The recent revelation of losses by J.P. Morgan has reignited criticisms of banks and general vitriol towards capitalism in the press, furthering the current American narrative that puts banks, corporations, capitalism and even business schools into a bin labeled “villains” and the less wealthy in another labeled “victims.” While discipline is important to regulate bank behavior, the renewed anti-business sentiment should similarly be kept in check in order to positively shape the public sentiment towards recovery.
First, we must acknowledge that American sentiment towards distributive justice trends with the economic condition. Where were these claims of predatory behavior during the seemingly blissful period of Clinton-era economic growth?
It is unlikely that during those years, bankers were just behaving well and now they are no longer doing so. But at that point in time, we looked the other way, towards deregulation. We encouraged banks to grow without wondering about too big to fail, we removed firewalls between commercial and trading activities, we marveled at financial supermarkets such as Citibank, without wondering whether they are too interconnected.
As our 401Ks and pension funds did well, we didn’t ask questions why or wonder what bets were being made, for many of them returned amazing fortunes. It is only in times of financial stress that banks, corporations, and the wealthy become the Big Bad Wolf and many in the public play the part of Little Red Riding Hood.
Besides bankers, corporations have also been increasingly vilified during the downturn. While focus has been put on the evil tendencies of corporations, the positive aspects they bring to the economy are minimized.
I assume that those with negative views towards corporations never shop at Target, Staples, Whole Foods, or the Gap and do not use a single Apple product.
I’m assuming the ease of use, lower prices, product availability and innovative design these corporations provide have never been enjoyed by those condemning corporations.
And most certainly, I’m sure that anti-corporation writers in the press do not make any money from the distribution channels set up by Amazon or Barnes and Noble for their book sales.
Furthermore, the anti-corporation sentiment is typically communicated without even considering a discussion of the employment and other economic support corporations provide many small American towns.
At one time or another, Wall Street made bets on these companies, bets that appeared to be very risky or outright callous even though these. While we don’t agree with everything each corporation does, painting corporations with a wide, negative brush is both unfair and hypocritical unless one lives corporation-free. (And I highly doubt most of us would ever want to).
In addition to the banks and corporations, another wolf has reappeared – business schools. Some wonder what kinds of techniques are being taught in those bastions of capitalism?
I suggest critics look at the curricula and the course syllabi before making judgments. I know firsthand that among the many skills business students are typically taught, one of them is to hone one’s analytical thinking through statistics. To be able to evaluate a business plan or trends in financial markets as a hedge fund manager, and differentiate opportunities for growth from spurious correlations is a skill that arguably we need more, not less of.
Further in this narrative is the idea that compares hard-working scientists, artists and scholars with the hedge fund manager, implying that there is social injustice in that the latter is rich while the former is not.
There is no injustice in different utility functions – these groups of people are interested in different rewards. What’s missing here is the argument of choice.
The government does not owe us financial wealth regardless of what career path we choose.
Starting out in a career as an academic economist, for instance, one is fully aware that one is forgoing a more wealthy life on Wall Street for quiet life in the halls of academia. What we should expect and strive for is that government policy allows for the opportunity for each American to have the awareness and ability to be able to make that choice. That regardless of background, if you do have utility for wealth, the paths exist to create that wealth for yourself in your lifetime or for your children.
The focus should therefore be on understanding how government policy can work to democratize opportunities for wealth vis-à-vis education and pro-business policies.
Trying to further create a witch hunt for the rich, or for corporations, or for capitalism, does not serve to empower us with the economic inspiration and ambition to move forward. It serves at creating a further polarizing political divide, wasting time and energy identifying the wolf in grandma’s clothing rather than taking the hood off and making more productive changes.
Sharon Poczter is an expert in emerging markets, financial economics, industrial competitiveness and strategy. She is an assistant professor of managerial economics in the Dyson School of Applied Economics and Management at Cornell University.