Understanding Runaway Inequality

If you want to understand runaway inequality, really understand it, you must read Les Leopold's book, aptly titled "Runaway Inequality: An Activist's Guide to Economic Justice".

Leopold, a longtime labor activist, is working to build a national movement around the concepts outlined in the book. The key thing to note about the book is that it explains the concepts in everyday language and simple, clear graphs so that your don't have to be an economist to grasp the ideas. And it shows how runaway inequality is related to the other issues we, ask progressives, care about. As Les concludes "everything is connected to everything else".

I am participating in his "Train the Trainer" workshop this weekend and hope to post a synopsis of the book and the workshop in short order. However, as a teaser, I've copied below a press statement I wrote for the President of the SENC Central Labor Council, based on Les' analysis (and 30 minutes of research on the Internet).

Background - Duke Energy, the largest electric utility in the country and the only one in North Carolina (with the exception, I believe of a couple of very small co-ops) has been storing its waste coal ash in open ponds through out the state. This became an major issue when one of them spilled into the Dan River polluting the drinking water for hundreds of thousands of homes.

Belatedly, Duke has been ordered to clean up some of the ponds. So now Duke has demanded a 17% rate hike to pay for this and future clean ups. To add insult to injury, the way the proposed rate hike is structured it will hit small consumers (working class families) the hardest. The following is the statement read at a press conference and at the rate hike hearing in Wilmington.

Statement by Herb Harton, President, Southeastern North Carolina Central Labor Council.

Duke Energy is demanding a huge rate increase to pay for cleaning up the coal ash ponds, a mess that it created, and for its failure to invest sufficiently in clean energy to prevent future environmental crises.

It’s not that Duke didn’t have the money from its profits over the past ten years. Rather it chose to pay out 17 billion dollars in dividends. It chose to spend billions more to buy back almost one-half of its outstanding stock in 2011, resulting in the value of the remaining stock tripling from $21 a share to $63 a share in just one year. It chose to use its assets to buy Progress Energy for $13.7 billion, paying Progress Energy’s CEO a $44 million golden parachute. Just a note – at the time of the merger, Duke’s CEO stated that it would save customers at least $600 million over 5 years. The 5 years are up, and we’re still waiting!

Who benefited from all these actions. Duke’s CEO and other officers who get paid in stock options on top of their inflated salaries and Duke’s other large shareholders, but certainly not its customers.

Duke claims it needs more money to clean up present and future messes and make necessary investments in infrastructure. They want their customers, working families, most of whom haven’t seen any increase in their meager incomes over the past 10 years, to pony up.

But we have a better idea. Duke needs to start retaining its profits and investing them. If they need more money to invest, they can resell 10% of the 600 million shares of stock they bought back in 2011, which, at current prices, would give them $5 billion cash to invest. That’s what companies would have done 50 years ago, when the growing economy benefitted most Americans, not just a few.