Why are the One Percent So Thin Skinned?

(AP Photo-Tom Margot)

From The Wall Street Journal, Letters to the Editor, last Friday:

Regarding your editorial "Censors on Campus" (Jan. 18): Writing from the epicenter of progressive thought, San Francisco, I would call attention to the parallels of fascist Nazi Germany to its war on its "one percent," namely its Jews, to the progressive war on the American one percent, namely the "rich."

From the Occupy movement to the demonization of the rich embedded in virtually every word of our local newspaper, the San Francisco Chronicle, I perceive a rising tide of hatred of the successful one percent. There is outraged public reaction to the Google buses carrying technology workers from the city to the peninsula high-tech companies which employ them. We have outrage over the rising real-estate prices which these "techno geeks" can pay. We have, for example, libelous and cruel attacks in the Chronicle on our number-one celebrity, the author Danielle Steel, alleging that she is a "snob" despite the millions she has spent on our city's homeless and mentally ill over the past decades.

This is a very dangerous drift in our American thinking. Kristallnacht was unthinkable in 1930; is its descendent "progressive" radicalism unthinkable now?

Tom Perkins

San Francisco

Mr. Perkins is a founder of Kleiner Perkins Caufield & Byers

 I find Perkins' letter utterly stunning.  Josh Marshall at TPM is startled as well. He does a great analysis and puts it this way:

It is the mix of insecurity, a sense of the brittleness of one's hold on wealth, power, privileges, combined with the reality of great wealth and power, that breeds a mix of aggressiveness and perceived embattlement.

In the Review Section of last Sunday's New York Times Sam Polk adds an important perspective from his own, quite brief, hugely financially rewarding career on Wall Street: It's greed, he says. Pure and simple. As obsessive and as difficult an addiction to kick as alcoholism. Polk titled his article "For the Love of Money".

As Progressives, we need to understand the psychology of the One Percent. We need to be much smarter than the Neocons and the Right generally have been in their simplistic views of Iran. As best we can, we need to understand these One Percent folks at a visceral level.

First of all, I am a member of the One Percent. As you might expect, so are many of my friends. That doesn't make me better at interpreting their reactions. In fact I have been baffled and angry at our generally conservative financial elite for their utter lack of remorse for the GFC. How could all of Wall Street and the entire Republican Party blame the whole mess on Fannie and Freddie? There was absolutely no ownership of the problem by any part of Wall Street, as far as I could tell. It just didn't make sense to me. I grew up in a wealthy, productive, successful, values-based family that preached and lived out the call to hard work, integrity, service, and taking responsibility for your life, and all your actions. The subtext of my 1963 Class at Princeton was "Princeton in the Nation's Service". So what has happened? What's going on?

Liberals would say "Nothing". The wealthy have always been greedy and they always will be. FDR and the New Deal were hated by the rich, and business elites fought the President all along the way, until Pearl Harbor and World War II brought the country together. So there's truth in the Liberal critique; but some things have changed. Let me try and put my finger on where the important differences are, that might bring us to this place where an uber-wealthy and successful WASP (Perkins) is willing to publicly express his concerns that his elite class of WASP's might be subjected to an American Kristallnacht, with, presumably, a full Holocaust to follow.

For most of the post-war period up through about 1990, the business of America was making things. Profits were generated by value-adding corporations. After 1990, the share of profits generated by the financial sector expanded dramatically, peaking at 45.8% in 2001, just prior to the dot com bust. The sector had a loss in 2008-9, but, amazingly, bounded right back to the 30% level. Take a look at this chart (from Barry Ritholtz):

The Financial Sector delivers only 10% of the value-added in our economy, but takes down about 30% of total profits. Deregulation, beginning under Reagan, but continuing aggressively under Clinton has supported the financialization of the banking and mortgage business, and the development  of uber-complex, generally opaque, often off-Exchange traded derivatives - both of which trends have allowed traders like Sam Polk to make enormous sums of money.

This is where traders have a chance to make bundles of money in a corporate (formerly partnership) business environment, where cutting corners on legal niceties and customer service are often considered fine, if the trade is successful. Fines and penalties are just another cost of doing business; and since you are often making so much money, it doesn't seem to matter. Did you see that Jamie Dimon of JP Morgan Chase just got a 74% raise to a $20 million salary in a year where his firm was fined $20 billion for a very wide variety of fraudulent activity (though rarely in the settlements is a bank required to admit guilt)?

And here are my conclusions:

• Wall Street folks feel absolutely entitled to every penny they make. In 1987, when the big money breakout for the Street was just beginning, Tom Wolfe, in Bonfire of the Vanities, called these folks Masters of the Universe. For many of the high performing, wealthy people I know on Wall Street (which is not just a geographic address; it's a category of business, as well as a state of mind), this description is precisely accurate.
• In more ways than I could possibly list, America's scorecard is money. Your self-worth and your social standing are directly related to how much money you take home. This is not just an American characteristic; it's true throughout much of the world, and seems to get more true as a country's economy grows and develops.
• Wall Street is not used to criticism. Critical satire is fine: traders are organizing private screenings of Leonardo DiCaprio's "The Wolf of Wall Street", and they roar with appreciation as the Wolf and his scumbag buddies continually rape and pillage their customers, and about anyone else they can find. Breaking the law, screwing your customers are no big problem, as long as you make a killing. I am suggesting that this has always been so; that human nature has not changed. What's happened is that the playing field (the casino) has gotten larger and much more profitable.
• Tom Perkins, and all his Wall Street friends, know that the only power strong enough to confront Wall Street is the Government. Normally the Government can be managed with lobbyists and campaign contributions. Thanks to Citizens United, the Street can effectively buy a good number of legislators. Dodd-Frank has hurt, and the Street has complained a lot; but it was not a mortal blow. Only a truly aroused public, responding to a populist campaign, focusing on income inequality, working through the Government, could truly change the rules of the game. Wall Street (Perkins) knows this. Thus the over-the-top preemptive strikes, like Perkins' letter.
• One more thing: They hate Obama, and like their Tea Party brethren, they will do anything to stop him. Surprisingly, these very smart people are essentially incapable of reading this man, of giving an accurate assessment of what his strengths and weaknesses are. Obama is simply dismissed as over his head, inexperienced, an ineffective leader, a bad negotiator, too professorial, etc. No Wall Streeter that I know has what, in my opinion, would be a balanced, reasonably accurate view of the President. This is one of Obama's best weapons - his opponents invariably underestimate him. The best recent example is the Shutdown. And from what I read, they might be doing it again.

I am, quite literally, sickened by the sense of entitlement on Wall Street and the utter absence of any authentic conversation saying "Here's what we got wrong, and here's what we need to do to avoid another huge mess like this in the future. And by the way, we really are sorry for all the pain we helped to cause." It won't happen. It's simply not in the Street's DNA.

So what to do? We must address income inequality, but this deep structural issue is only partly Wall Street's fault. We can't push one group ahead at the complete expense of some other group. We need to push all groups ahead, but fairness needs to be the measure. In a progressive tax system like ours, those who have more pay a larger share; and until recently, this was a "generally accepted American principle".

Most of all, we need to invest significant dollars back into our infrastructure, our education system, and other parts of our economy where investment now would help us prepare for the future, and in the meantime, much of this investment money would go to provide jobs for the working class.

Suspect this will be part of what the President calls for in his State of the Union speech Tuesday night.