THE END OF INEQUALITY….Over at the Weekly Standard, Irwin Stelzer talks about growing income inequality. He walks us through the usual statistical litany and even adds a few new ones for the Robb Report set: blue collar men have less money than their fathers; the share of national income going to the middle class is shrinking; corporate vice presidents are losing ground to CEOs; and CEOs are envious of the skyrocketing incomes of principals in private equity firms. Things are tough all over.
But this being the Weekly Standard, you can be sure that none of this is a problem. Guess what’s coming to the rescue?
Market forces are already in motion to change some of these trends. As more and more imitators follow the path of the original private equity players, those profits are being competed down — which is what happens to all builders of better mousetraps in the long run. CEO compensation is now under greater scrutiny than ever, as increasingly active shareholders and corporate boards, awakened to their fiduciary responsibilities by Sarbanes-Oxley, become less generous. More and more workers are enrolling in community (two-year) colleges to upgrade their skills. Wages in China and India are rising, easing some of the pressure on wages of unskilled workers in developed countries.
That’s a relief, isn’t it? Market forces are going to fix all this stuff, so there’s no need to worry our pretty little heads about it. Now get back to work.
POSTSCRIPT: Really, though, I’d be remiss if I didn’t excerpt this paragraph from Stelzer’s piece. Read and be astonished:
Start in a place where you wouldn’t ordinarily expect to hear whining about relative incomes: the executive suites of major corporations….Not that CEOs are suffering. Professor Xavier Gabaix of MIT and Professor Augustin Landier of New York University estimate that average CEO incomes increased six-fold between 1980 and 2003….But even the most handsomely remunerated corporate chieftain is a pauper compared with the moguls who run Blackstone, KKR, and the other buy-out shops. The average CEO can afford to join a country club, either with his own money or by having the corporation pick up the tab; a private-equity operator can build his own golf course. A corporate jet is fine, but using it for private travel is likely to raise howls of protest from shareholders and, in some cases, attract the attention of federal prosecutors. Leaders in the private equity sector have their own jets, and no need to apologize or explain if they flit to the south of France for a weekend in the sun.