?

Log in

No account? Create an account
Why I'm no longer a Libertarian, part 83 - Baxil [bakh-HEEL'], n. My Sites [Tomorrowlands] [The TTU Wiki] [Photos]
View My LJ [By Tag]


October 21st, 2004
01:44 am
[User Picture]

[Link]

Previous Entry Share Next Entry
Why I'm no longer a Libertarian, part 83
Rant time.

This article is an excellent summary of how runaway executive compensation and stagnating middle-class jobs are widening the class divide in America, and the toxic effects this is having on our society. Sample statistics:
Executives' salaries aren't to blame for this—bloated as they are, they still generally constitute only a tiny fraction of major companies' revenues—but they are a symptom of the larger trend. According to the Congressional Budget Office, between 1979 and 1997 the richest 1% of American families—those who had an annual income of at least $677,900 in '97—saw their incomes more than double. But for families in the middle, income grew by only 10%. For the lowest 20%, it actually fell.

Especially illuminating is how executive compensation has leapt onto a vicious upward spiral. In short, increased recruitment of executives has led to the increased use of consultants who try to give salary offers based on the industry average plus a few deal sweeteners (since who wants to pay less than the average?) -- which drags the average up, which then gets factored back into the calculations when the next round of management changes rolls around.

Libertarians, broadly speaking, favor decreased regulation on businesses and less government intervention in market forces setting the fair price for goods, services, and labor. But the problem here is that it's market forces that are creating the problem. Boards, acting in their own self-interests, drive up executive wages; executives, acting in their own self-interests, hold out for higher wages. Shareholders would normally be acting in their own self-interests by exerting a counterforce holding these expenses down ... but, um, considering the vast number of stock options thrown into these deals, who exactly are these shareholders and what are their interests?

The 1,100,000 Washington households that makes less than $46,000 a year probably collectively own less stock than the one man who is chairman of its flagship corporation Microsoft. Meanwhile, a great number of those million-plus households can't even afford health insurance (45 million Americans go without). Gods forbid their primary income provider(s) get in a car accident.

Now, it might be the case that market forces can also solve the problem of the widening class divide. But I don't see an answer being suggested. Even the Libertarians who get beyond "I don't get it. Why is having a handful of ludicrously rich people a problem for America?*" generally smile and say "The market can fix it" and then ignore the problem entirely as if those words were the magic incantation that made the market start fixing it. (Or, worse, blame the poor and middle class for not putting more economic pressure on the corporations to change their policies. Look, folks, popular apathy is just about the only glue holding our society together. When the proletariat bands together and decides to put pressure on their bourgeoisie ... there's a word for it, and it starts with R and ends with evolution.)

I've heard a few market-based, non-government solutions that could conceivably have a positive effect. For example, voluntary regulation or industry-set salary caps. I'd be quite willing to give these a try, seeing as how they're better than nothing, but nobody is seriously advocating them. Show me one Libertarian, even one, who considers income inequality a major political issue and feels it's among the top issues that society must address before it spirals out of control.

No, really. Please show me one. I want my respect for the party back.


At any rate, I'm trying to figure out how an equitable way of addressing this problem (governmental or otherwise) would work. Because this does need to be addressed.

Simply raising the marginal tax rates is really the best first step. The top bracket used to be over double what it is today, and it didn't slow down the Rockefellers. J.T. Wellington never had to mortgage his mansions because two-thirds of his income went to the state. I wouldn't mind seeing Samuel Walton get the same treatment.

But that's only half the issue, and doesn't solve the underlying problem. It would go a long way toward providing services and quality of life for the rest of us that can't afford private jets to our personal neurosurgeon's office, but it's basically just a big transfer of wealth from the rich to the politicians, and one thing I still do share with the Libertarians is a distrust of our lords and masters. Still better than nothing, but not a complete solution, especially given big money's stranglehold on government these days.

The goal is to reduce income inequality, not income.

Flat salary caps are a little too simplistic for my taste, and politically DOA -- almost no Americans would support a plan that limited the money one could earn.

