2/23/2009

Games Wall Street Plays

My favorite quotes of the month are all about how "the best and the brightest" are being put upon by terrible ideas like limits on CEO salary and talk about cranking up the upper bracket income tax rate.

The best and the brightest? Maybe, it's sad to say.

It's actually possible that this country has directed its best and brightest into do-nothing mobster occupations like tax accounting, finance, MBA-style management, marketing, law, and similar unproductive manipulative skills. Many so-called "top schools" have refocused their output into accounting, law, and MBA programs, moving out of the much more capital intensive science and engineering disciplines. Americans are rarely found in the engineering and science departments of our own universities. The money is found elsewhere and that's where the hot students have gone.

The money is the only motivation for the legal crowd. Where the money isn't is in government service. Under a constant barrage of Republican and faux-Republican (Clinton's "Eisenhower Republican" administration) executive branch bureaucrats for nearly 30 years, the federal government's talent level has fallen to 1929 levels. Reagan and the Bushies stuffed the legal system with hundreds, if not thousands, of untalented neocon fruitcakes and it will take decades, if we cared to do the work, to purge that collection of morons from the judicial system. Cinton packed the regulatory agencies with pro-corporate yes-men. Dedicated talent fled civil service after Reagan made it clear that talent was the last thing he wanted in government. For the last 8 years, Bush actually actively chased down talented civil servants and tossed them out.
If the United States wants to make a comeback, we are going to have to reverse all of this foolishness. The federal government is, once again, going to have to find a way to staff itself with scientific, industrial, economic, diplomatic, legislative, and white collar criminal investigative talent. Our universities and K-12 education system is going to have to relearn how to educated itself, then its students, in disciplines that are based in science and technology, not tax-evading money laundering games. We have to figure out how to, once again, attract the best and the brightest to government service.

Wall Street is the last place we want to waste that kind of talent. As anyone who follows history knows, Reagan's "miracle of the markets" is based on the squalor of criminal behavior. Markets, when allowed to run wild, are nothing more than a collection of gangsters in suits wallowing in greed, corruption, and collusion. Mathematic's game theory has long proven that the basic capitalist theory was a misreading of human nature. Libertarian theory is so far from reality that it appears to be as reality-based as Creationism. Humans are both greedy and lazy. The greediest and laziest are often best suited to take advantage of a system that is not based on laws that regulate those tendencies. Executives are not the cream of any crop and haven't been since the first generation of any industry. Once the founders are gone, the politicians move in and sharks begin to feed on the business culture, turning it from productive to vicious. Keeping the best and brightest from finding homes on Wall Street should be a prime directive of the education system, the legal system, and the rest of us.

For now, we are stuck with a generation or two of our best and brightest who are unsuited for any productive work. The American X, Y, and Z Generations have rarely been engineers, scientists, doctors, technicians, or even schooled in any reality-based discipline. Our society and our education system has wasted 20 years of bright young talent and there will be a terrible cost to the world because of that misuse.

A solid description of the flaw in our economic and education system is presented in "The Ascent of Money," a British documentary about how money has been disconnected from reality. The introduction to this documentary demonstrates the scale at which money has outstripped reality. The fact that derivitives have valued themselves more than 10x the total assets of the world is mind-boggling. Bankers have actually invented an alternative universe of money that argues against the existence of the real world. This is not only insane, but it is an example of how poorly our education system has prepared the average person to govern himself.

Obviously, the cure is in our tax system. It should be clear that a tax system is designed to encourage or discourage activity. We tax the stuff we don't want to happen and we don't tax the stuff we want to encourage. Currently, our tax system is designed by exactly the people our culture ought to be discouraging.

There is no upside to fantastic inherited wealth, which is the reason for inheritance taxes. G.W. Bush is the posterboy for why wealth and power should not be inherited. The people who campaign actively against "the death tax" are exactly the people who benifit from the lack of a rational tax system, which would actively prevent those people from inheriting the power to launch a meaningful campaign for anything.

There is no advantage provided to businesses or the culture for excessive executive salaries; it's not like these morons could go somewhere else and make money. We should stop providing corporate tax breaks for executive income expenses.

We need alternative energy research and development. We need a working education system. We need manufacturing, infrastructure, and technology. We don't need more lawyers, tax accountants, or MBAs. The fix is to tax to death the things we don't want and to reward the activities we desperately need.

Above all, the nation needs to develop and encourage leaders. However, leadership is top-down. When the top of our corporate structure is incompetent, uneducated, and corrupt, you can expect the economic levels below them to follow. For the last 30 years, from the President to CEOs, our "leadership" has been drawn from the worst of the worst. We have to fix that. We need to find a way to discourage our best and brightest from wasting their abilities on Wall Street.

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