What Have the Rich Ever Done For Us?

People who make a lot of money should whine less. But many of them are actually do create jobs.

In a column titled “The Plight of the 1%,” Felix Salmon aptly demonstrates that very rich people whining about how much they pay in taxes come across as churlish, indeed. Whatever the merits of their arguments, attacking those far beneath them on the economic ladder is unseemly.

Of an extraordinarily successful investor who recently complained about the 45 percent of Americans who pay no federal income tax, Salmon notes that 61 percent of said individuals earn under $20,000 a year whereas said CEO is worth almost $6 billion. Doing the math, he points out “that works out at $20,000 an hour, every hour of every day, even when he was sleeping, since the day he started working.”

Again, whatever the merits of that degree of earning disparity, it’s probably best to leave that argument to someone else.

Salmon closes the column, though, attacking former BB&T CEO  John A. Allison IV, who says that any rule requiring public companies to disclose the ratio between the compensation of their CEO and their median employee would constitute “an attack on the very productive.” While that’s a rather silly argument, Salmon makes a far sillier one:

I’d love to know how John A. Allison IV measures his own personal productivity and determines that it’s extremely high. Because, speaking as someone who earns a very healthy salary myself, I have no idea where I’d even start on such a quest. I could measure words written per day, I suppose, but how much is a word worth?

The fact is that the ultra-rich really aren’t productive, and instead mostly collect rents from people who are. This is what capital always does, of course: it buys labor (some people call that “job creation”, even if the jobs being created are mostly in China), and then extracts dividends from it.

It’s no doubt true that running a bank or writing a financial column for a prestige outlet is a more enjoyable way to make a living than working an assembly line, mining coal, operating a jackhammer, or any number of other physically demanding jobs that pay a whole lot less in both dollars and prestige.

As Chris Rock has pointed out, those of us with careers need to pipe down in the presence of those with jobs.

But that doesn’t mean that only those with jobs perform valuable services for society. Salmon’s work may not be as demanding as that of a longshoreman or long haul trucker. But far fewer people have the requisite skills to do it and, surely, the ability to explain complex financial issues to lay readers is worth something.

As to Allison, he isn’t some yahoo who got hired to head up an already-profitable company, ran it into the ground, and still made out like a bandit. No, he spent almost four decades at BB&T, working his way up from manager to  CEO and grew the bank from less than $5 billion to over $150 billion in assets.  While much of that came through shrewd mergers and acquisitions, he’s almost certainly a net job creator.

If he’s netted a few billion along the way, I’d say he’s earned it. Feel free to bust his chops over his Ayn Rand fetish, though.

FILED UNDER: General
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. legion says:

    James,
    You’re on the right track, but there’s a recent twist that’s missing from this analysis… In past generations, people with lots of money could only make _more_ money by investing in products – physical goods. Factories, commodities, even speculation requires the existence of objects to speculate with, and those objects require job-having human beings to exist.

    Nowadays, that’s not the case. Now, with the deregulation of high finance that’s happened over the last decade or three, we have the sort of system that created the housing bust:
    – People with money buy up lots of pieces of paper that represent things (in this case, mortgages)
    – They sell those pieces of paper to other people with lots of money
    – Those people pay ratings agencies to say those pieces of paper are now worth _more_ money
    – The pieces of paper get sold to someone else
    Profit. Rinse. Repeat.

    This is why the top of the top don’t want the system to change – this is the system they built. They don’t have to build anything, produce anything, hire anyone, or (most importantly) pay anyone except the one small group that keeps telling everyone else that the pieces of paper are worth more now than they were last year.

    That’s why CEOs can run companies into the ground and still get paid – the people paying them don’t care what happens to the companies. That’s why the rich are no longer “job creators” or “entrepreneurs”, or “anything other than parasites”.

  2. michael reynolds says:

    As a person who has held both jobs, (waiter, restaurant manager, janitor, library clerk, bowling alley mechanic among others) and a career, (writer) I can say that in no way, shape or form do I “deserve” what I have. I have what I have because the DNA genie said, “Let’s give this one a really good imagination and some ability with language.”

    Did I work hard at exploiting the gift o the DNA genie? Yes.

    Did I work even harder at waiting tables? Hell yeah. And for very little money.

    I was handed an exploitable talent. Given it, like a rich kid inheriting a fortune, or George Clooney with his face. Boom, here you go: you can make good money if you try. And no, sorry, not everyone gets that gift of the DNA genie. Some people get Down Syndrome instead. They don’t deserve what they got. an I don’t deserve what I got. Life isn’t fair or just.

    Billionaires are billionaires, and hobos are hobos because that’s how the dice landed.

  3. Herb says:

    If he’s netted a few billion along the way, I’d say he’s earned it.

    No doubt, but other people did most of the work. I think that’s what Salmon is hinting at here. Is Allison himself mucho productive? Or are all the people under him?

  4. James Joyner says:

    @michael reynolds: That’s a very different argument than the one Salmon is making, though.

    There’s no doubt that inherent talent matters. A lot. So does sheer dumb luck. No matter how much I worked, I was never going to be an NBA caliber basketball player, much less Michael Jordan. And neither would Michael Jordan if he’d been hit by a truck. And we don’t factor those things in enough when we consider who “deserves” what.

    But Salmon is arguing, implicitly, that what you and Jordan do are no more valuable to society than what you were doing waiting tables. And that’s just nonsense. Bringing people their food is honorable work and vital to the restaurant business. But it’s a job that most people can do, making those who do it commodities in an economic sense. Writing outstanding teen fiction or being one of the best basketball players on the planet is simply more valuable.

  5. James Joyner says:

    @Herb: Well, Allison was surely THE key factor. It was he who worked himself to the top of a piddly bank and turned it into a massive player through shrewd mergers, acquisitions, and branch expansions via his leadership and vision.

    Beyond that, though, one presumes that his senior staff was also handsomely compensated. The bank tellers and low level managers, who had zero to do with the growth of the company, likely didn’t benefit very much beyond increased job security.

  6. ponce says:

    The Walton family is worth more than the poorest 30% of Americans.

  7. @ponce:

    So what?

  8. ponce says:

    THE key factor. It was he who worked himself to the top of a piddly bank and turned it into a massive player through shrewd mergers, acquisitions, and branch expansions via his leadership and vision.

    So?

    Why is bigger better?

    I’d gladly exchange Home Depot (don’t go to Lowe’s anymore because of the ad thingy) for the half dozen or so small hardware stores that operated in my city before Home Depot opened its doors here.

    And I’d gladly have my old bank back that was consumed by U.S. bank.

  9. Ron Beasley says:

    @legion: Much of this is the result of the supply side myth. The real job creator is and always has been demand. If there is no demand for a product or service because a majority of the people have little money jobs won’t be created no matter how little taxes the so called job creators pay in taxes. It was an affluent middle class that built the economic engine that was the US in 50s, 60s and 70s.

  10. While much of that came through shrewd mergers and acquisitions, he’s almost certainly a net job creator.

    Net jobs?

    That’s actually a hard argument to make, because you don’t just look at the guy’s company, you look at the system as a whole. It’s particularly risky specifically in the ATM domain. Wasn’t that an illustration of fewer jobs per capita going forward in time?

    No, I’m afraid “this company is big” is not the same as “this company ‘produced’ net jobs.”

  11. James Joyner says:

    @ponce: So, mostly likely, are you. There’s almost no wealth at the bottom of the economy.

    @ponce: Few people agree with you. Home Depot and Lowe’s are crowded whereas the mom and pop hardware stores aren’t. Yes, the latter may be more knowledgeable and friendly. But they can’t compete on price or selection.

    @john personna: But Allison isn’t responsible for the US economy or even the banking industry. BB&T surely employs vastly more people than it did when he took it over.

  12. Remember, Nick Hanauer flips it around and says that demand for (labor intensive) goods and services create jobs, not the particular manager who orchestrates them.

    Say bungie jumping fades as a trend, and bungie wranglers are laid off. At the same time yoga picks up trendiness. Is the manager of a yoga chain a “net jobs creator” or did something else make that work?

    (Ideally the bungie wranglers are now yoga instructors, and all is well.)

  13. jpmeyer says:

    @James Joyner: That’s not the argument that I see. I see essentially two arguments from Salmon:

    1) There are many jobs where people either cannot at all or cannot easily estimate how much value they are contributing to a company or to the economy. A salesman can point out that he sold $10m worth of contracts this year, but a janitor can’t exactly quantify how much value he contributed to a company through keeping the plant clean and in running order. That then also leads him to the conclusion that many people vastly over-estimate how much value they provide.

    2) There are many jobs where one can create a large quantity of wealth without needing to create a large quantity of jobs, or even worse through engaging in zero or negative-sum activities.

  14. @James Joyner:

    But Allison isn’t responsible for the US economy or even the banking industry. BB&T surely employs vastly more people than it did when he took it over.

    If he isn’t responsible, and can’t show “net” in the real sense, how can we be sure he is a “creator?”

  15. Hey Norm says:

    NPR tired to find some of the job creators that would be harmed by the millionaires surtax that Democrats proposed to pay for the payroll tax holiday.
    http://www.npr.org/blogs/itsallpolitics/2011/12/09/143398685/gop-objects-to-millionaires-surtax-millionaires-we-found-not-so-much
    The job creators are a myth. A non-existant genus. Job Creator is simply a Luntzism to describe the wealthiest amongst us…and their only shared trait is a historically low effective tax rate.

  16. michael reynolds says:

    @James Joyner:
    I’m speaking only to the moral aspect, the quaint Calvinist notion that the people who are doing well are ipso facto deserving.

    There’s the separate issue of whether the acquisition of wealth is necessarily connected in any positive way to value to society. In the extreme case we balance the billionaire who has eliminated 100k American jobs and enriched himself, vs. the NICU nurse who saves the lives of children on a daily basis and makes just enough to get by.

