Banks are collecting money from every corner of this economy, becoming “the special winner in the capitalist game of our time,” says economist Richard D. Wolff. The bonuses “strike another blow for that growing inequality between the rich and everybody else in the United States”
SHARMINI PERIES: It’s the Real News Network. I’m Sharmini Peries coming to you from Baltimore.
All over the financial press this week, the Wall Street Journal in particular, reported that the average banker bonuses in New York was over one hundred and eighty four thousand dollars in 2017, the biggest annual haul for Wall Street employees since the great financial recession of 2007-2008. Now, one must remember that these bonuses, which is on top of their annual salaries, which the New York State Comptroller put at 388000 dollars, and on top of that you have the perks, the write-offs, and so on. So here’s a peek at the Bloomberg discussion this week on these bonuses.
NEWS REPORT: And bonuses are back. We love these superlatives, right, in the newsroom and on Wall Street. Biggest, as you said, David, since 2006, the average $184,220. Not chump change. You see the chart here. That really does show, I mean, they’ve been fairly consistent, as you can see. But that last time we saw this was 2006. That, you know, makes people happy in the sense that those were really good years. But then you start to think about what happened in ’07, ’08, ’09, and maybe you get a little bit worried about where we are in the cycle. The bonus pool, and this is according to figures from New York City, 31.4 Billion. It’s pretty good. So it’s not bad. That’s not bad.
SHARMINI PERIES: Those bonuses, which total 31.7 billion, is up 17 percent over 2016. Plus the broader rebound of the stock markets last year, with all of that the Wall Street bankers are sitting pretty well these days. When was the last time you got a 17 percent pay hike? On to talk about this with me, I’m joined now by economist Richard D. Wolff. Richard is professor of economics, and he is professor emeritus at the University of Massachusetts-Amherst. One of his most recent books is titled “Capitalism’s Crisis Deepens: Essays on the Global Economic Meltdown.” Moving forward, you will see Rick Wolff’s program, the Economic Update, here on the Real News Network. Thanks for joining me, Rick.
RICHARD WOLFF: Thank you for inviting me.
SHARMINI PERIES: Rick, these executive bonuses, what can you tell us about them and the impact that’s going to have on us?
RICHARD WOLFF: Well, first of all, what these bonuses are about, they tell you a story of the American economy. The role of banking and finance has gone crazy over the last 40 to 50 years. We all can feel that. You know, we have to go to the bank to get a mortgage for our home, go to the bank to be able to buy a car, go to the bank to be able to use a credit card. And now finally, loading up our children with debt through banks mostly to go to college. The banks have inserted themselves everywhere. They charge a commission, or a fee, or an interest rate. And so they’re collecting money from every corner of this economy and becoming the the special player, the special winner in the capitalist game of our time.
And nothing shows that better than what you just quoted here, and what the Wall Street Journal talked about: high salaries in New York City, and then a bonus of 184000-plus on top of that. As to the impact, the first and biggest impact is to strike another blow for the growing inequality between the rich and everybody else in the United States.
If you look closely at these bonuses it will be, show you even more dramatically, that those at the top of the banks, the big executives at the top, they get a disproportionate share. Millions. Which is why the more modest bonuses of folks at the bottom average out to that big number of 184000. In short, what you see here is a graphic example of the way we run our economy. We allow boards of directors and corporate shareholders to get all of the profits of business into their hands, and then share them out among themselves, and then we get these results. Those at the top keep most of it for themselves, and the inequality that has been growing for 40 years just gets worse and worse with all of its political and cultural consequences.
SHARMINI PERIES: All right, Richard. Now, these bonuses and stock price increases. Washington as well as the Wall Street will tell us that this is good for us and it’s good for the economy, because these people who are making so much more money will buy more goods, go to more restaurants, give us more tips. They invest and create jobs. Isn’t all this good for the economy?
RICHARD WOLFF: No. This is the rationale that is as old as Methuselah. Everybody who ever grabbed the wealth for themselves tried to convince everybody else that doing so would in the end be good for them, too. This has names like trickle-down economics, or stimulus economics.
The bottom line is if you make the rich richer, that’s the end of the sentence. That’s it. The notion that you can tell what the rich will do as they become richer, and that it will help you in the end, that’s looking into the future and shouldn’t be taken any more seriously than what you take from the fortune lady at the zoo when you go and give her a quarter and ask her to tell your future, either.
Here’s the reality. For the last many years, especially since the crash of 2007-08, wealthy people have chosen not to build more jobs, not to create more wealth for anybody other than themselves. They’ve used that money to buy back shares of stock. They’ve used that money to lend to the United States government and to other governments. If they have created any jobs, and there haven’t been many, they’ve created them in other countries. The bottom line is, they are free to do with these enormous incomes whatever they want to do. And they have not chosen to do stuff that’s good for the rest of us. And to believe now that suddenly they will do that is to be gullible . I’m putting it as polite as I know how. You’re just listening to their rationales for why they should be allowed to become richer still, because in some faraway day it will all benefit to us. It isn’t the case. And there’s no reason to believe it will be the case next year, or in the foreseeable future.
SHARMINI PERIES: All right, Richard. Now, regularly, including at the State of the Union address that Trump gave back a month ago, you had him claiming responsibility for this boom and the strengthening of the markets, and so forth. Does Trump have anything to do with this current boom?
RICHARD WOLFF: Nowhere near as much as he boasts. And there again, I don’t mean to pick on Mr. Trump, however exciting that might be. Most politicians in high office will take credit for when the economy is good, and blame somebody else when it isn’t. The truth of the matter is they don’t have that much influence on what goes on. The effects of the economy today are determined by things that happened two, four, six, and 20 years ago that Mr. Trump had no reasonable control over. He’s been very lucky in his first year a year and a half that things have gone relatively well compared to where they would have gone.
The only thing he can claim, and that’s, I’m using the word claim to be polite again, the only thing he can claim is that he gave the business community and the rich, having become much richer over the last 40 years, he gave them a bigger Christmas gift this last December than they have ever gotten before when he cut corporate profits taxes from 35 percent to 20, 21 percent. That was an incredible gift. That, like these bonuses, will make the rich richer. It will have no other effect. It isn’t having any other effect. And the bottom line is that Mr. Trump is doing what the business community wants. That’s his way of trying to get their support. He did, after all, lose the election, no matter what he says, in terms of the popular vote. He has to build strength, and he is supporting the business community 100 percent, and the wealthy 110 percent, in order to build the kind of support without which he cannot continue his presidency.
SHARMINI PERIES: All right, Richard. I thank you so much for joining us, and I should add that if you enjoyed that interview with Richard Wolff, you’ll find Richard’s Economic Update here on the Real News on a regular basis moving forward. I thank you for that, and I thank you here for this interview today. Thank you so much, Richard.
RICHARD WOLFF: Thank you, Sharmini, it was a pleasure to do it.
SHARMINI PERIES: And thank you for joining us here on the Real News Network.