Of free markets and comeuppance

Posted: Mar 05, 2002 12:00 AM
So as I observed to my wife the other night, on hearing mention of Diane Sawyer's salary (about 100 times larger than Alan Greenspan's, I think): "What does she do with all of it?" But that failure of imagination on my part no more just gets the conversation going. I imagine the big enchilada question to be, "Isn't that up to her?" In other words, if that's the load she wants to tote, and if ABC pays for the toting of it, who can really object? Ms. Sawyer -- Mrs. Mike Nichols, if you prefer -- comes to mind because of all the foofaraw over the immense rewards bestowed on some business executives. Jeffrey Skilling comes prominently to mind, as do Andrew Fastow and Ken Lay. The hue and cry is up. The high-minded are beginning to talk about a spot of regulating. The chairman of the Securities & Exchange Commission, Harvey Pitt, speculates about requiring an earnings-back guarantee by executives "who are compensated for their performance, but who, in fact, produce illusory performance." There is a national buzz about overpaid moguls and underpaid, not to mention laid-off, workers. A lot of people in America could be called overpaid -- from Jeffrey Skilling (when he had a job) to Diane Sawyer (who has a job but evidently no life) to Ernie Els, who walked off last weekend with $846,000 for four days' work in Miami at the Genuity Championship. The question concerns society's right to make that judgment. Not to mention society's ability to do so. We have these discussions with great regularity. Humanity is hard-wired for them. Our wont -- especially in comfortably democratic circumstances -- is to construct mental fantasies about entitlement. We seem to know just how much everybody else is worth, and much of the time it's less than we ourselves are worth. It is a kind of tribute to American culture that we generally fail to dress up these assumptions in their formal best. We grumble but most of the time let it go, except for occasions like the Depression, when the generously compensated got
really unpopular. This valuable knack for restraint helps to explain America's success in the world, as contrasted with the un-success of countries that determine and regulate your worth. I doubt there's much danger under the Bush administration of a successful movement's arising to control corporate compensation, but the moment seems propitious to mention the reason we don't even need such a movement. The free marketplace (when left free) is as unforgiving of failure as it is bounteous in rewarding success. In other words, whether it's Diane Sawyer or Ken Lay, the marketplace operates with beady-eyed efficiency. If you deliver the goods for which you were hired -- that is to say, if customers and stockholders are reasonably satisfied -- the marketplace will be understandably, sometimes lavishly, generous. Otherwise? Well, the hard landing of the Enron coterie of manipulators demonstrates anew what kind of comeuppance awaits those who think they can fool the market forever. Get to thinking that way, and in due course, out goes the rug from under the feet, courtesy of the good old beady-eyed marketplace. Most Americans, it strikes me, mostly understand that this is how things work. What makes them clench their fists from time to time is the inevitable "unfairness" of outcomes. This perception arises sometimes from envy, sometimes from generosity of heart. The race is not to the swift, nor the battle to the strong -- but how come? One good reason: Our is an imperfect world, full to the brim with imperfect people. This is where economic freedom (among other prized commodities) comes in to redress the balance until the next inevitable episode. Cries for greater government oversight of business, and especially management, make good as political sound bites. That's about their only value. Government exists to guarantee honesty, not outcomes. If we leave the marketplace generally alone, things may even out over time. How would we know? Because they just about always do, that's how we know.