What is Killing the People?

About 25 years ago a farmer living in eastern Ontario used to complain about the state of the world by saying, “It’s them frozen peas what is killing the people.” I think he meant the farther we are away from the basic survival operations involved in growing our own food, the less we are able to be realistic in other spheres. It is too late now to save ourselves with universal gardening; however, the prospect of discovering a simple thing “what is killing the people” is attractive.

There are many candidates to plug into the frozen pea slot: too much religion, not enough religion, video lottery terminals, TV, SUVs, and many more. We all have pet hates and valid complaints. Of all the available choices my favourite is “naivety about the economy.” In an effort to correct this without tumbling into unreadable complexity, I propose we adopt a new rule of thumb to help us change our point of view. So let the people shout: “All Money is Public Money”.

This is a reasonable rule of thumb because every penny received by governments, private sector companies and service providers comes from the public inside or outside of Canada. There is no good reason not to apply the same level of oversight to corporate excess that we apply to government waste. Private sector spokesmen might argue that because consumers have choices, companies are free to use their profits for any purpose permitted by law and acceptable to shareholders.

But consumer choice is a weak force in the marketplace. My supermarket may take my money and make foolish investments that I do not agree with, they may pay their executives unreasonably high salaries, they may downsize the jobs of my neighbours to add to share holder value, they may squeeze farmers out of reasonable profit, etc. My ability to affect the policies of my supermarket is negligible. Protest shopping at another supermarket won’t help because all supermarkets operate in about the same way. Motivating enough people to join me in a battle with my supermarket is improbable. And there are too many battles. The same argument can be made for automobile companies, banks and so on. In these matters the supposed sovereignty of the consumer in the market is a myth.

Because all money comes from the public, the majority of the population could use its political power to impose what amounts to speed limits on parts of the economy where excess and unfairness are apparent. Such is the case for the top 100 CEOs in Canada whose average compensation at $9M has now reached 240 times the average Canadian wage and 570 times the earnings of a minimum wage worker (Canadian Centre for Policy Alternatives report of 2 Jan 2007). It is hard to understand why we need to motivate our leaders with huge sums of money. After all, they expect the people at the very bottom to work diligently at dull boring jobs for the miserable motivation of the minimum wage.

It is instructive to examine pay in the Canadian Forces where morale is influenced by benefits enjoyed by the different ranks. A lieutenant general (one step down from the Chief of the Defence Staff whose exact salary is unknown) makes $211,500 per year according to April 2006 data (of pay scale maxima) while a private soldier earns $43,788. This is a ratio of 4.83 from the near-top to the bottom. By including the CDS, the ratio might be as high as 9 or 10 (estimate based on deputy ministers’ salary data). As far as I know there is no lack of energy, drive or motivation apparent in the work of these officers despite their low salaries compared to CEOs.

If a 10 to 1 salary ratio is enough money motivation to lead an army, where death on the job is a possibility, couldn’t CEOs manage with less? A feasible way to curb salaries might be to tie the maximum amount to the minimum wage. For example, a ratio of 60 would yield a maximum salary of $950K. Or a ratio of 120 would yield $1.9M. Whatever amount is agreed let the compensation committees busy themselves with devising appropriate salaries for other executives within such a limit instead of vainly trying to push all executive salaries above average. They might then find it worthwhile to campaign for increasing the minimum wage to a living wage.