Mark Abrams doesn't understand capitalism

The otherwise reasonably intelligent lefty radio host Marc Abrams (Kremer and Abrams on KXL AM-750, Sundays 9 to 11 am) blew it today big-time.

Oh, you people who think the private sector is better are so wrong, Abrams crowed. Yet look at Merrill Lynch - they let their chairman and chief executive, Stan O'Neal, go - and paid him $161 million after the guy lost them $8.4 billion.

Here are some of the ways Abrams gets this wrong:

1. Nobody said capitalism was error-free, any more than government is error free. That's a straw man argument. The real difference lies in things like, how are errors handled? What are the incentives? Whose money is it, and who makes the decisions? In this case, the guy responsible for blowing it was canned. He won't be around to continue to make mistakes for the next 4 or 8 or 20 years. Compare that to say Oregon DMV where a Director can blow $88 million and get a promotion. Notice how many of these examples - 10 of 13 - are from government (look under "Notable Project Failures").

2. Paying O'Neal $161 million to leave was some sort of sweet deal - he should have been kicked to the curb. Whose money was it? Private money - not taxpayer money. If you don't want your money used that way, don't own Merrill Lynch shares. It's not yet clear from the news reports if the $161 million is what his contract calls for as his severance.

3. Yes O'Neal lost the firm $8.4 billion this year. Over the last two years he made them $12 billion, and increased the firm's cash by $17 billion. He did that by risking private capital, not taxpayer dollars. By creating wealth.

Find me the government program that creates that kind of wealth, without risking tax dollars, and that actually holds people responsible for performance, and I'll start to think maybe the government is coming close to being as good as the private, capitalist sector at being efficient and effective. Until then, you can go stand in a DMV line.