A few days ago, a man from a slick new magazine about business sent me an e-mail. He wanted me to do a column for him about what was "new, hot and exciting -- or terrible -- in business today." The only catch was that he did not want me to complain about the rich. This is what I sent him:
Here is what's new and hot and exciting (or terrible) in the world of money today:
The average wage of the American worker adjusted for inflation is lower than it was in 1973. The only way that Americans have been able to maintain their standard of living at the middle and lower ends has been to send more family members to work and to draw down savings or go into debt or both.
The most sought after jobs in the United States now are jobs in finance in which basically almost no money is raised for new steel mills or coal mines, but immense sums are raised to buy companies, recapitalize them -- which means pay the new owners immense special dividends and other payments for going to the trouble of taking over the company. This process results in fantastically well-paid investment bankers and private equity "financial engineers" and has no measurably beneficial effect on the economy generally. It does facilitate the making of ever younger millionaires and an ever more leveraged American corporate structure.
An entire new class of financial entity has been created called "the hedge fund." It is new not in the sense that there were not always funds that hedged by selling short or buying assets uncorrelated with other assets. The new part of this phenomenon is that it is based on a demonstrably false premise: that these entities can consistently outperform wide stock indexes. They have not and cannot, and yet their managers and employees for a time are paid stupendously well.
As with the private equity function, the main effect is to siphon money from productive enterprise into financial manipulation. Or, to put it another way, to siphon money from Main Street to Greenwich or Wall Street.
Starting MBA's at hedge funds, which are basically gaming enterprises, get paid multi-six figure sums. Starting teachers in the state of Florida get paid $28,000 a year.
Here's what else is new and exciting (or terrible) in money: there is real poverty among the soldiers who fight our wars. There are fist fights to get children into $30,000 a year kindergartens and pre-schools in the right neighborhoods in Manhattan. There are 40 million Americans without health care insurance. There are almost 40 million baby boomers with no savings for retirement. There is a long waiting list for Bentleys at the dealership in Beverly Hills.
There are soldiers' wives selling blood to buy toys for their kids. There is a man selling non-functioning body armor who threw a $10 million Bat Mitzvah for his daughter.
In Brentwood, where the houses start at $3 million, the housewives complain about what a terrible country America is. In Clinton, South Carolina, where the textile mill closed fifteen years ago and there is real hardship, the young men still believe in America and their fiancees at Presbyterian College wait for them while they fight in Iraq.
This is a small part of what's new and exciting (or terrible) in America in the world of money right now.
I never heard back from the man at the slick new business magazine.
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