The Hotdog Theory
An economic model of America
By C. William Boyer
IMAGINE YOU’RE ONE OF A HUNDRED CONTESTANTS ON AN ISLAND, striving to survive on the 100 hotdogs shipped daily to that island. But I’m warning you, it’ll be hard, if you're not one of the elite, because this island is modeled after America and its current levels of wealth distribution.
It goes something like this:The richest man on the island, Mr. Big, will wake up in the morning and get 40 hotdogs- and if Mr. Big’s labor-to-cash ratio mirrored that of corporate CEOs, he'd be making on average 419 times his employees average annual income. The next richest four people on the island, the Pretty Bigs, will get 5½ hotdogs each, and the next richest five, the Still Pretty Bigs, will get just over 2 each. The bottom 90 people, the little people, get 27 hotdogs split up all among them, less than 1/3 a hotdog per day. In other words, the richest 10 people will get 3 times the hotdogs of the other 90 people combined.
And that’s exactly how America’s wealth is divided.
Now, since our island is modeled after America, let’s see how Mr. Big and his buddies rig the system in their favor:
Mr. Loyal Employee had a sister working for Mr. Big at his hot-dog refurbishing factory where she turned hotdogs into corn-dogs for half-a-dog a day. Unfortunately, she lost her job when Mr. Big “off-shored” the factory to another island, paying that island’s folks a quarter-dog daily[4].
The poor, off-shored woman can’t subsist solely on the 2/10th’s of a hotdog she gets working a new job, so she gets a credit card to make ends meet. Soon, if Mrs. Off-Shored can’t get a better job, she’ll max out her credit card and need to file bankruptcy. Because Mr. Big knows this— and because he owns the Banc of Hot Dog— he wants to short-circuit Mrs. Off-Shored’s intended bankruptcy. So Mr. Big gives the island’s elected representative five hotdogs for his re-election fund to close that pesky, bankruptcy-allowing loophole. That man’s name is Mr. Congress. Ostensibly, Mr. Congress works for the People, but in reality he’s Mr. Big and the Pretty Bigs’ lackey.[5] Mr. Congress later helps Mr. Big win the island’s hotdog-delivery contract. As a reward, Mr. Big gives another three hotdogs to Mr. Congress’ re-election campaign and hires the man’s son, little Timmy Congress, to run the island’s hotdog-refurbishing factory at a full two dogs a day and despite the fact the kid’s never been in a hotdog-refurbishing factory in his life and wouldn’t know a foot-long from a Vienna sausage.
Despite everything being in his favor, something’s still bugging Mr. Big. See, despite his immense wealth and importance and all that he does for the island’s citizens, Mr. Big still must pay taxes that are so much higher than, say, Mrs. Off-Shored. Why, he discovers, he’s paying nearly 20 hotdogs in taxes and can barely get by while that lazy, job-jumping woman pays only 1/10th of a dog. It’s just not right. Luckily, one of Mr. Big’s buddies, a Pretty Big, has been elected Supreme-Head-Man by convincing Mrs. Off-Shored and Mr. Loyal Employee that he’s one of them. To prove it, the Supreme Head Man passes a hotdog tax-cut. “See,” he says, “I’m looking out for you and I’m looking out for Mr. Big, who will create more jobs by spending more hotdogs back into the island’s economy.”Mrs. Off-Shored’s tax cut is 1/20th of a hotdog. Mr. Big’s is fifteen hotdogs. “But at least,” she consoles herself, “he’ll hire me back at a higher wage.”
Uh, nope.
Instead, the next day, Mrs. Off-Shored discovers that the hotdog-cutting plant’s been moved to another island as where they pay just 1/10th a dog. The reason, Mr. Big solemnly explains, is because the plant has remained ‘unprofitable’ despite the fact Mrs. Off-Shored and her co-workers’ pay and benefits were cut and people laid-off along the way.
Oh, and also along the way? Little Timmy Congress, who wouldn’t know a frankfurter from a polish sausage, got a 20-hotdog golden-parachute package[6].
Suddenly, Mr. Big, with as many hotdogs as the poorest 95% on the island combined, decides he needs even more hotdogs. “What we need,” Mr. Big says, “is another factory employing more people to turn hot dogs into pigs-in-the-blanket. But to do that, I need capital. I’ll let everyone buy into the factory and we’ll share the extra hotdogs.” The island’s citizens heartily agree that a new factory with lots of jobs is just the ticket and so an Initial Public Offering (IPO) is planned; to ensure everything’s fair when the IPO hits the market, only the man running the release, Mr. Stockmarket, knows the date before-hand. Alas, on the eve of the release, Mr. Stockmarket gives Mr. Big and the Pretty Bigs a heads-up, selling them hotdog shares at rock-bottom prices. These shares are in turn sold the very next day to regular folks on the island at a healthy profit [7].
