View all notes
Many news outlets have published stories lately describing this destructive force, a force so powerful that it controls the livelihoods of 5.8 million employees. That’s how many people work in the thirty-five thousand companies private equity firms own in the United States. And some of those articles angrily mock what looks like the ineptness of executives, who buy a company, say they’re going to improve it, then ruin it instead. It seems like repetitious failure. But when private equity executives trot out the line that they are going to improve a company, understand that what they mean is: improve it for their own interests. And when ministrations result in the company’s collapse, understand that that’s private equity working as intended.
“We assume the finance capital is there to create opportunities for capital more broadly to succeed, and I think that is a rather complacent assumption to make in relation to the way finance and business have been structured in the last twenty, thirty, forty years,” Matthew Watson, author of The Market and Uneconomic Economics and the Crisis of the Model World and a professor of political economy at the University of Warwick, told me over the phone in December.
“If we put a conventional framework of understanding business success and business failure onto private investors, we probably can’t really understand how it is they continue to survive and prosper in the modern economy. We have to move that frame of reference to understand how they can prosper from other people’s adversity.”
Private equity firms raise their money from a variety of external sources. One of the largest groups of investors is public pension funds, which means that ordinary taxpaying employees contribute to this misery-making project. Stockbridge’s $13 billion worth of funding, for example, comes mostly from two sources, one of which is the Pennsylvania Public School Employees’ Retirement System. (Private equity firms that buy mobile home parks can also get money from the U.S. government, as Stockbridge did when it got a $1.3 billion loan from Fannie Mae, which justified it by saying it was helping low-income renters.)
Why would public pensions invest in something so destructive? According to financial experts (who also happen to stand to make a buck with this assertion), private equity funds allegedly outperform public markets across the world—a necessity, from the pensions’ point of view, given that pensions around the country are underfunded to the tune of $1 trillion. And I say “allegedly” because there are plenty of studies that shed doubt on whether private equity firms are the cash cow they claim to be.
Whatever the justification, the deal we’ve struck is that for one group of people to retire after a lifetime spent teaching third grade, we’re willing to risk another group being made jobless or homeless.
to think about: when power is decoupled from its impact
[...] it could be that you are so sensitive or defensive about your privilege that any little jibe about riding on “your corporate jet” seems beyond the bounds of decent discourse. I’m going to strain here for the most charitable interpretation: you felt singled out. You have a simpleton’s idea stuck in your head that recognizing that one class of Americans is pitted against another is dangerous.
This is how it always is with plutocrats: they believe the concerted efforts they make to protect their power and standing is nothing more than their rightful participation in politics. Meanwhile, anyone who points to their manipulation of the system—and wants to reverse trends toward the concentration of wealth—is accused of class warfare. Look into the ways we’ve had several decades of top-down class war, Cooperman. Ask your researcher to tally up all the money the Koch brothers have spent to support candidates who defend the wealthy, or to explain the effects of the Citizens United ruling in American politics. Today’s vast inequality isn’t a random event like the weather: certain people made it happen. You.
Let us entertain, then, the possibility you are a successful man when it comes to understanding finance and that you have a knack for making money multiply but that you are a stupid man when it comes to understanding politics, history, and ideas. Why pretend otherwise? Like most people devoted to accumulation, you are a man of reaction, not reflection. There is a variety of boobus Americanus produced by the nation’s best business schools. They look a lot like you—spending most hours of the day playing the markets. They have no time in their life for literature, or for books that take ideas seriously. They have been trained to discard “normative reasoning” in business decisions as a potential violation of the shareholder’s right to a maximized bottom line. In other words, they have no capacity to incorporate questions of morality or justice into discussions of the economic system.
I saw a glimpse of that when you were grousing on CNBC in November. When Scott Wapner noted that people at the top are seeing “exponential” growth in income while people at the bottom see wage stagnation, your response was the equivalent of a shrug: “What are the causes? I don’t know. You’re raising issues that are beyond my scope.” If the problem of increasing inequality is beyond your scope, Cooperman, you are going to have a hard time understanding what makes people angry in American politics.