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You Don't Deserve to Be Rich
The sooner we shed our illusion that people end up financially where they deserve to, the faster we’ll fix the economy.
Yes, it should have been obvious before, but now that a seemingly endless parade of bankers have made fortunes while gutting their institutions and sinking the economy, we’re finally having our eureka moment.
Wealth in America increasingly comes not as the proverbial reward of the “free market,” but from rigged compensation systems that reward mediocrity or outright failure. This is causing a brain burp among many professionals — a group I call the Lower Upper Class – because it’s an affront to an idea they’ve cherished since they first started bringing home A’s from school and acing their SATs.
The best-performing gerbils on the treadmill are learning that working hard and succeeding in their chosen profession is no longer the path to the topmost ranks of wealth and influence.
American capitalism is a meritocracy, they’ve always been told, a place where people basically end up economically where they deserve to. Yet you can’t open the paper nowadays without seeing screaming evidence that this notion is a fraud. Does former CEO Kerry Killinger deserve to retire to an island with $100 million after destroying Washington Mutual? Did Bob Rubin deserve his $115 million for making Citigroup a ward of the state? And what about the several thousand less-prominent geniuses across Wall Street who made off with less loot (but tens of millions nonetheless) peddling mortgage-related securities that produced illusory profits?
At about this point in the resentment-anger-outrage cycle, a quieter question naturally occurs. What if this is the way of the world, and that stuff about capitalism being a meritocracy was always baloney?And what if to fix our economy right now we actually have to get over the idea that people end up where they deserve to? Admitting that “merit” is less connected to economic destiny in an age of crisis and globalization can liberate us from old bromides and inspire fresh approaches to assuring opportunity and security in a global era.
As it turns out, the notion of a close link between economic standing and moral dignity or overall status is relatively new. As Alain de Botton points out in his wonderful book, Status Anxiety, from the time of Christ up to the twentieth century, there were credible and soothing narratives on offer – from the Bible to Marx -- that assured the poor or otherwise humble that they were no “worse” in an ultimate sense than anybody else.
Yet very different stories gained ground after the eighteenth century to alter people’s sense of their place in the world. Adam Smith argued that the spending of the wealthy was actually an engine of economic activity and employment. Next came the narrative that economic status did have moral connotations. Napoleon, this idea’s exemplar, loathed his era’s “imbeciles and hereditary asses.” And in Britain and the United States, these new impulses combined with Charles Darwin’s theories to yield the ugly (but for rich people, quite gratifying) philosophy of economic survival of the fittest.
In the United States, this harsh philosophy of Social Darwinism eventually yielded to a subtler, more pervasive and institutionally administered belief in meritocracy, via the rise of intelligence testing, the SAT, and the all-consuming college admissions craze. Over time, it became an article of faith that those with “merit” in these narrow terms would deservedly enjoy the best of society’s material rewards.
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Isn't the whole idea that wealth is somehow merited kind of a Ponzi schemer's wet dream to begin with? After all, who merits 2,10,100 billion dollars? But the illusion is a willful one as it still justifies the reaping of gross wealth. The lower uppers' gripe is less that they have been duped as it is that they realize the limits of their own wealth-making. No one's innocent here.
Those guys are not rich because they are better than us. They are better because they are richer than us.
So let's invest!
Madoff's "genius' is that he understood this. Look at Sanford. Rubin et al set up the system like Henry Gondorf in "The Sting" and let the players do the rest.
Money is the real illusion. All it takes is our willingness to believe in it and what ensues is either magic or tragedy.
"You Don't Deserve to Be Rich"
What a frightening statement.
. . . and Public Radio
doesn't deserve to be subsidized by taxpayers.
Wall Street Execs do NOT deserve to be bailed out,
but who will determine who "deserves" to be rich?
A government that's more wasteful and incompetent than private industry?
It's not just Wall Street at the heart of this economic mess, was it not some in Congress who forced the hand of banks to give home loans to people who couldn't afford those homes, creating the crash that precipitated the lack of lending, which extended out to the car industry and the business sector?
Are the hearings in Washington backwards?
Rather than Congress grilling corporate CEO's, shouldn't private industry be grilling Congress?
"As Alain de Botton points out in his wonderful book, Status Anxiety, from the time of Christ up to the twentieth century, there were credible and soothing narratives on offer - from the Bible to Marx -- that assured the poor or otherwise humble that they were no "worse" in an ultimate sense than anybody else."-
Only a person who hasn't read either could link the messages of the two but surely even the author would see that the Bible's message to the por was that through piety and Christ-like behavior they would be "made rich in heaven" while Marxism, basically, tells the poor that they are the victim of a conspiracy to which class war and ultimately violence is the solution.
