The Socialism advances in Switzerland

A new and impressive victory of socialism happened in Europe, after Swiss voters approved on referendum some limitations to the salaries of managers of corporations. As this happens in Switzerland – may be the most successful pro-capitalistic country in Europe, it marks the influence of leftish ideas that lead to a much more regulated and non-free economy and society as a whole.

The government intervention in private companies’ affairs obviously will make Switzerland less attractive to investors. It suggests that company owners are stupid and do not understand their interest so the state must act. In fact the real truth is that there is no better understanding of a private interest than the understanding of the owner. That is the proved from centuries principle. If there is a problem with the salaries of managers, the shareholders have enough power to regulate them. In fact the salaries are formed on rules accepted by shareholders. So why must the government intervene?

The answer of this question is very simple. This intervention is a direct consequence of another stupid intervention that happened some years ago. Then during the financial crisis the government acted to save some banks that were considered “too big to fail”. After that it became clear that the management of these banks has received enormous bonuses. And this logically inspired taxpayers’ discontent that also logically has led to the current stupid regulation.

Can you see what happened? The government saved the banks using taxpayers’ money and after that decided managers are guilty so salaries must be limited… One fool decision follows another – also fool decision.

The natural economic model is when someone is managed badly, to go bankrupt. And shareholders to pay the price for the bad management they have elected. No taxpayers’ money, no losses.  But the government saved the stupid bankers, and after that decided to intervene in salaries.

But let’s look at the number of saved by government banks, and compare it to the whole number of companies in Switzerland… Why a regulation is needed for the whole business, due to a less than 1% share of problematic companies? Why the private property must be limited, because of saving the banks that should have been left to bankrupt?

The bonuses in big corporations were invented naturally. The merit of the management to the business success must be awarded. As in big corporations the managers are not the main owners of shares, so they couldn’t receive the profit that they bring to the company. So in some companies some shares are given to the management, in other – options, in third – just bonuses. It is just a mechanism of connecting the salary with the business result. If no such connection, the managers will have less motivation to do a better business and will stay like a doing nothing silent bureaucrats – just to take the base salary.

Limiting the bonuses in fact will lead to a reverse to the expected effect. In other countries there are no such limitations so there higher salaries will be offered. So good professionals will go there making their business more competitive. And this will lower the profits of companies with lower salaries. I.e. at the end the risk of another default will increase.

Such type of policy is nothing else than a public revenge to the blamed for every problem bankers. But in fact the most of the punished will be the good bankers and company bosses, as really guilty ones are a minority. The price of this new socialism will be paid by the whole society in a way of less production, less jobs and lower wages.

In China there are no such limitations. You can be simultaneously a billionaire and a member of the ruling Communist party :) So which country has better economic perspectives :)

March 3rd 2013

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