Richly deserved

By John Lloyd
March 6, 2013

The tale of two worlds – the fabulously rich and the increasingly poor – is a defining narrative of contemporary life, and it continues to throw up vivid reminders, at once doleful and grimly hilarious.

One of the latest examples was told by the writer and provocateur Matt Taibbi, famed for having described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

In a recent Rolling Stone blog post, Taibbi related a confrontation between Jamie Dimon, chief executive of JPMorgan Chase, and the analyst Mike Mayo of Credit Agricole Securities during an investor conference call earlier this year. These calls are where analysts get to question the masters of the financial universe about their actions. Mayo asked Dimon if investors would not prefer a bank – he offered UBS as an example –that had a higher capital-to-debt ratio. The exchange then went:

Dimon: So you would go to UBS and not JPMorgan Chase?

Mayo: I didn’t say that … that’s their [UBS’] argument…

Dimon: That’s why I’m richer than you [raucous laughter].

Taibbi used the anecdote to show, as he said, “how these guys think.” To push that thought a little further: It’s how people, who live highly stressed lives with much depending on their judgments, think of themselves: that they are worth it. The conventional view is that every company of size and reputation needs several of these people so it may survive. In effect, large wealth has now been given a rational, maybe even a moral, underpinning.

At around the same time, a number of other matters came to light. Forbes Magazine published its billionaires’ list, which revealed that there are 1,426 of these exotic creatures, with 210 in the superleague for the first time. A little over a third of them are in the United States; 23 are under 40; 386 are in the Asia-Pacific zone, 366 in Europe, 129 in the Americas and 103 in the Middle East and Africa. United, the billionaires of the world command $5.4 trillion, up from $4.6 trillion last year, and now worth one-third of annual U.S. output. The Mexican Carlos Slim, with $73 billion, remains on top, and Bill Gates, with $67 billion, remains at No. 2. But there’s a newcomer at No. 3, rudely elbowing aside the sage of Omaha, Warren Buffett – the Spanish entrepreneur Amancio Ortega, who owns a majority stake in Zara, the world’s biggest clothing company,. He added nearly $20 billion to his fortune in a year, which came out at $57 billion.

Most of these people are not shy, and many probably believe they deserve their billions; besides, many, like Bill Gates, give slabs of it to good causes. Most don’t boast of their worthiness, although the Australian mining magnate Gina Rinehart, who is probably the world’s richest woman, recently used a column to address her fellow Australians: If you’re jealous of those with more money, don’t just sit there and complain. Do something to make more money yourself – spend less time drinking or smoking and socializing, and more time working. Her rival for the title of richest woman is the French Liliane Bettencourt, whose family owns 30 percent of L’Oréal: She hasn’t said, at least not in public, that she deserves the money from the company created by her father, but its slogan is, irresistibly: “Because you deserve it!”

Ortega’s good (say, huge) fortune was made public at the same time as his country’s Department of Labor revealed that the 5 million Spanish jobless had increased by 1.2 percent, or just over 59,000 people, to bring the rate to 26.2 percent.

This ironic vein could continue for much longer because it has seemed that there’s not much to be done about it, and, when hopeless, irony is a better resort than the guillotine. Unlike the aristos who perished during the French, Russian and other revolutions, the rich now work hard. They create companies that create jobs, and political leaders vie to get them to move to their countries: The British Prime Minister David Cameron said he would roll out the red carpet for French business people fleeing high taxation.

There is a global market in entrepreneurs and superstars of all kinds, which Gerard Depardieu, the French superstar, dramatized when he bought a house across the French border in Belgium to escape a swinging wealth tax – besting Francois Hollande, the French president (who must occasionally long for the guillotine). On a recent trip to Russia, Hollande was careful to note Depardieu’s status – “If he decided to leave the country, if he loves Russia and Russia so loves Gerard Depardieu, then it is understandable. But still Depardieu loves France, which recognizes him as a great actor.”

The irony in the first part of his answer was an implicit recognition that the president of France was powerless – the more so since the French constitutional court had recently ruled that his proposed 75 percent super-tax was unconstitutional. The irony is that in less than a century, Russia has gone from being a haven for communists to being one for the rich. 

