Sunday, April 12, 2009

Economics 101 in Singapore

An idea was put forth this week at the Conference on World Affairs which, if implemented, could potentially prevent any future melt downs on Wall Street due to malfeasance and incompetence. The simple idea is this: pay the Federal regulators as much in salary as the Wall Street bankers pay themselves.

For years, the best and the brightest of the grads coming out of the Ivy League schools have gravitated— not to careers in government or science or teaching— but to finance. The reason is simply that they wanted to make as much money as possible in the shortest amount of time. The fact that they destroyed our economy doesn’t negate their claim to being the best and the brightest. Their goal wasn’t to preserve the economy, but to get rich in personal wealth, and they accomplished this beyond anything achieved by any group of people in the history of the world. Meanwhile, those people toiling within the bowels of the SEC and other Federal agencies— people who might have prevented the tragic mess— these people behaved with the detached lethargic incompetence that you often see in minimum wage workers who could care less about losing their job. The crooks were motivated and the police were not.

The idea about motivating government regulators with vast sums of money is not a new or novel idea. It actually works. We know this because it has worked in Singapore for more than thirty years. Like so many other things in that nation-state, it’s a radical notion that has proven highly effective but would probably be impossible in our democracy. But since Singapore doesn’t have the limitations of democracy, it has chosen to pay the public sector people salaries equivalent to the salaries in the private sector. The result is that the regulators actually want to keep their jobs, so they’re willing to do their jobs well. The crooks and the police are equally motivated, and as a consequence, some of the best and the brightest line up on the side of the good guys.

America isn’t Singapore, however, and so this economic disaster won’t be the last.

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