Journalism’s Enemies Within

I’ve never much cared for Robert Samuelson’s opinion pieces because he’s generally most obsessed with his opinion, regardless of fact. And he never met a problem that couldn’t be better solved by government intervention. Today’s nonsensical rant is no different, although he leaves his preference for government salvation as implied.

Amid the mayhem on world financial markets, it is becoming clear that capitalism’s most dangerous enemies are capitalists. …

Everyday Americans will conclude (rightly) that this brand of capitalism is rigged in favor of the privileged few. It will be said in their defense that these packages reflected years of service, often highly successful. So? It’s not as if these CEOs weren’t compensated in all those years. If you leave your company a shambles — with losses to be absorbed by lower-level employees, some of whom will be fired, and shareholders — do you deserve a gold-plated send-off? Still, the more serious problem transcends the high pay itself and goes to the wider consequences for the economy.

The action of a few capitalists allegedly indicts capitalism as a whole. If capitalists argued that capitalism was perfect, yes, then Samuelson might have an interesting idea. But we don’t argue that. We only argue that it’s superior to everything else we’ve tried. That includes government control. Any system run by humans will be flawed, so noting human flaws is not an effective indictment.

The rest of Samuelson’s column is as ridiculous as the opener. Consider one or two more points:

… Now there are signs of problems involving securities known as “credit default swaps.” Never mind the details. Concentrate on the possible fallout. …

Never mind the details. No truer example of imposing one’s subjective opinion as a substitute for objective evaluation exists. Of course, Samuelson engages the same basic flaw into the subprime mortgage issue.

Just why investment bankers and traders out-earn, say, doctors or computer engineers is a question I’ve never heard convincingly answered. Are they smarter? Unlikely. Do they contribute more to the economy? Questionable. True, Wall Street often performs a vital function. It channels savings into productive investments. It helps provide access to capital and credit. In 2006, U.S. companies raised nearly $4 trillion through new stocks and bonds. Many financial innovations, including mortgage-backed securities, have benefited individuals and companies.

Other than demonstrating that Wall Street adds value to society, I can’t imagine why Wall Street earns money.

But Wall Street also frequently misallocates capital and credit. …

Misallocates according to whom? The central planner, of course. And who gets to be the central planner who decides what the proper allocation is? I’m guessing Samuelson has a pretty firm belief that he’s a good judge of proper allocation.

More importantly, Samuelson only points to “failures” of the market like the tech bubble of the late ’90s and the current subprime mortgage issue. The presence of failures is enough to prove that the process is flawed. But anything involving humans will involve failure. Trial and error requires error. Samuelson ignores the continued existence and success of companies that benefited from cash influxes during the tech boom. He ignores the continued health and repayment of most subprime mortgages. Some failures exist in those categories, so the system is broken. That’s irrational.