Wednesday, March 04, 2009

Executive Compensation

Tibor R. Machan

Most executives draw pretty reasonable salaries, maybe up to $250m+ per year and bonuses, depending on how the company is doing or how important the executive's contributions is expected to be. This isn't unlike how baseball and football players are hired and compensated, especially the stars among them.

Some people are sought out very eagerly and promised exorbitant pay, including bonuses above the regular salary, and all this is agreed to from the outset, after pretty heavy negotiation. Contracts usually specify the terms, some of them unconditional, some conditional. If bonuses are promised no matter how the company is doing, this will be binding just as such contracts are binding in professional sports so that if a very promising hire turns out not to have done well, payment must still be made.

With the current brouhaha about high payouts in bonuses to company executives whose companies didn't manage to be successful, it may appear to be unjust to pay as per the terms of the contract but it isn't. As the saying goes, a promise is a promise.

Where trouble arises is when a company is receiving public funds in order to remain in operation and a sizable portion of these funds is used to pay bonuses agreed to prior to the bailout. What has happened is that the company's authority to pay the bonuses has diminished since the original contract was drawn up independently of the public intervention and subsidy. That, of course, could also have been taken care of by the terms of the contract--it could have specified that regardless of whether the company receives bailout funds, the compensation to the executive will remain the same. Or the terms of the bailout could have included a provisions that the original terms granting huge bonuses to executives needs to be changed for the bailout to go into effect.

I think looking at the matter along these lines should clear up any confusion about the current furor of executive compensation. But, sadly, the executive compensation issue seems to be a fodder for once again tearing down capitalism. And this time out of rank envy. Why all the fuss about the high pay executives get so long as they aren't stealing it? Makes you sick to see all these people fret about how well their fellows are doing. Oddly, in sports this attitude doesn't appear to be dominant, so when Tiger Woods is doing well people aren't demanding that he be brought down and make room for inferior golfers. Or with Kobe Bryant or Michael Phelps.

But when CEOs make big bucks from their closed offices, never mind what goes into their work, how much aggravation and preparation and anxiety, they immediately get attacked. This is precisely what makes some of us concerned about Obama & Co., this attitude of always looking at how others are doing, how well off they may be and how this cannot be tolerated. It is in fact the typical socialist mentality, one that was evident all over the Soviet bloc when I lived there--the snooping, the worry about how well others are doing. And that made some sense since socialism is a collectivist system and the tragedy of the commons and a zero sum game mentality prevail there, with no clear way to tell who earned what, who should enjoy how much. But in a near capitalist society agreements take care of this--if the CEO gets what was agreed to, that's the end of it. Unless, of course, the system has come to be corrupted by bialouts and subsidies and partial nationalizations.

I recall when I came West from communist Hungary I enjoyed all the wealth that surrounded me despite having hardly any of it myself. What a great thing that people can make lots of money and obtain what they needed and wanted for themselves and their loved ones. Look at all those great homes, fabulous cars, exquisite eateries, you name it and I found it all thrilling because it showed what all is possible for those who work hard and have a bit of luck.

But not long thereafter I realized, to my dismay, that even in the West, even in America, too many people are green with envy and would rather work on bringing down their fellows than getting up there themselves. Shame on them all!

Monday, March 02, 2009

The Infinite Dullness of PBS TV

Tibor R. Machan

Over the last few months I have had my TiVo record the News Hour with Jim Lehrer, the famed PBS TV program deemed very highfalutin by my liberal colleagues and pals. It's not so much that I lack news sources but more a matter of my own limited amateur investigative journalism. I am curious how a substantially government-funded news program deals with the current national and international economic fiasco.

By now I have watched over three months of this program and just as I suspected, it is so terribly biased, so uninterested in balanced reportage that it has become very boring to watch it evening after evening.

First of all, the two commentators, David Brooks (a slightly conservative or more accurately moderate Republican who writes a column of The New York Times) and Mark Shields (a moderate but reliably liberal pundit and perpetual TV commentator) are the dullest people one will encounter on TV, with virtually predictable right/left observations, "criticisms" and not an idea that hasn't been sanitized by the Washington press corps. All is just so terribly "respectable" and snooty that one may wonder how many viewers use their input as sleeping aids.

Then there are Jim Lehrer's minions, Judy Woodruff and Co., all of whom report the news as if it went through the editorial scrutiny of The New York Times and The Washington Post. Anytime these sterling journalist are given the task of gathering some educated opinions about various elements of the news, they manage, dutifully, to collect the very few usual suspects. There are all the apologists for President Obama's recommendations and policy proposals, of course, most of them members of the administration, and a few dissidents from the Republican opposition in Congress. When experts are called upon, the most frequent sort are the likes of Paul Krugman or Thomas L. Friedman, both, as you probably have guessed by now, from the Op Ed page of The New York Times. James Galbraith of the University of Texas at Austin shows up, with his predictable cheers for neo-Keynesian ideas and praise for anything that came out of the New Deal. (The idolatry toward FDR on The News Hour is truly embarrassing!)

