For such a bold claim I expected a more in depth analysis rather than this amalgamation of statistics. For example, nobody would argue against the fact that executive compensation has gone through the roof. However his argument for directly relating executive compensation to SVM is lackluster at best:
> We can see this has been a driving force behind the rise of the 1% thanks to a study by Bakija, Cole, and Heim
(2012). The rise in incomes of the top 1% has been driven largely by executives and those in finance. In fact,
executives and those in finance accounted for some 58% of the expansion of the income for the top 1%, and 67%
of the increase in incomes for the top 0.1% between 1979 and 2005. Thus, there can be little doubt that SVM has
played a major role in the increased inequality that we have witnessed
He makes a solid argument against companies which employ flawed executive compensation programs - which are without a doubt very common. But so are companies which try to increase shareholder value. Simple correlation doesn't imply causation here. If there's any case to be made here, it's that a flawed compensation scheme leads to a short term optimization of shareholder value (ie. propagation of SVM) and not the other way around.
His argument for the decline in labour share of GDP is even more spurious:
>The role of SVM in declining labour share should be obvious, because it is the flip-side of the profit share of GDP.
If firms are trying to maximize profits, they will be squeezing labour at every turn (ultimately creating a fallacy of
composition where they are undermining demand for their own products by destroying income).
He completely omits the rising productivity in many industries which simply require a smaller workforce for the same output.
Pointing out well known flaws in an established economic system is hardly noteworthy. Potential alternatives would be much more interesting to talk about.
> We can see this has been a driving force behind the rise of the 1% thanks to a study by Bakija, Cole, and Heim (2012). The rise in incomes of the top 1% has been driven largely by executives and those in finance. In fact, executives and those in finance accounted for some 58% of the expansion of the income for the top 1%, and 67% of the increase in incomes for the top 0.1% between 1979 and 2005. Thus, there can be little doubt that SVM has played a major role in the increased inequality that we have witnessed
He makes a solid argument against companies which employ flawed executive compensation programs - which are without a doubt very common. But so are companies which try to increase shareholder value. Simple correlation doesn't imply causation here. If there's any case to be made here, it's that a flawed compensation scheme leads to a short term optimization of shareholder value (ie. propagation of SVM) and not the other way around.
His argument for the decline in labour share of GDP is even more spurious:
>The role of SVM in declining labour share should be obvious, because it is the flip-side of the profit share of GDP. If firms are trying to maximize profits, they will be squeezing labour at every turn (ultimately creating a fallacy of composition where they are undermining demand for their own products by destroying income).
He completely omits the rising productivity in many industries which simply require a smaller workforce for the same output.
Pointing out well known flaws in an established economic system is hardly noteworthy. Potential alternatives would be much more interesting to talk about.