Here, then, is my concise breakdown of the two biggest reasons why greed and inequality are bad: First: When people at the top are greedy, workers don’t get their just rewards. For a long time in this country, there was a very close relationship between productivity growth and wage growth. Increased productivity is a good thing because it means we’ve come up with new ways to make more stuff with less effort. Now take a look at this chart:
As you can see, productivity started rising more rapidly than wages in the 1970s and has only accelerated since. This means, roughly speaking, that workers are now producing more but getting paid less. How in God’s name is this possible? Well, technology and globalization are definitely part of the answer. But I think there’s also something to be said for the fact that we’ve developed a real Randian “Cult of the Rock Star CEO" culture that values the output of the person at the top of the chain as key to creating wealth for everyone else (and if this sounds like economic fascism to you, well, you’ve got a point).[…]
Second: Greed can turn you into a dumbass. There’s this weird myth out there that the more money a Rock Star CEO has, the more money he’ll invest into his business, thus creating more jobs for everyone. While this is certainly true in some cases, I don’t think it’s at all true across the board. And what’s more, I think having too much money can give you a feeling of invincibility that can lead you to do stupid things.
Toward the end of that debauched period, lenders simply weren’t producing enough mortgages to satisfy the Wall Street Securitization Machine that had spent the past decade piling more and more leverage onto banks’ balance books. The solution, it turns out, was to create “synthetic” mortgage securities that were little more than bets on other mortgages that the banks didn’t even own. Because a combination of low interest rates, tax loopholes and financial chicanery had given banks a whole ass-ton of money to play with, they had at that point literally run out of crappy mortgages to buy. So instead of, say, doing something more useful with it they decided to double down and create more crappy mortgages out of thin air. The brighter libertarians out there will concede that, yes, having too much money can make you stupid but eventually the market will make you pay for your mistakes and you’ll never get hired again. Capitalism works!
Well, sure, if you ignore all the misery and poverty that financial collapses cause, I guess the system is great. And let’s not mention that being thoroughly incompetent at your job is no obstacle to future employment if you’ve got good connections — for Christ’s sake, the World Bank has just appointed former Lehman Brothers chief risk officer Madelyn Antoncic as its damn treasurer! This is like baseball hiring Barry Bonds to be in charge of overseeing its drug-testing operation!