Eat those mofo CEOs! Or maybe not.

For me the  “Eat the Mofo CEOs!” argument, aka “CEO pay is an outrageous inequitable violation of human rights”, etc, etc.  isn’t necessarily wrong, it’s just very incomplete.

What we DO KNOW is that most folks are a lot better off here in USA than in most of the alternative economies.  This is particularly true for those of us making more than a modest amount per year, but I think it’s hard to make a case that even welfare folks here are not better off than in, say, any of the other top 10 populated countries with perhaps Japan as an exception.

What has generated that prosperity for so many?    Certainly “high CEO pay” is at best only a small factor in this, but I’m not clear how you can start modifying things like “maximum CEO benefits” without running into some complications with innovation and productivity.

One can reasonably note that there’s not a correlation between CEO pay and corporate productivity  (at least I think this is indicated by several studies).   However a better question is really “is there a correlation between the lack of intervention in economies and productivity?”.   This has been tested now for many centuries across many countries, and we generally find that lack of intervention seems to create more total wealth and massive intervention as in old school communist crazy stuff tends to bring a sh**storm of economic trouble.

However US style ALSO seems to push the distribution more to the rich.    Of course it would be better to have more equal distribution IF you could keep all that productivity, but how do you arrange that?

It’s the biggest question of our lives.  I don’t have the answer, but when I look around the USA (where distribution is NOT equitable even after heavily progressive taxing of the rich) I see a LOT better standard for pretty much everybody than when I look around places that don’t have vibrant capitalistic economies (or have only had them a short time).

One can offer up Scandinavia as the “alternative model” and I’d agree that if we could duplicate Scandanavian standards of living at US scale we should do so.    but I don’t think you could apply that model effectively to a country the size of the USA.   These countries  have some major advantages that have to do with oil wealth and demographics and history.  They are smaller than many US states and thus not really comparable if you are talking about global economic architecture, as you must do when trying to “fix” the many problems the world is facing after the boom and recent mini-bust of the post WWII era.

It seems to me that the *first* line of discussion with respect to any economy needs to be “how do we create wealth?” rather than “how do we distribute he wealth we have created?”

This point is completely obvious to pretty much anybody I talk to from the right or in business, and seems to be completely opaque to many on the left side of the political equation, especially the wall street occupation forces.   Many of those folks seem out of touch with basic business economics and hell bent on the destruction of capitalism – naively assuming that massive productivity will continue under all scenarios, so the only thing we should focus on is making sure the rich don’t get … richer, because then we’ll see all that prosperity flow more equitably to … usually… their causes or even to them.

But be careful what you wish for because when taking a global perspective on things redistribution will not necessarily flow in your direction!   Folks in China and India are living at much lower levels than almost anybody here in the states, so as we work for equitable distribution (as we should), we’ll need to work to get THEM more involved in the economy so they can raise their standards to a fraction of ours!   Globalization is taking care of this right now in the sloppy form capitalism usually takes, but it’s ironic to me that occupiers seem to think the wealth of the super rich should be heading back to mainstreet USA rather than to the truly needy.    Rich or poor, pretty much everybody seems to think they are the underpaid and overworked folks.    Take out a map folks and put your finger on your location.   If it’s in USA then equitable distribution is likely to flow AWAY from you.

I’m all for more equitable distribution IF you can do it without hurting productivity, though I also would like to see that prosperity flow to those who really need it rather than simply bloating the bureaucracy as we tend to do when taxes go up.

Ray Dalio of Bridgewater Capital – the world’s largest Hedge Fund – both makes a ton of money and pays a ton of taxes.    Like most of the rich he pays both a greater total amount and a greater percentage of his income to federal taxes.   His point on Charlie Rose the other night was direct and simple.   Like Gates, Buffett, and legions of other super-wealthy folks Dalio is going to be giving most of his billion dollar fortune away to the poor.   He’d be happy to give it to the government IF they’d spend it wisely, but he knows that they will NOT.

19 thoughts on “Eat those mofo CEOs! Or maybe not.

