Krugman: Ego's and Immortality...reflections on the "cash strike"

By Paul Krugman, New York Times, May 24, 2012
In the wake of a devastating financial crisis, President Obama has enacted some modest and obviously needed regulation; he has proposed closing a few outrageous tax loopholes; and he has suggested that Mitt Romney’s history of buying and selling companies, often firing workers and gutting their pensions along the way, doesn’t make him the right man to run America’s economy.
Wall Street has responded — predictably, I suppose — by whining and throwing temper tantrums. And it has, in a way, been funny to see how childish and thin-skinned the Masters of the Universe turn out to be. Remember when Stephen Schwarzman of the Blackstone Group compared a proposal to limit his tax breaks to Hitler’s invasion of Poland? Remember when Jamie Dimon of JPMorgan Chase characterized any discussion of income inequality as an attack on the very notion of success?
But here’s the thing: If Wall Streeters are spoiled brats, they are spoiled brats with immense power and wealth at their disposal. And what they’re trying to do with that power and wealth right now is buy themselves not just policies that serve their interests, but immunity from criticism.
Actually, before I get to that, let me take a moment to debunk a fairy tale that we’ve been hearing a lot from Wall Street and its reliable defenders — a tale in which the incredible damage runaway finance inflicted on the U.S. economy gets flushed down the memory hole, and financiers instead become the heroes who saved America.
Once upon a time, this fairy tale tells us, America was a land of lazy managers and slacker workers. Productivity languished, and American industry was fading away in the face of foreign competition.
Then square-jawed, tough-minded buyout kings like Mitt Romney and the fictional Gordon Gekko came to the rescue, imposing financial and work discipline. Sure, some people didn’t like it, and, sure, they made a lot of money for themselves along the way. But the result was a great economic revival, whose benefits trickled down to everyone.
You can see why Wall Street likes this story. But none of it — except the bit about the Gekkos and the Romneys making lots of money — is true.
For the alleged productivity surge never actually happened. In fact, overall business productivity in America grew faster in the postwar generation, an era in which banks were tightly regulated and private equity barely existed, than it has since our political system decided that greed was good.
What about international competition? We now think of America as a nation doomed to perpetual trade deficits, but it was not always thus. From the 1950s through the 1970s, we generally had more or less balanced trade, exporting about as much as we imported. The big trade deficits only started in the Reagan years, that is, during the era of runaway finance.
And what about that trickle-down? It never took place. There have been significant productivity gains these past three decades, although not on the scale that Wall Street’s self-serving legend would have you believe. However, only a small part of those gains got passed on to American workers.
So, no, financial wheeling and dealing did not do wonders for the American economy, and there are real questions about why, exactly, the wheeler-dealers have made so much money while generating such dubious results.
Those are, however, questions that the wheeler-dealers don’t want asked — and not, I think, just because they want to defend their tax breaks and other privileges. It’s also an ego thing. Vast wealth isn’t enough; they want deference, too, and they’re doing their best to buy it. It has been amazing to read about erstwhile Democrats on Wall Street going all in for Mitt Romney, not because they believe that he has good policy ideas, but because they’re taking President Obama’s very mild criticism of financial excesses as a personal insult.
And it has been especially sad to see some Democratic politicians with ties to Wall Street, like Newark’s mayor, Cory Booker, dutifully rise to the defense of their friends’ surprisingly fragile egos.
As I said at the beginning, in a way Wall Street’s self-centered, self-absorbed behavior has been kind of funny. But while this behavior may be funny, it is also deeply immoral.
Think about where we are right now, in the fifth year of a slump brought on by irresponsible bankers. The bankers themselves have been bailed out, but the rest of the nation continues to suffer terribly, with long-term unemployment still at levels not seen since the Great Depression, with a whole cohort of young Americans graduating into an abysmal job market.
And in the midst of this national nightmare, all too many members of the economic elite seem mainly concerned with the way the president apparently hurt their feelings. That isn’t funny. It’s shameful.
While agreeing with all of Professor Krugman's history and analysis, I would also add that the kind of immunity and impunity sought/bought/secured by the very wealthy is likely to be afforded by an obsequious media, whose existence more and more seems tied to their capacity to fawn over their "star" interviews, comprised mainly of the rich and the famous.
The rich and the powerful have never had so many sycophant scribes. From the television show, "Lives of the Rich and Famous," hosted by Robin Leach back in the day, we have watched an active production incubator of both shows and print coverage of the narcissism of the rich.
The very fact that Romney's millions have propelled him to the Republican nomination for president, along with the millions contributed to the PAC's supportive of his candidacy, gives notices that many of those same Wall Street billionaires, and their corporate CEO friends, are ostensibly holding back their mountains of cash from investing in the American industries who could benefit from those investments, not to mention the thousands, perhaps even millions of jobs those investments would unleash, perhaps waiting for his election in November and then demonstrating his capacity to "create jobs" by unpacking what is essentially a "cash strike".
Analogous to a labour strike in which workers withdraw their services, in order to put pressure on their employer for enhanced working conditions, and/or benefits, the rich have produced this "cash strike" without worry of breaking any law, thereby crippling both the economy and the employment rate, under the pretense of "too much uncertainty" for them to make wise investments, because they do not know what the tax rate will be in 2013.
Holding both the economy and the unemployed, the poor and the dispossessed hostage to this undeclared "cash strike" supported as it is by the financial sector, also under the rubric of "assuring that Obama is a one-term president" is also shameful. State and local government coffers are being starved of the cash that income and business taxes would generate, should even half of this cash be released from the vaults in which it is being held.
While the Republicans chortle at this chicanery, salivating at the thought of capturing the Congress and the White House in November, the country withers on the vine of both greed and financial withdrawal.
If this were a marriage, the 99% would and should divorce the 1%....and let them hang in the wind.
If this were a partnership, it would be dissolved.
If this were a corporation, the board of directors would, hopefully demand a change in leadership.
But because it is only a country that has lost its political and financial bearings, and is only too ready to pass the reins of power over to Bush III (Romney), both it and the rest of the world will continue to suffer its unbridled narcissism.