The Least Productive People in the World
GroundSwell, January-February 2010]
Productivity, as determined by labor output, has been measured for
decades, or longer. But, while it's important to look at who, or what,
is the most productive person or enterprise, shouldn't we also look at
the least productive people, that is, the least effective laborers?
Perhaps by understanding who the least productive people are, we can
learn how to make them more productive. This would help them, and help
So, who are the least productive people?
Well, on the first take it might be tempting to look at those who
don't labor at all, or those whose labor doesn't produce anything that
satisfies human desires - the ultimate goal of production. Let's
exclude children and the very old or infirm from this tally. While it
is true they are not productive, in the case of children, we expect
great things from them in the future, and in the case of the very old,
they may have produced a lot in the past. Finally, in the case of the
infirm, there is only so much one can do when nature limits your
This would seem, at first, to leave the poor, or even the homeless.
After all, the modern-day cold and calculating economists tell us, if
those people were productive, than society would reward them for their
So, is that it? Do we get to the zero line and say, "That's the
bottom. That's the least productive people are capable of being"?
No. There is another class of human beings we've neglected, a group
that exists below the zero line, sometimes reaching up to drag us down
below with them - or, at least, to take our money down with them.
This, of course, is the criminal class - not just the robbers,
burglars and muggers who directly take our money, but the ones whose
labors injure us or our loved ones and make us incapable of producing
ourselves, thereby adding a second minus to their own.
So, maybe that's it then. We just need to find the most heinous
criminal; the one who's taken the most lives, or swindled the greatest
amount of money out of productive people, and we have our candidate
for the Most Unproductive Person, the winner of the Golden Unpro.
Let's see if we can think of a few individuals to nominate then.
How about Bernie Madoff? According to Wikipedia, the amount missing
from client accounts, including fabricated gains, was almost $65
billion. However, the court appointed trustee estimated actual losses
to investors of $18 billion. But, wait a minute. Henry George tells us
that investor money is really "speculative money" and
doesn't actually produce very much, if anything. That is, I may buy a
stock from you, and you might make a profit while I eventually sell it
at a loss, but nothing of value has been created between us. Your pile
of money has simply grown while mine has shrunk. True, companies that
are invested in are able to borrow money, using their investor's money
as collateral - as highly volatile and unreliable as that is, as we
recently discovered during the Great Crash of 2008. But nothing is
actually produced from investors' money. There is not much labor
involved either - which, of course, is what makes investing in the
markets so attractive, at least until the bubble bursts. Yes, of
course, the investor-speculators will all say they polish their green
eyeshades daily and scrutinize their investments mercilessly. But,
when 95% of the money managers can't beat the dumb S&P index over
10 years, perhaps this is labor we can redirect to more productive
uses. Or, as Michael Hudson stated in a recent article "Tax to
The wealthiest 10% lend out their surplus to become
debts owed by the bottom 90%. By charging rent and interest and by
shifting taxes off themselves onto workers, the wealthiest enjoy a
rising share of gains.
This is not what Adam Smith described in The Wealth of Nations.
This extraction is a form of overhead, not a technologically or
economically necessary cost. It is a zero-sum game -- one party's
gain (that of Wall Street usually) is another's loss.
Well, there is no doubt the legal system found the labor of Madoff to
be counter-productive, or at least, wealth-destroying, since it
sentenced him to 150 years in prison - or more than 10 times the
average sentence length for First Degree Murder in states without the
death penalty. At least the courts have their priorities straight!
Paper wealth, even if unlabored for, is legally worth far more than a
But, we can do better in searching for the least productive people.
Now that we know what pool to look into, let's go after some big fish.
For example, according to Answers.com:
When the U.S. economy fell into recession in 1990,
Trump's highly leveraged business empire threatened to collapse.
Entities of the Trump Organization, or Donald Trump personally, had
incurred more than $5 billion in debt--$8.8 billion, according to
one source--of which almost $1 billion had been drawn solely on
Trump's personal guarantee. Big New York banks had financed $3.75
billion worth of debt. They reduced their risk and collected fees by
syndicating the loans to some 70 other banks...Most of this money
was recovered after subsequent restructurings, but some $600 million
to $800 million may have been lost. Forbes magazine had estimated
Trump's worth at $1.7 billion in 1989, making him the nation's 19th
richest man. But two years later it assessed his worth at minus $900
million, making him a heavy contender in the world's poorest man
category [emphasis added].
The 'Donald,' as he is affectionately called, is an interesting case,
wildly productive at times, and a negative producer at others (at
least if one takes into balance the sucking out of capital to "resuscitate"
his business enterprises, at the expense of other potential
borrowers), much like the Real Estate market he speculates in. No
surprise there, since we Georgists know that the true cause of
economic busts is when Rent has been pushed beyond what labor and
capital can pay, leading to a collapse and a stoppage of production
Of course, unlike the average foreclosed-upon homeowner, the Donald
has rich creditors all over the world to fall back upon. Or, perhaps
it is like that old saying: when you owe a bank a hundred thousand
dollars, it is your creditor, when you owe them a billion, it is your
partner. I won't go further than that because Trump also engages in
another zero-sum game - suing people he disagrees with. Make no
mistake, however, I do want him to continue the productive business of
erecting buildings! Moving on
We need something more, someone who subtracted even more
substantially from the commonwealth pot, even beyond being an active
but unwitting pawn in what the fickle market removed. We need someone
who labored hard, apparently, but who ultimately destroyed both
capital and jobs (other people's ability to labor).
Well, we can start by looking at some of the top candidates for
Portfolio's Worst American CEOs of All Time:
Vikram Pandit - Citigroup
Pandit didn't create the mess Citi is in, but
when Pandit took
over, Citi was already on track to report write-downs and increased
credit costs of $20 billion. Today, the banking supermarket is propped
up by $45 billion in bailouts and is, in effect, owned by the U.S.
THE STAT: Although Pandit's currently earning $1 a year, his pay
package was valued at $38.2 million for 2008, a year when taxpayers
kept the firm in business.
Carly Fiorina - Hewlett-Packard
A consummate self-promoter, Fiorina was busy pontificating on the
lecture circuit and posing for magazine covers while her company
floundered. She paid herself handsome bonuses and perks while laying
off thousands of employees to cut costs. The merger Fiorina
orchestrated with Compaq in 2002 was widely seen as a failure. She was
ousted in 2005.
THE STAT: HP stock lost half its value during Fiorina's tenure.
Stanley O'Neal - Merrill Lynch
Stanley O'Neal's abrasive personality and ruthless cost cutting
earned him many enemies, but his push toward riskier bets and subprime
exposure led to his ouster. After Merrill posted the biggest quarterly
loss in its 93-year history-and O'Neal was caught approaching Wachovia
about a merger without the board's approval-he was finally fired.
THE STAT: O'Neal walked out the door with $161.5 million in
Gerald Levin - Time-Warner
Levin's failure comes down to one colossal mistake: In his desperate
eagerness to become a new-media CEO, he orchestrated a megamerger
between Time Warner and a overvalued AOL-one of the worst acquisition
deals ever. "He had the largest midlife crisis in the history of
American capitalism," one of our panelists quipped.
THE STAT: The AOL deal destroyed over $200 billion in Time Warner
Martin Sullivan - American International Group
This is the guy who approved those "retention" bonuses that
AIG tried to pay after sucking up nearly $200 billion from U.S.
taxpayers. Sullivan was ousted before the bailout, but his inaction as
CEO helped create AIG's mess. He brushed off the firm's subprime
exposure as "manageable" while writedowns mounted and the
firm recorded its two largest-ever quarterly losses.
THE STAT: Sullivan's severance package was $25.4 million, including
$322,000 for private use of corporate aircraft._____
John Sculley - Apple Corp.
Sculley forced Steve Jobs out of Apple. Enough said. But let's
continue: Though he was a brilliant marketer at Pepsi, he proved to be
disastrous as the top manager of a tech company and unsophisticated
about the technology field. His tenure was marred by infighting among
top managers and expensive projects that flopped in the marketplace.
