Global Policy Forum

The Growing Gap Between Rich and Poor


By Tom Lewis

Socialist Worker
August 1, 2003

The U.S. economy experienced record growth during the 1990s. Corporate America raked in profits at home and abroad, and books appeared with titles like The Dow at 40,000--reflecting Wall Street's belief that an era of unlimited prosperity had arrived. The decade ended with amazed politicians scratching their heads over what to do with a trillion-dollar federal budget surplus.

But working Americans didn't benefit from the corporate feast. And the Bush administration has already spent the surplus--and then some--on war and tax cuts for the rich. Today, the gap between the haves and the have-nots in U.S. society is as great as ever--clear evidence that all Americans are not "on the same side." Tom Lewis examines the reality of workers' lives after the bosses' biggest bonanza in history.

As recession took hold of the U.S. economy in late 1999, one financial bubble after another began to burst. But one bubble that didn't pop was the salary bubble for America's leading corporate executives. In 2002, the median salary for CEOs at the top 100 U.S. corporations was $33.4 million. At the average large company in the U.S., the top dog pocketed $5.2 million. That means median CEO pay at large companies was a whopping $1,017 an hour.

Even Army Gen. Tommy Franks, who led the U.S. invasion of Iraq, earned a pittance by comparison--just $69.10 an hour for the services that he rendered to U.S. oil interests. While CEOs wallowed in millions, doctors made an average of $60.14 an hour, grade-school teachers earned $28.01 an hour and firefighters received $17.16 an hour. The average worker in the U.S. got $16.23 an hour. And workers in downsized or unskilled jobs made only half of that figure.

This vast inequality today is part of a trend that grew throughout the 1990s. In the era of corporate globalization, billions of workers and poor people around the world learned that a country's economic growth does not automatically result in rising standards of living for the majority. And the U.S. is no exception. The 13,000 richest families in the U.S. now have almost as much income as the 20 million poorest. "And those 13,000 families have incomes 300 times that of average families," liberal economist Paul Krugman wrote in the New York Times Magazine.

In the mid-1990s, the United Nations published a report showing that the U.S. had already become the most class-stratified society among all the advanced industrial countries. Now, wealth in the U.S. is even more concentrated in the hands of a few. "It's remarkable how little growth has trickled down to ordinary families," Krugman explained. "Median family income has risen only about 0.5 percent per year--and as far as we can tell...just about all of that increase was due to wives working longer hours, with little or no gain in real wages."

In their 1992 campaign for the White House, Bill Clinton and Al Gore liked to point out that the top 1 percent of Americans owned 40 percent of the country's wealth. They also said that if you eliminated home ownership and only counted businesses, factories and offices, then the top 1 percent owned 90 per cent of all wealth. And the top 10 percent, they said, owned 99 percent! But once in office, Clinton and Gore did nothing to redistribute wealth more equally--despite the fact that their two terms in office spanned the economic joyride of the 1990s. On the contrary, inequality only continued to grow.

But it isn't just that gains have been nonexistent for most U.S. workers in recent years. Life has gotten worse, and dreams of the future have darkened. Some 2.6 million jobs have disappeared since March 2001--the longest sustained period of job losses since the Great Depression of the 1930s. Two million workers lost their health insurance last year alone because of layoffs. And workers who still had coverage faced skyrocketing costs and larger co-payments.

In 1988, 27 percent of American workers belonged to health maintenance organizations (HMOs). During the 1990s, the CEOs and Washington's politicians drove the vast majority of Americans with health coverage into the HMOs. They said that the HMO "managed care" system would control costs and save money for ordinary people. But by 2001, 93 percent of U.S. workers and retirees got their health services through managed care--and were paying more for it!

Most states now face dramatic budget shortfalls. This means fewer social services--from welfare to veterans' benefits to support for disabled kids--and more hardship for workers and their families. The recession is partly to blame, but giveaways to corporations and tax cuts for the wealthy threaten to make the added burdens permanent. Public education, for example, lies squarely on the chopping block. Politicians have slashed education budgets for kindergarten through high school, and annual double-digit tuition hikes have become the norm in colleges and universities. State and local governments, under pressure from Washington, are forcing parents and students to pay directly for an ever-increasing portion of their college degree. In many states, the increased amount that families must bear exactly matches the amount by which state funding has been reduced.

The bosses' bonanza did nothing to improve the quality of life for U.S. workers. Hunger is still a daily reality for one in five children in the U.S. under the age of 18. One in four under the age of six goes to bed undernourished. And 25 percent of kids under the age of six officially live in poverty.

Their parents fare little better. Even though unemployment has surpassed 6 percent, the average American now works nine weeks longer per year than European workers do. We work the equivalent of five weeks longer than we did here in 1973--about 200 hours more each year. All of this has contributed to vast amounts of stress, heart disease, depression and other ailments--as U.S. workers literally work themselves to death.

