Personal vs. Social Responsibility

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This topic was really born in the topic I created on Social Securty. My question basically is what level of social responsibility do you accept? This is different from personal responsibility. While I believe that everyone should try to do the most with their life, and be a contributing member of society to the best of their own ability, I do feel a sense of social obligation to those who are worse off than myself.

For example, I do not begrudge paying into things like the Social Securty (sustence money given to the elderly), Medicare (helath care for the elderly), Medicaid (health care for minors not covered by parents medical plans), or for paying into the unemployment (self explanatory) and welfare (impoverished families) funds.

I do more beyond that even. I contribute items to goodwill that I don't have a use for. As an example here, we give old clothing away to a goodwill organization. Last year, we also donated our old dish washer to goodwill as well. It still worked, but was missing a few tines that hold the dishes in place, and was noisy. Still, it was still functional (i.e., it cleaned the dishes placed inside it).

I guess the reason I feel this way, is that where you end up in life is in large part based on where you start. If you grow up in a middle class household, and are of average intelligence, you should do alright. If you are born wealthy, and have supportive parents, even if you are of below average intellect, there is very little chance that you will fail (reference George W. Bush). Conversely, if you are born poor, to a single mother living off of welfare, then your only real shot is if you win the genetic lottery and are gifted either physically or mentally. (We see pro athletes that came from very humble beginnings, but for every one of them, how many didn't have the physical talent to be become a pro athlete?)

So what is your personal feeling towards social responsibility? Are you more of the opinion that people should fend for themselves, or do you feel that it is your responsibility to help those that in many cases are in no position to help themselves?

 

I couldn't disagree more. The reason poor stay poor has nothing to do with gifts of intelligence or physical skill, it is purely social programming. I have a minority friend who couldn't score high enough on entrance exams to qualify for college, was a C student, and came from dirt poor parents. He makes twice as much as I do now. Now how? He went to work at McDonalds, worked his ass off and was promoted up to shift manager, then assistant store manager, then store manager, and then they gave him a chance to take over a failed franchise that they took back from the franchisee. I have no doubt he is a millionaire now.

As far as the GW crack, I don't think Yale gives out sheepskins, and I know that Harvard doesn't give out MBA's to those of even average intelligence. GW might not be the most eloquent speaker we have ever had, but he would kick the ass of every person on this board at jeopardy, unless Ken Jennings is a poster here!

Now on to social responsibility. Social responsibility stops at the point at with personal responsibility takes over, in other words, don't expect others to make up for your bad choices. Social Security in its role of retirement insurance would be fine if it was optional, and if you opt out, don't expect the gov't to help you out when you get old. Instead the gov't set up a pyramid scam where the ever-growing population covered this over reaching plan.

As long as the gov't is only taking care of those who's truly are victims, as opposed to those who are victims of their own free will, I have no issue with it, but to rob Peter to pay Paul is wrong, especially if Paul is just using the gov't as his personal strong-arm collection agency.

Now, private charity is great, and I support this form of social responsibility. Anything that people want to support of their free will is great, but anything that amounts to a poor majority voting to take wealth away from a minority who have worked and earned it is inherently wrong.

 

This is in my opinion a question impossible to answer. We are pre-determined to be who we are due to our background and our genetics and thus our lives are more or less since from the moment of our birth. I dont believe that to be true, I know that to be true. At the same time however, so is each and every individual responsible for his or her own choices. One of those paradoxical truths of life.

In my personal view the best option for a society is to deliver as good a safety net as possible for all its citizens. Society at large benefits from diminishing the deepest chasms between people. Poor people are expensive and unproductive for a society. Much of what Darkwolf says, even without involving morals or compassion, is just simply counter productive in my opinion. Whether you like it or not we are all in the same boat and even if Paul is a stupid screw up I actually think Peter would prefer it if everyone paid a little bit to ensure that Paul can get by without robbing Peter of everything he has and perhaps raping Peter's wife while he is at it. I know that if I manages to be successful so do I not want to live locked away in a gated community somewhere deathly afraid of roving bands of murdering criminals with no hope whatsoever. I would prefer it perhaps instead by the slightly smaller pool and hopefully contribute to people becoming productive members of society instead of criminal leeches or knocked out wrecks.

