Workers of the world: You're screwed
On lessons not learned and the messages at the Milken conference.
1. David Rubenstein
David Rubenstein, the co-founding partner of the gigantic private equity fund Carlyle Group, started by asking the audience questions.
Rubenstein's questions at the annual Milken Foundation conference in Los Angeles left little doubt about the kind of economic policy he would like.
Who among the audience thinks there will be another major recession within the next 12 months? Who thinks the worst is behind us and the government should be given the credit? Or that the government should be blamed for leading us into this recession?
How many think their taxes will rise? Or that their employer will compensate them for the increase in taxes? How many regret not studying medicine? How many send their kids to medical school?
The annual Milken meet is attended by thousands of participants – business figures, entrepreneurs, economists and government officials, but the impression is that the finance managers are the most important presence there. Rubenstein knows exactly how the audience in front of him feels – most of them are in the top 10 percent, 1 percent, even 0.1 percent of American income earners. He for one feels that the American government wants to close its budget deficit by squeezing more taxes from him.
In the United States, even now, to be extremely rich is in, even if the money is from Wall Street. Being wealthy and in politics is perfectly acceptable.
Rubenstein congratulated Robert Rubin for his stint at the United States Treasury Department during the Clinton administration. But he also said he wouldn't support Rubin's return to politics.
Rubin supports raising taxes on private investment fund managers, the multimillionaires and billionaires like Rubin, who pay some of the lowest tax rates in the U.S. and are among the biggest donors to politicians and parties.
However, Rubenstein and his fellow 0.1-percenters needn't worry. U.S. President Barack Obama may employ different rhetoric than the Republicans, but like everyone else he relies on donations from the finance industry. If there's one thing alive and well these days in the U.S., it is the finance industry's lobby.
2. Al Gore
After Rubin and Nobel Economics laureate Prof. Gary Becker spoke, former U.S. Vice President and (almost president) Al Gore came onstage.
Gore is famous for his fight against global warming. He's also among the 0.1 percent after he pulled in millions of dollars for various businesses, including a TV network, Current Media, that he recently sold to Al Jazeera. He also owns tens of millions of shares in Apple and has been on its board of directors for 10 years.
As a politician, Gore feels the need to talk about extreme income inequality in the U.S. Gore speaks in a monotonous voice about social gaps and the need to implement changes to the tax system. But then comes his global warming bit.
He raises his voice and delivers an emotional performance. Do you mean to prevent global warming for the sake of the children, he asks the audience, and grandchildren who will ask in another 50 years, "Where were you, dad and grandpa?"
The audience goes wild. Gore's green bit was a tour de force. His inequality talk, only so-so.
Green is exciting. Inequality is depressing. Green is entrepreneurial and American. Inequality is for crybabies. Gore knows what moves his audience.
He also knows that today it is impossible to ignore the vast sums of money corrupting American politics. Gore talks about it in measured, well-considered words. This isn't global warming. All in all, it’s a country that has transformed into a plutocracy. It’s important to him just to say that the money is Congress on both sides of the aisle, Republican and Democrat.
"It began with the Republicans, but today it's on both sides," Gore says.
Eventually he mutters that it is more extreme among Republicans. The audience seems bored. Tell us something we don’t know. Tell us something interesting.
Blast politicians, talk green.
3. Henry Blodget
12 years ago Henry Blodget was a symbol of the dotcom bubble, Wall Street corruption, and the uselessness of analysts to investors. Back then, Blodget was an analyst for CIBC Oppenheimer investment bank who famously predicted that the stock of online book retailer Amazon would reach $400 per share. He was convicted for securities fraud and banned for life from working in the securities industry.
That was then. Now Blodget is one of the most influential journalists covering Wall Street. His website, Business Insider, enjoys wide currency among finance industry people and investors. The wheel turned; recently Amazon founder and CEO Jeff Bezos invested in Blodget's company.
Blodget is no Nobel laureate in economics. He doesn't have billions of dollars under management, he isn't fighting global warming and wasn't a senior administration official. One thing he does is mirror trends and undercurrents among the American public at large, specifically among people interested in economics.
There is a good chance that 15 years ago when he was an analyst on Wall Street, Blodget and his clients had only a vague idea that the holiday International Workers existed and what it symbolized. However, for this year's May 1, Blodget published a short analysis. Profits at companies in the U.S. are at record heights, they're flush with cash, yet "workers in the U.S. are screwed." He uses an expression a bit more vulgar than "screwed."
May Day? Workers? What happened to Blodget? Until a few years ago the dominant discourse on Wall Street and the American economy focused on corporate profits: The idea that corporations are responsible for more than just earnings per share or share price and that they had "shareholders" was alien. Let alone the idea that the economy isn’t just comprised of investors who occasionally lose money, but also workers who have been getting screwed for 30 years.
4. Maria Bartiromo
Wall Street CEOs adore Maria Bartiromo. She, in contrast to Blodget, has remained faithful to the cause even after the financial crisis and even after the dimensions of inequality in America was exposed. The star news anchor on CNBC sounds exactly like the people she reports on. At the American financial news network, they are whistling to the same tune they were a decade ago: hot air from morning 'til night about quarterly corporate earnings, the new hot stock or some fluctuation in the market.
What's your opinion about Facebook's quarterly results? she throws at investment managers and for a moment you begin to think that Facebook's quarterly results really matter, both for Facebook and the world at large. But no, the focus on some isolated profit above or below expectations is one of the many failures of American capital markets. Distorted incentives, information asymmetry, chasmic disparities between managers of other people's money and those whose money it actually is - the list grows and the sums do too.
"Money Honey" Bartiromo moans with the top 0.1 percent and its lackeys in government, the press and academia about the "uncertainty" that the Democratic Obama administration is responsible for that "prevents companies from investing and consumers from buying."
The possibility that 100 million middle-class Americans don't have enough money today to buy, save for their pensions, pay for health insurance and send their kids to college isn’t mentioned. No one addresses these Americans who simply don't see their economic future in a cruel world where manufacturing, jobs and growth are moving to the Far East or are disappearing due to technological change. Bartiromo doesn't discuss International Workers Day.
What is good for Wall Street will be good for workers. Or maybe not, but even this isn't bad.