Stinking Rich-- An Existential Danger For American Democracy

Talk of the town this week was an endlessly fascinating and somewhat startling article-- did they plan it to come out just when Romney's stinking rich, self-entitled donors would be lined up in their Porsches and Jags and Ferraris spouting off about nails ladies and how the common folk are bad for democracy?-- by Lisa Miller in New York: "The Money-Empathy Gap: New research suggests that more money makes people act less human. Or at least less humane." This is a must-read for fans of Chris Hayes' book, Twilight of the Elites and his theory about the end of he meritocracy.

[Paul] Piff, who is 30, published a paper in the Proceedings of the National Academy of Sciences that made him semi-famous. Titled “Higher Social Class Predicts Increased Unethical Behavior,” it showed through quizzes, online games, questionnaires, in-lab manipulations, and field studies that living high on the socioeconomic ladder can, colloquially speaking, dehumanize people. It can make them less ethical, more selfish, more insular, and less compassionate than other people. It can make them more likely, as Piff demonstrated in one of his experiments, to take candy from a bowl of sweets designated for children. “While having money doesn’t necessarily make anybody anything,” Piff says, “the rich are way more likely to prioritize their own self-interests above the interests of other people. It makes them more likely to exhibit characteristics that we would stereotypically associate with, say, assholes.”

...When was the last time, as Piff puts it, that you prioritized your own interests above the interests of other people? Was it yesterday, when you barked at the waitress for not delivering your cappuccino with sufficient promptness? Perhaps it was last week, when, late to work, you zoomed past a mom struggling with a stroller on the subway stairs and justified your heedlessness with a ruthless but inarguable arithmetic: Today, the 9 a.m. meeting has got to come first; that lady’s stroller can’t be my problem. Piff is one of a new generation of scientists-- psychologists, economists, marketing professors, and neurobiologists-- who are exploiting this moment of unprecedented income inequality to explore behaviors like those. As Piff’s colleague Michael Kraus explains in a forthcoming article co-authored with Piff and three other scientists in Psychological Review, their focus is on “predictable social cognitive thought patterns and world views” of the people familiarly known as “the haves.” Their field is less than ten years old, and its conclusions are thus “incomplete,” says John Dovidio, a social psychologist at Yale. Money has a million symbolic meanings and reflects as many human yearnings; wanting it, getting it, having it, using it, and abusing it are entirely different impulses with entirely different effects on personality, behavior, and interpersonal relationships, and no single researcher has yet captured all of that nuance. But in a country that likes to think that class doesn’t matter, these social scientists are beginning to prove just how determinative money is.

...[A]s the 2012 election approaches-- an election framed more than most as a referendum on how much prosperity should be shared-- those on opposite sides of the income spectrum appear not just different, but as alien tribes who have accidentally washed up on the same beach. The economic data are well known: The top 20 percent of Americans own about 87 percent of the wealth; the bottom 80 percent splits the rest. Social mobility, never as attainable as imagined, is stagnant. Forty percent of Americans inhabit the same social class as their grandparents, making the United States less socially mobile than Japan or France.

...The American Dream is really two dreams. There’s the Horatio Alger myth, in which a person with grit, ingenuity, and hard work succeeds and prospers. And there’s the firehouse dinner, the Fourth of July picnic, the common green, in which everyone gives a little so the group can get a lot. Markus’s work seems to suggest the emergence of a dream apartheid, wherein the upper class continues to chase a vision of personal success and everyone else lingers at a potluck complaining that the system is broken. (Research shows that the rich tend to blame individuals for their own failure and likewise credit themselves for their own success, whereas those in the lower classes find explanations for inequality in circumstances and events outside their control.) But the truth is much more nuanced. Every American, rich and poor, bounces back and forth between these two ideals of self, calibrating ambitions and adjusting behaviors accordingly. Nearly half of Americans between 18 and 29 believe that it’s “likely” they’ll get rich, according to Gallup-- in spite of all evidence to the contrary. Those who have already gotten wealthy wrestle openly and with real anguish over how to raise children who are productive, community-minded, and hardworking. Jamie Johnson, an heir to the Johnson & Johnson fortune, made a documentary in 2003 called Born Rich and, since then, has become a kind of confessor to the anxious wealthy. “Everyone says, ‘I don’t want my kids to turn out to be the next Paris Hilton,’?” says Johnson, “It’s weird. You know they want their kids to be superior. They want their kids’ lives to reflect the wealth and the position they have in society. But they don’t want their kids to be elitist and arrogant.”

This tweet from Rep. Brad Miller (D-NC) made me decide to write about this today-- and suggest the connection to Eduardo Porter's article in the NY Times Business Section yesterday: The Spreading Scourge of Corporate Corruption. It's the kind of stuff I was very aware of when I was president of a division of TimeWarner. Basically, soon after entering the corporate world, I realized the richer someone is the more likely they are to be greedy, selfish and avaricious. Jesus got it right when he said: "Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God." (Matthew 19:24). He wasn't foolin' around. Of course, neither are the banksters-- as we just saw in the way they've been working together to manipulate interest rates for their own benefit (the Libor scandal).

The misconduct of the financial industry no longer surprises most Americans. Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. And it’s not just banks that are frowned upon. Trust in big business overall is declining. Sixty-two percent of Americans believe corruption is widespread across corporate America. According to Transparency International, an anticorruption watchdog, nearly three in four Americans believe that corruption has increased over the last three years.

We should be alarmed that corporate wrongdoing has come to be seen as such a routine occurrence. Capitalism cannot function without trust. As the Nobel laureate Kenneth Arrow observed, “Virtually every commercial transaction has within itself an element of trust.”

The parade of financiers accused of misdeeds, booted from the executive suite and even occasionally jailed, is undermining this essential element. Have corporations lost whatever ethical compass they once had? Or does it just look that way because we are paying more attention than we used to?

This is hard to answer because fraud and corruption are impossible to measure precisely. Perpetrators understandably do their best to hide the dirty deeds from public view. And public perceptions of fraud and corruption are often colored by people’s sense of dissatisfaction with their lives.

...Company executives are paid to maximize profits, not to behave ethically. Evidence suggests that they behave as corruptly as they can, within whatever constraints are imposed by law and reputation. In 1977, the United States Congress passed the Foreign Corrupt Practices Act, to stop the rampant practice of bribing foreign officials. Business by American multinationals in the most corrupt countries dropped. But they didn’t stop bribing. And American companies have been lobbying against the law ever since.

Extrapolating from frauds that were uncovered during and after the dot-com bubble, the economists Luigi Zingales and Adair Morse of the University of Chicago and Alexander Dyck of the University of Toronto estimated conservatively that in any given year a fraud was being committed by 11 to 13 percent of the large companies in the country.

Yet it may be wrong to shrug off the latest boomlet of corporate crimes and misdemeanors as a mere reflection of the business cycle. Americans appear to believe that corruption has become more prevalent over the years. And some indicators suggest they may be right.

In 2001, Transparency International’s Corruption Perceptions Index ranked the United States as the 16th least-corrupt country. By last year, the nation had fallen to 24th place. The World Bank also reports a weakening of corruption controls in the United States since the late 1990s, so that it is falling behind most other developed nations.

The most pointed evidence that breaking the rules has become standard behavior in the corporate world is how routine the wrongdoing seems to its participants. “Dude. I owe you big time!... I’m opening a bottle of Bollinger,” e-mailed one Barclays trader to a colleague for fiddling with the rate and improving the apparent profit of his derivatives book.

It’s difficult to know why corruption may be spreading. But there are a few plausible explanations. From globalization to rising income inequality to the growing role of corporate money in political campaigns, political and economic dynamics may have increased both the scope of corporate wrongdoing and the incentives for business executives to bend, or break, the rules.

Just consider the scale of recent wrongdoing. Libor is one of the most important rates in the economy. It determines the return on the savings of millions of people, as well as the rate they pay on their mortgage and car loans. It is the benchmark for hundreds of trillions of dollars worth of financial contracts.

Bigger markets allow bigger frauds. Bigger companies, with more complex balance sheets, have more places to hide them. And banks, when they get big enough that no government will let them fail, have the biggest incentive of all. A 20-year-old study by the economists Paul Romer and George Akerlof pointed out that the most lucrative strategy for executives at too-big-to-fail banks would be to loot them to pay themselves vast rewards — knowing full well that the government would save them from bankruptcy.

Globalization can encourage corruption, as companies compete tooth and claw for new markets. And the furious rush of corporate cash into the political process-- which differs from bribery in that companies pay politicians to change laws rather than bureaucrats to ignore them-- is unlikely to foment ethical behavior.

The inexorable rise of income inequality is also likely to encourage fraud, fostering resentment and undermining trust in capitalism’s institutions and rules. Economic research shows that participants in contests in which the winner takes all are much more likely to cheat. And the United States is becoming a winner-takes-all economy.

It’s hard to fathom the broader social implications of corporate wrongdoing. But its most long-lasting impact may be on Americans’ trust in the institutions that underpin the nation’s liberal market democracy.

This is Mitt Romney's world. This is the Republican Party's world. This is the world of Blue Dogs and New Dems. People shouldn't vote for them-- not any of them... not ever.