EclecticLip

I posted recently on the topic of executive greed, and how it could have impaired American automakers’ ability to compete with Japanese automakers.

John Robb posted much more eloquently on this, in greed is….  The salient passage is this (emphasis mine):

If approach this from the perspective of game theory and evolutionary biology, the propagation of greed as a virtue among elites is a game changer. It is a survival strategy mightily benefits the early adopters and confers great success. We have clearly seen evidence of this in our experience (from multi-billion dollar fortunes to CEO pay w/o reference to performance to Hamptons estates..). However, once greed becomes a universal survival strategy, it destroys system value (as the formal rules of intrinsic/moral fair play are replaced by hideously expensive and slow enforcement/legal mechanisms). It can also result in the type of massive economic collapse we are seeing today.

Fortified by his insight, I’m going to reprhase the thought underpinning my original post:

Greed is good if it’s symbiotic with the public good; greed is bad if it’s parasitic.

Greed on the part of a business leader — even a political leader — can be symbiotic if it increases the value of the underlying systems.  But where greed decreases the value of underlying systems, it is parasitic.

An executive who forgoes near-term compensation to improve their company’s competitiveness, and thus increase the value of their stock options in the long-term, is clearly practicing a “symbiotic greed”.  Since “symbiotic greed” is an oxymoron (since greed carries negative connotations) a better term would need to be found.  Somewhere, my Classical Studies professors are probably banging their head against the wall — I have the faint feeling they taught me just such a term, some time ago.

Contrarily, an executive who loots their company in the pursuit of compensation — reducing its competitive advantage and handicapping it in the long-term – is clearly practising a “parasitic greed”.  And all the more so, for a government peopled by citizens committed to building their personal wealth instead of the human and social capital (among other factors) which provide the foundation for societal prosperity.  The same would also apply in more limited form, for governments which disinvest in these factors, on the assumption that low taxes will solve everything.

This inevitably leads to the topic of whether a Nordic-type governing model (high-tax, high-social expenditure) is better for society than an Anglo-type governing model (low-tax, low-social expenditure).  My suspicion — building from the cases of Japan and South Korea — is that the former is on balance better.  As such, my thoughts align with those of Jeffrey Sachs: advantage, Scandinavia.