The 6 Pack Economist

Insulting CEOs (while letting them keep their perquisites) may be fun. But it doesn’t begin to address what’s killing the U.S. economy: the rancid notion that one person’s hard day’s work deserves more pay than another’s.

Ted Rall for those who don’t know is a writer who is left of, well everybody come to think of it.  The primary premise for this editorial is that the CEOs of these failed banks should be tarred and feathered and that is something we agree on.  But after that we differ on just about everything else.

I don’t like CEOs who get paid enormous amounts of money and run the company into the ground.  I believe in rewarding success and not failure.  But I firmly believe that some people should have more than others, if they deserve it because of their efforts.   I also think that the only person who can get someone out of crappy financial situation is themselves. 

First we must recognize people are not poor because of the money they have or don’t have.  They are poor because someone else has more money.  Poor and Rich are both relative.  Always remember that.  Even in the height of communist Russia there was still rich and poor. 

“In 1980, according to a Forbes magazine study, executive compensation was 40 times the average worker’s pay; by 2007, that had soared to more than 400 times,” CBS News reported on February 25^th. Now that the companies those ridiculously compensated executives were charged with running are tanking, CEO pay is coming under attack by pundits and politicians.

So what does this mean to the average employee?  Let’s say the average employee makes 50K a year and that there are 100000 employees in the company.  How much would it matter to each employee if the difference between 40 and 400 times was distributed evenly between those employees?  50K a year multiplied by 40 is 2 million.  Then 50K multiplied by 400 is 20million.  This yields a difference of 18million.  But what does that mean to the 100K employees; about 180 bucks a piece.  What would this have done to the average employee’s bills, something between diddly and squat. 

I want people to know that I do not think they deserve to get paid if the company goes down the toilet.  They should be the last ones paid but when they do well they should be richly compensated.  But the current compensation scheme is out of whack.  I would like to see a limit on salaries.  Before you call me a hypocrite I think there should be additional types of compensation.  Their money should come from bonuses and shares of stock in the company.  The bonuses would be paid at the end of the fiscal year based on the net profit of the company while the stock would be rewarded to the CEOs but it could not be sold for 2 years. 

This brings me back to my primary purpose of my post.  People should get paid what their days worth of work is worth.  I am sorry that the best someone can do is ask “do you want fries with that” but why should that person get the same as someone repairing an electrical circuit on the top of telephone pole.  A job that is both hard and dangerous.  Or perhaps someone guy making a decision that could destroy or rejuvenate the company.  I know that most left wingers believe that the CEOs of many companies are heartless pricks but in actuality they are human beings who care about their employees.  They might not be as caring as we would like but very few of them don’t sweat over laying people off. 

Although there are still too many pricks out there.

One of the ads that google gave me when I was re-reading my post on the death of capitalism was on Socialism vs Communism.   I find it entertaining because the difference is simple.  Socialism is communism with sugar on top.  Its like argueing if its better to be stuck in the water with a bunch of tiger sharks or great white sharks. 

In socialism the incrediably rich don’t have to change their name.  In communism they have register as part of the communist party.  Anyone not part of the super rich get screwed in either system.  Socialism will legislate the small guy out of business while communism just take it.

And remember all big corporations started as small business.

 One of the unique things about America is that super rich families tend to fall from grace.  It usually takes about three generations.  This is because of the competive nature in which America generally works.  Sure family names stay around and old money is still there but even this old money doesn’t last forever.

 It usually starts with one member of the family who is smart, industrious, and most times a little morally repugnant.  This person builds an empire of oil refineries, hotels, movie studios, search engines, or whatever is the flavor of the generation.  This person works very hard to build something from nothing.  Their children see this hard work and eventually after their parent built up the business and they too have gone from something little to something great takes over the business.  The empire grows bigger and eventually starts running on auto-pilot this second generation have children.  But these children have always had everything.  They do not understand the struggles the previous two generations had to go through.  They too believe that life is a bunch of cherries and everything comes easy.  Without these struggles they are handicapped to take over the business.

 This third generation is usually where the hedonistic attitude begins.  Once this hedonism takes over it is quick fall from grace.  Drugs, Parties, Lots of Sex, and extravagant money is no object spending quickly depletes the family fortune.  Occasionally they have some kids that are not morons and keep it going longer but few of these families ever regain their former greatness.

 One great example of this is the Hiltons.  The Grandfather built the empire, his son kept it going and growing, and well Paris will destroy it if she can. 

 This shows that the economic theory of relativity holds another interesting consequence.  Because the third generation never saw what having little was like they have a very hard time imagining the struggles that were need to accomplish this.  They never truly appreciate what they have.

 I wanted to add one other thing about this third generation.  They also tend to be the ones that are more open to income redistribution.  I think this is because they feel guilty for having so much while others have so little, but it also because they did not see what it took to get there and the hard work of those before them.  Perhaps it is a sense of being overwhelmed that they could never build the empire bigger.  I am not sure.  After all I am just a guy blogging who hopes that my grandchildren have an empire to destroy.