 

How odd. I think you actually are trying to make a serious point here. Your example is a Horatio Alger Myth. (For the uninitiated, the principle behind the myth could be summed up as "work hard and you will be rewarded".)

Let me clear up a few things first. My GWB comment was tounge-in-cheek. Yes, I believe that GWB's family wealth was a large part of him being accepted at Yale (and later Harvard). That having been said, being essentially a "C" student at a premier university probably means that you're "smarter than the average bear". While I disagree with your comment of GWB being able to kick anyone's ass on jeopardy, I admit that the man is of above average intelligence.

That's not the point though. Neither is the one guy getting out of poverty to become wealthy. It does happen. Similarly, there are probably examples (although I don't know of any) of people being born to millionaires then end up living their life in abject poverty. My arguement is simply that these people represent the exceptions to the general rule. I will concede that hundreds of people every year go against the rule, but millions more conform to it.

Just stand back and think of what you're arguing. Do you not agree the GWB would have lived a very comfortable life, even if he not got into politics, or even gone to college? Do you not agree that a teenager who has to go to work every day after school to help his family make ends meet is going to lack the time to complete his school work? Do you not agree that how well you do in school is in large part linked to whether or not you get into college, and futhermore what your future potential earnings will be?

I'm sorry, but your arguement basically boils down to: Most poor people are poor people because they're lazy. And I just think there is so much more to it than that. A person that doesn't have to rely on his wits, or his hands to make a living has it made. Not everyone who is poor made bad decisions or did not take personal responsibility. The kid that goes to work every day after school - what poor decision did he make? Obviously, he lacked the foresight to chose wealthy parents at the time of his birth, but what other mistake did he make?

 

This is a complex matter and there's no single right answer. On the state level, this can solved in two ways:

The rightist way: cut social expenses, don't provide free stuff, cut the taxes instead and let people buy things for themselves

The leftist way: keep a hefty social fund, provide free services, collect high taxes

Both these ways have pros and cons.

The rightist way:

Pros:

• you don't pay for things you don't get
• you don't give away half your earnings if you're a high wage earner
• you're generally better off when you have a high income because a percentile tax will most likely exceed what you would spend on healthcare, education and similar

Cons:

• people with low education and/or low intelligence are less likely to make the right provisions... so what, shall we leave them to die?
• all too often people can't afford the education needed to climb the ladder
• some people won't be able to afford healthcare on their own and charity won't always suffice

Now the leftist way:

Pros:

• There's a hefty social fund and people aren't left alone
• You're more likely to get the education you can take, and the healthcare you need, plus similar needs

Cons:

• You pay for things you don't get
• You can end up paying much more taxes than you "cost" the society; not like it's bad to be a benefactor, but no one is asking you
• If you can't recover your tax money that goes to education or healthcare, your money will go to waste if you go to a private school or doctor, so you're tied up with tax-funded institutions

Problems to consider:

Is it good that the rich have to pay for the poor?

The natural state knows no money and no property beyond maybe items of personal use. It's the social order which creates use for more advanced forms and greater masses of property. It's also the social order which protects that property. Let's face it: the rich pay more taxes, but the rich cost the state more than the poor. Also, the rich are more interested in keeping the social order in place... The poor or even the average citizens wouldn't mind some little re-arrangement, you know...

All the state agencies involved in trade and industry - whether it's research, standarisation, inspection, or even protection (police, courts). Heck, even diplomacy - e.g. trade agreements and good trade relations with foreign countries. Also, big business hates big taxes but loves big subventions, dotations and tax breaks. Someone pays for those. Therefore, it's reasonable that the wealthier pay more. It isn't good to have the rich pay for the poor, but it's even worse to have the poor carry the burden of the system on their own backs.

I worked my way from the bottom to the top without anyone's help. Why should I pay now?

Firstly, because you cost the society more than you did before. Secondly, someone has to maintain the system that allowed you to overcome your poor starting conditions and climb to the top. In a different system, you could likely be stuck with minimum wage.

It's surprising how often this argument is raised by people who received free education and healthcare before climbing to the top. Would they be alive and healthy now if they hadn't received free healthcare? Would they have been able to get their education if it hadn't been given to them for free? Especially people who received preferential treatment on the account of their unfavourable conditions in the past shouldn't really complain about having to pay for the state's social expenses.