But what does seem more interesting is a sort of hybrid of that idea. I've been tossing it around in my mind for a while. What about a firm-by-firm cap in which each individual company could only give an executive total compensation equal to some set multiplier times its [median/lowest] compensation? This sets no hard limits and allows individual megacorps to outbid each other for highest top salary -- but only if they lifted all of their workers up at the same time.

Brief illustration: Badcorp employs some janitors to clean its offices -- near minimum wage with no health insurance at $16K/year. Their top compensation package could be capped at (60*16000) ~= $1 million/year. Meanwhile, Niftycorp pays its lowest-paid janitors basic union wages with good benefits - $50K/year (factoring in the value of health insurance, etc). Niftycorp's CEO could get (60*50000) ~= $3 million/year. To sweeten the pot, perhaps the multiplier could even go up relative to how well the employees do versus the national average -- so Niftycorp's CEO might get (100*50000) ~= $5 million/year.

If these salaries seem low, just remember the figures from the article -- one of 1983's top executive salaries was $1.2 million. Adjusted for inflation, the Niftycorp CEO even at 60X would take him down a peg.

Remember, too, that 1983 was within my lifetime. When I was growing up, my parents sent me to a private school near the Bay Area's exclusive Blackhawk community. (I was one of the po' middle class folk.) And even then, in the late 1980s, when Blackhawk was a gated community for rich snobs, a million-dollar income meant something. The homes there sold for seven digits and normal folks' eyes bugged out at this incredible extravagance.

Ahem. Anyway. Obviously, some concerns would have to be addressed (how do outsourced jobs figure in? Contractors? How would this affect, say, service-industry corporations, whose employees are guaranteed to earn less than white-collar corps?), but the basic idea at least appeals to my inner radical.




* Because power corrupts, dumbass, and the concentration of power further corrupts. Think for a second about the entire POINT of a limited-government stance. I'll give you a hint: You ... want ... to ... prevent ... the ... accumulation ... of ... power. Classical liberalism is a very populist philosophy.

Current Mood: irateshrill
Current Music: Rob Jungklas, "Boystown"
Tags:

(18 comments | Leave a comment)

Comments
 
[User Picture]
From:elynne
Date:October 21st, 2004 03:56 am (UTC)
(Link)
I was about to say, "contractors." What would happen in this scenario is that every single menial job (like, the kinds of jobs I've been working all my life) would be "outsourced," so the only people that the company really technically employed would be (surprise!) middle-management and up. It'd kind of suck to be the manager/CEO of a contract agency... but I'm sure they could work up some kind of nifty "partnering" scheme that would let the rich bastards stay on top.

... NOT THAT I'M BITTER.
[User Picture]
From:baxil
Date:October 22nd, 2004 12:09 am (UTC)
(Link)
On further thought, I'm not so sure that any reasonably written regulation would be able to surmount this problem easily. :P Too many ways to outsource and you can't illegalize them all without making the caps meaningless. ... Back to the brainstorming.
From:noitaroproc
Date:October 21st, 2004 04:02 am (UTC)
(Link)
I've heard a few market-based, non-government solutions that could conceivably have a positive effect. For example, voluntary regulation or industry-set salary caps. I'd be quite willing to give these a try, seeing as how they're better than nothing, but nobody is seriously advocating them. Show me one Libertarian, even one, who considers income inequality a major political issue and feels it's among the top issues that society must address before it spirals out of control.

No, really. Please show me one. I want my respect for the party back.


Hi. :)
[User Picture]
From:baxil
Date:October 22nd, 2004 12:06 am (UTC)
(Link)
I probably should have been a little more specific -- show me one Libertarian opinionmaker who is speaking out about this problem. A silent minority (or, hell, maybe even majority, though I've seen no evidence for that) is a pleasant thing, but it won't set the party's direction.

