In November of 2008 my History of Economic Theory professor made a prediction: An Obama election would result in the end of capitalism. I wouldn’t have any of it, and voted him into office, along with the majority of America. I guess I didn’t want to believe in the impact of the reactionary policy that was to ensue.
Last week…
I opened the paper and read about the new U.S. Special Master for Compensation, Kenneth Feinberg. He will set salaries for 175 executives in American industries that took bailout funds. Congress has also granted him the power to procure any “wrongfully” awarded compensation in the last year as well as a symbolic blank check to the U.S. Treasury. Feinberg attempted to defend his market interference in a BBC interview June 12th:
"I am not imposing any restrictions on private capitalism in the private marketplace, but rather am working with these companies to try and develop a consensus package of reforms that can be embraced by everybody,"
In other words, Feinberg thinks he can further cuff the market’s free hand without slowing it down. Executives take the risks that make or break companies. When the latter is the result, executives lose their job, their company, their income, and their reputation. Feinberg is the result of the government’s unwillingness to let these companies fail — as they should have. Since they were saved, the reform that would have come naturally (either from new or recovered companies) must be forced at the will of a single man.
Reports also repeatedly plug Feinberg’s salary for this grotesquely important job: zero. We’re supposed to believe that this Washington lawyer is going to take on the task of determining “fair” compensation of industry’s management; his only motive: what he deems the best interest of America. I see potential for Washington-style favors to be handed out.
Yesterday…
I turned a page to be hit with the news of the proposed health care reform that will not fix our broken system. Talks of the new system include an additional spending of $2.3 trillion over the next ten years. America’s problem isn’t that we’re not spending enough; U.S. healthcare is already the highest in the world. The problem lies in the intricacies of the system itself: the market for heavy use insurance does not exist, incentives are misaligned, and insurance is tied to jobs. The proposed plan dances around these issues and will likely implement a national policy that will compete along side current private providers. I don’t see how this is better. The government isn’t going to do a better job providing a product that—according to asymmetry—cannot exist.
Today…
The front page boasted a regulatory re-vamp plan that—when approved—will take Atlas Shrugged out of the science-fiction genre. The main flavor of reform is giving federal institutions more power – more power to supervise, more power to scrutinize, more power to seize. A new agency was born, the Consumer Financial Protection Agency, to keep the consumer safe from evil banks trying to make money on mortgages and credit cards.
---
It is becoming harder and harder to stay hopeful. I read about policy reform hoping for a glimpse of a reality that will bring optimism—not destroy it. I had always criticized my professor for his depressing prediction. However, with the change we are experiencing, I’m beginning to see where he was coming from, and beginning to feel much worse for doing so. We study economics, yet good politics so often rules.
Last week…
I opened the paper and read about the new U.S. Special Master for Compensation, Kenneth Feinberg. He will set salaries for 175 executives in American industries that took bailout funds. Congress has also granted him the power to procure any “wrongfully” awarded compensation in the last year as well as a symbolic blank check to the U.S. Treasury. Feinberg attempted to defend his market interference in a BBC interview June 12th:
"I am not imposing any restrictions on private capitalism in the private marketplace, but rather am working with these companies to try and develop a consensus package of reforms that can be embraced by everybody,"
In other words, Feinberg thinks he can further cuff the market’s free hand without slowing it down. Executives take the risks that make or break companies. When the latter is the result, executives lose their job, their company, their income, and their reputation. Feinberg is the result of the government’s unwillingness to let these companies fail — as they should have. Since they were saved, the reform that would have come naturally (either from new or recovered companies) must be forced at the will of a single man.
Reports also repeatedly plug Feinberg’s salary for this grotesquely important job: zero. We’re supposed to believe that this Washington lawyer is going to take on the task of determining “fair” compensation of industry’s management; his only motive: what he deems the best interest of America. I see potential for Washington-style favors to be handed out.
Yesterday…
I turned a page to be hit with the news of the proposed health care reform that will not fix our broken system. Talks of the new system include an additional spending of $2.3 trillion over the next ten years. America’s problem isn’t that we’re not spending enough; U.S. healthcare is already the highest in the world. The problem lies in the intricacies of the system itself: the market for heavy use insurance does not exist, incentives are misaligned, and insurance is tied to jobs. The proposed plan dances around these issues and will likely implement a national policy that will compete along side current private providers. I don’t see how this is better. The government isn’t going to do a better job providing a product that—according to asymmetry—cannot exist.
Today…
The front page boasted a regulatory re-vamp plan that—when approved—will take Atlas Shrugged out of the science-fiction genre. The main flavor of reform is giving federal institutions more power – more power to supervise, more power to scrutinize, more power to seize. A new agency was born, the Consumer Financial Protection Agency, to keep the consumer safe from evil banks trying to make money on mortgages and credit cards.
---
It is becoming harder and harder to stay hopeful. I read about policy reform hoping for a glimpse of a reality that will bring optimism—not destroy it. I had always criticized my professor for his depressing prediction. However, with the change we are experiencing, I’m beginning to see where he was coming from, and beginning to feel much worse for doing so. We study economics, yet good politics so often rules.
No comments:
Post a Comment