I have been following the academic debate over President Obama's economic proposals and policies and none of it shows up anywhere on The News Hour. It is as if all the country's professional economists had to offer was more or less fierce Keynesian stuff. Not a dissenting voice! You would think that just as a matter of being differentiated from, say, Fox TV News, The News Hour would invite Professor Gary Becker of the University of Chicago or Professor James Buchanan of George Mason University outside Washington, DC, or perhaps some of their highly credentialed students of political economy but nothing. It's just neo-Keynesianism over and over again, with an undisguised glee, given how Keynes is (quite mistakenly, by the way) taken to be an unqualified supporter of huge government intervention in the market economy and how much this team of pseudo-journalists find the current fiasco a major excuse for bolstering the big government ideology that keeps PBS TV itself in business. (In the field of journalistic ethics it is clearly a case of unethical self-dealing for The News Hour to be so blatantly biased in favor of big government!)

Perhaps I am being naive to even bring up the idea that The News Hour ought to pay attention to the ethics of journalism by broadening its coverage of educated economic opinion. Maybe these folks are so unabashedly partisan, so bent on propaganda instead of journalism--reminiscent of Pravda and Izvestia of the old Soviet Union--that speaking up about it makes me appear to be a country bumpkin. But, dammit, The News Hour is taking money from the whole gamut of American taxpayers and has a professional duty to make room for a wide variety of political-economic opinion even if those producing and regularly appearing on the program find it unpalatable to do so.

Alas, however much one chides these people, they know who is in power now and will not budge a millimeter in the direction of presenting their viewers with a decent debate on public policy. Instead they are, well, propagandists, albeit of a somewhat nuanced variety--with that tone of snobbish voice so familiar from another of these public broadcast services, National Public Radio (which broadcasts at nearly every university radio station across the country).

It's a wonder most of us do not just throw in the towel, what with the dogmatic refusal of these people to show any interest in a national debate on vital public policy matters.

Sunday, March 01, 2009

Revisiting Socialism

Tibor R. Machan

During the recent Conservative Political Action Conference, held in Washington, D.C., several speakers laid in on President Obama for his alleged promotion of socialist policies. They were referring to various provisions of his bailout program as well as elements of his admittedly highly dubious neo-Keynesianism, the idea that it is best now for government to create demand for goods and services to offset the proclivity of Americans to withdraw from the market, to stop buying stuff and thus to impeded employment and economic growth. These conservative Republicans, especially radio talk show star Rush Limbaugh, allege that bringing the government into the economy as President Obama and his team are bent on doing is tantamount to socialism.

Well, that’s not quite right and by making the charge one thing these conservative Republicans are certain to achieve is to discredit themselves, to demonstrate their ignorance.

Socialism in the sphere of political economy amounts to the public ownership of the major means of production. Nationalizing banks and car companies and farms and so forth would qualify as socialist. But what Obama & Co. are proposing is in fact what has been called over the last century a system social democracy. Yes, much of the free market is undermined by social democratic policies but that’s not quite socialism, not what most of us think of when invoking that term.

In the non-economic realms of society, too, what Obama & Co. are pushing for doesn’t quite qualify as socialism. That would involve the complete abolition of a system of individual rights, including civil rights, and the collectivization of the bulk of society. Under socialism actually no individuals are even recognized to exist. Society is the focus of attention and it is even contended that society is a living entity of which the population are the cells. No independent individuality is recognized because socialists claim that people are integral parts of society, just as someone’s organs, limbs, and related biological constituents are integral parts of a human being.

Certainly there is no direct attempt to bring about this socialist vision, not at least so far, although bits and pieces of the vision presented by President Obama come close. Furthermore, there is something to the claim, which is perhaps what these conservative Republicans are referring to, that an American version of socialism is being promoted by the current crop of Democrats in Washington. Consider, in this connection, what Normal Thomas, the leader of the American Socialist party and six time presidential candidate of the Socialist Party, said in a 1944 speech:

"The American people will never knowingly adopt socialism. But,
under the name of ‘liberalism,’ they will adopt every fragment of
the socialist program, until one day America will be a socialist
nation, without knowing how it happened."

Thomas then continued: "I no longer need to run as a Presidential Candidate for the Socialist Party. The Democrat Party has adopted our platform."

So, arguably, a certain version of socialism could be said to be the goal of President Obama and the leaders of the Democratic Party. However, this is not Soviet Socialism--so when Rush Limbaugh refers to Lenin and Stalin in his criticism of President Obama’s regime, he is engaging in hyperbole, even in demagoguery, rather than helping his audience understand what is happening in America today.

As with many political systems, socialism has several versions. That’s true with capitalism as well, although in its pure, unqualified version capitalism is, plain and simple, an unregulated economy with full protection of the right to private property (including in the major means of production) and freedom of contract. But most people call various system with significant protection of the right to private property “capitalist,” including the current American or Canadian or English welfare states.

It is true that under the leadership of President Obama the American government is very likely to move closer and closer to a full scale socialist regime, so much so that in time many of the non-economic aspects of society will reflect socialist, collectivist principles. Perhaps in time there will not even be much room for the right to freedom of speech since a socialist government could well regard the exercise of such a right as a very serious obstacle to bringing about various goals of the government. Even totalitarian socialist measures could be coming down the pike if the government believes that its needs to micromanage the country so as to achieve its objectives.

But that’s not where we are now and to claim otherwise renders those making the claim disingenuous and robs them of credibility. It may be tempting to simplify in the realm of day to day politics but it is very doubtful that the distinctions warranted need to be abandoned, even in the heat of political debate.