Byline: Arnaud de Borchgrave, THE WASHINGTON TIMES
As Wall Street's subprime Ponzi scheme engulfed much of the world's economy, academics and learned journals are debating what the prestigious Council on Foreign Relations (CFR) calls the wholesale reconsideration of the capitalist model and free market economic orthodoxy.
In its daily analysis headed Capitalism in Crisis, Lee Hudson Teslik writes that it was French President Nicolas Sarkozy who first said, The all-powerful market that always knows best is finished.
The laissez-faire developed economies that kept their hands off the economic tillers have undertaken humongous economic interventions of historic proportion. CFR's daily appraisal said the U.S., most countries in Europe, Japan and South Korea have all funded private banks through recapitalization. Some, including the United States, even took the more radical step of buying assets directly from private firms. A much broader swath of countries, said CFR, have engaged in other forms of intervention that range from guaranteeing bank deposits to cracking down on short-selling to attempting to boost private lending markets.
Out of control Executive compensation packages, $100 million year-end bonuses for top traders, $150 million golden parachutes for CEOs voted out by their boards for doing a crummy job, and $300 million yearly pay for unregulated hedge fund managers, all contributed to the image of La Vegas on the Hudson.
There is talk of limiting tax return deductions to $500,000 for executive salaries in the institutions now partly under government supervision. But Fortune 500 CEO annual compensation has been averaging $14 million, including golf club dues, limo and driver, use of company jet, and other emoluments. And those limited by government fiat to half a million dollars a year are bound to find a way around new restrictions. Or they wouldn't take the job. Out of the $125 billion the Treasury is injecting into nine big banks, more than $40 billion is owed to their executives for past years' pay and pensions, according to a Wall Street Journal analysis.
The same hue and cry against corporate chieftains demanding U.S.-inspired financial rewards on the same level as sports and movie stars, has broken out all over Europe.
Back in favor is John Maynard Keynes, the Great Depression-era British economist who argued free markets would not self-correct and that government would always be needed to ensure (1) market gains would translate into improved living standards and (2) topside excesses would not give capitalism a bad name.
Many financial experts believe that the Nov. 15 summit of world leaders in Washington, sold by Mr. Sarkozy to George W. Bush, should produce at least the outlines of a new financial architecture to update, possibly replace, the post-World War II Bretton Woods accords. But this will be a long, tedious negotiation with a deck stacked against the United States.
Sober second thoughts have also flowed from prestigious global publications - i.e., the Economist and Financial Times, both British - urging decisionmakers not to throw the baby out with the bath water. Capitalism - wild or tamed - has brought great benefits to humanity. …