Our Double Bubble of Economic Trouble

Sam Pizzigati

‘Asset bubbles’ have been roiling our economy ever since America’s wealthy started supersizing three decades ago. But another bubble, this one enveloping those wealthy, may be just as essential to understand.

America’s corporations, the latest stats show, have been upping what they spend to protect their top executives by about 15 percent a year since 2006. A host of companies — the World Protection Group Inc., the 360 Group, the Steele Foundation — are now making millions keeping CEOs and their buddies secure.

But where are all these millions for executive security actually going? Even the most elaborate and expensive residential security system, after all, only needs to be installed once. So what are companies getting when they routinely lay out six figures a year — and more — to keep their honchos whole?

Consider this mystery solved. Corporations that shell out small fortunes for security, the July Mother Jones reveals, aren’t just buying their execs fancy alarm systems or even bodyguards. They’ve essentially providing armed servants.

The highly trained staffs that executive security firms supply aim to please. These security staffs carefully plot out, in excruciating advance detail, each day’s executive itinerary. The goal: to make sure executives never have to wait for an elevator or a car — or have anyone untoward ever get in their faces.

In effect, these security details are creating protective bubbles around America’s top executives. Inside the bubble, life’s daily inconveniences need never intrude. Top execs can glide through their days, week after week, year after year, without ever confronting just about anything distasteful.

In fact, you could even say that the millions upon millions that Fortune 500 corporations lay out every year for executive security have helped inflate a “bubble economy.” We have physically isolated our economy’s most powerful actors from life’s humdrum hard knocks — and, in the process, benumbed these powerful actors to the consequences of what they do.

This “bubble economy” notion could help explain Corporate America’s continuing cluelessness on CEO pay, as showcased once again this past spring in the annual executive pay reports that most all major daily papers publish.

These surveys, capsulized on this newly updated Too Much Executive Pay Scorecard, tell an incredibly shameful story: At a time of economic calamity for average Americans, power-suited Americans are raking in pay packages that have jumped all the way back to pre-Great Recession levels — and then some.

A few examples. In the real estate industry, the Great Recession’s epicenter, executive pay levels at the nation’s top 100 real estate companies are now running 13 percent over their previous 2006 record peak. In metro Las Vegas, the urban area left most devastated by the housing collapse, the top 10 local corporate executives last year averaged $12.2 million each.

Not too far away, over in Silicon Valley, high-tech execs saw their pay shoot up 37 percent in 2010. The Silicon Valley average worker wage, meanwhile, rose a paltry 1.6 percent last year, barely enough to offset higher gasoline prices.

Back east, in distinctly non-tech Buffalo, 25 local corporate execs took home over $1 million last year, the area’s highest number ever. Annual earnings for average Buffalo workers, by contrast, shrunk $19 to $35,006. The typical Buffalo worker, reporter David Robinson notes, “would have to work until 2039 to earn as much as the typical local CEO took home last year.”

In North Carolina, the state’s 50 top CEOs ended last year with over a quarter billion in personal compensation, up 25 percent from the year before. Average North Carolina workers with jobs saw their weekly earnings rise 1 percent in 2010. They felt lucky. Just under 10 percent of state workers had no jobs.

Did corporate executives in North Carolina even notice? Or care? Do corporate executives, anywhere in the United States, understand how obscene their enormous good fortune appears?

Former U.S. labor secretary Robert Reich has noted that we are, in America today, witnessing a “secession of the successful.” Our most affluent have essentially withdrawn from the ebb and flow of messy normal life. They live in private compounds, fly private jets, send their kids to private schools, and luxuriate in private clubs. They need never rub elbows with the hoi polloi at all.

The bubble around America’s top corporate execs simply takes this secession to an even higher level of isolation. These execs can wreak havoc with people’s everyday lives. They can downsize and outsource. They can pound away at worker pensions and cheat on their corporate taxes — and never see the resulting pain. They can cause suffering and never, in their gut, ever sense it.

Some analysts, to be sure, might not want to fix the “bubble economy” label on this phenomenon, for a good reason. We already have a “bubble economy” theory — based on a totally different set of economic phenomena.

This older “bubble economy” notion started gaining currency in the 1980s when modern American “asset bubbles” first began to pump up and pop.

Asset bubbles start inflating whenever wealth starts concentrating at the top. In these situations, economically productive opportunities for investment start getting scarce because ordinary people don’t have the wherewithal, with wealth concentrating, to buy what a healthy economy could be producing.

The wealth of the wealthy, in quick order, ends up chasing a series of speculative assets instead. Prices on these assets inflate. And then they pop.

We’ve been popping along, as a nation, for several decades now, first with the commercial real estate bubble that ushered in the late 1980s savings and loan debacle, then the dot-com bubble of the late 1990s, then the housing bubble, and now we appear be back in tech stock bubble territory.

Asset bubbles, in other words, remain a real and constant companion of our staggeringly high levels of inequality. They’re not going anywhere.

And neither are Corporate America’s armies of executive security personnel. They’re still creating bubbles of isolation around our power-suited finest.

So we have, in effect, a “double bubble economy.” Our asset bubbles reflect the toxic marketplace dynamics that inequality inevitably generates. The isolation bubbles that surround our most financially favored are, in the meantime, creating toxic psychological dynamics — and ensuring ever more brazen CEO looting.

Both these bubbles will continue to inflate until we take away the pump. Other nations have done that. We could, too, if we worked at becoming more equal.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up at Inequality.Org to receive Too Much in your email inbox.

Comments