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Who cares about the rules governing CEO compensation during bankruptcy?

Both MSNBC [ht: ja] and the Wall Street Journal are now documenting the fact that corporations are finding ways around congressional regulations governing compensation to Chief Executive Officers during bankruptcy proceedings.

Under Chapter 11, corporations are able to close offices and factories, cut jobs, and wipe out shareholders. But they’re finding ways of offering generous compensation to the CEOs who preside over the reorganizations.

From the Journal:

By examining court documents and regulatory filings, The Wall Street Journal was able to determine the pay of executives at 21 of the 100 largest companies that recently went through bankruptcy. Together, the chief executives of those firms earned more than $350 million in salary, bonuses, stock grants and severance for the periods their companies were under Chapter 11 bankruptcy protection or just afterward.

Of the 21 chief executives, seven had either been hired during a bankruptcy case or been with a company less than a year before its Chapter 11 filing. Some of the 21 CEOs, including Lear’s, received bigger bonuses during bankruptcy protection than in previous years.

And from MSNBC:

“There seems to be no sense of accountability at this level,” said Steven Kropp, a professor at Roger Williams University School of Law. “In most of these cases, the unsecured creditors aren’t being paid back in full, employees are being laid off, and in addition, they’re finding their health insurance and pensions diminished.”

Clearly, under contemporary capitalism, CEOs are finding new and ingenious ways of bankrupting the bankrupters.

Economics experts, with few exceptions, continue to hold to their view that it’s not capitalism but, instead, “technological change” that explains rising income inequality in the United States.

That’s the conclusion of the latest survey by the Initiative on Global Markets at the University of Chicago’s Booth School of Business. (The votes of the “experts,” along with their levels of confidence, are reported on the same page.)

The only dissenting votes were by William Nordhaus (“Although this is a common view, the causal factors are too complex to untangle unambiguously.”) and James Stock (for reasons presumably explained in the book, The race between education and technology).

A few other “uncertain” votes might also be interpreted as disagreements. But it’s still the case that, for most mainstream economists, changes in technology—and not the particular forms of capitalism—are the ultimate explanation of widening inequalities in the distribution of income in the United States.

Why is this important? Because, first, it attributes inequality to an exogenous factor, technology, over which there is no control (because that’s how technological change is understood within neoclassical economics, as something that happens outside the economy and society). And, second, it reflects the fact that everyone gets what they deserve (since those at the top have the skills to match the better technology, which is reflected in their higher pay, while those at the bottom lose out, which just corresponds to their lower skills).

What this means, in terms of policy, is the best that can be done is to encourage more education (to develop skills appropriate to the new technologies), and perhaps ameliorate the worst effects of inequality (via taxes and spending on social programs).

In other words, the view of mainstream economist is that we just have to adopt to the changing technology—and give up on the idea of eliminating capitalism.

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The proliferating scandals and enormous sums of money involved in intercollegiate athletics prompt the question: is it slavery or capitalism?

We should remember that, for a long time, professional baseball was organized as slavery—until the advent of free agency and the rise of capitalist baseball. And, according to Taylor Branch, intercollegiate athletics right now have the “unmistakable whiff of the plantation.”

So, which is it—capitalism or slavery?

The slavery analogy is reinforced by Joe Nocera’s recent series of columns (e.g., here, here, and here) on the arbitrary and capricious use of power by the N.C.A.A. over student-athletes.

But then there is the business of big-time sports, as explained by Judith Scott-Clayton.

While there can be quite a bit of arbitrariness in the accounting underlying these reports, it seems clear that at least some institutions are making money: among the 120 colleges in the Football Bowl Subdivision (F.B.S., formerly called Division I-A), about 25 percent generated $14.4 million or more in net revenues annually from their men’s athletic programs.

And then there’s the political support, leverage with other powerful people, and free advertising to students and parents that big-time sports universities obtain through television exposure and the use of luxury boxes.

Clearly, at least some (but certainly not all) colleges and universities make big-time money through intercollegiate athletics while treating the athletes themselves as plantation workers, with few rights or forms of redress.

