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  1. 2006/04/22 Eduardo Galeano Interview on Current Latin America
  2. 2006/04/22 Executive Pay in the U.S

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Eduardo Galeano Interview on Current Latin America

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The Current Situation in Latin America
An interview with Eduardo Galeano 
 
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Eduardo Galeano was born in Montevideo, Uruguay in 1940. During the military dictatorship he lived in exile, first in Argentina, later in Spanish Catalonia. In 1985 he returned to Montevideo. Galeano is an icon of progressive Latin American literature. His two monumental works, Open Veins of Latin America (1971) and the trilogy Memory of Fire (1982, 1984, 1986), made a tremendous impact on Latin American and world intellectuals, unveiling the brutality of colonialism and post-colonialism, but also capturing readers into their original, magic, and poetic prose. His latest book is Bocas del Tiempo (2004). 
 
VLTCHEK: How would you compare the situation now and during the time when you were writing Open Veins of Latin America and Memory of Fire? 
 
GALEANO: I would say that now the tendency is to vote in progressive governments that are trying to change things. This means a tremendous challenge, but also a tremendous responsibility because these new progressive governments that can be found in several countries of Latin America are carriers of collective hope, which was not yet dead but seriously wounded. Latin America is part of the world which was for many years condemned to the system of power where intimidation had more strength than the vote. It began in 1954 when the democratically elected government of Guatemala attempted to make agrarian reforms, to return dignity to indigenous people; all that was later destroyed by foreign invasion. Then it continued: invasions and coups against any positive changes—progressive or nationalistic—concerning natural resources, independence, national dignity. Governments that intended to implement changes were destroyed. It happened in Brazil, Dominican Republic, Bolivia, and in Chile, which became the most famous case because Salvador Allende was converted to an international symbol. Then the Sandinistas in Nicaragua; again the same thing—they were destroyed after ten years of war because they intended to create a country where there was only a colony before. 
 
So all this is a very long story of frustrations, failures, of hope washed in blood. All this created the situation in which we are now. How can I explain it? Change is possible, but to implement change, one has to fight against not only the painful and fucked up experiences of the last half century, but also against the long betrayal and something that I call “the culture of impotence.” It is a culture that has roots in the colonial period when the continent was controlled by Spain and Portugal and that was later broken up and consolidated by the military dictatorships and fatalistic brothers from the church. All this helped to create a culture of impotence that manages to paralyze people with fear. These days this culture of fear has a spokesperson who is a universal god—the god of the market. 
 
In Latin America it is common to criticize the foreign policy of the United States. On the other hand, it often appears that centuries of European colonialism are forgotten and forgiven. Can you this? 
 
I think this sentiment exists because there is nostalgia for the multi-polar world. From the weak nations’ point of view, it is better if there are many powerful countries than if there are just a few. The more concentrated is power, the fewer opportunities there are to move. Space for change, space for freedom to implement change is then very narrow; very small. A unipolar world—one with only one power—makes sure that this space almost disappears. In a multi-polar world this space multiplies. Therefore, there is nostalgia for a multi-polar world. For some 50 years we had something that was called the “socialist world,” which was of course not really socialist, but it managed to create another pole. During those times, Europe had at least some energy to implement its own development. Many people see the disappearance of that period as a loss. Now it seems like faraway history.
 
Things fundamentally changed; look at an extreme case like the one of the UK. Not long ago I was visiting London and I happened to be invited to speak at the Royal Festival Hall. It was packed with people. During my first lecture someone from the audience asked me whom would I vote for in the upcoming elections? I said that I’m not going to sell ice to the Eskimos; that I am not going to tell English people for whom they should vote. But people kept insisting, kept pushing: “Whom would you vote for?” At the end they reduced their questions to: “So at least say what would be your message to the English public.” So I told them: “I don’t think it is a very dignified position to be a colony of your former colony.” They were laughing a lot after I said that; they thought it was a great joke. But it wasn’t a joke. It’s true. Europe is now very much under the control of dictatorship; of only one power, which is represented by one guy from Texas presiding over the degradation of the political process, reducing it to the level of low quality comics. 
 
Most Europeans are losing any desire to vote. As we saw during the previous elections in the UK, the majority of people are voting for politicians for whom they harbor no respect. 
 
