The moderate cleric Ayatollah Montazeri, whom the Iranian opposition wants to install as a temporary “Supreme Guide” until a new constitution is drafted, issued a statement today. It said in part:
The distinction of a powerful government – Islamic or non-Islamic – is its ability to heed both similar and opposing views and, with religious compassion, which is a prerequisite of government, allow all the strata of society, whatever their political beliefs, to participate in the running of the country, instead of totally alienating them and constantly increasing their [the dissidents] number. Since this government is known as a religious government, I fear that the conduct and actions of the officials may ultimately harm the religion and undermine the people’s beliefs.
It may be too late for that. Years ago, long before the uprising began, the Iranian writer Reza Zarabi said the regime had already all but destroyed religion itself.
The name Iran, which used to be equated with such things as luxury, fine wine, and the arts, has become synonymous with terrorism. When the Islamic Republic government of Iran finally meets its demise, they will have many symbols and slogans as testaments of their rule, yet the most profound will be their genocide of Islam, the black stain that they have put on this faith for many generations to come.
we need to see both sides of this particular argument.
1 the AIG bonuses are heinous and
2. the way the house bill is trying to stop them is off the wall and probably unconstitutional
but their hearts are in the right place. Their mailboxes are no doubt full of anger over these things so what can they do? they figure they ahve to do something.
It’s easy for the press to report on the indignation of americans AND report on the ridiculous method congress chose to address it. anyone have a better idea?
Occasional use of capital letters in lester’s latest post is remarkable.
What makes me indignant is AIG’s $100 million sponsorship of the Manchester United football club. Some of that money is no doubt used to pay the salaries of psuedo-athletes running up and down the pitch kicking a ball at one another. And big salaries, too. I’m watching a match between my beloved Newcastle Magpies and they’re being humiliated by those millionaires in their sweaters with “AIG” in big gold letters across the front. It’s disgusting. Maybe Wayne Rooney should send a check to Geithner, especially since he’s been sidelined with a hamstring injury and doing zilch to contribute to the survival of Manchester United or AIG.
There will be no correction in 2010: the same demographic forces that brought us Obama will keep the Congressional Dems in power for a generation or more.
What’s wrong with these bonuses?
From what I gather, they were specifically designed as “retention” bonuses to induce certain employees to stick around and wind-down certain areas of business and thus themselves out of a job.
If that is is in fact true, they would likely be approved by a bankruptcy judge anyway, and there is nothing wrong with them.
If it’s not true, then certainly they could be considered out of line.
Does anyone have a link that goes to the actual nature of the bonuses?
Jennifer, Nocera is of course correct that Congress is reacting shamefully, like an out-of-control mob. But the major and minor media hasn’t been much better, endlessly castigating Wall Street. But what about you, Jennifer. You’ve often sounded like the leaders of the Capitol Hill mob, constantly fulminating about the measures the Obama administration is trying to take in order moderate the financial crisis. Instead of offering constructrive criticism, you’re displaying a level of ideological rigidity that is embarrassing to you and to those who formerly held you’re opinions in high esteem.
And as for the “Jester,” he is an unreconstructed neo-Nazi who sometimes crawls out of his hole like the worm he is.
6. ?? you said almost the exact same thing I did on this subject. are you going to call yourself names now?
Obama wants more money for his social welfare agenda, but in true 19th century style he tries to get it by gutting the rich.
He would be much better advised to listen to Gary Becker and to get the money by taking steps to increase the productivity of capitalist markets. That is the ONLY way to make us all richer and better off. It’s slower that conficating wealth, but it actually produces the desired effect over time.
Instead of trying to spread around the wealth, Obama should try to spread around the procutivity.
Obama wants more money for his social welfare agenda, but in true 19th century style he tries to get it by gutting the rich.
He would be much better advised to listen to Gary Becker and to get the money by taking steps to increase the productivity of capitalist markets. That is the ONLY way to make us all richer and better off. It’s slower that conficating wealth, but it actually produces the desired effect over time.
Instead of trying to spread around the wealth, Obama should try to spread around the productivity.
