Butch Mazzuca
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September 19, 2013
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Vail Daily column: The true beauty of capitalism

Not too long ago, a Vail Daily reader voiced his displeasure with the compensation of the CEO of McDonald’s Corporation vis-a-vis the lack of a living wage paid to the fast-food chain’s employees.

The individual referred to a Swiss law limiting executive pay to no more than 12 times that of that company’s lowest worker. The rationale being if Congress passed a similar law in the U.S., then we would likely see an increase in the minimum wages paid by U.S. corporations.

Perhaps so, but at the same time no mention was made of the unintended consequences that might result if incentives were removed for those who employ millions and are responsible for much of the economic innovation in this country.

By that same logic, shouldn’t we be compelled to ask if former President Clinton is worth $195,000 per speaking engagement, an amount that’s netted the former president in excess of $100 million since leaving office? And perhaps if Peyton Manning and Tom Brady surrendered a portion of their $30 million plus salaries, McDonald’s workers would be able to attend an NFL game without spending $80 for a nosebleed ticket.

Worrying about someone else’s compensation is a losing game. It eventually leads to the question of where “the line” should be drawn and who has responsibility to draw it? Why is it fashionable to question a CEO earning $12 million a year and who’s responsible for employing a half million people, but not questioning Brad and Angelina who are paid a combined $50 million per year yet employ perhaps a handful of workers to maintain their Hollywood Hills estate?

Those intent on legislating minimum wages don’t seem to grasp that in a capitalistic system, people tend to be compensated in direct proportion to the degree of difficulty in replacing them.

Should Aaron Rodgers make $62 million a year or Tiger Woods $78 million? I can’t answer that, but I suspect it might be difficult to replace the Green Bay quarterback or the world’s No. 1 golfer for less. The fact is Rodgers and Woods bring millions of fans (and dollars) into their respective venues and are responsible for the popularity of millions upon millions of dollars of consumer products.

I’ve written before that capitalism isn’t perfect — it fosters greed, selfishness and an unequal distribution of wealth. But at the same time, since our founding, American capitalism has produced the largest, most dynamic and most productive middle class the world has ever known.

When asked about capitalistic greed, Milton Friedman said to Phil Donohue, “Throughout recorded history, the only verifiable instances where the masses have escaped the grinding poverty that we find in places such as Niger, Sierra Leone and Ethiopia are in nations where capitalism, and by extension, free markets and free trade flourish.”

In his book, “Someone’s Gotta Say It,” Neil Boortz posed an interesting hypothetical scenario. He asked the reader to imagine it’s 1850 and someone is asked which of the four “far-fetched” ideas was likely to be accomplished during the next 150 years.

1. Figuring a way to sit in your living room and watch a live performance of the Bolshoi Ballet in Moscow.

2. Expand the average life expectancy of human beings by 35 years.

3. Develop a way of transporting 350 people from San Francisco to Boston in five hours.

4. Build a system of paved roadways from city to city across the nation.

Remember, this is from the perspective of someone living prior to the Civil War. If we’re honest with ourselves, we’re going to choose No. 4 — building a system of paved highways. Yet, that was the only item from the list that was accomplished by government — all the rest were a result of private individuals working in a competitive free enterprise market pursuing private goals for profit — the operative phrase being “for profit.”

Capitalism is a system that rewards those who are highly motivated and understand the concept of personal responsibility; at the same time, however, it’s not a particularly good system for those who lack those qualities.

Is someone expected to raise a family flipping burgers? Of course not; but if a “burger flipper” has a modicum of motivation, he or she will use that low-paying job to develop the work habits and people skills to prepare themselves for a better job that will increase their earnings while bringing value to the employer.

Unlike our European counterparts, the American socio-economic system isn’t static. Just because an individual’s earning are in the lowest quintile doesn’t mean they need to stay there. Studies have shown that of those in the bottom one-fifth of compensation in America, 80 percent rise out of that percentile within 10 years. And within that group, 20 percent advance into the highest quintile. Bill Gates and Steve Jobs weren’t born with billions, but they were motivated, they innovated and their ideas contributed enormously to society — and that’s the true beauty of capitalism.

Quote of the day: “The worst economic conditions in the world exist in those places and in those societies that have either departed from, or have never accepted capitalism” —Milton Friedman.

Butch Mazzuca, of Edwards, writes regularly for the Vail Daily. He can be reached at bmazz68@comcast.net.

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The VailDaily Updated Sep 19, 2013 10:03PM Published Sep 19, 2013 03:09PM Copyright 2013 The VailDaily. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.