I find the timing of the uproar of public anger at AIG bonuses and the Obama economic roll out to be quite amusing. That one full week of airtime is given to public rage at a few dozen innocent private sector employees is followed by an economic recovery plan that courts that very same sector to become partners with the government is irony you just can't find outside of real life.
The "public outrage" to me is understandable on an emotional level. The desire for someone to blame for your problems may never leave us as a species. My concern is not so much that it is irrational or immoral but that it is self defeating.
Deciding that someone other than yourself is responsible for your predicament will always put you in deep waters. That's number one. Number two is that believing life is a zero-sum game will lead to similar despair and frustration where there need not be any.
Let me take the first point first. Nobody is happy that they are half as rich as they were two years ago. Nobody is happy about losing their job and the concomitant diminishment in quality of life based on what they had gotten used to two years ago. But where were the people rioting in the streets two years ago when things were good? It would seem only sensible that these folks should have been hosting parades in every county to honor AIG, Citigroup, and Lehman Brothers for making them so wealthy and for not needing to take any of the public's money.
But somehow this never happened. People likely preferred to think that their prosperity was somehow of their own making. But when things went south they were unwilling to make the same determination that they were responsible for their losses as well.
Now individual responsibility can be overstated. Certainly Joe the factory worker can not be held responsibility for the larger macroeconomic downturn. Fine and true. But there is such a thing as collective responsibility. And Joe, as a member of the collective, receives both the booms and the busts that the collective does. The collective - and that includes nearly all of us - reaps the rewards and suffers the pain of our collective decisions as channeled through government and commerce.
To the extent that we individuate ourselves from the collective muck, we are able to avoid some of the pain while either taking reduced profits or making profits irrespective of the collective trends. There are no doubt folks who did well and continue to do alright throghout this crisis. They saw the writing on the wall and acted independently and appropriately. They chose to be responsible for themselves individually and collectively. Bravo.
But the lowering tide lowers all ships collectively as well- including innocent AIG employees whose stock holdings were wiped out by the crisis. The Times describes one such worker in their Op-Ed section
today. But where are the hordes coming to his side? Nowhere, because their position only makes sense when they see the world through the You Win-I Lose paradigm.
And that brings us to point number two. Markets and trade work because temporary alliances can be formed along the lines of mutual shared interest. Sometimes this is between different firms, but often - if not always - this is between firms and the public. Joe the factory worker, for example, still bought the $2.00 toothbrush and the 99 cent soap at the drugstore rather than forking out for the American Made $7.00 toothbrush and the $4.50 soap. The reason he had that choice is because toothbrush and soap companied aligned themselves with Joe's interest to produce a cheaper, yet 'good enough for Joe' product. Joe and Proctor & Gamble were business partners.
This is good for both of them. The more money Joe saves (and therefore earns, using the old maxim), the more money P & G makes. They're both in it collectively. Both win.
Joe doesn't necessarily see it this way, so when he sees employees from AIG making any money at all, he gets mad, because he feels that for them to make money, he will have to lose money.
Well yes, that money is coming out of his tax dollars (or really his great grandchildren's tax dollars), so it looks like he is losing money. But the folks at AIG are doing their best to put the company aright, so those dollars are actually being spent in ways that will benefit Joe and his heirs by leaving them with a sound and possibly profitable company.
If Joe were smart, he would put away his pitch fork and start reading trade journals about his industry so he could be better at doing something. He should go online (at the library if necessary) and learn something that would enrich him. This is not so hard to do, especially if Joe has recently gotten laid off. What he should not concern himself with (as much) is beggaring his neighbor. It is perfectly possible for the folks at AIG to make money and for Joe to make money with them. In fact that's kind of the point. By interfering with that process, Joe is not only continuing to place responsibility for his situation outside himself (and thus casting his fortune to collective cycles), he is sabotaging the improvement of his situation by doing same.
This, in many ways is inevitable. [This paragraph for the new age crowd] Presumably if the larger public understood money and knew how to make it, they would be doing so. Here is where the belief systems that we carry - the truest indicator of our predicament - make themselves clear. The so-called "poverty mentality" that effects Joe and his raging cohorts generates poverty upfront, and then preserves poverty even when it is possible to make money. The rich are getting out of this situation more or less unscathed. The super-rich are making multi-million dollar bonuses and are just getting super-richer. Their beliefs are aligned.
Joe would do well to take a look in the mirror rather than the newspaper. Improving one's own situation by improving oneself is an investment we can all make. Investing our time and anger in political gossip to punish strangers for living their lives does not yield nearly the same return.
In the coming weeks, Tim Geithner will have to convince the hedge fund world that it will be worth going into business with a government that has just publicly tried to seize legitimately earned income from private citizens. Good luck. The hedge fund guys will no doubt be asking themselves, "If your scheme works out, and we all get stinking rich off of it, what's to stop you from dumping a 90% tax
ex post facto on
us as well?"
There's no guarantee this scheme will work anyway, and there are plenty of other risky ventures for a fellow to spend his money on. This will likely be a tough sell for the young Secretary. Sorry, Joe.
What is possible, in a moment of true black humor, is that the government, in order to cover for its AIG lynching, will have to sweeten the deal for some of these Hedge Fund guys (thus wiping out any of the financial advantage to recovering chump change bonuses from AIG employees.)
If I were in the money business, I would certainly hold out while the government's hand is weak. Is this "unpatriotic"? Not really. If people want to give free money to the government, they are all welcome to do so. Putting up capital without potential for reward is not business, it is charity (or taxation). And investors should not be accused of disloyalty to country for spending their money soundly - earning good money is good for everybody, government included. But one can expect Joe to be out in the streets any day now, prodding these same people to put up their money to save him.
And around it goes. . .