Capitalist business practices and slave labor. Perhaps that combination is the closest we’ll get to an answer.

Jonathan Portes explains that the current depression in Britain is now—when measured in terms of the time period during which output remains below its previous peak—”longer than that experienced during the Great Depression, and is not likely to end any time soon.”

Or, as we say on this side of the Atlantic, how’s that expansionary-austerity thing workin’ out for ya?

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Special mention

Lockuptown, the U.S. approach to criminal justice, is a system that could be right out of one of Bertolt Brecht’s plays.

Adam Gopnik, in his exposé of the U.S. prison-industrial complex, makes three main points:

First, it involves the mass incarceration of poor black men.

For most privileged, professional people, the experience of confinement is a mere brush, encountered after a kid’s arrest, say. For a great many poor people in America, particularly poor black men, prison is a destination that braids through an ordinary life, much as high school and college do for rich white ones. More than half of all black men without a high-school diploma go to prison at some time in their lives. Mass incarceration on a scale almost unexampled in human history is a fundamental fact of our country today—perhaps the fundamental fact, as slavery was the fundamental fact of 1850. In truth, there are more black men in the grip of the criminal-justice system—in prison, on probation, or on parole—than were in slavery then. Over all, there are now more people under “correctional supervision” in America—more than six million—than were in the Gulag Archipelago under Stalin at its height. That city of the confined and the controlled, Lockuptown, is now the second largest in the United States.

Second, it is increasingly organized on a for-profit basis.

a growing number of American prisons are now contracted out as for-profit businesses to for-profit companies. The companies are paid by the state, and their profit depends on spending as little as possible on the prisoners and the prisons. It’s hard to imagine any greater disconnect between public good and private profit: the interest of private prisons lies not in the obvious social good of having the minimum necessary number of inmates but in having as many as possible, housed as cheaply as possible. No more chilling document exists in recent American life than the 2005 annual report of the biggest of these firms, the Corrections Corporation of America. Here the company (which spends millions lobbying legislators) is obliged to caution its investors about the risk that somehow, somewhere, someone might turn off the spigot of convicted men:

Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional and detention facilities. . . . The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.

Brecht could hardly have imagined such a document: a capitalist enterprise that feeds on the misery of man trying as hard as it can to be sure that nothing is done to decrease that misery.

Finally, the growth in the U.S. prison population has nothing to do with the decrease in crime.

One fact stands out. While the rest of the country, over the same twenty-year period, saw the growth in incarceration that led to our current astonishing numbers, New York, despite the Rockefeller drug laws, saw a marked decrease in its number of inmates. “New York City, in the midst of a dramatic reduction in crime, is locking up a much smaller number of people, and particularly of young people, than it was at the height of the crime wave,” Zimring observes. Whatever happened to make street crime fall, it had nothing to do with putting more men in prison. The logic is self-evident if we just transfer it to the realm of white-collar crime: we easily accept that there is no net sum of white-collar crime waiting to happen, no inscrutable generation of super-predators produced by Dewar’s-guzzling dads and scaly M.B.A. profs; if you stop an embezzlement scheme here on Third Avenue, another doesn’t naturally start in the next office building. White-collar crime happens through an intersection of pathology and opportunity; getting the S.E.C. busy ending the opportunity is a good way to limit the range of the pathology.

Yes, indeed, Bertolt Brecht would only have smiled in recognition: Lockuptown is a modern form of slavery and it works not because it stops crime but because it is profitable.

The hero of Mitch Daniels’s Republican address to the nation was Steve Jobs.

The problem, of course, is that a current Apple executive claims, “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

Or, for that matter, given the number of attempted and threatened suicides at Foxconn Technology, Apple’s key supplier, to solve China’s problems.

But like the rest of the apples in the barrel, the strategy is benefiting Apple itself: today it posted earnings of $13 billion, or $13.87 per share, more than double the $6 billion, or $6.43 per share, a year ago.

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The chart is relevant for many reasons, including the fact that I’m teaching the Political Economy of War and Peace this semester.