You never hear anyone complain that Steve Jobs became a multi-billionaire. That tells us something important about what motivates the protests growing on Wall Street and in many other places on both sides of the Atlantic.
The anger of demonstrators is not the result of envy or of politically-motivated hostility against the rich. Instead, it is the understandable expression of frustration with a system that has richly rewarded people who, quite simply, do not deserve it.
Whatever you think of the protests and the protesters, they have good reason to feel cheated.
When we discovered that the world’s financial system was on the brink of collapse back in 2008, the government had to rush in to prevent catastrophe. It was not about saving the bankers; it was about saving the world. Like it or not, the economy needs solvent, functioning financial institutions. Some of the world’s top financiers, in fact, have historically played important, honorable, even heroic roles in helping hard-working, innovative entrepreneurs bring progress and prosperity.
The American system rewards risk-taking, innovation, and entrepreneurship. Americans, unlike Europeans, don’t object to a system in which people can get rich — even extremely rich — if they make great contributions to society. In the United States, people tend to not hate the rich because they believe one day they might join their ranks. If you invent the iPhone, the iPad, become a billionaire. No problem.
But the other side of that covenant says you pay a price for your mistakes.
In recent years, however, the great minds of Wall Street brought us calamity. And when their irresponsible, unintelligent choices undermined the entire economy, the taxpayers had to step in to pay the price. That prevented everyone from having to live through the 1930s again. But it allowed the bankers to rake in more billions despite the mess they had made.
What surprises me the most is that it took so long for the outrage to reach the street, Wall Street.
At the very least, the bank bailout should have included a provision preventing huge compensation for people working in firms receiving bailouts. Financial firms claimed the bonuses were needed to attract and retain their brilliant staff. But their brilliance was rather well hidden.
Incredibly, in 2008, despite hundreds of billions in taxpayers’ bailouts and trillions in losses for investors, that year also ended with huge bonuses for Wall Street. That year, Wall Street firms paid $18 billion in bonuses, according to the New York State Controller. The average bonus in the largest firms topped $265,000. In 2010, the average bonus for all firms was $128,000. That’s on top of salary, options, and other perks. Many people receive millions each year.
The iconic investor Warren Buffett, who’s not very popular these days in certain tax brackets, made a dramatic recommendation a few years ago. “If an institution had to go to society and say ‘save me because if you don’t I’m going to topple society,’” said Buffet, “I would have it so that that person, the CEO and his spouse at least come away broke.”
In the U.S. there were absolutely no negative consequences for the people who undermined the global economy. Their wealth was protected. They went on with their games, knowing their firms were too big to fail. Some of the same Wall Street geniuses advised Greece on how to deceive the European Union about the country’s precarious finances. Their fingerprints can be found in today’s Euro crisis.
Some European countries have instituted huge tax rates for large bonuses. In Israel, the board of Bank Leumi has introduced “negative bonuses,” taking compensation away from underperforming managers. In the U.S. , there is no penalty for failure.
No penalty for those who cause it, that is: Everyone else has to pay.
Retirees on fixed incomes received almost no interest on their savings because the Fed pushes down interest rates to stimulate the listless economy. Efforts to trim bloated government budgets mean government employees lose their jobs, services are cut, infrastructure neglected. We all pay the price for the mistakes of people who have thrived despite their incompetence.
So, the anger is plainly justified. Until now, however, its expression — occupying Wall Street or taking to the streets — may be good therapy but it’s not very good policy by itself. This is when the spirit of “Be Like Steve Jobs” comes in. This is where people with passion and creativity emerge to design a well thought-out solution to these problems. Surely, there’s an app for that.