Now that inequality is finally on the mainstream media's agenda, we're hearing a lot of trash theories about why the top one-tenth of one percent is grabbing the nation's wealth. Conservatives will blame the poor for being poor and claim that the rich are rich because... well, they're just smarter than the rest of us.
The New York Times has added yet another dubious dimension this week by featuring a poignant piece by Sam Polk, a former hedge fund trader, who claims that he, and most others on Wall Street, are addicted to money: "I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted."
Polk sure had quite a Jones: "I wanted a billion dollars. It’s staggering to think that in the course of five years, I’d gone from being thrilled at my first bonus — $40,000 — to being disappointed when, my second year at the hedge fund, I was paid 'only' $1.5 million."
Yep, we feel your pain. But after suffering a rebuke from his billionaire boss, Polk saw the light:
"These traders despised anything or anyone that threatened their bonuses. Ever see what a drug addict is like when he’s used up his junk? He’ll do anything — walk 20 miles in the snow, rob a grandma — to get a fix. Wall Street was like that. In the months before bonuses were handed out, the trading floor started to feel like a neighborhood in 'The Wire' when the heroin runs out."
Polk also began to see that he was more than an addict; he was also an economic parasite:
"Not only was I not helping to fix any problems in the world, but I was profiting from them. During the market crash in 2008, I’d made a ton of money by shorting the derivatives of risky companies. As the world crumbled, I profited. I’d seen the crash coming, but instead of trying to help the people it would hurt the most — people who didn’t have a million dollars in the bank — I’d made money off it."
Unlike millions of low-income addicts, Polk had both the means to get counseling and the ability to build up a healthy bank balance that made going cold turkey possible (and perhaps not all that painful). He then embarked on a career path Mother Teresa would be proud of:
"In the three years since I left, I’ve married, spoken in jails and juvenile detention centers about getting sober, taught a writing class to girls in the foster system, and started a nonprofit called Groceryships to help poor families struggling with obesity and food addiction. I am much happier. I feel as if I’m making a real contribution."
Unfortunately, Pope —and the editors of the NYT— see much more in this story than a rich guy finally doing something worthwhile with his life. No, the real moral of the story is this:
"Wealth addicts are, more than anybody, specifically responsible for the ever widening rift that is tearing apart our once great country. Wealth addicts are responsible for the vast and toxic disparity between the rich and the poor and the annihilation of the middle class."
So if only these greedy SOBs became less greedy, rampant inequality would go away. What's the solution? Wealth Addicts Anonymous. I kid you not:
"Dozens of different types of 12-step support groups — including Clutterers Anonymous and Online Gamers Anonymous — exist to help addicts of various types, yet there is no Wealth Addicts Anonymous. Why not?"
You could run every Wall Street hustler through a 12-step wealth addiction program run by the Pope, and it would do nothing to close the gap, rebuild the middle-class, provide income for the poor, stop wage theft of immigrant workers, or raise the incomes of low-wage workers.
What Polk and the New York Times miss entirely is why it is possible in the first place to become a wealth addict on Wall Street. Where does all that money come from that gets divided up into big fat bonuses this time of the year?You can't become a wealth addict on Wall Street unless you have access to wealth. And you can't have access to wealth unless it's accumulated in vast amounts within hedge funds, banks, private equity firms and money funds. How did it get there?
While it's great to read uplifting stories about personal redemption, what we really need is story after story about our financialized economic system—about the structures that rip us off each and every day. It's a systemic problem with real causes in the real world, not just inside our heads.
Where does Wall Street wealth come from?
The mainstream media, NPR included, refuses to question the legitimacy of Wall Street money-making. It is assumed that its wealth, more or less, is earned. Sure, sometimes they cheat, as in insider trading, money laundering, gambling with depositor funds, colluding with drug cartels and payday loan sharks, ripping off mortgage and credit card holders, hiding profits, manipulating accounts... but those "infractions" are always treated as mere aberrations of an otherwise profitable and useful industry that our economy needs.
Most economists (wealth addicts and the non-addicted alike) argue that all profits, no matter their source, are productive profits. The ever omniscient markets wouldn't allow Wall Street to make so much money unless an equal amount of value was produced in exchange. It's just a high return to great acumen and value, so there's nothing wrong with it at all.
Well, even Polk knows firsthand that Wall Street's wealth is based on producing products that have no redeeming value at all, except to siphon off the wealth of others:
"Yes, I was sharp, good with numbers. I had marketable talents. But in the end I didn’t really do anything. I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Not so nurse practitioners." [His mother's profession.]
So how did Wall Street accumulate so much crack, heroin and meth?
The story starts 40 years ago when most of the economic profession made the argument that deregulated markets could solve all our problems by creating more and more wealth for society. By cutting taxes on the rich, there would be more incentive to create new enterprises and jobs, and higher incomes would then flow to all—all boats would rise. By getting government out of the economy, business would be free to innovate and grow.
This push for massive tax cuts and deregulation, however, unleashed Wall Street much more than it did the "real" economy —the part that produces tangible goods and services. In fact, it led to the destruction of much of American manufacturing as financiers (corporate raiders; private equity firms like Mitt Romney's) hollowed out corporation after corporation, loading each up with debt, and then squeezing its workforce as much as possible, including replacing it entirely by shifting the facility overseas.
Instead the "innovation" took the form of junk bonds, offshore accounts, high-risk mortgages, derivatives, CDOs and a myriad of financial tricks that step by step moved money away from productive industry and shoved into the pockets of Wall Street.
This chart says it all:
Before deregulation, no matter how smart you were (and no matter how addicted to money) you couldn't make more on Wall Street than you could in the rest of the economy. The crack just wasn't there. In fact, taxes on the rich were high and the income of the average worker was rising steadily (even after inflation). But after deregulation, Wall Street wages went sky-high and are still climbing because our economy's wealth was moved into the financial sector. Most working people haven't seen a real rise in income for over 30 years.
Put the deregulatory toothpaste back in the tube?
Unfortunately, it can't be done. We can't turn the clock back by re-regulating Wall Street. That won't work because Wall Street is not only wealth-addicted, it is extremely powerful. Wall Street lobbyists are eating Dodd-Frank for lunch. They own Congress and the regulatory bodies. They might get their hands slapped, but it's not an accident that not one bank official has been prosecuted personally even when caught ripping off GIs or facilitating money-laundering for drug cartels. The company pays the fines, the individuals involved get to keep their ill-gotten gains.
There's only one long-term realistic solution. Eliminate the big banks. Turn them into public utilities. Cap their incomes by law (which is the same as take away their heroin) .Public banking. Impose a financial transaction tax. Reverse eminent domain to help underwater homeowners. Free higher education. Raise the minimum wage to $20 an hour. All this and more is needed to close the income gap and bring a modicum of fairness and justice to our economy.
By all means, wealth addicts of the world, unite! Seek treatment and do good works. But the only good deed that will halt runaway inequality is to end Wall Street as we know it.