  1. Distribution of income is not “distribution” at all. It is a statistical artifact built on the assumption that there are a finite number of dollars of income in some period of time. That is the only way one can calculate that XXX% of income goes to YYY% of the ZZZpercentile of income distribution. A dollar Joe’s income in 2010 may also be a dollar of Jane’s income in 2010. Thus, if Jane’s income if taken away from her, it has an unpredictable effect on Joe’s income.

  2. Think of first creating the corporation… later we will find out if it is profitable and its CEO is mega wealthy or not.

    In the USA you fill out some forms you pay a few buck you got your corporation.
    In South America, you pay zillions, you have to know people, you have to go through lots of Rig and lots of Marole. THEN you can start to raise capital.

    In the USA mineral rights went with private ownership of land.
    In South America, the State owned all minerals.
    So look to see who is wealthier: State Oil or Standard Oil??

    That can be viewed as the starting point. Sure in the USA you can pay mega zillions to a CEO despite it being unearned income simply because there are a zillion CEOs already earning that money so it can’t be established as excessive.

    Yeah, Scandinavian models have advantages but who wants a tax rate of eighty percent and why should a millionaire pay megabucks for changing lanes without signalling just because the fine has to be a certain percent of his income rather than a certain amount of money.

    Sure maybe we are heading for a return to Cuspidor Capitalism but atleast it is capitalism.

  3. Redistribution of wealth; interventionist policies; communism; socialism; define them as one will, they are each based upon fallacious arguments which ignore human psychological truths.

    Throughout known history, the human species has been flawed by its predisposition towards greed, avarice, dishonesty and lust for power, it is just that some are better equipped mentally and physically at achieving those personal obsessions, whilst others are either disinclined, indolent or lacking in the mental and/or physical capacity to aspire to such objectives.

    Of those so inclined towards achieving what may perceive by some as being ‘greater things’, some may even start out with what they believe as being ‘good intentions’, but become corrupted along their way by the endemic corruption to which they are exposed. In short, one either conforms and goes with the flow or one, at best, is damned to fall by the wayside, or, at worst, is persecuted for expounding what are bound to be perceived as being anti-establishment or even subversive opinions. In that respect, I do not simply refer to ‘the big commercial bosses’. That applies to politicians, civil servants and, yes, the religious who purport to be our moral guides and guardians for all of that which we are all expected to aspire for us to live fruitful and honest lives.

    However, notwithstanding all of that and the desirability of a more equitable society, as someone once said, ‘if all of the wealth was taken away from the richest people of the world and redistributed equally amongst the rest of the world population, within one year those who originally had the most wealth would be restored to their former status.’ No matter what ones views may be about that, for the very reasons postulated above that is a most probable result.

    To my view, the disheartening facet of all of this is that, as a species, we are never satisfied. To a greater or lesser extent, we are all afflicted with this same discontent. Even the ascetic who may opt for a hermit existence in a desert cave is driven by hope of attaining ‘higher’ things. Perhaps, for most of us, it is only with advancing years we may mellow somewhat in that respect. As we pass from childhood to adolescence and then into adulthood, we are increasingly pressured into believing we need to aspire to higher things, to acquire an ever increasing number of possessions. We are literally ‘commercialised’ from cradle to grave, the objective being to keep our desires and dissatisfaction’s ‘live’ until our dying breath. The whole of the developed world economy is structured on that. Get that first car, the get the second one, then get that playtime one. Get a ‘phone, then a mobile ‘phone, then a ‘phone with a camera, then a ‘phone which is a computer too. Ultimately and inevitably, we end up with drawers and cupboards full of useless junk which is victim to planned obsolescence and which is of no use to man nor beast, all to satisfy the greed and avarice of an economic system which is founded on constant but unrealistic and unrealisable economic growth.