It's my property. The state has no right...

What's spare change to one can save the life of many. And I've already explained that property can function only within a certain social order. And also that more property costs more to protect. And that the services and institutions that protect and run the system work chiefly for chiefly for those who are more interested in maintaining said social order, i.e. those who have a better position within it. No one wants to be leeched. Neither those on the top, nor those closer to the bottom.

I don't use a certain public service. Shouldn't I pay less tax?

What if you you a service that someone else doesn't? What if you end up in need of the service you don't need now? Should you still receive it? What if you can't afford it?

Everyone can buy insurance...

No, not everyone. Some people still can't. Besides, what's the max limit of money you can get or the max limit of the expenses the isurance covers? What if the company goes bankrupt? What happens with insurance rates that don't go to those who get insurance refunds? Yeah, I think we've nailed it. The state won't go bankrupt and it can afford setting no max limit to your healthcare refunds and similar expenses. The "unused" rates don't serve to stash piles of gold for the company, but can always be used for a community goal. Or to reduce the rates in the future. Whatever. Also, the state can provide the most complex insurance ever - all included in the tax. How many commercial insurance contracts would you need to cover all your bases and how big the rates would be?

I still want my tax money back and I want commercial insurance if any at all. It's my life!

Then please no bitching if you get in trouble and the community turns its back on you. Now how does this sound?

The rich have more money. Go to them for the taxes and leave me alone.

That they have more doesn't mean they have to pay for you. Did you work for that money you're so eager to give away? There's no such thing as free lunch.

Raise the social fund. Give more things for free. Give us tax breaks. Give us refunds.

Someone has to pay for that. Money doesn't grow on trees.

Final reflection: It's a community, after all. We're all knee-deep in it and we all benefit from it, each to his own extent, and each of us carries some of the burden. Sometimes we just have to stand together and yeah, this often looks like one big universal insurance company. Everyone has to do his part and those who think they have found a key to the system and are set, they have no more right to bitch about taxes than those who would prefer the rich to pay for them. We don't need leaches. Neither down there where they cheat on welfare money, nor up there where they tweak and abuse the system.

EOR (End of Rant)

 

Chev,

Bypassing my belief that if you really want to get ahead and are willing to do what it takes you can, let me ask you this...

What you are saying is that to make up for the inherent lack of fairness in the world you are willing to correct it by being unfair to another group? How is it fair to take assets away from those who worked hard to get them to make up for someone else who may or may not be working as hard as them? Do two wrongs make a right? Does the ends justify the means?

This is a slippery slope you are on my friend. Why don't we index the blood for every person in our respective nations, and when someone needs a kidney, they test them and compare them against the blood of all citizens, and if you are the best match, you get escorted to the hospital by the local constable to "donate" one of your good kidneys? I mean it isn't fair that you have 2 working kidneys when someone else has none is it? I mean, you get blessed with 2 good kidneys and you only need one, and even if that one goes bad, they will just replace it with one they force someone else to give up, so you are not really in a position to loose that much!

 

For those people who think that the "rich" don't pay enough in taxes just remember the top 50% of wage earners in the US pay more than 96% of taxes.

 

Oh boy, here we go, it is on now!!!!

I agree with you khazad, but I hope you have a flame suit! If so don now, don't wait, put it on right now!

 

I'm inclined to think that khazanman's analysis is correct. While I have not specifically heard that figure, I did see an article where the top 20% of wage earners pay 63% of the taxes, so the top 50% paying 96% doesn't seem that far-fetched to me. Anyway, does this statistic surprise anyone? The government operates on the principle: "The more you make, the more we take."

 

Far from it! I insist that it's fair to collect more tax money from those who make more income. While it's unfair that the rich should pay for the poor, it would also be unfair to give someone improportionate discounts just because "he already pays a lot".

I believe you probably disregarded my brief analysis of the function of society and a particular social order within it. I don't like repeating myself, so let's just reiterate the essence: it's the social order what regulates the distribution of wealth and opportunities for advancement. The more you benefit from the social order being as it is, the more you should be oblige to contribute to the community.

How is it fair to say that all income disparity is due to hard work on one part and laziness on the other?

