Barack Obama has been busy cozying up to big business in the wake of his electoral victory in November, trying to mend fractured relations that saw Wall St and big industry put most of their money into Mitt Romney's campaign. “I am passionately rooting for your success,” Obama said to a group of business leaders last week at a question-and-answer session at the Business Roundtable in Washington.
It's slightly nauseating to watch Obama begging the business community for acceptance, but given the extraordinary hatred he has been subjected to by America's wealthiest citizens, it's not surprising. “You know, the largest and greatest country in the free world put a forty-seven-year-old guy that never worked a day in his life and made him in charge of the free world," said Forbes 400 rich list member Leon Cooperman earlier this year. "Not totally different from taking Adolf Hitler in Germany and making him in charge of Germany because people were economically dissatisfied." Cooperman, part of a Billionaire 'Hate Club' saw Obama's desire to see millionaires pay what they did under Bill Clinton as an affront to 'wealth creators' like himself and a turn towards socialism.
The poor relations between Obama and the mega wealthy is perplexing to say the least, given Obama has gone out of his way to ensure their needs have been well catered to. As Chrystia Freeland noted in a brilliant piece in the New Yorker in October of this year:
The growing antagonism of the super-wealthy toward Obama can seem mystifying, since Obama has served the rich quite well. His Administration supported the seven-hundred-billion-dollar TARP rescue package for Wall Street, and resisted calls from the Nobel Prize winners Joseph Stiglitz and Paul Krugman, and others on the left, to nationalize the big banks in exchange for that largesse. At the end of September, the S. & P. 500, the benchmark U.S. stock index, had rebounded to just 6.9 per cent below its all-time pre-crisis high, on October 9, 2007. The economists Emmanuel Saez and Thomas Piketty have found that ninety-three per cent of the gains during the 2009-10 recovery went to the top one per cent of earners. Those seated around the table at dinner with Al Gore had done even better: the top 0.01 per cent captured thirty-seven per cent of the total recovery pie, with a rebound in their incomes of more than twenty per cent, which amounted to an additional $4.2 million each.
The hatred felt from elites towards Obama is the symptom of a very serious cultural problem that has infected America in recent times and made economic progress incredibly difficult. That cultural problem is one of ideology - the ardent faith in markets that promotes self interest and greed as the main driving force behind economic growth. This makes reality increasingly difficult for people to understand as everything is always seen through the lenses of a predefined set of beliefs.
It is almost difficult to understand economic realities through the prism of ideology. From Marxism to Capitalism, ideologies set out the world as it should be - a socialistic paradise where mutualism and group solidarity increases productivity, or a individualistic utopia where self interest creates enormous material wealth for everyone. The problem is, human societies are far too complicated and erratic to responded docilely to imposed ideological structures, and understanding economic activity within them is as much an art as it is a science.
The Ayn Rand self interest model has been adopted by the economic elite for a simple reason; it justifies their position in society. Not only do they get to be wealthy beyond comprehension, they also get to be the saviors of society. It does not matter that much of their wealth has been built off the back of government investment and protection, and it does not matter that their continued existence is the result of a gigantic public bailout that propped up a crumbling system that was about to take down the entire global economy down.
To hedge fund billionaires like Cooperman, the wealthy are wealthy because they work harder than everyone else, and any attempt to get them to pay their fair share of taxes is akin to theft.
The problem with this model of self interest is that it completely discounts externalities that have disastrous effects on society. While Cooperman is raking in billions of dollars through his hedge fund, he pays no attention to the social havoc his investments can cause. Take for example, the debt crisis in Greece. Hedge funds have long been buying up Greek bonds at discount rates hoping to see a huge return for their buy-low-sell-high strategy. The problem is, as part of the EU bailout package, investors are being asked to take a hit along with the Greek public, and they won't accept it, betting they will be able to suck up a big portion of the bailout money if they hold out. While poverty spirals out of control in Greece, the general population has little control over the bailout deal their government negotiates. But hedge fund managers do, and they are continuing to squeeze Greece in order to make their billions. Traditionally, if you make an investment and it doesn't work out, you lose your money. But if you're on Wall St, the government is there to ensure you make your money regardless of how bad an investment it was, and how badly it affects the people involved.
This is one small example, but every industry on the planet has some adverse effect on society in some way, and given the nature of many businesses, if left unchecked their behavior would be catastrophic for society (and in the case of Wall St, it already is). That's why we have regulation, safety standards, and workers rights, because maximizing self interest doesn't always create the best results for society in general. That's not to say that a degree of self interest isn't a good thing, it clearly is as there are many benefits to an incentivized market system, but it should not be the only principle guiding the way we organize our society.
President Obama has tried to argue for a shift away from the culture of pure self interest without ruffling too many feathers. He proposals to bring taxation in line with the Clinton era is hardly dramatic, yet Wall St and big business have reacted with exceptional viciousness. Obama is again going back to them and offering more concession - stroking their egos and begging for acceptance. As Zeke Miller writes in Buzzfeed:
Robert Wolf, a friend, bundler, and adviser to Obama and the former Chairman of UBS Americas, said the relationship between the business community and the White House is more robust now than at any point in the Obama presidency.....
Wolf said he is optimistic [on the new relationship between the Administration and big business].
“They’re not just talking fiscal cliff, they are talking about ways to make the us more competitive going into 2013 — things like immigration, education, corporate tax reform, and tax policy that the president is making a priority,” said Wolf. “They actually align very well with what the private sector wants to participate it.”
This type of deal making may be a political necessity for Obama going forward, but there's one thing we can be sure of; it won't be good for the American public.