(Remember the Apple Newton?) Sculley boosted the price of the
Macintosh when personal computer prices were falling. The board ousted
him in 1993, when Apple was slipping toward bankruptcy.
THE STAT: In 1987, Sculley was reported to be the highest-paid
executive in Silicon Valley, earning a then-unheard-of $2.2 million.__
Roger Smith - General Motors
The CEO's job is often thankless, and no one was ever thanked less
than Roger Smith, General Motors chairman from 1981 to 1990 and the
unwitting stooge of Michael Moore's mockumentary Roger and Me.
He started his career at the company in 1949 as a green-eyeshade guy,
a lowly accounting clerk. His 1984 reorganization attempted to
streamline GM's back-of-the-house operations but was, in a word, a
disaster. It sowed confusion and disorder that practically idled the
automaker for months. Current CEO Rick Wagoner has said, "We've
been 12 to 14 years digging out from that."
Al Dunlap - Scott Paper/Sunbeam Corporation
Picked by the board of Scott Paper Co. as the man to turn the
struggling company around, Dunlap earned his nickname "Chainsaw
Al" by slicing 11,000 employees. When Scott merged with
Kimberly-Clark, Dunlap's payoff was estimated at more than $100
million. Dunlap's memoir/manifesto, Mean Business, roughly coincided
vastly with his next CEO star turn which was also to be his last.
Sunbeam's stock surged on the news that the Chainsaw was coming;
massive workforce reductions and factory closures followed within
Unable to flip Sunbeam to a new buyer, as he'd done with Scott,
Dunlap was stuck actually running the company. He failed
spectacularly. Within two miserable years, the board fired him. The
tactics he'd used to stave off losses-the company overstated its net
income by $60 million, which was real money back (in 1998)-earned him
a civil suit from the SEC and a class-action suit by shareholders.
Dunlap eventually settled both and was barred from serving as an
officer or director of any public company.
Bernie Ebbers - Worldcom
The ultimate corporate shopaholic, Ebbers bought an obscure telephone
carrier in the 1980s and went on a 17-year acquisition binge that
turned it into the world's largest telecom company. Alas, his passion
for dealmaking didn't translate into the savvy necessary for running
the complex business. When telecom stocks went south in 2000, the
company's massive debt was exposed. Ebbers tried to disguise it
through fraudulent accounting. In 2005, three years after WorldCom
filed for bankruptcy, he was convicted of overseeing $11 billion worth
of accounting fraud. He's now serving a 25-year prison term.
THE STAT: When Ebbers resigned, in 2002, WorldCom stock had fallen to
$1.79 from a peak of $64.50 in 1999.
Ken Lay - Enron
When it comes to bad CEOs, Lay was the complete package: He was not
only dishonest but disastrously inept as a manager as well. Lay, who
founded Enron and turned it into a $70 billion energy company, was
uninterested in the day-to-day tasks of running the business.
Consequently, he gave free rein to untrustworthy subordinates like
Jeff Skilling and Andy Fastow. He also signed off on a maze of
convoluted transactions that formed the basis of a massive accounting
fraud that would wipe out investors and bring down the corporation.
Lay was convicted of securities fraud in 2006. If he hadn't died soon
afterward, he would have faced as many as 30 years in prison.
THE STAT: Enron stock lost 99.7 percent of its value in 2001.
Angelo Mozilo - Countrywide
Meet the man who made subprime a household word. Once a symbol of
self-made accomplishment-a butcher's son who built the largest
mortgage lender in the country-Mozilo became blinded by success and
began going after the riskiest and most unsavory of borrowers to boost
his company's market share. In doing so, he legitimized a sector that
would ultimately bring down the economy.
THE STAT: Mozilo's once-secret, now-infamous "Friends of Angelo"
program provided loans on favorable terms to politically influential
borrowers, including Senators Kent Conrad and Chris Dodd.
