Is unfettered capitalism a threat?

[triedit]

Nobody needs that kind of money, whether it be bonus or salary. Jebus, how much money does one family actually need to live comfortably? Realistically, most people are way overpaid and that's why stuff is overpriced and forces the rest of us to feel underpaid....

[Vilepagan]

For a case study in how this is done, look to Goldman Sachs Group Inc., the premier investment bank in the world.

Goldman's policy over the past few years has been to funnel roughly a quarter of every dollar of revenue to employee salaries and bonuses.

The bank's generous compensation policy reserves the lion's share of gains for staff, while leaving less money than you might think for the shareholders that are risking their capital to fund its operation.

In 2007, a typical year before the financial crisis hit, Goldman ladled out US$20.2-billion to its 30,000 or so employees, an average of abut $660,000 per person.

Its shareholders enjoyed a far more modest payday. After paying for its expensive staff, Goldman generated US$17.6-billion in income before taxes, a couple of billion less than it paid out in salaries and bonuses.

The recent crisis has forced Goldman to crimp on its employees' first-class accommodations, but only slightly. The average Goldman employee will still receive US$500,000 for the year just past.

The investment bank is aware its mammoth paycheques might strike most of us as a tad rich during a downturn, so it attempted to demonstrate its new skinflint attitude by announcing yesterday that the compensation of its London-based partners will be capped at US$1.6-million each. "We've not deaf to calls for restraint," David Viniar, its chief financial officer, told a conference call last week. "We've heard them."

Goldman's dictionary apparently defines restraint differently than most do. If you're a Goldman shareholder, you can't help but wonder what might happen if the bank reduced its average employee's compensation to the Dickensian level of, say, a quarter million dollars a year.

Everything else being equal, cutting pay by this amount would boost per-share earnings by about 40% and send the bank's share price booming from its current level of US$157 to about US$230. But that would be putting money into the pockets of shareholders, not managers. And that is not how things are done on Wall Street.

Banks defend their habits by saying they need to pay huge salaries to attract the laser intellects and workaholic geniuses that are capable of making money in today's financial markets.

That argument, however, is threadbare. Multimillion-dollar paycheques didn't prevent Bear Stearns Cos. or Lehman Brothers Holdings Inc. from going bust.

If bankers' compensation packages were truly a result of their individual talents, you would expect to see a constant turnover of investment banks as the most talented executives left to start their own firms and obliterate their past employers. But that's not the case. All the top Wall Street investment banks -- Goldman, JP Morgan Chase & Co., Morgan Stanley, Citigroup Inc. and so on -- have roots that stretch back to before World War II.

The persistence of a few top firms suggests that the truly valuable asset on Wall Street isn't a few talented individuals, but the brand power, the contacts and the access to capital enjoyed by this handful of firms. That being so, the profits enjoyed by these firms should go primarily to the owners -- shareholders, in other words -- and not to the employees.

Over the past decade this has not been the case. While bank executives have enjoyed spiraling salaries, many U.S. bank stocks (including Citigroup, JPMorgan and Morgan Chase) have actually lost ground.

Read more: http://www.financialpost.com/story.h...#ixzz0djXZApRu

[grainfedprairieboy]

Nobody needs that kind of money, whether it be bonus or salary. Jebus, how much money does one family actually need to live comfortably? Realistically, most people are way overpaid and that's why stuff is overpriced and forces the rest of us to feel underpaid....

If you don't feel sports figures deserve 70 million a season then don't buy tickets or watch the games on TV. If you don't believe entertainers deserve multi millions or are allowed to compile billions of dollars don't watch their movies or shows or buy their music.

Why is the target of liberal rage over capitalism always directed at the wages of CEOs of private corporations who are directly responsible for the profits of shareholders, profitability of pension systems and whose same private shareholders approve their wages?

Why not complain about the basketball player with a grade six education making more then a random selection of the combined salaries and bonuses of 25 CEOs? How about advocating that Oprah's billions be dispersed because it is obscene that someone just sitting around talking for an hour a day should have that much money?

What makes our societies great is that we don't allow the lazy to place restricitions on the innovative and industrious of our societies. We encourage it and in doing so we reward it. Communism did not and as such you couldn't buy a toaster let alone a decent one.

Your position on how much wealth others deserve reminds me of the tale of the ant and the grasshopper:

CLASSIC VERSION:

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he's a fool, and laughs and plays the summer away. Come winter, the ant is warm and well fed. The shivering grasshopper has no food or shelter, so he dies out in the cold.


