Concerns about income inequality aren’t just overblown, but shouldn’t exist at all, according to JP Morgan CEO Jamie Dimon.
“It’s not right to say we’re worse off,” Dimon told the Detroit Economic Club on Thursday during a q&a; with MSNBC’s Chuck Todd. “If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.”
Dimon, whose bank has invested $100 million in Detroit’s revitalization, also criticized an argument that no-one actually makes. The billionaire told Todd “you can take the compensation of every CEO in American and make it zero and it wouldn’t put a dent into” inequality.
But literally no one argues for breaking CEOs on some economic torture rack. Instead, critics of the status quo note the mix of corporate practice and public policy that encourages companies to send more and more of their returns to wealthy executives and less and less to frontline workers.
It’s natural for Dimon to defend today’s level of inequality. His industry practically created it, exporting business practices that shovel ever-greater returns to executives at the expense of frontline workers to industries where the model is less appropriate than in finance — and more harmful to the real economy. As Congress lowered restrictions on the financial industry and shrank tax rates on the wealthiest Americans, it also made stock-based CEO pay tax deductible. Together, the changes ushered in a rapid explosion in inequality from a sustainable level to its current dangerous heights.
The share of total corporate income that goes to workers is at its lowest levels since 1950. Other than three natural resurgences during the past three recessions — when corporate profits drop, the denominator involved in calculating the labor share of income shrinks, driving the figure up almost automatically — corporate allocations to working folks have been dropping like a cartoon anvil since Reagan took office. Wages have ceased to grow at all, let alone to keep pace with ever-increasing workforce productivity.
Forget worrying about tax rates on the rich or wage stagnation in the working class, Dimon said Thursday: “What really matters is growth.”
The same one-note growth mentality was at play in one of Jeb Bush’s recent campaign gaffes, when he suggested that everything will be prosperous again once businesses start giving part-time workers full-time hours. But Bush, Dimon, and the rest of the growth obsessives are ignoring an awful lot of inconvenient data that suggests the distributive part of the American economy is too badly broken to maintain the country’s longstanding identity as a land of opportunity where hard work begets economic prosperity.
The very middle-class families Dimon was talking about could be earning $18,000 more per year were it not for the spike in inequality of the past three decades, according to one progressive economist’s research. More than half of all American public school students today live in poverty, and more and more families have been slipping out of the middle class and into lower income bands since 2000.
Dimon’s bit about iPhones echoes the favorite argument of the Heritage Foundation’s Robert Rector, a conservative scholar whose tendentious work on poverty has been undergirding right-wing political attacks for a generation. Rector and his fans are fond of the idea that because poor people have refrigerators and televisions now, there’s not really any such thing as poverty — at least not in the spirit-crushing sense the word generally invokes. Dimon is applying the same logic to the well-documented struggles of the American middle-class.
Lots of people disagree vigorously with the idea that modern creature comforts negate the dangers of economic inequality. Some even argue that inequality reduces economic growth itself. Many note that current inequality levels may threaten the underpinnings of democracy itself. History suggests that’s no idle threat. Dimon belongs to the very class of hyper-wealthy people who enjoy outsized influence in the political system to the detriment of needier voices.
Inequality’s opponents don’t want revenge-poverty for Dimon and his fellow billionaires. They want to restore the economic structures that used to prevent this kind of disconnect between how well the company does and how workers fare. Higher taxes on the rich and the investor class are only one part of what critics propose. They also call for returning to the era when corporations took a long-term view, acknowledging that lasting success depends far more on the performance of low-level workers than on the decisions made in the boardroom.
All of these ideas converge around the idea that growth alone isn’t enough without some significant changes to the rules and incentives governing how that growth gets divvied up. Pointing to iPhones, dishwashers, and straw-men doesn’t refute the progressive argument about inequality and corporate America. It’s sheer misdirection.