With the IPO start-up money, Mr. Big gets the factory running. But it’s a bare staff, and when pigs-in-the-blanket production lags and stock-price drops, Mr. Big hits on the idea to hire a man to talk up the factory. The man, Mr. Media, does such a good job the stock-price rises again, and to stoke the rise even further, Mr. Big slashes the factory’s staff, paying their salaries in a hotdog dividend to the shareholders.Mr. Media (there used to be a second Mr. Media, unrelated, who provided a different point of view, but he sold himself to the first Mr. Media so now there’s only one point of view and that’s Mr. Big’s point of view), Mr. Media also helps Mr. Big with public relations. See, it would be normal for folks subsisting on less than half a hotdog to resent Mr. Big and his 40 dogs, but instead they admire him. Mr. Media tells the regular folks— Mrs. Off-Shored, Mr. Loyal Employee, and BettyBlueCollar-Can’t-find-a-job, too— that they can be Mr. Big with enough hard work and moxy. Then Mr. Media shows the cool things they’d get as Mr. Big: the superluxurious hotdog-mobile, the massive house on the beach built from millions of Mr. Big’s hotdogs and the beautiful Hotdoggity girls. “And if it can be yours,” Mr. Media coolly implores, “what’s wrong with it being Mr. Big’s? You’ve just got to be smart.”
Boy, Mr. Big is smart all right. So smart that when that second hotdog plant takes off, rather than pay a silly corporate tax on all that profit from selling hotdog-byproducts to the island’s citizens, Mr. Big re-incorporates on a neighboring island roughly the size of a suitcase. Who cares that the other island’s tiny? It’s got a mailbox, which is all it needs to become Mr. Big’s corporate headquarters. And with all that profit saved, the senior shareholders, the Pretty Bigs, think Mr. Big’s pretty swell and award him more options, which he immediately liquidates[8].
One day the Supreme-Head-Man and Mr. Congress report with great sadness that the island’s budget is running a deficit. But, rather than raise the evil taxes on Mr. Big, they cut the jobless hotdog benefit to Mrs. Off-Shored and her sister, Betty-Blue-Collar-Can’t-Find-A-Job. Simultaneously, Mr. Big’s company gets a huge hotdog-byproducts research grant and Mr. Big gives himself a huge raise.
Now, you can imagine how distressing all this became to the island’s citizens: Mr. Big and the four Pretty Bigs live high on the dog, while the least well-off 60 citizens can hardly pay the bills. It gets so distressing, in fact, that a fed-up BettyBlueCollar-Can’t-find-a-job and Mrs. Off-Shored try getting their friends to work together to stop all the outsourcing and down-waging and benefits-cutting by forming a local Hotdog Makers Union, but it’s all to no avail: Mr. Big and Mr. Media team up, explaining how a union will drive up costs and force them to relocate to another island to be competitive and, besides, they say, why make hotdog products costlier to everyone so that a few, at most half the island, can enjoy a decent wage?[9].
“Just tell these people,” Mr. Big says, “to go back to school and re-tool for a high-tech weenie world. Then we’ll re-hire them at twice the pay.”
Mr. Congress chuckles off-camera. “Same thing he told the WeenieCom people before shipping their jobs to India.” Mr. Congress chuckles again. “Is this a great island or what?”
By C. William Boyer
IMAGINE YOU’RE ONE OF A HUNDRED CONTESTANTS ON AN ISLAND, striving to survive on the 100 hotdogs shipped daily to that island. But I’m warning you, it’ll be hard, if you're not one of the elite, because this island is modeled after America and its current levels of wealth distribution.
It goes something like this:The richest man on the island, Mr. Big, will wake up in the morning and get 40 hotdogs- and if Mr. Big’s labor-to-cash ratio mirrored that of corporate CEOs, he'd be making on average 419 times his employees average annual income. The next richest four people on the island, the Pretty Bigs, will get 5½ hotdogs each, and the next richest five, the Still Pretty Bigs, will get just over 2 each. The bottom 90 people, the little people, get 27 hotdogs split up all among them, less than 1/3 a hotdog per day. In other words, the richest 10 people will get 3 times the hotdogs of the other 90 people combined.
And that’s exactly how America’s wealth is divided.
Now, since our island is modeled after America, let’s see how Mr. Big and his buddies rig the system in their favor:
Mr. Loyal Employee had a sister working for Mr. Big at his hot-dog refurbishing factory where she turned hotdogs into corn-dogs for half-a-dog a day. Unfortunately, she lost her job when Mr. Big “off-shored” the factory to another island, paying that island’s folks a quarter-dog daily[4].