There is a universal crisis of so called representative democracies or democracies, which rely on the system of competing political parties. This crisis is mostly reflected in the apathy of young generations. If you ask young people whether they believe in democracy, in the energy of changes in democracy, most young people just shrug their shoulders and tell you that they don’t believe in it, or believe just a little. This universal crisis—and Latin America is part of this world and this crisis—takes place mainly because politicians did very little in order to dignify democracy. Many young people see democracy as some enormous circus where professional politicians are performing incredible tricks. Once they reach the government, they do everything possible not to fulfill what they have promised during the election campaign. 
 
This is exactly against the essence of democracy and young people at the end feel that they are invited to choose between the same and the same. The goal now is to restore democracy to its deep essence: as the power of the people. In this world, which is losing faith in so called representative democracy, there are new developments in participatory democracy. These are very interesting developments, reflecting the revitalization of community power with a more and more active presence of minorities in political life, including the presence of women who are of course by no means a minority. There is also the growing influence of the pacifists. Sometimes one feels that pacifists are powerless since they were not able to stop the war in Iraq. But we can’t forget that before the war, for the first time in the history of humanity, there were enormous demonstrations and protests against the war—before the war began.  
 
This was important because at least it put on record how disconnected many governments are from their people who were screaming slogans against the war on the streets, but their voices are being ignored. So at least it was important as a testimony. On the other hand, it is also obvious how far we are from the time of political maturity when we could be capable of punishing politicians for their betrayals; to punish with the most powerful weapon—the ballot. There is a saying that a lie has short legs. Not long ago I wrote an article arguing that it is not true: a lie has very long legs. So long are the legs of a lie that it is capable of running at full speed carrying liars on its back. Because when Tony Blair and George Bush lied about the weapons of mass destruction in Iraq, people in their countries still awarded them with the vote in the following elections. So we are still very far from the time when people will be realizing how powerful a weapon their vote can be. 
 
You mentioned pacifism. Do you believe that it is possible to fight against global dictatorship by pacifist means? 
 
I don’t believe in saying “The way to do it is armed struggle.” I’ve met many people who were seriously involved in armed struggle, but they were reacting to the will and desires of the people. They never acted as if they were enlightened by some divine power or by some chosen minority. Also, they say that if there were someone shouting, “Armed struggle, let’s die,” they would probably be working for someone and would be embarrassed to confess for whom. They would be some professional provocateurs like Bin Laden. Bin Laden is an official of fear, that’s clear. Bush was just about to lose the elections, and then Bin Laden appears, declares that he is going to eat all children in the raw, and Bush wins. So there is blackmail by the dominant power when it uses the threat of terror. It happens very often: one’s enemies are the best allies.
 
 I think the ways of change are dictated by the circumstances of each country, each place, and each time. I don’t think that arrogant intellectuals should be dictating to people which way they should be heading. I think we should be listening to the people, see in which directions things are developing. People are walking where they can, not where they want to. But they are walking. One has to have enough modesty and humility to listen to the sound of their steps. 
 
Now one thing that I can say: experience shows that this formula of universal capitalism is not working. It does not solve any basic problems of humanity and, in addition, it is endangering the very existence of our planet. Therefore, we have to be alert and follow the contradictions created by this very system. Contradictions between what the system says and what it does. Between what the system wants and what it can do. From these contradictions grow the base of the new world, which is not yet born. One has to be a realist, but also to remember that reality is not only the world that we know, but also the world that we need. And the world that we need is inside the stomach of the present world. This new world often seems to be too silent, but it exists. We have to be patient and humble to hear how it is kicking inside. We have to see in which way each situation is developing, at each and every moment, everywhere. By doing this, we have to drop formulas. The 20th century was where formulas failed. Formulas failed once, twice, 1,000 times. We already experienced the pedantry with which the world was forced to adapt to the formulas. 
 
At least we know that we don’t want to repeat mistakes, which occurred in the past when one half of the world had to sacrifice freedom in the name of justice, while the other half had to sacrifice justice in the name of freedom. Now we know that this will not do: that justice and freedom are Siamese twins. They were born back to back—attached to each other and they want to live together. At least this we know, so we don’t have to repeat what has been done; what went wrong with some terrible consequences. Remember, when the so-called “real socialism” collapsed without one drop of blood, nobody gave a shit. I knew many leaders of the Communist Parties from the former Eastern Block; they converted themselves into businesspeople, overnight. These are the countries that were claiming they were governed by the proletariat. 
 
