Wednesday, December 31, 2008

Winner takes all, or the Mouse Folk

Through the 90s and the first decade of the century, it has become common to explain the vast and growing gap between the top decile of the populace and everybody else in terms of a "Winner takes all" economy, in which globalization and the scale of media and distribution networks make it possible to drive network effects and sales volume. Not just survival, but dominance of the "fittest", from Stephen Cohen to Lebron James to Julia Roberts.

But, as the list of Madoff victims grows from Spielberg to Wiesel to (I love this one) Marketwatch's very own Irwin Kellner to Kevin Bacon to any number of banking nitwits, the bottom falls out of this winner takes all thing. There appears to be only one "winner," and he's under house arrest. The rest take not, but rather get took.

So we're back to the Kafka scenario, where Josephine, the winner, attracts adulation from the other mice for her scarcely differentiable piping, until she's weak. Then she does not.


Anonymous said...

wishing you and yours a happy new year, thanks for keeping it real in 08.


Steed said...

I think what the Madoff episode illustrates is that for wealthy people what they should do with their money is a difficult problem. I know, we should all be so lucky; it's a good problem to have. But still, it's not a simple one to solve. When stocks seemed risky they bought second homes, bought larger homes, added rooms. Hedge funds got popular. What they want is a return better than a treasury bond (3%, 4% if they're willing to get into a ten year instrument that will go down in value if interest rates go up), which seems really low to most people. But honestly, it's not that easy to beat.
Here's my new proposal. Raise corporate tax rates to 45%, offer the whole population medicare, call it medicure, so companies can stop offering benefits, and then make dividends tax exempt. Then the wealthy will just go back to the stock market, and all of these fancy investment vehicles will have to really produce value and transparency to compete with a regular old stock portfolio.