Capitalism's Enemies Within

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/22/AR2008012202615_pf.html

Capitalism's Enemies Within

By Robert J. Samuelson
Wednesday, January 23, 2008; A19



Amid the mayhem on world financial markets, it is becoming clear that capitalism's most dangerous enemies are capitalists. No one can have watched the "subprime mortgage" debacle without noticing the absurd contrast between the magnitude of the failure and the lavish rewards heaped on those who presided over it. At Merrill Lynch and Citigroup, large losses on subprime securities cost chief executives their jobs -- and they left with multimillion-dollar pay packages. Stanley O'Neal, the ex-head of Merrill, received an estimated $161 million.

Everyday Americans will conclude (rightly) that this brand of capitalism is rigged in favor of the privileged few. It will be said in their defense that these packages reflected years of service, often highly successful. So? It's not as if these CEOs weren't compensated in all those years. If you leave your company a shambles -- with losses to be absorbed by lower-level employees, some of whom will be fired, and shareholders -- do you deserve a gold-plated send-off? Still, the more serious problem transcends the high pay itself and goes to the wider consequences for the economy.

Wall Street's pay practices perversely encourage extreme risk-taking that can destabilize the economy. Subprime mortgage losses may simply be chapter one. Now there are signs of problems involving securities known as "credit default swaps." Never mind the details. Concentrate on the possible fallout. If banks and investment houses sustain more losses, the nation's credit system will be further wounded and so will the economy. The Federal Reserve cut its key overnight interest rate yesterday from 4.25 percent to 3.5 percent -- a huge move -- in part to shore up this wobbly credit system.

By "Wall Street," I mean all the commercial banks, investment banks, mutual funds, hedge funds and the like that comprise the financial sector -- but particularly investment banks. Pay is eye-popping. In 2007, Lloyd Blankfein, chief executive of Goldman Sachs, received compensation estimated at $68 million. But pay is also heavily skewed toward annual "bonuses" based on the profits that traders and bankers generate. I asked Johnson Associates, a compensation consulting firm, for typical Wall Street pay packages. The results describe "managing directors" based in New York with 10 or 15 years experience. Most would be in their 40s.

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of course capitalists are capitalism's worst enemies---if rampant neo-liberalism prevails

they are typically thinking in terms of short-term profits

if left to themselves, they'd destroy the system

this was articulated by Schumpeter decades ago---it's why there has to be state intervention and public participation

it's why neo-liberal reaganomics is insane

the so-called "free market" would destroy both capitalism and society

by St. Ronnie. Every Republic meme from Raygun to Dumbya means exactly the opposite of what it says.

I'm still wondering about "new-cue-lur". Perhaps he's just saying "new world order" really fast and mangling it in the process.

is the enemy.