Whenever there is a disaster, jokes start doing the rounds pretty quickly. Recently, I heard this one: What’s the difference between a pizza and a banker? A pizza can feed a family of four. Of course, the economic collapse is no laughing matter. But why then are some people poking fun at it? The answer is easy: there is a popular sentiment that the wealthy in society are oblivious to the poor and deserve their comeuppance.
As it stands, it appears that it is those with massive investments in the stock exchange that are taking the initial hit. Since the beginning of 2008, holdings in the US stock exchange have dropped from $20-trillion to $12-trillion. According to the Wall Street Journal, the average loss in stock exchanges across the globe is 40%. In other words, those who are feeling the pinch are the wealthy, at least for now.
The word on the street is that greedy investors have got what they deserve for years of excess and self-indulgence. It was largely bankers and those selling mortgages who wooed in cash-strapped borrowers, making a cut for bringing the financial institution business and essentially tying the borrower into a form of debt bondage for life. Everyone was so busy making money that nobody stopped to think about the consequences.
But the direct economic impact is only one aspect of the disaster that capitalist gluttony has left in its wake; the other part is psychological. The financial feeding frenzy of the last two decades has instilled a set of distorted beliefs. CEs who earn six-figure bonuses believe they are worth it and think that the wealth they create will somehow trickle down to the poor. Workers at the bottom of the financial food chain have started to believe it is their fault they are destitute.
Polly Toynbee and David Walker in the book Unjust Rewards demonstrate that the exact opposite is the case. Firstly, they show that where you are born is the biggest predictor of financial success. Class largely determines your chances of succeeding, not hard work as so many like to think. Secondly, they show that many top earners have no idea about how the majority live. Toynbee and Walker held focus groups with bankers and lawyers in the UK whose earnings are in the top 0,1%. They found that interviewees struggled to understand how people in the UK can live on under £40 000 a year when in fact 90% do. One of the interviewees thought his salary was average. He earns £200 000 a year.
Taking pleasure in the banking sector’s humiliation is, of course, short sighted. There is more to come. According to Forbes.com, in recent times, the average economic decline has lasted for 14,4 months. Further, the process might start with high stake losses on the stock exchange, but will eventually translate into the loss of working-class jobs as the whole economy slows down.
That said, the philosophy that unbridled capitalism is the only option to grow an economy has taken a major knock. One can also only hope that the crisis has left the banking sector humbled and more in touch with its limitations. The so-called financial banking giants of this world, The Guardian estimates, have needed $2-trillion to $4-trillion from the public purse around the globe to bail them out. They should be ashamed, repentant and embarrassed. But have lessons been learned?
Toynbee and Walker point out that the total salary packages of CEOs of the 30 biggest UK companies rose by a staggering 33% in 2007/8 as the reality of the crisis was hitting home. What is more, I have not heard one banker that oversaw this catastrophe apologise or thank taxpayers for the money. So what is the difference between a pizza and a banker? At least a pizza knows it is nothing more than fast food.
This article by Brandon Hamber was published on Polity and in the Engineering News on 31 October 2008 as part of the column "Look South". Copyright Brandon Hamber.