Assessing Value

AIG Retention Bonuses

The MBA executives that devised and administered the hedge fund division of AIG without fear of government regulation did their job with superior expertise. They executed what they were hired to do with superior performance.

They are being compensated for a job well done. So, what's wrong with that?

If we think that the AIG, MBA hedge fund executives were not hired to wreck the economy, we would be wrong. They produced huge value put away into the private property--the personal wealth--of the upper class, creating the largest accumulation of income in the upper class since before The Great Depression; deflated and consolidated the economic expansion--the more pluralistic expansion and equitable distribution of the wealth--that occured in the 90's when we had a more progressive tax code; created a huge budget deficit to be paid with a regressive tax burden while increasing the demand (the need) for government (including the TARP); and a convergence of what is public and what is private into a practical, organizational technology that ensures private ownership of the benefit, and public ownership of the detriment. This is a macro-economic model of economic entities too large to fail, antithetical to a free-market economics, that operationalizes neo-classical, Keynesian, capitalism into a low-risk, high-return business model, designed and executed by the best and brightest our educational institutions can produce and that money can buy.

The model is an elitist model called, state capitalism in which financing the cost is a function of the public sector, and financing compensation (the reward of success) is a function of the private sector. It is a bifurcation of the power structure retained by evolution of the model in order for it to survive and maintain an obviously inequitable outcome with a democratic legitimacy (see the article "Public Finance and Community Power Structure" and "Evolution of the Political Economy" at griffithlighton.blogspot.com).

Notice how the controversial AIG compensation cannot be changed. It is compensation for value received, which includes the value lost--like small businesses that will be allowed to fail (less competition) with the value of unemployment (lower compensation costs) and the loss of asset values (net worth) consolidated due to illiquidity (a lack of available credit and income) that will be resold with the lost value re-"gained," or realized in the recovery (distribution) phase of the business cycle. The value is not lost, it is consolidated, which is the goal, the intended consequence, the effect, the outcome of the classical model of capitalism in which the measure of success is defined by class distinction (unequal compensation and net worth). According to the power elite, it is the moral imperative, the "natural" outcome, that should not be, and as we see, cannot be, changed.

So we see, the economic value (the compensation, or what "We" are "willing" to pay) is a "moral" value to be conserved. Changing the inequity (the assessment of value) would rip the very moral fabric of civilized society and would condemn us to a conflicted process of chaos to be forged into order by a power elite. Nature is inescapable. It is inexorable. It is futile--immoral--to resist what is natural and, therefore, righteous in both the means and ends of power.

With a necessary talent for masterfully arguing the fallacy of composition, the inequity of what "We" are "willing" to pay, conservatives argue, is the equilibrium, the stability, of a civil society. The will to power is, therefore, the will to a peaceful prosperity and, therefore, the natural will of The People and the function of "the republic." Denying the ministers of the power elite full value is, therefore, neither legal or proper. The inequitable compensation is really the will of The People, the public good that, if you recall, Palin described during the last presidential campaign as the secret knowlege, the inscrutably difficult wisdom, conservatives have about what is really moral and righteous.

Controlling The Bid

It is, therefore, by the conservative argument, righteous to ensure the means of the power elite to control the bid (economic inequity), or what is "willing" to be paid and cannot be changed with the force and legitimacy of law (public authority, or the Hamiltonian model of government, "...the Republic for which it stands, under God, with liberty and justice for all").

Organizing to ensure the consolidation of wealth and power--organizing to be too big to fail--is the means to control the bid and, thus, the obviously inequitable compensation that, according to the force and legitimacy of public authority, is an assessment of value that is freely contracted and to be justly paid as compensation we are all entitled to (political equity) for services rendered of comparable quality (the effect, or the value rendered and received--the inequity). It is our natural right to be fully compensated for value freely contracted, performed and received. The value assessed and the compensation to be received is, then, legal and proper?

No!

The ability to control the bid is illegal! It is the effect of organizing to defeat the mechanism of free-market economics. That is entirely illegal and improper.

The conservative argument presented above is 18th Century utilitarianism in which the bourgeosie needed a legitimacy of power that was beyond the inherited and divine right of royalty. While the legal philosophy of the want-to-be kings expanded the right to rule (collect taxes and generally decide the fate of others) to the "natural rights of man," the divine right to rule is retained as a vestige of an evolving structure of power (see the article "Evolution of the Political Economy" at griffithlighton.blogspot.com).

For the government (what was previously the king, or the sovereign) to abrogate the contractual obligation for AIG's retention bonuses would be an illegal usurpation of public power; a dictatorial act strictly forbidden by the Constitution.

For the new power elite, power has to be gained, or won, by a pluralistic economic process freely pursued without government (the king's) interference (laissez-faire capitalism). God, or nature, acts to determine, or providentially endows, the legitimacy of power by class distinction of economic measure, and the "natural right" to that economic value (the private sector) is enforced with the constitutional legitimacy of public authority (the public sector). Where we see the right to private property becoming evermore a function of public policy and finance, assessing the value is no longer the exclusive domain of private want-to-be kings. Evolution of the power structure has been reduced to a choice between the fundamental elements of power. Should we choose an elitist or pluralist model of power and political economy?

Where the reward of gaining wealth, and power, is the ability to dictate the marketplace without government interference, the legitimacy of power is lost; and where government has evolved with a convergence of what is public and private to operate for administering private profit through public process (the political economy), what has evolved is the means and not the ends of power (see the article "Restructuring the Elements of Power" at griffithlighton.blogspot.com).

In order for the ends to converge with the legitimate means of power, we must choose the practical model to accomplish it. The elitist model is a confirmed failure--a nulled hypothesis (see the article "Science and Life" at griffithlighton.blogspot.com).

If we choose a pluralist model, the public and private dimensions of power will be fused by government ensuring a free and unconsolidated marketplace in priority. Choosing an elitist model will evolve the legitimacy of power from state capitalism (private gains with public losses) to state socialism. The probability of democracy diminishes significantly when it will be possible to operate as a fascist or a socialist state depending on the ability of the power elite to argue the value, if not the reality, of one or the other by means of public process, much like what we have now.

Does not Chavez argue his concept of the good life is what The People really want just like the conservative argument above, with what The People want always to be announced? Will exploitation of value assessed be an evolutionary vestige from state capitalism to state socialism? Accepting the pluralist model renders the question moot. Rather than uncertainty, we will have the practical application of continuous improvement through empirical process of close accountability--Democracy with a big "D." What is good and practically righteous--the value assessed--becomes the full value of choice, the full measure of what We The People decide in the full realization of what it means to be free.

Instead of ensuring the means to control the bid (the value assessed), ensure the means to prevent it with the clear and up close verifiable legitimacy that a free-market economics (pluralism) provides.