Dick Fuld - Lehman Brothers
When your hubris triggers a national financial panic, you're a
shoo-in for top prize. Fuld's reckless risk-taking may have been
typical of Wall Street, but his refusal to acknowledge that his firm
was in trouble-and take the steps necessary to save it-was beyond the
pale. Since filing the largest bankruptcy in U.S. history ($613
billion in debts outstanding), Fuld has been belligerent and
unrepentant. Even Bernie Madoff said he was sorry.___
Jay Gould - (Railroad Magnate)
When it comes to unscrupulous behavior, Gould makes (Michael) Milken
look like a sweetheart. A railroad developer and speculator, Gould
sold out his associates, bribed legislators to get deals done, and
even kidnapped a potential investor. He duped the U.S. Treasury,
pushing up the price of gold and prompting a scare on Wall Street that
depressed all stocks. After hiring strikebreakers during a railroad
strike in 1886, he was reported to have said, "I can hire one
half of the working class to kill the other half."
THE STAT: When Gould died, his fortune was worth an estimated $67
billion in inflation-adjusted dollars.__
It's difficult to pick the most unproductive corporate leader from the
list above, but perhaps that is not the point. From this list of the
unlucky 13 (out of 20 on CNBC's rogues gallery), only one - Bernie
Ebbers - was ever punished with jail time (though Ken Lay was headed
there before he died in 2006).
Jay Gould, perhaps the winner of the most Vicious CEO of all time
award, and a contemporary of Henry George, was never punished at all,
and was estimated to have had personally 1/185th of the nation's GDP
at that time he died. Things have not gotten any better; in 2006, Bill
Gates' personal fortune was estimated at 1/152nd of GDP that year.
Quite apart from whether these men have contributed so much to society
as to be personally worth a significant portion of the nation's
wealth, compared to hundreds of millions of other workers, is the
question of what might have been done with some of that money, if
returned to the community. Of course some of them may say they gave
enormously to charity, and that is true, but perhaps Americans would
like to be under a system that is not so paternal, as well as one that
is not so economically skewed. Can we not provide for ourselves, if
given the chance? Also, these men have suppressed competition in their
own far-reaching industries, thereby depriving us of
who-knows-how-many new inventions or ways of doing things, so that is
a negative to be subtracted from their production.
Finally, many of the corrupt business leaders, even when they were
finally booted out, made off with tens, or even hundreds, of millions
of dollars, while thousands of workers lost productive livelihoods and
quite often, their life savings. In the most recent meltdown, finally
triggered, according to many economists, by the $613 Billion (in
debts) collapse of Lehman Brothers, CNBC's #1 worst CEO of all time,
Dick Fuld, went both unrepentant and unpunished - and with nearly $72
million in total compensation. When Bob Nardelli was fired from Home
Depot by an angry board of Directors, he received $210 million in
severance. Full Disclosure: when I was laid off (not fired) from my
job as Manager of Information Systems when my department was phased
out after 22 years, I received a severance package as well. It was
somewhat less than $210 million.
Lesson Learned: If you're going to fail, fail spectacularly, and fail
If one looks over the list, one can't help but be struck by the
number of wealth destroyers who made their fortunes in large part
through speculation in the 'Land' markets (by Land, I, of course, mean
George's definition to include all of Earth's Natural Resources). Only
John Sculley and Roger Smith could properly be said to have failed
without the help of stock or resource market implosions. It's a bit
understating things to merely say the other 11 candidates for the
Golden Unpro would have done things differently if we had a true,
Georgist, Land Value Tax and something equivalent for the Stock market
(I am willing to admit the possibility that just a LVT may still be
enough, even in this post-George, shadow-banking era) - most likely
there would have been different CEOs altogether for those companies,
pursuing different ways of doing business. Workers at Hewlett-Packard
and General Motors might not have been laid off by the thousands;
Worldcom and Enron would have remained boring, but stable, utility
companies providing a real service. Is it impossible to imagine a
railroad company being made without the ruthlessness and gargantuan
self-enrichment of Jay Gould, and instead paying the community for the
land it used? Henry George, of course, did imagine just that.
CNN founder and billionaire Ted Turner once said that billionaires
competed against each other to see who would be the top billionaire.
