News Where Do Labor Unions Fit in a Capitalist Society?

[BobG]

A variation on the point you make below: why is it that ordinary workers have to sacrifice their salaries for their workmates while CEOs are actually given larger (and absolutely obscene) salaries - why does cutting costs not affect upper management? I mean, where's the fairness in a system that works like this?

If I were a heavy investor in Goodyear and their CEO got a hefty raise, I'd be screaming. Their stock prices fell from a high of $76/share in 1998 to $8.37 at the time of the story (2002) to under $4/share by 2004. They're a company in trouble, even if they have gotten back up to double digits.

Of course, the same could be said of United Airline's CEO, whose retirement benefits weren't affected by the company bailing out on employee retirement benefits. You could possibly justify that somewhat since the airline environment has changed substantially since United's commitment to provide and fund those benefits - a fact that has had more to do with United's problems than management ineptitude. You still would think management would get paid based on whether they win or lose, though.

 

[vanesch]

If I were a heavy investor in Goodyear and their CEO got a hefty raise, I'd be screaming. Their stock prices fell from a high of $76/share in 1998 to $8.37 at the time of the story (2002) to under $4/share by 2004. They're a company in trouble, even if they have gotten back up to double digits.

The reason why failing CEOs often get big bail-out checks is probably that their "power of nuisance" is so big, that giving them $20 million extra to make them leave 6 months earlier and without making trouble, will cost the company MUCH LESS than if the guy would stay on and be difficult. So the "price to get quickly off a bad CEO" is probably optimized with these big checks. Just my idea.

EDIT: if this is true, this would mean that if you, as a CEO, feel the wind turning, better make a complete mess of it right away, so that they pay you A LOT to leave :-)

 

[selfAdjoint]

The reason why failing CEOs often get big bail-out checks is probably that their "power of nuisance" is so big, that giving them $20 million extra to make them leave 6 months earlier and without making trouble, will cost the company MUCH LESS than if the guy would stay on and be difficult. So the "price to get quickly off a bad CEO" is probably optimized with these big checks. Just my idea.

EDIT: if this is true, this would mean that if you, as a CEO, feel the wind turning, better make a complete mess of it right away, so that they pay you A LOT to leave :-)

That's part of it maybe. But I am of the view that the set of CEOs of US companies is not a meritocracy at all, but a jobs pool for the Brahmin class of the US. See how many failed CEOs go right into another CEO position.

 

[alexandra]

Of course, the same could be said of United Airline's CEO, whose retirement benefits weren't affected by the company bailing out on employee retirement benefits. You could possibly justify that somewhat since the airline environment has changed substantially since United's commitment to provide and fund those benefits - a fact that has had more to do with United's problems than management ineptitude. You still would think management would get paid based on whether they win or lose, though.

This is exactly what I mean, though, by harping on about the injustice of a socio-economic system based on private ownership - it is inherently (according to my analysis) unjust and therefore flawed. That's why I think we could do better than this:-) But for whatever reasons (to do with past experiences we have had, our current situation in life, etc), we all arrive at different conclusions, even when examining the same facts. But I enjoy having discussions with people who refer to the facts (thanks, BobG), even if we don't ultimately agree on the conclusions we reach once we've completed our analyses.

 

[alexandra]

But I am of the view that the set of CEOs of US companies is not a meritocracy at all, but a jobs pool for the Brahmin class of the US. See how many failed CEOs go right into another CEO position.

Brahmin class! Great stuff, selfAdjoint!

 

[vanesch]

Just a bold proposition - as an intellectual exercise :-)

What if there were a MAXIMUM ownership allowed for ? Say, at something like $100 million or so ? That wouldn't change zitch to most people so almost all (good) incentive to DO and take initiative according to the capitalist idea remains intact. It would however naturally break the power of big corporations and a few very rich individuals, which is usually seen as the corrupting factor in capitalist systems. It would in fact lead naturally to a more smooth market mechanism (automatic limitation of monopoly situations). Large corporations could not exist, but would naturally be "woven networks of small companies" to do the same thing.
There is no revolutionary idea that needs to be invented to impose this limit: the system exists already and is called "taxes": it is sufficient to raise the taxation level to 100% once you reach the allowed limit.

(runs and hides...)

 

[alexandra]

Just a bold proposition - as an intellectual exercise :-)

What if there were a MAXIMUM ownership allowed for ? Say, at something like $100 million or so ? That wouldn't change zitch to most people so almost all (good) incentive to DO and take initiative according to the capitalist idea remains intact. It would however naturally break the power of big corporations and a few very rich individuals, which is usually seen as the corrupting factor in capitalist systems. It would in fact lead naturally to a more smooth market mechanism (automatic limitation of monopoly situations). Large corporations could not exist, but would naturally be "woven networks of small companies" to do the same thing.
There is no revolutionary idea that needs to be invented to impose this limit: the system exists already and is called "taxes": it is sufficient to raise the taxation level to 100% once you reach the allowed limit.

