Read This First
Read the news today and you will see a lot of negativity, particularly directed towards the
"haves", the big-time companies and their employees. Message boards are littered with vitriol against the so-called "1%", with much "well, I don't see them giving back their huge bonuses" and "you should be ashamed of yourself".
Let's all take a minute to calm down and look at this from the other side.
As you can see in the article I linked, not everyone in the finance business is eating babies and deliberately plundering your life savings. Do those people exist? Yes. (Well, except for the baby eating, I don't think there is much of that going on even on Wall Street.) But the industry is also full of people doing their best to help their customers. The conflict is between the desire to help your customers and a desire to make a profit.
Nowadays, "profit" has become a bad word. It seems to conjure up an image of some greasy fat-cat with a cigar. We have decided as a society that since some people are making a lot more money than other people, that anyone who makes money is bad. Look around online, or ask around at the local pub, and I think you will find that a lot of people, particularly of the "blue collar" persuasion, think that "rich" people are generally bad. Everyone wants to make money, but people will go out of their way not to drive a car that makes them look pretentious or let people think they are "rich".
When did this happen? People talk about the "American Dream", the old mythical goal of "making it" and being set for life. Now, if you achieve it, you have to take pains not to look like it, otherwise people will hold you in contempt. Look at Mitt Romney for instance. One of his biggest liabilities in a party that is known for celebrating the accomplishments of the individual and generally support "trickle-down" economic theories is that he makes "too much money".
We all seem to want to be rich, but not have other people think of us as "rich people".
Greg Smith, who wrote the article above, was an executive director of Goldman Sachs, one of the firms viewed as a prime villain in the recent recession. As such, his compensation was probably in the millions of dollars per year. Most people look at numbers like that and say "Wow, what a ridiculous amount of money, I can't believe he gets paid that much." Take a moment, however, and read the article. He mentions that "my clients have a total asset base of more than a trillion dollars". Let's pause here, as there is a demonstrated and documented inability of humans to grasp the amount of money that represents. He manages over $1,000,000,000,000 dollars. Even if he is paid $10 million yearly, that is 1/100,000 of the amount of money he manages. That is equivalent to someone making $40,000 per year being responsible for $4 BILLION. If I told you I would hire you for those kinds of numbers, you would probably laugh at me. So let's stop claiming he is overpaid. In fact, most people in finance are compensated similarly. They make a lot of money, but that is because they are responsible for ridiculously large amounts. Even your local bank branch has millions of dollars in its care at any time.
Instead of "these people make way too much money", let's focus on the more important point that Greg Smith raises here: "these people are far too callous with their customers". This is the important part. Reading the article, you can see a corporate culture that has changed to prioritize making money off of the customer rather than making money for the customer. This is a fundamental change. Goldman Sachs spent over 100 years as an extremely reputable firm. They built their success and reputation by making their customers a great deal of money. In the past decade or so they, along with many other financial institutions, seem to have transitioned to a point where they feel large enough that they don't need to worry about making money for their customers as much as making money for themselves. This attitude has led to a number of irresponsible and unethical policies, and seems to have contributed a great deal to the economic downturn.
I applaud Mr. Smith for his courage and principle in standing up, throwing back the curtain, and showing us the problems at the center of the system. Many people, even in the comments on his article, are lambasting him for not leaving sooner, or implying that he should give the money back. Let's not be ridiculous. It is difficult enough to throw away your colleagues, associates, and friends that you have gained through 12 years at a company. On top of that, he is giving up a very lucrative salary to blow the whistle. Whether you make $20,000 a year or $20 million, it is not an easy thing to give up on principle. Credit him for the integrity he has shown by coming forward, and demand more of the same from your banks and financial institutions.
Is the system a problem right now? Yes. Is it hopeless? No. There are still people with integrity in the business, let's support them. By vilifying the people who manage your money, you only give them more reasons to disregard your opinions. On top of that, you will force the people who value your opinion out, leaving only the dregs. Greg Smith did a very difficult thing, let's learn a lesson from it and try to improve the situation.
