Bob Somerby has been running an excellent series over the last week examining how the "greed is good" mentality has taken over American values over the past 40 or so years. Toward the end of his piece last Friday, he made pertinent point:
As income inequality has grown, one side’s heralds have worked very hard to pimp a load of supporting ideology. The other side’s heralds have largely slumbered, dozed, burbled and snored. We haven’t developed the language and the ideation with which we can approach those voters who are currently found outside our own tribe. Nor have we developed the forums in which we can approach such people with some hope of success. We prefer to spend our time insulting those who aren’t in our own tribe. This is lazy, self-indulgent behavior. Beyond that, it just isn’t smart.
What’s wrong with the societal pattern described in Whoriskey’s piece? If athletes and singers can haul in big swag, why can’t CEOs and “financial professionals?” The career liberal world has made little effort to fight back against that forty-year trend—a trend which has indeed driven along by “one half-baked study after another.”
I think there's definitely something to this. Liberals often assume that most of the public sees surging economic inequality as a profound and unqualified negative, but the reality is the public often has no idea just how unequal America has become. And what's more, the public has been fed the idea we should celebrate when the rich get richer because it means they'll just trickle more wealth down on the rest of us unworthy serfs.
So in response to Bob's challenge, I'd like to make the case for why greed is bad that could transcend the standard left-right divide and appeal to people who might disagree with me on a host of other issues. Let's give this a go, shall we?
Before delving too far into this, I'd like to give my general take on money. To me, money is a lot like sex and cupcakes. Meaning that while they're all things that everyone wants to have in one form or another, it's entirely possible to overindulge in all three. The key difference is, we don't stigmatize greedy people the same way we stigmatize people who are cads (i.e., Tiger Woods and Anthony Weiner) or people who are overweight (i.e., Michael Moore). In fact, when we read about somebody who makes an obscene amount of money we normally think, "Well good for them, I hope I can make it like that some day too!" The most classic example was the Wall Street Journal's interview with one of the homeowners whose foreclosure made hedge fund manager John Paulson into a gazaillinaire. Y'see, even though Paulson was literally profiting from the poor shlub's misery, he just couldn't find it in his heart to be upset:
In 2006, Mr. Booket got hit by a car while riding a motorcycle from a late-night party, was unable to find much work and couldn't pay the bank. In October 2008, he lost the house to foreclosure and plans to move out by next week. He says he bears no grudge against Mr. Paulson and Goldman.
"The man came up with a scheme to get rich, and he did it," says Mr. Booket, who had refinanced his mortgage just months before the accident. "So more power to him."
Mr. Booket is presumably a good guy. But he's also clearly bought into the idea that anything rich people do to make money is good for the rest of us too. Here, then, is my concise breakdown of the two biggest reasons why greed and inequality are bad:
- First: When people at the top are greedy, workers don't get their just rewards. For a long time in this country, there was a very close relationship between productivity growth and wage growth. Increased productivity is a good thing because it means we've come up with new ways to make more stuff with less effort. Now take a look at this chart:
As you can see, productivity started rising more rapidly than wages in the 1970s and has only accelerated since. This means, roughly speaking, that workers are now producing more but getting paid less. How in God's name is this possible? Well, technology and globalization are definitely part of the answer. But I think there's also something to be said for the fact that we've developed a real Randian "Cult of the Rock Star CEO" culture that values the output of the person at the top of the chain as key to creating wealth for everyone else (and if this sounds like economic fascism to you, well, you've got a point).
And look: Steve Jobs is a brilliant businessman, but he's not the one engineering the Mac Book Air, he's not the one refining the next-generation iPhone operating system and he's certainly not the one in the Chinese manufacturing plant putting all of these "magical" devices together. In other words, Steve Jobs is good at what he does but he has a whole lot of help that shouldn't be overlooked or underpaid. Note that I'm not saying Jobs doesn't deserve to be well-off for the work he puts into Apple. What I am saying is that as Jobs' wealth increases, so should the wealth of everyone else who works at the company. For the past 40 years in America, that just hasn't been happening.
- Second: Greed can turn you into a dumbass. There's this weird myth out there that the more money a Rock Star CEO has, the more money he'll invest into his business, thus creating more jobs for everyone. While this is certainly true in some cases, I don't think it's at all true across the board. And what's more, I think having too much money can give you a feeling of invincibility that can lead you to do stupid things.
I know I make fun of Charlie Sheen a lot but I think he's a really good example of the dumb crap people can get themselves into when they have too much damn money. Let's recall what Charlie said earlier this year when asked why he spent so much money on prostitutes:
Asked why he's "paid for sex" in the past, Sheen responded, "Because I had millions to blow. I ran out of things to buy."
"I had millions to blow. I ran out of things to buy."
That, in essence, was one of the problems we had in the lead-up to the housing bubble. Toward the end of that debauched period, lenders simply weren't producing enough mortgages to satisfy the Wall Street Securitization Machine that had spent the past decade piling more and more leverage onto banks' balance books. The solution, it turns out, was to create "synthetic" mortgage securities that were little more than bets on other mortgages that the banks didn't even own. Because a combination of low interest rates, tax loopholes and financial chicanery had given banks a whole ass-ton of money to play with, they had at that point literally run out of crappy mortgages to buy. So instead of, say, doing something more useful with it they decided to double down and create more crappy mortgages out of thin air. The brighter libertarians out there will concede that, yes, having too much money can make you stupid but eventually the market will make you pay for your mistakes and you'll never get hired again. Capitalism works!
Well, sure, if you ignore all the misery and poverty that financial collapses cause, I guess the system is great. And let's not mention that being thoroughly incompetent at your job is no obstacle to future employment if you've got good connections -- for Christ's sake, the World Bank has just appointed former Lehman Brothers chief risk officer Madelyn Antoncic as its damn treasurer! This is like baseball hiring Barry Bonds to be in charge of overseeing its drug-testing operation!
So that's my best crack at detailing in a (hopefully) amusing fashion why greed is really not a good thing that should be encouraged. Gordon Gekko wouldn't approve, but what does his fictional ass know that I don't?