What the country does not understand is that the financial industry is extremely competitive. They also do not understand that the only true assets a financial firm has walk out the door every evening. There are no machines inside those office towers; there are no widgets in a warehouse waiting a buyer. All a finance company is are the people inside and their ability to create value for their firm. If you do not take care of your assets, they will stop producing. Contrary to what many no-nothings have stated, these assets are not easily replaceable. If management feels that the only way to “protect” their assets is to pay them a retention bonus, then that is done with the best interests of the long-term value of the franchise in mind. Its not done to “rip-off” anyone. To describe a retention bonus as “heinous” is to not only use rhetorical over-kill, but it shines a light on someone who truly has no understanding of what he is talking about.
What the moment requires is wisdom. Imagine this. Congressional leaders learn about the bonuses to AIG Financial Products workers and learn as well that their constituents are upset about it. Rather than reaching for the tar and feathers, these Congressional leaders counsel calm and initiate an investigation in order to learn more about the nature of the bonuses, who received them and whether or not they represent sound business policy or an abuse of taxpayer money. At the end of their investigation they explain to the American people the reasoning on both sides of the issue and put forward a solution, if any were needed, that addresses the problem in a measured manner, looking not only to satisfy the whims of the moment but to benefit our collective economic future.
Back in the real world, of course, this is not what happened. We’re seeing the consequences of electing representatives on the basis of superficial personality qualities and abilities of communication. Think about it. Is the problem that these Congressional leaders are not intelligent? No. Barney Frank, for all the Elmer Fudd resemblance, is clearly a quick thinker. Obama is intelligent and a skilled communicator (at least with TOTUS). I don’t think Pelosi is exactly a Mensa or Triple Nine standout, but she’s not unintelligent. What, then, is the problem? Why are our representatives the way they are?
One of many reasons it that these are not *wise* people with *character* and a broad base of *experience*. For too long, the media have made it seem as though questions of character are old-fashioned, questions of experience are irrelevant if you’re impressive enough (hello B.O.), and…well, who ever heard of “wisdom” being raised in an election contest? Perhaps we talk of judgment, but they’re not the same, and concerns over judgment were pretty artificial in 2008, used either to support Obama when no other good reason was available or to imply that McCain is a hot-headed old man. Why should we care about wisdom? The important thing is that this person gives voice to my angers and frustrations, right?
The House is most amenable to populist pressures. We all know this. But this doesn’t mean that *no one* can stand up in the House and say that rushing through legislation (whether a “stimulus” or a retainder) like this is unwise. Congress took the anger of the American people, stoked it higher, and decided to make a firebomb out of all that heat. They decided it was more politically beneficial to immolate ourselves than to put out the fire and deal with the situation in a measured and responsible way.
Oh, don’t worry, Obama will surface as the voice of reason and endorse the Senate bill, which reportedly calls for a 70% levy, instead of 90%–but it will drop all pretense as being targeted, and apply it to every bonus for those making more than $250,000. Fairness, and all. Spread the wealth around.
A few other thoughts.
This is not really about the bonuses. The anger is fundamentally about two things: (1) the financial collapse itself and (2) the lavish compensation on offer in the financial sector. Washington, with many friends in the media, has blamed the entire financial collapse on Wall Street. Washington has never admitted its own involvement in the whole sordid affair, pressuring banks to make high-risk loans, distorting the market with GSE’s that bought up loans as a means of socially engineering low-income families (of all races, but the political pressure was on behalf of minorities) into homes, refusing to supervise those GSE’s effectively in exchange for mounds of campaign cash, unwise monetary policy, and etc etc etc. Instead Washington directed all the blame (and anger) at Wall Street. This is having destructive consequences.