However, since you've spoken up, I hope you don't mind me trying to put you on the spot for a second. May I ask if there is something about Libertarian thought (or your interpretation thereof) that informs your view on this; or is it something you consider a point of disagreement with a party you support? Also, having determined that it's an issue worth addressing, can you suggest a realistic solution in line with Libertarian principle, or at least brainstorm toward it like I was trying to do above?

These aren't gotchas -- I'm honestly interested in how the answers would work out from that perspective.

Thanks.
From:noitaroproc
Date:October 22nd, 2004 12:59 pm (UTC)
(Link)
I probably should have been a little more specific -- show me one Libertarian opinionmaker who is speaking out about this problem. A silent minority (or, hell, maybe even majority, though I've seen no evidence for that) is a pleasant thing, but it won't set the party's direction.

Touche.

However, since you've spoken up, I hope you don't mind me trying to put you on the spot for a second. May I ask if there is something about Libertarian thought (or your interpretation thereof) that informs your view on this; or is it something you consider a point of disagreement with a party you support? Also, having determined that it's an issue worth addressing, can you suggest a realistic solution in line with Libertarian principle, or at least brainstorm toward it like I was trying to do above?

I'm a firm believer that one's salary should be directly proportional to effort put in. I merely see it as a difference with the party that most closely fits my views. However, executives are often workaholics so an executive's salary may not be as ridiculous as one might think. However, a CEO or President or whathaveyou that does little work should not be paid these amounts at all. It all works out, at least on paper.

Hope that answered your questions.
[User Picture]
From:tyraelis
Date:October 21st, 2004 06:40 am (UTC)
(Link)
I read this same article in Sunday's LA Times magazine... really excellent, and it goes to show the problems that are arising in America, such as the widening gap 'tween the rich and poor, and the decrease in the middle class. Good summary and analysis, Bax.
[User Picture]
From:ysabel
Date:October 21st, 2004 09:37 am (UTC)
(Link)
The market can only correct stuff like this with an educated, activist populace.

Which we don't have, and are unlikely to have anytime soon.

I say we nuke the site from orbit. It's the only way to be sure.
[User Picture]
From:thrames
Date:October 21st, 2004 10:53 am (UTC)
(Link)
The free market system is one of mass inequality, oppression, and ruthlessness. You are just now noticing the symptoms of a much larger problem. While Americans are starting to get screwed over and American CEOs are somehow getting even richer and more powerful, you've failed to consider how they are crushing developing countries in their grasps. Or, perhaps you haven't failed to consider, you just didn't mention it in your rant here.

Regardless, the free market system is now a deathtrap for the majority of the world. Voluntary regulation would never work. If even one company didn't follow it, then the whole system's off as corporations need to compete, and to do that one must be profitable. If one's competitors are more profitable, then one dies. Only mandatory regulation would work. A truly free market leads only to ruin.

Remember, aside from a few Red ideas that FDR and company stole, this is the very same system that gave us the Great Depression, Robber-Barons, and Mafia-controlled enterprise. Only the plutocracy really gets much from a free market.
[User Picture]
From:heron61
Date:October 21st, 2004 12:41 pm (UTC)
(Link)
Well said, I completely agree. Also, clearly such regulations must be worldwide, or corporations will just do business where such regulations do not apply. One thought that I've had about how both the US and the EU should run things is to regulate businesses somewhat more strictly and also apply those same regulations to the way businesses deal with other nations (ie if a corporation wishes to do business in the US or the EU, it would also have to follow US or EU policies everywhere that it did business). That sort of regulation would do wonders for eliminating the corporate horrors currently going on in the third world.
From:noitaroproc
Date:October 21st, 2004 10:09 pm (UTC)
(Link)
Such statements are - to be horrifically frank - bullshit, since there has never been a free market in any civilized society at any time anywhere.

Hmm.

I am aware that you are an avid (self-professed) communist. Are you a Stalinist, a Leninist, a Maoist or are you an actual communist, one of the anarchist breed?
[User Picture]
From:thrames
Date:October 22nd, 2004 08:13 am (UTC)
(Link)
Such statements are - to be horrifically frank - bullshit, since there has never been a free market in any civilized society at any time anywhere.

