I've tried mightily not to be unfair to American CEOs. I have known a few in the course of my working life (and even more CEO wannabes), and they're a mixed bag. I've met only one who might possibly be called a visionary in any way; the rest have been fairly myopic individuals, focused narrowly on their businesses with little larger perspective. (And I doubt that it's a coincidence that the one standout came of age in the 1920s and '30s.)
For me to explain why, for the most part, I don't consider them inherently evil, just people who have perverse incentives to do evil things, is not the post I want to write today. I'm not sure that they're amoral or sociopathic, though you'll find no shortage of people who believe so. Rather, I believe them to be a group that lives in a world in which social norms have been suspended, people who are able to rationalize almost any action as long as it leads them in the direction they want to go (yes, I understand that many people would consider that the embodiment of evil, and I won't argue).
What I do want to do is switch gears and talk about something else for a moment. I've read a lot of books and articles lately that talk about the lamentable record of the United States when it comes to foreign aid. (For a lengthy discussion of this point, see here.) It is claimed that, for all our wealth, we help out too little, coming up well short in direct government aid to the people of developing nations.
Our cheapness is somewhat mitigated by our private generosity, but it's clear that we still come up behind Sweden, Denmark, and many others, especially surprising considering our creation of programs like the Marshall Plan to rebuild Europe after World War II. The question is, how can we have so much and give so little?
I can think of two arguments, each of which has some validity. First, we are not a society that believes in public solutions, that, especially since Reagan, sees government as the problem. To tax our citizens and give that money to other countries is counterproductive (so the argument goes), since government can't be trusted to pick winners in the geopolitical game. This has been especially true since the end of the Cold War, as there is no longer a strategic advantage to "proving" the superiority of democratic free-market capitalism.
Second, so much of our aid was mis-directed. We've all heard the stories of tinpot dictators diverting vast sums of food aid to building palaces, so even our best-intentioned programs have failed miserably in effectiveness.
Each of these arguments has reduced the desire of Americans to support direct outlays to foreign governments. Any candidate running on a platform that stressed the payment of foreign aid to other countries would soon find how unpopular that is.
But many of the aforementioned books and articles stress the desirability of these programs, and justify them in various ways, including the reduction in Islamic hate and terrorism. Something you will often read is that, even if only a fraction of the aid gets by the ruling class, it will still help the people - 2% of $10 million will make such a difference to lives that it compensates for the wasted 98%.
The counter to this, of course, is that well-designed programs, under the auspices of the United Nations or an NGO, one that puts people on the ground to monitor the giving of the aid, can up that 2% to something that is really helpful. Since foreign aid is not a specialty of mine, I will leave this topic here.
Back to the United States, and its reluctance to help the poor and downtrodden in other lands. While it is undeniable that our direct aid is underwhelming, we do have an effective and growing foreign aid program: the offshoring of American jobs and the granting of H-1B visas. All of these efforts to give work to people from other countries essentially provide millions of uncounted dollars to those people - a particularly American free-market way of providing aid to other nations. (Note: I'm not forgetting the thousands of students who take slots in our universities, particularly our public ones, and who benefit accordingly; that certainly presents a risk as more of them take their diplomas and go home, but it's not necessary for my current argument.)
Since the employees in or from other countries do not make as much money as those Americans who used to hold those positions (otherwise there would be little incentive to make use of these techniques), there is "extra" money swirling around. Let's look at who gets that money.
The country to which jobs are outsourced benefits (by the way, I'm not overlooking the difference in H-1B programs, but money does flow back through remittances, and the workers eventually flow back with more marketable skills, so the benefits are roughly the same) through the employment of their people and the building of their industries. The people who get the jobs benefit, even if they do receive only 20-30% of the wages that an American would get (in a form of labor utility arbitrage, the wages are still better than the alternative jobs would provide).
In the United States, the benefits are largely under the control of corporate executives. It is likely that prices will come down somewhat, which benefits consumers, but there is ample proof that the lower prices are a small fraction of the returns from outsourcing. Profits will probably go up somewhat, as costs are lower, but it is not clear that they go up by as much as the actual returns from moving the jobs, so investors do not get the bulk of the advantage. Executives could invest those savings in the company, using this opportunity to innovate and make a better world.
But I think we all know where many of the benefits tend to go - right into the pockets of executives. Bonuses are paid to the cost-cutting geniuses (who found about offshoring by reading The World is Flat or Fortune magazine), facilitating the purchase of that fourth vacation home or 15th luxury car.
So far, all I've discussed are the gains. Does anyone lose? Of course. There is an unquantifiable risk to the average American as skills and data are sent offshore; should we be comfortable with mortgage information sitting in the servers in Bangalore? We have convinced ourselves that our coworkers will forever be our geopolitical friends, and I hope that's true, but it still presents a risk.
Any other losers? Oh, right, I almost forgot the workers who lose their jobs, and, in many cases, their careers. They pay a heavy price indeed for all these great society benefits. But it benefits other countries, so we have a trade-off. We're taking money away from American workers and giving it to other people.
Wait a second, that sounds like foreign aid. And that's exactly what it is, except that, instead of using taxes and spreading the burden of helping others across the whole population, we're concentrating the expense in the factory workers and call center employees and software developers who are forced to create their lives again.
So we have a system in which a relatively few (but growing) number of Americans are giving up a lot to provide foreign aid, and the individuals who are benefiting the most are...corporate executives. And the most of the most goes to those sitting at the top of the corporate pyramid, the CEOs.