How about adding improportionate distribution of costs on top of improportionate division of income?

Try to look on the society as an eterprise with millions of investors. Let's suppose John provides 0.001% of the capital and Frank provides 5%. Is it proper to give John 0.002% of the profit just because for Frank it's spare change? No. But neither is it proper to keep Frank's share of profit at 5%, while giving him a discount and reducing his obligations to 4% just because he already pays much.

For a more personal example:

My LLM is due in two years. I speak some languages and dabble with computers. But I have no influencial connections, nor could I possibly afford opening an own law firm after obtaining practice rights. So I'll definitely need employment with someone else although I won't likely get a bad wage. If nothing wrong happens on the way, I might have an own law firm or a low to mid rank management position before I die. Now, I don't want my tax money to go for people who abuse the system... but neither on bottom (people who obtain undue social welfare) nor on the top (people who obtain undue tax breaks, tweak the law to their benefit and so on).

In case of necessity, I believe it's still better to trim one person's luxuries than to push a hundred people into poverty.

Example: When you have 20 pieces of silver to support your family, the difference between the tax being 2 sp or 3 sp is the same in proportion as the difference between the tax being 2 pp or 3 pp when you have 20 pieces of platinum. But the truth is that the difference between the tax being 2 sp or 3 sp out of 20 is going to hurt the family more than than the difference between the tax being 2 pp and 4 pp. Also, the person dealing with pp is much more interested in keeping the current social order and all institutions needed to maintain it than the person dealing with sp is.

Of course, tax rates can be extortionately high and it's sheer robbery to grab half someone's salary just because he gets a lot, anyway. Rates like 15%, 20% and 25% could be reasonable in some circumstances, but 5%, 20% and 35% doesn't look nice. A flat 20%, however, doesn't always have to be realistic. In Poland, we have something about 20%, 33% and 45%. And believe me, it does hurt to see almost half of a wage that would be barely decent elsewhere in the EU go to taxes. That sort of "you make more so we take more" attitude is not something I like.

[ December 22, 2004, 23:43: Message edited by: chevalier ]

 

Chev,

I am not arguing that the rich shouldn't pay more than the poor; I am arguing that we should all be expected to pay in an equitable way. This is why I am in favor of the Fair Tax Act. In a nutshell, it is a consumption tax paid only on new goods purchased by consumers. If you buy a used car, house, computer, etc, you pay no tax. If you by a new item, you pay a percentage tax on the sales price. The rich still would pay the majority of the taxes, but it would be more equitable, as if you don't want to pay the taxes, don't buy the luxury items (and new cars, houses, and boats and jewelry are luxury items). It places the taxes you pay under your control. Additionally, there is a calculation as to how much an average person needs to spend to stay above the subsistence level, and the gov't kicks back the taxes that would be paid on this amount each month to every individual citizen. It would probably be about $300 to $350 per person, whether you are rich or poor. To a rich person it is pocket change, and to a poor person it can be a month of groceries! All other forms of federal taxes, including FICA (Social Security) would be eliminated.

That being said, your further clarification as to what you think are reasonable amounts means that we are not that far apart in our beliefs. I believe that the max tax rate on anyone should be 25% (that is federal, state, and local taxes combined). Remember, you are basically bartering your life for money when you are earning it at a job. If you work a 40 hour work week, and pay 25% of your income to the gov't, than means that you are effectively giving 10 hours a week of your life to them. Supposing that you work 50 years, you would have given 12.5 years of your life to the gov't.

I would like to point out a fallacy in your argument that I didn't notice before:

Gov'ts have gone bankrupt, or had to resort to extreme measures to avoid bankruptcy. The US and many European nations have had to forgive debt, or inject currency into many gov'ts in order to keep them from becoming insolvent. Additionally, many nations have resorted to printing vast amounts of currency in order to devalue their debt to the point at which they could afford to continue to pay it (usually resulting in the foreign nation forgiving the debt as it is only worth tenths of what it used to be). Of course the money printing scam is effectively a tax, as the consumers end up with less purchasing power, just as they would have if the gov't had raised taxes.