After all that, do you still maintain some belief in socialism or communism? 
 
Of course I do. I don’t think there has been anything yet that we could call real socialism. There were developments, some experiences that were correct. But the system was divorced from the people. It was operated in the name of the working people, but it was not the case in reality and the proof was in the incredible simplicity by which it decomposed.
 
What an arrogance of that bureaucracy that later recycled itself in just ten minutes into a bourgeois class. They became capitalists. They changed one type of oppression for another, but one way or the other continued to function as an oppressive force. So all this has obviously nothing to do with ideals of socialism. But it is also obvious that if capitalism doesn’t work for the majority of people, sooner or later we will have to lift up the old banners, which were made dirty and were abused. 
 
Back to Latin America: it is clear that most of the people here still desire social justice and a system that would be able to guarantee it. However, after they vote in progressive governments, these are not always able to deliver their promises. 
 
People here want very basic things. They still can’t find the answers or solutions to their very simple demands like dignity, peace, and work. People are searching, but they are not finding solutions. They are walking and searching on different roads. They are being betrayed—we have a long tradition of betrayal here. They are now, generally and to a certain point, thinking that these new governments, which have lately appeared in several parts of South America, will act more or less in accordance with the hope that they managed to evoke. That’s why I always say, careful, one doesn’t play with people’s hope. Hope is very fragile. If people deposited this hope in your hands, comrades—be very careful. Don’t betray this hope. Because hope can’t be recovered easily. When it is lost, it takes a long time to bring it back. New progressive governments in South America are facing tremendous historic responsibility. One of the writers and journalists who had a profound influence on me kept repeating: one sin that can’t be forgiven is a sin against hope. Everything can be forgiven, but not this. That’s why progressive governments have to be extremely careful not to destroy hope. 
 
A lot is being written lately about betrayal of hope. Some point fingers at Lula’s government in Brazil. But how much space do these governments have to maneuver? 
 
Space is very limited and they have to fight an uphill battle. But one has to have something clear: if you are going to repeat history, it is better if you leave in power those who are already there. If your point is that you will not be able to change things, then don’t promise that you will. If you do and don’t deliver, you are lying to the people. If you can’t change things, let capitalists preside over capitalism. But if you are going to get your hands on power in the name of change, in the name of national sovereignty or human dignity, then you have to be responsible for your promises. If you can’t do it, just go home, turn on the television and let politicians take care of politics. In the moment when Lula or others propose changes, they are responsible for their promises. One of Lula’s politicians recently responded to the accusations about corruption in the present government: “But these things have always occurred in Brazil.” But if this is always going to happen, why didn’t they leave those who were doing it to continue? 
 
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Andre Vltchek is a writer, journalist, filmmaker, and co-founder of Mainstay Press, a publishing house for progressive political fiction. He is senior fellow at the Oakland Institute and author of several fiction and non-fiction books. His most recent is Point of No Return (Mainstay Press).
 
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2006/04/22 11:27 2006/04/22 11:27

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Executive Pay in the U.S

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Economics

By Jack Rasmus 

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The most fundamental and singular result of corporate policies of the past 25 years has been a massive shift in relative income from the roughly 105 million workers to the wealthiest 10 percent non-working class households in the U.S. This enormous income transfer grew in scope and magnitude annually throughout the 1980s and Reagan years, continued to expand steadily during the Clinton years, accelerated during the first term of George W. Bush, and now promises to exceed more than $1 trillion per year during the rest of Bush’s second term. 

Few groups within the ranks of the U.S. corporate elite have gained more from this historic income shift than the CEOs and senior managers of corporate America. In 1978, according to the Wall Street Journal, typical U.S. CEOs earned approximately 35 times the pay of the average paid worker in their company. In recent years CEO total compensation has risen to more than 500 times the average worker’s pay, according to the conservative global business source, Reuters. 


