The problem with capitalism

On Wednesday the 19th of October the documentary Capitalism: A Love Story (2009) by Michael Moore was broadcast by the Belgian Flemish channel Canvas. In its subject matter there are similarities with the documentary Inside Job (2010) I mentioned earlier, but the style of both documentaries is quite different. The makers of Inside Job took a serious, objective approach, interviewing people and explaining events in the history of the financial world. Moore does the same but broadens the subject. He isn’t objective but subjective, polemical and demonstrates a great sense of humour with a lot of sarcasm and cynism. What I dislike are his silly antics to grab attention, such as him driving a truck for money transport to the banks to demand the return of the taxpayer’s money.

In the Netherlands we also have some problems with greed, even if it’s not as bad as in the USA. In the Netherlands there is a rule that public administrators and servants shouldn’t be paid salaries higher than that of the prime minister at € 188.000 a year, the so-called Balkenendenorm, named after the prime minister who was in power at the time when the rule came into existence. Recently it was revealed that Nurten Albayrak, the director of the COA (the Central Agency for the Reception of Asylum Seekers), thought that the rule didn’t apply to her. She enjoyed a salary of € 273.000 and tried to get an Audi A8 to replace her old car, which is against the rules because that car is too expensive. Fortunately this fraud was unmasked by journalists and now she’s on suspension, likely to be fired after an investigation. The inconvenient truth for me is that this despicable person is also a member of the People’s Party for Freedom and Democracy, the VVD. As readers of my Dutch weblog can relate I’ve already figured out that a relatively large percentage of the members of my party are prone to greed.

Now another example from the corporate world. During March this year the troubled Dutch bank ING was heavily criticised because it wanted to pay bonuses again to its top executives while it still hadn’t paid back the Dutch state for its bailout. The CEO Jan Hommen thought a bonus of € 1,25 million on top of his salary of € 1,35 million would have been adequate compensation for him, but he and his cronies who have an insatiable lust for money backed off after public outcry. Had there been no complaints they would have went ahead, why should they care about the massive inequality of their income with the average Dutch person? That was March, but I’ve got a good memory. As soon as my bank account at ING is no longer free when I get my master’s degree (yes, it’s free for students) I’m going to switch to a more ethical bank like Triodos Bank or ASN Bank as soon as possible. Remember, like Moore said the masses can change the game when they think enough is enough, vote with your wallet!

When Moore started comparing the Christian view on capitalism with the practices of Wall Street we saw a fragment of a banker calling Wall Street holy ground, but I had something different in mind. I still remember that CEO of Goldman Sachs which reminds me far too much of Dr. Evil, Lloyd Blankfein, saying in an interview that he was doing God’s work. Later Goldman Sachs dismissed it as a joke, but had the interview been published while Moore’s documentary was still in production, it’s inclusion would have been priceless.

It’s a pity these people with their extravagant salaries do not have any notion of frugality, like Cincinnatus, Jesus or Gandhi had for example. Currently in the USA CEO’s of large companies earn 364 times as much as the average worker. Not too long ago the difference was much smaller. The USA should start taxing the rich more again, which would have already happened if the Republicans would not have blocked Obama’s proposals. In Europe  we’re tougher on executive compensation, and we already hear complaints from European banks that it’s harder for them to attract talent because the rules are not so tough elsewhere. Ideally, we could fix this by imposing a tax rate of 100% for, say, all income above € 500.000 a year. I know that’s not going to happen any time soon and the idea might be a bit too leftist for a liberal like me, but I don’t see any other solution when the current distribution of wealth in the world is a far cry from justice.

On the other hand, I’m not sure if I would be opposed to high (but not disproportionate) salaries if a person is actually ‘worth’ his or her salary. This is a difficult issue, but take a look at this article (Dutch, English people could use Google Translate) for example about presenters working for the Dutch public broadcasters earning higher salaries than the Balkenendenorm I mentioned earlier. On the one hand you could say that it’s not principally right that a presenter employed by a public broadcaster makes more than the prime minister. On the other hand, if you’d consider the increased income generated with advertising due to the work of the presenter and this income minus the salary of the presenter turns out to be more than the income generated by a presenter with less skills who is paid much less, then it’s easier to see why it would be justified.

As a concluding remark, I don’t think capitalism is necessarily a problem. Everything should be enjoyed in moderation, it only becomes a problem when an economy is in imbalance on the scale between capitalism and socialism, or in other words the scale with completely free market economy being one extreme and a completely planned economy on the extreme. The USA leans more towards the free market, while most European nations are more balanced mixed economies. There does not seem to be a correlation between these observations I just mentioned and the placement of the USA and European nations on the Human Development Index, which the USA scoring higher than the majority of European nations. However, when we look at the comparisons with the Gini coefficient and the Human Poverty Index we see far more difference. To continue my comparison, the statistics for homicide by country show a similar correlation. Statistics aside, we don’t have neighbourhoods as bad as in the USA in the Netherlands, we have much less poverty and we never had evictions on a scale like in the USA when the crisis hit us. That’s why I think the mixed economies of many European nations are superior in to the economic system of the USA.

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