  17. I think basically Republicans are playing (or more generously mistaking) a correlation for causality swap.

    It is true that companies that have many employees have highly paid (and often rich) bosses. So which caused which?

    Which did Starbucks need, a good CEO, or a population thirsty for better coffee?

    Or better yet, in the zero-sum game that is mass market pizza delivery, does Dominos “create jobs” or just steal them off “Papa John’s” (or vis versa)?

    I mean, I don’t suppose you think that with a higher tax rate on million-dollar earners we’d all drink less coffee, eat less pizza, and reduce the market to be served!

    (And no, a higher tax rate on million-dollar earners would NOT move the price of coffee or pizza.)

  18. James Joyner says:

    @michael reynolds: I think there’s a rough correlation between earnings and desserts, but there are glaring gaps. Physicians in most specialties are very well compensated. Nurses often make a very, very good living compared to others with a BS (or even an associate’s degree) but probably not in relation to the value provided.

    @john personna: The social contract and Laffer Curve debates are different from this one, though. One can simultaneously believe that some vast percentage of those who earn a lot of money are net producers and that they should pay a high marginal rate on earnings over a given threshold.

  19. @James Joyner:

    I don’t think your comment was really meant for me(?). I’m not discussing this from either a social contract or a Laffer perspective.

    I’m asking about what makes jobs, at a fundamental level. Now, if some rich guy hires hands for his yacht, and he is the only user of that yacht, he as created jobs, no question.

    But what are the expectations of any rich man in business? Is he the only user of his bank, and ready to run it at a loss? Or is he only willing to put jobs out there, in expectation of customers and return?

    If so, as Nick Hanauer has insightfully written, the customers are the jobs creators.

  20. James says:

    @James Joyner: I’m largely in agreement with the broad point you’ve made, that those who make $20,000 an hour shouldn’t complain the lower tax incidence of those who make less than $20,000 a year.

    But, the actual issue that Salmon is raising is on the actual tax rates that that people like Allison are far too low. The CEOs in Salmon’s article may be, in your terms, a “net job creators”, but that’s beside the point. The point is that public funds are used to educate the people they employ, service the roads that makes their business even possible, and all the other things that literally creates and services the entire free-market structure that allows for men like Schwarzman, Allison, Golisano, Schiff et. al. to become some obscenely wealthy in the first place. That’s something these self-styled free-marketters don’t get. To whit:

    Asked if he were willing to pay more taxes in a Nov. 30 interview with Bloomberg Television, Blackstone CEO Stephen Schwarzman spoke about lower-income U.S. families who pay no income tax. (italics mine)

    To make light of that fact that 47% of the country is so impoverished they don’t earn enough to pay Federal income tax is, is conduct befitting these gentelmen who animate the worst caricatures of Montgomery Burns.

  21. @michael reynolds:

    I’m speaking only to the moral aspect, the quaint Calvinist notion that the people who are doing well are ipso facto deserving.

    The just world hypothesis seems to be an ingrained part of human psychological makeup. Even though it’s easily shown to be untrue, the fact it’s so pervasive suggests that their may be or may have been some evolutionary advantage to be gained from the belief, even if it is an erroneous belief.

  22. ponce says:

    There’s almost no wealth at the bottom of the economy.

    James,

    That’s the most honest thing you’ve ever posted on OTB.

    (Provided you accept the 30th percentile as “the bottom”)

  23. Re. wealth at the bottom, a scary factoid via npr:

    According to a 2009 TNS Global Survey, when Americans were asked whether they could come up with $2,000 in 30 days, half of the respondents in a representative sample of the U.S. population said, “no.” This means that half the population does not appear to have the means to deal with a small financial shock, such as an important car or home repair, to say nothing of a large shock, such as job loss.

  24. MBunge says:

    “I think there’s a rough correlation between earnings and desserts, but there are glaring gaps.”

    I don’t think it’s a matter of gaps. It’s a question of not recognizing when the system is rigged to the benefit of some. The scam of CEO pay is one example, but I think a more specific one is Sean Hannity. Hannity makes millions of dollars a year in radio and TV, but his radio job exploits public property (the broadcast spectrum) and relies on federal regulation in order to function, yet he is required to do next to nothing to compensate the public or the government for their allowance. His television job is built on the fact that cable subscribers have to pay for Fox News whether they watch it or not. Hannity works hard and produces a product that some want to buy, yet it is the built-in inequities of the system that enable him to earn as much as he does.

    Mike

  25. ponce says:

    Yes, the latter may be more knowledgeable and friendly. But they can’t compete on price or selection.

    When you throw in the time and money I spend driving to Home Depot (won’t go to Lowe’s again), plus the time I waste waiting in the long lines there, I’d wager my old neighborhood hardware store was considerably cheaper for me to visit.

    Most of the “brilliant” innovations America’s dumbass CEOs have come up with over the last 20 years or so are just ways to pass their costs onto their customers or the government.

  26. legion says:

    @ponce: @James Joyner:

    Why is bigger better?

