In a London preview of Wall Street’s bonus nightmare, more than 1,000 investment bankers have quit Royal Bank of Scotland to work at rivals due to curbs on their paychecks, according to people familiar with the situation.
Wall Street banks fear top talent would flee en masse for greener pastures if Uncle Sam’s pay czar, Ken Feinberg, and Congress try to put more ceilings on bonuses and pay at financial firms.
In the UK, the rules are modeled after US actions to curb pay at firms bailed out by the government.
The protest exodus at RBS — first reported on the Web edition of the Times of London — involved less than 5 percent of its banking professionals.
Some headhunters see more bankers jumping ship in the coming year as the controversy deepens over pay freezes and curbs.
Pay people less than they think they can earn elsewhere, then “elsewhere” is where you will find them.
Some will say that these ship-jumpers can’t be worth too much if their companies had to be bailed out, but that gets it exactly backwards. For the most part, it’s those who are responsible for the floundering that will be left working for the rotting (and now government owned) corpse, while those most capable find positions in more stable firms.
There’s nothing particularly bad about this sort of slough off, except that with the bailouts thrown into the mix, it’s the public that’s left holding the bag. Absent the government takeovers, the same sort of thing would have happened, only in a quicker, more orderly way (see, e.g. the fallout from the collapse of Arthur Anderson, or the bankruptcy of BearingPoint).
Moreover, the demonization of Wall Street types accomplishes nothing constructive, and may very well convince otherwise enterprising young B-school grads (or potential grads) to employ their intellectual talents in other fields that may not fully capture their potential or interest. All that does is deprive the rest of us of smart, young and industrious business people who might make our world better, and instead treats us to a glut of some other professionals that we likely don’t need (i.e. lawyers). And we really don’t want that now, do we?
If you’re among the 15 or so in this country that believe this White House job summit will actually end up creating policies that produce jobs, I think Evan Newmark’s WSJ piece might dissuade you from that belief:
Now, I’ve never been to a White House summit, so I can’t say exactly what will happen on Thursday. But as a past Davos World Economic Forum participant, I’m pretty familiar with these kinds of VIP schmooze and snoozefests.
And here’s how it will likely play out. A senior White House official — perhaps the president — will give a welcome pep talk to the 130 gathered “summiteers.” He’ll ply them with thanks and stirring patriotic words.
But then he’ll urge them to not waste the day in conference fuzzy talk. Instead, the summiteers should turn words into actions and actions into jobs. After all, it is a “jobs” summit.
And then the summiteers will shuffle off to one of six working groups — where of course they’ll end up wasting the day in conference fuzzy talk.
It’s inevitable. Prepared remarks, banal anecdotes and empty debates are the stuff of these mushy forums. I can count on one hand the number of memorable moments from the dozens of my Davos sessions on technology super-revolutions, entrepreneurial innovation and world peace.
That’s because the VIPs at these things aren’t there to say or do anything unexpected.
Do you think that FedEx CEO Fred Smith and United Steelworkers President Leo Girard will somehow reach agreement that the best way to create jobs is to kill the union-card check?
Do you think that Randi Weingarten, President of the American Federation of Teachers, will suddenly serve up innovative ideas for trade unions to assist small businesses?
It seems unlikely.
And so the jobs summit will fail for the same reason Obamanomics is failing: The White House mistakenly believes economic growth and new jobs are created by society’s stakeholders — business, labor and government — cooperatively working together.
Like most of these events, this is a political stage show. It is a visual representation meant to convey the idea that a) the government is interested in your problems and, most importantly, b) it is here to help.
But the key to the failure of this summit, even if they were serious about creating jobs, is found in Newmark’s last sentence. The key to economic growth and new jobs aren’t the product of summits among “society’s stakeholders”. They never have been.
In fact, it’s pretty simple as he notes:
But that’s not the way capitalism works. It doesn’t take a village to create a new job. It takes a businessman trying to make another buck.
