Absolute Wealth Corrupts Absolutely

The boom of the 1920s spawned corporate misdoings that were ultimately unveiled when the economy fell to pieces. Sound familiar?

BY KEVIN PHILLIPS
Time.com

July 02, 2002

The country is now waking to the unpleasant reality that boom-era excesses and corporate malfeasance go hand in hand. When the wealth of the million richest U.S. families, the top one percent, expands too much over a decade or two of booming stock prices, the eventual result seems to be a taste for speculation and highly developed sense of "gimme" that winds up jeopardizing both the American economy and the vitality of the American democracy. Especially in corporations, this ethical erosion over the last 4-5 years is now coming home to roost.

Since the influence of great wealth seems to rise with its size and momentum, a few examples will make the point. In 1982, the wealth of the thirty richest U.S. individuals and families ranged from $500 million up to $8.6 billion. By 1999, seventeen years later, the range was $7 billion to $85 billion, a tenfold increase. In 1980, the ten highest compensated U.S. executives had an average annual pay package of $3.4 million, but by 2001 that had skyrocketed to an average of $155 million — and this while the typical American household in the middle quintile barely stays ahead of inflation.

Economic history has seen other such surges, and the classic U.S. example involves the perverse proportionality of how the binge of the 1920s was followed by a three-year wringing-out after the 1929 Crash. Thus it's highly relevant — and a little scary — that experts are beginning to compare current circumstances with the precedents of that era.

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