Column: Richly deserved

Wed Mar 6, 2013 10:13am EST

JP Morgan Chairman and Chief Executive Jamie Dimon is seen in between the audience as he attends a session during the annual World Economic Forum (WEF) meeting in Davos, January 23, 2013. REUTERS/Pascal Lauener

JP Morgan Chairman and Chief Executive Jamie Dimon is seen in between the audience as he attends a session during the annual World Economic Forum (WEF) meeting in Davos, January 23, 2013.

Credit: Reuters/Pascal Lauener

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(Reuters) - The tale of two worlds - the fabulously rich and the increasingly poor - is a defining narrative of contemporary life, and it continues to throw up vivid reminders, at once doleful and grimly hilarious.

One of the latest examples was told by the writer and provocateur Matt Taibbi, famed for having described Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

In a recent Rolling Stone blog post, Taibbi related a confrontation between Jamie Dimon, chief executive of JPMorgan Chase, and the analyst Mike Mayo of Credit Agricole Securities during an investor conference call earlier this year. These calls are where analysts get to question the masters of the financial universe about their actions. Mayo asked Dimon if investors would not prefer a bank - he offered UBS as an example -that had a higher capital-to-debt ratio. The exchange then went:

Dimon: So you would go to UBS and not JPMorgan Chase? Mayo: I didn't say that … that's their argument… Dimon: That's why I'm richer than you.

Taibbi used the anecdote to show, as he said, "how these guys think." To push that thought a little further: It's how people, who live highly stressed lives with much depending on their judgments, think of themselves: that they are worth it.

The conventional view is that every company of size and reputation needs several of these people so it may survive. In effect, large wealth has now been given a rational, maybe even a moral, underpinning.

At around the same time, a number of other matters came to light. Forbes Magazine published its billionaires' list, which revealed that there are 1,426 of these exotic creatures, with 210 in the superleague for the first time. A little over a third of them are in the United States; 23 are under 40; 386 are in the Asia-Pacific zone, 366 in Europe, 129 in the Americas and 103 in the Middle East and Africa. United, the billionaires of the world command $5.4 trillion, up from $4.6 trillion last year, and now worth one-third of annual U.S. output. The Mexican Carlos Slim, with $73 billion, remains on top, and Bill Gates, with $67 billion, remains at No. 2. But there's a newcomer at No. 3, rudely elbowing aside the sage of Omaha, Warren Buffett - the Spanish entrepreneur Amancio Ortega, who owns a majority stake in Zara, the world's biggest clothing company. He added nearly $20 billion to his fortune in a year, which came out at $57 billion.

Most of these people are not shy, and many probably believe they deserve their billions; besides, many, like Bill Gates, give slabs of it to good causes. Most don't boast of their worthiness, although the Australian mining magnate Gina Rinehart, who is probably the world's richest woman, recently used a column to address her fellow Australians: If you're jealous of those with more money, don't just sit there and complain. Do something to make more money yourself - spend less time drinking or smoking and socializing, and more time working. Her rival for the title of richest woman is the French Liliane Bettencourt, whose family owns 30 percent of L'Oréal: She hasn't said, at least not in public, that she deserves the money from the company created by her father, but its slogan is, irresistibly: "Because you deserve it!"

Ortega's good (say, huge) fortune was made public at the same time as his country's Department of Labor revealed that the 5 million Spanish jobless had increased by 1.2 percent, or just over 59,000 people, to bring the rate to 26.2 percent.

This ironic vein could continue for much longer because it has seemed that there's not much to be done about it, and, when hopeless, irony is a better resort than the guillotine. Unlike the aristocrats who perished during the French, Russian and other revolutions, the rich now work hard. They create companies that create jobs, and political leaders vie to get them to move to their countries: The British Prime Minister David Cameron said he would roll out the red carpet for French business people fleeing high taxation.

There is a global market in entrepreneurs and superstars of all kinds, which Gerard Depardieu, the French superstar, dramatized when he bought a house across the French border in Belgium to escape a swinging wealth tax - besting Francois Hollande, the French president (who must occasionally long for the guillotine). On a recent trip to Russia, Hollande was careful to note Depardieu's status - "If he decided to leave the country, if he loves Russia and Russia so loves Gerard Depardieu, then it is understandable. But still Depardieu loves France, which recognizes him as a great actor."

The irony in the first part of his answer was an implicit recognition that the president of France was powerless - the more so since the French constitutional court had recently ruled that his proposed 75 percent super-tax was unconstitutional. The irony is that in less than a century, Russia has gone from being a haven for communists to being one for the rich.

Yet people who live on low, even middling incomes and who may be or are threatened by being unemployed are becoming more and more angry at the sight of vast wealth, and are ceasing to believe that nothing can be done. The Swiss are not known for their love of irony, but they do love referenda: They had 12 last year, on employment leave, second houses, building society savings, a fixed book price agreement, gambling revenues, healthcare, foreign policy, home buying, a smoking ban, secure housing in old age, music lessons at school and an Animal Diseases Act. Earlier this month, 68 percent of citizens who took part voted for a series of curbs on executive pay, including a ban on golden handshakes and parachutes and bonuses for organizing a takeover or a partial company sell-off. This in the world's banking capital; moreover, it's in the state that has struggled to preserve the secrecy of the often-dubious fortunes lodged in its banks.

The European finance ministers are this week debating a vote in the European parliament last week that would limit banker bonuses to a 1:1 ratio with salaries. The British, home to the biggest financial services industry in Europe, are worried that the high-rolling bankers in the City of London will seek new homes: several have said so. One banker told the FT: "This is big stuff. This wrecks the model of keeping salaries low." (Salaries were kept low, but augmented with bonuses.) But a vote in the European Parliament is likely to be decisive: Something along these lines is now likely.

Dickens' Tale of Two Cities begins "It was the best of times, it was the worst of times." In today's tale of two worlds, it is a time when nothing can be done, it is a time when something must be done. Popular anger and will is beginning to demand that the resignation to vast inequality ends, and something less gross takes its place. This will run on - and on.

( John Lloyd co-founded the Reuters Institute for the Study of Journalism at the University of Oxford, where he is Director of Journalism. Lloyd has written several books, including "What the Media Are Doing to Our Politics" (2004). He is also a contributing editor at FT and the founder of FT Magazine.)

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