As for the compensation, it does seem unjust that teachers who decide to work in our inner cities are paid $30K a year while hedge fund managers will make $30M–one thousand times more. Frankly it *is* unjust, but it’s a part of the free market and this is the best system we have. It also seems unjust that executives like Angelo Mozilo will lead companies into the ground, with devastating financial consequences for thousands of people, but escape with hundreds of millions for themselves. Again, it *is* unjust, but it is one part of a much larger system (the free market economy) that has lifted billions of people out of poverty. People are just not educated about this anymore. It’s too gauche to celebrate the benefits of capitalism. The media are much happier to tell the stories of the Angelo Mozilos instead of talking about the nations that come out of poverty when they open up a free market to the world. And we can have a reasonable conversation about the Angelo Mozilos and tying executive pay to long-term business performance, without passing fashionable legislation that is ultimately going to damage the viability of American businesses and make them less competitive around the globe.
Finally, Democratic congressional leaders are actually behaving in a very rational manner, given their motives. This is not only about satisfying angry constituents and seeking reelection. This will be seen as justification for even *more* government intrusion into the workplace. Rather than confessing government involvement is destabilizing, leading to the making of business decisions for populist and political reasons instead of sound principles, Pelosi and the gang will say, “See, we need the government even more involved, because otherwise these greedy businessmen are going to run off with all the cash and leave the house to burn. So we’re going to tell everyone how much to pay, whom to hire and fire, where to invest, how…” So the Democrats see not only a chance to ride the populist wave but a chance to further their agenda of increasing government power over businesses.
“As for the compensation, it does seem unjust that teachers who decide to work in our inner cities are paid $30K a year while hedge fund managers will make $30M–one thousand times more. Frankly it *is* unjust, but it’s a part of the free market and this is the best system we have.”
No. Justice really has nothing to do with it. The free market produces uneven outcomes for individuals. Some may not like the results, but it’s not a matter of justice. If it were, it would be entirely appropriate for the state to get involved. It would also be unjust if it rained on my outdoor birthday party, and I would want the law to do something about it.
This is why the meaningless phrase “social justice” had to be invented, so people could complain about outcomes of the great spontaneous order known as the free market.
Very well put, Ahithophel! Years from now, when the dust has settled and responsible historians have a chance to dive into the archives, I think we’ll learn that the political pressures that built up over the decades, from the Carter years onwards, to force lenders to lower their standards in order to make mortgages available for those with dubious credit and insufficient income, laid the groundwork for the current financial crisis. Fannie Mae and Freddie Mac’s decision in the late 1990s to go full speed ahead to securitize those mortgages to the tune of trillions of dollars despite warnings from their risk managers and others that they were becoming dangerously overextended was cheered by many, especially Democrats like Barney Frank and Chris Dodd who oversaw their operations from their influential committee perches with no thought about the ultimate consequences once the real estate boom ended. Yes, investment banks like Lehman and Bear Stears, along with mortgage companies like Countrywide raked in enormous profits by structuring and selling those sub-prime mortgages, but they would never have considered doing so had not Fannie and Freddie, often the buyers of last resort, had not lowered their standards. Public policy, predicated on the assumption that anybody who wanted a home should be able to buy one, created the context that led to the financial meltdown that’s now playing itself out.
I’ve been watching the Red Guards over at Washington Monthly to see if the light will finally dawn and one of the adults finally spoke up. I don’t believe it will matter. These people are mostly hourly employees who have never figured out where the money comes from to fund their paychecks.
The judge who sentenced Lavoisier stated, “The Republic has no need of scientists or chemists.” He would fit right in that House committee.
Of course, the 90% tax bill will die in the Senate but not before demonstrating the clownish behavior of the majority party. A few Republicans have also disgraced themselves but the majority of that party have restricted themselves to pointing out the follies of the Democrats.
Herodotus, I hope such historians do exist one day but I would point out that You Tube has just removed the video showing Dodd admitting he wrote the amendment that protected the bonuses. I watched it a half hour ago, then posted a link in another blog. When I went to view it again to check the language, it was gone.
I would refine Paul Mansour’s comments at #14 as follows. In the free market, people have the option of making choices that reward them differently. Nothing fates the inner-city teacher to choose inner-city schoolteaching. He can go be a hedge fund manager on Wall Street if he has the temperament, the interest, and the drive. The hedge fund manager can likewise choose to be an inner-city teacher, if she prefers to seek other rewards in life.
