Warning: This post is a rant. It has the veneer of civilized and reasoned discourse, but it is at heart a rant. And I am honest enough to admit that it is a stinking, envy-soaked, so dyed-in-the-green-it's-environmentally-friendly rant. More disclaimers to follow.
And as for those people reading this blog who know who I'm referring to, please be discreet. Thanks!
So I received an invitation for this weekend to attend a barbeque house party at a friend's place. Now, I won't actually be attending and the reason is that I have a Father's Day family dinner this weekend. It's important for me to state this upfront as you will soon see. I would otherwise attend this little shindig at my friend's place.
When the email invitation arrived, one glance at it was enough to arouse a seething cauldron of somewhat uncharitable feelings.
First, let me say that I have nothing but good things to say about this friend. He's kind, generous and an all round nice guy. In fact, I bunked in with him one time I was in New York when we were still students (he attended Columbia). So this isn't really about him.
So what got my ire up?
It was the address on the invitation. He stays in one of the toniest districts on the island. You can check out the price of an apartment in his condo right here. Bear in mind that he's my age (not yet 30). But clearly he's doing much better than me (and just about 99% of the people I know). It could be family money, although I seriously doubt it as I have been to his parents' place and it is less lavish. It certainly seems like it is his own (and his wife's) apartment.
Why is he doing so well? Well, probably because he's a banker. He works for Credit Suisse. He did some time on Wall Street and the City dealing in something credit related (I do not know for sure if it was CDS's) and now he's back in Singapore.
The point is...doesn't it seem just the teensiest bit inequitable that bankers can earn literally millions of dollars just by "pushing" money around?
Now I am far from being a card-carrying member of the kill-the-banksters, pitchfork-wielding crowd, but it is obvious that the finance industry has destroyed far more value in the last 2 years than it has created in the previous decade.
Here, I have to reiterate again that it is nothing personal against my friend. It is with banking in general.
I don't think people begrudge the vast wealth of people like Bill Gates, Sergey Brin or Larry Page for the enormous value that their creations (Microsoft and Google) have given the world. But it's a rare uninterested (in the financial sense) person who does not question why bankers and financiers are so heavily rewarded when their societal contributions are manifestly less valuable (or even destructive as we have seen in the past year). What makes it even more odious is how arrogant financiers are in general (my friend above excepted of course). See how Fred Goodwin is quoted in this article. "Hard work, focus, discipline...". Right.
Even if you accept the argument that finance plays an important role in imposing discipline on capital allocation, which in fact I do, much has been written on how large the finance economy has grown in relation to the real economy, and the costs such a large financial sector exacts on all of us, notwithstanding arguments to the contrary.
How do grossly overpaid bankers and financiers affect you and me?
The first most obvious effect is on inflation. Starkly high income inequality causes the prices of goods to be bid up, affecting all of us. This includes what we normally consider goods, as well as such "goods" as a college education and work-life balance. Having a group of very prominent people in society who work crazy hours tends to have some kind of effect on working hours for all white-collar workers.The economist Robert H. Frank has written extensively on phenomena related to this.
But I'm not rich enough to afford an apartment at Le Arc at the Draycott you say, unlike my friend above. Perhaps, but most of us will probably buy homes one of these days, and the price of land anywhere on this land-scarce island (like say at Draycott road) will have an impact on the price of land where we do buy our homes.
Ditto that for the higher rent on Orchard Road, which translates into higher prices for goods and services.
And because wealthier folk invariably consume more upscale goods and services, and can afford to pay for them, naturally the vendors that service them will gravitate to locations of greater convenience, pushing out the shops that most of us patronize to the suburbs. New York City is a great (and ironic) example of this. The concentration of wealth in Manhattan means that many of the people who work in Manhattan providing essential city services cannot actually afford to live there. This includes: sanitation workers, nurses, police officers, firefighters, and government workers. There is just something so intrinsically wrong with that. We are starting to see this in Singapore in an ever widening ring centered on the CBD.
Beyond the effects on inflation, the presence of overpaid bankers has other pernicious effects. Like how the financial sector has been siphoning off talent that would otherwise have gone on to careers more productive in their output to society. Instead of being enticed into "pushing" money around, bright young people could actually be doing useful things. The irony is that the high cost of living, and the massive costs of a debt-financed college education, influenced by income inequality brought on at least in part by an oversized finanical sector, compel young people to actually seek out the most highly remunerative careers they can ... in finance. This is peripherally addressed in the books Strapped and The Trap.
And even for those who have chosen to work in other careers, the inevitable comparisons with bankers arise. Nassim Nicholas Taleb recounts a story in The Black Swan about how an otherwise wealthy lawyer has an unhappy wife because they stay in a condo filled with much more highly remunerated hedge fund managers. Perhaps that is why bankers are mostly friends with other bankers and very rich folk. No one else cares to associate with them; the juxtaposition is just too uncomfortable.
The resentment can be especially sharp if one does not consider oneself the inferior in talent or hard work to a banker. Such as I discovered when I received an invitation this week.