Value extracted from society by the rich — instead of value creation by them — resulted in the income share of the top 1 per cent in the US expanding from 9.4 per cent in 1980 to 22.6 per cent in 2007. During that period productivity growth was relatively good. However, since the financial crisis in 2007 — in part caused by some among the 1 per cent — matters have worsened, and in 2016 the top 1 per cent’s share was 38.6 per cent. Similar vast canyons have been constructed by the wealthy in other countries, including Britain.
Professor Hubbard points the rich to the example “of Henry Ford’s decision a century ago to pay his workers enough that the best workers would reliably work for Ford”. Henry Ford’s reasoning was actually broader than that. He figured that by paying his workers more they would be able to buy more Ford cars, thus expanding the volume produced and lowering the production cost with the consequence he would sell more to customers elsewhere too. Those better paid workers therefore made him even wealthier and likewise other businessmen who followed suit. That was one of the foundations of the middle classes and of wealthy western nations.
Today’s business leaders — who have enriched themselves by reversing that and plundering the middle class — should heed those lessons before their mountain of wealth melts, as has that of the middle classes they have impoverished.
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