Armageddon Is Coming
By Joel S. Hirschhorn
25 April, 2007
being a compliant consumer. Face the ugly truth. Don’t get fooled
by the stock market. Accept the need for the mistreated middle class
to become the revolutionary class. The British military establishment's
most prestigious think tank sees what too few over-consuming Americans
are willing to anticipate. Unjustified and mounting economic inequality
is planting the seeds for global economic conflict.
Here is what the new report
from the UK Defense Ministry's Development, Concepts and Doctrine Centre
warned might happen by 2035. "The middle classes could become a
revolutionary class. The growing gap between themselves and a small
number of highly visible super-rich individuals might fuel disillusion
with meritocracy, while the growing urban under-classes are likely to
pose an increasing threat...Faced by these twin challenges, the world's
middle-classes might unite, using access to knowledge, resources and
skills to shape transnational processes in their own class interest."
Consider the wisdom of economist
John Maynard Keynes: The rich are tolerable only so long as their gains
appear to bear some relation to roughly what they have contributed to
society. Think of it as proportional and justified economic success.
This can be tolerated by poor and middle class people if they believe
the economic system is fair and properly rewards those who work harder
or have better capabilities. But truly obscene economic rewards angers
people. When most prosperity and wealth is unfairly channeled to relatively
few Upper Class people, it is only a matter of time until fuming, resentful
people in the Lower Class decide enough is enough and revolt. Perhaps
violently, if the political system remains controlled by the Upper Class.
A ton of data demonstrate
how crazy our economic system has become where a relatively few receive
astronomical gains that no rational person could see as justified. One
study tracked down home ownership data for 488 CEOs in the S&P 500
Index set of companies. The typical home of the CEOs has 12 rooms, sits
on 5.37 acres, and carries a $3.1 million price-tag. Companies big enough
to rate S&P 500 status hiked their median CEO pay by 23.78 percent
in 2006 to $14.8 million. In comparison, U.S. worker weekly wages rose
just 3.5 percent in 2006.
Despite what you hear about
the sagging housing market and the many people facing foreclosure, business
at the top end of the U.S. housing market is booming. Sales of homes
in the $5 million-and-up price range rose 11 percent last year, reports
the Dallas-based Institute for Luxury Home Marketing. Ten residential
properties sold for over $28 million in 2006. The most expensive in
New Jersey sold for $58 million; it went to Richard Kurtz, the CEO of
Advanced Photonix, a telecom supplier. In the “ultra-luxury market”
a set of suites in New York’s fabled Plaza Hotel was converted
last year into one-bedroom condos that start at $6.9 million.
From another study we learn
that pay for American college presidents over the past decade has jumped
seven times faster than pay for college faculty. In 1996, only one college
president took home over $500,000. In 2006, 112 college presidents hit
that mark. Meanwhile, after inflation, compensation for college professors
increased just 5 percent since 1996. And college students have faced
rapidly mounting tuition far higher than inflation rates.
CEOs are getting away with
economic murder. Bob Nardelli, the CEO who departed Home Depot early
this year, had an exit package worth $210 million. IBM CEO Sam Palmisano
took home $18.8 million in 2006 and will receive $34.9 million in deferred
pay and $33.1 million in retirement benefits when he leaves IBM. Even
more extreme is the case of Occidental Petroleum CEO Ray Irani. The
interest income alone on the $124 million that ended the year in Irani’s
deferred-pay account totaled $679,396. The Los Angeles Times estimated
Irani's total payoff for 2006 at $460 million. Leslie Blodgett, the
top exec at cosmetics giant Bare Escentuals, collected $118.9 million
in 2006, with most of that coming from the $117.7 million she cleared
cashing out stock options. She received 4 million additional stock options
before 2006 ended.
Economists Emmanuel Saez
of the University of California at Berkeley and Thomas Piketty of the
Paris School of Economics found that the richest 10 percent of the U.S.
population received 44 percent of the pretax income in 2005. This was
the highest since the 1920s and 1930s (average: 44 percent) and much
higher than from 1945 to 1980 (average: 32 percent). With more than
140 million U.S. workers, that top 10 percent equals 14 million workers.
The bottom half of that top 10 percent had incomes of about $110,000.
That may not seem all that high, except that the overwhelming majority
of Americans can never expect such income. And remember that many of
these top 10 percent Americans are married to or living with equally
highly paid people.
When it comes to obscene
economic inequality, however, you must focus on the huge gains received
by the richest 1 percent - some 1.4 million people. Their share of pretax
income has gradually climbed from 8 percent in 1980 to 17 percent in
2005. Their average income was $371,000. Who is in the top sliver of
richness? Economists Steven Kaplan and Joshua Rauh of the University
of Chicago estimate that there were about 18,000 lawyers, 15,000 corporate
executives, 33,000 investment bankers (including hedge fund managers,
venture capitalists and private-equity investors) and 2,000 athletes
who made roughly $500,000 or more in 2004.
Do those at the top pay their
fair share of taxes? Middle class Americans, after nearly 30 years of
tax-cutting, are now paying about the same share of their incomes in
federal taxes that they paid before Ronald Reagan entered politics.
In contrast, America's richest have seen the share of their incomes
that goes to federal taxes cut by over half. That what happens in a
failed democracy and the rich control the political system.
What the future holds for
the victimized middle class will not only depend on the uncontrolled
greed of the wealthy Upper Class and its control of the political system.
It will also be linked to the coming tsunami of global warming impacts
on climate, sea level, water supplies, crops and disease. There will
be devastating impacts on hundreds of millions and perhaps billions
of people worldwide. Lower Class people will be sacrificed – left
to suffer the consequences. The rich will retreat to their walled, protected
and well stocked havens.
Add to this scenario the
inevitable collapse of the entire economic system. At some point it
will not be controllable as it is now by those in banking and finance,
able to manipulate it to sustain economic injustice. Eventually the
inherent fundamental absurdities of the global economic system will
prove unsustainable. The wealthy Upper Class will have siphoned off
most of the world’s wealth and hoarded resources to maintain a
What the future holds: Lower
Class economic slaves fighting to survive in a medieval, ugly and bleak
world that so many science fiction stories have portrayed. In that hell
their best option will be to rise up and revolt against the rich and
powerful Upper Class. With such a prospect, global class war on a sick
planet, prevention is a priority. For us, that requires paying much
more attention now to economic inequality, economic injustice, economic
apartheid and the many attacks on the middle class. If not, we get Economic
Armageddon along with environmental disaster.
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