Defining Executive Pay 

The typical worker in the U.S. receives about 90 percent of their earned income from their paycheck whether earned as an hourly wage or weekly salary. Not so for the typical CEO and senior manager. Historically only 7-10 percent of their income is earned from a salary as such. Focusing only on CEO salaries, therefore, totally misses the point and statistics quoting CEO salaries as the sole indication of executive pay levels should be especially suspect. At times the term “direct compensation” is used as an alternative measurement of executive pay. But that too underestimates such pay, as it excludes hidden indirect forms of compensation. 

A slightly better term is “total compensation.” It includes direct and indirect forms of executive pay. CEO total compensation may include salaries, bonuses (cash or other forms), stock options, stock grants and awards, long term incentive pay, deferred pay of various kinds, regular and supplemental management pensions, below market rate mortgage loans to managers by the company, write offs of personal loans by corporate boards, innumerable forms of perks with direct dollar value, prepaid charitable donations, lifetime use of corporate jets, company payment of CEO tax obligations (called “gross up” compensation), and so on in a long list of forms of creative and hidden pay. These and other non-salary forms of executive pay account for 90 percent or more of CEO and senior managers’ total compensation.  

But even “total compensation” is an inadequate indicator of executive pay. With hearings on executive pay by the U.S. Securities and Exchange Commission (SEC) to begin this spring, it is clear that many other forms of executive compensation remain hidden by opaque corporate accounting and reporting practices, are not counted as part of “total compensation,” and are never communicated to the IRS. 

During the Reagan years average CEO pay rose from just over $1 million a year to roughly $2.5 million by 1989. By 1992, at the close of the George Bush senior administration, it nearly doubled again to $4.5 million—despite the recession of 1990-91 and falling corporate profit performance. It more than doubled again under Clinton to $11.1 million by 2000, for a 342 percent gain over two decades. Some estimates placed the pay of the average U.S. CEO as high as $14.4 million by 2001.

According to a just released study by professors Lucian Bebchuk of Harvard Law School and Yaniv Grinstein of Cornell University, based on interviews of CEOs and top managers at the 1,500 largest publicly traded corporations in the U.S., the group of 5 top managers at the corporations received collectively $122 billion in compensation between 1999-2003 compared to $68 billion for the same group during 1993-1997. On top of these 1999-2003 gains, the Harvard-Cornell study estimates another 39 percent increase in average executive compensation in 2004 for the surveyed group of the largest corporations. 

But even the Harvard-Cornell figures are underestimations as they exclude the lucrative and fast-growing supplemental pensions for executives, called Supplemental Executive Retirement Plans (SERPS). Some sources estimate SERPs constitute as much as an additional one-third of total executive compensation. Were SERPS and other supplemental retirement plans included in the Harvard-Cornell study estimates, the nearly doubling of executive pay that was estimated between 1999-2003 would have been even higher. 

As corporations over the past decade have been busy reducing pension benefits for workers, under-funding and even abandoning their pension plans for workers, SERPs were being added across the board by corporations in the U.S. Changes in the tax laws in 1994 provided a strong incentive for creating SERPs for senior executives as a way to shelter more of their total compensation from taxation. Less than half of senior executives had supplemental pension plans prior to 1995; today more than 90 percent have such plans. Thus billions more have been squirreled away for CEOs and senior managers of the largest public companies over the past decade. 

For CEOs of the largest corporations that means at least another $60 billion in addition to the $122 billion of the Harvard-Cornell study. But that additional $60 billion still does not include the rest of the 90 percent of corporations—apart from the 1,522 surveyed by Harvard-Cornell—that have also established SERPs today for CEOs and senior managers. 

One of the great scandals at Enron when it went bankrupt was that Enron executives froze workers’ pensions and did not allow them to take their money out as the company began to default, while those same executives were cashing out their pensions in a separate, supplemental management pension plan. 

Other measures of growth in executive compensation corroborate the above trends and figures for executive pay. The non-partisan research group the Corporate Library recently surveyed “median” as opposed to average CEO pay. It estimated that median CEO compensation for 2003 rose 15 percent in 2003, followed by another increase in median executive compensation of 30 percent in 2004. No doubt results for 2005 will show a continuing accelerating trend. 


Trading Jobs for Executive Pay 

CEOs who have been doing especially well under George W. Bush are those companies that have been involved in aggressive offshoring of jobs. Approximately eight million quality, high paying jobs have been lost due to “free” trade policies and offshoring since the 1980s and the number continues to rise rapidly. Free trade policies and offshoring reflect the radical restructuring of trade relations and foreign direct investment strategies implemented by corporate America since Ronald Reagan. More than a million jobs have been lost due to NAFTA in the last decade alone and another 2.5 million have resulted from the granting of special terms of trade with China in 2000. 

