The Banksters Are Clueless

Speaking of Jon Stewart, Jim Fallows flagged this excellent interview with former Bain executive Edward Conard, author of a new book lauding the virtues of private equity:

It’s a great interview, but not exactly for how Stewart picked him apart. Fallows does a better job countering Conard’s attempt to take credit on behalf of Wall Street for all the innovation in America’s tech sector:

The destructive and false part was his assertion that the only causal factors worth talking about are tax rates and income share for people at the top of the economic distribution.

I think any fair-minded observation of the world shows that other factors matter more in America’s pro-entrepreneurial climate. My list would start with: openness to immigration and outside talent; strong university-based research systems; world’s largest domestic market as incubator; rule-of-law and culture of venture capital (as opposed to absolute income share for venture capitalists); supportive “innovation in a garage can lead to glory” concepts and the related ideal of mobility and opportunity; and so on. A lot of my recent writing has been about why China, in particular, will have trouble matching this range of advantages — and why America will be at risk if we neglect or throw away the pillars of our ongoing wealth.

Moreover: there is no plausible evidence that income inequality like today’s is necessary for this creative climate. How could it be, if most of the success stories on Conard’s list — Microsoft, Apple, Google — in fact got their start when tax rates were higher and income inequality was lower than today’s levels? Does any sane person think that Bill Gates and Paul Allen would not have started Microsoft if Gates had thought he would end up with $20-some billion rather than $50-some billion? That Steve Jobs was driven mainly by money? That Sergey Brin and Larry Page would have given up on Google if they thought they’d end up as only minor rather than major billionaires? That Mark Zuckerberg is quitting Facebook because the IPO is making him a lot less rich than he might have hoped?

Or, as one of Fallows readers put it:

It’s a kind of economic creationism: we can’t possible have an economy if we don’t totally focus on growth and innovation, to the utter ignorance of sustainability, stability and the survivability of those whose lives don’t happen to involve innovation.

All very good, worthwhile and true. But for my money the best part of the interview is how Conard sounded. Even though Stewart didn’t ask the most probing questions one could have imagined, Conard couldn’t answer them anyway, and he was clueless as to how he was coming off.

This is an increasingly glaring trait among the banker class—their total disconnection from the rest of the population. Probably the best example of this was from Blackstone head Steve Schwarzman, who compared Obama’s proposed increase in the capital gains tax to Hitler’s invasion of Poland. A disgusting thing to say, sure, but more importantly it reveals the enormous, tottering egos among the Wall Street titans and their lack of understanding how the rest of the country thinks. It suggests that anyone courageous enough to run against Wall Street FDR style would not only garner significant benefits rhetoric- and enthusiasm-wise, but would probably provoke a hysterical, unhinged over-reaction.

Ryan Cooper

Ryan Cooper, a contributing editor of the Washington Monthly, is currently the Washington correspondent for The Week.