    “Bigger” may be better or worse, from the point of view of the consumer – a bigger company (like James’ Home Depot example) may be able to offer a wider selection and better prices. But it also provides little, if any, alternative if that one store doesn’t have what you need, at a price you’re willing to pay. It’s better for the bigger company, in that they have more control over the market and less competition, but those same points make “bigger” worse for the overall economy, in that fewer competitors means fewer jobs, and lower wages for the remaining jobs.

  27. Herb says:

    @James Joyner:

    The bank tellers and low level managers, who had zero to do with the growth of the company, likely didn’t benefit very much beyond increased job security.

    Well, I wouldn’t say the low-level players had zero to do with the growth of the company. I think it would be fair to say that their contributions were necessary for the growth to occur in the first place.

  28. michael reynolds says:

    I think there’s a rough correlation between earnings and desserts,

    Is it enough of a correlation for us to consider it meaningful? I would have no ideahow to calculate that, but I suspect if the metric you were to use was something along the lines of, “improves the odds for human survival, and the continued growth of human civilization,” there would be no meaningful correlation. The average plumber does more more survival and for civilization than the average banker.

    I think it’s nothing but faith that causes us to believe the wealthy are also the productive in those terms. A top of the line meth dealer may be wealthy. A pornographer may be wealthy. A dictator may be wealthy. Kim Jong Il was wealthy.

    I doubt a statistically valid case can be made that the wealthy are a net plus in terms of human survival and human civilization. Maybe. But it’s not something I can accept merely on the assertion of faith.

  29. Hey Norm says:

    @ James…

    “…To make light of that fact that 47% of the country is so impoverished they don’t earn enough to pay Federal income tax is, is conduct befitting these gentelmen who animate the worst caricatures of Montgomery Burns…”

    Actually our friend Jan has repeatedly made the argument that the solution to our economic woes is for the 47% need to pay more taxes.
    I’m just sayin’

  30. michael reynolds says:

    You could look at it this way. As pointed out above, six members of the Walton family have greater wealth than the bottom 30% of the population.

    Subtract the daily contributions of those six Waltons from the population.

    Now subtract the bottom 30% — every store clerk, every fast food worker, road worker, bus driver, baggage handler, gardener, janitor, garbage man, cab driver, hospital attendant.

    Now see which crashes civilization faster.

  31. James says:

    @Hey Norm: That would make her Mr. Smithers then, yes?

  32. Drew says:

    Look at the aggregate performance of ESOP companies vs non-ESOP.

    Get back to me on the merits of the common laborer and their ability to do what managers do, what with their “bad luck.”.

  33. Hey Norm says:

    Doh…Donald Trump is posting again as Drew. Or is it Drew posting as Donald Trump?

  34. JKB says:

    @michael reynolds: The average plumber does more more survival and for civilization than the average banker.

    And yet, the average plumber wouldn’t have a job or even a vocation if it hadn’t been for the average banker or wealthy investor who financially backed the development of indoor plumbing and sanitation. Nor would their be roads or schools to educate the children. Nor probably would Apple have become a corporation or Google, the search giant it is.

    The wealthy, the bankers, invest at the risk of financial loss in ideas and people who develop companies who hire workers all because someone, most likely without capital, saw a demand that was being unmet even when the public didn’t know they wanted it. And so the wealthy, and the bankers (pooling money from depositors) loan money to individuals with ideas, many that lose money but the losses are made up when one makes it big.

    Now, if you wish to tax them more, then they’ll invest less as the government has absconded with some of their money. Sometimes the government builds infrastructure that is for the common good and of use to those who paid taxes or didn’t. But more recently, the government has invested in boondoggle technologies that no one who had interest in creating something productive would invest in. And oddly, in this latter event, the “entrepreneur” seems to have gotten high pay long before their product made a dime in the market.

    It is difficult for most, living inside a productive operation, to see the bootstrapping into this large economy with lots of tax dollars sloshing around. But it doesn’t take much to knock it off and as Africa has demonstrated, it takes a lot to get it started

  35. James says:

    @JKB:

    But more recently, the government has invested in boondoggle technologies that no one who had interest in creating something productive would invest in.

    I’d be delighted to hear some of your examples of this assertion. Maybe the Internet? GPS satellites and receivers? Nuclear power? Anti-retroviral drugs? Please, do stop me if you’ve heard of these “boondoggle technologies” before.

  36. JKB says:

    @James:

    Solyndra, corn ethanol, and the tilting at windmills.

    None of those will ever produce value absent government transfers to the “owners”

    There are investments like you mention that are good for government to pursue in a limited manner as the technology might not be permitted to be commercialized due to national security and thus not attract investment. More recently, with our export laws, it makes since to develop such technology oversees using non-US researchers to avoid being limited in where you can sell the technology by US regulations.

  37. OzarkHillbilly says:

    While much of that came through shrewd mergers and acquisitions, he’s almost certainly a net job creator.

    Is he a “job destroyer” when he lay’s people off?