(runs and hides...)

I'd go with that (maybe bring that maximum figure down a bit, though)! You get some excellent ideas, vanesch - if I could vote for you, I definitely would!

 

[vanesch]

I'd go with that (maybe bring that maximum figure down a bit, though)!

No, no, the idea is still that you can get unethically rich, buy a nice luxury boat and everything. However, no legal person should have SO MUCH money that it turns into political power. I don't know exactly where that limit is.

 

[loseyourname]

Just a bold proposition - as an intellectual exercise :-)

What if there were a MAXIMUM ownership allowed for ? Say, at something like $100 million or so ? That wouldn't change zitch to most people so almost all (good) incentive to DO and take initiative according to the capitalist idea remains intact. It would however naturally break the power of big corporations and a few very rich individuals, which is usually seen as the corrupting factor in capitalist systems. It would in fact lead naturally to a more smooth market mechanism (automatic limitation of monopoly situations). Large corporations could not exist, but would naturally be "woven networks of small companies" to do the same thing.
There is no revolutionary idea that needs to be invented to impose this limit: the system exists already and is called "taxes": it is sufficient to raise the taxation level to 100% once you reach the allowed limit.

(runs and hides...)

How do you tax assets that are not liquid? Let's say someone buys an Arena Football League team for $20 million. The league takes off, the team is very successful and becomes worth $200 million. Will you force him to give half ownership to the government? What possible interest could the government have in owning half of an AFL team?

 

[vanesch]

How do you tax assets that are not liquid? Let's say someone buys an Arena Football League team for $20 million. The league takes off, the team is very successful and becomes worth $200 million.

First, I think indeed my number of $100 million is too low.
But to answer your question, the team would have to SPLIT UP into smaller groups, which could then eventually reach "business agreements" to play games together. Best would even be that the members of the team became independent, proposing their services of game for one, or a set, of games, to the "team" which would only be a "game organizer" (worth much less without the players!). The players would be "playing consultants" :-)
A much higher flexibility would arise that way: no "big contracts" and things like that, just individual players, worth what they are worth, proposing their individual services to "game organizers", for one, or a few (package deals :-) games.
In most big companies, this system is applied anyway, by splitting up the personnel in "business units", which play the game of internal competition. Instead of keeping that competition internally, you could put it on the market straight away, business units making up "virtual companies" in a dynamical process. It wouldn't change much, except for the big corporate structures, which wouldn't exist anymore, but just emerge as dynamical business relationships.

 

[GENIERE]

Just a bold proposition - as an intellectual exercise :-)

I like the concept. I don't like the tax aspect. I cannot at this moment conceive a practical means of implementation but I'll give it a go. I think it worthy of much mental effort. Capitalism does certainly have the major flaw of rapid concentration of wealth in the hands of the few while sluggishly enriching the millions. I believe socialism and Marxism are dead animals and should be discarded. The only elitist government I can think of existed in France for a brief period after Louis was disposed. It was an utter failure. I’m not aware of a long-term success of a benevolent dictatorship. Capitalism has withstood the test of time yet appears to be less successful then it once was. IMO we have only the choice of improving capitalism or devising an entirely new system.


...

 

[alexandra]

First, I think indeed my number of $100 million is too low.

vanesch, you just lost my vote Who would need even $100 million dollars to live well in a lifetime?

 

[loseyourname]

First, I think indeed my number of $100 million is too low.
But to answer your question, the team would have to SPLIT UP into smaller groups, which could then eventually reach "business agreements" to play games together. Best would even be that the members of the team became independent, proposing their services of game for one, or a set, of games, to the "team" which would only be a "game organizer" (worth much less without the players!). The players would be "playing consultants" :-)
A much higher flexibility would arise that way: no "big contracts" and things like that, just individual players, worth what they are worth, proposing their individual services to "game organizers", for one, or a few (package deals :-) games.
In most big companies, this system is applied anyway, by splitting up the personnel in "business units", which play the game of internal competition. Instead of keeping that competition internally, you could put it on the market straight away, business units making up "virtual companies" in a dynamical process. It wouldn't change much, except for the big corporate structures, which wouldn't exist anymore, but just emerge as dynamical business relationships.

Whether you think that is fair economically or not, I can say the idea of players being continual free agents and only banding together for pickup games basically, kills the sport for me as a fan. I think many fans would agree, which very well might bankrupt the league. It's hard to root for a team that is constantly taking on and losing players from game to game, and it's equally hard to root for a player that is never on the same team.