 

That's a tricky question as I'm not sure I'd say I am willing to accept any social responsibility. As an individual I am not responsible for taking care of other people - that's what we pay our taxes for the Government to take responsibility for.
However, I am willing to pay tax & NI in order for the less well off to be able live better. As it happens I don't have a choice in the matter any way.
I agree with Darkwolf (to an extent) that given the drive and work ethic, you can change your situation. It's not that people in general are lazy, but to change your situation from poor to rich requires an enormous amount of effort. It's only very few that have the amount of drive required to do it.

My biggest bugbear on this topic is when you see people who you know are making no effort to change their own situation. I'm not talking about the elderly or groups that can't work but in teenagers and young adults. I can see that this seems to be passed down from generation to generation in some families. Growing up and seeing your parents getting by quite comfortably without having to work isn't going to make someone feel inclined to work. There are some horror stories in Britain of people taking the same sort of money off the welfare state that I earn by working. There is work out there (In Britain anyway), growing up as a teenager I never had any problems finding menial labour to earn money. I'm thinking of auditioning for the next series of "Grumpy Old Men" think I have a chance?

I would prefer to help people to help themselves, hence I think the "Buying a Goat" Scheme is an excellent idea.

I would, however, say that I will take full personal responsibility for all of my actions. I have extreme dislike for the "blame and claim" system - if you trip over in the street because you're not looking where you're going it is your own fault. The classic tale of the burglar falling through a skylight and suing (successfully) the school makes my blood boil.

Not sure where it fits in the above but I am environmentally aware, so items I have no need for get recycled or reused - I very rarely throw things away. It's not for peoples benefit, but the benefit of the planet. In the same way I support Animal charities on the grounds that animals are definitely unable to help themselves, people generally are.

 

As for the "fallacy", I assumed we were talking about a normal, not necessarily affluent, but more or less solvent state. The state is less likely to bankrupt than any bank and usually has more money at hand. Note that I said "it can afford", as a possibility and not a fact. I live in a country that does have such limits. One more good thing is that the state has an amount of more or less secured income every year, so it doesn't need to put money aside specifically for the purpose of being prepared to pay for surgeries etc. A private insurance company needs lots of cash at hand, and it's also intended to grow and grow into an even bigger corporate money holding millions of virtual dollars that aren't put to any other use than increasing the number of digits on corporate accounts. Again, private businesses tend to be better managed, so the difference will vary between states. I'm beginning to believe that in this country (Poland) anything would be better than the public healthcare we have now.

Hmm... it's not a bad idea, that Fair Tax Act. But I think one could come up with all kinds of exploits in no time. Why buy a new Ford if you can buy a two year old Porsche? Why build a new house if you can buy a hacienda or a Victorian (OK, I know this doesn't apply to the US...) city house. Or second-hand top designer clothes instead of new garments of less exquisite brands. No one will ever know if you've just bought it or if you've always had it. Except maybe you won't be so up to date with current trends.

Personally, I think the most equitable way of taxation would to be impose a flat tax, same rate all across the board, and apply modifiers based on how much you cost the state or local community. I mean the "running" costs, not welfare kind of expenses. It's impossible to calculate that precisely, so I think it would be all right to suffice with preventing people from draining the public treasury - from undue welfare to arcane tax break and subvention lawyering.

 

I've got a few things to bounce off the debate here:

First, apply the Fair Tax act to retail businesses that sell second hand goods. If you buy a used vehicle/computer/whatever, you're still paying taxes based on the purchase price. Again, the rich will pay more because they have more to pay, but that's only fair.

Second, Welfare should cover needs. Give food stamps or grocery coupons out. Have "welfare housing" where rent and utilities are assumed to be paid as long as needed. This would be focused on those who can work, but are unemployed for the time being. Welfare shouldn't cover gambling, alcohol/tobacco/drug use, or purchase of "luxuries". There should be something to help those who are legitimately disabled, but that is something I don't have an adequate idea on.

Third, implement (or maintain) public healthcare. That way, the average citizen is not wiped out if they get injured in an accident or have a serious illness. Subsidize medications to those who need it. If it can work, include optical and dental coverage. The State can regulate this, make sure that you have enough professionals to make this work. Also Public Education would be mandatory. And none of this seperate school boards drawing money away from the public system. If Education is standardized then there is a better chance for producing a quality workforce for the next generation.

