Much of the Christian Century Network blog conversation over the last year or so has been about the need for a new economic ethos in the United States, one that is based on honest productivity, fair compensation tied to real contributions, equitable distributions of compensation that mitigate against extreme differences between the very highly compensated and everyone else, and a national character that is not driven by unwarranted consumerism.
The recent news of a $3.44 billion second quarter for Goldman Sachs combined with their announced bonus pool of $11.36 billion is a troubling, but not unexpected, sign that things may not be headed as hoped for. There seems to be some mystery, and more than a little suspicion, about how they generated that $3.44 billion in earnings. Was it from the expansion of credit to small and medium size businesses? Or was it from some financial version of three card monte? And how does one generate over $11 billion in bonuses from $3 billion in earnings? Moreover, exactly who would be eligible for a share, and what did they do to earn it? In related news it has been reported that the banking industry is gearing up for a fight to kill the Consumer Financial Protection bill that would, among other things, make contracts for loans and credit cards simple and easy to read.
The point is that an industry’s corporate culture based on engineered duplicity and greed does not come easily to a conversion experience. They live and succeed in a world governed by greed, and however many of their colleagues go to jail for malfeasance simply culls the herd of competition and sharpens the taste buds of their avarice.
The easy thing to do would be to lay all the blame on Wall Street, but that would be unfair and self-deluding. Goldman Sachs and other investment bankers provide a necessary service that makes the ebb and flow of credit possible; the very ebb and flow of credit that allows main street shops to stay in business, new startups to borrow the capital they need, houses to be built an cars to be bought. There is nothing wrong with that. We need it. But couldn’t they do that with less greed driven compensation?
If we look a bit closer it becomes obvious that most of us play by the same rules that we condemn on Wall Street. We actually lust after the debt laden over consumption that we abhor when we are not a part of it. Economic recovery, to many, means getting back to building millions of oversized, overpriced houses, and inefficiently manufacturing cars in too many plants, selling them through too many dealerships, and plying us with ads encouraging inappropriate use of predatory consumer credit to keep it all going.
The virtues of a more ethical society that we so highly praise would mean more new kinds of jobs at less extravagant wage and salary levels producing a wider variety of products and services of more utilitarian value in smaller lots. Population shifts might result in a greater distribution of people into more modest cities located in more environmentally sustainable areas. These are not changes that we are likely to endorse in real life. They could mean the loss of jobs and products we are used to. Cities in unsustainable places such as L.A., Los Vegas, New Orleans and the like could become much smaller. Credit cards would be harder to get. Houses would be less expensive, probably smaller, and one would have to have a decent down payment to get in. A flatter corporate structure would mean less opportunity for income potential as a rising corporate bureaucrat. That might make teaching, family medicine, general farming and the like more attractive as long term careers. Who wants that?
The fact is that we are inclined to go along with a more authentic, transparent and equitable private enterprise based economy until we see that unique opportunity to slam dunk our neighbor and gain an unassailable competitive advantage. Then the old game is on again in a rampage of legal but morally questionable greed driven consumerism.
Maybe we are on a path that will not go in that direction. I hope so. But it will not be a comfortable path for some, and it may take a full generation to become comfortable with a new and better way of being American.
Optimistically you say in your closing words it may take a generation……..I'm hoping it only takes a few generations for the opportunity to live in a less hectic pace than we Americans do now, equal advancement with nice but not over the top salary rewards, reduced consumer spending – the list is long as you've outlined. It seems hopeless but maybe not – maybe there is a generation growing that sees their mothers and fathers dying young, divorcing asap, chasing the golden ring day in and ay out, only they can decide to shout out stop!!! It's not worth it…..I find optimism short on my side but hope is a big factor for me in these matters. Your reasoned posts sort out a lot of issues for me. Thank you.
And the AIG executives again get big bonuses! As Talleyrand, who had cynically switched his allegiance from the French Republic to the rising Napoleon, and when Napoleon clearly was going to lose, to the restored Bourbon monarchs, said of those Bourbons, \”They have learned nothing and they have forgotten nothing.\”! So that seems to be the unreformed American corporate culture! Dr. B
Bill, it seems to me that they only know one way and the only thing they can think about is how to stuff that one way into any new situation. It's always worked before so why not now?CP
CP:Good thoughts here and little to disagree with other than to say that now that Goldman Sachs is owned by the government, the feds have a stake in their profit margins now as well…. Maybe that is why there is silence on the latest round of bonuses.
Hi Allan,As it turns out, the feds do not have an equity stake in Goldman Sachs. They paid back the $10 billion in TARP a month or so ago. They were able to do that in part through a payback of debt owed to them by AIG in which the feds do have an equity stake, so there is a connection in that sense. CP