Op-Eds Procapitalism, China.

February 03, 2009 ... The Confusion of Premier Wen Jiabao.

During his trip to Europe including the UK and Cambridge University, where he was targeted by a disgruntled shoe-thrower lacking the desired precision, Premier Wen Jiabao bitterly complained that, much of the current economic woes sweeping the world, are attributable to greedy and extraordinarily over-compensated executives, and too little regulation. Whilst there is a degree of truth to that conclusion, Premier Wen Jiabao is focusing on a degree of truth which is marginal in the extreme, and entirely, perhaps deliberately, misleading.

Assuming sheer ignorance of economics, Premier Wen Jiabao should know that some executives have become extraordinarily rich simply as the consequence of the supply of capable executives being hugely diminished by the strict stakeholder criteria demanded by governments in China and in the west, to underpin a myriad of socioeconomic policies which necessitated that certain on-message executives be paid hugely inflated salaries and ludicrously large bonuses.

On a free market, the level of executive compensation, in comparison to labour, was traditionally a factor of between the 20-40 (Peter F. Drucker. William and Ken Hopper.) as advocated by Germany's Chancellor Merkel, since a significantly higher factor was indicative of something amiss, seldom indicative of extraordinary talent. This was because management of significant firms had developed over time to not be concentrated in very particular, and automatically limited number of hands, but was predicated on an experienced management team, which excluded the tendency towards the head of the team being vastly over-compensated, for his/her efforts. But the rise of the professional manager replete with an MBA and directed by a government certified, and vastly over-rated/compensated team leader-cum-stakeholder, put paid to that. Thus Premier Wen Jiabao's complaint.

As for regulation: At no time in economic history has there ever been more regulation. Yet the economic chaos of today has never been greater. And the much vaunted light touch? That was no more than 'the blind eye', so long as the numbers per reporting quarter matched the rhetoric. Let the good times roll. 1929... History is bunk?

Premier Wen Jiabao should immediately abandon communism and become a Proponents of Laissez Faire Capitalism. For if he persists along his current trajectory, he will have a lot more than a shoe, to worry about.

Premier Wen Jiabao:
Was it an African shoe or a European shoe?