When perfectly legal practices destroy the fabric of our society, we have to stop and realize something is very wrong.
By Jeffrey Hollender
Do Wall Street executives know the extent of the damage they have wrought on everyday Americans? The answer, shockingly, is yes.
That’s per an extremely important article from journalist Timothy Noah titled Brooks Brothers Bolshevism, published in The New Republic last year. Yes, it’s from 2011, but check it out. It’s a must-read.
Why? Noah uncovers a little-known truth: Wall Street is aware of income inequality.
“The upper classes of this country raped this country.” “We fed the monster until it blew up.” Those aren’t words from an Occupy Wall Street protestor, but Morgan Stanley money manager Steve Eisman, describing one of the more polite things that one could say on the eve of the 2008 sub-prime fiasco.
Citigroup: U.S. Is A Plutonomy
With 1 out of every 7 Americans now relying on food stamps, 25 million children homeless and 46.2 million Americans living below the official poverty line, the highest number in the 52 years, we almost hope that Wall Street execs are unconscious of the consequences of their actions.
Noah suggests otherwise:
“If you want to read a radical critique of twenty-first century American capitalism, skip the Daily Worker and go straight to Wall Street. A 2005 report by three Citigroup analysts coined the term ‘plutonomy’ to describe an economy in which only the rich matter. In a follow-up report (cited in Don Peck’s excellent new book, Pinched), the analysts explained that the United States was ‘powered by the wealthy, who aggrandized larger chunks of the economy to themselves.’
“Not to be outdone, Michael Cembalest, the chief investment officer of JPMorgan Chase, wrote in July of this year (in a clients-only newsletter obtained by Washington Post columnist Harold Meyerson) that ‘profit margins have reached levels not seen in decades,’ and ‘reductions in wages and benefits explain the majority of the net improvement.’ (Cembalest printed the latter quote in boldfaced lettering.) ‘US labor compensation,’ he explained, ‘is now at a 50-year low relative to both company sales and US GDP.’”
Wall Street Banker: Middle-Class Debt Serfs
In their eyes, the beauty of the system that Wall Street has created is “middle-class serfdom,” as Dan Alpert, a former managing partner of the New York investment bank Westwood Capital coined it.
“Once upon a time," Alpert explains, "American capitalists paid American laborers with something called a ‘salary.’ Henry Ford famously boosted his workers’ pay to $5 a day so they could buy the Model Ts they were assembling. The better part of a century passed, and, by the early aughts, globalization had created a world oversupply of free-market labor—a hiring hall now housing about 2.6 billion recruits from emerging nations, together with roughly 550 million in the developed world."
"It no longer made financial sense to pay American workers high wages when you could pay Chinese workers low wages to do the same work. On the other hand, if American workers lost their spending power, who would keep the U.S. economy afloat?"
“The solution to this challenge was the rise of cheap credit. "American labor effectively got paid in a different currency: debt. Instead of Model Ts, the latter-day working class bought overpriced houses and all sorts of other stuff it couldn’t afford."
Note to Gordon Gecko: Greed Is Not Good
While many of us are focused on the practical and structural problems our society and economy, we can’t avoid a much more difficult conversation about ethics and morals. Business hides behind the law to avoid the conversation about greed and how perfectly legal practices destroy the fabric of our society. While we often talk about “externalizing costs,” we rarely discuss the collateral damage and unintended consequences of a society that has removed ethical responsibility from the conversation.
Greed is not good.
When Wall Street executives publically state that, "the upper classes of this country raped this country," and "we fed the monster until it blew up," we have reached a sad and truly dangerous place in the decline of our civilization.