So why aren’t the businessmen out there trying to “make another buck”? While business is all about risk, the risks they take are rational. Businessmen aren’t at all inclined to take risks that can ruin them, especially in unsettled markets. Right now economy is very unsettled and government has huge tax laden legislative bills pending which will directly effect these businesses in a very negative way. And of course, there’s new and increased financial regulation pending which may effect their ability to get funds to expand their businesses and hire new workers. Thus they’ve concluded it would be entirely irrational to expand their business or hire in such an atmosphere.
Instead, they’ll hold off on hiring or expanding until the economy and markets are much more settled and they’ve had the opportunity to gauge the cost to them of all of this new legislation and regulation.
That said, the simple answer on how ease economic uncertainty and thereby create more jobs is kill health care, kill cap-and-trade and back off the increased regulation. Additionally, a corporate tax cut might help as well. All of that would certainly settle market down and give businesses an incentive to both expand and hire. But this job summit? Newmark nails it. Fuzzy talk aimed at the wrong solution. The best thing the government can do is back off and let the market get back to work. Unfortunately, that won’t be the solution the “summit” proposes nor will it be the policy the White House will adopt.
Happy Thanksgiving, everyone.
Usually I try to keep this day as a non-partisan, non-political day in which I wish everyone of every ideological persuasion the blessings of the day (and I still do!). But as it happens, the day provided me with one of the best examples of the differences between libertarians and liberals I’ve seen in a while. Two separate postings concerning Thanksgiving. One from a liberal blogger, Ezra Klein, and one from a blogger who is a visitor at the American Enterprise Institute (Mark Perry).
Klein reprints a food section column (one assumes he does so approvingly) all about controlling behavior:
I asked Ariely how he would set up his Thanksgiving feast to limit overeating without having to exercise self-control. His answer was to construct the “architecture” of the meal beforehand. Create conditions that guide people toward good choices, or even use their irrationality to your benefit.
“Move to chopsticks!” he exclaimed, making bites smaller and harder to take. If the chopsticks are a bit extreme, smaller plates and utensils might work the same way. Study after study shows that people eat more when they have more in front of them. It’s one of our predictable irrationalities: We judge portions by how much is left rather than how full we feel. Smaller portions lead us to eat less, even if we can refill the plate.
There it is in a nutshell – the liberal propensity toward trying to control the behavior of others. The writer decides it is his or her job to make it more difficult for you to “overeat”. Instead of just deciding to put on a great feast in keeping with the day and butt out of the affairs of others, the writer approvingly decides it is incumbent upon the server to construct an “architecture” to control the eating of others. Really – “move to chopsticks”! Or put the mashed potatoes in the kitchen!
Speaking of which, Ariely suggests placing the food “far away.” In this case, serve from the kitchen rather than the table. If people have to get up to add another scoop of mashed potatoes, they’re less likely to take their fifth serving than if they simply have to reach in front of them.
Some people can just suck the joy out of an occasion, I swear. But this seems perfectly in keeping with my observations of the more liberal among us.
On the other hand, Mark Perry decided on focusing on a completely different thing for the day – a celebration of a miracle that occurs daily all over the world that is rarely acknowledged. Thanksgiving provides the perfect day to note it:
Like in previous years, you probably didn’t call your local supermarket ahead of time and order your Thanksgiving turkey this year. Why not? Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you showed up “unannounced” at the grocery store to select your bird.
The reason your Thanksgiving turkey was waiting for you without an advance order? Because of “spontaneous order,” “self-interest,” and the “invisible hand” of the free market – “the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many.” And even if your turkey appeared in your local grocery stores only because of the “selfishness” or “corporate greed” of thousands of turkey farmers, truckers, and supermarket owners who are complete strangers to you and your family, it’s still part of the miracle of the marketplace where “individually selfish decisions lead to collectively efficient outcomes.”
Thanksgiving is epitomized by the process Perry describes. Our holiday is indeed as much a miracle of the market as anything. It enables everyone who wants too to have what they need or desire for that day – and every day. It is truly something to celebrate.
Free markets. Free people.
