Thursday, April 30, 2009

Krugman's latest hypocrisy

(The following is adapted from an e-mail I sent to Don Luskin, with a few additions and deletions.)

Coming across Krugman's latest -- the same old hackery -- was unintentional. I rarely read his columns anymore, and certainly not at lunchtime lest they turn me into a bulimic. I have a new tagline for his columns and blog: "Hypocrisy purer than Vermont maple syrup."

The minute he started talking about executives getting paid too much, I knew he'd never, ever mention Robert Rubin. I even Ctrl-F'd to make sure; it's not there.

Of course, Krugman has to create a strawman, and I'd lay odds he knows he did, about bankers' pay being "a reward for their creativity — for financial innovation." This is utter BS. Sandy Weill contributed immensely, unquantifiably to the American economy by running a supercompany that helped people grow their wealth, "creatively" or not. Rubin, on the other hand, took $115 million over a decade so he could direct Citi to increase risk-taking in 2004-2005.

So how many strawmans can he create in the same breath? "Still, you might argue that we have a free-market economy, and it's up to the private sector to decide how much its employees are worth. But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector." So Wall Street can't pay people what they're worth because the government stepped in, using force to dictate terms of compensation. Is Krugman unaware of his absurd circular logic here, or was it deliberate because he couldn't otherwise make the argument?

Then as if to demonstrate his utter cluelessness, he writes, "Claims that firms have to pay these salaries to retain their best people aren't plausible: with employment in the financial sector plunging, where are those people going to go?" Unemployment may be high overall, but valuable people always have options. A few months ago, I was being courted by a major private bank. They were excited to find me, because of my experience combined with strong tech skills. It would have been a very senior position -- would have been, because I turned it down. It's not the first time I've been recruited, but this time was tempting: the big role came with total compensation double what I'm currently making. However, I'd rather stay where I am, because asset managers are historically more stable than banks. After a couple of bad quarters, new staff could be the first to be downsized. Most importantly, I'm loyal to my boss, who's become a good friend as well as a mentor. I'm hesitant about working for someone new, someone who I might find I cannot trust. You also never know when you start somewhere and are sabotaged or made to be the fall guy for a boss' mistake.

And I'm not the only one who gets calls from recruiters. My friends at work do, too, and we choose to go or stay depending on what's offered. Then again, we have skills that are in demand, even during a recession, unlike dime-a-dozen types like, oh, a newspaper reporter.

I suppose it's too much to expect that a tenured economics professor would ever understand the nature of competition. He and his Princeton colleagues don't have to worry about "So it's eat, drink and be merry, for tomorrow you may be sacked" and can pretty much do what they want, whereas most of the rest of us actually have to continue producing value to keep our jobs.

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