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October 30, 2011

The capitalist mantra of the one per cent

Scott Stockdale

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While Occupy movements continue to escalate around the world, based on the dominant theme that "We're the 99 per cent and you're the one per cent," - the dominant message is the anger that a small proportion of powerful people hold the majority of society's wealth -- and they seem to be getting richer. The CBC Radio program The Current recently interviewed some of the one per cent people.

If you're lucky enough to earn more than $400,000 a year, the Conference Board of Canada suggests you're quite rich. In fact, the roughly 250,000 of Canadians are the richest one per cent of all Canadians. Not surprisingly,  the representatives of the one per cent constantly trot out the capitalist mantra – in one form or another – that, “the more we have, the better we can look after the rest of you in terms of jobs and services, which cost money you know.”

After pointing out that the right to assemble and the right to free speech is something democracy celebrates, and these are rights that people in other parts of the world are making great sacrifices to try and achieve, W. Brett Wilson, Chair of Canoe Financial, explains why he feels the top one per cent should earn what they do and why the other 99 per cent aren't entitled to more.

“The top one per cent may represent a significant amount of the engine of growth, the entrepreneurship, the employment, the redeployment of capital, the decisions that are made, that actually help grow our economy.  A redistribution of wealth would be an extraordinary uneconomic decision by the community if they simply tried to just hand cash out, take away from the rich and give to the poor. That would be a short term solution that would absolutely destroy the economy.”

What he doesn't explain is why the average salary of a Canadian CEO is $6 million, while the minimum wage is $10.25, and why some of that money couldn't be redistributed to the workers who produce the goods and services that allow the CEO to earn $6 million.  With consumer spending accounting for 2/3 or more of the economy, if the majority had more money to spend, wouldn't that help business?

Terry Campbell, President of the Canadian Bankers Association, followed with a long-winded explanation about the extraordinary disclosure the banking industry has to make, adding that he doesn't think people are aware of it.  He also talked about the banks' community work, philanthropy, and employment equity record, as justifications for the large profits and salaries. 

When moderator Anna Maria Tremonti questioned him about the billions in profits banks continue to make, and the multimillion dollar bonuses CEO's are getting, and how these bonuses actually went up last year, Mr. Campbell can justify all of that too.

“One of the great lessons of the financial crisis of the last few years is that you want to have strong banks. You want to have profitable banks. If you look around the world we see the lesson of banks that were not properly run. These are very large institutions and yes they generate a lot of wealth and people do make money in institutions but this is all in the context of a very structured elaborate process to review corporate governance, to review compensation practices. You can't have a strong economy without a strong bank. You can't have a strong bank without profitability.”

Jocelyne Cote-O'Hara, a businesswoman who has served as a CEO and as a Corporate Director on several public and private boards, didn't accept these arguments as a justification for executive compensations far in excess, not only of workers' salaries, but of what executives used to earn a generation or two ago.

“I just want to address the compensation issue. I believe the gap has widened so extensively that it’s a big, ‘Oh my gosh!’ when you see $25 million. There hasn't been a good response across North America. In late sixties when I was at Harvard we did a review of compensations for CEO's around the world and Canada was at the lower end. What used to be an appropriate ratio that people had accepted has gone out the wayside. It's not just the salary. It's all the other things that have come into play. You know the bonuses, the special stock allotments, all of this total allotment.  And there has to be some conversations about this.”

However, Mr. Campbell stuck to capitalist dogma.

“Yes they (banks) are profitable and they generate a lot of wealth, but they lend money to businesses, which creates jobs. They pay out dividends to pension funds, to your retirement fund, your mutual fund. They support local communities. The money banks make is put back to productive use on a regular basis.”

He conveniently ignored the fact that the lion's share of the income these activities generates goes to the one per cent at the top, while implying that the 99 per cent should be grateful for whatever they get.

When Ms. Tremonti pointed out that banks are attached to the credit card industry, which charges 18 per cent; and when consumers want to change this, the banks employ their lobbyists to prevent them from doings so. But Mr. Campbell saw that as fair business practice that everyone participates in.

“Everybody has a lobbyist. Everybody has influence because there's not this sort of secret cabal. Public policy in Canada is open and it's transparent; and sure we have a voice, so do people on the other side, so do different kinds of industries, so do consumers. There's a consumer movement in Canada. And then there's the legislature and democracy. Sure we try to influence the outcome but we don't succeed as much as people think.”

But they certainly succeed an awful lot more than the 99 per cent do.

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