Fourth, have means to create jobs. If the corporations are not hiring enough people, then be able to hire more people to maintain the nation's infrastructure. More people with jobs mean more people paying taxes, and fewer people drawing from those public funds while contributing nothing.

Fifth, subsidize production of vital commodities (like food, fuel) to keep basic expenses from outpacing income. If it would be cheaper to produce our own gasoline, then why are we paying the extortionate prices to OPEC? Also if you restrict taxes on these commodities (like reducing taxes on gasoline), cost of living is reduced, allowing people more money to spend on other goods which would be taxed...

Sixth, make government accountable for where that money goes. If these things can be provided more efficiently, then do it, but make sure that these things are done. Stretch the public dollar as much as possible. Punish corruption severely.

These are a few ideas that might help...

 

That's probably the case in your country, but here there has been a very different experience. In the US it is all about choice: Conservatives want to spend less on social programs, but spend tons of money on the military-industrial complex; iberals and progressives want to spend less on the "big business of warfare" and more on social programs. But the liberals want to raise taxes to pay for their spending, while the conservatives just say: "Charge it!" And in the process offer some nice tax cuts, while running up some huge debts.

Sooner or later someone will have to pay the piper for all the empire building that has been going on lately. That is when there will be some real change. Once Americans find themselves without jobs and enough money to make ends meet, I certainly would not want to be the party in power.

But while the "welfare state" for the poor has been replaced with "welfare windfall" for the rich, we've had to change the terminlology a bit. We no longer have welfare moms (since welfare reform sent them to work). But now we have the "working" poor, mostly single mothers, who used to be welfare moms.

Edit: Gnarfflinger - I think you have defined a pretty good economic agenda. But to speak of Public heatlhcare will earn you the dreaded "socialist" label by those who support the current system, which as you correctly noted - is fraught with problems for the average working person.

[ January 04, 2005, 06:56: Message edited by: Chandos the Red ]

 

Actually, I am Canadian. In Canada, we do have public healthcare. I have taken advantage of the free flu shot for several years now. It's nice to know that if I get hurt on the job, or on the way somewhere, I can receive treatment without having to provide proof of insurance or a huge bank account. It's not perfect, but there are solutions somewhere...

 

I don't think this is correct, even if you limit taxes to "income taxes." If you include payroll taxes and sales tax, then it's most certainly wrong.

Also: the bottom 50% isn't necessarily made up of social parasites. I would guess that, for example, a number of school teachers, who are highly educated relative to the general population, and who perform an important public service, fall into the bottom 50%. And how many people actually believe that hard work, or even the provision of social benefit, is totally correlated to earning power? I could have landed (or still could land) a job with Morgan Stanley or McKinsey and Co, where I would be making much much more than I did when I was working, or ever will once I finish my PhD. Does this mean that I will be providing less benefit to society doing research in the future than I would have been as an I-banker or consultant, or that I won't be working as hard? I think not.

More likely, the answer is: them that can take, take. If you're in finance, you are at the top of the production food chain. You have maximal control over the abstract stuff, the flow of capital, and so you can claim for yourself the maximum possible fee, and skim the maximal amount off the top. Certainly, financiers play a vital role in the economy, but does this mean that they are working harder than everyone else, or that they are smarter than everyone else, or even that they deserve all of the gains that they are able to claim?

Look at US CEO salaries over the last 50 years; IIRC, they've shot up from something like 10x the average factory worker's salary to 400x that, with much of these gains happening recently. Does this mean they are doing their job 40x as well? Or does it mean that the rules, motivations, organizational structures, information systems, etc have changed in such a way as to allow executives to get away with it. And in the cases of WorldCom, Enron, Fannie Mae, and all of the disasters soon to come, this isn't always in the best interest of competition and healthy markets.

Also: look at regulators. An economist working for the SEC, or any gov't branch, makes pennies compared to what they could make in industry. Does this mean that their jobs aren't vital? Again, over the last few years we've seen some evidence that more, rather than less, regulation could have been in order, and I'm afraid, in spite of all the attacks from certain quarters on the Sarbanes-Oxley bill, that we might see things get even worse. The hard truth is, sometimes business does not know what is best for business, and economic history is filled with episodes of resourse depletion, over-speculation, bubble-blowing, etc, often followed by chastened businesses hiring up the very same specialists and critics they had dismissed as meddlesome before the crisis hit.

