New Capitalism’s Excessive Corporate Paycheques are Absurd

We’ve been thinking more about this New Era capitalism. In the old capitalism, owners were stingy. The idea was to exploit labor…not to be exploited by it. But that has changed too. The capitalists seem to have lost their heads; they think their new Zoo-Capitalism is all upside. And since it is all upside, there is no reason to worry about the downside.

Control costs? Heck, they’re all going to get rich; why bother to be a skinflint? They also have an outsize faith in money and financial incentives. So, they figure if they pay managers…or money managers…excessively, somehow they will get outsize returns. Give the corporate managers big stock options, they believe, and these hacks will make big profits. Likewise, give the hedge fund managers a big percentage of the gains…and they will make big gains.

As a logical matter, it seems absurd. If a manager can’t deliver profits at a salary of $1 million a year, how can he do so if you pay him $2 million? Why would he be holding back? And why would competent managers need to be paid so much more than they were before the New Era arrived? Every generation must have a number of successful managers; if salaries were only $1 million a year, rather than $10 million per year, what would they do…become crane operators?

And what about the hedge fund managers…and other financial professionals? Even if their salaries were only half as high, they wouldn’t likely give it up to become short order cooks.

The whole idea of the New Capitalism is a humbug. You can’t set aside common sense and standards of prudence just because some yahoo tells you the new free market will make you rich. The old free market can make you rich, but not if you ignore the old rules that go with it.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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1 Comment on "New Capitalism’s Excessive Corporate Paycheques are Absurd"

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greetings billy,

i’m not a very good writer, being lazy, as well as prefering multi-dimensional mathematics and color graphics.

but, i’ve noticed a similar stylistic problem i usually have…

paragraphs 1+5 make a good rant as well as 2-3 make a good point.

perhaps, you should just rant first and *BLEEP* any naughty words. BLOODY &*($%#@ censors.
and then do the logical arguements on facts and figures.

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