From Wall Street Journal article:
"The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter. The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance. Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively."
Is this right? Is it legal? It is clear that executive pay has gotten out of hand, but is the correct way to remedy the problem to have government use laws or "moral suasion" to dictate pay? This seems to be the first steps down a slippery slope. These are private companies owned by shareholders who dictate executive pay.
Wednesday, May 13, 2009
Capitalism vs Socialism
A recent editorial in the Wall Street Journal observed:
"What caused this recession? We still don't have a simple explanation. Such is the uncertainty sapping the country's confidence that in a recent Rasmussen Reports poll only 53% of Americans said they prefer capitalism to socialism; 27% were unsure and 20% preferred socialism."
A number of political pundits agree that the current economic crisis is causing the country to shift from a mindset of free market enterprise since Reagan in the 80's to a new period favoring socialism. We will continue to discuss the merits of the debate, but would like to include a quote from Warren Buffett for the time being:
"Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 211⁄2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges. Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead."
Before proclaiming death to capitalism, it is important that people review the broader historical spectrum and compare the last century in the US with other systems throughout time and domicile.
"What caused this recession? We still don't have a simple explanation. Such is the uncertainty sapping the country's confidence that in a recent Rasmussen Reports poll only 53% of Americans said they prefer capitalism to socialism; 27% were unsure and 20% preferred socialism."
A number of political pundits agree that the current economic crisis is causing the country to shift from a mindset of free market enterprise since Reagan in the 80's to a new period favoring socialism. We will continue to discuss the merits of the debate, but would like to include a quote from Warren Buffett for the time being:
"Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 211⁄2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges. Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead."
Before proclaiming death to capitalism, it is important that people review the broader historical spectrum and compare the last century in the US with other systems throughout time and domicile.
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