    To achieve all of that, we have to have highly complex commercial structures with, we are told, very clever and very special people who deserve to be paid huge amounts of money, “because that is what is their worth and what they deserve”. We are also told, by the very greatest beneficiaries of this greed system, that if their rewards are not maintained to be consistent with their contribution to the (claimed) successes of the enterprises they are charged with heading, they will simply go elsewhere to obtain the rich rewards they believe they deserve. In reality, that is nothing but a self-perpetuating round of CEO’s and many others, patting each other on the back , telling each other how wonderful they are and awarding each other magnificent remuneration packages which, in one year will exceed the income of ordinary folk in an entire lifetime of work, not to mention obscene severance and retirement packages, all derived from the same cosy club sources. And what is driving all of this? The obsession with power, influence and a personal wealth beyond imagination. And what means will they use to achieve and maintain their lifetime and lifestyle objectives? Literally, any means at their disposal. Dishonesty, cheating, lying, bullying and even stealing in the broadest possible sense. The unpalatable paradox is that even when these individuals are exposed as being disreputable, or dishonest, or even incompetent, they still enjoy rewards beyond the comprehension of most common sense people and, more often than not, as one door closes another is immediately opened for them to ensure their lifestyle remains unaffected and uninterrupted.

    If one take the current state of world economic affairs, as an example, that mostly started from within a corrupt financial services sector which was so driven by greed it was prepared to break even the most basic of banking principles to fuel individual greed. And how was that achieved? By selling unrealistic dreams to hapless people who did not have the experience or the discerning capacity to reject the cheating and lies they were being offered. And why were these hapless people so vulnerable? Because from the day they were born they have been exploited by a system built on an unrealistic economic model founded upon and driven by greed.

    Is there a realistic solution to these human ills? I think not, because with each succeeding generation, the same old mistakes are made based on the same, inherent,human frailties. Each new generation believes it has the answers to the mistakes made by its predecessors when, in fact, the very basis of human nature will determine the eventual results, namely many poor at the expense of a few very rich.

    Regardless of all of that however, the greatest dilemma facing the human race is the the world population is growing at an alarming rate and most amongst the poorest people in the world, in those countries which already cannot feed and water their populations. Accompanying that population explosion is an aspiration to emulate the material lifestyle of our part of the world, that which is at present using natural resources disproportionately to its population size and net contribution to the world well being. That poses a most fundamental question. How can that be achieved without a reduction in the lifestyle expectations in what we term as the ‘developed’ world? The answer is, it cannot. And yet we are still driven by that desire for more wealth, indeed, more that one can reasonably expend in what is, after all, a quite short life span.

    If one has been rewarded (note, I avoid the use of ‘earned’) with $200 million in one year, how much more can one need, never mind deserve? As for the richest paying the most tax, that may be perceived as being so by some, but equally, it is the most rich who are most adept at finding ways of not paying tax proportionate to their wealth, compared with ordinary folk who invariable have no means of avoidance. Or should that properly read evasion?

  4. Tax rates are still at record lows (especially with BushCo cuts to cap. gains)–so while the wealthy pay a lot, it’s nothing like they paid say under Nixon. There’s not enough tax revenue coming in to pay for deficit and govt. programs (including entitlements). . Had Reagan not slashed taxes in 86 or so, they wouldn’t have made the money they have. I don’t exactly approve of all the OWS demands (or tactics) but….they have a few reasonable ideas (student loan reform for one), and just the basic idea of controlling financial predators (including the TARP corporate welfare).

    Salary caps seem reasonable to me. Shouldn’t people of equal skills or talents be paid approx. equally? I wager my neighbor Esmeralda,an RN knows as much biochemistry–and science in general– as,say a google exec. or Bill and Melinda. Yet because of the nature of the silicon casino, they are billionaires and she (and I wager most of makes only a five figure income. I don’t begrudge a wealthy doctor, professor, or engineer too much–doctors should make more than RNs (how much?). Wealthy hustlers, brokers, entrepreneurs, scam artistes are another matter. So, taxation might be a form of social engineering in a sense–so be it (superior to like…maoist forms of social engineering).

    Looks like real trolls have arrived (I have a suspicion who it is, Duck).