SOCIETY, whose taxpayers pay for the school system, doesn’t voluntarily choose to remit $30M to the teacher. Nor would anyone choose to go work 18 hours a day managing hedge funds if she could only expect to be paid $30K. We, the teacher’s employer, just about can’t fire him, nor is there any real mechanism for making his performance matter; the hedge fund manager, on the other hand, is in danger of losing her job 24/7 because performance, as managed by the strength and profitability of her hedge fund, is paramount.
Of course, all of this is in FREE market: a market you can choose or not to participate in. The TARP bailout is shackling the financial market faster than Houdini’s assistants. The taxpayer has no business weighing in on the compensation of a hedge fund manager — unless our intention is to not have a functioning free market at all.
Mike K — that’s interesting about the Dodd video. I wonder if it was pulled because of being proprietary, its posting violating a copyright agreement or something? I didn’t have any trouble finding CNN video of the Dodd admission just now.
For very intelligent and sophisticated observers (no, lester, I’m not including you), I’m surprised that the previous posters are giving any credence to the “anger” rationale for the actions of the D’s and Number One.
I’m sure they’re angry in some sense — mostly that they, with their salaries and perks and cushy jobs, are making less than those with the bonuses — but this is all carefully calculated, with a much larger and more sinister goal in mind. Drudge is just now reporting that the House Organ (the NY Times) iwill be giving us in its Sunday edition (the better to control this week’s news cycle) Obama’s press release that he will be mandating (and Congress is sure to follow) salary and bonus caps on all executives who have any relationship to banks or the market (I’m sure that having a checking account will be enough of a nexus).
So it comes to pass that social justice, wage justice, economic victim justice — whatever crypto-socialist jargon you want to use — is going to be enacted.
My only consolation is that all those Wall Streeter liberals who voted for the Great Confiscator will — for a few years at least — be poorer. Of course, the thought that Number One or Barney Frank or any of the economic geniuses in Congress or in the MSM are smarter or more ruthless than the Wall Streeters is laughable. And, armed with a number of well-placed “donations”, the Street will be back to personal business as usual in a few years. However, you and I will probably continue to wear the salary/bonus collar for the rest of our working lives.
America has been lucky, over the years, with the leaders it has chosen. This time, we blew it, big-time and permanently.
Interesting and not really so interesting comments.
Something is rotten in Denmark (ie the USA) and conservatives are giving out every excuse in the book.
Some of my thoughts:
People here say, ‘Hey $30 million for a financial analyst compared to $30 K for a teacher is just fine because this is after all a free market system, otherwise the government would intervene’.
But is this not what broke many companies? The compensations so huge, despite falling revenues, that the company went belly up?
Others say, ‘The anger is misdirected, the execs are getting retention bonus, not bonus for performance’.
Wait, why pay retention when there are no jobs to be found in a recession? Why break the company to retent people who already have cushy jobs????
Is it more likely that the better explanation is that the top people of many companies want to plunder the company assets before it goes belly up?
Yet others say, ‘The bonus are just normal routine business practice, I know, I was involved in some of these contracts’.
Normal??? If an exec has a $300K salary, why is he getting $3 million as a bonus? Is that more a matter of robbing the bank than of a real honest bonus.
Most middle class salaried persons would be happy to get even a $3k bonus!
What I am getting at is that since the Reagan years, a mind set have grown up that says,’ if you can get away with it, do it’. And, ‘if it breaks your company or your country, at least you saved your ass’.
Just reading the excuses are disgusting but people here present these disgusting views as if its perfectly normal human behavior and if one disagrees, then you are promoting class envy, socialism, robbing the rich, etc.
There is almost nothing normal about the views from Contentions.
Can you provide even one example of such a turn of events in any of the companies that are making news? There have been several situations where CEOs and others received outsized compensation – often in the form of stock options cashed in near whatever top, in other cases via so-called golden parachutes – but I’m not aware of any major ones, even cases involving outright fraud and embezzlement, where excessive compensation packages were themselves the cause of a company’s bankruptcy.
