Monday, February 23, 2009

Sticking It To CEOs

With much fanfare and popular support, Mississippi Senator Claire McCaskill called a few weeks ago for a $400K salary cap for executives in firms getting public bailout money. $400K is the salary of the President of the United States, though of course, presidents get perks that even the titans of corporate America can only dream of. The “populist” clamor for sticking it to CEOs got to be so intense that even President Obama, the Forgiver-in-Chief who only wants to “look forward,” felt obliged to weigh in. He supported the idea, kicked in another hundred grand, and then implemented the proposal in his stimulus package in a way that will affect almost no one. Still, it’s the “symbolism” that counts. Overnight, top executives have been transformed from heroes into villains.

Needless to say, they deserve all the contempt we can muster and, in most imaginable circumstances, it makes sense to villainize them. But this latest “populist” eruption, for all its merits, can be profoundly misleading. It also reveals how mindless and ahistorical what passes for a “left” in our country has become.

It can be misleading because it puts the blame for economic turbulence on “malefactors of great wealth” instead of on the system they exploit for their own advantage. Had the Bush Treasury Department and the Federal Reserve (with Timothy Geitner leading the way) not let Lehman Brothers collapse, the current spate of crises in the financial sector would doubtless have unfolded at a different pace and perhaps with less severity. But the incompetence of the Bush administration and the Fed is not the reason why credit is now virtually frozen. The problems are structural -- and were therefore bound to have their due, one way or another. Similarly, had Wall Street and its overseas counterparts been a tad less greedy, the misfortunes engulfing the world economy now might have been mitigated somewhat. But, in the final analysis, the crises we face did not result from the misdeeds of bad individuals. Again, the problems are systemic – a point that largely eludes acknowledgement among those whose sympathies lie with “the wretched of the earth.”

This is why calls to stick it to CEOs are largely beside the point., the popular base of “left Obamaism” congratulates itself for the largely symbolic pay caps in the stimulus bill. So do others who have stuck their own two cents into the fray. These contentions are not without merit. They show how Obama can be pushed into taking a more progressive direction than his Wall Street friendly advisors might like. But they also show how intellectually bankrupt those who rally behind “populist” causes have become.

For one thing, it’s not clear what our new populists think the problem with exorbitant CEO salaries is: is it that they’re inefficient?, that they represent a kind of profiteering (but of whose wealth? the stockholders?), or is the problem that top executives’ salaries offend egalitarian principles so egregiously that even liberals must take notice? Perhaps it’s some inchoate mixture of all of the above or something else altogether. But, at an intuitive level, it is plainly the offense to equality that is doing the work. Presumably, no one on the “left” gets exercised about shareholders being taken advantage of or about how corporations might be made meaner and leaner.

If the problem is indeed inequality, it’s not that there aren’t ample bodies of theory available to enlighten the discussion. For more than a quarter century, equality has been Topic A in academic social and political philosophy and in cognate fields. Inevitably,all this attention has yielded advances in understanding. However, as is often the case in our political culture, these advances have not made their way into either mainstream or dissident thinking. For those outside narrow academic precincts who know about them at all, their interest is strictly “academic.” The result is that proponents of the new populism are blissfully ignorant of work that could make their efforts more coherent. Thus their opposition to exorbitant CEO compensation is only intuitive, not principled. It is of a piece with the reflexive goody-goodyism that has become emblematic of “progressive” politics today.

This is why the “pay cap populists” endorse positions that thoughtful egalitarians can only find bizarre. What they favor is not equality, on any plausible construal of what that notion involves, but generous limits on inequality – for those who work in corporations and financial institutions. [If they have opinions about athletes or actors or pop stars or, for that matter, investors, they keep them to themselves.] Specifically, they favor 1950s levels of inequality – levels that were, needless to say, thoroughly inegalitarian, though better than what we have today. In effect, they are not so much fired by egalitarian sentiments as by nostalgia for the Eisenhower era.

On matters of fiscal policy, Bill Clinton was an Eisenhower Republican too – albeit a timid one. Ike launched the inter-state highway system; Clinton let highways and bridges deteriorate. But it is one thing to adapt Eisenhower policies to current conditions, and something else to turn those policies into a vision of ideal arrangements. That’s the point we’ve now reached. Of course, the 50s were followed by the 60s, the era of “the imagination in power.” If we’re doomed to cycle between those poles, and if we don’t want to succumb entirely to the situation we now face, we’ve got to get to work quickly to get on to the next phase. To that end, it’s far from clear that that pay cap populism is something to encourage.

I’ve already suggested that vilifying outrageous salary levels draws attention away from the structural features of the economic system that make these outrages possible. The problem, though, is that the idea that there are alternatives to the system in place has fallen into desuetude. Today’s “populists” don’t favor alternatives to capitalism; they only favor saccharine ameliorations of some of capitalism’s deplorable consequences. For them, this is not even a principled choice; the idea that there are fundamentally different ways of organizing modern economies is a relic of a bygone era to which, if they think about it all, they bid good riddance.

Indeed, it is only for those of us “of a certain age” and perhaps also for the generation too young to have been warped by the Reagan-Clinton-Bush Family consensus -- for those of us for whom “red” means something other than “Republican” -- that the current crisis in global capitalism does not betoken a crisis of capitalism itself. Europeans and others, with richer socialist traditions to fall back upon (even as they have fallen farther away from them in recent decades) are not quite so disabled. In any case, the time is long past due for anti-systemic resistance.

Caps on executive compensation can be accommodated within Obama’s “pragmatic” framework. Perhaps they can even gain a measure of “bipartisan” support – especially if they are more symbolic than real. This is not something to be despised. But neither is it anything wholeheartedly to praise. The time is upon us already where it has become urgent to transcend the horizons of the Obama framework. To that end, congratulating ourselves over pay caps in the stimulus bill can be more of a hindrance than a help.

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