For dismantling of a good part of the U.S. manufacturing base, CEOs and senior managers of U.S. corporations involved in offshoring of jobs have been generously compensated compared to their already well-paid corporate peers. For example, a Business Week survey in 2003 of CEOs at the 50 largest U.S. companies that outsource the most showed that their CEOs enjoyed an average increase in compensation of 46 percent between 2001-03, earning as a group a reported $2.2 billion while sending an estimated 200,000 jobs offshore. 

CEOs and managers are now compensated at record levels, not for their contribution to the corporate bottom line anymore, but for selling off the company, for leaving quietly, or for gross performance failure. Thus Carly Fiorina, ex-CEO of Hewlett-Packard, departed last year with a package of more than $40 million. David Pottruck of Schwab left with around $50 million, and Craig Conway of Peoplesoft exited with a total package of more than $60 million. Among the biggest winners of CEO departees, however, were Phillip Purcell of the investment bank, Morgan Stanley, who left with a reported $113 million, and James Kilts of Gillette who walked out the corporate door with $165 million. Even more amazing was Steven Crawford, recent co-president of Morgan Stanley, who left after only three months of employment with $32 million—or a rate of pay of more than $10 million a month. Crawford’s gain was more than matched in terms of the bizarre, though, by Daniel Carp, still CEO of Blockbuster Video Corp., who in 2004 received more than $50 million in compensation even though the company recorded a loss of $1.25 billion that year.

Comparing Pay 

As previously noted, executive pay between 1980 and 2000 climbed an astounding 342 percent, outpacing the rate of inflation over the period by at least 4 to 1. In contrast, the average hourly wage for more than 100 million workers, when measured in 2003 dollars, rose from $14.86 at the start of 1980 to only $14.95 at the end of 2000. That’s a 9 cents an hour gain after 20 years. 

Furthermore, the average hourly wage today for 105 million workers after adjustment for inflation is exactly the same at year end 2005 as it was in 2001, according to the U.S. Department of Labor’s statistics. In 2004-2005 it has fallen steadily as inflation has begun to accelerate. For the 60 million at the medium wage level or below, inflation the past two years has been rising at twice the rate of their hourly wage. 

To compensate for stagnant and declining real hourly wages and earnings, U.S. workers have had to resort to alternative means to try to maintain income levels and spending. These alternatives to wage gains fall into three categories. 

First, more U.S. families have been having other family members enter the workforce to supplement family incomes and/or have had to take on second part time jobs in addition to their normal job. U.S. families have increased the number of hours worked by more than 500 a year since 1980. Americans now work by far the greatest number of hours per year than workers in any of the other industrialized countries—approximately 1,970 hours each per year out of 2,040, based on a normal 40 hour work week. The next closest is Canada where workers average about 1,800 hours. Workers in industrialized economies of Europe average fewer hours worked, 1,600-1,800 hours per year.  

Second, they have had to take on record levels of consumer and installment debt, levels that have doubled from $4 trillion to more than $9 trillion since Bush II took office. 

Third, workers fortunate enough to own their homes have been refinancing those homes and using the proceeds as discretionary income to pay for major purchases such as medical expenses, education, and large ticket items—in effect living off their assets. 

All three solutions to the stagnation and decline of real wages over the past quarter century, however, have their finite limits and cannot continue long term as safety valve alternatives to declining real wages, earnings, and incomes for the 105 million. 


Reforming Executive Pay Abuse 

Growing executive pay abuses and excesses have in recent months provoked a response from several quarters. Stockholder complaints that CEOs and executives have doubled their take from roughly 5 percent to more than 10 percent of total profits, have focused attention on the impact of accelerating levels of executive pay on shareholder dividends and stock returns. Thus, even some capitalists have now begun focusing on the issue and splits and differences about what to do have arisen within their ranks. As a result, several bills and legislative proposals have been entered into Congress addressing executive pay.

