It is official: The land of chocolates, pocket knives, watches and tax havens has passed a referendum limiting executive pay. The initiative passed after Swiss pharmaceutical maker Novartis revealed plans to pay outgoing chairman Daniel Vasella $78 million. Corporate backlash was immediate. Nestle’s CEO immediately denounced Switzerland, claiming that its businesses will no longer bring jobs to Switzerland. Yet, despite the condemnation, the European Parliament passed a similar measure to limit executive pay. Switzerland is now no longer the cold, rocky haven in Europe where CEOs can hide from the righteous hand of equality. This marks a turning point in the social justice not just of Europe, but of the world.
We all remember the banking crisis of 2008. What we may not remember, however, is that the hasty bailout enabled banking executives to walk away from a mess they created with millions in bonuses. All of this happened while the Average Joe applied for food stamps, unemployment insurance and other social programs that allowed him a scrap of dignity.
Currently, America has a higher rate of wealth inequality than any other developed nation. We have a higher disparity than Russia, Iran, Pakistan, the Ivory Coast and most of the rest of the world. Over the past 30 years, executive pay has increased 127 times faster than the average worker’s pay. The average income for the bottom 90 percent of Americans is $31,244 per year. The last time America saw a similar economic injustice was during a time period properly called “The Gilded Age” in the early 20th century. We have now entered into a “New Gilded Age” where the rich have the government on a leash. The only real question is: Where is our Teddy Roosevelt?
Teddy Roosevelt called for vigorous government intervention to destroy the invisible, unholy alliance between corrupt businesses and corrupt politics. We need a new generation of legislators to take up this noble cause.
Curtailing executive pay is just the start of the measures the United States must enact immediately in order to prevent our democracy from slipping farther into a plutocracy.
First, the minimum wage must be raised. President Obama’s challenge to Congress to raise the federal minimum wage to $9 is cute. However, Australia touts a $17 minimum wage: The U.S. should raise its minimum wage to $15, at least. This would put money back into the hands of Americans who can then buy goods and services, creating a functioning economy instead of the gluttonous credit monstrosity of today. Opponents of an increase like to point out that there is no evidence that increasing the minimum wage amounts to a stimulus. I would argue that there is no evidence that cutting taxes for the wealthiest Americans amounts to stimulus or how deregulating banks stimulates the economy. Then there are the more far-fetched arguments that well-paid employees won’t work as hard.
Another measure the U.S. should enact is to establish a maximum wage for the highest earners, which includes hiking the capital gains tax. Now that Switzerland and the rest of Europe are eliminating their tax havens, where will U.S. executives go to be tax exiles?
America has seen this before. In the first decades of the 20th century, America had a widening gap in wealth equality. Our cities were festering, and the rich were capturing more wealth and power. Still, America did not have a revolution; we did not turn to socialism, fascism or communism. Instead, we reformed. We instituted a progressive income tax, initiated unemployment insurance, busted up the big trusts and regulated corporations. That’s what the Progressive Era was about: embracing reform. Even today, most people would agree that these measures were not extreme and did not negatively affect the economy. That is what America needs today: not socialism, but reform.