THE CANADIAN MODERN VERSION:

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he's a fool and laughs, dances and plays the summer away. Come winter, the ant is warm and well fed.

The shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others less fortunate like him are cold and starving.

CBC shows up to provide live coverage of the shivering grasshopper, with cuts to a video of the ant in his comfortable warm home with a table filled with food.

Canadians are stunned that in a country of such wealth, this poor grasshopper is allowed to suffer while others have plenty. The NDP, the CAW and the Coalition Against Poverty demonstrate in front of the ant's house. The CBC, interrupting an Inuit cultural festival special from Nunavut with breaking news, broadcasts them singing, "We Shall Overcome."

Exiled Svend Robinson rants in an interview with Pamela Wallin that the ant has gotten rich off the backs of grasshoppers, and calls for an immediate hike on the ant to make him pay his "fair share." In response to polls, the Liberal Government drafts the Economic Equity and Grasshopper Anti-Discrimination Act, retroactive to the beginning of the summer.

The ant's are reassessed and he is also fined for failing to hire grasshoppers as helpers. Without enough to pay both the fine and his newly imposed retroactive taxes, his home is confiscated by the government. The ant moves to the U.S. and starts a successful agribiz company.

The CBC later shows the now fat grasshopper finishing up the last of the ant's food though Spring is still months away, while the Government house he is in (which just happens to be the ant's old house) crumbles around him because he hadn't maintained it.

Inadequate government is blamed, and Roy Romanow is appointed to head a commission of enquiry that will cost $10,000,000. The grasshopper is soon dead of a drug overdose, and the Toronto Star blames it on obvious failure of government to address the root causes of despair arising from social inequity.

The abandoned house is taken over by a gang of immigrant spiders who are praised by the government for enriching Canada's multicultural diversity. The spiders promptly terrorize the community.

[Vilepagan]

Why is the target of liberal rage over capitalism always directed at the wages of CEOs of private corporations who are directly responsible for the profits of shareholders, profitability of pension systems and whose same private shareholders approve their wages?

Because, if you read the article I posted, the CEO's often don't give a rat's ass about the shareholders.

When Robert Nardelli was pushed out the back door of Home Depot with his $210M "golden parachute", he left behind a company which demanded pay cuts from its employees to stay afloat.

Your position on how much wealth others deserve reminds me of the tale of the ant and the grasshopper:

And your position reminds me of "The Emperors New Clothes"

You're in denial. Unfettered capitalism is as unworkable as communism.

[grainfedprairieboy]

Because, if you read the article I posted, the CEO's often don't give a rat's ass about the shareholders.

When Robert Nardelli was pushed out the back door of Home Depot with his $210M "golden parachute", he left behind a company which demanded pay cuts from its employees to stay afloat.

So what? The CEO answers to the shareholders, it is their problem not yours. If you want it to be your problem then don't shop at Home Depot or create the anti Home Depot group and find others willing to refuse to patronise the store until such time as your concerns are addressed.

But don't slag capitalism. Don't demand laws to punish success because you aren't motivated, talented or bright enough to emulate the best. Talk about throwing out the baby with the bathwater.

your position reminds me of "The Emperors New Clothes"

So you believe I think that "unfettered capitalism" is actually wrong but advocate it because I think others do believe or have you picked the wrong parable?

You're in denial. Unfettered capitalism is as unworkable as communism.

And what is your answer to the problem only a handful of nonbusiness, mostly uneducated and entitlement oriented people believe? Nationalsozialismus?

Plainly put there should be no restrictions on reward for effort, return for investment etc. Conversely, there should be no involvement by government in supporting industry financially.

[Ron Toronto]

So what? The CEO answers to the shareholders, it is their problem not yours. If you want it to be your problem then don't shop at Home Depot or create the anti Home Depot group and find others willing to refuse to patronise the store until such time as your concerns are addressed.

The last time I heard this retort was when Conrad Black was trying to defend himself from the ogres that sent him to prison. You wouldn't happen to be writing that from Florida by any chance?

But don't slag capitalism. Don't demand laws to punish success because you aren't motivated, talented or bright enough to emulate the best. Talk about throwing out the baby with the bathwater.

No one is slagging capitalism, just asking that there be reasonable controls to discourage excessive greed and criminal acts.

So you believe I think that "unfettered capitalism" is actually wrong but advocate it because I think others do believe or have you picked the wrong parable?