Yet people who live on low, even middling incomes and who may be or are threatened by being unemployed are becoming more and more angry at the sight of vast wealth, and are ceasing to believe that nothing can be done. The Swiss are not known for their love of irony, but they do love referenda: They had 12 last year, on employment leave, second houses, building society savings, a fixed book price agreement, gambling revenues, healthcare, foreign policy, home buying, a smoking ban, secure housing in old age, music lessons at school and an Animal Diseases Act. Earlier this month, 68 percent of citizens who took part voted for a series of curbs on executive pay, including a ban on golden handshakes and parachutes and bonuses for organizing a takeover or a partial company sell-off. This in the world’s banking capital; moreover, it’s in the state that has struggled to preserve the secrecy of the often-dubious fortunes lodged in its banks.

The European finance ministers are this week debating a vote in the European parliament last week that would limit banker bonuses to a 1:1 ratio with salaries. The British, home to the biggest financial services industry in Europe, are worried that the high-rolling bankers in the City of London will seek new homes: several have said so. One banker told the FT: “This is big stuff. This wrecks the model of keeping salaries low.” (Salaries were kept low, but augmented with bonuses.) But a vote in the European Parliament is likely to be decisive: Something along these lines is now likely.

Dickens’ Tale of Two Cities begins “It was the best of times, it was the worst of times.” In today’s tale of two worlds, it is a time when nothing can be done, it is a time when something must be done. Popular anger and will is beginning to demand that the resignation to vast inequality ends, and something less gross takes its place. This will run on – and on.

PHOTO: Jamie Dimon, Chairman and CEO of JP Morgan Chase & Co., smiles during the Yale CEO Summit  in New York December 11, 2008. REUTERS/Shannon Stapleton

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Comments
5 comments so far

There is nothing new under the sun. Make no mistake, the fabulously wealthy of the 19th century though they deserved it.

They thought they worked hard.

What these people don’t seem to realise is that there are other people, working just as hard or harder, that get precious little reward.

An intelligent elite (such as the British aristocracy) does not push the peasantry too far. Or it ends in the guilotine. Is today’s global elite more like the British, or the Russian, aristocracy. Either way, with or without the guilotine, this process must go into reverse.

Posted by Urban_Guerilla | Report as abusive

Justice. We need Justice, not to punish or favor. Our lack of justice demotivates many. We have people who are too rich for the laws, too big to fail. In what strange alternate universe are we that we assume injustice to be the acceptable ends. This is what happens when you have lawyers as leaders. They were trained to manipulate justice. Our leaders are lawyers and our judges are lawyers and none of them cares about justice.

It may be too late. Most people can see the scams and many now assume that the smart person is the one that can lie and get away with it. The stupid people are those that won’t cheat and those that get caught. And why would we think anything else when our elected officials are the worst liars?

Posted by brotherkenny4 | Report as abusive

A very effective and simple way to reverse the growing disparity between the super rich and the growing millions of poor is to change the tax code.

Since the 1980s Reagan Tax Changes, payroll taxes have increased on middle income by 4x. Sales tax, the most regressive, is now the preferred tax revenue of most cities and states. Excise taxes (gas, telephone, utilities) and residential realestate taxes continue to rise from 1980 levels. These all hit the poor and middle class.

Yet the rich never had it better: Capital gains taxes (80% of all financial assets are held by under 5% of the population) have reached rock bottom. Dividend tax rate used to be up to 70%+, up to this year it was 15% for the past decade. Gains of real estate investment sales are 100% deferred if re-invested. Off-shore income for the mega multinationals has ballooned while their US Federal effective tax rate has plummeted. Many US companies pay more in lobbying fees than in Federal income taxes.

Wasn’t the rallying cry of the AMerican Revolution “No Taxation without Representation”. Who in the US Senate represents the poor and middle class? Who in the Senate and the House even have a middle class income or net worth? Probably less than 5%. What big monied lobby in DC is speaking up for US middle class, small businesses, or the working poor? Which big monied thank tank is pouring out PR releases and skewed studies showing that the poor and middle class are bearing the burden of taxes in the US?

The US has become an oligarchy – not much different than England and France before the 1800s. Progress seems to have stopped dead in its tracks as to social fairness and equitable tax burden in the US. And this is no exaggeration.

Posted by Acetracy | Report as abusive

“… it is a time when nothing can be done, it is a time when something must be done.” — Perfect description of our times, and not just on this issue. Thank-you Mr. Lloyd.

Posted by Sanity-Monger | Report as abusive

When you have the top justice official, Holder, saying that the banks are “too big to jail”, then that shows a lack of actual justice. Seems like we need someone as had of the Justice Department who puts the people of this country first and not the big banks and someone who is not afraid of a fight.

Posted by AZreb | Report as abusive
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