We have foreign aid moving from Americans to people of other nations, with fat cats in the middle taking a big chunk of it for themselves. This is just like the old system, except that, instead of dictators building mansions with our money, we have American CEOs building mansions with our money.
I guess it's a little better, since the construction jobs are going to Americans...
For me to explain why, for the most part, I don't consider them inherently evil, just people who have perverse incentives to do evil things, is not the post I want to write today. I'm not sure that they're amoral or sociopathic, though you'll find no shortage of people who believe so. Rather, I believe them to be a group that lives in a world in which social norms have been suspended, people who are able to rationalize almost any action as long as it leads them in the direction they want to go (yes, I understand that many people would consider that the embodiment of evil, and I won't argue).
What I do want to do is switch gears and talk about something else for a moment. I've read a lot of books and articles lately that talk about the lamentable record of the United States when it comes to foreign aid. (For a lengthy discussion of this point, see here.) It is claimed that, for all our wealth, we help out too little, coming up well short in direct government aid to the people of developing nations.
Our cheapness is somewhat mitigated by our private generosity, but it's clear that we still come up behind Sweden, Denmark, and many others, especially surprising considering our creation of programs like the Marshall Plan to rebuild Europe after World War II. The question is, how can we have so much and give so little?
I can think of two arguments, each of which has some validity. First, we are not a society that believes in public solutions, that, especially since Reagan, sees government as the problem. To tax our citizens and give that money to other countries is counterproductive (so the argument goes), since government can't be trusted to pick winners in the geopolitical game. This has been especially true since the end of the Cold War, as there is no longer a strategic advantage to "proving" the superiority of democratic free-market capitalism.
Second, so much of our aid was mis-directed. We've all heard the stories of tinpot dictators diverting vast sums of food aid to building palaces, so even our best-intentioned programs have failed miserably in effectiveness.
Each of these arguments has reduced the desire of Americans to support direct outlays to foreign governments. Any candidate running on a platform that stressed the payment of foreign aid to other countries would soon find how unpopular that is.
But many of the aforementioned books and articles stress the desirability of these programs, and justify them in various ways, including the reduction in Islamic hate and terrorism. Something you will often read is that, even if only a fraction of the aid gets by the ruling class, it will still help the people - 2% of $10 million will make such a difference to lives that it compensates for the wasted 98%.
The counter to this, of course, is that well-designed programs, under the auspices of the United Nations or an NGO, one that puts people on the ground to monitor the giving of the aid, can up that 2% to something that is really helpful. Since foreign aid is not a specialty of mine, I will leave this topic here.
Back to the United States, and its reluctance to help the poor and downtrodden in other lands. While it is undeniable that our direct aid is underwhelming, we do have an effective and growing foreign aid program: the offshoring of American jobs and the granting of H-1B visas. All of these efforts to give work to people from other countries essentially provide millions of uncounted dollars to those people - a particularly American free-market way of providing aid to other nations. (Note: I'm not forgetting the thousands of students who take slots in our universities, particularly our public ones, and who benefit accordingly; that certainly presents a risk as more of them take their diplomas and go home, but it's not necessary for my current argument.)
Since the employees in or from other countries do not make as much money as those Americans who used to hold those positions (otherwise there would be little incentive to make use of these techniques), there is "extra" money swirling around. Let's look at who gets that money.
The country to which jobs are outsourced benefits (by the way, I'm not overlooking the difference in H-1B programs, but money does flow back through remittances, and the workers eventually flow back with more marketable skills, so the benefits are roughly the same) through the employment of their people and the building of their industries. The people who get the jobs benefit, even if they do receive only 20-30% of the wages that an American would get (in a form of labor utility arbitrage, the wages are still better than the alternative jobs would provide).
In the United States, the benefits are largely under the control of corporate executives. It is likely that prices will come down somewhat, which benefits consumers, but there is ample proof that the lower prices are a small fraction of the returns from outsourcing. Profits will probably go up somewhat, as costs are lower, but it is not clear that they go up by as much as the actual returns from moving the jobs, so investors do not get the bulk of the advantage. Executives could invest those savings in the company, using this opportunity to innovate and make a better world.
But I think we all know where many of the benefits tend to go - right into the pockets of executives. Bonuses are paid to the cost-cutting geniuses (who found about offshoring by reading The World is Flat or Fortune magazine), facilitating the purchase of that fourth vacation home or 15th luxury car.
So far, all I've discussed are the gains. Does anyone lose? Of course. There is an unquantifiable risk to the average American as skills and data are sent offshore; should we be comfortable with mortgage information sitting in the servers in Bangalore? We have convinced ourselves that our coworkers will forever be our geopolitical friends, and I hope that's true, but it still presents a risk.
Any other losers? Oh, right, I almost forgot the workers who lose their jobs, and, in many cases, their careers. They pay a heavy price indeed for all these great society benefits. But it benefits other countries, so we have a trade-off. We're taking money away from American workers and giving it to other people.
Wait a second, that sounds like foreign aid. And that's exactly what it is, except that, instead of using taxes and spreading the burden of helping others across the whole population, we're concentrating the expense in the factory workers and call center employees and software developers who are forced to create their lives again.
So we have a system in which a relatively few (but growing) number of Americans are giving up a lot to provide foreign aid, and the individuals who are benefiting the most are...corporate executives. And the most of the most goes to those sitting at the top of the corporate pyramid, the CEOs.
We have foreign aid moving from Americans to people of other nations, with fat cats in the middle taking a big chunk of it for themselves. This is just like the old system, except that, instead of dictators building mansions with our money, we have American CEOs building mansions with our money.
I guess it's a little better, since the construction jobs are going to Americans...
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