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  • From: Clansgian AT wmconnect.com
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Out of control capitalists
  • Date: Wed, 20 Apr 2005 22:35:17 EDT


> The reason that capitalism allows such things is that the person is
> valuable; if they weren't valuable enough to pay oodles of money for they'd
> be let go.
>

This may have been true at one time in our economic history, but it isn't
true now of days. Let me make a comparison: people often say of the
ridiculously high price of something, say, real estate, that it is worth what
people
are willing to pay for it. But real estate has (at least) two components to
it:
1) a use value and 2) a speculative value. The use value of a house is
what it would cost you to live in like surroundings if you didn't own the
house.
But real estate buyers also keep an eye on what they thing the house WILL be
worth in the future (for whatever reason) and so are willing to pay more than
the cost of similar quarters when they buy a house. This is the speculative
value of real property. It's always been a part of it, but it is completely
beyond reason now of days.

Like that (somewhat like that) companies used to pay executives salaries and
bonuses based on how they (the executives) and the company have performed in
the past. That is not true now, they pay high executive packages not on how
the executive has performed for the company but rather on how they hope the
company under their leadership will perform in the future. Often that
speculation is entirely baseless.

If you get a chance find the flick "Startup.com". It traces a group of
dot.bomb types through creating a virtual company (it's more of a documentary
than
anything else) all the way until it belllied up. Along the process the
creators made a pitch to a venture capital group which backed the company
with
something like $15 million dollars. At one time the founder was on one of
the news
TV shows saying how he had gone from an idea to the company being worth $50
million dollars based on the price of its stock. During that time they
bought
out partners for a quarter million dollars or more, had expensive offices,
staff, gave lavish parties, etc. Before they could go "online", another
startup
company offered their same product (centralized electronic site for large
municipalities) at a much reduced rate. During the whole time from startup,
finding backing, buying each other out, and finally going bust .... th
company
never actually sold any product or service. The creators executive salaries
and
benefits were NOT based on how the company had done, but on how the investors
believed and hoped it would perform. The investors lost all their money.

Capitalism is in a very backwards state now. High salaries and benefits as
are cited in the article are not often the results of how the company or its
execs have preformed, but rather on how the investors HOPE he will perform
...
even if there is no basis for thinking so or thinking that the high salary
makes any difference in the situation.

James




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