    No? Then he is just another surfer, riding the waves for better or for worse, just like the rest of us.

    James, for just once, only once, I would like you to acknowledge the propaganda you push. People do not create jobs, economies do.

  38. James says:

    @JKB: I’m sympathetic to the issue of the specter of nationalization retarding private investment in some industries. This creates the logic of government intervetion in the market in the first place. I’m unsure how the issue of negative externalites and socialized costs associated with a carbon heavy energy policy substaniates your point. I’m not going to defend the excesses of corn subsidies, but that’s entirely seprate issue, as far as I can see. Moreover, I’m genuinely confused about this point of no product value without a transfer to “owners”. Solar cells and wind mills produce energy without the commitant carbon emissions of other energy sources. Thats’s the value they produce.

  39. tyndon clusters says:

    Mr. Joyner, I wonder how you would be as a manager in a corporation. I can just see you now as a bank VP calling a staff meeting.

    It would go something like this (wavy screen, fade to james addressing the “troops”.)

    “Ok lets start with all you bank tellers and low level managers, who have zero to do with the growth of the company, We really value your service… keep up the ambigously difficult to quantify work .”

    Or James as QB of the Redskins…”yes it was me who threw all the touchdowns so please don’t give my line any credit since they are faceless, low level types who lack any true skills and don’t really contribute like the receivers and backs who actually SCORE the touchdowns.

    I think the sickness of our baby boom society as opposed to the greatest generation who suffered thru the depression and the beaches of Omaha and Utah is that we believe we ARE better than the next guy.

    This is possible because we started separating students in jr. high into the true brainiacs, the B students, then the idiot degenerates who went to trade or continuation school.

    The brainiacs went to grad school and serve no real purpose, the b students build, service, manage and clean our societal infrastructure while the idiot degenerates are resentful and call themselves republican tea baggers.

    This innocent segmentation by the educators in the 50s and 60s have sowed the seed of class resentment now manifest in the tea party, OWS and James’ ludicrous statement I quoted above.

    My grandfather told me the story of how he and some of his other buck private infantrymen grabbed General Teddy Roosevelt and dragged him up the draw at Normandy. That shared sacrifice between lowly GI and vaunted General was the metaphor for the insane prosperity that existed for a generation until the Reagan zealots and neo Calvinists insisted that instead of containing the greed of the selfish assholes at the top, we should worship them.

    In doesn’t get any clearer how this has destroyed our country than “The bank tellers and low level managers, who had zero to do with the growth of the company, “

  40. michael reynolds says:

    @JKB:

    And yet, the average plumber wouldn’t have a job or even a vocation if it hadn’t been for the average banker or wealthy investor who financially backed the development of indoor plumbing and sanitation.

    Nonsense. Plumbing was developed over the course of centuries, even millennia — long before such a thing as a banker existed. Major plumbing projects — sewer systems, aqueducts — have generally been government enterprises, going all the way back to Roman times, and certainly in the major European cities. Taxpayers did it, not rich bankers of the kind who just burned up trillions of dollars and now demand to be bailed out by taxpayers.

    Now, if you wish to tax them more, then they’ll invest less as the government has absconded with some of their money.

    There is no evidence for this proposition. It’s merely an article of religious faith among Republicans — a faith preached of course by the rich. In point of fact we had a flourishing economy under Bill Clinton’s higher marginal rates, and the economy fell apart after Mr. Bush’s disastrous cuts in rates.

  41. Liberty60 says:

    As others have pointed out, there is no such thing as a “job creator”.

    Jobs are created when a series of factors occur- demand for a product, availability of raw material, skilled labor, societal infrastructure that facilitates trade, and of course access to capital.

    None of these factors is any more important than the others; the holders of capital are no more or less important to job creation than consumers or skilled laborers.

  42. de stijl says:

    The inventor of banking should be a billionaire.

    If you’re some random CEO dude charged with trying to improve market share by 0.1% in the next quarter and increasing Non-Interest Income, you’re just a schlub like the rest of us and should be paid accordingly.The way they set these things up and the adept professionals they array around you like robes, you’d have to be an idiot to fail at these goals.

    Citicorp’s Executive Board can choose to pay Jamie Dimon like he invented banking, but, in point of fact, he did not invent banking.

    I did.

    So where’s my check?

  43. anjin-san says:

    And yet, the average plumber wouldn’t have a job or even a vocation if it hadn’t been for the average banker or wealthy investor who financially backed the development of indoor plumbing and sanitation.

    You don’t spend a lot of time on history books, do you?

  44. anjin-san says:

    The bank tellers and low level managers, who had zero to do with the growth of the company

    Could you explain how the bank would conduct operations, much less grow, without tellers and low level managers? A company has to does have to operate to grow.

    I spent the last few years doing a lot of work with a major league sports franchise. The players, broadcasters and executive leadership make most of the money and they get all the attention. But if you don’t have ushers, hot dog vendors, guys cutting the grass, and a crew picking up garbage and power washing the seats after everyone leaves, you don’t have ball games. Or growth.

