I am not sure what the truthfulness is of the story, but regardless, the overall point is good (in my capitalist, non-socialistic, conservative opinion).
A simple analogy*
An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class. That class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said ok, we will have an experiment in this class on socialism. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. But, as the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too; so they studied little.. The second test average was a D! No one was happy. When the 3rd test rolled around the average was an F. The scores never increased as bickering, blame, name calling all resulted in hard feelings and no one would study for the benefit of anyone else. All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great; but when government takes all the reward away; no one will try or want to succeed. Could not be any simpler than that....
31 comments:
Excellent. Mind if I borrow it?
(BTW, my word verification is latinglu. Latin Glue. I think that's funny)
nice!
go ahead and borrow it! I stole it lol. =) Nice word Verication hehe
I agree that socialism as a practice does not generally work (although the principle makes sense to me). However, in keeping with your analogy, sometimes the kids that "bring down" the grade average aren't those that didn't study. They could instead be the kids with learning disabilities or other issues that affect their grades, issues far outside of their control.
Jana
I absolutely agree that there are kids with disabilities and stuff bringing down the average. But keeping with analogy, I know that there are far fewer kids with disabilities or other grade-affecting issues bring down the average than kids who don't study. =)
Working hard as a collective group has many places: Group projects where each individual is graded by their peers, Tandem bicycles, and a 2 income household. The difference between these examples and Socialism is that in these examples you feel the direct effects of you slacking to keep up your end of the bargain. Socialism doesn't work with a nation because no one feels the effects on their suffering neighbor on the other side of the USSR. Socialism absolutely cannot work in a large society, our sin nature will never allow it; we act in our own interest too often.
BTW, way to bring up a hot button issue. :)
BTW again, my verification word is "fradakul". Funny stuff!
May I point out that Capitalism is failing miserably right now? As individuals *we* might not be suffering, but there are a lot of *average* *hardworking* people out there who are victims of the dark side of Capitalism, namely greed.
No, I am not a socialist. But I find it fascinating that no one is talking about our Capatilist failings that are taking place.
-Lori
(quietly reading all comments, pondering)
Word verification: glizz. Did someone mean for the first z to be a t?
Did anyone else notice that the Prof lied? He said "no one would fail", but then failed the "entire class".
What's up with that?
Good Point A. Lori! Honestly, I don't think any "system" will ever work perfectly. Some will just have less failures than others.
I agree that our system is failing right now and it is definitely due to greed, especially at the corporate level. That's why the consideration of a middle ground needs to be taken. I would lean towards a middle ground being a small bit of regulating business: I think we can all agree that this needs to be done at least a little.
Why is capitalism failing? Recessions are part of a lending driven economy. Recessions are a very important part of a economy as complex as our, they are a self correcting mechanism to trim stagnation, inefficiency, dead weight.
Nice blog Jess. A very heated one at that!
Self-correcting should not be because of greed.
Charlie, we certainly agree on more regulation, not to impede the free market, but to keep out corruption - as much as possible.
tend to agree with Jon. How is capitalism failing? It appears from my point of view that certain regulations and "socialistic" laws are impeding the processes of capitalism. The "capitalism" of america is failing because it is too socialist.
Are you talking about personal greed, or business greed? The word "greed" can't really be applied to business, since greed typically means a disproportionate concern for self-interest, while the purpose and reason for a business to exist is to make money. It's not to supply jobs, or stimulate the economy, or help people. Business are under no obligation to these things, and it isn't "greedy" when they ignore them, it's them doing what they are in existence to do. Yet, it is nice to help others, and because of this some business choose to take these things into account. Just like we don't force people to donate to charity, we shouldn't force people to do these things either.
Just like we don't force people to donate to charity, we shouldn't force "business" to do these things either.
Capitalism is subject to individuals who exhibit personal greed, and Socialism is subject to the same. All persons have a propensity for greed.
However, in a perfectly theoretical sense, Capitalism WORKS.
Socialism DEMORALIZES.
History bears this out.
I disagree that Capitalism is failing because of socialism. What new Socialist plans do we have in place)? Medicare? We have had that for a long time....luckily for my mother.
DE-regulation has caused the current problem. Tell me how paying a CEO billions of dollars after the company has run into the ground is sound capitalism?
Socialism demoralizes? Tell that to all the millions of people without a job and can't get medical care under our Capatilistic society. That too is demoralizing. Besides there are plenty of European Counties and Canadians who are not demoralized.
Now Communism, that is a whole different beast. ......that is demoralizing. So are Theocracies, especially for women.
Okay, I better stop.
:-)
Lori
PS The bailout seems like a bad idea to me. I say let them all fail and give whatever money was planned for the company to the workers!!! Think of all the new goods and services THAT would create!!!
;-)
PS I wasn't tying deregulation together with CEO pay although it looks like it.
Regulations are a lengthy discussion.
Also, I have never understood why some companies have paid their CEOs so much money when they do not perform. Why do the stockholders and/or board members allow it? Maybe someone can enlighten me on this one.
"What new Socialist plans do we have in place"
-The bail out program.
-The government firring executives of private businesses that are being lent money.
-Nationalization of banks
-Our president literally advocating the "redistribution of wealth" as a platform to get elected.
-The movement away from state economy.
"Tell me how paying a CEO billions of dollars after the company has run into the ground is sound capitalism?"
