And why should a crappy manager get a cut simply because he/she is a manager? Just as not everything is not necessarily the fault of management, it can't all be laid at the feet of workers. Accountability should go both ways...but it quite often doesn't.Originally Posted by Presley Cannady
"On the plains and mountains of the American West, the United States Army had once learned everything there was to learn about hit-and-run tactics and guerrilla warfare."
T.R. Fehrenbach This Kind of War
It seems to me that this conversation is losing value rapidly due to the fact that ad hominems and generalisations are creeping in. Buttons pushed and stuff like that. I think that two main questions / themes are being blurred somewhat.
1). To what extent are some CEOs and other top players guilty of criminal conduct?
2). To what extent is a huge differentiation in income (something like 500 fold) morally / ethically / legally / economically / social fabrically / what-ever-ly, justifiable or useful or sustainable?
Me? I am a self employed builder. I guess that puts me at least pretty close to the crappy workers class.
I have no problems whatsoever with the fact that a brain surgeon pulls in more than I do. I’d be concerned if that was not the case. But how much above the median or mean should the top few be? An order of 5 to 10 or so, I’d have no issues with at all. An order of 20 to 50 or so….my eyebrows are starting to gravitate in a Northerly direction. An order of 500 or so…..I think that is beyond silly!
I don’t agree with all that John Rawls puts on the table, but I think me makes some good points. The reason the top few can achieve the levels they do is because of the existence of hordes of crappy workers. These form the physical backbone of the social fabric. That same social fabric that the top few can enjoy to extents that go way beyond their individual contribution and worth to that social fabric. The businesses that these CEOs in question lead, and to which they deliver their value, are also agents within this same social fabric. Any individual or business that puts him/her/itself (too far) above this social fabric is delusional. But they can afford to disassociate themselves, financially at least. Beyond that…..well, we’ll see what the future has in store.
Nothing that results in human progress is achieved with unanimous consent. (Christopher Columbus)
All great truth passes through three stages: first it is ridiculed, second it is violently opposed. Third, it is accepted as being self-evident.
(Arthur Schopenhauer)
ONWARD
Considering the immediate topic of interest deals with a prevailing current of ad hominem and generalization (and abundant know-nothingness where it concerns the financial sector), that's to be expected. Whether that means the conversation is losing value, I'd say consider the alternative before jumping to that conclusion.
Is there a reason to suspect a spike in criminal conduct amongst CEOs and top players worthy of discussion here?I think that two main questions / themes are being blurred somewhat.
1). To what extent are some CEOs and other top players guilty of criminal conduct?
Morally and ethically, don't give a damn. People would be whining about fairness if CEOs were making only 40 times the lowest income wage earner, let alone 275.2). To what extent is a huge differentiation in income (something like 500 fold) morally / ethically / legally / economically / social fabrically / what-ever-ly, justifiable or useful or sustainable?
Legally, since when is it illegal in this country to be richer than someone else?
Economically, the top 1 percent owning a quarter of the "nation's" wealth is not qualitatively different from owning 40 percent. Outrage over this statistic alone betrays a severe ignorance of what constitutes wealth, as if 40 percent of it were stuffed into mattresses by a bunch of miserly hoarders.
Socially, Americans whine after a bust. Muddle through to the recovery and the vast majority will go back to being satisfied with being in the top 1 percent of the entire world.
Sustainability has very little to do with the magnitude of wealth ownership. Even wealth parked as conservatively as possible--in Treasury bonds--finances the trillion dollar deficits the nation runs up on top of $2 trillion in tax receipts the top $900 billion the top 1 percent fork will fork over for 2012. That leaves real estate investment (which peaked at 6 percent GDP over half a century ago), equity and bonds, and consumption--the latter three of which directly reinject wealth back into the system.
Why do you care? What does it cost you?Me? I am a self employed builder. I guess that puts me at least pretty close to the crappy workers class
I have no problems whatsoever with the fact that a brain surgeon pulls in more than I do. I’d be concerned if that was not the case. But how much above the median or mean should the top few be? An order of 5 to 10 or so, I’d have no issues with at all. An order of 20 to 50 or so….my eyebrows are starting to gravitate in a Northerly direction. An order of 500 or so…..I think that is beyond silly!
I've very little interest in philosophy, so I'll leave that to others.I don’t agree with all that John Rawls puts on the table, but I think me makes some good points.
That's not true, certainly not now as some universal law and--as automation picks up the pace--eventually not even as a matter of circumstance. But even when a man gains wealth by employing labor, precisely what obligation does he have to labor beyond what was contracted? A wage is earned.The reason the top few can achieve the levels they do is because of the existence of hordes of crappy workers.
Who are you to judge whether the top few are compensated "way beyond their individual contributions?"These form the physical backbone of the social fabric. That same social fabric that the top few can enjoy to extents that go way beyond their individual contribution and worth to that social fabric.