Debt is a major source of worry and anxiety. No matter how hard or how long we work, it seems increasingly impossible to make ends meet each month. In the first three months of 2001, workers not only were unable to save, but used credit cards to spend 7 percent more than they earned. Personal debt is now at a record 120 percent of personal income in America. But if we work hard, we're told, at least we can look forward to a comfortable retirement. Not any more! The retirement age is being pushed up so we get fewer years. And the pressure is on to privatize as much of retirement as possible--including Social Security.

And yet private pensions are eroding at breakneck speed. Corporate pension plans lost between $300 billion and $500 billion over the past two years. The Pension Benefit Guaranty Corporation--a quasi-governmental agency that insures corporate pension programs--is currently broke. By 2031, estimates are that companies will cover less than 10 percent of retirees' health expenses. Already, 20 percent of companies have eliminated retiree medical plans for new hires, and 17 percent will require new hires to pay the full premium for coverage.

Faced with the impact of recession and cutthroat competition, management sees jettisoning pension plans as a tempting idea. According to The Economist magazine, "Pension liabilities have become a key element in corporate insolvencies and resurrection from Chapter 11 bankruptcy. U.S. Airways, for instance, America's seventh-largest airline, was able to emerge from bankruptcy protection a few weeks ago only after shedding its pension obligations." Pilots stripped of their retirement dreams only got angrier when they learned what happened to the CEO who ran U.S. Airways until just before the bankruptcy filing. Stephen Wolf left the company with a one-off pension payment of $15 million in his pocket.

Does the system work for us? Mired in recession and war, working Americans are having a rough time. At the end of the Cold War with the USSR in the early 1990s, Papa Bush promised us a "peace dividend" that would change our lives for the better. That was a pack of lies. Now Baby Bush's doctrine of a newly aggressive U.S. imperialism has dashed hopes that the trillion-dollar surplus would be used for national health care, higher teacher pay, secure pensions and revitalized cities--because the trillion-dollar surplus has become a huge deficit.

Like our bodies and our lives, this system grinds even our dreams into dust. We have to get rid of an economic and political system that increases hardship for the majority, while a tiny minority live in luxury. If Corporate America couldn't deliver for us in a period of capitalist expansion like the 1990s, it never will. We need to fight for a socialist system that puts the needs of ordinary people ahead of corporate profits.

Do American Workers Benefit from U.S. Imperialism?

A NUMBER of people--both inside and outside the U.S.--think that American workers get material benefits from U.S. imperialism. Corporate America's exploitation of workers in the economically less developed countries is believed to maintain and improve living standards here. And the U.S. military is said to defend the comfortable lifestyles of U.S. workers.

But the experience of the 1990s proves otherwise. Starting in the 1980s, the U.S. undertook to rebuild its confidence and ability to intervene militarily throughout world. The U.S. government had suffered a humiliating defeat when it lost the Vietnam War. Ronald Reagan attempted to overcome the "Vietnam Syndrome" by invading Grenada in 1984 and bombing Libya in 1986. Papa Bush then invaded Panama in 1989 and ordered the first Gulf War in 1991. Bill Clinton sought to occupy Somalia in 1993 and invaded Haiti in 1994. He used depleted uranium weapons to bomb Serbia, Kosovo, the Sudan and Afghanistan in the second half of the 1990s. Clinton also militarily enforced economic sanctions on Iraq that killed more than 1 million Iraqis during the 1990s. Baby Bush went on to raze Afghanistan in 2001 and launch the current military invasion and occupation of Iraq in 2003.

So the past 20 years have been characterized by a global reassertion of U.S. military power. And hand in hand with this, U.S. economic power, with its "free trade" ideology, marched across the globe.

U.S. corporations extracted huge profits from almost every corner of the world in the 1990s. But as the declining living conditions of U.S. workers show, these profits didn't trickle down to improve their lives. Some observers argue that, without those profits, the decline in U.S. workers' living standards would have been even greater. But the reality is that U.S. bosses robbed from U.S. workers everything they could get away with--just like they did from workers in less economically advanced countries. Downsizing, union-busting, benefit reductions, demands for labor flexibility and forced productivity gains were strategies used by U.S. corporations not only in foreign countries but also here at home to drain more out of workers.

The idea that U.S. workers live well because their brothers and sisters in less developed countries live poorly is plain wrong. The U.S. ruling class lives well--as do the ruling classes of the less-developed countries--because workers everywhere are exploited. The 1990s saw an expansion of U.S. economic and military imperialism. Big business benefited, and U.S. workers lost out.

More Information on Inequality of Wealth and Income Distribution
More Information on Corporate Crisis and Bubble Capitalism
More Information on US Empire and Economic Expansion

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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.