Thursday, March 17, 2011

In a Government-Regulated, Government-Assisted (Corporatist) Economy, Why SHOULDN’T Government Set Profit/Compensation Rates?....

We need to accept reality – we don’t have a free market economy in America. We haven’t had one since 1912, when J. P. Morgan and Bernard Baruch helped usher in the modern Corporatist economy to America.

The reason it’s so important that we accept this is because too many people erroneously believe that the economic ills that have impacted the USA since 1912, from The Great Depression to the current and ongoing global credit crisis are failures of America’s NON-EXISTENT Capitalism.

Today, America, like Western Europe and Japan has a modern Corporatist economy - a partnership between business and government.

Yes, ALL of America’s incredible rise to economic world power to its pre-1912 free market-driven explosion in economic power can be attributed to free-market Capitalism, just as you can attribute all the failings since 1912, from The Great Depression to the inflation-driven “economic malaise” of the 1970s to the current and ongoing global credit crisis squarely on America’s Corporatist economy.

Still, the fact is, we HAVE a Corporatist economy NOW!

The only question is, since government sets and controls the compensation of those who directly work for it (ie. teachers, firefighters, police officers, etc.) then why shouldn’t it also set the compensation of those it assists, bails out and otherwise regulates. These would include virtually all banks and brokerages, most auto-makers, physicians and other health care professionals and every other business that has been bailed out, financially assisted (even with tax breaks) and all such entities are in some way dependent upon government protection.

In one regard, it would be a good thing to “dispense with the pretense” of our non-existent “Capitalist economy.”

For another, it would also move us to a more equitable wage scale backed by the power of government...and MAYBE, in the process, outrage enough Americans to galvanize enough of them in opposition to this very flawed system.

After all, why SHOULDN’T businesses that are regulated and often fiscally dependent upon government, also have their compensation levels set by the state?

Today, more than 60% of our medical dollars come from Medicare and Medicaid – our two existing “public options.” One sure way to reduce the escalating costs of health care is to have government cap and set the compensation of physicians and all other health care workers, and given how highly regulated the health care industry is, there’s no reason government shouldn’t set compensation levels for all health care workers.

Currently, social welfare benefits make up 35 percent of wages and salaries in 2010 America. That’s up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data. By way of comparison, the U.K., another modern Corporatist state has social welfare benefits making up 44 percent of wages and salaries, according to TrimTabs’ economist Madeline Schnapp.


Social welfare benefits have increased by $514 billion over the last two years, according to TrimTabs figures, in part because of measures implemented to fight the financial crisis.

With our highly regulated and government controlled economy and with more and more Americans depending on the government for their incomes/compensation, why shouldn’t the government cap the compensations of ALL those working on government-regulated/partnered industries?

Indeed, ONLY within the confines of a free market economy do bankers, physicians, attorneys etc. have a right to earn “whatever compensation the market will bear for their skills.”

With so many Americans already having their compensation rates set by government, it’s certainly worth considering expanding government’s control over compensation to all those who work in all the other government-regulated industries.

For one, it would certainly more honestly represent our real existing (Corporatist) economic system and for another it might engage more of those previously unaffected by direct government control, once their own compensation is capped.

Corporatism Done Wrong

Corporatism unlike socialism, CAN work, but it must be reined in and since it relies on the advantaged (those in government and partnered businesses and industries), to in effect rein themselves in, that generally doesn’t happen.

In the U.S. the current NFL negotiations demonstrate this. Despite the hard economic times, NFL revenues are rising and rising fast. Despite that the owners, with sweetheart tax deals a Congressional anti-Trust exemption and stadiums often paid for with taxpayer funds, want to keep more of the revenues for themselves. They’ve demanded the players take an 18% cut in compensation that would go to the owners.

In a free market, in which the owners paid the going tax rate, paid for their own stadiums and foregone that anti-Trust exemption, they’d be free to rake in as huge a portion of hat pie as they wished...but once they’ve taken the money and protection of the government (and the people), they must operate under whatever rules are set for them.

Similar scenarios are going on throughout both the private and public sector.

In a Corporatist economy (like OURS), business “owners,” who’ve been given access to public lands, sweetheart tax deals, often even taxpayer funded bailouts and most of all protection from the hordes of leaner, hungrier, more avaricious entrepreneurs barred from the market via government regulation, the PRICE of those protections is a limited/capped personal share of “the winnings.”

Perhaps the NFL owners AND the owners of all American businesses and industries should be allowed a 25% to 30% margin of the profits, including their operating expenses! In some extreme growth-scenario cases, another 20% to 25% could go toward expansion, but the other 50% would go to the workers and retirees.

Perhaps THAT is the proper COST of the government-protections under Corporatism.


Skunkfeathers said...

I have to admit, you're well over my head on much of this. My only perhaps salient observation is, whatever the government seems to try to regulate these days, they manage to screw up like a three peckered goat in a ewe convent.

Skunkfeathers said...

..only worse than the goat.

JMK said...

Hey SF! This comes from seeing so many "pro-BIG government" Corporate CEOs and wealthy people. I'm sick of that! GE WAS the worst, but there are so many more around today just like Imelt.

What we have isn't Capitalism OR Socialism, it's actually Corporatism, often described as "the Mixed Economy."

More and more, what many of these wealthy Corporatists are pushing for is "socialism" for the wealthy and for Corporations and a sought of mercantile feudalism for everyone else.

Look at the ongoing NFL Lockout. Billionaire owners, flush with record profits, even in the midst of this down economy, are pushing for an 18% CUT in compensation for their workers (players and others who work for the NFL)!

The idea that these pseudo-"owners," their stadiums often financed by taxpayers, their business interest fueled by special tax abatements AND a Congressional Anti-Trust waiver, should be able to dictate "their terms" to players and fans alike is NOT something I as a Conservative Libertarian can support.

A REAL owner puts his own fortune on the line and it is THAT risk which entitles that REAL owner to dictate terms and set wages as he sees fit.

RISK is the key element in such ownership! When your "risk" is being subsidized by the taxpayers and you are granted tax breaks and Anti-Trust exemptions by the government, then you're not the "owner," as the RISKS are all taken by the taxpayer! So, it's the risk-taking taxpayer who is the actual owner here.

The same kind of scenario is going on throughout this economy. Wall Street bosses are raking in record profits after getting bailed out by taxpayers and are now looking to "recoup" even more in savings by jettisoning as many jobs as they can.

Again, in a free market, where the "owner" takes the risks, he sets the rules....but in a Corporatist economy, where those risks are absorbed by the taxpayers, than the "rights" of "ownership" must be reined in or abridged.

A dose of THAT reality might be the ONLY thing that could motivate more of these taxpayer-funded "owners" to abandon Corporatism and embrace actual free markets!

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