Iraq and Afghanistan

As I have argued recently in these postings, the strength and health of the United States has an important influence on the near-term health of the world. This brings us to today's column by Kristof on what he calls the "Captains of Piracy". The compensation of top executives in American firms is now out of hand. If this pattern continues, the competitive position of the United States, and ultimately its economy, will be down the tubes. Kristof reports that the bonuses for CEOs rose last year by 46%, often irrespective of the performance of their institutions. Since 1993, the average pay of CEOs for the top 500 companies in Standard and Poors tripled to $10 million (many other countries, including Japan, Great Britain and Germany continue to pay much less). Paying such compensation is not a trivial expense, even for large companies. A recent Harvard study found that public companies today devote about 10% of their profits to compensating their top five executives, up from 6% in the mid 1990s. If we look at long term trends in the relation of ordinary worker pay to that of top executives we will find that in 1980 it was 42/1, in 1990 85/1, while today it stands at 301/1. These comparisons suggest that the United States is no longer either socially or economically competitive with the rest of the world. The insistence of the current Administration that even in the face of these great disparities, the country should reduce the tax burden on the richest of the rich is mind boggling.

It has been argued that the greatest strength of America is its "soft power", a term that some in the Administration pretend not to understand. Soft power is the power of example, the power that comes from being the society that the rest of the world wants to imitate. Anything that lessens the attractiveness of American society in the eyes of the world reduces the country's soft power. Ultimately this means that America will no longer be the country that everyone wants to move to, or at least be educated in. Our "superpower" status will be stripped of everything aside from the sheer military power that we can put into the field. As the economy sours as debt overcomes it and the dollar weakens, the forces we can field will no longer be so exceptional: we will no longer be able to play our role. And with no country in a position to replace us, the world will relapse into a melange of warring states, each trying to become "Number One".