In the mid-to-late 19th century, something quite similar to the free market existed. There were very few, if any, laws or regulations which constrained the markets, mostly just things like tariffs, nothing like regulations preventing a company from selling things like lard made with rendered horse (and the occasional rendered human) or "miraculous" cures containing things like mercury or wood alcohol or the like. Corporations have been legally considered persons since 1886 and have been unduly coercing the US government to do things like hold most of Latin America in tyranny. In 1855 in Nicaragua William Walker marched in and destroyed the government there and took over. His rule was short, however, as Vanderbilt armed himself with a Central American coalition which ousted Walker because he was harming Vanderbilt's trade.

And while the years pass on, the US markets do get slightly more regulated (so we don't have fingers in our canned ham), US corporations still insist on using the US army in Latin America.

I am aware that you are an avid (self-professed) communist. Are you a Stalinist, a Leninist, a Maoist or are you an actual communist, one of the anarchist breed?

Revolutionary Socialist. Probably closest to a Leninist. Stalin, of course, was crazy. Mao may have been all right had the Great Leap Forward not failed so completely, but, that probably contributed to his whole "beat the intellectuals" thing a few years later. People like Lenin and Ho Chi Mihn are my favorite Reds, as they are pretty good people who aren't completely paranoid. And I might continue on this, but I have to get ready for class which starts in about 15 minutes.
From:noitaroproc
Date:October 22nd, 2004 12:52 pm (UTC)
(Link)
In the mid-to-late 19th century, something quite similar to the free market existed. There were very few, if any, laws or regulations which constrained the markets, mostly just things like tariffs, nothing like regulations preventing a company from selling things like lard made with rendered horse (and the occasional rendered human) or "miraculous" cures containing things like mercury or wood alcohol or the like. Corporations have been legally considered persons since 1886 and have been unduly coercing the US government to do things like hold most of Latin America in tyranny. In 1855 in Nicaragua William Walker marched in and destroyed the government there and took over. His rule was short, however, as Vanderbilt armed himself with a Central American coalition which ousted Walker because he was harming Vanderbilt's trade.

The world back then was very different from the world today. While a few of your points do hold serious water (rich businessmen hiring/recruiting armies to do dirty work is a definite danger, for instance) the 19th century style of capitalism was almost entirely due to the situation with the newborn practices of industry and manufacture, which radically changed the sociopolitical and economic climates to the point where monopolies such as Vanderbilt's could be forged simply because he was the first to try it and be successful, which thereby transformed him into an almost divine figure in the eyes of the public (not to say that he was a GOOD divine figure, of course).

Nowadays, Latin America has the means to steadfastly defend itself against any corporate threats if they should so choose. Mercenary corporations have proven themselves time and again to be as effective if not more so than a highly-trained military. In any case, I would say that before a free market system can really work we need a better fuel source than what we currently have available.

Concerns about mercury or other toxins in miracle cures are, today, silly. A corporation would have no reason to make things with such ingredients. After all, a sick or dead consumer is not a consumer who is buying your products. The only reason they used toxins and narcotics as ingredients in the Victorian era is because they honest-to-goodness did not know better.

Revolutionary Socialist. Probably closest to a Leninist. Stalin, of course, was crazy. Mao may have been all right had the Great Leap Forward not failed so completely, but, that probably contributed to his whole "beat the intellectuals" thing a few years later. People like Lenin and Ho Chi Mihn are my favorite Reds, as they are pretty good people who aren't completely paranoid.

I respect Lenin. I do not like the fact that the entirety of Czar Nicholas' family was murdered, but Lenin definitely had an excellent set of goals and a lot of hope for the Russian people.
[User Picture]
From:thrames
Date:October 24th, 2004 11:26 am (UTC)
(Link)
The world back then was very different from the world today. While a few of your points do hold serious water (rich businessmen hiring/recruiting armies to do dirty work is a definite danger, for instance) the 19th century style of capitalism was almost entirely due to the situation with the newborn practices of industry and manufacture, which radically changed the sociopolitical and economic climates to the point where monopolies such as Vanderbilt's could be forged simply because he was the first to try it and be successful...

