense of workers' wages.

In 1975 corporate leaders made 44 times as much as the average factory worker. During the early 1980s, CEOs such as Goizueta of Coca Cola and Eisner of Disney convinced stockholders to link their compensation to company stock prices. By 1985, CEO salaries rose to 70 times the average worker.

A 2001 report published by the Institute for Policy Studies revealed that today's corporate leaders make 531 times as much as the average factory worker. That is a 571 percent increase (before adjusting for inflation) since the 1990s alone. Worker pay, meanwhile, grew 37 percent--barely keeping up with 32-percent inflation.

The average pay for top executives at 365 major U.S. corporations is $13.1 million a year, while the average factory worker makes $24,668 a year. If workers' annual pay had grown at the same rate as CEOs, their 2000 annual earnings would be $120,491. If the minimum wage had grown at the same rate as CEO's earnings, it would have been $25.50 an hour instead of $5.15.

CEO salaries also outpaced the stock market and corporate profits. From 1985 through 2001, the average worker saw his or her pay increase by 63 percent, while the S&P 500 index rose by 443 percent. Over the same period of time, CEOs enjoyed a pay increase of 866 percent.

One might have expected CEO incomes to drop as the market took a bearish turn in 2000, based on the 1980s model of linking compensation to stock prices. This did not occur, however, because we have created an economic order described by George Will as "welfare capitalism," where profits are privatized while losses socialized.


The new economic system established since the 1980s is known as "neoliberalism." It essentially transfers wealth from the bottom of society to the top, creating a growing income disparity between the poor and rich. The process is carried out through the dismantling of social services, such as welfare, adequate education and health care, while increasing tax breaks for the wealthiest.

The greatest danger of neo-liberalism is the threat it poses to our democracy. When wealth in concentrated in the hands of the few, political inequality follows.

Note: the emphasis is ours.


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