I think the parable was appropriate since you're mostly repeating the rationale of so many on the neo-con right side of the political spectrum despite the fact that many, including Greenspan and a number of economists, admitted they had no idea what the hell just went on.

And what is your answer to the problem only a handful of nonbusiness, mostly uneducated and entitlement oriented people believe? Nationalsozialismus?

When all else fails, conjure up another comparison to the Nazis, good work there.

Plainly put there should be no restrictions on reward for effort, return for investment etc. Conversely, there should be no involvement by government in supporting industry financially.

As long as there isn't shady monopolistic greed and collusion bordering on criminal acts kind of stuff going on, no one is putting a damper on effort or investment. On the other hand, what kind of effort or investment is supported when one per cent of the population decide whose efforts are rewarded and who comes out on the short end? And if government had no involvement whatsoever, industry would not engage in a lot of necessary work or deeds that make our society work, throwing out all the controls ensures that your unfettered capitalism perpetuates economic injustices of the worst kind.

[Vilepagan]

Don't demand laws to punish success because you aren't motivated, talented or bright enough to emulate the best. Talk about throwing out the baby with the bathwater.

Talk about total bull. I don't want laws to punish success, I want laws to punish people who commit crimes. According to the theory, unfettered capitalism will attract the most motivated, talented, and bright people to our investment firms and they should be rewarded for their efforts by receiving ever more obscene compensation packages, while the shareholders, the actual owners of the company, and the people providing the capital for these people to invest, are getting less and less. Follow that with the fact that it was the "best and the brightest" that were at the helm during the current financial difficulties. Yet here you are claiming if we just followed the same system and set of rules that got us into this mess, we'll be fine. You must love your new set of clothes.

So you believe I think that "unfettered capitalism" is actually wrong but advocate it because I think others do believe or have you picked the wrong parable?

Neither. I think, that for reasons passing understanding, you actually believe unfettered capitalism is a good thing.

And what is your answer to the problem only a handful of nonbusiness, mostly uneducated and entitlement oriented people believe? Nationalsozialismus?

:huh:

Plainly put there should be no restrictions on reward for effort, return for investment etc. Conversely, there should be no involvement by government in supporting industry financially.

Plainly, if we had followed that advice, we'd be in much worse shape than we are now.

[grainfedprairieboy]

The last time I heard this retort was when Conrad Black was trying to defend himself from the ogres that sent him to prison.

Really? Send link.

No one is slagging capitalism, just asking that there be reasonable controls to discourage excessive greed and criminal acts.

There is no such thing as "excessive greed". Only your perception. To some family living in squaller in Somalialand the accumulative wealth and lifestyle of the RonToronto family is by definition excessive greed.

I think the parable was appropriate since you're mostly repeating the rationale of so many on the neo-con right side of the political spectrum despite the fact that many, including Greenspan and a number of economists, admitted they had no idea what the hell just went on.

1. If you were actually familiar with the story you'd appreciate the delicious irony of your above comment RonEmperor.

2. A neo con by definition and pejorative is a liberal who believes the ideology of liberalism itself has failed. Are you trying to state this is a problem confined to liberal converts to fiscal conservativism but social liberalism or are you one of those extremists who laughingly believes the term actually refers to far right social conservatives?

3. I'm not sure when Greenspan stated he had no idea what the Hell was going on but what exactly does that have to do with tax funded condoms for Toronto elementary students?

When all else fails, conjure up another comparison to the Nazis, good work there.

But this political movement advocated the exact same measured approach to capitalism you are. I never compared it to the Nazi's themselves, just the ideology. I can't help it if you lack the mental or historical acumen to distinguish between the two.

what kind of effort or investment is supported when one per cent of the population decide whose efforts are rewarded and who comes out on the short end?

That is your perception. If you were as clever or motivated as you believe you are you'd be in that category too but you are not. You are hopelessly average as are the vast majority of us.

And if government had no involvement whatsoever, industry would not engage in a lot of necessary work or deeds that make our society work, throwing out all the controls ensures that your unfettered capitalism perpetuates economic injustices of the worst kind.

So is this supposed to be some sort of 'fill in the blank with your worst nightmare' line of propaganda or are you going to clearly articulate your apocalyptic future of "economic injustices"?

[Ron Toronto]

Doesn't calling me RonEmporer get Gfed some kind of warning?

I recall I got one when I made fun of his name.

And it's actually Mr. RonEmporer, thank you.

[grainfedprairieboy]

Gfed

Administrators:

I beseech thee to infract Ron's ass for altering my nic to sound like a rapper's title.

:blum: