I HAVE COME NOT TO PRAISE CAPITALISM BUT TO BURY IT
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.