Cases of a proprietor raiding his own doomed company’s accounts are as old as business, but not what we’ve been dealing with here. To the extent there’s a kind of hypertrophied metaphorical resonance to it all – the way that big capital in association and active cooperation with big government has run off with huge portions of our economic surplus and accustomed itself to doing so over many years – what it suggests is that the current phase of populist-driven social self-immolation is merely the fulfillment of the grand national “bust out” scheme. Just be clear that the compromised executives and traders are only one part, and rarely the leading faction, in such criminal conspiracies.
The rest of post #21 displays ignorance joined to willful misreadings, for a result that, as ridiculous as it is, roughly illustrates the kind of presumptuous naivete that we, the public, are hiring when we put ourselves in charge of companies like AIG.
_What correction is there for Congress and a White House run amok? Ultimately just the good sense of the voters who can adjust course at the next election. I’m sure they’ll have put down the torches by 2010_.
We’ll see. Meanwhile do you suppose Princess Neoterica can keep on throwin’ her firebrands and thunderbolts at Comrade POTUS for another … lemme see … another seven hundred and nine (709) days?
Happy days.
Oops! Only SIX hundred and nine (609) shoppin’ days to régime (non-)change.
lesterologist- geitner’s plan is going to be unveiled on monday. my prediction is thus back on for a 500 point spike in the dow. it might not all happen on monday but it will rise 500 points.
if it goes up 500 or more and it’s NOT because of his plan but something else, I lose. or if it doesn’t go up. my prediction is exact.
Quote”Can you provide even one example of such a turn of events in any of the companies that are making news? ”
Yeah, here’s one:
“Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night.
The revelation sparked fury among the workers’ former colleagues, Lehman’s 5,000 staff based in London, who currently have no idea how long they will go on receiving even their basic salaries, let alone any bonus payments. It also prompted a renewed backlash over the compensation culture in global finance, with critics claiming that many bankers receive pay and rewards that bore no relation to the job they had done.”
Link: http://www.huffingtonpost.com/2008/09/22/outrage-as-lehman-brother_n_128438.html
Actually you are trying to be too specific hoping that I can’t find an example of a recent failed big company.
However, as I made clear I am talking about the last 30 years of business culture whose bad attitudes started with the Reagan “revolution” which eventually led to today’s collapse.
No, I am not naive or wilfully misreading. I think that you are naive thinking that an exec working 1 day is worth a regular worker working a year and not get strong reactions from normal people.
Just a note of reality–teachers in Chicago make $48K-75K for teaching the shortest school year in the nation. And they don’t have to know math the way a hedge fund manager does. Several years ago our CEO for schools after a two-year process had a list of 48 incompetent teachers to “release from the system,” a system that comprises more than 640 schools. (I’ll bet any organization would be grateful to have such a low percentage of incompetent employees.) But just as the teachers were about to be fire the CEO himself was replaced and the firings did no take place.
J.E.Dyer is right–people are not assigned to these jobs. They choose them for whatever reason. It is pusillanimous to make your choice and then be mad because it doesn’t give rewards you had no reason to expect from it.
I think the bonuses fit very nicely Mark Twain’s definition of “tainted money”–”t’aint mine, and ‘t’aint yours.”
Well, yeah, Drudge seems to confirm my (obvious, I know) prediction that this would just become an excuse for greater government intrusion over the marketplace.
And I knew some people would suggest that justice has nothing to do with the market. I simply find that argument unpersuasive, and a little too convenient. Of course it’s unjust that a person who works an inner city school gets paid *one thousand* times less than a hedge fund manager. Of course it is. Yes, he works long hours (at least initially), and he doesn’t have tenure, but he makes more than the teacher does in *one thousand* years. If you don’t see that there is something unjust about that, well, I think you’re being willfully blind.
It’s not necessarily an injustice in the sense that the government is at fault. Partly, in my view, society at large is at fault, because of the things we value.
*Still*, I don’t think that the government is justified in intervening, because a free market without government intervention is, on the whole, far better for our society that a pseudo-free market with government intervention. I think we can apply social pressure for tying executive pay more to the long-term success of the firm, but I don’t think the government should impose it.
