Robert Reich: Debunking Myth #3: ‘The Rich Deserve To Be Rich’ – OpEd
Don’t be fooled by the myth that people are paid what they’re “worth” — that the rich;deserve;their ever-increasing incomes and wealth because they’re worth far more to the economy;now;than years ago (when the incomes and wealth of those at the top were more modest relative to everyone else’s).;
The distribution of income and wealth increasingly depend on who has the power to set the rules of the game.
Those at the top are raking in record income and wealth compared to everyone else because:
1. CEOs have linked their pay to the stock market through stock options.;They then use corporate stock buybacks to increase stock prices and time the sale of their options to those increases.
2. They get inside information about corporate profits and losses before the rest of the public and trade on that insider information.;This is especially true of hedge fund managers, who specialize in getting insider information before other investors.;
3. They create or work for companies that have monopolized their markets.;This enables them to charge consumers higher prices than if they had to compete for those consumers. And it lets them keep wages low, because workers have fewer options of whom to work for.;
4. They use their political influence to get changes in laws, regulations, and taxes that benefit themselves and their corporations,;while harming those without this kind of influence — especially smaller competitors, consumers, and workers.
5. They were born into (or married into) wealth.;These days, the most important predictor of someone’s future income and wealth in America is the income and wealth of their parents.;Sixty;percent;of all wealth is inherited. And we’re on the cusp of the biggest intergenerational transfer of wealth in history, from rich boomers to their children.
None of these reasons for the explosion of incomes and wealth at the top has anything to do with;worth;or;merit.;They have to do with power — or the power of one’s parents.
Meanwhile, the pay of average workers has stagnated because they have lost economic power and the political influence that goes with it. Corporations have kept a lid on wages by outsourcing work abroad, replacing workers with software, and preventing workers from unionizing.;
Bottom line: Wealth doesn’t measure how hard someone has worked or what they deserve. It measures how well our economic system has worked for them.
- This article was published at Robert Reich’s Substack