Right Wing Nut House

3/22/2009

I HAVE COME NOT TO PRAISE CAPITALISM BUT TO BURY IT

Filed under: Bailout, Financial Crisis, Politics — Rick Moran @ 9:41 am

tombstone-1

Tell me I’m being hysterical. Tell me I’m getting my panties in a twist over nothing. But that sound you hear is the death knell of capitalism as we know it.

The government is in the process of ordering levels of compensation for all. For those who believe regulators will stop with determining all “executive compensation,” I pity your naiveté and ignorance. Once government demonstrates it can do something, it has no reason to stop at some arbitrary point. Why? When has it ever done so in the past? It may not happen under President Obama, or even in the next decade or two. But some reason or justification will eventually be found to regulate and dictate the compensation of everyone and they will base that action on what the Obama Administration has proposed:

The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.

The outlines of the plan are expected to be unveiled this week in preparation for President Obama’s first foreign summit meeting in early April.

Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.

The administration has been considering increased oversight of executive pay for some time, but the issue was heightened in recent days as public fury over bonuses spilled into the regulatory effort.

The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.

“Relax you stupid conservative,” I can hear some of you saying. “This is simple oversight.”

The key is in that last graf I quoted above; “…how far it could go beyond simple reporting requirements.” They are already thinking beyond “oversight” and looking for “control.” And once the government can determine how much money one worker can make, they can determine what all workers make. All they have to do is gin up enough outrage at the “exorbitant” salaries paid to office managers, store managers or customer service managers as compared to clerks and secretaries and before you know it, we’ll have regulators determining your salary.

Could never happen here, right? Why not? Who’s going to stop them? Do you seriously believe that because you don’t want the government mucking around with your compensation that it will matter one iota? Perhaps you even support the idea that government should determine everyone’s wages. I think you will be enormously disappointed. With incentive virtually gone, our workforce will end up doing exactly the amount of work that will keep them employed and no more. And if you think that is the ticket to create a new kind of economy that will build wealth and create jobs, I’ve got a factory in North Korea I’d like to sell you.

Tigerhawk gives a little perspective on the Administration’s plan to regulate executive salaries:

First, this will do nothing to encourage executives in American public companies to take the risks necessary to restart the economy.

Second, executive compensation at public companies, including banks, did not cause the present economic troubles. This is but another “crisis” not to be wasted by people who want to effect social change.

Third, we are going to drive many of our best people out of public companies into private companies, or (perhaps worse) management will become dominated by people who are trained in process (lawyers and accountants and such). We are also going to deter private companies from going public (as has already been happening with the steep decline in initial public offerings in recent years). It does not seem to me that we should exacerbate either of these trends.

Fourth, you can cure “excessive” executive compensation by having the United States Congress or the attorney general of the state of New York determine what public company executives should make, or you could simply repeal the Williams Act and other state law obstacles to hostile takeovers. In a liquid market for corporate control, big, fat executive paychecks will become “synergies” if they do not earn a decent return.

Executive salaries and bonuses did not cause the economic meltdown. Regulating the matter won’t restart the economy. The only reason to try and dictate compensation is because they can. They have successfully demagogued the issue to the point that people are making death threats against AIG executives who had absolutely nothing to do with the trading in derivatives that caused all the problems, whose only “crime” is that they work for the company in some capacity. Way to go, Mr. President.

Like all other “opportunities” in this crisis that the Obama Administration is taking advantage of by scaring people half to death or now, ginning up murderous rage against “the rich,” Obama is putting the remaking of America ahead of economic recovery. Liberals have been railing for years against people making “too much” money especially compared to the rest of us. Now that they have the opportunity and the sheer gall to do so, they are going to do something about it. The fact that it will contribute nothing to the recovery and everything to Obama’s idea of “change” will not matter in the end. The effect will be the same; opening a door to exessive government control of decisions that should be made by individual companies.

For all its many faults - especially as it has been practiced for most of the last century - the world has known no greater engine of prosperity since civilization began than American capitalism. Much more than Thomas Jefferson or Andrew Jackson, American capitalism created the “common man.” It gave him a stake in the success or failure of both the macro and micro economy in which everyone participates. This self interest drove the American workingman to feats of productivity never before seen. It greatly expanded the “middling classes” and showered goods and possessions on them that were only reserved for the rich in most other countries. It created more wealth, more freedom, more human happiness than has ever been achieved anywhere else.

Yes, it also created suffering, misery, inequality, and great sadness while sending many to an early grave and others to live in abject poverty. American capitalism has always been about winners and losers and the idea that you can have one without the other is a mirage, a phantasm. Like life, it isn’t fair. Some risk takers are rewarded beyond avarice while others crash and burn. And playing by the rules is no guarantee that you will succeed.

