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Capital Flow Toward the Elite and the Economy

Friday, February 6, 2009

While reading the Financial Times this morning (great newspaper, by the way, AbuKhalil, a fellow radical lefty, always talks about how great the elite capitalist class magazine the Economist is; well, I’m here to say that my favorite elite capitalist class news source is the FT, but, I digress) I was struck by a specific paragraph in this article:

Wall Street bankers complained that the restrictions imposed on them and their companies would hamper their ability to recruit and keep top talent in areas such as trading and investment banking.

It got me thinking about capital accumulation and how it tends to funnel to the top strata of society and how, in corporations, when it comes to payment, money tends to be concentrated among the board members with little of it getting to the workers.

My normal reaction maybe five years ago would have been.  “This is outrageous!  They should spread the wealth around!”

But, as of now, I’m thinking this might just be the normal consequence of capitalism.  It is inevitable that CEOs and board-members will be getting higher and higher benefits packages and more outrageous executive pay and bonuses as capitalism in this country progresses.

Over the past decades capital has been accumulating at a higher and higher rate and has been getting concentrated in fewer and fewer hands.  I tend to take the capitalist economists at their word that if there is limits placed on executive pay or forceful relocation of capital toward the masses (which is not socialism, just simple capitalist tax policy) that it may, indeed, affect the bottom line of companies and the stock market in general.

Executive pay has been getting higher and higher due to the competition between the capitalists, and in order to attract better talent, as bubbles have increased, there has been a need to have bigger and more bloated severance packages, pay, and bonuses to attract “better” talent.  While, indeed, it is true that many of these people with large salaries have run the banking system into the ground they have indeed created much more wealth concentration within their companies (towards them!) and were able to create much more fictitious capital (before the collapse) then before.  Because of this they have been able to give themselves huge pay raises; no smart conservative and liberal elite economist has ever argued that capitalism was supposed to spread the wealth (just create more capital more efficiently).

So, is it unfair to cap salary at $500,000?  Well, in a certain way, it is at least silly as talent will go toward other companies and create a two-tiered banking system.  In another way it is only a short speed bump for the capitalists as those restrictions will soon be lifted and left meaningless in a few years.

Basically, what I see here, is that under our current system there is no way to stop exuberant amounts of bonus pay for top executives in the Fortune 500 companies because that is where the system is inevitably leading us.  Capitalists kinda have no “choice,” almost, but to give themselves gigantic paychecks in order to compete on the market.

What this does show us, however, is the true contradictions of the capitalist system.  In certain times of crisis (more so than in “good” times) the curtain gets drawn back and many in the public can see the system for what it truly is.  It may get to the point, in the future (especially when there will be no more Third World to exploit to prop up the capitalist system in the U.S.), that CEO pay is so exuberant and the contradictions in society so great that there might be one gigantic collapse as each and every time the government bails out the elites they just stave off another (worse) crisis.

Wage Decline

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3 Comments
  1. roland permalink
    Friday, February 6, 2009 4:36 pm

    Yes, and what the economic crisis has done is throw class conflict into relief. Here in Australia there is a row between the political parties over the stimulus package. Three quarters of it is targetted at low income earners, public schools and so on. The opposition, which mostly represents the owners of capital and wealthier end of town, has objected to precisely these elements of the package. Why give money to the poor? They’ll just ‘waste’ it. And public schools? Our children wouldn’t know what one is.

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