Monopolies can still come into existence, though. Wal-Mart, for instance, is quickly starting to acquire that position as it incorporates different sorts of goods and services into itself. By incorporating grocery stores, banks, auto-service, etc. and then undercutting its competitors, Wal-Mart destroys its competitors. Even specialist stores, like Toys'R'Us, cannot withstand Wal-Mart. While it is unlikely that Wal-Mart will become the only store on earth, they reduce the selection drastically to choices that are basically the lesser of two evils.

Also, it is largely through government actions, like anti-trust legislation, that prevent monopolies from forming.

Nowadays, Latin America has the means to steadfastly defend itself against any corporate threats if they should so choose. Mercenary corporations have proven themselves time and again to be as effective if not more so than a highly-trained military. In any case, I would say that before a free market system can really work we need a better fuel source than what we currently have available.

I'm not sure I quite understand what you are saying here. Are you saying that Latin American countries can afford mercenary armies? Otherwise, it seems like you might be contradicting yourself, as most LA countries have armies of their own (except Costa Rica), but most don't have as much money as most corporations to afford a mercenary army. If not, please clarify.

Concerns about mercury or other toxins in miracle cures are, today, silly. A corporation would have no reason to make things with such ingredients. After all, a sick or dead consumer is not a consumer who is buying your products. The only reason they used toxins and narcotics as ingredients in the Victorian era is because they honest-to-goodness did not know better.

Not against mercury or other heavy metals, but, there are some things of concern, like GM crops, brominated vegetable oil, run-off from fertilizers (which have created a Texas-sized "dead zone" in the Gulf of Mexico), and the like.

And sorry for taking so long to reply. The network connection in the dorm here has been down since Friday evening.
From:noitaroproc
Date:October 24th, 2004 03:38 pm (UTC)
(Link)
Monopolies can still come into existence, though. Wal-Mart, for instance, is quickly starting to acquire that position as it incorporates different sorts of goods and services into itself. By incorporating grocery stores, banks, auto-service, etc. and then undercutting its competitors, Wal-Mart destroys its competitors. Even specialist stores, like Toys'R'Us, cannot withstand Wal-Mart. While it is unlikely that Wal-Mart will become the only store on earth, they reduce the selection drastically to choices that are basically the lesser of two evils.

I do not believe that Wal-Mart's monopoly will last long, for various social and cultural reasons. They're starting to have a stigma attached to them, which will kill them eventually.

I'm not sure I quite understand what you are saying here. Are you saying that Latin American countries can afford mercenary armies? Otherwise, it seems like you might be contradicting yourself, as most LA countries have armies of their own (except Costa Rica), but most don't have as much money as most corporations to afford a mercenary army. If not, please clarify.

Sorry. I'm saying that if a Latin American country ever needed more power than its military possessed to fight off some sort of foreign corporation, mercenary corporations are always up for hire.

Not against mercury or other heavy metals, but, there are some things of concern, like GM crops, brominated vegetable oil, run-off from fertilizers (which have created a Texas-sized "dead zone" in the Gulf of Mexico), and the like.

I am a firm believer in GM crops. I've never heard much fuss over brominated vegetable oil, but I avoid it anyway since to me it tastes a little bit funny (and I prefer peanut or olive oil anyway). Run-off is definitely a problem that should be addressed, but through research into better fertilizers, not government banning or regulation.
[User Picture]
From:thrames
Date:October 24th, 2004 03:53 pm (UTC)
(Link)
I do not believe that Wal-Mart's monopoly will last long, for various social and cultural reasons. They're starting to have a stigma attached to them, which will kill them eventually.

Wal-Mart is just a single instance. Also, there's the problem of more discrete monopolies, like ADM or Monsanto, which very few people buy directly from.