 

[vanesch]

vanesch, you just lost my vote Who would need even $100 million dollars to live well in a lifetime?

I treat physical and legal persons on the same level, so $100 million would be the very maximum that a corporate structure can be worth. That's not very much if you want to set up a car factory or a commercial airplane factory, for instance. Even if much (that was the goal) is subcontracted. That's why I think that the limit should probably be a bit higher.
The point was not to stop people from being insanely rich (have a private jet and so). That's part of the dream, and it doesn't HURT anyone. The point was to stop so much value to accumulate in the hands of one physical person, or in the hands of a legal person (structure) that it becomes POWER, so that it can start to weight upon decisions in society (which I think, is the main problem with capitalism). Murdoch wouldn't be there if this limit was imposed.
Imagine you bring down the limit to say, $1 million. That hinders too much individual initiative. Of course, you can live "reasonably well" on $1 million (even if it isn't *that* much for the rest of your life !) as a person, but can you do much (setting up a small business) ?
With $10 million, you could set up a small business, but you would hinder slightly more ambitious plans. The idea was NOT to hinder private initiative. The idea was only to break the corrupting power of big capital concentrations.

 

[vanesch]

It's hard to root for a team that is constantly taking on and losing players from game to game, and it's equally hard to root for a player that is never on the same team.

I never understood people rooting for something else than their village team in which they played when they were kids, but never mind :-)
The market will regulate that, normally. After all, the team CAN stay together, and will then be worth exactly $100 million, and stay there. It is up to the team members to estimate whether they will be worth more when they separate or not, and whether they go for the money, or for the team :-)

 

[Art]

vanesch, you just lost my vote Who would need even $100 million dollars to live well in a lifetime?

That is why it is pretty irrelevant how much personal wealth a person accumulates, they can only spend so much on personal items within their lifetime.
Limiting personal wealth is aimless in itself as it is not as if this money is taken out of circulation and so unavailable to anybody else. On the contrary it is more normally found invested in businesses which provide goods, services and jobs. The real issue with people accumulating enormous amounts of individual wealth is the power this gives them to shape society to their liking through the influence they exert on both governments and the members of society.

 

[alexandra]

I treat physical and legal persons on the same level, so $100 million would be the very maximum that a corporate structure can be worth. That's not very much if you want to set up a car factory or a commercial airplane factory, for instance. Even if much (that was the goal) is subcontracted. That's why I think that the limit should probably be a bit higher.
The point was not to stop people from being insanely rich (have a private jet and so). That's part of the dream, and it doesn't HURT anyone. The point was to stop so much value to accumulate in the hands of one physical person, or in the hands of a legal person (structure) that it becomes POWER, so that it can start to weight upon decisions in society (which I think, is the main problem with capitalism). Murdoch wouldn't be there if this limit was imposed.
Imagine you bring down the limit to say, $1 million. That hinders too much individual initiative. Of course, you can live "reasonably well" on $1 million (even if it isn't *that* much for the rest of your life !) as a person, but can you do much (setting up a small business) ?
With $10 million, you could set up a small business, but you would hinder slightly more ambitious plans. The idea was NOT to hinder private initiative. The idea was only to break the corrupting power of big capital concentrations.

Ah, vanesch - I'm glad to see you care about my vote. Ok, your arguments are convincing, so you get my vote back.

Now, when you're in power, could I be part of your team? I'd love a go at changing the dreams (so maybe minister of education would be the position I'd like - and, of course, we'd need somebody really sensible as minister of mass media). I'd try to foster a love of knowledge in the schools - knowledge because of curiosity and interest in the universe. If people had such dreams ("I want to be a great mathematician", "I want to be the best astrophysicist", etc), then they could live on a lot less than even $1 million (because academic books would be very, very cheap)

 

[alexandra]

The real issue with people accumulating enormous amounts of individual wealth is the power this gives them to shape society to their liking through the influence they exert on both governments and the members of society.

Good point, Art. But even if this is the only reason, it's a pretty good one for legally limiting the ability to accumulate excessive wealth. I'm not saying 'abolish all private property' - I liked vanesch's idea of keeping it at reasonable levels (even though we disagree - as we are bound to - about what 'reasonable' means in this context).

 

[Smurf]

and, of course, we'd need somebody really sensible as minister of mass media

oh! oooh! ME! ME! PICK ME VANESCH!

 

[vanesch]

oh! oooh! ME! ME! PICK ME VANESCH!

Sorry, I'd love to, but I still have to place my brother in law, my 2 sisters, my uncle, my 3 nephews and a few buddies of me