No matter how asinine the other points (aren't you one of the undeserving rich Matt Miller?) the flagrant ignorance this sort of analysis should clue people in on the real reason Western Civilization is on the decline and con artist were bale to take investors for all they had. We live in a culture of where actual knowledge is ignored and populist drivel is considered brilliant.
Claiming our country is a meritocracy is a smokescreen created by conservatives to decry things like affirmative action which help the unwashed masses get a shot at success. The same conservatives have no problem with affirmative action for the rich.
How else did George Bush II become the most powerful man on earth? His repeated failures as a student and businessman never held him back because of his family's wealthy friends who were more than willing to bail him out repeatedly. (Each time he bankrupted his companies, he managed to get even more financial help.) Bush got a plum assignment in the National Guard the same way. He even managed to escape legitimate charges of insider trading at Harken Energy. Yet this incompetent man was the guy that the monied interests in the Republican Party PERSONALLY hand-selected to become president.
Bush - and his family - are some of the more visible examples of the way our system really works. People with little or no talent frequently rise to the top due to their powerful, wealthy connections. Once there, they work hard to make sure truly talented, unconnected people are kept out of the inner circle.
no one forced the banks to loan to insolvent borrowers.
This author may have something here. What if the bulk of the very rich don't deserve it.
Why not tax the very wealthy like they don't deserve the bulk of the money they are getting (say at the 80% to 90% level), unless they put the money back into the society that made them wealthy? That might help the deficit and take some pressure off of the middle class.
Who knows?
What? Matt, you must not have ever run a business. Ten percent of any organization brings ninety percent of the value--unfortunately. Sure, there are crooks, but to assert that we all bring the same to any situation is just plain foolish. Have you ever been to a sporting event? Are all players equally contributing? The lack of competition (capitalism) in business and Wall Street is why there are more bums in Corporate America than in the NFL or MLB. We are now protecting those big businesses with immoral managers from destruction. When you advocate this, you are protecting them. This protection allows the thieves and bums to flourish. If you want to protect employees and shareholders this way, you will provide cover for the crooks.
"How do you run a government when the voters are smarter than you?"
http://tinyurl.com/cfqbm6
Having CEOs grilling congress wouldn't alleviate the pervasive feeling that the system's rigged, a feeling that I share. Does sophia5 think the leaders of the banks etc are the best, most talented people and therefore the most deserving of the VAST sums of money paid to them?
BTW how is it that congress forced banks to loan money to people who couldn't afford them?
Obama seeks to raise taxes on wealthy to cut deficit.
--news item
OH, NO!
Our most productive people
Are under fierce attack;
The country might just lose them--
What if they move to Iraq?
I created a company from a desk and a phone and built it into a billion dollar market cap. My salary was always modest, among the lower ten percent of my field. My board told me I should make my money on the stock. Make the stockholders rich, you will get rich. When we sold the company, the banker made more in three months than I made in salary in ten years. It is clear that in order for the outrageous salaries that were the norm on Wall Street that they would have to create something more than normal services. They "made" smoke and mirror investment products. Fortunes should go to those who "produce", not those who shuffle paper.
I'm not convinced this is news, we've always had robber barons. What may be news - at least in this country's history - is the degree to which we've institutionalized such behavior, the extent to which we've accepted that they will escape the consequences of their actions. As Queen Victoria said when the Boers strung up Leander Starr Jamieson, 'Buccaneers should expect to rough it'.
I don't like what they did, but Killenger and Rubin did what many other capitalist would do: they sought profit based on the environment that the regime created for them to operate in.
The robber barons did the same thing and created the railroads and helped build a powerful country that expanded west. The little guy got 40 acres and a mule. (obviously, the metaphor breaks down at this point).
If BOFA and Citi had not been pressured to make sub-prime loans so that their applications to acquire other banks would be regarded favorably, then they would not have done that. Congress created the environment.
I agree, you don't deserve to be rich but you can't fool Adam Smith's invisible hand - the markets will always prevail. If Congress creates artificial 'opportunities' then capital will follow.
It is the pricing system that moves the economy, or sales.
I think that is what started this, was the price of oil-gas, it went sky high.
Then everyone's costs changed, and prices went up to pay for rising costs, people stopped buying things first, not gas.
Workers are usually paid fixed incomes without bonuses. The bonus is not a bad idea, within reason, it gives you incentive to work towards profits.
If prices are too high, people may still value what have you to sell but can not buy it, if prices are too low, to create demand for product, the revenue doesn't cover costs. So when there is friendly competition, the costs don't go too high, and don't have to be lowered too. That is why monopolies can do such damage.
