“Liquidated – an Ethnography of Wall Street” – Karen Ho, 2009 (Part I)
Karen Ho is a former anthropology student from the U of Minnesota that worked on Wall Street until she was downsized, then followed up with further research into the denizens of that strange New York tribe. Like anthropologists who investigate the ‘primitive’ peoples of the Amazon, Ho instead spent time with the ‘masters of the universe’ – the employees of investment banks on Manhattan.
She worked in the 1990s, and so this book is a nice follow-up to “Den of Thieves,” which covered the triumph of financialization in the 1980s. (see review below) Ho has the ability to chart what that decade did to the Street in the ‘go-go’ 90s of Bill Clinton. As one Democrat once asked me about Clinton, “What do you have against prosperity?” Of course, I answered, ‘Whose?’
This book is unusual in that it combines economic with anthropological/cultural analyses. Ho’s first anthropological point is that the people in investment banking and Wall Street generally see themselves as ‘smart’ – maybe even geniuses. The firms mostly recruit from Harvard, Princeton and to a lesser extent, Yale. If you are a graduate of those schools, the Street does not think you even need an MBA. They do hire MBA’s from lesser schools on the east coast, but merely graduating from Harvard or Princeton guarantees you a place in the pantheon – er, the corporate finance department of a Goldman Sachs or a Morgan Stanley. Ever since Mommy put them in a private nursery school, and told them they were ‘exceptional’, until the day they graduate from Princeton, they believe it. The Wall Street firms, who recruit in these school constantly, tell them the same thing, all the while lavishing them with high-class food, cocktails and trips. The young idealist who enters Harvard thinking about ‘saving the world’ is soon turned into the investment banker thinking about getting rich. Up to 40% of the graduating classes of these schools enter Wall Street – the highest proportion of any ‘discipline.’ So the cream of the bourgeois crop is soon – sour. Ho went to Princeton, and lived to tell the tale.
Ho’s second anthropological point is that ‘work’ becomes a value that knows no peer. First and second year employees of the investment banks work 6-7 day weeks, 12-15 hours a day, eat catered food at work, and are driven home by chauffered limos if they stay that long. They grind out Power-Point and Excel spreadsheets if they are on the technical end, or shmooze corporate CEO’s if they are on the ‘relationship’ end. Thye lose friends, they drop relationships, they do nothing but work. The 40-hour-a-week worker is to them a ‘chump’ – lazy, unambitious, weak and beneath respect. That, of course, includes the admins, the back-office, the assistants, and all the staff of the banks. Since investment bankers in whatever area are amazingly legally “exempt’ from overtime rules – syndicate, research, corporate finance, sales, trading - they work all the time. Bringing a brown bag, wearing tennis shoes to work, helping an admin, or even socializing with staff is a sign that the ‘master of the universe’ is not one. Class, anyone?
Ho’s third anthropological point is that Wall Street itself is subject to the ruthless downsizing, ‘right-sizing,’ asset stripping and mergers that they advocate for corporate America. Wall Street firms have constant turnover – most people never stay in the same firm for long. The reason is they have the planning outlook of a 4 year old. Short term internal and market trends combine to make them hire and fire constantly, in small layoffs mostly. While they blame the market, it is really the short-term focus of the street that enforces their employment policies, as even in good times, they lay-off. Of course, having a golden parachute, or have packed big money away, or having ‘connections’ or a Harvard pedigree is somewhat different from the loading dock worker who loses his job at Amazon.com. But that doesn’t stop them, because working-class America is invisible to these people, except as a bunch of rubes.
Ho’s point is that these attitudes gained at work carry over into the ideology of Wall Street. I’m smart, I work hard, I get fired, so I have the right to ‘advise’ you because I’ve been there and I’ve lived it, and I know better.
Ho’s fourth point is the most important, from the economic point of view. She neatly analyzes the conflict within capital between corporate capital and finance capital – essentially giving a very good history lesson on the development of this relationship since the early days of the modern corporation in the early 1900s. The conflict between ‘managerial’ capitalism and ‘shareholder’ capitalism came to a head in the 80s, when the ‘shareholder’ group won the battle, and Wall Street took command of the economy. Ho very carefully points out that this was the FIRST time that financial capital had dominated so severely, unlike the ‘neo-classical fable’, as she puts it, that postulates an early ‘idyllic’ time when the shareholder dominated. The shareholder never did.
Essentially it boils down to whether the corporation is an entity responsible to many parties – suppliers, employees, shareholders, the environment, the society, the community in which it is located, the country – or just one – the shareholder. After World War II, and with the long lingering effects of the 30s still on everyone’s mind, ‘welfare’ capitalism was ascendant. 90% of all financing of corporate growth was done internally, through exploitation of labor. The rest was through corporate bond offerings – i.e. debt. Equity offerings – i.e. stock – was rare and only a third possibility. The ‘ownership’ society – defined as owning stock – was limited to a very small part of the population.
Adam Smith, in his “Wealth of Nations,” actually based his vision of capital on the sole entrepreneur, the independent businessman – not the corporation, or Trust as it was called then. Smith said the Trust would fail because it did not involve personal considerations of profitability. Capitalist classicists and neo-classicists have had difficulty trying to reconcile the modern corporation with their seminal theory, or actually, seminal fantasy. Modern capitalism started as the ideology of the local shoe-store owner.
What is interesting here is that the ‘welfare’ corporation is coming very close, in form, to a socialist ‘corporation’ – or co-operation. Marx pointed out that the forms of capitalism would burst at some point, and the hidden, but pre-existing social relations of production would become dominant. So this battle between corporate ‘welfare capitalism’ and Wall Street ‘shareholder capitalism’ also marks an ideological battle between finance capital and the hidden forms of social capital – socialism –within the capitalist shell. And the advocates of shareholder capital know it well, whether they can verbalize it or not. Of course, what Ho misses, as she is not a Marxist, is that there is a reason why formerly profitable companies have to go to the Street to raise – capital. What happened in the 1980s was not just an ideological fight, but also has to do with falling rates of profit by corporate capital – and their need for another source of funds. And also as an outlook for investment – as productive investment no longer seems desirable. Enter the ‘equity’ market. As I call it, ‘the only game in town.’
There is more to the book, and I will add that in Part II.
And I bought it at Mayday Books.
Red Frog, September 24, 2010