Let us take the AIG example. The part of AIG that had problems, which everyone talks about was the credit default swaps. A CDS is a bigger lending organization insuring a smaller ones credit lending practices against a default - this is good, it helps manage risk. AIG typically has been a sound financial investment, even in recessions - but what happened was the Fed panicked when AIG had to start paying out on a large numbers of CDS, and lowered AIG's federal reserve insurance rating bellow it's long standing "AA" basically forcing them to try to come up with 75 billion dollars of liquid assets over night, when they were already stressed from trying to take on "risky" debt they insured. In other words, government control caused the AIG fiasco, not CEO miss-management. This brings us to a few points about the CEO bonuses:
#1 The CEO's didn't "cause" the crisis, they did their job properly
#2 The CEO's are contractually guaranteed a bonus
#3 Not allowing a bonus is a form of a government controlled salary cap, which is a tale-tale sign of Communism, beyond socialism.
#3 is a very important point. People all the time say, "I don't think it's fair X is paid (or cost) Y, i mean Y only does (or cost to produce) Z". This mode of argument is innately flawed and used all the time (I burn music arguments fore example). People have the right to charge what ever they like for their services, or goods. Should athletes, actors, musicians, artists, inventors have a maximum salary that they are allowed? Do people employ these high paid professionals if they aren't getting a good return on their money? Of course not, how many football teams out there high a quarterback if they don't think he will make them win more by such an amount, that they will generate more revenues to off set his cost? The same goes for labels with musicians, art galleries with artist, investors with inventors... Why are CEO's different? A CEO is a very important position in a company, so why shouldn't the primary share holders, or board of directors, or who ever, be able to offer bonuses and high salaries to attract a quality of CEO they feel they need. If you take the bonuses away from the CEO, and salary cap them, why would CEO Joe want to be a CEO of a multi-billion dollar head acke when he could get paid the same to be the CEO of a multi-million dollar head acke?
point 1:
I didn't say CEO's created the problem, lack of regulation did.
point 2: You are right about contractually guaranteed. My point is that they shouldn't be granted that much money until it is known how they perform. Given so many companies fail despite this obscene pay, it is a wonder why they are given that much upfront. Is there a problem of hiring someone for a decent high-salary? No one will do it or be qualified? How much worse can you do than run a company in the ground?
point 3
Do private companies control the salary of a CEO? Yes. So, if a company accepts TAX-PAYER (gov) money, we should be able to dictate salary. Here we may agree.... Don't bail them out, let them fail. The only reason I am not sure of this is that perhaps the bailout is preventing a massive depression? Can't say I know why we are bailing out for certain. But, if private companies DO accept taxpayer money, there should be no surprise a limit on salary could be expected.
The "redistribution of wealth" is none other than the tax code that was in place before Bush.
This is my last comment because this could go on forever. Besides, my daughter has come in twice for kisses and keeps asking for me. ........supply and demand at work on the home-front!
Peace,
Lori
Heated! My favorite!
I honestly agree that we need to let failure happen, its part of the cycle as Jon pointed out. The problem with letting failure happen is that its easy to look at numbers, hard to see the numbers as people. Capitalism is used to make a profit, regulation is used to limit some failure for the sake of people.
I'll get back to everyone with the solution as soon as I get out of grad school :)
^^^^^^
That was me :)
-"I didn't say CEO's created the problem, lack of regulation did."
I agree with this, with an amendment - lack of regulation in somethings caused problems, while governmental involvement caused the other half (see the AIG example).
-"My point is that they shouldn't be granted that much money until it is known how they perform. Given so many companies fail despite this obscene pay, it is a wonder why they are given that much upfront. CEO's of major companies have had a history of managing companies before. Do you think the CEO of GM, B of A, or AIG hadn't demonstrated good management skill with a smaller company before they become a CEO of a giant(AIG's CEO was in charge of allstate, and the CFO of smaller companies; GM's CEO was in charge of regional operations for GM first, then a CFO, then a CEO)? Should a quarter back have to play a season to see how he does with his new team before he can demand what the market dictates hes worth?
"Is there a problem of hiring someone for a decent high-salary?"
Yes, I addressed the problem in point 3 :)
"How much worse can you do than run a company in the ground? "
But in your redress to point #1, you said it wasn't the CEO's fault?
"Do private companies control the salary of a CEO? Yes. So, if a company accepts TAX-PAYER (gov) money, we should be able to dictate salary"
Banks get nearly ALL of their money from the federal reserve, which means they ALWAYS (even in the best economy) get their money from the gov't i.e. the tax payers. Businesses get nearly all their money from banks, again, this means it comes from the gov't. Another problem with this is this is a form of nationalization, which is bad for the economy.
"Here we may agree.... Don't bail them out, let them fail. "
Yes, we do.
"The "redistribution of wealth" is none other than the tax code that was in place before Bush."
I agree with this, but i heard our current president advocate the redistribution of wealth (exactly that phrase) a few times.
"This is my last comment because this could go on forever. Besides, my daughter has come in twice for kisses and keeps asking for me. ........supply and demand at work on the home-front!"
I hope I didn't offend you? I just happen to disagree with you on this, it is nothing personal.
Charlie, Grad school for econ?
That is one of the grad studies i am considering when i get out of the AF!
I lied. I'm commenting again.
Not offended, not personal.
There are great arguments for either point, really.
The truth is, we have not been down *this* road before in our Country. I think there are valid points all around.
-Lori
See you at Harvard Jon :)
Why spend $35K+ per year at Harvard? I feel like I'm getting a great education right here!
P.S. I'm available as a CEO for any company that wants me, and I'll work for food.
wow I missed a crazy discussion over easter weekend! Hope everyone had fun! lol =)
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