CEOs, Hedge Funds, and Football Players, Oh My!

If we can thank the COVID-19 pandemic for anything, it is that it has successfully laid bare the economic inequality that has always existed in America.

Capitalism, it seems, has been converted from an economic system into a weapon used to punish anyone it deems ‘not worthy.’ We tout its virtues at every turn, yet can’t seem to resist raging at its flaws.

Still, capitalism remains the best economic system we know about. It advances the individual’s ability to grow and advance in wealth and knowledge. It also allows for unrepentant greed and commercial excess.

American novelist Tom Robbins quipped, “Let nothing interfere with economic growth, even though that growth is castrating truth, poisoning beauty, turning a continent into a shit-heap, and driving an entire civilization insane.”

Capitalism has always been built on winners and losers, victors and victims. But for all its troubles, it cultivates diversity, discovery, and entrepreneurship far more efficiently than its well-known counterpart, socialism, which has been given so much press the last few years that you’d assume it was literally on the election ballot in November.

The fallacy, of course, is that we are presented only one choice between capitalism and socialism. I have written previously about the absurdity of absolutism—that a variety of choices only contain binary options. The problem with this idea is that it leaves far too many solutions off the table. None of the most successful economies on earth adheres to true socialism. Why should equity be considered the enemy of capitalism? Could we not learn to take some of the better concepts from both extremes and meld them into one bold example the rest of the world could emulate?

In fact, that has been true of the American system of commerce since at least the 1920s.

The news has been filled with economy-related stories over the past couple of weeks, and I’m sure you have not missed many of them.

It started when social media users on Reddit banded together to prop up GameStop and other stocks as a way to stick it to wealthy hedge fund managers, who have learned to use the system of market uncertainty to their advantage and have amassed huge amounts of wealth. This resulted in stocks ballooning to unsustainable levels, thereby crushing said funds. The social media users used capitalism to teach a lesson on capitalism. Brilliant! They were the winners, at least for a day or two, before the stocks they had inflated crashed. In the end, the cutthroat capitalists won, and the stock market, which has always represented our economic system, lived to see another day under the promise of investigations.

I enjoy following professional football, so I often read about exorbitant player contracts, which have predictably led many to claim that professional football players are overpaid. Truthfully, to you and I, a hundred million bucks a year to play a football game borders on the insane, until you examine the economics of it all.

Football players are not only employees, but they are also contractors. They sign deals to play for a certain franchise long-term, often for explosive sums of money. These players have agents to help sell their talents to prospective teams. Franchises that look into these players evaluate the player not only on football talent, but his ability to deliver substantial return on investment. We look at those huge salaries as ridiculous, but better products earn better demand, which can fetch larger sums.

As an example, let’s say that Quarterback A plays reasonably well for a pretty good team. He throws ten interceptions in a season compared with thirty touchdowns, avoids sacks and has led his team to playoff appearances two years in a row. Now, Quarterback B is a superstar. He throws five interceptions and forty touchdowns and has played in several Super Bowls. No one would argue that Quarterback B is worth more money in terms of on-field production. The reality is that winning teams and players generate more fan excitement, land good sponsorship deals, and sell gobs of team merchandise. His hundred million-a-year salary doesn’t seem so crazy next to the many millions that player brings back to the franchise.

So, National Football League players are paid exactly what the franchise executives have determined they are worth. The argument often questions, why should football players earn so much money when veterans are starving and homeless or teachers bring home peanuts for the massive return on investment they generate? In other words, we should pay football players less so that we can pay veterans and teachers more. It seems a lot more equitable than the current system, even ignoring that the logistics of said scenario are virtually impossible. That proposal is an example of socialism, which is supposed to be all-out evil.

Also in the news, Amazon founder Jeff Bezos has stepped down from his CEO position to take on a different leadership role within the company. Bezos is one of the world’s richest people and therefore, completely evil if you listen to the scores of internet commenters who decry his wealth as unacceptable greed and the inequality Amazon certainly endures. The masses have accused Bezos of trampling small businesses and his own employees to command ever-increasing sums of money. It was capitalism that allowed Bezos to build such an empire. Americans tend to ignore some of the better things a businessman does in order to focus on the inherent imbalance.

Contrary to popular opinion, Amazon has allowed private sellers and small businesses to thrive by setting up a system whereby those enterprises can peddle their wares and enjoy the benefits of Amazon’s huge success and market reach. Millions of writers, including Yours Truly have also flocked to the evil empire to sell and distribute art of their own creation at a market immensely more visible than Mom and Pop’s Bargain Bookstore in Canton, Mississippi.

Amazon has also been under fire for ending contracts they deemed detrimental to their success over one party failing to curtail violent, extremist rhetoric. In other words, it was capitalism that brandished its heavy hand in limiting ‘free speech.’ For more of my thoughts on that, read the last installment of this blog.

Chinese philosopher Confucius once said, “The Master said, ‘If your conduct is determined solely by considerations of profit you will arouse great resentment.’”

So what is the story, America? Is capitalism as great as we always believed, or does the system allow for improvement to offer better equity than a purely unregulated free market? Believe it or not, debate can be had without resorting to ridiculous attacks on socialism and greed. Once again, the way to better realization of our economic potential runs through the center. It doesn’t have to be totally socialist or completely unregulated for our nation to thrive.

That choice between extremes is being sold as a poison from both sides to discourage open discourse and further a political agenda. It is our job as citizens to not fall into that trap by thinking critically and expanding our understanding of the many subtleties at play. It is okay for it to not be simple. If we want to participate fully, we must strive for both equity and growth. Believe it or not, we can achieve both.