Needless to say, there is a lot angst regarding Wall Street’s mis/management of the economy. And while the recent populist surge is puzzling to many in the finance industry, it is clear that Wall Street’s denizens are ready to fight back.
Joshua M. Brown, aka The Reformed Broker, posted an email that reportedly made its way around Wall Street last week, calling the communiqué a “hideous little piece of class warfare,” and stating that “it’s Us-Vs-Them theme is sickening.”
Here are some of the highlights:
“The government and average Joes are looking for a scapegoat …
“I didn’t hear America complaining when the market was roaring to 14,000 and everyone’s 401k doubled every 3 years. Just like gambling, it’s not a problem until you lose …
“Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: we’re going to take yours …
“We’re going to stop buying the new 80k car, we aren’t going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We’re going to landscape our own backyards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.”
Oh, where to begin?
First off, regardless of the fact that the vernacular is getting uncomfortably common, there is a problem when the stock market is compared to casino gambling.
Second, the notion that the majority of Americans will be hurt because executives can’t afford to leave a good tip at their business lunches is absurdly comedic at best, and pathologically delusional at worst.
As is the image of Wall Street’s finest slumming it by washing their own cars and mowing their own lawns. (“The horror … the horror …”)
Not surprisingly, this Wall Street Manifesto is ripe not only with an over-inflated sense of self, but also by an inordinate amount of faith in the ever-popular theory of Trickle-Down Economics.
The problem with Trickle-Down Economics, however, is that wealth is not likely to trickle down any farther than the gilded gutters of Wall Street.
Rather than reaching the masses, stock market wealth upholds the affluence of a small percentage of Americans at the expense of everyone else and, in so doing, helps perpetuate the conditions of economic inequality.
Consider the following study from the Economic Policy Institute, which outlines the “distribution of stock market wealth by wealth class” from 1989 through 2004 (the most up-to-date study available). The wealthiest 10% of investors have consistently held a staggering 80% of the stock market wealth for a decade and a half. And the top 20% wealthiest investors have held about 90% of the stock market’s wealth. (See figure below or image here.)
This hardly seems a recipe for equal economic opportunity. While all investors will benefit from a rising stock market (such as the one referred to in the email above), said rising stock market benefits a small percentage of investors far more than it benefits the average Joes (also referred to in email above) of the investment world. And while those wealthier investors stand to lose more from declining stock prices, it is not their livelihood that they “gamble” with, but rather the extra cash that comes only with vast amounts of accumulated wealth.
To paraphrase George Orwell, all investors are equal, but some investors are more equal than others.
Which seems an appropriate narrative for how the wizards of Wall Street view themselves, and their role in society.
“Although the word ‘entitlement’ fits, it’s been used so frequently as to have become inadequate to capture the preening self-regard, the obliviousness to the damage that high-flying finance has inflicted upon the real economy, the willful blindness to vital considerations in the pay equation,” states Yves Smith in her essay “Indefensible Men,” which ran in a recent issue of The Baffler (but not online).
Smith “worked for a few years in the early 1980s in investment banking at Goldman Sachs, and later in the decade starting up the M&A business for a Japanese bank … [and has] continued to consult to the industry.” She also blogs at Naked Capitalism, and recently released a new book ECONNED: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
In her Baffler essay, Smith has also noted the class warfare that occurs on Wall Street. “Class-consciousness is felt nowhere more keenly than in the world of high finance.”
But for Smith, class-consciousness only explains part of Wall Street’s defensiveness. “It’s one thing to be angry at a reversal of fortune … but the petulance, the narcissism, the lack of any sense of proportion reveals a deep-seated pathology at work.” (No pun intended, I’m guessing.)
“Many psychological disorders are otherwise healthy tendencies carried too far … Single-mindedness, drive to succeed, aggressiveness and lack of remorse are useful traits in business, but when do they tip into the psychopathic? In the case of Wall Street, the collective psyche has suffered as important checks on ego and behavior have eroded.”
Her essay is extremely valuable in attempting to understand why the Wall Street mindset is so out-of-touch. According to Smith, that out-of-touch-ness is a prerequisite for working in the finance industry.
Which, in itself, is fine enough. Many folks are happily/overly/obsessively involved in their jobs, for many different reasons, circumstances and motivations. There is nothing wrong with seeking success or fortune.
But what happens when the business of a small percentage of folks disproportionately affects the livelihoods of a large percentage of other folks? When the liberties taken by a select handful of citizens infringes on the liberties of so many others to effectively live the lives of their own choosing?
“The idea that the needs of the financial sector trump those of the productive sector isn’t just specious; it’s pernicious,” states Smith. “But its strange persistence as an article of faith among our leadership class, both in government and the media, has yielded inertia and fecklessness where there should be energy and resolve.”
The time has come for an emphasis on an economy that considers the consumption and production of all people in our society, not just a select few. And for a new economic understanding to be articulated from our leadership class. One that truly does trickle down to everyone.