Tuesday, January 28, 2014

The money delusion

All Holocaust analogies are destined to fail, but some Holocaust analogies fail more quickly than others.  And none is likely to fail more quickly than the one in Tom Perkins's recent letter in the Wall Street Journal, in which he warned of a rising tide of hatred against the rich and drew parallels between modern progressivism and the "unthinkability" in 1930 of Kristallnacht, generally regarded as the first concrete step toward Hitler's "Final Solution."

Let me be clear:  Perkins's analogy fails on virtually every level of analysis.  There is no long history of anti-wealth sentiment in this country (if anything, we fetishize wealth).  The rich are not a powerless minority; unlike the Jews Hitler scapegoated, wealthy people actually do have access to the levers of government.  Modern progressives do not advocate for discrimination against the wealthy but for fundamental fairness for the non-wealthy.

(I note with some irony that over the last few years, thousands of poor Americans have been driven from their homes because of deception and, in some cases, outright theft, by "banksters" who guzzled down billions of tax dollars in bailouts; Perkins apparently has no sympathy for people who have had actual losses due to factors beyond their control.)

And, on top of that, his analogy is just offensive to everybody, or should be. 

So let's throw it out and look at the point Perkins is trying to get across.

That's important because even though Perkins has issued a tepid apology--the equivalent of "I'm sorry you were offended"--he has not taken back his claim, that wealthy people are a put-upon minority that is in danger of being wiped out by a progressive majority bent on the destruction of wealth, or his thesis, that wealth is a sign of virtue.

Like many people in his financial stratum, Perkins suffers from the delusion that his financial position is the result of his own virtue, of his work--that he is entitled to what he has because he earned it.  He believes that he has been greatly rewarded because what he does has value to the economy as a whole. In an interview published in the last few hours, Perkins said:

So I think that the solution is less interference, lower taxes. Let the rich do what the rich do, which is get richer. But along the way, they bring everybody else with them when the system is working.
Perkins probably has a tighter grip, a better claim, on that philosophy than most of his peers, because of his history as a venture capitalist, but only slightly.  The firm he co-founded focused primarily on helping already-big businesses get bigger, and the businesses in which he invested have hardly been the drivers of good jobs in this country.

But even if you concede--and I do not--that wealthy people do more to create jobs, Perkins's philosophy that his rewards are based upon the virtues he exhibits, is wrong-headed, to say the least.  Perkins has been rewarded as he has because of the confluence of three factors, only one of which he had any control over:  (1) his own work ethic and applied intelligence, (2) the financial assistance of others in backing his activities, and (3) the availability of opportunities to accumulate wealth and a political and financial climate that allowed him to keep it.

In his book Valley Boy, Perkins recounts his humble beginnings, noting that his parents, especially his mother, demanded of him that he earn money for the family, and crediting a science teacher with pushing him to become the first of his family to attend college.  Perkins won a scholarship from MIT, and, with the scholarship money, savings, and a $200 loan from his father, he took an engineering degree. 

Perkins is to be commended for this part of his biography.  Without his hard work, he would never have climbed to the lofty heights he now occupies.  But lots of people work hard, even harder than Perkins ever dreamed of working, without achievement.  Perkins's hard work was made meaningful by the opportunities presented to him: in the beginning, scholarship money from a prominent university, a public-school teacher who cared about his progress, even a father who could scrape together $200; later, investors who backed his early businesses and the opportunity to be a part of a new venture capital firm funded mostly by others' money.  And Perkins grew his wealth in a climate of low taxes on high incomes.  (In 1960, the top tax marginal income tax rate exceeded 90%; it bottomed out at 28% in the 1980s, and capital gains--where Perkins has made most of his money--are taxed at lower rates still.)

But he views it all as attributable to him alone.  The work part--that was his.  The rest came about because of the work, in his view.  And that's where he goes wrong. 
The central message of progressive philosophy is that we must do more to make certain that those opportunities are available to everyone.  That means that we must take some portion of Tom Perkins's sails in.

Sadly, Perkins worries that the ascendancy of progressivism will lead to billionaires being reduced to mere hundred-millionaires--or, in his case, to lesser billionaires.  Perkins has a financial net worth of about $8 billion.  He is over 80 years old.  If he lives to be 100 years old, does not receive a dime more in income of any sort, and spends a million dollars a day, he will still not run out of money.

So, weep not for the Tom Perkinses of the world.  They are not a put-upon minority, and it is offensive for him to claim that mantle, given the opulent conditions in which he lives.  If anything, Tom Perkins owes us all a debt.  Don't let him delude you into thinking we owe him anything, or that he deserves our kindness and consideration.

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