Tom Matlack makes the case for an upper limit on income.
Ray Dalio of Bridgewater Associates made $3.9 billion last year. He was one of three hedge fund managers who made a billion in 2011. I guess we should feel good about the fact that the year before, 2010, there were six with the top earner at $5.0 billion. But I for one feel sick to my stomach.
As an asset class Hedge Funds lost 5% in 2011 while collecting $14.4 billion in fees according to AR Magazine.
Is it just me but if you are going to get filthy rich off making money for other people aren’t you suppose to make money for other people?
Meanwhile the median household income in 2011 the median U.S. household income was $50,221. Mr. Dalio made 77,657 times the median.
The headlines tell us that the pension plans for working people that are the biggest investors in alternative assets like hedge funds failed to perform as well as those that stayed away from the riskier investments. The $51.4 billion Pennsylvania public schools pension system had almost half it’s assets in alternative investments, paid $500 million a year in fees, and has significantly underperformed the broader market and other pensions funds for years.
There is plenty of talk about the 1%, or even the .01%, of the wealthiest Americans and how 93% of the income increases have gone to the rich.
But no one seems to be connecting the dots.
To me there is a difference between Mark Zuckerberg, as much as I happen to dislike him, and Ray Dalio or James Simons, who pulled down $2.1 billion last year. I am okay with rewarding entrepreneurship, even for assholes like Steve Jobs was reported to be my many in his biography, with countless riches. If you build a company, specially a technology company, you are providing economic leadership. And we need that. A lot.
But if you take money–pension money for instance–and then make an unimaginably large fortune not through technological revolution or even selling a product but through massive fees, that is not capitalism. That is stealing.
Perhaps at one point in our history that kind of behavior might have been okay. We have had our share of fortunes built on bootlegging and shady deals. But with a national debt threatening to tip us over, an education system failing our young people, and economic inequity eating us alive we can’t allow the rich to get richer when their only talent is highway robbery.
I realize to break out of our denial as a people we will have to give up that part of the American Dream which we each hold somewhere deep in our hearts that we too can be a billionaire, even if the cards are stacked profoundly against us. It doesn’t matter that the chance of wining the $656 million lottery is less than going down in a plane. We stand in long lines to buy our shot.
We just can’t stand to believe that the dream of joining Mr. Dalio at his club is something fed to us to keep us from rioting, from demanding that our pension plans not make money managers fabulously rich for failing to perform, from asking the hard questions about what is really going on in this country.
I would like to believe that in a great nation like ours, a hundred times the median income would be enough for anyone to suffer through. That’s $5 million per year. Above that amount, you can choose to either be taxed at 100% or give your excess income to a charitable non-profit of your choice. And if you are an entrepreneur that’s the amount you can sell in any one year without be subject to the same treatment.
The arguments against such a system have always centered on Adam Smith and the free hand of capitalism. The reality is that beyond $5 million a year it really isn’t about the money anyways. It’s about some outdated version of machismo and an individualistic instead of communitarian view of the American Dream.
Bill Gates and then Warren Buffet didn’t decide to try their best to save the American education system and cure any number of lethal diseases in Africa because they gave up on capitalism. They just realized that the point really isn’t to amass a fortune unless you are prepared to use that wealth for some concrete good for those far less fortunate here and around the globe.
So what do you say Mr. Dalio? How about you keep $5 million and give away the other $3.885 billion? For all I know you are as frustrated with Washington as the rest of us. That’s okay. Keep it away from all that pork belly nonsense down there. Give it to school teachers, or a community college, or an inner-city training program, or a faith-based program to combat gang violence.
I don’t care. Just don’t buy a jet or a boat or stick it in some bank account where it only serves to memorialize what our system has done wrong.
Photo— Mykl Roventine/Flickr