I am a regular reader of Dr. Paul Krugman's NYT blog. From time to time, I notice people posting cranky comments about how his liberal analysis is completely wrong because he has never participated in the market, meaning he’s never owned a business, been a banker, etc. He, of course, participates in the market via the publishing world, but for some, the only real measure of truth is whether you’re a successful (defined as how rich you got) businessperson.
This goes back to the Cult of the CEO phenomenon I’ve mentioned before. In this view, more or less, every human calling is subservient to that of commerce, and no matter what the result for the rest of us, if someone gets rich, they are, de facto, smarter or harder-working than the rest of us and are therefore entitled to make pronouncements and decisions that are not to be questioned. Business, after all is one of the noblest of human pursuits.
In a recent blog post, Krugman notes some flak he got from BusinessWeek magazine in 2010 as being a liberal gloom-and-doomer when sharp operators like billionarie hedge-fund manager John Paulson were more upbeat:
If [Krugman] makes you want to head for the hills with your shotgun and turnip seeds, consider another view, expressed the week prior at the London School of Economics. The speaker was not a decorated academic with visions of 1873, he was a profit seeker, pure and simple: John Paulson, the hedge-fund manager on whose behalf Goldman Sachs (GS) cooked up those killer collateralized debt obligations designed to pay off handsomely in the event of a housing crash. He was right about that one, you’ll recall.
Here’s the entire story, by BW’s Executive Editor, Hugo Lindgren.
When Krugman posted on this, he got comments like:
The best way to measure market knowledge is by performance. We know that Paulson made something like 600% over the two years when the market was decimated. How did the Professor do and did he warn people that this disaster was coming to the door?
Krugmanhedge is just another boneheaded economist who could not make dime in the real world.
Okay, so in this universe, a “profit seeker, pure and simple” merits respect because he is a “profit seeker, pure and simple.” Anyone who is not a “profit seeker, pure and simple,” can butt out and keep his/her (assumedly liberal) opinions to him/herself.
Except that “those killer collateralized debt obligations designed to pay off handsomely in the event of a housing crash” (a crash some believe Wall Street saw coming, and acted not to prevent it, but profit from it, at our expense – ) turned out to be job-killers. They helped drive the economy over a cliff, and that had consequences for millions of people. For some, this was a clear sign the “general Welfare” (quoting from Preamble to the Constitution) took a back seat as powerful economic decisions were made that were driven by an allegiance to the bottom line over every other concern..
SEC sued Goldman for civil fraud, and the firm eventually paid paid $550 million to settle. Some would argue they got off pretty cheap, considering the world-wide damage they helped create. Paulson adroitly brought in two senior SEC officials for his board.
Okay, there are those who will take Paulson/Goldman’s example and, hey, that’s smart business, tough noogies for the rest of you. If Social Darwinism is your thing, that fits right in.
In the political area, this view was crystallized at this weekend’s CPAC meeting with the exhortation from Congressman Allen West (R-FL) that, We also realize that the public good is a misnomer, created by our liberal friends . . . . It is not the public good that matters, it is the personal good.
Memo to Congressman: check that Preamble of the document you swore to uphold and defend when you took your oath of public office.
But if building a sustainable economy that offers opportunity and a measure of security for most, if not all, its population is more important (that’s my own philosophy, no surprise), then that’s not only cruel, but disastrous. So, it’s worth pondering – and I don’t know if they teach this in ethics in business schools, or if the students really care – but what does it say when a powerful financial industry figure sees a coming collapse of part of the market and, instead of saying, “Hey, guys! We have to do something about this before it becomes a disaster!” says “Whoa, I can make some real money on this!”
And even Mr. Paulson blows it sometimes. 2012, so far, is shaping up to be a bit rosier for him.
But the point is not whether John Paulson is a genius, or if being rich automatically makes him one,or if he has or should have a moral sense of responsibility for how his actions affect the rest of us. The point is whether the dog-eat-dog view of the world, which enables a few to commit economic rape and still be admired, should be the one that guides our public actions and our policies.
I think it’s clear where I come down on that one.