For anyone who might be interested, Rob Port of Say Anything Blog has graciously invited me to co-host his radio show tonight. It will be airing from 7-9 PM Central time, and can be heard on Ustream and can be seen right here (allegedly):
Tonight’s topics will include the Pelosi health care bill, the elections this week, the Fort Hood tragedy, and my post on Corporatism v. Capitalism. If you desire, you can call into the show toll free at 888-598-8464. Hope to hear from some of you all.
This guy is sooooo close to getting it exactly right, and at HuffPo of all places.
When I heard the word “corporatist” a couple of years ago, I laughed. I thought what a funny, made up, liberal word. I fancy myself a die-hard capitalist, so it seemed vaguely anti-business, so I was put off by it.
Well, as it turns out, it’s a great word. It perfectly describes a great majority of our politicians and the infrastructure set up to support the current corporations in the country. It is not just inaccurate to call these people and these corporations capitalists; it is in fact the exact opposite of what they are.
Capitalists believe in choice, free markets and competition. Corporatists believe in the opposite. They don’t want any competition at all. They want to eliminate the competition using their power, their entrenched position and usually the politicians they’ve purchased. They want to capture the system and use it only for their benefit.
The sensible approach would be to recognize the problem and figure out a way to avoid it the best we can. Money always finds a way in, but we can at least be cognizant of the issue and try to combat it as much as possible. We must do this as citizens who care about our democracy, but we must also do it as capitalists.
If he just realized that the answer isn’t “that we watch politicians with a very wary eye”, but instead to make sure that the politicians have as little and diffused power as possible. Without concentrated power, politicians have nothing to sell, including the power to protect big corporations. If there’s nothing to sell, the corporations have nothing to buy for their protectionist schemes and are left to sink or swim in the market just like the rest of us. The end result? More freedom and more free markets.
Private health insurance companies have been demonized by the Democrats and the administration as modern day “robber barons” who are raking in obscene profits mostly by denying you coverage. But a simple fact checking dispels that sort of an attack as negative propaganda with no basis in reality:
Health insurance profit margins typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.
Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.
In other words, the methodical demonization of private insurance by government has put the industry on very shaky footing. Should a public option – defined as the government selling insurance or, as the Democrats are trying to rebrand it, Medicare part E – be placed into law, there’s a distinct possibility that the private market may dry up. Another untruth the government is pushing is that it’s entrance into the market will offer “choice and competition”. In fact, with the unlimited borrowing power of the US Treasury backing the public option and no requirement to make an profit, there will likely be less competition and at some point no real choice.
A little reality check pertaining to the industry:
Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better – drugs and medical products and services were both in the top 10.
It is pretty tough to characterize an industry making an average 2.2% profit margin as one which is exploiting its customers. As a comparison:
The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.
Can anyone point me to the government characterization of those two industries making obscene profits or exploiting their customers? Apparently the government has no plans to take them over – yet.
In fact, the private health insurance industry isn’t at all in the ‘obscene profit’ category and falls more in the “average” category when it comes to comparison to other industries in various sectors:
The industry’s overall profits grew only 8.8 percent from 2003 to 2008, and its margins year to year, from 2005 forward, never cracked 8 percent.
The latest annual profit margins of a selection of products, services and industries: Tupperware Brands, 7.5 percent; Yahoo, 5.9 percent; Hershey, 6.1 percent; Clorox, 8.7 percent; Molson Coors Brewing, 8.1 percent; construction and farm machinery, 5 percent; Yum Brands (think KFC, Pizza Hut, Taco Bell), 8.5 percent.
In this case the devil isn’t in the details, it is instead in the factually incorrect and disingenuous attack of politicians.
Apparently they decided to explore a global tax:
Bob Davis of the Wall Street Journal deserves a journalism prize for taking the time to read the recent communiqué issued by the G-20 countries meeting in Pittsburgh. He found they had assigned the International Monetary Fund (IMF) the job of studying how to implement a global tax on America and the rest of the world.
“The IMF assignment from the G-20 has been widely overlooked,” Davis noted. His article ran under the headline, “IMF Mulls Global Bank Tax.”
The “Leader’s Statement” endorsed by President Obama and released at the event declares on page 10 that “We task the IMF to prepare a report for our next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.”