Wednesday, March 14, 2012
Monday, March 5, 2012
Meet the New Boss, Same as the Old Boss
Your Classwork for Today
The Russian Presidential elections have been held, and results coming in show Vladimir Putin leading with about 65% of the vote. If you pay any attention to the news, this should come as absolutely no surprise. There have been numerous accusations of unfair campaign practices, ballot stuffing, and other corrupt policies. Numerous international news sources, including Al-Jazeera, have published these claims. Putin has received congratulations from President al-Assad in Syria, Hugo Chavez in Venezuela, and Hu Jintao in China, all nations known for their extremely transparent democracies (yes, that is sarcasm, folks.) At first blush this seems like yet another perversion of the democratic process and a bad sign for Russia.
But let's stop and look at it.
Russia as a nation has always tended towards strong individual leadership. When the Mongols invaded the Rus in the 1200s, they awarded the title of Grand Duke to the Duchy that generated the most tax revenue. Moscow, as an up-and-coming river trade port, won this title consistently, establishing Moscow and its Grand Duke as the de facto ruler of Russia. These Grand Dukes eventually included such luminaries as Ivan III (The Great) and Ivan IV (The Terrible). These men built Russia to a great power, but mainly through a very strong central power and expansionist military policies.
This tendency towards expansionism is completely understandable. A people descended from Vikings, forged by Mongol rule, and living in one of the harsher climates in the world would have to develop an aggressive bent merely to avoid extinction. History is full of European powers who look East as an easy means to expand their empires, and the Far Eastern powers were often looking west. Any such militaristic group of people cannot help but to gravitate towards strong leaders, and this has shown itself throughout Russian history.
When the Bolsheviks overthrew the Tsar in 1917, it was arguably a matter of the people supporting another strong leader, Vladimir Lenin, over a then-weakened leader in Nicholas II. The reforms that Nicholas had been forced to accept in the aftermath of the Revolution of 1905 had weakened his position considerably and lost him the support of the people.
Despite the economic failures of the Soviet regime, Russia remained strong through the vast majority of the Cold War. Once Gorbachev came to power, he was able to open up the Soviet system, introduce some capitalism, and thaw the Cold War. Unfortunately, this once again painted him as a weak and unfocused leader, opening the way for an attempted coup in August 1991. Order was again restored by a strong and charismatic leader, Boris Yeltsin.
Yeltsin was unable to maintain a strong hold on the country, however, and the shock of a conversion to capitalism left the country mostly lawless, rampant with organized crime, and financially insolvent. The 1998 Russian Economic Crisis sounded the death knell for Yeltsin's government. At this point, a true Russian leader stepped in once again.
A former KGB Second Directorate (Counter-Intelligence) officer, Putin had grown up in communal apartments in St. Petersburg (then Leningrad) and worked his way up through the system, eventually becoming a close associate of Anatoly Sobchak, Mayor of Leningrad. Putin resigned from the KGB after the failed coup against Gorbachev, and eventually turned that hard-line credibility into a political career, working his way up to Yeltsin's right-hand-man. In this position, he put a halt to further efforts to limit federal power, and eventually rescinded many of the limitations upon becoming president.
What does this history lesson have to do with this story?
Everything. Upon ascending to the Presidency, Putin's strong leadership led to a revivification of the Russian economy. By focusing on developing Russia's incredibly valuable natural resources, Putin dramatically improved the economy and stamped out a large amount of the lawlessness common in the 1990s. Measures to maintain stability have been draconian at times, particularly in Chechnya, but many Russians seem to prefer stability under the threat of oppression.
We have a tendency in America to view democracy and fair elections as the most important thing in the world. This is a dangerous view when applied to Russia. Since Putin has come to power, Russian GDP has surged, more than doubling during his first term. In addition, unemployment has been roughly halved. Despite a growing wealth disparity, Putin has led Russia to prosperity unseen since the end of the Cold War.
Beyond the domestic successes, Putin has brought Russia back onto the world stage. We see Russian policies as generally backward or dangerous, particularly in situation such as the Syrian conflict, where Russia is blocking UN intervention. It must be noted, however, that this ability to oppose action is mainly dependent on the stability of the Russian state. This stability is vital, as it provides another anchor internationally. When Russia was unstable, there were constant dangers of lost nuclear weapons and bio-war technology, often thought to be funneled towards rogue states and terrorist groups.
