The one word you never hear from the lips of a practicing capitalist is “guilt.” Milton Friedman taught a generation of business execs and bankers that their only job is to make as much money as they can. Leave the blame game to dewy-eyed liberals. Economists and business schools picked up on the theme and told losers who didn’t share in the good times it was their own fault. They didn’t work hard enough or get a proper education. Maybe in their next life they can go to grad school or choose a career that doesn’t involve working with their hands.
Only now comes this world-class player from the privileged “1 percent” to admit he is feeling guilty. Two cheers for Bill Gross, the co-founder and managing director of PIMCO, the California-based bond house that manages some $2 trillion in other people’s wealth. Gross himself has accumulated $2.2 billion, which puts him at #252 on the Forbes 400.
“Having gotten rich at the expense of labor,” Gross confessed, “the guilt sets in and I begin to feel sorry for the less well-off.” The message is addressed to fellow rich guys who are IMCO clients, in Gross’s latest monthly Investment Outlook. He calls them “Scrooge McDucks.” He suggests they stop whining about the enormous taxes they pay the government and give more back to the society they degraded with inequality.
“Admit that you and I and others in the ‘magnificent 1 %’ grew up in the gilded age of credit,” Gross wrote. “…You did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions.”
Gross propose this reform: “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end.” That heresy is a little like punching PIMCO customers where they live, but Gross will no doubt get away with it. They are used to hearing his occasional heresies and Gross has made them lots of money over the years. Besides, the capitalists are counting on the politicians to protect them from higher taxes.
Some other wealthy capitalists like Warren Buffett have made similar raise-my-taxes pleas, but Bill Gross’s is distinctive because, first, he acknowledges a personal sense of guilt and, second, he bluntly describes the fundamental conflict as capital versus labor. You seldom hear that kind of talk any longer in American politics and certainly not from financial-market billionaires. Gross is not a closet commie. He is simply acknowledging in plain English the underlying ideological contest that has dominated the last thirty years.
Capital won and labor lost. Not just union workers but middle-class people of all kinds, especially “those who used their hands for a living,” as Gross puts it. That verdict is now so obvious that even timid commentators talk about it obliquely. The middle class is breaking up, while the largest capital owners continue to claim an ever larger share of the nation’s wealth, even during the economy’s bad years. This trend has been obvious to working people for years while elite opinion was celebrating the triumph of market economics. Neither political party wishes to inquire too deeply into the causes since both Republicans and Democrats are implicated.
Maybe it requires unorthodox sources of truth-telling—odd heretics like Bill Gross—to put these questions on the table. Certainly, the political system will not find any real answers as long as most politicians are afraid to ask real questions. Gross expressed his own frustration with reluctance of elected officials to face hard truths about the hollowing US economy.
He cited Barack Obama’s recent speech sounding “a faint alarm” about the failure of corporations and capitalists to invest in US productivity. Obama said, “It’s time for folks to…focus on doing everything we can to spur growth and create new, high-quality jobs.” Gross was exasperated. “Folks?” he responded. “Ordinary folks, the 99 percent, don’t have money any more. Mr. President. The rich and corporations do.”
I am a little biased in Gross’s favor because I first encountered him fifteen years ago with my book on the globalizing economy—One World, Ready or Not—which described the capital-labor struggle and the threatening consequences I foresaw for Americans. Gross invited me to address the semi-annual conference PIMCO has its bond traders from around the world. I asked him why. Prominent economists and financial reporters were disparaging my fears as silly. Bill Gross said he thought I had the story right and his people needed to hear it. The bond traders, rather loudly, did not agree.
William Greider writes that the $13 billion JPMorgan settlement is a good start—but not enough until someone goes to jail.