The term “fair and substantial contribution” is code for a global tax. Other misleading terms for global taxes include “innovative sources of finance” and “Solidarity Levies.”
Those that believe in the concept of “one world government” have been wanting global taxes for decades. The money would give them a completely different type of power – a revenue stream vs. having to rely on donor money. Note the “source” of the tax revenue – the “financial sector” or those “evil, rich Wall Street types.” Too easy:
While the global tax would affect the savings of ordinary Americans and be passed on to consumers, it is being packaged by the international left and its progressive allies in the U.S. as an assault on Wall Street and the big banks.
If you’re shaking your head and trying to push this off as some anti-left fantasy, try this:
Meanwhile, President Obama used his recent speech to the United Nations to declare, “We have fully embraced the Millennium Development Goals.” He left unsaid what this means. It has been calculated that this will cost the U.S. $845 billion to meet U.N. demands for a certain percentage of Gross National Product to go for official foreign aid to the rest of the world. Compliance with the Millennium Development Goals (MDGs) was incorporated into the Global Poverty Act that Obama had introduced as a U.S. senator but which never passed.
A global tax of the kind envisioned in the G-20 document could help provide the revenue to fulfill Obama’s promise to comply with the MDGs.
Yes, he did introduce such an act, and no, thankfully, it didn’t pass. But we’re in an entirely different situation now than in 2007 aren’t we? In addition to all the other economy killers, our betters are “exploring” another scheme to loot almost a trillion dollars from the American taxpayer (and others around the world).
The most popular proposal is called the “Tobin Tax”:
One proposal, popular at the United Nations for decades and long-advocated by Fidel Castro, is the Tobin Tax, named after Yale University economist James Tobin. Such a tax, which could affect stocks, mutual funds, and pensions, could generate hundreds of billions of dollars a year. Indeed, Steven Solomon, a former staff reporter at Forbes, says in his book, The Confidence Game, that such a proposal “might net some $13 trillion a year…” because it is based on taking a percentage of money from the trillions of dollars exchanged daily in global financial markets.
And we can’t have that much money flying around not being taxed appropriately, can we? Not when it can fulfill a long held dream for some. Make no mistake – this is not about an equitable global tax, not that I’d support that either, but this is a redistribution of the wealth scheme, plain and simple:
What is driving the global taxation agenda is a Marxist view that the U.S. is exploiting the people and natural resources of the world. According to this perspective, international institutions such as the International Monetary Fund, the World Bank and even the U.N. must be restructured and provided with new financial resources to supervise and manage the redistribution of the world’s wealth. The United States, being the leading capitalist state, has to pay the largest price.
Their attitude was expressed at a non-governmental organization forum in Monterrey, Mexico, associated with the U.N.’s International Conference on Financing for Development, that Christopher Columbus “invaded, destroyed and pillaged” the hemisphere and that a global tax was necessary to pay for the damage.
In his 2001 speech to the U.N. World Conference on Racism, Castro advocated the Tobin Tax specifically in order to generate U.S. financial reparations to the rest of the world. He declared, “May the tax suggested by Nobel Prize Laureate James Tobin be imposed in a reasonable and effective way on the current speculative operations accounting for trillions of US dollars every 24 hours, then the United Nations, which cannot go on depending on meager, inadequate, and belated donations and charities, will have one trillion US dollars annually to save and develop the world.”
Because all this
prosperity destruction is our fault.
Keep an eye out for this scheme as it develops. This has been a “progressive” dream for quite some time. They now have the man and the Congress to make it come true.
Do you suppose that’s true? That that’s why we have such absurdities as people climbing in zoo cages to cuddle the animals? It would explain a lot of things.
It would explain, for instance, why the writer of that article is able to regurgitate a century and a half of Socialist propaganda and get commenters calling it “insightful”. Two centuries of modern capitalism have resulted in such ease, such comfort, such near-total safety and security, that Americans (at least, some Americans) don’t just take it for granted but consider it the normal state of affairs, so much so that they are ready and willing to smash the structures that created it, in the confident “knowledge” that the safety and prosperity will remain because they are “normal”.