So the idea of the invisible hand running a meritocrasy seems a bit stretched to me. And not only because people at the top of the financial food chain have a control over resources far greater than what "merit" itself would allow, but because consumers often have poor taste. If the economy provided a just and equible distribution of rewards for hard work and talent, then McDonalds wouldn't be so widespread, orchestras would be far better funded, Britney Spears would be a waitress, and the guys who came up with "Survivor" would work at Jiffy-Lube. But it's totally within peoples' rights to have bad taste, and I wouldn't want to take that away from them. But to say that's "merit" is problematic...

 

Sorry Bion, but I have to take you to task on this one:

This is a matter of supply and demand. The fact is that there are a large number of people willing to do this job (teaching), as it is really not all that challenging or stressful, so the price remains low.

Having worked in this industry I can tell you that these people earn their money. You far underestimate the stress and pressures of these types of positions. To correlate, banking requires many of the same types of skills, but is a much lower stress level job, hence there are a lot more people willing to be Personal Bankers for Bank of America, Chase, or Citibank, hence their pay is much lower than a Personal Financial advisor in a brokerage house. Getting a job in the investment industry is a lot easier than excelling or keeping it, as the failure ratio is very high.

This is why tiered socialism fails. The fact is that as the market defines it, you will not be worth as much. If there was a shortage of people willing to do the work you are doing/going to do, then the pay would rise in response, all the way to the point at which your worth to your employer stops being commiserate with the value of your labor. When you start using human judgments to put a value on a job, and eliminate the ability for employers to base the pay upon the pool of available workers and the return on the labor that they produce, you end up with unrealistic values.

You discount the fact that there is competition for these resources. However, if you take your example and apply it to industries that are assumed by the gov't, then it is true. If the gov't takes over or over regulates the industry, effectively eliminating competition, then those in control can set whatever prices they want for their services.

Pay is not always commiserate with how well you do a job. Does an excellent burger flipper deserve more money that a mediocre brain surgeon? The fact is that CEOs are paid the same way the rest of us working in the private sector are. They negotiate their pay based upon supply and demand for qualified applicants. CEOs are hired and fired just like the rest of us. They are hired by the Board of Directors of a corporation, who are elected by the stockholders (read owners of the corp). If the Board makes poor choices, like hiring the wrong CEO or paying him/her too much, then the board will be voted out and a new board voted in who will certainly take note of what happened to the previous board.

Additionally, I don't think you realize the level of stress and workload of the average CEO of a major corporation. It is very easy for all of us to think that they have a cushy job riding around in limos and Gulfstreams, but most of them work 14 to 16 hour days 7 days a week. They agonize over every major announcement, and are held responsible for decisions that they have no direct oversight of. CEOs have a much lower life expectancy than the population for a reason.

In regards to regulators, this is again a supply and demand issue, as covered above.

In regards to the economic fraud issues you raise, this is best handled by the market place. People need to stop putting such faith in the gov't to protect them, as it has the same failings as the rest of humanity. All of the corporations that went dot-bust and/or failed in the late 1990s/eary 2000s were plainly evident to most informed investors. The reason that some of them got caught was because of the fact they were willing to take the risk in hopes of timing their exit from the investment. I am not saying that those who cooked books and defrauded people shouldn't be held accountable, they absolutely should face serious prison time, but the gov't cannot protect people from themselves. Reasonable legislation to ensure that accurate and timely reporting is given is probably a good thing, but people need to be more selective in either what they invest in or whom they choose to allow to invest for them.

I am curious though, other than just a doom and gloom view, what basis do you have for your statement of "...I'm afraid, in spite of all the attacks from certain quarters on the Sarbanes-Oxley bill, that we might see things get even worse."? Is this based upon some information you have obtained, or just pessimism?