The thrust of so any of the troll-posts, of which #21 is a good example, is that businesses cannot be trusted to run themselves. But they never complete the idea. If businesses cannot run themselves, and competent Deities are unavailable to take on the job, what is left?
There appear to be two options. We can do without businesses, a policy that gave us the glorious economy of the hunter-gatherer days, or we can invite the government to assume the role of management, a policy that gave us the storied economies of the Soviet Union, Chairman Mao’s China, Kim Jong-ihl’s North Korea and , in this country itself, the Post Office, the Department of Motor Vehicles, Fannie Mae, Freddie Mac, TSA, and ethanol subsidies. Prototypic examples of humanitarian efficiency, every one of them.
How anyone who has survived to adulthood can be so hyperbolically stupid as to believe that the likes of Barack Obama, Nancy Pelosi and Fortney Stark can run an economically successful insurance company is beyond my imagination, though I see examples around me every day.
There was a time when American legislators, while never wise, at least had the good sense to refrain from meddling in the day-to-day workings of the economy. You see, in those days there were bankruptcy laws, and courts to administer them. And companies that adopted foolish policies, or overpaid for incompetent management, or signed foolish union contracts were headed right there, to be herded through steps that would rectify the problem, or liquidated outright.
Those policies created a society that did not ensure wealth or fairness or equal opportunity. But it was the wealthiest, fairest, most egalitarian society of significant size ever created. One would like to see it survive.
And thanks, #24, for correcting your original post to bring us 100 days closer to “hope and change.”
#26 – that’s not an example for your original thesis, which I will furnish again:
So, no, excessive compensation may be a symptom, but it is not, as your rhetorical questions imply, the cause of companies like Lehman or AIG going “belly up.”
At the same time, if you look at companies that are doing quite well, that yield stellar earnings quarter after quarter, employing thousands of people while providing innovative products used and enjoyed by millions of people, you’ll find more than a few whose executives earn in one day what a regular worker earns in a year. Some executives are even able to retire at young ages, and go on to earn a lifetime’s worth of regular worker’s wages on interest and dividends in a year or a month. Some of that very select few are even known to offer themselves up for free as props for the Barack Obama show. In the meantime many of those same regular workers you refer to can be found in the stands at baseball games or in the movie theaters on weekends cheering celebrities who do easily as well as your average evil fat industrialist chomping his cigar and dangling poor children by their ankles so as to sweep up the change that falls from their pockets, etc., etc.
“Critics” can claim whatever they want, and the social utility of high finance is another issue entirely, but most Americans understand intuitively, or used to understand, that the only thing worse than seeing some peculiar physical specimen paid millions of dollars for being tall and throwing a ball in a hoop, when the average schoolteacher may not even be able to afford a good seat in the arena built partly with public funds, is having the government decide how well-compensated such specimens should be.
In general I agree with those who are saying that over-compensation of executives was not a cause of companies going belly up. Consider, though, someone who worked in sub-prime mortgages. He could come in and, in a single year, make (say) $100M by pushing the company to take on ever riskier investments. As long as the housing market is going up, no problem. But the executive makes his $100M; he is incredibly wealthy for the rest of his life. Maybe he is done after two years. What does he really care whether the company goes belly up after that? Yes, I know, executive compensation is often tied to stock options, etc., but many of those are short-term, or can be. I’m afraid that when executive compensation becomes so fabulously high, we actually diminish their accountability for the long-term health of the company.
Margo, as for “reality,” the average teacher salary in Chicago is about #53k. The average teacher in Miami makes about $34K. It doesn’t really make a difference. I was comparing them with a hedge fund manager who makes $30M in a year, but we all know they can make far more than that. Yes, teachers work 9 months instead of 12. And hedge fund managers work long hours. That justifies a 1000x disparity? Oh, I forgot, hedge fund managers “have to know math.” You’re right! They deserve 1000 times as much. Nobody knows math like those hedge fund managers. I guess professors and researchers of mathematics must make 100,000 times as much, right? Because it’s all about the math. (I’m sorry for being sarcastic; I almost always agree with you; no disrespect intended.)