Ric’s observation stemmed from a Firedoglake post (linked above) in which capitalism is noted as the source of violence. I think Ric pretty much nailed why such thinking is so absurd. Also see Synova’s thoughts on the matter, which are also quite good.
Ann Althouse is watching the propaganda so you don’t have to. Something in her review of the new Michael Moore agitprop, “Capitalism: A Love Story”, struck me as interesting:
The most striking thing in the movie was the religion. I think Moore is seriously motivated by Christianity. He says he is (and has been since he was a boy). And he presented various priests, Biblical quotations, and movie footage from “Jesus of Nazareth” to make the argument that Christianity requires socialism. With this theme, I found it unsettling that in attacking the banking system, Moore presented quite a parade of Jewish names and faces. He never says the word “Jewish,” but I think the anti-Semitic theme is there. We receive long lectures about how capitalism is inconsistent with Christianity, followed a heavy-handed array of — it’s up to you to see that they are — Jewish villains.
Am I wrong to see Moore as an anti-Semite? I don’t know, but the movie worked as anti-Semitic propaganda. I had to struggle to fight off the idea the movie seemed to want to plant in my head.
I may be alone in this observation, but for quite some time I’ve viewed anti-semitism and anti-capitalism as basically one and the same. Said another way, hatred for Jews appears to me to be closely tied to their historical affiliation with capitalist enterprises.
Certainly the anti-semitism found in the Middle East is somewhat different, in that there are religious and historical factors mixed in to that particular bigotry. And Christian Europe was never terribly friendly to the Jews either, with religious rivalry and illogical scape-goating (i.e. holding Jews responsible for killing Jesus, even though it was the Romans who actually did it, and Jesus was supposed to die according to the scriptures) being played out in large part there as well. Even so, I think there is definitely an anti-capitalist element to anti-semitism.
During the Middle Ages in Europe, Jews were often forbidden from owning land, or entering certain professions, which relegated them to doing the work that the Christians wouldn’t do. Lending money for interest had long been considered to be an awful enterprise, so much so that it was forbidden for Christians to engage in it (much as it is still so for Muslims). Therefore the Jews, who had no strictures* against charging interest, settled into those roles (as well as tax collectors, accountants, rent collectors, and other money-centered jobs), and for quite some time were the only lenders around. During the Roman Empire they were both reviled and tolerated for the practice. Of course, being the only lenders in town meant that when defaults happened, it would be a Jew who would looking for his “pound of flesh” and that did not make them any more desirable. Maybe it was during this time that the capitalist enterprises of making a profit from the use of money became closely associated with Jews, or perhaps it occurred much earlier, but before the term “capitalism” even existed there were Jews performing those functions.
With the rise of socialism in the industrial age, especially during the Progressive Era, all those capitalistic endeavors in which Jewish families had staked their claims started to fall into disfavor (even as they were employed with great abandon). Charging interest for money, always historically suspect, and all other occupations concerned with amassing capital were looked upon with increasing scorn. These were anti-social behaviors engaged in by the “greedy” who placed money above all else, and especially human well-being. It wasn’t uncommon for Jews to be treated as the face of these unsympathetic capitalist sorts.
In the age of industrialization vast sums were risked in building factories and the like, and huge fortunes were made, while regular working stiffs found themselves displaced from their idyllic farms and shacked up in dirty tenements, teeming with poverty (or so the story goes). As in medieval times when the Lord came up short on his payments, and couldn’t provide for those who depended on him, the Jewish lenders made for an easy target when industrialists failed. Wealthy bankers such as the Rothschilds and the Warburgs often came under scrutiny (and still do today) because of their Jewish heritage and massive family fortunes, and many conspiracy theories concerning Jewish attempts to control the world through their financial houses flourished. Indeed, during this ironically anti-capitalist period (ironic because of capitalism’s rapid spread during this time, raising the living standards of millions upon millions of people), political parties and community groups were sometimes formed based quite openly on their antisemitism. As an acceptable social prejudice, anti-semitism was often found to be quite politically useful in Europe and here in the United States. At the same time, prevailing political winds were blowing strongly in the direction of scientific socialism, and decidedly against capitalism and individualism.
