More G20 Protests
Two hundred twenty-five individuals possess half of the privately held wealth in the world, at least that's what two protesters on TV said as a reason why capitalism is bad. The two young women were protesters of the G20 summit and the system of mixed markets and government regulated global capitalism that has, through historical trial and error, proved to be the worst system of capital distribution other than any other one that's ever been tried. Sadly, while I didn't catch the vocation of one of the two ladies one identified herself as a graduate student (subject left unspecified) at the University of Pittsburgh.
It seemed hard to believe that there are people who are in line to earn post-graduate degrees who say things as banal with regards to capitalism as a system as "why does anyone need to make more than $500,00 a year?" and when asked what their alternative system of wealth distribution would be they would be for not centralized government based control of the economy but "people-based distribution of wealth." It's one thing to distrust that corporations will not use power they accumulate for nefarious purposes, or to think that our country doesn't do enough to provide enough social welfare programs by taxing the rich further. But how can someone who graduated from high school and then college not make basic observations like: living standards for people generally are highest in countries that, while they have greater or lesser amounts of government redistribution of wealth, are fundamentally market capitalist systems (with regulation) and that furthermore this economic system is compatible with representative forms of democracy that generally promote the greatest amounts of personal freedom of any historical political entity? Did they not pick up the independent thinking skills to follow their thought process of "people-based distribution of wealth" and "why should anybody make more than $500,000 a year?" and get to the conclusions that people work based on incentives, that in a "people-based wealth distribution system," the incentive will be to get non-monetary perks in the form of political power, that history has shown that this inevitably leads to a powerful elite and an enslaved population and finally that if you don't let people make (and keep) more than $500,000 they won't go out and do the work that creates the wealth that make all of our lives so much better than they would be if we didn't have this society.
Sadly, too, the grad student at the end launched into a maudlin story at end of her interview about how she came from working class stock and cared about the poor and that if all America's wealth were split up evenly that a family of 4 would have nearly $200,000. Sigh. Of course, after that year where you confiscated all the peoples' money the massive disincentive on wealth creation would cause the amount of money available to a family of four next year to be a much, much smaller number. Further, she didn't seem to understand the beauty of a system that allowed her, the descendant of poor people who had struggled through life with much more difficult conditions of living and no time to ponder the evils of capitalism, to have in a few short generations to have, based on her own intelligence (such as it is) to have a life in academia where, due to capitalism, she will live in relative comfort and that her capitalist stooge grand parents would be very pleased that their toil within the capitalist system allowed her to live in comfort.
With fundamental tenets of capitalism under threat in less inane and more reasonable ways, though, the general anti-capitalist mood of the country is depressing. Barack Obama pledged today to end the cycle of boom and bust and to regulate executive pay. Why? To what end? The ability to pay large sums of money for extremely rare, high wealth generating talent is a fundamental aspect of capitalism. Is it a surprise that the Yankees and Red Sox, the two highest paid baseball teams in the Major Leagues, are going into the playoffs as the favorites... again. If CEOs are ineffective then that is a failure of the market and the answer is to empower competitors of the company who is squandering money on an overpriced CEO. In baseball it seems to work well enough; sometimes baseball players have flukish prior performance and they get lucrative contracts that are too rich for their talents, in general quite a bit of research is dedicated to allocating salary so that the competitive value added to the team is worth the outlay.
Booms and busts are another feature of the capitalist system; the worst system except for all the other ones. For all the complaint about stagnation of median wage growth--which is a valid concern, and is a symptom, I believe, of the U.S. not embracing the knowledge economy in deeds actively enough, as the financial difference between the intellectual/educational "haves" and "have nots" ever starker--the U.S. still has a higher median income (not mean, median) of any major industrialized country (I believe Luxembourg beats us.) So are there problems with the system? Of course; they're just much, much more manageable than those of any other system of economic arrangement. Financial regulation is fine, but as I've written before, it's naive to think that you can have only the boom part of capitalism. You can ratchet down the amount of risk people can take... and of course thereby ratchet down their ability to make a strong return on investment. This is a question we should have frankly; in Europe they all already had slightly less, were more equal to each other in wealth, but were still often wiped out by the global crash; Iceland--the whole country--had to declare bankruptcy. We can go to a more European, regulated, less income inequality, less free market system, but we do so by sacrificing GDP growth, innovation, speed of increase in quality of living conditions, and ability to provide fuller employment. France has been at about 10% unemployment for years. Are we so short sighted that having, for most of us in society, not lived through the Great Depression, not having felt the down-side of a system that gives people an essential quality to be free economic actors who can take risks (which--I guess people forgot this--can end badly) once they taste that dark side that manifests itself cyclically, they're ready to give up on the whole thing. They're ready to throw away the booms in order to throw away the busts. Like the girl who asks why we anyone should have more than $500,000 a year and wishes that everyone just had an equal share of the $200,000 we generate per 4 people in this country, there's very little understanding that the convictions that those who went before us and created the greatest wealth creation engine in the history of the world are being cast aside for a vision of benefits without costs that will never materialize.