The poor, off-shored woman can’t subsist solely on the 2/10th’s of a hotdog she gets working a new job, so she gets a credit card to make ends meet. Soon, if Mrs. Off-Shored can’t get a better job, she’ll max out her credit card and need to file bankruptcy. Because Mr. Big knows this— and because he owns the Banc of Hot Dog— he wants to short-circuit Mrs. Off-Shored’s intended bankruptcy. So Mr. Big gives the island’s elected representative five hotdogs for his re-election fund to close that pesky, bankruptcy-allowing loophole. That man’s name is Mr. Congress. Ostensibly, Mr. Congress works for the People, but in reality he’s Mr. Big and the Pretty Bigs’ lackey.[5] Mr. Congress later helps Mr. Big win the island’s hotdog-delivery contract. As a reward, Mr. Big gives another three hotdogs to Mr. Congress’ re-election campaign and hires the man’s son, little Timmy Congress, to run the island’s hotdog-refurbishing factory at a full two dogs a day and despite the fact the kid’s never been in a hotdog-refurbishing factory in his life and wouldn’t know a foot-long from a Vienna sausage.
Despite everything being in his favor, something’s still bugging Mr. Big. See, despite his immense wealth and importance and all that he does for the island’s citizens, Mr. Big still must pay taxes that are so much higher than, say, Mrs. Off-Shored. Why, he discovers, he’s paying nearly 20 hotdogs in taxes and can barely get by while that lazy, job-jumping woman pays only 1/10th of a dog. It’s just not right. Luckily, one of Mr. Big’s buddies, a Pretty Big, has been elected Supreme-Head-Man by convincing Mrs. Off-Shored and Mr. Loyal Employee that he’s one of them. To prove it, the Supreme Head Man passes a hotdog tax-cut. “See,” he says, “I’m looking out for you and I’m looking out for Mr. Big, who will create more jobs by spending more hotdogs back into the island’s economy.”Mrs. Off-Shored’s tax cut is 1/20th of a hotdog. Mr. Big’s is fifteen hotdogs. “But at least,” she consoles herself, “he’ll hire me back at a higher wage.”
Uh, nope.
Instead, the next day, Mrs. Off-Shored discovers that the hotdog-cutting plant’s been moved to another island as where they pay just 1/10th a dog. The reason, Mr. Big solemnly explains, is because the plant has remained ‘unprofitable’ despite the fact Mrs. Off-Shored and her co-workers’ pay and benefits were cut and people laid-off along the way.
Oh, and also along the way? Little Timmy Congress, who wouldn’t know a frankfurter from a polish sausage, got a 20-hotdog golden-parachute package[6].
Suddenly, Mr. Big, with as many hotdogs as the poorest 95% on the island combined, decides he needs even more hotdogs. “What we need,” Mr. Big says, “is another factory employing more people to turn hot dogs into pigs-in-the-blanket. But to do that, I need capital. I’ll let everyone buy into the factory and we’ll share the extra hotdogs.” The island’s citizens heartily agree that a new factory with lots of jobs is just the ticket and so an Initial Public Offering (IPO) is planned; to ensure everything’s fair when the IPO hits the market, only the man running the release, Mr. Stockmarket, knows the date before-hand. Alas, on the eve of the release, Mr. Stockmarket gives Mr. Big and the Pretty Bigs a heads-up, selling them hotdog shares at rock-bottom prices. These shares are in turn sold the very next day to regular folks on the island at a healthy profit [7].
With the IPO start-up money, Mr. Big gets the factory running. But it’s a bare staff, and when pigs-in-the-blanket production lags and stock-price drops, Mr. Big hits on the idea to hire a man to talk up the factory. The man, Mr. Media, does such a good job the stock-price rises again, and to stoke the rise even further, Mr. Big slashes the factory’s staff, paying their salaries in a hotdog dividend to the shareholders.Mr. Media (there used to be a second Mr. Media, unrelated, who provided a different point of view, but he sold himself to the first Mr. Media so now there’s only one point of view and that’s Mr. Big’s point of view), Mr. Media also helps Mr. Big with public relations. See, it would be normal for folks subsisting on less than half a hotdog to resent Mr. Big and his 40 dogs, but instead they admire him. Mr. Media tells the regular folks— Mrs. Off-Shored, Mr. Loyal Employee, and BettyBlueCollar-Can’t-find-a-job, too— that they can be Mr. Big with enough hard work and moxy. Then Mr. Media shows the cool things they’d get as Mr. Big: the superluxurious hotdog-mobile, the massive house on the beach built from millions of Mr. Big’s hotdogs and the beautiful Hotdoggity girls. “And if it can be yours,” Mr. Media coolly implores, “what’s wrong with it being Mr. Big’s? You’ve just got to be smart.”
