Xtreme Gulpism

Posted January 2, 2007

Categories: Articles

In the mid-1970s, Coca-Cola tried to sell the convenience store 7-Eleven on the idea of a 32-ounce cup for soft drinks. The 7-Eleven rep doubted that the public was ready to drink that much: the larger cup was “absolutely insane.” Alas, American consumers proved him wrong and soon came the Super Big Gulp (44 ounces) and the Xtreme Gulp (52 ounces).

“Greed is good,” Gordon Gekko proclaimed in the famous scene in the movie Wall Street. Just as American consumers have guzzled down more and more glucose drip, U.S. executives have also taken a bigger and bigger gulp out of the overall income stream. The average U.S. chief executive officer now makes 364 times the average worker. It wasn’t always this way. Back in 1989, two years after Gekko’s plea, the gap was only 71 times.

The United States did not invent greed. But particularly in the last quarter century, Americans have taken excess to a new level. Extravagance was once the province of kings and emperors. Now, even the head of a relatively obscure company can earn fabulous riches. Ever heard of XTO Energy? The CEO of this oil company pulled in a nearly $60 million paycheck last year.

As FPIF analyst Sarah Anderson explains in Executive Pay Debate Raging in Europe and the United States, the American-style pay scale is no longer just for Americans. “European business leaders have traditionally taken home far less compensation than their American counterparts. But European executive compensation has been rising, and these pay increases have citizens in European nations deeply concerned,” Anderson writes.

Huge bonuses, golden parachutes, executive stock options — these features of go-go capitalism are spreading to other parts of the world, particularly places where a more egalitarian spirit has traditionally reigned. In Japan, the CEO-worker gap has traditionally been around 10 to one. But inequality has grown in Japan. In the last 20 years, income inequality has grown faster in Japan than in any other rich country.

Globally, the gap between rich and poor is appalling. The richest 1% take in as much as the poorest 57%. Subtract China from the equation, and global inequality has only gotten worse over the years. Has America exported the ideology of Xtreme Gulpism to the world? Global waistlines have certainly expanded because of American corn products, fast food, and automotive culture. And U.S. pressures to reduce government “interference” in the market have allowed corporations to accumulate unprecedented wealth.

Not everyone is happy with the ideology of Xtreme Gulpism. “A July 2007 Financial Times/Harris public opinion poll dramatically captured the growing European outrage over executive pay,” Sarah Anderson writes. “Over 60% of those surveyed in the UK, France, Italy, and Spain, the poll found, would like to see their government set caps on top business executive pay.”

For a more dramatic example of push back, check out the 2004 German movie The Edukators. A small group of disaffected German youth breaks into the houses of the rich but doesn’t steal a thing. Instead, they rearrange the furniture and leave a note behind: “Your days of plenty are numbered.” Given the anger over income inequality around the world, CEOs should start reading the writing on the wall.

The Appendix of Europe

You might think that there was nothing left of Yugoslavia to divide. Slovenia, Croatia, Bosnia, Macedonia, and most recently Montenegro have all gained independence. But the Kosovo region of Serbia also wants out. Well, the 90% of the population that is ethnic Albanian wants independence. The rest, mostly Serbs, wants to stay in Serbia.

The United Nations came up with a compromise plan: give Kosovo independence in everything but name (and a few other trappings) and accord the Serbs substantial autonomy. The threat of a Russian veto in the Security Council, however, has unraveled the compromise. “The stage is now set,” writes FPIF contributor Richard Caplan in Kosovo in the Balance, “for what is likely to be a four-month period of fruitless talks between Belgrade and Pristina that could culminate in a unilateral declaration of independence on the part of Pristina and Serbian counter-efforts to assert their claims — in short, a prescription for disaster.”

Caplan envisions three scenarios: stalemate in negotiations, partition, or Kosovo’s declaration of independence. The Bush administration, he recommends, “must tone down its rhetoric and send clear signals to the Albanians that a unilateral declaration of independence would be unacceptable” and opt for “managed independence instead.” Bosnia’s transportation minister recently argued that his country was Europe’s appendix: ignored except when inflamed. The same applies all the more so to Kosovo.

The Costs of War

In Death at a Distance, FPIF columnist Conn Hallinan examines a worrisome trend in the wars in Afghanistan and Iraq: “an enormous intensification of U.S. bombardments in these and other countries in the region, the increasing number of civilian casualties such a strategy entails, and the growing role of pilot-less killers in the conflict.”

Hallinan looks at how the air war has become a way to compensate for the failure of U.S. troops on the ground to achieve their increasingly opaque objectives. “The stepped-up air war in both countries has less to do with a strategic military decision than the reality that the occupations are coming apart at the seams,” he concludes.

Meanwhile, as if the $147 billion supplemental to fight the wars in Afghanistan and Iraq were not enough, the Bush administration is likely to request from Congress another $50 billion. As Travis Sharp writes in Bush Won’t Stop the Bucks, the administration is probably looking at a series of increases in military spending, from increased procurement to more spending on veteran health care.

“The administration has also proposed increasing the size of the active-duty Army and Marine Corps to 547,000 and 202,000, respectively, by 2012,” Sharp writes. “This proposal enjoys bipartisan support in Congress, but the Congressional Budget Office estimates that it will cost $162 billion to implement over the 2008 to 2017 period.”

Our CEOs siphon up more of the country’s income stream. The Pentagon slurps up more of the government’s revenue stream.

Xtreme Gulpism is truly an addictive ideology.

FPIF, September 4, 2007

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