Again, I don’t know how or when anti-semitism and anti-capitalism became so intertwined, but for at least the last 150 years I think it’s safe to say they share common space. If you were to replace the words “multinational corporations” with “the Jews” in the popular anti-capitalist screeds of today, I don’t think one would see much of difference in coherence (be that as it may) or objection from purveyors of these conspiracy theories.
Bringing it full circle, I think that close connection between anti-semitism and anti-capitalism is why Althouse gets this feeling from Michael Moore’s film:
He never says the word “Jewish,” but I think the anti-Semitic theme is there. We receive long lectures about how capitalism is inconsistent with Christianity, followed a heavy-handed array of — it’s up to you to see that they are — Jewish villains.
In some ways, the bigotries may be inseparable.
* To be sure, the Bible does prescribe certain regulations for lending, one of which has been interpreted as meaning that Jews were forbidden from charging interest to other Jews, while doing so for loans to gentiles was perfectly acceptable. As I understand it, however, these Biblical restrictions treat “lending” as a sort of charity (that may or may not be paid back), in which Jews were encouraged to be free with their money in the service of their tribe, while having no compunction to be so charitable with “outsiders” (although, there too, be charitable when possible is encouraged). In short, it is a “take care of you family” sort of restriction on lending and not a “screw anyone who’s not Jewish” policy that it is sometimes made out to be.
It is, instead, a prelude to monopoly. That is the case with the “public option” in the health care reform desired by the left:
The problem is that government, by definition, isn’t just another economic player, and will always tend to want to control markets for its political purposes. That threatens economic as well as political liberty.
And that’s precisely what a government run entity in a private market will be directed by – politics and an outcome favorable to the goal of politics – the accumulation of power. So there’s a basic level of dishonesty going on here when those in support of a “public option” talk about “competition”. Rep. Paul Ryan calls Kathrina Vanden Heuval on just such a use:
What’s concerning about this debate with me is that you’re using capitalist rhetoric to try and move a plan that is inherently anti-market. The problem is that the facts tell us this: A public plan option quickly becomes a government-run monopoly.The actuaries are telling us is that in a few short years, the public plan option displaces the private sector, employers dump their employees on the public plan, and then they have no choices but the public plan. And so, lets not try to sell a government-run plan using free market rhetoric.
Redefining “competition” to mean nothing more than the introduction of another entity in the field is the ploy. Relying on the economic ignorance of most Americans to carry it off is also part of the plan.
Instead competition is the battle of private entities with the same goal – market share and profit. In a free market system that goal is attained through winning the preference and loyalty of customers for their product at an acceptable price for both consumer and producer. It is the existence of other producers and their products which keeps the other producers “honest”. But the introduction of a government entity into such a market introduces a “competitor” which is only interested in one aspect of that competition – obtaining the preference and loyalty of customers. It has no interest or need to have that price acceptable to the producer since it doesn’t have to seek a profit to provide the product. In fact, it can run a loss as long as it takes to clear the market of other “competitors”. Such predatory pricing will be supported by whatever subsidies are necessary from the US Treasury. It will end up distorting the market to the point that those who must have a profit to continue to serve their customers and produce their product (actually pay for it with money they earn) will leave the market.
That’s not “competition” by any stretch of anyone’s imagination. And, in fact, with the ability to absorb as much loss is necessary to drive private firms out means government will indeed, at some future point, enjoy a “single payer” monopoly. They’ll be the only game in town. It seems that our government is unfriendly only to private monopolies, not public ones.
So, in summary, defenders of the public option are being blatantly disingenuous with their rhetoric and stated intent when they claim that the “public option” would introduce “competition” and keep insurance companies “honest”. In fact it won’t do that at all. It will, instead, evolve over time into a “market” in which the only insurance entity standing will be the government run one which will enjoy monopoly status and give the liberal left the “single payer” system it so badly wants to see enacted here.