JimPinto.com - Connections for Growth & Success
No. 195 : 6 November 2005
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
Click on any item to jump directly to that item
Pinto editorial comments
I wrote about Poverty in my last eNews (25 October 2005) and
received a considerable amount of insightful commentary which
stimulated further thinking. Three of the most thought-provoking
eFeedbacks are included. Bear with me here, while I think these
thoughts through on my hot keyboard.
Sorry, although I had prepared a few items, I couldn't include
any other automation or technology items in this edition of eNews.
They simply didn't seem appropriate. We'll continue our usual
format later this week.
Poverty - Capitalism's blind-spot
Let me say at the outset that I'm an ardent and passionate capitalist.
I believe in free enterprise and enlightened self-interest as defined
by the American Constitution. Indeed, this is exactly why I'm
reviewing the failings of Capitalism as practiced in the US today.
Every system thrives on its sustained advantages, and fails with its
fatal flaws. This was true over the course of history, going back to
Alexander the Great, the Turkish and Roman empires, the more recent
century when 'Brittania ruled the waves'. There are lessons to learn.
But perhaps inevitably linked with the human condition, history keeps
Greed - the Achilles Heel
The American Constitution believes in "enlightened" self-interest,
not just narrow self-enrichment. Karl Marx predicted the fall
of Capitalism through "greed'. This was clearly demonstrated by
executives of Enron, Tyco, Worldcomm and other major capitalistic
Make no mistake, these were not just isolated incidents now solved
by vigilant watchdog committees and hastily imposed government
regulations. The symptoms still persist. Just as computer hackers
seek system flaws to create new viruses, so hoards of lawyers and
accountants seek out legal loopholes and tax dodges to exploit for
corporate enrichment. Just as soon as plodding Congress and Judicial
systems generate safeguards, business experts seek out yet more new
ways to avoid laws for personal and corporate gain.
Common practice - tax & legal loopholes
When I was CEO of Action Instruments, I refused to participate in
tax schemes that I felt were unfair ways to line my own pockets.
I remember the surprise of the people proposing the legal loopholes,
"But, Jim! Everybody does it!"
It's a game that's played in executive suites by capitalistic
enterprises large and small. Hire better accountants to find new ways
to reduce taxes, better lawyers to find new ways to bend the rules
with impunity. Our Capitalistic culture values the adjectives
'clever', 'bright', 'smart', 'ambitious', all of which were used
in glowing business articles about Koslowski of Tyco, Ebbers of
Worldcomm and others just a short time before they were caught.
Sit back with this perspective and read any issue of Business Week,
Forbes and Fortune. Inordinately high profit margins are lauded with
respect. Bankrupt companies avoid bankruptcy by ditching their pension
plans, and the executives walk away with big bonuses. Much admired
Jack Welch of GE was understandably expecting to borrow the corporate
jets and penthouse when he retired. Failed executives often receive
exit packages of $25 - $100 million and even more after just a few
years on the job. It's "common practice".
Executives who are grossly out of line get bad press, but only after
they've fallen. Just recently, a CEO was in the news for having spent
$250,000 at a strip club in Chicago; do you really think that was just
an isolated incident? How much do regular patrons spend with impunity
at that same establishment? Who's actually paying the bills?
And what's really stopping others from spending similar amounts?
The system is self-perpetuating. The board appoints a CEO who's
attracted by a big base salary, options and perks. The compensation
committee reviews "comparable" companies to set the scale. The CEO
quickly appoints new board cronies to rubber-stamp pay increases.
Small wonder then that the system produces an executive pay scale
that generates an American CEO-to-worker pay-ratio that is several
times more than anywhere else in the world. Small wonder that
Exxon-Mobil, Chevron-Texaco and all the other oil companies made
windfall profits in the wake of Katrina and "expected" oil-shortages.
And, of course, they "earned" their big bonuses.
Another blatant chicanery: Pharmaceutical companies justify their
high prices by claiming that their research is very expensive.
They promote that claim with expensive prime-time media advertising.
And their pills proliferate. Take a look at how many TV ads there
are for medications, compared with any other category. They promote
the concept of magic pills: take this pill and your problems will
be solved instantly. TV advertising rushes through the warnings that
there "may be abdominal bleeding, cramps and sexual side-effects"
while the patients continue to cavort and dance around happily.
Everyone knows these are just actors, but no one complains.
Magazine ads for pills are usually two pages. The facing page
promotes pill potency. The reverse side lists - in fine print -
all the warnings and side-effects. One must presume that the
fine-print satisfies legal obligations. How many people actually
read the fine print? And yet all this is common practice and legal.
Indeed, this past week, a judgment was handed down that Merck had
adequately warned Vioxx users about the dangers of heart-attacks.
The result of this sham is that America has the highest drug prices
in the world. And import of comparable inexpensive drugs from Canada
and Mexico is banned, with high-level FDA support and legislation.
Poverty - the Blind-spot
Clearly the flaws in any system are the bad side-effects.
The antithesis of the wealth produced by Capitalism is Poverty.
Perhaps Katrina served America well by the stark contrast of the
poor and the black. Warnings to evacuate were heeded by those who
had the means. But the poor had no transportation and nowhere to go.
