The great Jewish philosopher Maimonides wrote that a person who has suffered misfortune feels less miserable when confronted by a person in a more calamitous situation than themselves. Similarly when a dejected person sees someone who is more privileged than them their sense of despondency is increased. People who are unsuccessful find it difficult to observe the success of others. Our challenge is to overcome this negative envious trait and be happy for others even if we personally are experiencing setbacks.
Americans, on the whole, have failed in rising to this challenge. Last summer, as oil prices rose, oil companies made record profits. As the profits went up so did the envy and ire of the American people. In response prominent politicians berated the oil companies and threatened to tax them heavily. But things have now become much worse.
As the financial crisis was unfolding last summer workers at American International Group’s (AIG) financial products division were offered bonuses for remaining in their jobs for a specific period of time. At the end of last year AIG then became contractually obligated to pay those bonuses. When, earlier this week, it came to light that one hundred and ninety million dollars worth of these bonuses were paid out a public outcry ensued. This culminated, yesterday, in the United States Congress passing a law that would slap a ninety percent tax on the bonuses paid out to employees of AIG.
Whether it was fair for these employees to receive bonuses is irrelevant. As children we all learned that life is not fair. Whether they deserved the bonuses is also irrelevant. Even the fact that these bonuses were given to people who helped create this financial mess is not important here.
What is significant here is that there was a contract which obligated AIG to pay retention bonuses to these people. It was the Hebrew Bible that introduced the concept of private property rights and contractual obligations to the ancient world. Western law has in many ways been inspired by that ancient code. The knowledge that property rights and contractual agreements can be enforced is the backbone of any successful economy and civilized society.
Honest and decent people abide by their contracts unless there is a mutual agreement to do otherwise. Backing out of a contractual agreement because its obligations become unpopular is deplorable. AIG chief executive Edward Liddy did the right thing in paying these bonuses. It was absolutely wrong and unethical for congress to use their legislative powers to essentially void contracts that were made in good faith. The fact that this was done simply because the contracts became unpopular in the eyes of an envious and indignant public makes it all the more abhorrent. This is a dangerous precedent. Why should anyone trust a contract if, post fact, Congress can use its legislative powers to steal money that was contractually obligated to be delivered?
Ultimately the public outcry against these bonuses is derived from envy and resentment against those making more money in a time when many are losing their jobs and homes. Instead of pandering to these lowest of human character flaws, politicians should be standing up for what is right and honest. Tragically this economic downturn is bringing the worst out of many in society and the spineless unprincipled politicians are just magnifying all that is negative in human nature. We need to remind them that following public opinion is not leadership. Real leaders lead they don’t follow.