So yes, regulate these markets that caused the meltdown to ensure it won’t happen again. And play your little power games with the bonuses of those getting bail out money. But, as Roger Simon points out, if you’re going to want everyone to play fair, perhaps you should look to your own house first:

I want it all out there. Total transparency, including Timothy Geithner’s TurboTax printouts and Christopher Dodd’s Irish real estate holdings. [Doesn't Dodd remind you of Claude Rains in "Mr. Smith Goes to Washington"?-ed. Worse.]

In other words, Mr. President, you want “increased oversight,” let’s have it - for everyone! That includes some of your creepy allies. Otherwise, you’re a hypocrite. Stick it.

[You forgot Charlie Rangel!-ed. I forgot a lot of people. Harry Reid and the Vegas connection! That too.]

Arbitrary exclusions to oversight like those above make the tyrannical proposals by Obama even more problematic.

21 Comments

  1. Nixon?

    Ahhh such short memories…

    Nixon made it clear that wage and price controls were temporary. Do you hear that coming from these bozos about executive compensation?

    ed.

    Comment by Davebo — 3/22/2009 @ 10:17 am

  2. Your hysterics over Obama notwithstanding, of course its the end of capitalism AS WE KNOW IT and it’s damned well time.

    The model is just fine, thank you, but its application over the last several decades — Republican and Democratic administrations alike — has done nothing less than create an income gap so yawning and systemic abuses so profound that what is surprising about our present straits is that it took so long to get where we are.

    Comment by Shaun Mullen — 3/22/2009 @ 10:30 am

  3. O’Dumbo selected over Shrillary = thousands of corporate Hqtrs moved overseas. Run on the banks.
    O’Dumbo limits executive salaries = the rest of the corporate world move overseas.
    Since the democrats took control of congress in Jan 2007 Americans have lost 90% of the wealth they worded a lifetime for. Math, not democrat liberal crazy spin back this up. I’m sure any lying democrat has the ability to go back to 2007 and find the truth, like they could reconize the truth if it bit them on the a**. When the welfare system fails it will effect democrat liberals 100%.
    How many criminal corporate leaders did GWB indict from the Slick Administration? Now we will get them out of prison and back in charge.

    If I owned a company of any size that could be moved it would be on the moving van.

    Comment by Scrapiron — 3/22/2009 @ 11:02 am

  4. Scrapiron;

    If I owned a company of any size that could be moved it would be on the moving van.

    But to where? I don’t think you understand the scope of the failure here. America was the best and brightest hope because of its dedication to capitalism free markets and free people. We have been the example to the rest of the world for generations. How will the rest of these places be in a very short period of time, given the condition of that example?

    I submit to you that very shortly there will be no place for you to go.

    Comment by Eric Florack — 3/22/2009 @ 11:18 am

  5. Our current administration is very good at confusing the issues, and therein, lies a more dangerous threat.

    Comment by Zane — 3/22/2009 @ 11:52 am

  6. Yes, you’re being hysterical. You run around yelling that Obama is killing capitalism and Krugman is running around yelling that Obama has been co-opted by capitalists and you’re both wrong.

    In fact, far from pushing some crazy socialist agenda, Obama is trying it seems to save capitalism from the capitalist cretins who have done so much to damage it.

    Obama’s not stoking rage over the AIG bonuses. In fact he was late to the party. The rage is self-stoking. It’s sui generis rage. It’s the spontaneous combustion of rages and the amazing thing is how restrained it’s been so far.

    What the Obama administration is trying to do is head off a populist firestorm caused — in its entirety, 100% — by the incompetence and sheer, bloody-minded stupidity of the great captains of industry. How in God’s name can anyone be expected to justify billionaires getting trillion dollars bailouts while paying themselves millions in taxpayer money? Of course there’s rage. It’s kind of off the topic, hysterical and overblown, but it’s also inevitable.

    But Rick, it’s been coming for a long, long time. We’ve smiled benignly at a corporate culture which holds that profits derived from firing workers should be translated into bonuses for the executives who did the firing. How did you think that was going to end up? Didn’t you think there might be some pushback at some point? A touch of moderation on the part of corporate greedheads, and a sense of basic decency, would in turn have moderated the pushback but we don’t demand moderation or decency, we praise greed and giggle at excess.

    If we need to pump the people’s money into the banks to refloat the credit market then we need the people to be on board. Which means diverting their rage so that we can get back to what matters. And that’s what Obama is doing. With no help from the jackasses in the big New York skyscrapers or from myopic right wing or left wing pundits.

    Comment by michael reynolds — 3/22/2009 @ 12:05 pm

  7. The Fresh Prince of Hot Air, at his core, is an anti-business, anti-free enterprise, BIG GOVERNMENT loving race baiter, nothing more, albeit with a smoother voice and delivery than Sharpton and Jackson.

