How does one solve the apparently unsolvable ills of Capitalism?

Mr. Kristof, an Op-Ed Columnist at the New York Times, wrote an insightful article titled, “Mistresses of the Universe,” that cites good research which relates preponderance of males on Wall Street and the high-risk decisions taken in turn. The article argues for more diversity in all Financial Institutions, especially increasing Women population.  There is no argument against more diversity on Wall Street — Women, African American, Asians, Hispanics, et al. — it can only be positive, however, I do not believe that will solve Wall Street’s ills.

I have seen corporations with great diversity yet forcing a singular agenda and eerie silence at the top no matter what the mix —  don’t see evil, don’t hear evil and hence don’t talk evil being the very easy to adopt philosophy no matter White, Black, Asian, Hispanic, Man or Woman.

Wall Street is burdened by its very nature — it deals with money. Firstly, it will attract people who want to make money, loads of it, and at any cost (Go to, “Why not socialism for all in bad times?” to read mind-numbing utterances from Mr. Welch, exposing himself as yetanother “money at any cost” guy).  The ones that do join the Financial sector due to academic achievement or lack there of (it is the average mind on the average that makes it to Finance) or “my-parents-told-me-so” phenomenon will soon find the temptation too great.

You see, money is pouring out of every orifice at these companies since they have cornered the market on dealing with it. Regulations are a must to control this industry, but as we have seen over and over again that regulations go by the way side under the pressure of the financier-lobbyist-law maker nexus and I am ready to bet that this is not the last time the world populace will say “deja vu” in this regard.
The problem, you see, is with the financial model in a capitalist society – at least in the version of capitalism currently being practiced in America.

The only answer is to cap the amount of money these folks can make (all types of compensation put together),  a maximum wage limit very much like the minimum wage limit. The cap for the non-government funded company executives should obviously be much higher than 500K but they should still be capped. For, I cannot imagine an individual who as a worker at a company, not as an owner, can single-handedly make billions for the company (single-handedly making billions is the only way to justify the hundreds of millions in compensation that thousands of executives have been making).  The current corporate environment is so corrupt that all bad decisions that cost the company hundreds of millions are either swept under the rug, blamed on extraneous, uncontrollable forces or on people lower down the ladder. I am absolutely convinced that there is not one CEO or Senior Executive at a fortune 500 company — not including the owner/inventor of an idea that started a company — that deserves the money they have made.

Grades of pay should exist before achieving the maximum, even at the same level, so there is always something to work for – this is of course the right way to structure compensation but should also shut up those who consistently point to human greed as an essential virtue in the capitalistic model. And I find an inherent problem with their logic anyway: unbridled, self-payment methods are actually an anomaly and not the norm! There are a LOT, and I mean a LOT of people who are doing a great job knowing very well that they will not rake in unlimited amounts of money. The President of the United States of America, all Public Servants, Teachers, Professors (though in some cases they are neither good nor not greedy), Pilots, Engineers, Policemen, Firemen, Armymen, etc. etc. etc. There are hordes of great workers and leaders even at corporations, people who continue to strive for the betterment of the company and themselves knowing very well the level of thievery going on. It is time for virtuous leadership to be the criteria and not the level of greed and co-option of morals.

Such a model should put the brakes on excessive greed and allow for risk while ensuring it is approached at a steady pace rather than break neck speed. It will still encourage growth but real growth at a more controlled pace as oppose to the catastrophic downfalls which affect everyone and the stratospheric highs that benefit only a few.

I will call this “excess free capitalism” and we should all push for it because enough is enough and so is true with money, or should be.

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4 Responses

  1. James Grant, Editor of “Grant’s Interest Rate Observer” has a collection of essays published in a book, “Mr Market Miscalculates”. In one from June 15, 2007, titled “Fire the Brainiacs”, he criticizes the quants for being way too clever and sweeping very real risks under the rug. He quotes that ‘engineering has delivered safer planes and better skyscrapers while financial engineering has brought us more crises’. He writes “Only very smart people could dream up such a wonderful idea {that a clump of low-rated mortgages could be transformed into a highly rated security}. And only educated people could accept it (they are taught to respect great minds, no matter what cockamamie conclusions those minds arive at).”

    He concludes: “…I remember Warren Buffet’s comment on brainpower in his preface to the fourth revised edition of Graham’s Intelligent Investor. Wrote the Sage of Omaha: “To invest successfully over a lifetime does not require a stratospheric IQ…”
    I have given this matter some hard thought. Not only does a sky-high IQ not guarantee success, but it also could pose a danger, not only to the genius’ own net worth but to the safety and wealth of others. I there urge the relevant regulatory bodies of the United States and Canada to incorporate an IQ test into their securities licensing exams. There would be no minimum passing grade. But nobody would be allowed to work in the financial markets in any capacity with a score of 115 or higher. Finance is too important to be left to smart people.”

  2. Not directly relevant to this thread, but I think your readers will like this:
    http://d-squareddigest.blogspot.com/2004/05/d-squared-digest-one-minute-mba.html

    Avoiding Projects Pursued By Morons 101

    Good ideas do not need lots of lies told about them in order to gain public acceptance.

    …..

    The Vital Importance of Audit. Emphasised over and over again. Brealey and Myers has a section on this, in which they remind callow students that like backing-up one’s computer files, this is a lesson that everyone seems to have to learn the hard way. Basically, it’s been shown time and again and again; companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.

    • Sorry Srini, I don’t agree with the basic premise of the article you refer to in your comment. Intellectualism is hardly the problem with capitalism, intellectuals from all walks of life are against capitalism – from Karl Marx to Che Guevera at one extreme and people like you and me who, to a lesser degree, oppose capitalism for its unbridled excesses. Quite to the contrary, Intellectuals more often lean towards socialism than not and intellect and heart/compassion is the driving force behind most intellectuals.
      It is vile, at best ignorant, to defile intellectuals the way the author of the article is doing. We don’t need to lean on Quran, like the author of the article referenced in your comment, or any other religious text to decipher the ills of capitalism. He has his own agenda and all that will happen is replacement of one agenda (unbridled capitalism) with another (religion) and replacement of one set of oppressors (rich & powerful) with another (theocracy).

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