And the more fucked up thing is, the government GIVES them bailout money. If I were in government I'd tell them to go fuck themselves. And those CEO's, they never officially get canned, the CEO of ford made $28 million in ONE QUARTER while Ford lost $12 BILLION. And when the board fired him, I bet they gave him another $25 million.

At some point, enough is enough. And when the CEO of a company that's bleeding red ink year after year is making 8 figures and is getting paid another 8 figures when he gets fired, enough is enough.

IRSistherootofallevil

No duh.

Sabre_Justice: Okay, no more long name.

Christan_Eff

Now that being said, economists also tend to premise theory on the notion that man is a "rational actor," aka "homo economicus," and foundation for such a premise is flimsy... at best.

But back to the original point, I don't know who the "everyone" is that says socialism fails because of human nature. Both socialists and capitalists, generally speaking, are interested in maximising their utility. A capitalist would often tie this concept to short term profit. We can see how that is going. Socialists would argue that the individual maximises utility when society maximises utility, i.e. "if nobody's starving then the chances of my being mugged are greatly reduced, and thus my well-being rises with everyone elses'." Unfortunately, few have made any wholehearted efforts to enact such a system. Maybe that is changing or will change soon. In any event, both systems live and die on the corruption of the individuals therein, not, as you claim, by way of human nature writ large. The vast majourity of people are likely well-intentioned (and, not coincidentally, virtually powerless in the grand scheme of things).

Your point about education is well-taken: compare U.S. education and social welfare structures (not to mention happiness and quality of life statistics) to those of Northern Europe, and your point becomes incredibly well illustrated.

Christan_Eff

EthnicRedneck

The goal of the insurance industry has transformed, from proviing a service for people in need (car accident, death, etc) to a mechanism to take peoples' money and then deliver as little as possible when there is a claim.

Its all about taking in as much money as you can with a big smile on your face, and then when people expect that money back, delivering as little as possible.

doormat

Under Wall Street rules it doesn't matter if your company is profitable. You have to be more profitable than you were at the same time last year, you have to be more profitable than the week before, the month before, the quarter before.

This unhealthy attachment to growth is the problem. If it were simply a matter of "Hey, did you make more money than you spent? You did? AWESOME!" the world would be much better off.

Jordan Lund

On the other hand, inputs like "services" and "service industries" are zero-sum economic activities which could be called "parasitic" because they don't actual contribute to GDP growth in a true sense but rather "take a cut" from true growth in exchange for some "overhead" value to the whole. Normally when done in moderation this provides a useful contribution because there are many overhead activities that must occur simply to "make" more population or efficiency growth happen.

For those from a corporate world-view: there are only two profit-centers and all the rest are cost-centers. The financial industry is a cost-center just like a corporate finance department. Some finance departments discover they can make more money with leasing that with : think GMAC vs. GM. This attempts to make a cost-center a profit-center. The problem is that the cost-center services tend to be the first to go (they're inefficient) so now the profit-centers suffer (so maybe R&D profit centers get outsourced). Ultimately if no one is making cars, the car financing isn't going make any difference because now your economy isn't based on efficiency anymore but instead is based only labor-limited businesses in a society that has no labor surpluses (compared to India or China or other developing nations). More outsourcing occurs and more inefficiency follows. The problem is that efficiency always pays better in the long term than services.

Between outsourcing and financial "robbing-Peter-to-pay-Paul", the core economic infrastructure of the US is being liquidated to maintain a faux growth. It's akin to relying on anorexia to look lean-and-mean - ultimately the internal organs and bones are eaten away to supply the nutritional needs that remain despite the mixed up intent. Another analogy: bacteria are parasites to larger animals. These bacteria either coexist as an ecosystem player normally or they "get too greedy", "too virulent" and they create pathological diseases or even kill the host despite themselves. This is exactly what's happening in the USA today.

TickedOff

Rusted

I see the whole thing as a war between people's greed for money and status, and the more fundamental urge to make something cool and valuable. The financial services industry is very good at sucking in people who are hardworking and ambitious without being too smart or scrupulous (I was a finance major and saw this firsthand in college; the really smart people I knew steered clear of it because they didn't want to spend their 20's working 100-hour weeks doing spreadsheets for The Man). Part of the problem is that people unconsciously assume that just because you're being paid a lot of money you must be doing something valuable, which is like assuming that just because Enron is reporting record profits they must be on a tear.