Boy, Mr. Big is smart all right. So smart that when that second hotdog plant takes off, rather than pay a silly corporate tax on all that profit from selling hotdog-byproducts to the island’s citizens, Mr. Big re-incorporates on a neighboring island roughly the size of a suitcase. Who cares that the other island’s tiny? It’s got a mailbox, which is all it needs to become Mr. Big’s corporate headquarters. And with all that profit saved, the senior shareholders, the Pretty Bigs, think Mr. Big’s pretty swell and award him more options, which he immediately liquidates[8].
One day the Supreme-Head-Man and Mr. Congress report with great sadness that the island’s budget is running a deficit. But, rather than raise the evil taxes on Mr. Big, they cut the jobless hotdog benefit to Mrs. Off-Shored and her sister, Betty-Blue-Collar-Can’t-Find-A-Job. Simultaneously, Mr. Big’s company gets a huge hotdog-byproducts research grant and Mr. Big gives himself a huge raise.
Now, you can imagine how distressing all this became to the island’s citizens: Mr. Big and the four Pretty Bigs live high on the dog, while the least well-off 60 citizens can hardly pay the bills. It gets so distressing, in fact, that a fed-up BettyBlueCollar-Can’t-find-a-job and Mrs. Off-Shored try getting their friends to work together to stop all the outsourcing and down-waging and benefits-cutting by forming a local Hotdog Makers Union, but it’s all to no avail: Mr. Big and Mr. Media team up, explaining how a union will drive up costs and force them to relocate to another island to be competitive and, besides, they say, why make hotdog products costlier to everyone so that a few, at most half the island, can enjoy a decent wage?[9].
“Just tell these people,” Mr. Big says, “to go back to school and re-tool for a high-tech weenie world. Then we’ll re-hire them at twice the pay.”
Mr. Congress chuckles off-camera. “Same thing he told the WeenieCom people before shipping their jobs to India.” Mr. Congress chuckles again. “Is this a great island or what?”
[1] In 1980, the average pay of Chief Executive Officers (CEO's) of the largest corporations in the U.S. was 41 times larger than the pay of the average blue collar worker. By 1998, the average pay of those CEO's increased to 419 times larger ($10.6 million per year). This is the widest wage gap in the world.
[2] Statistically, it’s much worse. The bottom 40% of the population has 1% of the wealth. In our model, that’s 40 people living on a single hotdog. The bottom 80%, and chances are that’s you, have 15% of the wealth.
[4] A recent report from Forrester Research has projected that as many as 3.3 million American white collar tech jobs will go to overseas workers by 2015. [Information Week; January 26, 2004]
[5] A 30-member lobbying coalition which includes MasterCard, MBNA Corporation, Daimler-Chrysler and the American Bankers Association donated nearly $20 million to candidates in the 2002 election, 64 percent of it to the Republican Party which controls both Houses of Congress and the chairmanships of the House and Senate Judiciary Committees where the legislation to wipe out consumer bankruptcy protections originates. [ProgressiveTrail.org; January 14, 2004]
[6] CEOs of firms that announced layoffs of 1,000 or more workers in 2001 earned about 80 percent more, on average, than executives at 365 top firms surveyed by Business Week. The layoff leaders earned an average of $23.7 million in total compensation in 2000, compared with a $13.1 million average for executives as a whole. The top job-cutters received an increase in salary and bonus of nearly 20 percent in 2000, compared to average raises in that year for U.S. wage-workers of about 3 percent and for salaried employees of 4 percent. [Executive Excess 2001: Layoffs, Tax Rebates and the Gender Gap; Institute for Policy Studies and United for a Fair Economy; August 2001]
[7] In the stock-market’s run-up in the late-90s, investment bankers promised CEOs whose business they sought dibs on shares of hot IPOs like Yahoo.com. The CEOs would buy these shares just before they began trading publicly. As soon as the price skyrocketed—often within minutes of trading—CEOs would sell their shares (an action called “flipping”) and pocket the cash. In exchange for this favor, the CEOs would give the bankers future business. [Maxim; May 2003]
[8] Corporate offshore tax havens cost the U.S. Treasury approximately $70 billion a year. In the year 2001, Tyco Industries pocketed $1 billion in public money while evading $400 million in taxes with its Bermuda P.O. Box. [Salon.com; May 16, 2002][9] Unions now represent less than 10 percent of the workforce in the private sector in the United States. Union workers average a 28 percent wage premium for union membership in the United States -- meaning the single fact of belonging to a union raises the average worker's wage more than 28 percent -- and it is far higher in the area of benefits. [Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It-Edward Wolff]
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