The hedge fund manager and the nurse

TheStar.com – opinion/editorialopinion
Published On Mon Mar 07 2011.   By Linda McQuaig, Columnist

Common sense tells us it’s wrong that hedge fund manager John Paulson made $3.7 billion in 2007, while a typical nurse earned about $45,000.

Paulson made his billions by betting against the subprime mortgage market, helping trigger the 2008 financial collapse. In what moral universe is he worth as much as a single nurse — let alone 82,000 nurses?

Our tolerance for this sort of absurd discrepancy illustrates our abject submission to the dictates of modern economic doctrine. According to this economic dogma, Paulson’s income — just like the income of a nurse — is determined by natural market forces, and any attempt to adjust incomes amounts to meddlesome interference in the free workings of the marketplace.

It’s a doctrine which has been good for Paulson, and others who dominate the financial and corporate world, while helping to keep nurses — and women in general — much lower down the income pecking order.

But, in fact, there’s nothing natural or innate about the marketplace. The so-called “free market” is nothing more than a set of laws devised by humans.

Change the laws, and you end up distributing income very differently.

Hedge fund managers, for instance, have been able to score fabulous jackpots in recent years because of the particular laws that govern banking and finance. Under the very different set of laws that governed banking and finance 30 years ago, such massive windfalls weren’t possible. (And yet the overall economy did well back then; indeed, it did much better than today.)

Similarly, today’s CEOs earn dramatically more than CEOs did 30 years ago — largely because of changes in laws governing executive stock options. (After these changes were implemented in the 1990s, stock options became much more lucrative. The value of stock options for Canadian CEOs in the 1990s exceeded the value of their salaries by 300 per cent.)

In other words, incomes are heavily determined by the particular laws in place at a given time. And those laws are determined by which groups have power and are able to influence governments. So, as labour has lost its political clout in recent years, governments have watered down laws protecting labour, and workers’ pay has declined.

The fact that women have traditionally wielded less power and influence than men helps explain why their pay has always lagged behind.

That began to change with the rise of feminism and organized political action by women in the 1960s and ’70s. Protesting the fact that Canadian women were earning 64 per cent of what men earned, women’s groups succeeded in pushing the Trudeau government to introduce some limited pay equity legislation in 1977.

There was initial progress, with women’s wages catching up to about 70 per cent of men’s — where they’ve been stuck for several decades.

In 2004, a federal task force called for stronger, proactive pay equity legislation. The Liberal government promised action, but the Harper Conservatives, taking over in 2006, rejected stronger pay equity laws. Instead, the Harper government introduced legislation that effectively strips women in the public service of pay equity coverage.

On this rather sombre International Women’s Day, it’s worth reminding ourselves that the gigantic incomes of the financial elite and the low incomes of nurses have little to do with merit — or even the workings of a “free market” — and a lot to do with who gets to make the rules.

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