There's a difference between making money and getting money.

dunross36

Imaginary_Friend

Thanks for your brilliant statment!!!

Die_Fledermaus

The answer is simple: outlaw corporations-as-persons; require everyone who has a financial interest in an organization to be individually responsible for the actions of their company. Require companies doing business (of a certain $ magnitude or greater) in the United States to be headquartered here, to employ a high percentage of US citizens at all pay scales, and to pay local property taxes like every homeowner.

@Ogman - who is "they"? The "they" who are in a position to be able to do something are the ones benefiting from it. They aren't going to do this willingly! The "they" (meaning "us") who object don't have the power to effect change unless we organize and consistently use our spending (or lack thereof) to destroy the abusers. Let's say we've identified XYZ, Inc. as a huge abuser of their corporate power. Could we make it so shameful to do business with them or with anyone who does business with them that they were forced to shut down?

Keter

humphrmi

ogman

It takes educated and intelligent people to sacrifice short-term gains for long-term rewards, and we as a population are getting stupider by the day.

Mr. Gunn

The investors profits in Sally Mae in the past few years were huge. Had I sunk some money into that I could have had my student loans paid off.

bohemian

CEOs do get paid too much in most cases, but if you think that's the case, why not hire members on the board that will actually pay them accordingly?

People in finance are only responding to the demands of stockholders for ridiculous amounts of short term growth because if they don't then they'll be out of a job. Stop shooting the messenger.

SOhp101

Short term vs. long term: GM vs. Toyota.

TechnoDestructo

Sort of like saying your FICA deductions on your paycheck isn't really a "tax" becaus eyou'll get it back when your 65.

I see your point, but if the money is being "redistributed" into mutual funds and retirement funds it's money that is not currently in the economy except inside the capital gains system.

Good analogy: My family have owned a business for 25 years. Sales peaked in 1996 at seven million. Today the company barely breaks even. (I'm not involved in it.)

My parents are not re-investing past profits into the company. They took the profits and invested it in their retirement and capital gains. Today they earn money off capital gains, and they only keep the business around to keep the employers employed and to be part of the group health plan. They did this because they wanted to retire early, not devote their entire lives to the growth of the business. That was their rightful choice. The company could close tomorrow and they have their money divested from it.

I think more business owners (not to mention corporations) are doing this now than ever before.

I think what Bogle is saying is that in the 1950s people like my parents would have continued to reinvest the profits back into the company and created a larger company with more employees and longer term goals.

Today, a lot of entrepreneurs ad executives simply take the profits of their enterprises and invest them in capital gains mechanisms. As soon as they have enough money to hire money managers, and as soon as they have enough money to live off the capital gains, they don't reinvest in growth. They only invest in growth in shorter terms until they have enough capital to live off their portfolios or other non-business-related investments.

The analogy is good, I think. Think of the employers of this company as "the American people". If my parents had decided to reinvest past profits the company would probably be larger, with more employers. (At the same time they would have had to work longer and possibly risked their retirement fund.) Instead at some point they chose to take the profits and invest them in other things than the long-term growth of the business itself.

So in essense, they "took money out" of the company and put that money in capital gains, benefiting neither the company nor the employers but rather providing them with the means to retire early and shed their dependence on the company's growth.

In any case, I don't buy the argument that just because more people are "encouraged" to tie their retirements to private capital gains mechanisms that this makes it a "democratic" system from which all benefit.

The statistics on the increasing concentration of wealth in the top tier undermines that entire argument. When are people going to let go of supply side economics; trickle down doesn't work, unless by trickle down you mean "trickle between butt cheeks of the wealthy and invested down to the rest of us, so we can fight over the droplets."

But I suppose that just makes me a un-American commie.

olegna

The article is arguing for limits on executive pay, focus on long term profits and greater payments to share holders. I am not "The Man" as i am not one of the mulitmillionaire CEO's of the finanical mangement companies.

The reason all the focus is on the short term, is these CEO's are grabbing as much money as they can, knowing that this situation can not last for ever. Then they stockpile it away. Taking the money OUT of the economy.

From the article "The evidence is quite compelling that today corporations are run in a very important way to maximize the returns of its managers at the expense of its stockholders.

