Some people make too damn much money. No CEO is worth the mega million dollar salaries and cash bonuses they are often paid just doing the job they are already handsomely paid to do. The vast number of financial advisors and fund managers charge way too much in fees without even having to add value to their investors portfolios. If they don't outperform a simple low cost index fund, and most of them don't, any fee they charge is too much*. Bank loans, real estate deals, car purchases and leases, credit card charges, cell phone contracts, and seemingly most other major consumer transactions involve outrageous fees that have no rational explanation. Personally, I believe they are nothing more than legalized theft. And fraud is so rampant throughout the government run health care industry that many hospital administrators and doctors belong in jail. Insatiable greed has taken over the country.
All of this is not the fault of capitalism. True capitalism is based on free competitive markets and private enterprise. It is an economic system where the means of production and distribution are owned and managed by private individuals for the purpose of generating a profit. Like government, capitalism needs a limited number of rules and regulations to function properly by maintaining a fair and competitive environment. But too many constraints in either arena cause the system to break down.
Our current situation is the fault of corrupted and coercive capitalism. It is the fault of creeping government control of the economy as ever increasing federal rules and regulations favor the dominant players in each industry. After all, it is the large established organizations who can afford the lawyers, accountants and extra clerical staff necessary to comply and take advantage of the requirements government continues to impose. Big business can afford the lobbyists who bribe Congress to pass legislation benefitting their companies. The commercial and industrial giants can afford the marketing teams and ad agencies that stretch the truth or create outright lies about their products to gain more market share. Government regulations are driving small businesses out of the marketplace so the lack of competition can let the big boys charge any prices and fees they want.
How can that be changed? Obviously with less government interference in the marketplace. Fewer rules and regulations is the best cure. But also strengthening truth in advertising laws, enacting lobbying constraints, enforcement of laws already on the books regarding consumer transactions, and tax laws encouraging small business. Government at each level should make sure they hire enough people to enforce consumer and commercial laws already in place rather than hiring more people to conduct income redistribution, entitlement expansion and unnecessary regulatory activities.
Capitalism must have a conscience to function properly. Every enterprise must do its best to be a good citizen in each of the communities where it operates. Successful companies must focus on product quality, customer satisfaction, employee morale, operational productivity, corporate financial stability, shareholder returns, and community involvement - not activities that exploit workers and stuff the bank accounts of Wall Street bankers and corporate executives. But those values have been lost as big government continues to take greater control of the economy by creating an environment where big business and labor union leaders maintain corrupt incestuous relationships with regulators and politicians.
Somehow Republicans get blamed for this environment even though Democrats are the primary perpetrators of this big government creation. Republicans could increase their electoral prospects dramatically by making three changes in their agenda, changes that actually are warranted. One would be to propose eliminating all tax preferences. Every tax preference is an unfair payoff to some powerful special interest group. Most should be eliminated immediately while some such as the mortgage interest deduction and property tax could be gradually removed over time to allow taxpayers to adjust.
Another change would be to support increasing marginal tax rates on those making over $250,000 a year. Incomes over $1 million could be taxed at escalating higher marginal rates as they climb through each million dollar level. No one needs to make that much money. The argument that higher tax rates would stifle creativity, innovation, entrepreneurship, and managerial efficiency is absurd. Talented people will not stop producing just because their taxes increase on each marginal dollar as long as the rates apply to everyone. A third boost to conservative prospects would be provided by eliminating regulations and other impediments restraining small business and setting a zero tax rate on enterprises with revenues less than $10 million or profits less than $1 million, all in the interests of creating more jobs.
I am as big a believer in capitalism as anyone. But I view the rewards of capitalism accruing to those who risk their own capital, who buy ownership through shares of stock or partnership interest. Business executives are well compensated for their contribution to the success of the enterprise. No individual contributes that much to a company's success to earn the outrageous bonuses not available to other employees.
Personally, I would consider legislation limiting any CEO and all corporate officers from receiving compensation more than 25 times the average employee, and more than 50 times the lowest paid. That would still provide ample incentive to gain the top job at any organization. A bonus would only be considered if every employee would be equally rewarded at the same percentage up to 100% of their salary (all employees including officers, or none) with rights to buy company stock or partnership interests at the market price at the time of the reward, meaning they all profit if the stock goes up. That would provide incentive for all to continue to work hard to improve productivity and creative product development for the company to be successful.
* I even wrote a book 8 years ago about investment advisers charging too much. "Don't Feed The Vultures" needs to be updated, but the primary message is still applicable.
