Grasso Resigns: Indictment of Capitalism

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by David Remer Sept. 20, 2003 PoliWatch.Org

It is said that history is a recording of the swing of a pendulum that moves endlessly from left to right and back again. The implication is that social trends gain momentum and expand until they create a growing force to counter the expansion and reverse the social trend that became extreme in its application. It would appear Richard Grasso's resignation in response to outrage and concerns by large pension fund managers marks such a turning point of the pendulum which has been swinging right since the early days of Ronald Reagan.

Some would argue that the Grasso controversy centers on the relationship between the CEO and the compensation committee being chosen by the CEO. However, such an argument would too narrowly define the issue. Before it was even known that Grasso selected members of the compensation committee, the controversy had already begun based on nothing more than the amount of Grasso's compensation. The $188 million dollar pay package from a company that produces only $27 million a year in profits, is what raised eyebrows, questions and inquiries. Grasso was quick to rescind $48 million of the package, apparently in the hopes of stemming the growing tide of indignation over his labor's worth. Grasso supporters attempted to defend Grasso's pay package based on Grasso's stearing of the New York Stock Exchange (NYSE) through troubled waters in the past. But the amount of the compensation was just too large.

Richard Grasso had only one regret according to the NY Times which states: Last week, Mr. Grasso said his only regret was that he had deferred much of his pay during the last few years. Had he not, there would have been no headlines about $140 million.

Socialists, supporters of a mixed economy (socialism and capitalism), The Green Party and Democrats have argued since the 1960's that capitalism unfettered by government and regulation results in egregious accumulation of wealth in the hands of a very small number of persons. They argue such accumulation of wealth ultimately damages the society and the economy by creating unequal classes of persons in society and withholding large sums of money from the consumer demand side of the economic equation. Further, they state that disparate classes of citizens and loss of money from the economic equation will create economic slow downs, recessions, and substandard quality of life for millions of people. Capitalist purists argue that the accumulation of wealth is self regulating since competitive forces will dictate compensation according to demand and supply and least cost/highest quality analysis.

The pendulum of history has been swinging toward the Capitalist purists since the early 1970's and is reaching new heights under the Bush administration. Under the guise of "compassionate conservativism" the Republican Party touts free enterprise and capitalism in their rhetoric; yet ironically, find themselves having to bring the weight of government down on the heads of some very big corporations like Enron, Global Crossing, WorldCom, and a host of others.

President Bush is now having to sheepishly rescind his steel tariffs which came back to bite him in increased manufacturing costs for American manufacturers at a time when jobs will decide in part whether the President is reelected or not. The FCC backed by President Bush has tried to move toward monopolization (the ultimate dream of capitalists) of media and hit a brick wall of bipartisan opposition among the electorate and Congress. The pendulum's swing to the right is slowing under its own weight of excesses. Deregulation promised competitively lowered phone costs, energy costs, airline costs, but, have resulted only in increased costs (often through increased taxation) or lowered quality for consumers of each of these industries.

Grasso's resignation (with 140 million pay package intact) seems to have awakened many in the financial and economic arena's to what the middle class have known for many years. The inequities between those who own and run corporations and companies and those who fill the employment rolls of those organizations are becoming obscene. A broker puts in a 50 hour week. Grasso puts in a 60 hour week. The broker makes $100,000 per year and Grasso makes $40 million. This picture is becoming more and more unacceptable to working Americans who have placed their faith and trust in the conservative capitalists to provide jobs and increased standards of living. Those same Americans are awaking to the fact that the recession and unemployment were a breach of that faith and trust. They are awaking to the fact that their parents had more purchasing power per hour worked than they do today.

The growth of the Green Party throughout the world is a direct response to such inequities. So too are dissension and protests at the World Trade Organization and G7 meetings by representatives of third world and mainstream countries. Even the concessions by unions to Corporation's needs is a sign of changing times that represents the rise of a social movement that will turn Democrats into fiscal conservatives, the elderly into activists, and some socialists into heroes.

Since the stock market crash of 1929 America has never been purely capitalist. And since the FDR programs the country too, has never been purely socialist. America has been a mixed economy with capitalism and socialism working together to control the excesses and extremes of each economic system. But the mix has grown too lean on socialism as the baby boom generation faces retirement without social security, as workers make less and less for their hour worked, as health care moves further and further away from 40 million Americans.

The pendulum is slowing but will not reverse course in November of 2004. It would probably be a great thing for America's working people if a Green Party candidate won the Presidency. But, since that is not even remotely possible, Americans will have to settle for the replacement of the current President. This is the most readily accessible change that American working people can bring about in the near future. It will not be until the electorate goes after the Congress in a "throw the bums out" campaign that spreads like wildfire, that America will see the pendulum stop its movement to the right, and begin a downward move back to the left. The roots of the capitalist rich mix in our economy lies in Congress.

The capitalists have taken to the working person's tax dollar the way they have taken to higher returns on investment in foreign based manufacturing. The Congress is using the American public as a credit card. The deficits will peak at about 550 billion but the debt will continue to grow. And so too will the interest rates on that debt. Like a credit card that starts with an introductory 7.9% rate, and goes up as the balance reaches the maximum allowed, so too will the tax burden on lower and middle class Americans begin creeping up as the debt grows from 7 trillion to 12 trillion over the next 10 to 12 years.

Congress is responsible for this growing deferred tax burden on working Americans. But, it will not be until 2008 or beyond that the American public realizes just what this debt is going to cost them. The conservative Congress is bloating the debt with a star wars defense system, and armament for the fourth and fifth world wars, with subsidies to American corporate farmers that stand in stark contradiction to the conservatives "free enterprise" rhetoric. And that debt is growing to secure geographic areas around the globe that American energy companies will need to tap to sustain their carbon based profitability.

Grasso's resignation should be a wake up call to working tax payers that our mixed economy has the wrong blend. To some it is, but, to far too few to make any real difference in 2004. Even if Carol Mosley Braun were to win in 2004, her ultra left-liberal position would be rendered ineffective by the conservative Congress. She could veto bill after bill until her pen ran dry of ink, but, it would not move the country any further toward recapturing the right mix of socialism and capitalism that our parent's generation enjoyed. Until the conservative Congress has a new mix, our economy will continue down its faltering path, and the Pendulum, though slowed, will not stop, and reverse direction. Richard Grasso took the money and ran. American voters should now take the hint and run to the polls in 2004, not for a change in presidency as much as a forceful change in Congress.

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This page contains a single entry by David R. Remer published on September 21, 2003 2:21 AM.

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