Last edited by davidbfpo; 11-16-2011 at 12:29 PM. Reason: Reviewed and retained as part of debate, not the unpleasant tone that crept in later
PH Cannady
Correlate Systems
I think the extent is significant, but few--if any--charges will ever be brought. Instead, they'll throw one-off rogues like Adoboli under the bus whenever they get caught, satiating or attempting to satiate the public's hunger for justice. The collaboration between Standard & Poor's and the securitized mortgage industry alone ought to result in centuries of jailtime.
Hard to say how sustainable it is. There are a lot of ways the have-nots could shift the balance of power to even things out, but there are a lot of options available for counteracting those methods.
Morally/ethically, the line is the point at which those who have significant wealth are able to leverage that wealth to change the laws of commerce to the disadvantage of everyone besides themselves. There's no number at which it becomes wrong (though I could see a number which strongly indicates that something is wrong), it's the manner in which that number is used.
There is no end to the madness
http://www.bizjournals.com/washingto...l-out-big.html
Tax payers dollars, requesting another tax bail out while asking for bonuses, once again a rewarding failure. This isn't capitalism.The Federal Housing Finance Agency, which regulates the mortgage giants that are now under government receivership, has approved $12.79 million in bonus pay for the performance of 10 executives at Fannie and Freddie last year despite both companies posting losses in all four quarters, Politico reported.
The executives were rewarded with Wall Street-style incentives for meeting modest performance targets tied to modifying mortgages in jeopardy of foreclosure, according to Politico. Among the compensation deals was a $2.3 million bonus awarded to outgoing Freddie Mac CEO Ed Haldeman for 2010, a figure that is more than double his salary of $900,000. Fannie Mae CEO Michael Williams got $2.37 million in performance bonuses.
http://www.foxnews.com/on-air/on-the...e-giants-fredd
Government run can't be worse than what it was. Even an SES employee wouldn't come close to making that much money, and they frequently have much more responsibility (or provide more value in other terms).VAN SUSTEREN: I mean, it isn't exactly good talent if -- maybe we could -- maybe we pay just to get rid of them so we don't have to pay another $6 billion next quarter!
THUNE: Right. Well, these are the guys who were brought in to kind of clean up the mess. And you know, so far, they're asking for another $6 billion. They have reduced what we think is going to be the liability of the taxpayers, though, for the Freddie Mac and Fannie Mae bailout significantly over the course of the last year.
But that being said, they're asking for an additional $6 billion in taxpayer assistance at a time when they're making these big bonus payments. And it just sounds -- it just looks terribly inconsistent, and I think it is -- it is an outrage. And I think, you know, you've got to show a little bit more of an ear for what's going on in this country right now and how important it is that we get our fiscal house in order, how important it is that we get people in the real economy back to work. This just doesn't square with that.
VAN SUSTEREN: I take it that we didn't sort of tie them up and handcuff them and drag them into these $900,000 jobs, right? They came voluntarily?
THUNE: Right, and you know...
VAN SUSTEREN: I mean, so it's, like -- (INAUDIBLE) it's not like they were forced to take -- and I -- when -- when they got these jobs, did we promise them this $13 million to be divvied up in bonuses?
THUNE: I don't know the answer to that for certain. What I know is that the Federal Housing Finance Agency, in consultation with the Treasury, sets this. Now, the president's czar sort of set the pay for a lot these things a long time ago. But I think the bonuses are probably all something that's very discretionary. And you would think if it's discretionary, you wouldn't want to make those types of payouts right now.
Now, the House of Representatives is working on legislation to reform Freddie Mac and Fannie Mae in a way that would create a new structure for the pay for these that's more consistent with what other federal employees might receive.
Trust me, you'll barely notice.
Which definition of capitalism excludes bail outs and conservatorship? Might as well toss out bankruptcy while we're at it, eh?This isn't capitalism.
Have you heard of HUD?Government run can't be worse than what it was.
Fannie and Freddie together manage about about $175 billion in revenue. Aside from DoD and the entitlements, care to point out any other agency that has a comparable budget?Even an SES employee wouldn't come close to making that much money, and they frequently have much more responsibility (or provide more value in other terms).
PH Cannady
Correlate Systems
Why should a crappy worker get a severance package? Or his last paycheck? Or his last hourly wages? Short answer, because that's what both parties agreed to when they contracted with one another.
Except some folks seem to want more accountability going one way on top of that agreed to at the time of hire, for no better reason than the form and degree of compensation is way the hell out of their experience.Just as not everything is not necessarily the fault of management, it can't all be laid at the feet of workers. Accountability should go both ways...but it quite often doesn't.
Last edited by davidbfpo; 11-16-2011 at 12:29 PM. Reason: Reviewed and retained as part of debate, not the unpleasant tone that crept in later
PH Cannady
Correlate Systems
Early in my economic studies I learned about what leads to wages.