Sorry. I'm saying that if a Latin American country ever needed more power than its military possessed to fight off some sort of foreign corporation, mercenary corporations are always up for hire.

Ah, okay, I get it now. However, this also presetns problems if the country is poorer than a corporation.

I am a firm believer in GM crops. I've never heard much fuss over brominated vegetable oil, but I avoid it anyway since to me it tastes a little bit funny (and I prefer peanut or olive oil anyway). Run-off is definitely a problem that should be addressed, but through research into better fertilizers, not government banning or regulation.

I'm not opposed to GM crops in the general, however, I think the patenting of specific gene sequences is, to say the least, a rather terrifying prospect.

Brominated vegetable oil is what's used in clear green-yellow citrus soft drinks (Mello Yello, Mountain Dew, etc.). This report states that a lot of rats tend to die when subjected to large amounts of brominated vegetable oil, however, pigs receiving a substantially lower dosage (100 mg/kg as opposed to the 1000 mg/kg in rats) didn't die and weren't fed BVO until they died. Studies in humans are pretty inconclusive thus far. While I'd rather not be a humongous fear monger, I keep my amounts of BVO to a minimum (maybe a Mello Yello every week or a 12-pack of Mountain Dew rip-off every few months) just to be on the safe side.

As far as runoff, I definitely agree to more research, however, I feel that unless any fertilizer that comes from it is as cheap or cheaper, it won't do too good. Corporations can prove quite hard to change methods without enormous public outcry or government regulation.
[User Picture]
From:thrames
Date:October 24th, 2004 04:01 pm (UTC)
(Link)
'Straight from the Hip' article dealing with brominated vegetable oil. He seems accurate enough, though, you might take it with a grain of salt.
[User Picture]
From:heron61
Date:October 21st, 2004 12:57 pm (UTC)
(Link)
It's worth noting exactly how much worse the US is in this regard than the rest of the world. Here's a post I made about the fact that the wage gap between executives and ordinary factory workers is more than 20 X higher in the US than in other First World nations. The US also has the highest gap between poor and wealthy of any First World nation. While exceedingly disheartening on the surface, the above figures are also hopeful, in that they mean that the US can change and become far more humane and in line with the rest of the world if we can successfully regulate corporate greed.

I admire the social goals of libertarianism (and would in fact describe myself as an anarcho-socialist) The problem was when the US took drastically (and continuingly) shifted towards being a highly conservative nation in the late 1970s, US libertarianism transformed from a group that focused primarily on unrestricted social rights to a group that focuses on money, property rights, and the elimination of taxes. An excellent history of "right" (modern) and "left" libertarianism can be found here in the Anarchy Faq.
[User Picture]
From:thoughtsdriftby
Date:October 21st, 2004 12:59 pm (UTC)
(Link)
knowing no solution to greed, the market is countering abet slowly
----
often >52% of manufacturing cost are upper management
to remain competitive for a while cheaper labor is used but eventually there is collapse
cheaper management is better able to compete displacing bloated companies
institutionalized greed will move the US to predominantly a workforce for foreign management

Simple example is Toyota's NUMMI plant a former GM Fremont, CA plant closed in 1982. GM was loosing millions. Though listed as an independent joint venture it is in effect a Toyota plant and is able to produce Vibe for GM for less than GM can where labor rates and taxes are much higher than other states.

Corporations tend now not to be controlled by those that generated the business. Not those creating new jobs and markets but by persuasive carpet baggers with MBAs who convince the board of their personal majesty. They are attracted to financial success like flies, spending their work day working to remove as much wealth as possible without going to jail. Often such a parasite must be bought off to leave only to be replaced by the next.

Reading a text or attending a US business ethics class can be a real eye opener. Seeming more lessons in crime and corruption but dancing along legal lines and loopholes. The goal being personal wealth, keeping the patient alive is a minor consideration, and employee health and well-being is more an investment/return calculation.
----
mmmm, seems my week for rather negative postings
Tomorrowlands Powered by LiveJournal.com