Why our economy will continue to lack jobs

rockefeller by Ethan Bloch
Wasted Talent and Corruption:
[Via Firedoglake]

Calvin Trillin explains explains that the cause of the great crash of 2008 was all the smart people who went to Wall Street. Once upon a time, the big jobs on Wall Street were filed with third-raters, the guys who slept through Rocks for Jocks at Ivy U. They got their jobs through their parents or their friends or people they charmed at homecoming. Their dreams were modest, a house in Greenwich and a sailboat.

Of course, Trillin makes this banal insight a joke, claiming that the old boys were only mildly greedy, but then Wall Street started importing really smart people, and making mountains of money. The third-raters weren’t able to comprehend the risks, but loved the buttloads of moolah (you gotta love Margaret and Helen) they were making. The smart people didn’t understand the risks either, but they pretended to, and uncontrolled greed led to the crash.

The humor masks the ugly reality. The standing joke in law school is that the A students become professors, the Bs become judges, and the Cs become millionaires, or as we used to say in college, the business guys hired the engineers, and the science guys become professors.

The most obvious bad thing about smart people going to Wall Street is that it means we don’t have productive jobs for them in the fields they are trained for. If a bunch of physicists are working for Goldman Sachs, it means they aren’t doing physics. It means we don’t have work requiring physicists or their training. It means we are falling behind the countries that do have work for physicists. How many chemists do you think China has working in finance?

The second bad thing is the way financial elites make money. Floyd Norris gives a good picture in this column. They charge high fees, and hidden fees. To justify those fees, they have to produce huge returns, which they do by leverage. They rely on complexity and deception, particularly in swaps and derivatives. Wall Street has become more concentrated. All of these things are dangerous to the rest of society, which has to bail those incompetents out when they fail.

The third bad thing is that they aren’t doing the one thing we need for them to do: allocate capital to its best use. As Norris points out, dumping money into asset bubbles is a giant fail.

Many of the financial innovations of recent years were not designed to increase operating profits for customers. Instead, they sought to avoid taxes, or make accounting statements look prettier, or get around regulations seeking financial safety. At their worst, they boiled down to an offer to charge a customer a dime for letting him evade 20 cents in taxes. Such transfers do nothing for the larger society.


Both parties are corrupted by the large sums of money being pumped into Washington. It is so easy to see who is doing the bidding of their corporate masters. Thus, nothing will be done over the next few years to really change the dynamic. In fact, I expect things to get worse and that the thing people really care about, jobs, will continue to be secondary to bolstering Wall Street.

I expect this to be the real realignment divide between those who want corporations to continue to have all the rights that citizens have with none of the responsibilities and those who want actual living human beings to come first.. Either a Republican Party that can foster another Roosevelt or a Democratic Party that can foster another Roosevelt.

I just hope the corruption of corporations can be reduced to a molehill instead of a mountain. And soon.

If not, America will not be much of a leader in much of anything.

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