The NYT pushed the old "government versus market" line in an article about Senator Clinton's economic positions. At one point the article tells readers that "Mrs. Clinton put her emphasis on issues like inequality and the role of institutions like government, rather than market forces, in addressing them." Of course it was not market forces that led to the rise in inequality in the last quarter century, it was deliberate government policy. High on the list of government policies that promoted inequality are trade deals like NAFTA, which were designed to put non-college educated workers in direct competition with low-paid workers in the developing world, while keeping in place, or increasing, the barriers that protect the most highly educated workers. The predicted and actual effect of such agreements is to redistribute income upwards. In presenting this contrast of government versus market, the article also notes the explosion in CEO pay, throwing in the assertion that "it is difficult to reduce such pay with new laws." Actually, it is easy to imagine laws that could have a large impact on curbing excessive CEO pay. Current laws on corporate governance allow insiders (like CEOs) to plunder corporations in ways that do not seem occur in other countries. It is possible to rewrite the laws on corporate governance to prevent such insider abuse. For example, the law could require that the compensation packages for the top executives are sent out for shareholder approval at regular intervals, and only the votes actually returned are counted in the election. (Currently, management is allowed to count unreturned proxies as supporting their position.) The laws on corporate governance exist to prevent the sort of insider abuse that we are now seeing in the United States. The explosion in CEO pay presents strong evidence that these laws need to be modernized.
--Dean Baker