While your examples are intriguing, there are a lot of businesses that are extremely profitable that were scorned in their infancy. If people hadn't been allowed to invest in them they would never have bloomed. Who would ever believe that a little silicon wafer could create machines capable of completing millions of calculations in an instant? Who would of thought that some hick from Arkansas could have created a business that would take down every major discount chain (Wal Mart)? Who would have invested in a smelly loud unreliable "horse-less carriages"? What dolt would invest private money to put a satellite in orbit so that you could bounce radio signals off of it or maybe take some grainy pictures of earth with it? Given the failure rate in the research of new medicines, why on earth keep pouring money down that rat hole? Even taking your example to a ludicrous extreme, everyone knew the world was flat, so what kind of idiot would invest in a venture to sail around the world? Talk about a poor investment choice, I mean, your ships are just going to fall of the edge of the world!!!

Even in your examples, an argument can be make that they do deserve merit, because those ideas meet with what people want, and if we want to have people provide us with what we want, we have to reward them for it. There are people who think that orchestras are a total waste of resources, that Britney is talented, that the only problem with survivor is that they don't create new ones fast enough, and that there aren't enough McDs in the world. What makes your views any better than theirs? My parents think that video games are going to be the end of society, and that they are a waste of assets, and they make a compelling argument. Does that mean that we should consider making them illegal?

Remember, what is bad taste to you is gourmet to others.

[ January 04, 2005, 19:57: Message edited by: Darkwolf ]

 

Do you have some real numbers to back up this claim? I still remember Ken Lay driving around Houston is his big limo with the mayor, trying to get his pet project passed, Enron Field. In the meantime, he had no idea what was happening in his own company. Sounds like he was really agonizing over his business - of course, prison can be stressful enough for some of these guys I guess. But being white-collar crminals doesn't really count for much.

Then there was the CEO who ran Coke, and they ended up paying the guy millions just to go away. I would like to get paid 20 million for getting fired for doing a bad job also. Yeah, let me get out the world's smallest violin to play for all these CEO's who have such a hard life.

Oh, and how could I forget about these guys? How many of these firms have been investigated and fined for corruption in the last few years? I've lost count. I recall Ralph Nader's comment that, "their corruption was more wide-spread than even I thought." That's saying quite a bit.

[ January 04, 2005, 16:46: Message edited by: Chandos the Red ]

 

@Darkwolf: As I know a bunch of people in finance as well, I can't say I'm moved to pity by your description of their stressful lives. Lots of people in lots of industries experience stress, and by no means to the finance people have a monopoly here.

It's not enough to cite the free market, as there are a number of different possible ways to run a free market, and a number of different ways of structuring the rules that define it. I think you fall into the common misconception of assuming that the free market that we currently have (perhaps with several sources of regulation/taxation relaxed) is indeed the only possible free market, like the old "best of all possible worlds" argument. As though the current US example of the free market must be the best, or at least must be heading in the right direction, simply because it "freely" came into existence. So the growing gap between the rich and the poor must be correct because the invisible hand has made it so. Don't get me wrong, capitalism is a powerful thing. But to pretend that there aren't man-made rules and policies which underlie the workings of the free market, and that these rules were written by people with agendas, seems naive to me.

Just think of all the groundrules anyone doing any kind of finance has to deal with? And think of how important it is to know these rules inside and out if you want to be successful. I-bankers might complain about some rules, but there are many many others that they totally and unreservedly rely on.

Competition isn't so efficient that it in itself guarantees that best possible set of rules will come into being, or that the best possible products will be produced. Capitalism often produces the very sources of corruption (monopolies, cartels, etc) which render it less efficient. It is the role of regulators to remove that corruption to make the system run better. So what you have in effect is a constant back and forth between market forces, and the defining and revision of the ground rules, towards the end of making the whole system work better. This work is done not just by gov't regulators but by industry as well.

So, IMO, the widening gap between the wealthy and the poor has less to do with the sainted invisible hand, and much more to do with people getting away with what they can, in a way that will be bad for markets (and most certainly for democracy) in the long run. Yes, it's in the nature of capitalism for people to get away with what they can, but there are limits, as defined by the widely accepted illegality of monopolies, etc. And I think we are in a period where the people at the top of the financial food chain are doing damage, knowlingly or not, to the economy, and I fully expect that some painful adjustments (followed by new regulations) are in the future.

Pessimistic? Perhaps, but I think realistic as well. There are a number of indicators I could cite here: from the credit markets, to the money supply, to the housing bubble, to global trade imbalances, to the rapid decline of the USD, etc. I think Morgan Stanley chief economist Stephen Roach is interesting to read in this regard.