It seemed hard to believe that there are people who are in line to earn post-graduate degrees who say things as banal with regards to capitalism as a system as "why does anyone need to make more than $500,00 a year?" and when asked what their alternative system of wealth distribution would be they would be for not centralized government based control of the economy but "people-based distribution of wealth." It's one thing to distrust that corporations will not use power they accumulate for nefarious purposes, or to think that our country doesn't do enough to provide enough social welfare programs by taxing the rich further. But how can someone who graduated from high school and then college not make basic observations like: living standards for people generally are highest in countries that, while they have greater or lesser amounts of government redistribution of wealth, are fundamentally market capitalist systems (with regulation) and that furthermore this economic system is compatible with representative forms of democracy that generally promote the greatest amounts of personal freedom of any historical political entity? Did they not pick up the independent thinking skills to follow their thought process of "people-based distribution of wealth" and "why should anybody make more than $500,000 a year?" and get to the conclusions that people work based on incentives, that in a "people-based wealth distribution system," the incentive will be to get non-monetary perks in the form of political power, that history has shown that this inevitably leads to a powerful elite and an enslaved population and finally that if you don't let people make (and keep) more than $500,000 they won't go out and do the work that creates the wealth that make all of our lives so much better than they would be if we didn't have this society.
Sadly, too, the grad student at the end launched into a maudlin story at end of her interview about how she came from working class stock and cared about the poor and that if all America's wealth were split up evenly that a family of 4 would have nearly $200,000. Sigh. Of course, after that year where you confiscated all the peoples' money the massive disincentive on wealth creation would cause the amount of money available to a family of four next year to be a much, much smaller number. Further, she didn't seem to understand the beauty of a system that allowed her, the descendant of poor people who had struggled through life with much more difficult conditions of living and no time to ponder the evils of capitalism, to have in a few short generations to have, based on her own intelligence (such as it is) to have a life in academia where, due to capitalism, she will live in relative comfort and that her capitalist stooge grand parents would be very pleased that their toil within the capitalist system allowed her to live in comfort.
With fundamental tenets of capitalism under threat in less inane and more reasonable ways, though, the general anti-capitalist mood of the country is depressing. Barack Obama pledged today to end the cycle of boom and bust and to regulate executive pay. Why? To what end? The ability to pay large sums of money for extremely rare, high wealth generating talent is a fundamental aspect of capitalism. Is it a surprise that the Yankees and Red Sox, the two highest paid baseball teams in the Major Leagues, are going into the playoffs as the favorites... again. If CEOs are ineffective then that is a failure of the market and the answer is to empower competitors of the company who is squandering money on an overpriced CEO. In baseball it seems to work well enough; sometimes baseball players have flukish prior performance and they get lucrative contracts that are too rich for their talents, in general quite a bit of research is dedicated to allocating salary so that the competitive value added to the team is worth the outlay.
Booms and busts are another feature of the capitalist system; the worst system except for all the other ones. For all the complaint about stagnation of median wage growth--which is a valid concern, and is a symptom, I believe, of the U.S. not embracing the knowledge economy in deeds actively enough, as the financial difference between the intellectual/educational "haves" and "have nots" ever starker--the U.S. still has a higher median income (not mean, median) of any major industrialized country (I believe Luxembourg beats us.) So are there problems with the system? Of course; they're just much, much more manageable than those of any other system of economic arrangement. Financial regulation is fine, but as I've written before, it's naive to think that you can have only the boom part of capitalism. You can ratchet down the amount of risk people can take... and of course thereby ratchet down their ability to make a strong return on investment. This is a question we should have frankly; in Europe they all already had slightly less, were more equal to each other in wealth, but were still often wiped out by the global crash; Iceland--the whole country--had to declare bankruptcy. We can go to a more European, regulated, less income inequality, less free market system, but we do so by sacrificing GDP growth, innovation, speed of increase in quality of living conditions, and ability to provide fuller employment. France has been at about 10% unemployment for years. Are we so short sighted that having, for most of us in society, not lived through the Great Depression, not having felt the down-side of a system that gives people an essential quality to be free economic actors who can take risks (which--I guess people forgot this--can end badly) once they taste that dark side that manifests itself cyclically, they're ready to give up on the whole thing. They're ready to throw away the booms in order to throw away the busts. Like the girl who asks why we anyone should have more than $500,000 a year and wishes that everyone just had an equal share of the $200,000 we generate per 4 people in this country, there's very little understanding that the convictions that those who went before us and created the greatest wealth creation engine in the history of the world are being cast aside for a vision of benefits without costs that will never materialize.
Labels: ballyhoo, economics, government
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