Wall Street Plunder

As explained by Adam Smith, the acknowledged dean of capitalism, the value of labor in a free market is largely determined by the difficulty and training involved in acquiring and employing the skills in demand. Hence he deemed it fair that in his day a bricklayer earned less than a house carpenters, because carpentry entailed more ingenuity; that house carpenters earned less than coal miners, because coal mining was a dirtier and more dangerous; that coal miners earned less than bartenders, because dealing with drunks was even more dangerous than coal mining; and because hanging and beheading was the most unpleasant occupation of all, executioners were right in demanding the highest wages among manual workers. And so it went with the relative value of the work of physicians, lawyers, scholars, ministers and other professionals--The Wealth of Nations, "Book One, Chapter Ten." (1776)

Like Adam Smith in his day, We Americans in 2011 have no trouble accepting the fact that on average common laborers earn less ($24,000) than skilled electricians ($50,000); elementary school teachers less ($40,000) than engineers ($70,000); dentists ($120,000) less than heart surgeons ($300,000); and U.S. Senators ($174,000) less than the President ($400,000). Entertainment celebrities buck the general rule (Adam Smith regarded them as morally no better than prostitutes), as do sports stars, though, in all fairness, some allowances could be made for their often stressful and ephemeral careers.

Now consider the astronomical sums commanded by Wall Street financiers. In 2007, even as Lehman Brothers was verging on bankruptcy and on the brink on triggering a global financial catastrophe, the compensation package of its CEO was $121,000,000, more than 300 times the salary of the President of the United States, 400 times that of a heart surgeon, and 5000 times that of the hardhat guys who repair our roads.

So we may rightly ask. What is it that those Wall Street financiers actually do to make so much money? What do they actually contribute to the economy? What is so valuable about their credit default swaps, derivative packages, and other abstruse paper products? Now there is no doubt that commercial banks serve an important function by providing credit to local businesses and consumers. But those mammoth Wall Street financial institutions, Are they banks in the true sense of the word? Do they take risks with their own capital, as commercial banks and shop owners on Main Street must, or do they make their fortunes by gambling with their client’s money and, win lose, get their bloated pay nonetheless? Are they bona-fide private-sector enterprises, or are they, as mounting evidence suggests, a shadow parasitical cartel created to siphon off the nation’s wealth?

Their apologists argue that the millions—billions in some cases—that big-time financiers rake in are but a minute fraction of the nation’s aggregate salaries and wages. True, but what the apologists fail to consider is that so much money concentrated in the hands of few, rather than spread over a large population of business leaders, gives that small, tightly-knit group the means to buy off elected officials and civil servants in key positions, and, thereby, the clout to control, not only the national economy, but the entire government as well. The fact that government regulatory agencies saw the financial crisis of 2008 looming but did nothing about it, not even sound the alarm, speaks volumes.

Their apologists further argue that big-time financing is so complex a business that multi-million dollar compensation packages must be offered to attract and retain the rare few capable of understanding and running the business. This backward logic, of course, makes some sense: If the industry’s ruling cadre of insiders deliberately convolute, veil, obfuscate and jargonize their cultural lingo beyond the comprehension of outsiders, then it follows that only they are qualified to run their business, and being such a talented bunch, geniuses as some claim, they deserve nothing less than multi-million dollar compensations.

Though Lehman Brothers, Merrill Lynch, Bears Stearns went bankrupt in the 2008 crash, their former CEO’s are still hanging around, biding their time for the opportunity to get back in the loop. With Morgan Stanley and Goldman Sachs, the two survivors of the big five, thanks to a taxpayer bailout, it’s still business as usual, as the $100,000.000 bonus awarded the Goldman Sachs CEO in 2010 will attest.

Adam noted that when an industry becomes so lucrative that its owners begin to make unusually large profits, competitors will get into the act, thereby increasing the supply of the product demanded and, by the Law of Supply and Demand, causing profits to come down to reasonable level. Unless, of course, competitors are prevented from competing, in which case, the profits of the original owners will continue to spike indefinitely. Obviously this is what tightly-knit Wall Street players have done. They have cornered the financial market, bought the necessary government influence, kept out the competition, and reaped all lucre for themselves. Why the fiscal conservative politicos bent on cutting benefits for average wage earners while lowering taxes for the very rich is cause for suspicion.

The iconic Revolutionary War flag of a rattlesnake warning “Don’t tread on me” (the Gadsden Flag) was inspired by Benjamin Franklin’s dig to the British Government that if they insisted on exiling their convicted criminals to America, then we should respond in kind by sending Britain our rattlesnakes. Perhaps today we can retaliate against the unfair trade practices of some of our economic competitors by outsourcing to them our Wall Street financiers.

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