    Anyone who drones on and on about how “unfair” American free enterprise system is, is a whiner and a loser and a nutjob.

    Hopey McChange is all about shifting wealth from those who have some to those who have little or none - i.e., his constituency.

    The only question left is, how can we the people get rid of the Kenyan Marxist in the White House?

    Comment by Nessus — 3/22/2009 @ 1:51 pm

  8. Greedy capitalist kept on taking a bigger piece of the pie, while real wages for someone in the middle class like me has seen their wages stagnant since 1970. CEO’s making 300 times what the guy on the line made. Credit default swaps bs is a crime! We are turning into a country like Mexico, no middle class will be left because of the greedy fat cats. I don’t want caps on executive salaries either, but if these pigs can’t control themselves at the trough, something has to be done. And by the way, federal employees should have a wage price freeze until we come out of this recession. And Nessus, its nutballs like you that give decent conservatives a bad name. Go on over to worldnetdaily where the other loons reside.

    Comment by Joe — 3/22/2009 @ 3:26 pm

  9. Obama is a socialist. Period. Anyone thinking he’s somehow saving capitalism is still feeling tingles all over and not really serious about analyzing what Team Obama is doing.

    Regardless of what one believes capitalism is or isn’t socialism is far worse by any objective measure as it’s been implemented. And that’s the kicker, how it works in the real world. It has no incentives except for those running the system. It dictates outcomes, methods and every meaningful aspect of ones life. Capitalism rewards those that put in 18 hour days over a period of ten years. Socialism usually puts those persons in prison.

    Socialists have learned that one must always practice deceit in implementing the system. Thus the use of odd phrases for simple things. We have “toxic assets” when what they simply are are loaning people too much money they could never pay back. Calling them toxic not only confuses the issue but provides misdirection as well.

    Then there are the “regulations” tossed around to impose wage controls. Regardless of what it is called, it’s wage controls. Period. Price controls are not far behind. Nationalization is in the mix. Rick is absolutely correct about the techniques used the main one is fear.

    Obama is simply who he is. He will behave as he has been trained and raised. It is shocking that so many refused to believe his history. It’s even more shocking that some that “wanted him to succeed” are now surprised that he seems to be succeeding. Surprised, one presumes, that his success is not what most would applaud.

    Obama may or may not be competent. He may or may not know how to run a twiddly-wink enterprise. He may or may not be a lot of things but he is a socialist trained in the socialist methods. He’s just doing the only thing he knows.

    The only way Obama will win is if the voting majority in 2010 have bought into his socialism. I don’t see that happening. I see more and more signs of buyers remorse. Americans usually only pay real attention to the change in their pockets. They’re waking up to the fact that Obama has his hands not only in their pockets but all over their body as well. But you know, Obama won’t care - he is what he is. If a backlash builds he’ll turn into a vicious, cornered, bitter, angry President not fearful of using his powers to punish those who oppose. The Bush years will actually look like Nirvana to the Left by the time all this shakes out.

    Comment by cedarhill — 3/22/2009 @ 5:15 pm

  10. I second Joe. Remember Teddy Roosevelt? While I don’t agree with some of the proposed measures this out-of control gambling has(d) nothing to do with capitalism that works.

    Comment by funny man — 3/22/2009 @ 6:04 pm

  11. “I don’t want caps on executive salaries either, but if these pigs can’t control themselves at the trough, something has to be done.”

    No, it doesn’t. “Controlling pigs at the trough” is a cute, folksy way of giving approval to Obama’s totalitarianism. You think that because you don’t make the bonuses or the salary that some wealthy Wall Street types make, you’re going to be the beneficiary of wage controls. You’re wrong. Obama’s plans are to benefit a VERY small and specific economic class, and that is the lowest of classes. It’s the people that don’t have jobs, haven’t ever had jobs, and have no interest in getting a job in the future. It’s the people that wander into my husband’s deli and plop down an EBT card for their food purchases, along with three twenties for their scratch tickets.

    If you think the “greedy fat cats” are the ones who are going to suffer, think again. They have the means to withstand– they can move to a different country if it gets bad enough. We’re stuck here. And you’re badly deluded if you think any of us are going to be on the winning end of Obama’s sick ambitions.

    Comment by CH — 3/22/2009 @ 6:46 pm

  12. ah, class envy- ain’t it swell. I see the otards here are down with whatever the north american version lite of little kim or hugo chavez. still wondering what the hell the voters saw in a the neophyte chicago way holier-than-thou assclown sitting in the oval office. Oh yeah, it was for a good teleprompter reader/mulatto to run the show. As George Soros ecstatically pulls strings and makes more billions. I’m sure ACORN will do a bang up job assisting/corrupting the census figures too and walmart will be happy to raise prices so union goons get their dues from the workers too fearful to tell unions to go f*** themselves.
    The Iron Curtain worked so well under communism, eh clueless libtards on this board? And fatboy Moore thinks Cuban health care is so great he is moving there?