We cannot let our devotion to democratic principles blind us to the fact that a stable Russia is vital. Despite our differences in opinion, a strong Russian government is an entity that we can reasonably negotiate with. In the end, it is better to have the devil you know than the devil you don't
The Russian Presidential elections have been held, and results coming in show Vladimir Putin leading with about 65% of the vote. If you pay any attention to the news, this should come as absolutely no surprise. There have been numerous accusations of unfair campaign practices, ballot stuffing, and other corrupt policies. Numerous international news sources, including Al-Jazeera, have published these claims. Putin has received congratulations from President al-Assad in Syria, Hugo Chavez in Venezuela, and Hu Jintao in China, all nations known for their extremely transparent democracies (yes, that is sarcasm, folks.) At first blush this seems like yet another perversion of the democratic process and a bad sign for Russia.
But let's stop and look at it.
Russia as a nation has always tended towards strong individual leadership. When the Mongols invaded the Rus in the 1200s, they awarded the title of Grand Duke to the Duchy that generated the most tax revenue. Moscow, as an up-and-coming river trade port, won this title consistently, establishing Moscow and its Grand Duke as the de facto ruler of Russia. These Grand Dukes eventually included such luminaries as Ivan III (The Great) and Ivan IV (The Terrible). These men built Russia to a great power, but mainly through a very strong central power and expansionist military policies.
This tendency towards expansionism is completely understandable. A people descended from Vikings, forged by Mongol rule, and living in one of the harsher climates in the world would have to develop an aggressive bent merely to avoid extinction. History is full of European powers who look East as an easy means to expand their empires, and the Far Eastern powers were often looking west. Any such militaristic group of people cannot help but to gravitate towards strong leaders, and this has shown itself throughout Russian history.
When the Bolsheviks overthrew the Tsar in 1917, it was arguably a matter of the people supporting another strong leader, Vladimir Lenin, over a then-weakened leader in Nicholas II. The reforms that Nicholas had been forced to accept in the aftermath of the Revolution of 1905 had weakened his position considerably and lost him the support of the people.
Despite the economic failures of the Soviet regime, Russia remained strong through the vast majority of the Cold War. Once Gorbachev came to power, he was able to open up the Soviet system, introduce some capitalism, and thaw the Cold War. Unfortunately, this once again painted him as a weak and unfocused leader, opening the way for an attempted coup in August 1991. Order was again restored by a strong and charismatic leader, Boris Yeltsin.
Yeltsin was unable to maintain a strong hold on the country, however, and the shock of a conversion to capitalism left the country mostly lawless, rampant with organized crime, and financially insolvent. The 1998 Russian Economic Crisis sounded the death knell for Yeltsin's government. At this point, a true Russian leader stepped in once again.
A former KGB Second Directorate (Counter-Intelligence) officer, Putin had grown up in communal apartments in St. Petersburg (then Leningrad) and worked his way up through the system, eventually becoming a close associate of Anatoly Sobchak, Mayor of Leningrad. Putin resigned from the KGB after the failed coup against Gorbachev, and eventually turned that hard-line credibility into a political career, working his way up to Yeltsin's right-hand-man. In this position, he put a halt to further efforts to limit federal power, and eventually rescinded many of the limitations upon becoming president.
What does this history lesson have to do with this story?
Everything. Upon ascending to the Presidency, Putin's strong leadership led to a revivification of the Russian economy. By focusing on developing Russia's incredibly valuable natural resources, Putin dramatically improved the economy and stamped out a large amount of the lawlessness common in the 1990s. Measures to maintain stability have been draconian at times, particularly in Chechnya, but many Russians seem to prefer stability under the threat of oppression.
We have a tendency in America to view democracy and fair elections as the most important thing in the world. This is a dangerous view when applied to Russia. Since Putin has come to power, Russian GDP has surged, more than doubling during his first term. In addition, unemployment has been roughly halved. Despite a growing wealth disparity, Putin has led Russia to prosperity unseen since the end of the Cold War.
Beyond the domestic successes, Putin has brought Russia back onto the world stage. We see Russian policies as generally backward or dangerous, particularly in situation such as the Syrian conflict, where Russia is blocking UN intervention. It must be noted, however, that this ability to oppose action is mainly dependent on the stability of the Russian state. This stability is vital, as it provides another anchor internationally. When Russia was unstable, there were constant dangers of lost nuclear weapons and bio-war technology, often thought to be funneled towards rogue states and terrorist groups.
We cannot let our devotion to democratic principles blind us to the fact that a stable Russia is vital. Despite our differences in opinion, a strong Russian government is an entity that we can reasonably negotiate with. In the end, it is better to have the devil you know than the devil you don't
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