"Dear A.I.G I Quit!" My response: Good!
I had second thoughts after reading Jake DeSantis's letter resigning from A.I.G's infamous Financial Products unit. The part I recognize is the classic mid-level, middle-class anger of having severely overworked oneself and then getting the opposite of thanks. The combination of overwork and powerlessness blows up when you throw non-appreciation on it. It's detonating little pieces of organizations day after day all over the country, making their output lower and more painful for all. Nobody in charge seems to care.
But there is no good explanation for why Mr. D gets a $750,000 post-tax bonus. This is ten times the after-tax amount that a college professor might earn after twenty years on the job: she would work from age 50 to age 60 for the bonus Mr D got trying to detoxify his units CDO waste, and to little effect. He's the beneficiary of an absurd system that has sucked money out of every segment - higher ed, K-12, auto maunfacturing, agriculture -and into finance, segmenting the society and making it unable to function with decent equity or efficiency.
There is no truth in Mr D's sad lament: "I am blameless."
You quit, Mr D? Good! Don't forget to take the rest of A.I.G. with you.
Wednesday, March 25, 2009
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5 comments:
We can accept someone making good by building a business that becomes valuable, and the stock is worth a fortune. Even there, there are ways to fuss about whether folks got screwed over, but we go, so the software cost $140 rather than $130, perhaps that's an okay market rate so good for him. We accept that. We can even see that works for movie stars or sports stars, in music too. Good for them, there's some obvious talent, a nice marketing machine, and they make good. I can deal with that 2 year $45m that Manny takes in, I guess. Though 100x less is still pretty good pickins in my book.
But when we look at how your just ordinary well connected got a good job professionals have taken a lock on things--medical faculty in the UC, for instance, earning an AIG quittin' time bonus in salary every year, or attorneys cleaning up in class action lawsuits, or financial or HMO or insurance folks raking it in in salaries--for stuff that appears to be essential services--then one starts to wonder about the imbalance, the over success when the parasite becomes the predator.
You don't expect to get that kind of rich this way running a water district or a high school or grocery store or an auto repair shop. We say, that's exploitation or price gouging. We can argue that the market rewards things differentially. How true. But we are not at an utter helpless loss to manage our market rewards either. It's not simply a matter of unions beating up management for a bigger share of the gouging. A janitor's strike at Goldman Sachs isn't going to change stuff, even it adjusts in some tiny way the differential in a huge profit between the blue and the white. It's not the redistribution of wealth--hard earned or lucky or inherited--that we are looking at. It's the redistribution of professional value in essential services. If talent is in it merely for the money rather than the satisfaction of providing the service, maybe there is good reason to back off some whole industries from being so close to the money.
Wonder how that rhetoric would start. I know, try living on $750K. If doctors don't earn that, maybe just $400K, or investment bankers in a company to big to fail have to make do on $300K, why then the talent will go to other places. Like where? Teaching high school, since there's no practical difference between earning $400K in NYC and $40K in Santa Fe? Not so much socialism or central planning as a resetting of where the capitalism in capital and innovation is needed. Reward risk and talent, and new things that make us stronger, but set some limits on the stuff we need as communities. Go make tons of dough, but don't become systemically predatory on our future, either as employees or shareholders. Maybe that would be a good thing. Would change the idea of corporate accountability, wouldn't it? Dunno.
Gerry - I don't buy the distinction between the No Limits incomes for Talent and Socially Responsible Incomes for Just Folks. Neurosurgeons say they are more talented than both nurses and soccer superstars (and in more socially valuable ways), so why shouldn't THEY make 7 M or 70 M a year? The conceptual distinction between the merit of the Great and the merit of the Good is how we got to this utterly divisive and economically WASTEFUL and inefficient place. C
But if we have no distinctions then where are we? I'm trying to mark out that there are distinctions--that the anger at AIG bonuses is not carrying over to sports or media, doctors and lawyers. If there are no distinctions allowed--no good way of making money via investment, say, or building engines for investors--or by being in demand for non-essential stuff (sport, high end cars)--then one really is proposing a community radically different from what we've got.
My point was trying to center around whether a society should have any control over classes of occupation based on their relationship to community need. I wouldn't know how to suggest it. But we see this when a product turns to utility. Or when a storm hits and we do not allow prices to go up in response to shortfalls and demand. But clearly it's that way now--there are distinctions--, and to some extent that way has been permitted, if not enabled, by various regulatory positions.
This is really good "My point was trying to center around whether a society should have any control over classes of occupation based on their relationship to community need." If we do this, we won't pay Beckham $50 million a year, I promise. (http://toodumbtolive.blogspot.com/2007/01/todays-sunday-dumbness-star-economics.html)
I'd like to know what you think of the primal market thought experiment outlined at http://toodumbtolive.blogspot.com/2009/02/anger-at-bankers.html
Chris wrote: "What possible argument could show that in our primal auction the assembly that represents the market would pay the CEO $14 million a year (233x the teacher) and the manager of a top-20 hedge fund $657.5 million a year? (10,958x the teacher)?"
No way if it's an auction. But we have companies posing as legal "persons". What is their price?
The outlandish compensation happens only because there is a so much even huger income to the company that a board setting executive compensation can allocate a tiny chunk of it to the CEO that represents their interest in driving the company and the brokers to a better share of the overall barter market for services.
There is no reason to it with regard to magnitude, just proportionate share.
What I don't get is--why do we structure the taxes on this kind of activity so that government comes to depend on it rather than limit it?
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