"A Billion Here, a Billion There"
"A Billion Here, a Billion There" By Eduardo Porter
"Past the initial schadenfreude, it’s hard to figure out what to think about the shrinking of the nation’s 400 most gilded fortunes. It is reassuring that the super-rich can lose money too — $300 billion in the last year, according to Forbes, bringing their total down to $1.27 trillion. It’s about the same percentage that was lost by Americans’ private pensions, whose assets dropped by about $1.1 trillion, nearly 19 percent.
It can hardly hurt as much. Warren Buffett lost $10 billion but still has $40 billion. Kirk Kerkorian has $3 billion left, after losing $8.2 billion. Citigroup founder Sanford Weill dropped off the billionaires list, but still has many millions.
Every year as I get worked up over Forbes’s latest billionaire review, I try to convince myself that accumulation of wealth at the top can serve a social function. I tell myself that inequality of income is a standard feature of capitalism, pushing the best and brightest into the most profitable jobs. It encourages people to study hard and work hard, or at least to become a banker. Big financial rewards push people to excel, and thus the economy to grow.
Every year as I get worked up over Forbes’s latest billionaire review, I try to convince myself that accumulation of wealth at the top can serve a social function. I tell myself that inequality of income is a standard feature of capitalism, pushing the best and brightest into the most profitable jobs. It encourages people to study hard and work hard, or at least to become a banker. Big financial rewards push people to excel, and thus the economy to grow.
But $1.27 trillion? That’s a decade of health care reform in one of the more expensive versions. This isn’t garden-variety inequality — this is a winner-take-all deal that can destroy incentives for everyone except those in the upper crust. Lawrence Katz, a labor economist at Harvard, sensibly points out that one could generate incentives to excel for less: “I don’t think the added incentive of earning $100 million over $50 million is very different than the incentive of making $10 million over $5 million,” he told me once.
Maybe the jolt of billion-plus losses can spur plutocrats to change. Ralph Nader just wrote a novel called “Only the Super-Rich Can Save Us!” in which Mr. Buffett (already a major philanthropist), Ross Perot and a few other billionaires go to Maui to “redirect” society onto the right path. Warren Beatty gets to run California. Wal-Mart workers unionize. Corporate greed is brought to heel.
There is no sign of such enlightenment on Wall Street. Financial markets are back up; bankers are scouring the horizon for new opportunity. The hottest new incomprehensible financial object is the “re-remic,” bundles of distressed mortgages repackaged in a way that banks and insurers can minimize how much cash they must set aside in case the investments go south, again. Amid all this it’s hard to see how our oligarchs could be persuaded to restrain their appetites.
Perhaps I’m being too pessimistic. We could promise that Mr. Nader wouldn’t have a say in the outcome. That would seem like a reasonable incentive."
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