– Milton Friedman
There seems to be something very different about this recession than others. I don’t mean to be alarmist and I’m not suggesting that we are in a Depression. I don’t even know what a Depression is. Ronald Reagan once said, “a recession is when your neighbor loses his job. A depression is when you lose your job.” In our individualistic society, everything is local, so that description is as good as any.
Since we are a nation of individuals, what’s more disconcerting are the populist attacks on capitalists, and I would argue, freedom itself. Sure, we are used to the rhetoric from the MoveOn.org folks, but it is now coming from most of our government figures, and quite disingenuously I might add.
The rise of anti-capitalist sentiment is very evident in the reaction/response to the AIG bonus fiasco. There are many things wrong with this situation, the least of which are the bonuses themselves.
Do I think AIG should have given contractual guarantees to incompetent people, some without performance metrics? Of course not. It was stupid and it was done before AIG accepted public funds. However, as soon as the government regulates stupidity, it also takes away the ability to be smart.
Capitalism works because smart people start smart businesses to make money by providing a product or service that someone else determines is worth more than the price. Inversely, Capitalism also works when people make bad decisions and in due course they go away and are replaced by smart people running smart businesses. Besides the likely constitutional issues, the taxing of bonuses at 90% will ensure that few smart people will work for AIG. Good luck in turning that company around.
I’ve always viewed capitalism as a major part of freedom. It’s economic freedom. The other major part of freedom is civil liberty. Is it not a violation of an individual’s civil liberties to be “outed” by Andrew Cuomo and Barney Frank as a recipient of contractual compensation? This situation is fast turning into a populist witch hunt, to quote one of my clients.
I’ve been paid most of life through contracts but I am certainly not rich. I couldn’t imagine, in this country, having to be worried about my safety and the safety of my family because every crazy Robin Hood out there knows that I am due a bonus that may be more than they earn. This is not freedom.
Try and stay free out there.