benjaminlandy:

(Republished in full from the October 6, 2011 issue of The New Republic. The online version is behind a paywall; Timothy Noah, you’re doing a fantastic job as Jonathan Chait’s replacement. Please do not sue me.)

Brooks Brothers Bolshevism: Wall Street discovers income inequality

By Timothy Noah

If you want to read a radical critique of twenty-first century American capitalism, skip the Daily Worker and go straight to Wall Street. A 2005 report by three Citigroup analysts coined the term “plutonomy” to describe an economy in which only the rich matter. In a follow-up report (cited in Don Peck’s excellent new book, Pinched), the analysts explained that the United States was “powered by the wealthy, who aggrandized larger chunks of the economy to themselves.”



Not to be outdone, Michael Cembalest, the chief investment officer of JPMorgan Chase, wrote in July of this year (in a clients-only newsletter obtained by Washington Post columnist Harold Meyerson) that “profit margins have reached levels not seen in decades,” and “reductions in wages and benefits explain the majority of the net improvement.” (Cembalest printed the latter quote in boldfaced lettering.) “US labor compensation,” he explained, “is now at a 50-year low relative to both company sales and US GDP.”



Cembalest and the Citigroup analysts see the American postindustrial economy’s abandonment of fair play as an interesting fact to consider in formulating future investment strategies, not an occasion to march down Broad Street waving some Fortune 500 chairman’s bald head atop a bloody pike. By contrast, the Wall Street maverick traders profiled in Michael Lewis’s razor-sharp 2010 narrative The Big Short see it as both. “The upper classes of this country raped this country” is one of the more polite things that Morgan Stanley money manager Steve Eisman has to say on the eve of the 2008 sub-prime fiasco. A Spartacus Youth clubber might judge Eisman’s rhetoric a trifle overwrought. A few pages later, Eisman concedes that, by shorting the sub-prime market, he helped create the liquidity that kept it going: “We fed the monster until it blew up.”





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