It's NOT the hardship, economic value or societal value of the work.
Let's have an example.
A plumber works normally. Suddenly, half of the plumbers in the nation die.
The next few months he'll still do the same work, but he will earn much more. Then new plumbers will arrive and few years later he'll earn only lightly more than before.
This happened with programmers in Germany. They were rare and well-paid, now they aren't rare any more - and their hourly salary has dropped 40%.
The work and performance of programmers hasn't changed much. If anything,t hey are now much more productive due to better compiling.
Wages and salaries are market prices, and as all market prices they may be distorted by market failures. One in this case especially relevant market failure is power asymmetry.
A corporation has much better negotiation power than a lone worker, and as a result the worker gets paid little.
Workers with rare qualifications have better negotiating power, and accordingly get paid more.
A common tool to balance the power asymmetry is to allow effective labour organisation and collective bargaining - workers earn more with this power of being united and accordingly, employers and shareholders hate that and lobby against labour unions.
So the wage or salary that results in market activities is not at all a fair price, but the result of market powers. It's in most cases perfectly legitimate to spot power asymmetries, point them out and demand better wages/salaries.
Sadly, the U.S. government cheers labour unions only when they're sabotaging some distant socialist country. At home they're being portrayed as evil, corrupt - in the interest of shareholders and executives.
Similarly, agreements between executives and their company can be subject to distortions as well. The principal-agent problem is strong in this.
I hope I've made clear that trust in negotiated conditions of employment and negotiated income as well as market outcomes in general must not be trusted in economic policy discussions. They are subject to distortions and a good economic policy has first and foremost to counteract major market failures.
A multiplication of the ratio between CEO pay and worker pay over the course of a generation is a big, big indicator for market failure. And it's just an example for market failures that lead to major (excessive) income inequality.
Have some forgotten the SWC rules?
Moderator's Note
I have hesitated to remind some of those post here that SWC is a discussion forum. This thread has elements of acrimony and sniping as the exchanges on economics in particular have swayed back and forth. Please consider what you post.
In an interview on SWJournal Dayuhan stated:That does not mean Dayuhan agrees with me here, but it is a good reminder of what makes SWC work.This would be a good place to say that the SWJ Council is, bar none, the most effectively moderated online discussion board I’ve ever seen. Too many times to count I’ve seen intelligent, substantive discussions on other sites overwhelmed by shrieking ideologues and partisan buffoonery; SWJ manages to keep that off without censoring ideas. They could be accused of censoring morons and wankers, but that to me is admirable, if politically incorrect... and yes, I know that’s subjective, but it’s nice to see somebody with the cojones to make the call.
Last edited by davidbfpo; 11-09-2011 at 05:52 PM. Reason: Add quote
davidbfpo
If the absence of unions is perceived as a market distortion, what would you call the presence of unions that are capable of shutting down an employer who doesn't give them what they want... perhaps looking at Britain in the late 70s as an example? Is that not an equally distorted market?
Would a the power of labor in a non-distorted market be the ability to leave and seek work elsewhere, not the ability to not only stop working, but to apply coercive force to prevent anyone else from taking over the job? That seems like a fairly severe distortion in its own right.
Nobody complains about the impotence of American unions when unemployment is low and jobs are plentiful: if you don't like your job, you don't need to strike, you quit and go work somewhere else. In those conditions unions seem largely irrelevant and the dues start to seem like an imposition, especially since American unions have not always handled their money responsibly, to put it mildly. Of course when unemployment is high, all that changes.
Similarly, when we go into bubble mode neither the populace nor the government has anything bad to say about the financial industry: they cheer the business on, tap into the bubble as much as they can, tell themselves how smart they are to be "winning". When the bubble pops and nobody seems quite so smart, all the fingers point to Wall Street. It's a bit like passengers in a car screaming "faster, faster" and handing the driver drinks, then filing lawsuits for negligence when there's a crash.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary”
H.L. Mencken
You can't really call either a market "distortion"--the term Fuchs is actually grasping for is "inefficiency"--without additional context. We would first need some measure over a nest of transactions to determine how far they deviate from some maximally efficient allocation of goods and services. Given your particular example, we'd have to:
1) determine some wage that is optimal for both employer and employee, and
2) examine how far we stray from the optimum incident to some regime of collective bargaining.
The first step is hard, because calculating maximally efficient allocation of goods and services is an exercise in highly conditional, subjective teeth pulling. The second step is comparatively elegant (provided the math holds up, which is what the folks in Stockholm apparently believe).
PH Cannady
Correlate Systems
It is. Power asymmetry can go both ways.
Countries can balance the powers or employers and labour unions through legislation, jurisdiction and culture, though. I think that's what all developed countries should strive for - and it's an everlasting challenge.
Btw, slightly related to topic (UK, not U.S.):
Last edited by davidbfpo; 11-16-2011 at 12:27 PM. Reason: Removed unpleasant text
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