    Your snobbery lessens you.

  45. anjin-san says:

    Solyndra

    You have to wonder if these guys realize that no one outside of the Foxverse gives a rats ass about Solyndra.

  46. Ben Wolf says:

    The “job creator” is the latest iteration of the perennial Randian economic superman. It’s a concept embraced by those who think humanity is dragged forward kicking and screaming by the Great and Powerful Producers, who are born only a few to each generation. People who believe this fall into classification as either sycophants or megalomaniacs, unwilling to accept that for each Mega Man who makes it to the top there are a million others capable of replacing him but unable to break through the barriers our aristocrats vomit out to prevent competition.

    The truth is a great many CEOs and executives aren’t particularly bright; their success is entirely based on their ability to talk other people out of a buck, to shift blame for their mistakes onto others and to steal credit for another’s accomplishments. It’s like this in every large human institution whether public education, politics or the corporate boardroom.

  47. JKB says:

    @michael reynolds:

    I’m curious, who were these taxpayers of yore, before the income tax was lowered to include those of modest incomes? Of course, first there had to be jobs created to give even these modest incomes. Or perhaps, who bought the bonds the government sold to finance the infrastructure projects or in historical times were governments better at saving tax revenue for such projects?

    “There is no evidence for this proposition.” – well, by the nature, higher taxes mean the taxed will have less money to invest. Granted on the leftovers, they will invest but the high marginal tax rates will influence what gets funded. I wouldn’t be surprised if the fact many companies don’t pay dividends is a consequence of the need for non-ordinary income investments.

  48. JKB says:

    @Liberty60:

    Jobs are created when someone or entity recognizes or anticipates a demand, finds the raw materials at a competitive price, arranges facilities and/or land to conduct operations, then they hire, if available, skilled labor. Sometimes the labor is provided by the person who arranges the enterprise. But often, the acquisition of raw materials and facilities as well as pay wages to the skilled labor until the improved stock can be sold, requires a large influx of capital, which is generally only available from the wealthy or banks who will only fund such operations if there is a reasonable chance of earning interest, dividend or profits from the application of their money.

    Should the individual who brings all this together and keeps it organized so that a profit can be made be permitted to earn a premium for his efforts?

  49. Ben Wolf says:

    @JKB:

    Of course, first there had to be jobs created to give even these modest incomes.

    Mass unemployment was largely unknown before industrial capitalism: self-employment was the standard meaning pretty much everyone had a job.

    Or perhaps, who bought the bonds the government sold to finance the infrastructure projects or in historical times were governments better at saving tax revenue for such projects?

    When you put your money into a savings account, you are buying government bonds. They aren’t just for rich people, it turns out.

  50. Ben Wolf says:

    @JKB:

    Should the individual who brings all this together and keeps it organized so that a profit can be made be permitted to earn a premium for his efforts?

    Define “premium”.

  51. michael reynolds says:

    @JKB:

    Well, the “taxpayers of yore,” were many things depending on the era and the place. Slave owners. Robber barons. Peasants barely scraping by. Soldiers giving up spoils. seriously: invest in at least a tiny little bit of an education in history.

    Part two of your remark: I repeat that there is no evidence for that article of faith. If you have some evidence, let’s see it.

  52. anjin-san says:

    There are investments like you mention that are good for government to pursue in a limited manner as the technology might not be permitted to be commercialized due to national security and thus not attract investment

    @JKB

    You should fire up the Googles and do a search for “Apollo guidance computer”. Focus your research on downstream economic activity that flowed from that project. Try and calculate how many trillions of dollars it adds up to.

  53. James Joyner says:

    @tyndon clusters and @anjin-san: I’m making a much more narrow claim than that. Of course tellers and low level managers are important to the success of a banking enterprise. I’m arguing that Allison deserves the lion’s share of the credit for the growth of BB&T, which increased 30-fold during his tenure as CEO. They didn’t grow so fast because their tellers and managers were far and away the best in the business but because of the vision and tireless efforts of their leader.

    The Atlantic Council has exploded in size and influence since I started work there a little over four years ago. I’ve contributed to that, as have a few dozen others. But the single most important factor–far and away–is the fact that, a few months earlier they brought on a new CEO who had a new vision for the organization and has rebuilt it from the ground up. The day-to-day success is a function of a whole team of very talented, dedicated people. But the man who put that team together and pointed it in the right direction gets most of the accolades for the success of the team.

    The difference in this case, though, is that he’s not making an effectively hourly wage equivalent to what our lowest level staffers are taking home in a year. Unless you count the unpaid interns.

  54. sam says:

    Alison’s a randian tool:

    Speaking at a recent convention in Boston to a group of like-minded business people and students, Mr. Allison tells a story: A boy is playing in a sandbox, only to have his truck taken by another child. A fight ensues, and the boy’s mother tells him to stop being selfish and to share.

    “You learned in that sandbox at some really deep level that it’s bad to be selfish,” says Mr. Allison, adding that the mother has taught a horrible lesson. “To say man is bad because he is selfish is to say it’s bad because he’s alive.” [Source]

    Hmmm.

