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Demonizing One Percenters Ignores Their Social Good

Jan 22 2014, 9:17am CST | by

The New York Times continues its battle against people in the top 1 percent income bracket, through Paul Krugman’s latest warcry  and a first-person essay from Sam Polk, an ex-Wall Streeter...

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25 weeks ago

Demonizing One Percenters Ignores Their Social Good

Jan 22 2014, 9:17am CST | by

The New York Times continues its battle against people in the top 1 percent income bracket, through Paul Krugman’s latest warcry  and a first-person essay from Sam Polk, an ex-Wall Streeter and recovering, self-diagnosed “Wealth Addict.”

Let’s start with Polk’s narrative. He’s a former hedge fund trader who chucked multi-million dollar bonuses to launch a non-profit organization with a wonderful mission to help low-income families fight obesity.

It’s fabulous that Polk found a meaningful life. And it’s true that many of the derivative products he criticizes are too opaque and complex for buyers and sellers. The “virtuous” origin of derivatives as a means to protect, say, farmers from weather aberrations, has morphed into something dangerous and harmful to Wall Street investors, and by contagion, Main Street. Those schemes can and should be reigned in.

Of course Polk’s free to pursue a life he finds rewarding. But it would have been fascinating to read about his recovery from “wealth addiction” while remaining inside the financial system instead of completely wrenching himself out at a young age. The irony about Polk’s switch to non-profit work is that someday he could write an equally scathing rebuke of mismanagement, cronyism and self-interest in 501c3-land . Perhaps someday he will.

And it seems he’s looking through an “either-or” lens. He’s dismissing the morality of capitalism , the realization that what he did as a trader added value to the world and lifted people out of poverty by creating wealth through efficient capital investment. Yes there are some shoddy financial instruments. But financial services firms could not stay in business if they weren’t adding substantial value.

This value provides infinitely more succor in the millennia of human history (and perhaps prevents more wars) than any government handout or NGO. Polk’s sinister portrayal of  hedge fund investors and workers doesn’t acknowledge that these people are big boys and girls who understand risk. We want to encourage “creative destruction” by these high net worth folks as a way of creating value for everyone else.

Polk urges his former Wall Street compatriots to either quit their jobs or pool some of their bonus money together for charitable causes. His rhetoric echoes Krugman, who lambastes what he calls “The Undeserving Rich,” those shameless, heartless cads in the top income brackets.

Yes, plenty 1 percenters are materialistic and superficial. And it’s true, as Krugman implies, that many 1 percenters personally behave in imprudent, dirty and self-indulgent ways that don’t help the cause of social conservatives seeking to restore the nuclear family  and traditional values to help alleviate poverty. But these wealthy people, through either their smarts or birthright–as a friend jokes, those who “won the sperm lottery”– create undeniable value for those below them in the income ladder. And even if we dispersed all bonuses or taxed the uber-rich to equalize median household income levels, it would be merely a drop in the bucket compared to what a well-functioning economic machine does to help life from being nasty, brutish and short.

If wealth was perfectly distributed, there would be neither the incentive nor the ability for these high-risk projects to get off the ground. It wouldn’t be feasible to corral massive levels of capital if it were equally spread across households, many of which prefer to spend rather than invest. Inequality is the tradeoff for societal progress on a sustained upward, growth trajectory .

Krugman bemoans rising tuition costs at American universities, which makes it more difficult for low and middle-income kids to get an education. But he doesn’t point a finger at the university administrators–the one percenters who overwhelmingly donate to Democrats –who jack up the price of tuition above inflation, fueled by a massive expansion of government financial aid to students without proper financial training or cost/benefit analysis of whether their chosen field matches the new, information-based economy.

A primary trigger of the financial crisis was low-income folks taking out mortgages they couldn’t afford, pushed by regulators that sought to expand homeownership to unqualified buyers. We need to empower low-income folks with a comprehensive financial education to prevent such crises from happening again.

Source: Forbes Business

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

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KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was b ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

The Prince Of Wales Visits The Royal International Air Tattoo
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan R ...
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Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Huss ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selata ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in comp ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minist ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

6 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

6 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

6 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinr ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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