Of course what we see is the attribution bias at work in this article. Blame the owners when things go bad, threaten nationalization even.
To a degree, the worker who produces the products doesn't get what he is generating in profit when products are making a surplus of wealth, and owners of production get that surplus, the risk, which the managers are paid a bonus out of to be controlling get a a bonus for controlling it, supposedly. Another attribution bias at work.
It seems like the oil prices are controlling prices o. everything. Oil is the lubrication of industry and sold in an area where many people hate us due to our perceived war mongering.
The middle East issues were big in the 70's too during the energy crisis. In many they caused the energy crises.
Those people are not making money shuffling paper, they might be making money by manipulating prices, which has been my theory for a long time, and they are using paper to design their scheme, and then they will shred the paper. Do you Enron, all the tons of paper being shredded at Anderson's?
Why do they keep saying this speed short selling is good for the economy? If someone is not making a lot of money manipulating prices? Then the attribution bias can kick in and be used as smoke and mirrors.
Spreading rumors is another big one, which can devalue stock, the other issue is diluting stock, all these calculations are done on paper, and make and break businesses. Paper work is not done just to create smoke and mirrors effect. Paperwork can be used to slow down production even.
Pricing is everything, and I think is being manipulated, big time. Class warfare is at work via the attribution bias, and is distracting people.
All people have to do is look at their own behaviour, when gas went up, what did most people stop doing first, spending loose change in their pocket on coffee possibly at Starbucks, now look what happened to Starbucks.
Teens were given less pocket money, so they bought less designer things.
That is what built my business in the 80's was people's desire for a high end product, that before no one would have thought of buying.
The big one was the "no fear fad" that was something, I couldn't keep enough of that stuff in stock, people stopped each other in the street asking where they got that no fear shirt or whatever, cause they were sold out at many stores. Those were great days.
We thought they would never end.
aaah...the illusion of control.
that if we do this, we'll get that.
lulled into believing we deserved the good life.
conned by it all, we bought it all.
we do not control life.
we do not know what's ahead.
it's random. it's a crapshot.
even a slumdog gets his day.
Use your own experience, when you go walking around stores, haven't you seen stores, where nothing in there a person would want to buy, they picked all the wrong things to sell, and then you go to another store, they picked all the right things, there are lots of things in the store you would like to buy. That is talent. In one store talked to like a criminal in the store you are talked to like a friend, that also takes talent.
It is the same with shares, knowing which shares to pick, and when to sell, that takes talent as well as a lot of research.
Also risk, the people that take risks are the ones that risk losing or making money. Doing some business planning and modeling on paper, is not just shuffling paper, finding underpriced assets today, doesn't take alot of paper, they are everywhere.
Destroying value is related to the cost of capital and valuation of assets.
Value of assets is a big one, as prices plunge so does the value of the business on paper, by regulation they have to be marked to market, in some countries down but not up, paper valuation of houses is the same thing, people are paid inflated prices on now deflated property. The house hasn't changed any, it is price manipulation. What else can it be?
It is not the shuffling the paper that is causing or hiding the problem, it is the destruction of value through manipulating value of assets on paper.
No one seems to be questioning it, they get sucked right in to the attribution bias generated by media and the thrill of class warfare.
How will the economy recover if we don't look at the real causes, and who is making money off this? To think no one is making money off this, is only proof the attribution bias works to fool people.
From the outside it looks like a crap shoot, from the inside, that is where the secrets are.
It is not about controlling, the process does that, and hopefully the process has control lines for quality control.
It is about creating opportunity, it is about creating windows to see the opportunity, and doors for people to walk in and to experience the opportunity.
Use your own experience. You hear of a new product or something through advertising, you look through the window and then walk in the store.
Research and Development, is what made America great.
Even slumdog used Research and Development to win the contest, and of course the powers to be just saw him as a slumdog, the attribution bias at work again, they didn't see what what growing inside.
Thanks for putting it into words. Oh, and don't even get me started on bonuses!!!
Oh, and the upper crust that has formed as a result of this scandal are the biggest bunch of zeros who have done nothing for society and on top of it don't even want to pay taxes. They all should be shot.
Enough of what certain people think drives the economy-if the biggest brains can't even figure it out; it is time for new action.
If America is supposed to be a meritocracy then why are there signs on every college campus saying "63% of people got their jobs while networking"?
If you never listened to this podcast, do yourself a favor and listen to This American Life's reporting on the mess we are now in:
http://tinyurl.com/4jcb6k
"The Giant Pool of Money"
(special program about the housing crisis produced in a special collaboration with NPR News. We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.)
I would also recommend the Crisis of Credit Visualized by Jonathan Jarvis on You Tube
Thank you.
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