    • The northern European economy doesn’t seem like the worst model the USA could use. Most teabuggers would probably call it socialist but it still has capitalist elements. There might be a higher degree of “salary parity” in NorEuro. if you will, but…doctors and engineers still make more than nurses (or manual laborers etc). Similarly in Germany–which has a much more efficient education system as well. People are trained for certain jobs, and that’s what they do–whether as professionals or labor. They don’t have the capitalist barons as in the USA (and some germans–usually the rich– complain about overly socialist elements) but on the whole they have a higher standard of living, nicer cities, roads, good jobs, etc.. Voonderbar.

  5. Rodney… There is no such population explosion. That is what wars, famines, pandemics and the like are for. That is why feeding and inoculating the starving Africans is a recruitment measure for the warlords and nothing much more than that.

    Equality of salaries is a Scandinavian goal but it does not link salaries to abilities it only tends to provide incentives for people to pursue their interests rather than a high income.

    • Since 1800 we have had two massive global conflicts and goodness knows how many relatively minor skirmishes, but what impact have they had on world population growth? Even in those countries directly afflicted by the massive loss of their flowers of youth their populations have grown substantially.

      Of course there is no population explosion. It’s a mere figment of the imagination that a world population in the early 1800’s of 1.8 billion has only this week reached a mere 7.0 billion. It is also a mere figment of the imagination that the world population is set to increase by further 50% over the next 40 years. True, population growth is falling, in relative terms, in what we term as ‘developed’ nations, but regardless of that, the pressures of massive population growth elsewhere will cause significant problems for all of us, not just in respect of mere feeding, but also with pressures upon water supplies. We worry we may not be able to afford the gas for our motorised guzzlers. We should be more worried about whether we can supply sufficient water to sustain our life styles, not to mention affording to buy it!

      One must suppose too, it is a mere figment of the imagination that the most rapid expansion is mainly in the poorer countries, countries where there are those who will still support their argument for uncontrolled population growth based on a need to restock those lost because of high infant mortality rates.

      It is also a the figment of imagination that science is doing its utmost to reduce infant mortality and, at the same time, working flat out to afford us older ones en even longer life than is our natural allocation (and that is not offered a religious comment!).

      There are those who will also argue the the entire world population can be ‘comfortably’ contained in a space the size of greater Paris. Wonderful, if one desires to spend ones entire life in a filing cabinet drawer!

      The arguments proffered in support of non-intervention in population growth is that our planet has more than enough space to accommodate the predicted 9.0 billion by the mid-century and whatever it may eventually be beyond that. However, what is conveniently side-stepped is that the world infrastructure and natural resources cannot sustain both unrestricted economic growth and an ever expanding demand for the much applauded materialist life style in which us, the most privileged, indulge, plus, justifiably a lifestyle expectation of the presently less privileged on our planet.

      I wonder just how many subscribing to this forum are also ardent ‘armchair environmentalists’ in that they subscribe to the view that it is not just the human species which deserves our protection and consideration and that all species are of value for a wide, varied and sustainable environment, including fauna and flora? And yet, we are the very same people who will also propound unceasing economic growth and increasing material wealth, the very factors which must essentially be detrimental to the ultimate well being of the planet and all aspects of life thereupon.

      The truth is we are all double dealers to a greater or lesser extent. We are also mostly NIMBY’s and, of course, it is only the other guy who is causing the problems. The situation we have is like a slow moving car crash, but, of course, it can only happen to others.

      • Population is overrated as a problem while underdevelopment, the main cause of overpopulation and also human suffering, remains hopelessly underrated. I’m convinced it’s some sort of human thought defect – we look to grab the guns and bullets after all hell breaks loose rather than plan a few years in advance with well placed (one could even say ‘strategically placed’ clinics and schools.

    • Wow FG, the Malthus and cannon fodder notion of foreign aid is rationally unsupportable but you seem to always fall back on those completely discredited notions. Population control is mostly a function of *positive development* and high standards. These lead to lower populations, more birth control, etc. It’s a win win. Also well documented by decades of population research and also by simply noting that in almost any year you choose, wars and famines will kill only a small fraction of those who die from easily preventable illnesses.