    Our Daughter Isn’t a Selfish Brat; Your Son Just Hasn’t Read Atlas Shrugged

    I’d like to start by saying that I don’t get into belligerent shouting matches at the playground very often. The Tot Lot, by its very nature, can be an extremely volatile place—a veritable powder keg of different and sometimes contradictory parenting styles—and this fact alone is usually enough to keep everyone, parents and tots alike, acting as courteous and deferential as possible. The argument we had earlier today didn’t need to happen, and I want you to know, above all else, that I’m deeply sorry that things got so wildly, publicly out of hand.

    Now let me explain why your son was wrong.

    When little Aiden toddled up our daughter Johanna and asked to play with her Elmo ball, he was, admittedly, very sweet and polite. I think his exact words were, “Have a ball, peas [sic]?” And I’m sure you were very proud of him for using his manners.

    To be sure, I was equally proud when Johanna yelled, “No! Looter!” right in his looter face, and then only marginally less proud when she sort of shoved him.

    The thing is, in this family we take the philosophies of Ayn Rand seriously. We conspicuously reward ourselves for our own hard work, we never give to charity, and we only pay our taxes very, very begrudgingly.

    Since the day Johanna was born, we’ve worked to indoctrinate her into the truth of Objectivism. Every night we read to her from the illustrated, unabridged edition of Atlas Shrugged—glossing over all the hardcore sex parts, mind you, but dwelling pretty thoroughly on the stuff about being proud of what you’ve earned and not letting James Taggart-types bring you down. For a long time we were convinced that our efforts to free her mind were for naught, but recently, as we’ve started socializing her a little bit, we’ve been delighted to find that she is completely antipathetic to the concept of sharing. As parents, we couldn’t have asked for a better daughter.

    That’s why, when Johanna then began berating your son, accusing him of trying to coerce from her a moral sanction of his theft of the fruit of her labor, in as many words, I kind of egged her on. Even when Aiden started crying.

    You see, that Elmo ball was Johanna’s reward for consistently using the potty this past week. She wasn’t given the ball simply because she’d demonstrated an exceptional need for it—she earned it. And from the way Aiden’s pants sagged as he tried in vain to run away from our daughter, it was clear that he wasn’t anywhere close to deserving that kind of remuneration. By so much as allowing Johanna to share her toy with him, we’d be undermining her appreciation of one of life’s most important lessons: You should never feel guilty about your abilities. Including your ability to repeatedly peg a fellow toddler with your Elmo ball as he sobs for mercy.

    Look, imagine what would happen if we were to enact some sort of potty training Equalization of Opportunity Act in which we regularized the distribution all of Johanna’s and Aiden’s potty chart stickers. Suddenly it would seem as if Aiden had earned the right to wear big-boy underpants, and within minutes you’d have a Taggart Tunnel-esque catastrophe on your hands, if you follow me.

    Johanna shouldn’t be burdened with supplying playthings for every bed-wetting moocher she happens to meet. If you saw Johanna, her knees buckling, her arms trembling but still trying to hold aloft the collective weight of an entire Tot Lot’s worth of Elmo balls with the last of her strength, what would you tell her to do?

    To shrug. Just like we’ve instructed her to do if Child Protective Services or some other agent of the People’s State of America ever asks her about what we’re teaching her.

    After all, we’ve managed to raise a bright, self-reliant girl who achieves her goals by means of incentive and ratiocination and never—or very rarely—through the corrupt syllogism of force. We know, despite what you and a number of other parents we’ve met have said—as they carried their whimpering little social parasites away—that Johanna’s defiant, quasi-bellicose nature only superficially resembles that of an out-of-control toddler, and in truth posits her as more of a latter-day Dagny Taggart than any kind of enfant terrible.

    Yes, she’s blossomed into everything we ever hoped or post hoc rationalized she would. In our house we no longer say, “Who is John Galt?” Instead we say, “Who’s our little princess?”

  55. sam says:

    @JJ

    I’m arguing that Allison deserves the lion’s share of the credit for the growth of BB&T, which increased 30-fold during his tenure as CEO. They didn’t grow so fast because their tellers and managers were far and away the best in the business but because of the vision and tireless efforts of their leader.

    Really?

    On Friday, Colonial BancGroup, a large lender that rode the excesses of the nation’s real estate boom, was seized by federal regulators, making it the largest bank failure of 2009 and one of the most costly since the collapse of IndyMac Bancorp last year.

    Regulators simultaneously brokered a rapid sale of its branches and deposits to BB&T Corporation of North Carolina, a regional bank that has emerged from the financial crisis as one of the industry’s strongest players. The failure is expected to cost the Federal Deposit Insurance Corporation about $2.8 billion. [Source]

    Profitable expansion via reliance on the actions of a government agency. Say, isn’t that a form of rent-seeking?

  56. JKB says:

    @Ben Wolf: Mass unemployment was largely unknown before industrial capitalism: self-employment was the standard meaning pretty much everyone had a job.

