Sunday, May 19, 2013

Ode to Oligarchs

Conspicuously absent from RT''s coverage of Federal Reserve Board of Governors member Sarah Bloom Raskin's speech to the Society of Government Economists and the National Economists Club was the equivalent data on the asymmetric wealth distribution of the oligarchs of Russia since 2009.  While one can cavalierly dismiss this absence as propaganda, such a response would reveal an imperviousness to the real strain in our social fabric.  In their report on the uneven American economic "recovery" from 2009-2011, the Pew Research Center reported that the mean net worth of the most wealthy 7% rose $697,651 or 28% while the lowest 93% saw their mean net worth decline $6,079 or -4%.  Eight million households with nearly 3/4 million more asset value and 111 million households with $6,000 less asset value - a disparity that is growing in 2013.  Now 2/3s of the denominated wealth of America is in the hands of 7% of the population.  Sarah and the Russians both saw fit to point out that this disparity has short term social consequences and long term fundamental economic consequences.

Before we dive into this information any further, let's put it in context.  America - that great capitalist experiment currently is precisely in the middle of the income disparity statistics for the world's 180 measured countries.  The "richest 10%" have nearly 16 times more than the "poorest 10%" according to the UN's data.  Scandinavia and Eastern Europe lead the world in parity while several African and South American nations enjoy the most egregious dispersions.  Reagan's rhetorical boast of America as, "that God-given place between two oceans… a shining house on the hill," appears to be more aptly described as the working class suburb invested equally  with fast-food joints,  bars,  Wal-Marts, strip clubs and Bible churches.  When "God" gave this place, he obviously had pre-ordained contempt for those who were the previous stewards - groups like the Lakota Nation surviving at Pine Ridge where the per capita income is the decline in net worth for the bottom 93% in the Pew data.  That's right, the Lakota earn what the bottom 93% lost in the "recovery".  In America, our heritage keepers die five times faster at birth and die twice as fast in adulthood all the while being forgotten by a world that entombed them in Franklin D. Roosevelt's Indian Reorganization Act.

Board member Raskin's speech is worth heeding as a vital commentary on the self-evidence of the fraud that is the much heralded "recovery".  The fact that Russian TV found it noteworthy is fascinating in that their treatment of her speech is actually quite reasoned and absent the "I-told-you-so" diatribes of an ideological past.  What's deeply alarming is that, apart from the Russian media, only the Federal Reserve's own site provided much coverage of her speech.  While everyone piled onto Ben Bernanke's effervescence on the innovation economy - the very economy that his banking policy has entirely neglected - no one seemed to hear the oracle that is Sarah Bloom Raskin.  The lonely Reuters report addressed her dissonance on the consensus sunny outlook but missed the moral implications of her address altogether.

Poverty.  I'm fascinated by our inoculation against speaking about inequality and injustice - about Pine Ridge and human trafficking to support Wal-Mart's Everyday Low Prices.  But what I find even more fascinating is the degree to which our society seems to be incapable of recognizing that monetary metrics miss the unraveling at our society's core.  The Pew data showed that most of the asset growth among the wealthy was not in activities that build the future - infrastructure, glorious architecture that once graced all with aesthetic beauty, or community spaces.  Rather it was in speculative trading bouyed by aggressive fiscal intervention and tax manipulations design explicitly for the effect they achieved - the largest wealth dislocation in modern times.  And while the EU finance ministers are responding to the base erosion and profit shifting imbalances that have fostered tax shelter booms, this week Tim Cook will assiduously circumvent Congressional contempt and blame tax policy for Apple's $100 billion tax evasion rather than taking moral leadership in reforming the legacy of Steve Jobs' profit obfuscation for egoic immortalization.   Who is poor?  Apple sycophants or Pine Ridge diabetics?  Tragically, both!

Poverty is a symptom of a more consequential disease.  Its absolute manifestation arises from an inflection in the human condition where individual future uncertainty and fear exceeds the impulse for network resilience.  The moment I decide that my hording for my uncertain future is more important than creating well trafficked exchanges of mutual value, I unleash the conditions for poverty to manifest.  Wealth is not measured in absolute assets.  Rather it is measured in the capacity to engage in value exchanges with reliability.  Sure, at times the hedge fund manager or venture capitalist who has amassed great monetary resources may be seen as "wealthy" but his or her true wealth is not in asset command but in transactional stewardship.  Equally, the poetic homeless magician who has the audacity to interrupt my walk on Charlottesville's Downtown Mall with an apparently random Tarot card "reading" winds up closing a circuit in my brain that unleashes a whole new venture - a venture worthy of venture capitalists!  Whenever we close ourselves off - whether through the illusion of abundance or want - we are impoverished.  Whenever we engage the resources we steward to build network resilience and value exchange - we unleash wealth.

Thank you Sarah Bloom Raskin and Pew Research Center for reminding us to care about the growing unraveling.   I trust that each of you readers share this with your networks and see if we can get a conversation growing that celebrates the value of transacting value so that We the People can regain a humanity that can illuminate a more suitable future.

1 comment:

  1. David, this is great as usual. Congratulations and best wishes to you and your firm this Summer. Below please find my thoughts along these lines:


    In the beginning was the Word.

    Civilization is based on four primary codebases: physics, biology, story and number. We see them as emergent properties of One Sacred Code, and view the concept of stewardship as the guiding principle of our relationship with it. Insights from each branch inform the conscious balanced, loving evolution of our world.

    We are problem solvers. On the Planet Earth of today, inherent flaws in the story of civilization have been encoded into the numerical pattern language of finance, resulting in conflict between human enterprise and biophysical reality. This phenomenon – told as the story of War, Pollution, Climate Change, and the Limits to Growth – emerges from defects in the code in the same way that a mutant organism emerges from a damaged embryo.

    The Special Case of Finance

    In our career in finance, policy, and culture we observe the powerful hold of various assumptions on the direction of human endeavor. Perhaps the most damaging core assumptions of all, binding the verbal and numerate control systems together in a death grip, are the various myths of “fiduciary obligation.” Although groundbreaking work to upgrade fiduciary understandings has been done with the UN, and the debate is moving forward vigorously, a brief analysis of fiduciary obligation in the context of our code metaphor will be useful.

    The commonly accepted legal interpretation of fiduciary obligation is that investors must focus on short term profits before and when necessary to the exclusion of all other considerations. Here we see how the story affects the numbers. What is much more infrequently discussed, is that emerging causally from this disastrous narrative are all kinds of mutant civilizations, deformed by their inability to envision or plan for a future which they actually want. Our world is like a bird egg whose genetics required it to think only about how to hatch and eat, providing it with a beak and stomach, but no wings.

    The investment business is perhaps the only business on Earth where arguments are made that it is unethical to think about what the effects of your actions will be in the future real world, and to plan for an outcome that is consistent with one’s cultural, institutional and personal aspirations. In the investment world, it is considered more ethical to identify pathways to profit, the consequences in the real world are treated as collateral damage...


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave