Losing Our Way
Written in reaction to an excellent post from Umair Haque.
Earlier today I read about a study which concluded that there are significant differences between how the wealthy and non-wealthy view the world. http://t.co/66N9aay At the risk of over-generalizing, in general the rich are more selfish and less empathetic than those less well off. I thought of that tonight as I read your excellent article.
The reality is that within many developed countries, income inequality has never been greater. While this by itself is both economically and morally repugnant to many of us, what sets our era apart from those that came before is what activities are driving this disparity. In the early 20th century, someone like Henry Ford was hundreds of times more wealthy than the average worker, yet it was undeniable that the products (and processes) that Ford introduced had a profound and positive impact on society in general and the working class in particular (wages increased by a factor of 10 for Ford’s employees). I believe that few of us would begrudge an innovator reaping their just reward in such a case.
Contrast that with the activities driving the income disparity today. With increasingly rare exceptions, it is sycophantic corporate boards lavishing tens of millions of dollars on their CEOs, regardless of the value that CEO adds (and often despite the damage the CEO has caused). It is private equity and large financial institutions gambling hundreds of billions of dollars on exotic financial instruments that have no proven economic or social value. It is high-frequency traders who make money by using lightning-fast computer programs to take money from traders using slower computers. Nearly all of these activities are, AT BEST, zero-sum; that is, someone wins and someone loses, but no value is created (1-1=0). Not only that, but many of these activities are negative-sum (1-1-10=-10); due to leverage, these activities are essentially making bets with other people’s money, with the potential to bring down entire economies and devastate millions of families. And how is this carnage penalized? Well, by mortgaging our future to make these people whole, by using monetary policy (QE1, QE2) to artificially inflate the equity markets, largely benefiting the people who least need a helping hand.
I grew up poor – in fact we spent several years on welfare. Years later, a close relative (just down the hall in our trailer in fact), had the good fortune to marry into money. I’d love to say that I started getting emails and phone calls requesting donations to worthy causes. Instead, just last year, she joined the Tea Party. Someone who 15 years ago was wholly reliant on the taxes of others now scorns those less well off, as if somehow they have chosen a ‘lifestyle’ and should be made to suffer for it. While this irony is apparently lost on her, it’s something I think about constantly. Human dignity is too precious to sacrifice to outdated economic theories, selfishness, and political incivility.