    And why cannot this be true today? Can those skilled workers who find themselves unemployed not engage in self-employment like their long ago ancestors?

    Could it be that even with their skills the workers need someone to bring together the raw materials, arrange the facilities, purchase the machines and organize the capital to be extended to pay for it all until the refined product can be sold?

    You have come upon the solution to our unemployment woes, workers simply need to self employ, then they will never be out of a job.

    “When you put your money into a savings account, “

    Where is this savings account you speak of? Could it not be in a bank controlled by bankers?

  57. James says:

    @JKB: I’m sure you fancy yourself as clever, but I don’t think I’ve ever seen a more naked display of haughty ignorance. No one here owes you, much less do you deserve an abriged history of free market economics. Needless to say, if you really wonder why the currently unemployed can’t “engange in self-employment like their long ago ancestors” then you clearly don’t understand the issues here at all.

  58. anjin-san says:

    @tyndon clusters and @anjin-san: I’m making a much more narrow claim than that. Of course tellers and low level managers are important to the success of a banking enterprise.

    @ James,

    I’m sorry, but that is not what you said. What you did say is:

    The bank tellers and low level managers, who had zero to do with the growth of the company

    The meaning of “zero” is pretty clear.

    You are a good guy James. I think all of the Democrats/liberals in here like and respect you. I do. But your contempt for the working class & low level salaried folks comes through loud and clear on occasion, after the fact spin or no. You should work on that – like I said, it lessens you.

  59. JKB says:

    @James:

    Oh, I can come up with plenty of reasons why workers can’t self-employ but I would be interested in why you think they can’t?

    In fact, the internet has altered this back toward self-employment since many skilled (internet) workers no longer need to attract a large pool of capital to get started in business.

    On a related note, I believe we are entering a period of increasing self employment. If anything is apparent from the current unemployment crisis, it is that being dependent upon and specifically valuable to one or a small group of employers is bad, especially as you age. So workers, who will be changing jobs more frequently in the future, will need to become somewhat independent contractors so they can diversify their employment. So if one employer lays off, you can increase your work in other areas that are unaffected.

    Not to mention, if you are both the owner and the workers, some jobs that are now sent overseas can be profitably done since the worker is claiming both the wages and the profit from the enterprise, whereas such jobs are not sustainable by those earning wages alone.

  60. James says:

    @JKB:

    I would be interested in why you think they can’t

    I can think of numerous reasons. Healthcare costs, for one.

    The internet is no more a panacea for a self-employment than was newspapers, the telegraph, radio or television. Industiralization means divison of labor. Agrarian based self-employment a thing of the past.

  61. mannning says:

    Most engineers in the past decade have made a good living right from the start, and really talented ones have accelerated in both salary and responsibility. Riding herd above them are engineering managers; that is, those engineers that have largely shed their technical contributions for the task of guiding, directing, shaping, and nursing the engineering enterprise to ever greater success. They are usually paid substantially more than their team of engineers because they manage to get the team to be productive, pulling in the same direction, and efficient.

    But the engineering manager has a boss too, who presides over perhaps six other teams, all tasked with a creative job, budget and schedule. This boss keeps his managers going in the right direction, on time and within budget. He is paid quite a bit more than the line managers since his responsibilities are crucial to the success of the enterprise, and his abilities to keep his snarling cats from degenerating into chaos, and on target for the next delivery, are rare indeed.

    And so it goes up to the General Manager or CEO, who works to further the longer range goals of the enterprise, to keep business coming into the shop, to maintain the staff properly, and to ride herd on the financial health of the place. He is compensated for his success in doing just those things and doing them very well indeed. His wage is far above most of the others because he is successful in keeping them employed and productive, and the enterprise profitable and healthy.

    His tenure is rather brittle, too, which means that a bad year could cost him his job; two bad years and he is gone. So his pay reflects this uncertainty as well; he took the job knowing he may well be unemployed quickly if he doesn’t succeed. He is also incentivized by shares in the company given repeated successes.

    People, once they shadow a CEO for a day or two, quickly learn that they really do not want that job with its pressures and 100+ hour work weeks, problems with the products or delivery times, people problems, customer problems, lots of business travel to forsaken places, recessions to cope with, and much agonizing over the latest government demands on industry, and decision after decision that may mean success or failure of the company, and himself.

    Their home life is severely truncated by their need to focus on the demands of the job and not the family. It is somewhat amazing that the CEO slots get manned at all, but it does represent the capping achievement of a career, and, hopefully, a more comfortable life afterwards, however shortly that comes to pass. It doesn’t surprise me that they make millions while they are in the saddle of major enterprises. Try it sometime: go shadow a CEO and see for yourself what they must be able to cope with, practically 24/7, at close range.

  62. mannning says:

    In my CEO story, I forgot one major point. They are officers of the company and are therefore libel for any misdeeds of the company. That puts them financially and criminally on the line for seeing that the company does right. For some companies, that can be a terrible burden.