Well, is it so hard to imagine such titans could not be just as happy
competing against one another to be merely the top millionaire, if
millionaires were all that existed? Would society be lessened? Would
output per CEO be reduced? Is it credible to say that Bill Gates,
currently estimated to be the world's richest person, actually sat in
his college dorm room in his younger days, contemplating dropping out
of college to found Microsoft and asked himself, "Gee, I'd like
to start a software company, but I really can't see the point unless I
make at least $20 billion at it?" Or, did he just see an
opportunity to do something game-changing and challenging, with,
perhaps, some lucrative, but unspecified, reward down the road?
In fact, we now have ample empirical studies and social proof that
excessive pay does NOT lead to superior performance, and may even lead
to the opposite, by focusing executives labor on short-term,
unproductive, activities. A summary of these findings "CEOs Are
Overpaid" tells us:
According to Business Week, the average CEO of a major
corporation made 42 times the average hourly worker's pay in 1980.
By 1990 that had almost doubled to 85 times. In 2000, the average
CEO salary reached an unbelievable 531 times that of the average
"Pay for performance", tying executive compensation to
the financial success of their company, has become very popular in
the past decade. In the face of the largest bull market ever, that
isn't surprising. It also isn't realistic. What CEO honestly
believes that all or most of the appreciation in value of their
company is due to their own talent?
ZD Net's Total Compensation Vs. Total Return To Shareholders chart
(no longer online), shows that total return to shareholders was
higher for many companies whose CEO compensation was under $500,000
than for companies who paid their CEOs multi-million dollar
compensation (emphasis added).
Virtually all of the organizations and pundits who talk about the
egregious wealth-destroying actions of top executives and other
controllers of money-mountains act as if the only things wrong were
moral character and a few regulations. None of them get to the core of
the problem, as George did.
Money goes to where it can get the greatest return, and right now,
and especially in the last 30 years, that has been in the FIRE sector.
While there have been innovations in computing, materials,
manufacturing etc. that have created real wealth, it is harder to make
that case for financial innovation, where piles of money (really,
credit) are merely shifted around, without producing anything of
lasting value, while siphoning both money and opportunity from the
shrinking middle class. Indeed, ex-Federal Reserve Chairman and
current Economic Council Head to the President, Paul Volker, has said
that the most important financial innovation of the last couple of
decades has been the automated teller machine. And, Danny Latham, head
of infrastructure, First State Investments, said, "We
[infrastructure investment teams] need more real engineers and fewer
financial engineers." Ah yes, how true, but where will get the
money to pay them? We will get it from the Land, George answered, in
the age of Jay Gould, 130 years ago. But this cannot happen unless we
rip the plant out by the root; merely trimming off a few bad branches
will not do. Ordinary workers have no chance to produce positive
wealth when the top 1% is producing negative wealth. Like matter and
anti-matter, wealth created by labor acting upon the resources of the
earth gets annihilated when confronted by credit-wealth (which is not
wealth at all). Worse, since the size of credit implosions are only
limited by the imagination of those who created the initial bubbles in
the first place, unlike goods and services, which are created from
true labor and finite land, there is no limit on the anti-wealth side
of the equation, hence no limit to their destructive capacity. If this
kind of reaction could be placed in a bomb, it would destroy the world
- which, in a different way, it threatens to do.
Looking for the winner of the Golden Unpro, or the "Lex Overpaid
CEO" and "thief" award presented to Dick Fuld by the
Financial Times, misses the point. The blame for the creation of the
Speculator Class belongs to the same place as the blame for the
creation of the Poor Class: to the absence of a tax on the finite
resources of the Earth and on the actions of speculation itself. As
George said in Social Problems, what good does it do society for
someone to become the world's richest pirate, if all he is doing is
merely stealing from the average seagoer?
Oh, and the homeless person we passed by earlier on our race to below
the bottom for the most unproductive citizen? He's more likely than
not to have had a job producing something at some time in the past,
quite likely he served in the military, and, contrary to popular
belief, there's only a 25% chance or so he has a mental illness. In
any case, he is unlikely to ever be as counter-productive as most of
the richly rewarded failures listed above. To achieve that level of
unproductivity, you really have to be a Star.