The best response (even though I disagree with it) to the issues I’m raising is indeed that “everyone has the freedom to try to work on Wall Street.” No one forced person X to go to work in an inner city. True. So let’s assume that person X actually cares about his kids and works hard. His conscience compelled him to help the children he saw turning to drugs and prostitution; in the summers he runs a get-kids-off-the-streets program to bring his income up to $40K. That doesn’t mean he cannot legitimately wish that our society were such that he were better compensated for his sacrifices.
If we cannot see that there is something amiss when an executive or investor makes 1,000 or 10,000 times more than a schoolteacher–or a soldier–we are headed for the political wilderness for a long, long time. I deplore Obama’s response and solutions. But we need to recognize the problem so that we can explain better solutions.
#25: Your prediction was for a particular date. Anyone who
played that week on the basis of your prediction, has lost.
Your claiming retrospectively a moral victory cannot
recoup his, or her, or your, losses.
As a speculator yourself, you cannot afford such self-indulgence.
I note, with approval, the definiteness of your new prediction.
#31: You are confused. I’ve done both:
1) Worked in a public agency with at risk kids for over a decade as a younger man. There is a big difference because anyone with a pulse and a college degree can get most probation and social work and teaching jobs, and, to keep your job in government, all you have to do is keep breathing. The results speak for themselves in spite of a minority (like I was) who really work hard at these jobs. Chicago now can boast that ONLY 49 % of our public school kids drop out of high school.
2) Worked on Wall Street for 27 years now. There is a big difference because only a few survive and far fewer make the big bucks. We get to eat what we kill. If we don’t generate revenue we starve. There were points when I wasn’t so sure I would make it, when I wondered if I might loose my house. I hung in there, working 80 hour weeks, still do, but many of my peers couldn’t make it, and even some of the very best are now looking for something productive to do. There are many entirely empty floors where they used to sit just one year ago.
We will be in deep du du if we start legislating how much people at the top can make. Why just focus on Wall Street? Do we also want to go after the Kennedy and Rockefeller and Heinz and Kohl trusts? Do some entertainers and athletes also make too much?
How about LAWYERS? Let’s insist that everyone’s income is capped, even the lawyers’.
That will put a stop to all this rubbish, don’t you think?
Ahithophel:
Your example of an unethical employee on who guts the company of $100M and absconds with his ill-gotten gains is real, and, in a plethora of variations, has led to the failure of many companies. But, assuming the “evil” employee acted legally, the possibility that he could do that is straightforward evidence of poor management, in a company that probably would not prosper in any case. Losing millions to an avaricious employee is no more damaging to the prospects of a company than losing it on a poorly conceived product or bad marketing strategy.
Failures caused by poor products or poor marketing dwarf those caused by employee overcompensation. But a free market has ample room for them all.
I should add that the most prominent current examples of impending failure due to overcompensation are in the domestic auto industry. And it is the workers, rather than the executives, whose compensation is the issue.
Well, you guys probably know me well enough by now to know that I don’t think businessmen are evil, or anything of the sort. (And Zoltan, of course there are differences. I’m not saying it’s just as *easy* to be a Wall Streeter as it is to teach at a school in the inner city. Or that no more talent or training is required to succeed in Wall Street. I acknowledge all of that.
Let me use the example of a soldier, since we conservatives have some justified suspicions of the teaching lobby. It’s not right that a soldier should be paid, say, $40,000 to put his life on the line, while an investor should make $40M to do something that puts him at no significant risk. He may lose money, lose his job, but he’s already a millionaire, so he’ll be fine.
And just to be clear once again, I do *not* think that this is a reason for government imposition of hiring or compensation regulations. Perhaps we need a change in the way we think about business management, so that, as materialist says, these sorts of poor management things don’t arise. We are not going to survive as a party or a political group if we continue to think there is no problem here.