  6. As a further thought, is it not something upon which to ponder that whilst ‘our’ free market economy world is economically and financially collapsing about us, it is the two largest totalitarian states of the world which are now offering to bail out our so called ‘systems’.

    Mindful of that, let us not forget that whilst China may now be presenting itself to the world as a more liberal regime in that they now appear to be more ‘westernised’, beneath the skin it is still iron-fist communism which dominates its people and only a handful of elitist super-rich can have the opportunity to exploit its new wealth.

    Similarly, although the old Soviet bloc has been (more or less) dismantled and the outward appearance of Russia is one of being a ‘democracy’, it is still very much ‘totalitarian’ controlled by the communist old regime oligarchs and exceedingly corrupt at that (as is China – ‘Poorly Made in China’ is a book well worth reading). It is also interesting to reflect upon how Russia has rather shrewdly off-loaded most of its loss-making satellite nations and many of those are now parasitic EU members, or waiting in the wings to become so.

    Great, the Eurozone is now considering approaching China for bail-out money, on which it will have to pay interest, so that we in Europe can have enough cash sloshing around for us to buy on credit cards goods imported from China! I suppose one needs something similar to a Harvard Business School education to dream up a fabulous scheme of that magnitude. Also, I now read that Russia is prepared to loan the IMF massive amounts from the profits it has screwed out of us for oil and gas, subject to ‘certain conditions’ of course. It all seems a bit like the Faust and Mephistopheles story all over again to me!

    But then, I am not a high flying financier or banker, or lawyer. I am only a simple minded and retired common sense mechanical engineer who knows only about nuts and bolts and absolutely nothing about such highly sophisticated issues.

  7. You’re not even that, “Rodney” (a pseudonym). You’re a t-shirt salesman from Sac who knows nothing about economics or politics, and your rants have nothing to do with the original post.

    Trusting charity-nomics on the part of executives to take care of the problems of the world, Mr. Duck–that seems about like trusting mobsters and mafia henchmen to change their ways and turn themselves in.

    • No trust needed, that’s the beauty of entrepreneurial capitalism. Sure, it leeds to bubbles and trouble sometimes and we’re in the worst of one of those bubble pops right now, but last time I checked the difference between the standards of “average folks” in, say, Vietnam vs the USA, I found that we in the USA continue to hold up very well by any reasonable metric. It does not matter if you like the architects of this system or if you trust them or if they are fair, what matters is that they get the kids fed better than any other *large* country and better than most.

      Interesting prosperity metrics here, note USA as tenth in world with Scandanavian countries at the top as they should be. Unfortunately I don’t think those models could scale to 320,000,000 Americans, though it’s where we should look for inspiration.

  8. 01010100 a Horatiox? No, Duck– yet as the platitude goes, imitation is the sincerest form of flattery. That said, I would concur with 01010100 insofar that charity has definite limits as an economic ideology. Poor families in Vegas might have a higher standard of living than…those in Mexico City–and much of that might be due to charity handouts from wealthy casino owners,etc., or hitting it big occasionally at the slots–but that sort of “trickle down” is more or less arbitrary and dependent on the whims of the wealthy. That doesn’t merely mean welfare but planning and intervention when needed, and paying for govt. programs and the deficit by raising taxes back to normal levels (at least Clinton). The capital gains rate especially should be raised to 40% or so (instead of the 15%–the giveaway- to-the-barons-rate it is now)

  9. Your old pals at New Worlds have been sharing some deeep thoughts on the Oakland “Occupy” fun (delete if you want to but it’s relevant to your post).

    We should oppose police brutality (even against transients–which most of the O-town Occupy gang appear to be), but the police are in a difficult situation and have had bottles/trash thrown at them,etc.There are street rabble and mentally people out there going insane. “Byronia”‘s stupid insults and rants are thus completely improper.

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