It was the blind-spot that suddenly came sharply into focus,
highlighted by sensation-seeking media. The exaggerations were quickly
pointed out by the guilty, to mollify their guilt. But weeks later,
the media have moved on to other headlines, while the Katrina
displaced are reduced to incidental back page bylines.
Think on this: When was the last time that YOU confronted Poverty?
Perhaps occasionally, when you drive downtown and a homeless person
stumbles by. Or, at a traffic light in a big city, when a "Homeless
Veteran" asks for help. You excuse yourself from giving him some
change because he is "probably drunk". And you ask yourself,
"Why doesn't he just go get a job?" The point is that it's a
"blind-spot". You just can't see it. You know what, next time just
give that person some money for reminding you that he's there.
Federal Reserve Chairman Alan Greenspan, champion of the free market,
said succinctly in recent public testimony:
"The income gap between the rich and the rest of the US population
has become so wide, and is growing so fast, that it might eventually
threaten the stability of democratic capitalism itself."
Who is heeding that warning?
Rich-poor gap gaining attention
Newsweek - The Other America
Understanding Poverty in America
Statistics on poverty & food wastage in America
Return to the TOP
Rich Merritt [firstname.lastname@example.org] on how the recent bankruptcy
legistlation contributes to American Poverty:
"Sadly, the motto in our country is: "When a man's down, kick him."
The poor get poorer, in part because the credit industry does
everything it can to get them in debt, keep them in debt, and
bleed them of every nickel the can with high interest rates and
penalties. The poor actually represent tremendous profit to loan
sharks, car dealers, mobile home dealers, payday loan companies,
sub-prime lenders, banks, credit card companies. There's lots of
money out there for those who who exploit the poor.
A few examples:
- When a poor person retires, credit card companies increase their
interest rate. If a person misses a payment, credit card companies
kick the interest rate up, plus tell all the other credit card
companies, so they ALL raise their rates.
- For those who have trouble making it from paycheck to paycheck,
Payday-loan sharks provide advances at 400% interest-rates.
- Banks offer "upside down" loans for those who want to buy houses
or cars they can't afford ((more than it's worth). They know
that the client can't get out of such a loan without going into
bankruptcy. And that is taken care of with new legislation.
"The new Bankruptcy Bill, just passed, is designed to make it
very difficult, expensive and time consuming for anyone to file
bankruptcy. And it drives attorneys out of the bankruptcy practice.
"The banks and credit card companies wrote the Bill and contributed
$400 million in campaign contributions to Congress who passed the
Bill, and GW Bush signed it. It was opposed by virtually everyone,
from labor unions to judges, from women's organizations to consumer
groups. But none of them had enough money to stop it. It's the most
vicious, nasty piece of legislation ever to come out of Congress,
purchased for $400 million.
"For those who have a medical emergency, lose their job, or suffer
any other kind of financial emergency, the protection of bankruptcy
is gone. The economic vultures this world are waiting to prey on
"One really good way to help the poor people of America would
be to pass usury laws that limit the cost of credit to a more
reasonable amount, say 5% over prime. The next would be to go
back to the old bankruptcy law - the one that actually helped
people, but didn't benefit financial companies. In both cases,
that would mean going up against banks and credit card companies,
and we don't have enough money to buy that kind of legislation."
Return to the TOP
Reese Horton [email@example.com] from Atlanta recognizes the
widening gap between the haves and have-nots:
"Your comments hit home for me. My feeling is that the American
middle class is shrinking and we are becoming a nation of haves
and have-nots. There are low talent jobs out there, but because
some feel they can't pay their bills with them, they don't work.
As a result immigrants, legal and illegal, are doing these jobs.
"In Atlanta, I see extravagant shows of wealth and really scary
scenes of poverty and no hope. Maybe if we don't help our poor
people they will revolt and kill us and we won't be able to take
any of our wealth to the grave.
"In the recent bankruptcy of Delphi, there was a threat by
management to do away with pensions and turn them over to the
government, whose program is all but bankrupt anyway.
"The management at Delta Airlines and others, who reward themselves
handsomely when they haven't covered their pension and healthcare
plans, should be forced to give the money back and go to jail
because they aren't directing their companies well."
Return to the TOP
Dave Cutter [firstname.lastname@example.org] on why the statistics show
that the US economy is booming while poverty increases:
"America's economy is booming - but the personal economies of most
Americans are in the ditch, with their incomes not even keeping up
with inflation. This is not by accident. Yes, the economy under
reported to be creating jobs, but those jobs don't pay diddly.
Yes, taxes were slashed , but the gains went to the richest people
and failed to stimulate the prosperity that was promised for all.
"For the first time on record, our household incomes have failed to
increase for five straight years. Yes, people are working, but last
year alone the median pay of full-time workers dropped by some 2%.
Meanwhile, more than 1 million Americans were added to the poverty
rolls last year. As you pointed out, 37 million Americans now live
in poverty, an increase of six million during this current
"But wait, there are statistics showing that "overall employee
compensation is up!" Yes, but the trick played is to lump
wage-workers with the CEOs. And the CEOs get fat salaries, bonuses,
and stock options. The average looks good, but it hides the fact
that 80% of the US population are getting little or nothing,
while the millionaire class has advanced significantly.
"It's a sad day for the poor man in America!"
Return to the TOP
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