This development has forced the Bush administration to issue a response and proposals of its own. The SEC, this past January 2006, issued preliminary draft rules for revising corporate executive pay practices and reporting. These rules were open for a 60-day period in February-March for public discussion and comment, following which the SEC would issue final rules for revising executive pay to take effect in 2007. 

However, in issuing initial draft proposals the SEC made it clear that it would not impose limits on executive pay, as the objective of the SEC is only to require more accurate reporting by corporations of their pay to executives. The solution, according to the SEC, is to let the market regulate the excesses and abuses in executive pay practices—the same market that has been allowing those abuses and excesses in the first place. As SEC chair Christopher Cox put it this past January, “Our purpose here is to help investors keep an eye on how much money is being paid to the top execs.” Apparently this means allowing them to see better the full scope and magnitude of the executive pay theft, even though there will be little they can do about it once they know the full extent of the abuse. 

Executives are awarded their excessive compensation by their corporate boards. By law board members cannot be removed by shareholders. That’s how the system is set up. Furthermore, shareholders have no power to veto or approve executives’ salaries pensions, severance, personal loan subsidies, perks, and so forth. As one of the authors of the Harvard-Cornell study put it, “Shareholders have very limited power to do anything about it.”  

The SEC’s tepid main proposal in its draft rules is to consolidate the reporting of executive pay for the top five managers in a corporation into a single figure in a corporate proxy statement. Currently, elements of executive pay are distributed all over the proxy statement and many are hidden in accounting rat holes in the document that never see the light of day. 

Elsewhere the SEC’s draft rules merely tweak the system. For example, currently perks awarded to execs valued at less than $50,000 a year need not be reported. This limit would be reduced to $10,000. On the other hand, the SEC’s draft rules say nothing about closing some very large loopholes, such as requiring the valuation of stock options given to executives and not just reporting the number of shares of stock. Or requiring the reporting on dividends paid to executives on restricted stock—which is currently not required at all. Or allowing corporations to deduct executive pay from their corporate taxes, which is also now permitted. Or backdating stock strike prices for stock options, which allow executives to reap huge stock windfalls. 

In fact, the SEC is proposing to widen the reporting loophole for personal transactions between executives and the corporation (i.e., personal loans, gross ups, etc.). The SEC has suggested the cut off level for reporting such transactions be raised from $60,000 to $120,000, meaning that more compensation will actually be hidden rather than revealed. The Wall Street Journal responded to the SEC’s initial draft rules by declaring, “This is a case of admirable regulatory restraint.” And as that business source further noted, after all “who knows what is exorbitant pay anyway.” 

Despite the SEC’s cautious approach to reforming executive pay now running rampant, business has criticized the SEC draft by arguing that more transparent reporting is just the first step to establishing limits on executive pay, that revealing more detail about executive pay will lead to more competition for pay packages between executives and thus higher pay, and that more transparency will result in other creative ways to raise or defer executive pay. In other words, don’t fix a broken system because you may break it even more. 

In the middle of the political spectrum, more liberal Democratic elements in the House have called for legislation requiring shareholder approval of additional executive compensation where the sale or purchase of corporate assets are involved (e.g., mergers or acquisitions). The AFL-CIO is calling for a law that provides for shareholder approval, not just transparent reporting, of general changes in executive pay. 

But like so much on the U.S. political scene today, the debate is conducted between various factions of the corporate elite. The 105 million workers in the U.S. and their direct interests in any debate of economic significance or import are left out of the picture. Thus little will likely come out of the SEC’s hearings or efforts in Congress to rein in accelerating executive pay in the U.S. The coming months of debate on the subject will provide much smoke, little fire, and a lot of mirrors. Meanwhile, the real hourly pay and earnings of more than 100 million workers will continue to stagnate and decline as gas prices, medical costs, housing, and general inflation rises—forcing tens of millions to work more hours, take on extra jobs, assume an ever-rising burden of credit, and spend down the assets in their homes in order to maintain consumption levels and standards of living. Executive pay may be the ongoing obscenity; but worker pay in the U.S. is the true continuing tragedy.

Source http://zmagsite.zmag.org/Apr2006/rasmus0406.html

 


Jack Rasmus is the author of The War At Home: The Corporate Offensive From Ronald Reagan To George W. Bush, available in independent bookstores and directly from the author (www.kyklosproductions.com).
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2006/04/22 11:07 2006/04/22 11:07

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