The Democrats, after getting their butts kicked all through July, are trying to change the momentum by raising the bloody flag of class warfare. Last Friday the House of Representatives voted 237-185 along party lines to enable financial regulators to limit Wall Street pay and bonus packages they deem inappropriate. The new regulation would affect firms worth over $1 billion, whether or not they got government bailout funds. The Washington Post and AP both asserted the House was responding to looming “populist anger,” although polls suggest recent public concern has been over spending and health care.
Class warfare rests on the assumption, usually well disguised and used very selectively, that capitalist profits are a rip-off, a heist, “unearned.” In his recent health-care pitch, President Obama declared insurance companies are “making record profits,” a questionable claim but presumably identifying both the evil enemy and the room for government to save money, if you buy that the government can deliver something as good for the same cost.
This selective economic demonization serves two purposes. First, it attempts to write current history. During the debates, candidate Obama asserted that the economic crisis was the result of the lack of regulation, presumably of Wall Street speculators gone wild. It was a time of frightening mystery, with the pipes of the financial system seemingly clogged. It was evident that exotic financial instruments, like bundled mortgages and credit default swaps, were the clogs. But the meal was the housing bubble, caused mostly by government policies. It was a policy, not a regulatory, crisis. Read Thomas Sowell.
Second, demonizing Wall Street gins up class warfare, an even more reliable tool of progressive demagoguery than those tricky diversity cards. If diversity pieties are likely winners so long as we are different, then class war is surefire so long as those schmucks up there take big scores while we inevitably stew in our envy.
If there is any group that should recognize this hustle, it’s the entertainment community, which lives in a marketplace as clearly defined as Wall Street. Big stars take down big scores; last year Harrison Ford got $65 million, Adam Sandler $55 million, Will Smith about $50 million, and Eddie Murphy about $40 million. The reason: being a true star involves a mystical chemistry between player, camera, and audience, and it’s very scarce in this risky business. Since the demise of the classical, vertically integrated studio, only a star and/or a sequel can secure ticket sales on an opening weekend.
Same story in TV: Oprah made a colossal $225 million, her pal Dr. Phil took home $45 million, Letterman $40 million. To this list, add star athletes (they’re also entertainers): Tiger Woods banked $110 million, Kobe Bryant, Michael Jordan, and Finnish Formula One racer Kimi Raik $45 million, Manny Pacquiao $30 million. Maybe Barnie Frank could deem some of Harrison Ford’s pay as unearned or try to take Pac-Man’s money back for taking excessive risk.
Perhaps you think the Wall Streeters deserve more regulation because the government had to bail them out, though some have repaid and the House bill would regulate even non-borrowers. But as John Nolte has pointed out, Hollywood itself, like the film industry worldwide, has long been up to its neck in public subsidies (tax breaks, film offices, use of public spaces), as have TV and professional sports (airwaves, stadiums, transportation, etc.).
A sidelight to all this: most movie and TV stars, super-jocks, and hedge fund managers supported Obama, suggesting that cultural identification trumps economic interest.
Whatever stars and moguls say or do in public, privately they understand the way capitalism works. It’s centripetal, a car wreck that throws off money and progress and wreckage unequally, in many directions (Schumpeter’s “creative destruction“). But even if you’re not a star, you want to be in on the deal. A carpenter or seamstress or driver in the industry, especially attached to a successful crew, makes more than their counterpart in the regular economy, not to mention sharing the freedom and spiritual rewards of the creative life. This is what John Kennedy meant when he said a rising tide lifts all ships.
Demonizing the market economy in the interest of government regulation to equalize things can only screw things up for everybody.
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