The Really Rich Got Stinking Rich in the Last Decade--Bring Back Max Weber

Posted by: Bruce Nussbaum on August 5, 2009

I found a copy of Max Weber’s Protestant Ethic And The Spirit of Capitalism in the East Hampton dump this weekend and took it to be a sign of the times. I remember his deep insight into the culture of capitalism—that it developed out of Puritan ethic of work being perceived as holy. Making profits and getting rich were just results of celebrating God through effort and work. Today, it seems as though making profits and getting rich often comes as a result of financial speculation, regulation-rigging through political lobbying and corporate board malfeasance (ergo, massive CEO compensation for mediocre performance).

The IRS has just released figures on income and taxes for the past decade. Take a moment to read them and ponder what they mean for American society. I’ve got these figures from Ed Yardeni, one of the smartest analysts around.

“The Top 5% of earners received 25.7% of AGI (aggregate gross income) in 1987. In 2007, they received 37.4%. The share of the Top 1% rose from 12.3% to 22.83% over this period.”

Got that? The top 1% of earners doubled their take over the past 10 years to 23% of all all income.

We have created a culture of speculation in America over this decade that has doubled the size of finance in the economy and doubled the “take” of income by those few people in charge of it. CEOs and top corporate managers, their compensation tied to the stock of their companies and the market as a whole, did hugely well in this time period. Wall Street, well, we know that narrative. The middle class, well, it’s income stagnated for a decade. Yes, I know class mobility is important and there was plenty of it in recent years. But…..

It’s not all the fault of the bankers and CEOs. American culture has made a fetish of gambling, renaming it “gaming,” and speculation. Poker is more popular than baseball. The best mathematical minds are employed in devising arcane financial instruments. The “enemy” really is “us.”

The big question now, as the recovery begins, is whether or not we change this culture of speculation. Can we rebuild manufacturing in a new way? Can we redesign education to produce people capable of modern work? And can we change our values so that the graduates of Brown and Harvard, Stanford and MIT see glory in making things rather than playing games on Wall Street?

Can we bring back Max?

Reader Comments

Sergei Dovgodko

August 6, 2009 5:20 AM

Specialists on culture would argue that culture changes at a "glacial pace". So I suspect the US culture today is not that different than it was 50 years ago.

I hope that the current crisis is a sort of a "global warming" for the culture.

It just made more visible what the actual culture is vs. the one presented by consolidated for-profit media companies.

When recovery comes, it will be business as usual. Except people will be poorer.

le plus ca change le plus ce la meme chose.

Bourgogne

August 6, 2009 6:35 AM

"And can we change our values so that the graduates of Brown and Harvard, Stanford and MIT see glory in making things rather than playing games on Wall Street?"

Bruce...I trust you read the Vanity Fair piece on Harvard's woes.

Those institutions you mention have served their purpose in the history of capitalism. Their value(s) in the world of creating "stuff" is no longer needed or trusted I am afraid.

The label of "damaged goods" will be difficult to shake, and Max Weber is to be put back on the shelf next to all of the other reference books that document a period of time that is no longer present.

See you in Shanghai or Bangalore, Seoul or Hong Kong...

Gong Szeto

August 6, 2009 7:55 AM

protestant ethic? sounds good to me (even though i am an ardent atheist)

re: rebuilding manufacturing - ralph gamory has a lot to say about this. a service economy does not make a strong nation. manufacturing does. http://bit.ly/Xq8Z9

re: redesigning education - define modern work, pls.

re: changing values? i think we're seeing that happen now. whether or not it is sustainable remains to be seen.

re: gambling. i designed derivatives trading systems for several years. they behave not unlike slot machines. blinky lights and all. one thing to note, and i'd like to put a very fine point on this. in the real economy, the cohorts you know best know the material world and at its most abstract level, the brand, the logo. in the world of finance, it's symbolic and abstract. stock symbols being traded at the speed of light, entire industries collapsed in the ticking effervescence of 3 and 4 letter stock symbols. up arrows, down arrows. prices. that's all it is. millions of transactions per second, and abstracted even more by potent little programs and algorithms that locate loose nickels and pennies in financial cyberspace. and you wonder why all this seems so divorced from reality...it's because it is. we real economy stalwarts are getting crushed. we can't compete with this, bruce. time to wake up to that reality.

re: stinking rich: i humbly believe they are all hedonistic nihilists and know something we don't. that the world is actually, really, truly going to hell in a handbasket, and while you can make some coin, do it now and do it large. party like it's 1999, so to speak. that's not very protestant. remember, for the impressive capitalization that is our public markets, individuals only own 25% of it. the rest belongs to the top 1%. how do you change that? you can't. it's too late.

re:gaming: i think nice guys finish last, bruce. i say we game it back. i have ideas. let's talk. :) (i am a firm believer in the stealth flanking maneuver in the theatre of war)

Trip Allen

August 6, 2009 8:23 AM

Bruce

Spot on.

As far as I am concerned, the real heroes don't work in the world of "speculation."

The real heroes of today are the likes of Steve Jobs, Jeffrey Bezos and Shai Agassi(and there are plenty more). They have actually implemented innovation and invention.

Who are your banking and finance heroes of today?
I can barely remember any of the the CEOs' names (easier to remember the ones who have done injustice!).

Trip Allen, Team Egyii, Singapore

ike raoul

August 6, 2009 5:22 PM

This makes me crazy, just bat shit crazy. Quoting as news stats that were last heard, when, during Obama's campaign speeches halfway around the calendar ago?!!? The not-quite-but-maybe-one-day-fierce urgency of now. Let's go. Time to act. Each one of us can make change by being change.

Murli Nagasundaram

August 12, 2009 7:49 AM

http://blogs.zdnet.com/Foremski/?p=673

Govt. is killing Silicon Valley innovation: "Innovation is in trouble because of restrictions on H1B visas; unfavorable tax policies regarding stock options; the failure to change Sarbanes-Oxley in regards to startups which increases costs; and the government investing billions of dollars picking winners and losers, such as the bailout of the automakers. It’s all building into a crescendo that harms innovation."

One man's opinion, no doubt, but still ...

MikeyCee

September 1, 2009 2:09 AM

Most people, who are not rich by way of working for it, are followers and bitchers. Followers hate the thought of someone else doing better than them. That's why they follow the herd. If you want to be a success in this copycat world, you dig your own ditch and leave the normals behind. The rebels, eccentrics and people with guts are those who will keep the ship afloat. Not the feds or people who moan and groan about it.

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