The reality is that AIG, for political reasons, was of late insulated from the market forces that have been the substance of this discussion. Its politics played out at another level. By that I mean that AIG fell victim to Credit Default Swaps as many in this bear market had. Ironically, this kept AIG alive where it killed others. The reason AIG was kept alive is that its demise would have brought down a plethora of foreign banks, and we can all imagine what the reaction from American taxpayers to subsidising foreign banks directly would have been. This fiasco, as almost everything economic today, boils down to sub-prime mortgages and government intervention in markets. Thank-you Chris Dodd, Barney Frank, and Maxine Waters!
As for what people make, the above conflates, wrongly in my view, worth and market value. Clearly a brain surgeon is worth more than a pro hokey player, especially when one is need of an operation after being conked on the head by a puck while at a hockey game. But the reality is there are fewer hockey players of talent playing for shorter periods of time, and everyone of them has a better agent than your typical brain surgeon billing some HMO.
Achitophel, I do see your point about someone being “worth” a thousand times more than someone else. I was really addressing the point of why people would choose one or the other. But the “worth” idea really has little to do with it. That is between two people–the employer and the employee. Presumably, they are both doing the best they can for themselves; they are not trying to adjudicate the personal worth of everyone in society.
As free agents, they should have the right to do that, I think, without any third party’s second guessing–or rather, dictating to them and taking the decision out of their hands.
It’s not very fair for someone who signed up for a low-paying job that you can’t be fired from to later turn around and claim it’s unfair for someone else who has taken great risks to get paid less.
For us bystanders, I think the question ought to be what is good for us–in other words, for society as a whole. Is it better for us if people make these choices and strike these bargains themselves, or if some mastermind of infinite wisdom decides for us? The answer has been worked out both theoretically and in hard practice: Society as a whole benefits when each of us does this himself. This is justice at a higher level, that even the very poor gain from the dynamic prosperity of a society in which people choose the risks and the rewards they want to go after.
AS for the other kind of just, remember that the reward of the righteous is in the world to come.
Executive compensation. What are us shareholders of publicly held corporations paying for when we allow executive compensation committees to shovel dump trucks full of money into the accounts of senior management? Well, it’s pretty much the same situation as professional athletes, who are paid for what they did last year in the hope that they’ll do it again this year. So, for one reason or another, we hire someone like Carly Fiorina, who then proceeds to be incompetent at what her job entails, which is making decisions. Corporate honchos don’t come up with a cure for scabies or invent magnetic levitation devices. They make decisions about marketing, finance and personnel on the basis of what underlings tell them and their own experience. Evidently some are better than others, but are they that much better? Somebody has to take the position and it can’t be the kid in the mailroom. It has to be someone with some success credentials and they have to get paid well or the shareholders wouldn’t accept them.
Look at college football. There’s something like 108 division one programs in the country and each apparently requires a head coach. Since football is a common and well-understood game, the pool of potential coaches for a division one vacancy could include all the small college and high school coaches in the country. There are thousands of viable candidates. And this doesn’t include their critics glued to the TV every Saturday afternoon. An opening could be filled by a high school coach from Nowhereville for a $50K a year salary who could fail just as completely as a million dollar a year guy, because, after all, each conference has only one champion and there’s just one national champ. Everyone else is a failure at one level or another. But that wouldn’t work because the alumni and fans expect their team to be led by a proven, high profile and consequently highly paid coach. They know that their chances of success are small but think that it’s worth the money, especially since it’s not their money. A similar situation exists in the business world. Executive search committees don’t hire a janitor to run the company and have to pay the new guy more than he got before. That’s life.
I agree with Ahithophel that the pay disparity in the US is unjust and that if the risk/reward calculation for executives that creates that disparity is skewed to increased risk for the corporations, it is also bad for the society as a whole.
I suspect some more graduation in the income tax table – say 50% at $5m, 70% at $20m, 90% at $100m – would help the net distribution stats without costing us too much in lost productivity. I don’t subscribe to the “no one needs $x” rationale for limiting compensation – it implies need has something to do with what the market should be allowed to produce. But I’m fine with saying “We can get along without the marginal effort of people who insist on making more than $X,” where X is a very large number.
I really liked your blog with the Man Utd mention.
I try to follow as much Premier League football news as I can from Sao Paulo, Brazil.