Its CEOs, well, the upper level of five or six top officers." and

"If you didn't make a $129 million last year -- I'm presuming that you didn't. You don't rank among the highest paid 25 hedge fund managers. A $129 million doesn't get you into the upper echelon."

Die_Fledermaus

Seriously, I can't think of too many other reporters who are leaning as far forward as he is to point out the bull$h1t know as our collective governments and corporations. Yes there are some socially responsible corporations out there, but they are far outnumbered by the money grubbing CEOs of the land. (Seriously over $129M for managing OTHER PEOPLE'S MONEY? WTF? Pay them 1% that and they're still comfortable. The other $128M+ needs to go back to the investors and financial firms worker bees.)

taka2k7

Contrast that with I forget which executive at Toyota said something like (paraphrased) "I never worry about Toyota's stock price. I don't plan to sell it."

I totally agree with the gist of the article - too many companies are worried solely about the bottom line, to the exclusion of delivering a competent quality product with competitive customer service. You know, qualities that tend to drive long term profits and return visits from consumers.

I've been a partner in a small business before, and the correct attitude isn't "how can I wring as much profit out of the next week as possible?"

It is "how can I act in a way that reflects that I will be in business 10, 20, 50 years from now?"

InThrees

[digg.com]

VidaLondres

Dan-Gilbert

Adam291

BaysideWrestling

When I invest, I'm resigned to knowing some paper pusher is going to be earning more off of my money than I am. When I buy a car, I know the company that built it plans on it collapsing within 8-10 years. When I buy insurance, I know the company that issues it, from that day forward, is looking for a way to cancel my policy the second I make a claim. I know that if I ever have to admit my parents into a nursing home, I'll have to spend every afternoon there making sure medications have been administered and daily procedures done because there won't be enough staff. Don't even get me started on cell phones and cable providers.

These fund managers, etc., are TAKING from the economy. But not just money - also the incentive to do ANYTHING that doesn't immediately show as a gain on that quarter's financial report. Little things like providing contracted services, customer service, or even just sheer honest, ethical behavior.

EVERYONE is out to screw us in America now. It's just that, after 30 years of it, we're all reigned to it.

BaysideWrestling

People have lost patience. They don't have respect for long term investment. They don't save money.
People live paycheck to paycheck, heavily in debt. They are doing anything possible to keep the lifestyle they've become accustomed. They borrow against their homes. They roll debt into second mortgages.

I think you'll see a change in the coming years. It's harder to file bankruptcy. The housing bubble is bursting. People are finding it harder to hide debt. They'll soon start borrowing from their 401K's. Identity theft is on the increase. Soon, more and more people will turn to crime to keep their lifestyle.
There is a real lack of ethics in society today.

yikz

America builds "yes men" not "entrepreneurs."

axiomatic

It goes into the pockets of hedge fund managers, mutual fund managers, bankers, insurance companies.

This is what every argument along the lines of "The man is pocketing your money" boils down to, and even more so today: We are the man. It's like that mobile phone commercial a few years ago, "But sir, aren't you the man?"

Financial Service companies are, for the most part, publicly held companies just like the rest of the economy. My point is, that 560 billion isn't taken out of the economy, it's profits for publicly held companies that are redistributed to their shareholders, and it's quite likely if you have a retirement plan or mutual fund you are one of those shareholders.

humphrmi

Then the S&L blowout we had, lotta folks lost money over that. Sure it was a disaster, but we recovered with no permanent damage.
[en.wikipedia.org]

Now with this credit issue, this is affecting how many Joes and Janes? Not many, only the ones that let their cards take over their wallets.

And this mortgage ordeal? Same thing, lotta folks let their spending get out of control and it dug them a nice hole.

Look at it on the bright side folks, right now it's a buyer's market for homes, foreclosures or otherwise. You can make any real estate broker sweat blood over a deal if you play your cards right.

Nighthawke

Eventually, the merchant class subverted the whole society (by having a huge military naval organization to protect the trading ships from their competition, or simply to bludgeon unwilling trade partners - opium wars, anyone?).

The net result was that, for an anglo-saxon bourgeois, the ONLY measure of success was not how much he improved society, but simply how much money and power he was able to muster in order to improve his own lot.

The ultimate conclusion of this mindset is a company that does nothing but shuffles paper (or increasingly binary bits on wires and in computers) and makes a lot of money.

We have seen the future, and it is now.

Jean Naimard