Issue #24, Spring 2012

Survival of the Richest

Is economic behavior best understood in Darwinian terms? Actually, no.

Similar results obtain in a comparative study of national literacy scores by epidemiologist Arjumand Siddiqi; his research team “found that countries with a long history of welfare state provision did better and, like Willms, report that countries with higher average scores have smaller social differences in reading literacy. Finland and Sweden have high average reading scores and low levels of inequality in reading scores; Greece and Portugal have low average scores and a high degree of inequality in reading literacy.” So much for Frank’s claim that well-heeled educational performance serenely floats above objective questions of state-based resource allocation in “virtually every country.”

Frank likewise delivers an unpersuasive, faux-pragmatic excursus on executive compensation in the United States, which has produced no end of perverse incentives for CEOs to stress short-term profitability over an enterprise’s long-term financial health and labor bottom line. You’d perhaps expect Frank to seize on this trend as a textbook illustration of the Darwinian mismatch between the remorseless pursuit of individual advantage versus the interests of the common weal—what more counterproductive strain of bull elk is there, after all, than Countrywide’s Angelo Mozilo, say, or Enron’s Kenneth Lay?

Instead, Frank launches a confused defense of outsized executive compensation packages, based largely once again on the tautological logic that they must be justified because they’re what the market will bear. For all his efforts to depict himself as a scourge of free-market libertarian dogma, Frank revives all the familiar, paper-thin defenses of the high-end executive compensation market—the collapse of the “anti-raiding norms” of earlier corporate eras has stoked healthy bidding wars for a CEO’s services, he contends, and as a result, “This new spot market for executive talent has affected executive salaries in much the same way that free agency affected the salaries of professional athletes in recent decades.” By way of example, Frank cites IBM’s cross-industry hire of corporate takeover titan Louis V. Gerstner, Jr., in the 1990s—which helped stoke the tech giant’s market turnaround.

Never mind that plenty of other industries have had nowhere near such heartening results from cross-industry CEO hires (all one has to do in my own terminally hard-pressed field of journalism is mention one recent such crown prince—Sam Zell, the real estate mogul who took over the now-bankrupt Tribune Group—and stand back as the tear-filled profanities fly). And never mind as well that the free-agent revolution in professional sports came about via the heroic resistance of a single player, Curt Flood, backed—yes—by a union, the Major League Baseball Players Association. No, for Frank, it’s clear that critics whining over the market distortions created by the United States’s grotesquely top-heavy system of executive pay are wasting their time. There is, he allows, “a conspicuous exception” in the financial services industry, which gamed political institutions to create a deregulated status quo that “insulated firms from effective competition.” Apparently, no such thing was thinkable in non-exceptional industries such as pharmaceuticals, insurance, or consumer electronics.

Such, sadly, are the polemic distortions that now routinely mar what is otherwise a worthy intellectual undertaking: the theoretical defense of state intervention in the private sector. It’s far from clear why such efforts now have to come cloaked in the rhetoric of evolutionary biology—especially when, as Frank makes all too plain, such appeals are no more scientific, and are perhaps even more misguided, than the traditional libertarian appeal to the omnipotent and omniscient invisible hand.

Nor is it clear why believers in state intervention need to engage with their libertarian foes in the first place. The conception of a libertarian welfare state sounds as though it may very well be the worst of both worlds—and while Frank imagines himself to be an idealist on the order of Don Quixote, transcending the partisan “mindless slogan contest” that he, like so many other pundit sages, diagnoses at the heart of our decaying public life, his bid to proselytize among the Randians seems neither especially pie-eyed nor particularly pragmatic. In a more confident liberal age, the libertarian faithful were largely, and justly, regarded as little more than faddish cultists on the economic scene. The point then was not to reason together with them, but to marginalize and defeat them.

In our own market-addled age, however, economic liberalism is marginalized and defeated, and the ascendant libertarian worldview owes its outsized influence not to free-market rivalry in the marketplace of ideas, but to its polar opposite: a vast, well-funded complex of think tanks, university chairs, movement journalists and the like, all preaching the fundamentalist free-market gospel via generous subsidies from the Koch brothers, FreedomWorks, and assorted other right-wing gravy trains. Now there’s a battery of badly choreographed individual choices, arrayed perversely against the long-term survival prospects of our species—if only we had an economist with the gumption to tackle them.


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Editor's Note by Michael Tomasky

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Issue #24, Spring 2012

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