BOB WOODS: John Rawls and the real cost of executive greed in America
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Bob Woods
One of the brightest minds of economic philosophy was John Rawls of Harvard, who died in 2002. His greatest work, "A Theory of Justice," contained a number of principles that influenced greatly the economic policies of this nation. Unfortunately, over the decade since his death, one of his primary measures of an economically just society has been forgotten. He contended that while inequalities were unavoidable, all inequalities should work to the benefit of the least well-off in society. In simple terms, Rawls maintained that captains of industry were free to amass as much money as they could, so long as doing so did not cause a disadvantage to the least well-off member of a society. In the age of what is being called "vulture capitalism," Rawls is patently ignored and rejected.
Ironically, the type of greed one sees today is a large part of our economic malaise, and is a self-defeating approach to income and wealth. This was driven home by the Associated Press article "Romney's wealth among greatest of presidents," published Jan. 29 in The Californian, which noted there are more than 8,600 people in this country who earn $10 million per year or more. Some, indeed, earn vastly more.
Let's take a look at what that statistic could mean. A first premise is that the more people employed at good jobs we have, the more staples and consumer products will be purchased and the healthier our economy will be. A second premise is that a decent $50,000 per year job has an actual cost to the employer of $100,000 when taxes and benefits are included; I pick that number because, when I was in business some years ago, fringe benefits for me were about 60 percent of payroll; 1.6 times $50,000 is only $80,000, so allowing for growth of expenses, $100,000 appears fair.
Now, let us assume those earning $10 million per year could somehow manage to scrape by on, oh, say $5 million a year. The $5 million withheld from our exemplar executive could instead be used to fund 50 jobs at $100,000 each. If all 8,600 people who make over $10 million cut their pay to $5 million and invested the remaining $5 million in pay for additional workers, there would be 430,000 more people employed. Importantly, this would not increase a business's overhead since it would be a simple shift of the $5 million from one executive to 50 employees. Say 10 percent of the population replaces a car every year and you have 4,300 more cars sold -- ditto refrigerators and clothes and so on. By pocketing obscene levels of compensation, executives actually, in the long view, decrease the possibility their future will be as profitable. Truly a lose-lose situation. Extrapolating to those who earn hundreds of millions per year, and the folly and injustice of such incomes in the face of high unemployment becomes even more apparent.
This ties into another problem, one I have mentioned before: Whether one attempts to jump-start the economy by tax-cutting and credits or stimulus spending, how do we as a society ensure that our tax dollars are used to indeed create jobs, and not just further line managerial pockets? While regulatory approaches may be possible, it seems to me a large part of this quandary must be addressed by executives backing away from Darwinian economics and listening again to voices like that of John Rawls. Fortunes are not made in a vacuum; they arise from conditions made possible by society, by tax-funded education, roads, police and fire services, and by the labor of us all, from the lowest-paid entry-level worker up through the ranks of semi- and skilled labor, and the science which develops and invents that which we make. In short, the marketplace needs to be more just, and whether by blunt force of law or rekindled executive judgment and conscience, until the misuse of business earnings for excessive personal gain ceases, our economic future will remain uncertain.
Robert D. Woods of Kernville, a retired attorney and part-time Episcopal priest, is a fellow at the Kegley Institute of Ethics at Cal State Bakersfield.