    Comment by aoibhneas — 3/22/2009 @ 7:40 pm

  13. Why would I disagree with you, Rick? You are right. Of course, the Democrats will go too far and there will be a swing back to the right. The problem is it will be 3 steps left and 1 step right. This will continue until we reach Obama’s promised land, gov’t. control of everything. Probably in his lifetime.

    Once over 50% of voters quit paying income taxes it was all over with. Surprised it took you this long to recognize it.

    ? So now that you’re against his policies will you also be responsible for an economic meltdown along with the rest of us? Per a prior article.

    Comment by Harry O — 3/22/2009 @ 8:11 pm

  14. To some of the ’shout louder’ crowd I suggest this article. Many of the people you attack are actually conservatives. We just don’t belong to the Limbaugh cult.

    http://www.amconmag.com/article/2009/feb/23/00006/

    What are you talking about? How in God’s name did Rush Limbaugh enter the picture? It;s laughable that you would even suggest I belong to the Limbaugh cult - a man I have skewered on this site any number of times.

    And you obviously have no clue what a conservative is if you think executive pay control is a good thing.

    ed.

    Comment by funny man — 3/22/2009 @ 9:24 pm

  15. I think the blame can be laid at the feet of whoever decided that Billy Tauzin was the right person to sell the flat tax meme. It became a poster child for accounting hocus pocus and I think his used car salesman attitude helped bring about its demise. Would anyone really care about all of this current uneven distribution if the little folks could have put money in their pockets due to lower taxes not predatory equity bamboozles?
    Go back and replay the last 5 years as if we would have had the flat tax. Just a thought…

    Comment by The Fly-Man — 3/23/2009 @ 6:09 am

  16. Surprise, surprise. Is Obama doing anything he didn’t say he would do during the campaign? Is his behavior any different than one would have expected from his past family influences, education, alliances, and voting record. Was anyone paying attention? Were you reading Rick’s columns during the campaign? Top it all off with Pelosi and Reid running a Democratic Congress and Mr O gets anything he wants…sometimes even more than he wants.

    Our parents were the Great Generation. They were tough and they sacrificed for us. We are the generation of cowards. For all the reasons enumerated in thousands of venues (including the natural business cycle) our econmy goes south. Are we willing to toughen up and work through it? No we just want to take a numbing feel good pill. Obama is that pill. He’s the sedative that too many of us wanted. Unfortunately when we wake, the nightmare won’t be over.

    In a proper capitalist system, executive pay would be overseen by a responsible and prudent Board of Directors in a publicly held corporation. Others have said it here. If those idiot hypocrits in congress start determining who gets paid what, the United States of America may as well replace our flag with a banana.

    Comment by cdor — 3/23/2009 @ 6:28 am

  17. And to think … 2 years from now we will be looking back on this period and thinking .. you know, it was so much better then.

    Now isn’t that a scary thought.

    Comment by Neo — 3/23/2009 @ 7:44 am

  18. Rick,
    I didn’t refer to you or your article with this link. If you thought so I apologize. I was just upset that when Joe suggested some measures to reign in certain segments of Wall Street he was attacked with some obscure ranting. Anyway, keep up the good work (and I should stick to the contents of your blogs).

    Comment by funny man — 3/23/2009 @ 10:38 am

  19. I cannot conceive of a conservative that would think that larger government with more control on business is a sound plan of action. These companies that followed a now failed business model should be allowed to fail. We are passing the buck on these toxic assests instead of removing them from the books. Sooner or later they will rear their ugly heads and we will be back full circle. Government has no place in a free market. The meddlings of Franks, Dodd and many others is in fact the reason we are here. Bush started this bailout mentality and Obama has gleefully followed suit. They have both done a great disservice to this country. Flame away.

    Comment by Robert — 3/24/2009 @ 1:26 am

  20. Surprise, surprise. Is Obama doing anything he didn’t say he would do during the campaign?

    Kinda hard to say. Most of what he said was so insubstantial, tying what he said then to what he’s doing now is like trying to nail fog to a tree.

    Comment by Eric Florack — 3/24/2009 @ 10:16 am

  21. I have a horrid vision of O becoming a Pol Pot or the judge who tried to “equalize” the Kansas City school system. Brother#1 got an idea that anyone in Cambodia who squinted must have hidden hisher exploiter runningdog eye glasses, so all Cambodians with poor eye sight were killed. Hopefully leveling the playing field in the New Era won’t go that far, but keep your borzhwazee fingers crossed.

    Comment by doctor w g sumner — 3/24/2009 @ 10:34 pm

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