In a recent piece in the Yale Daily News, Ike Swetlitz attempts to legitimize the Occupy Wall Street protesters’ disdain for anyone pursuing wealth through a career in finance. He claims that the Occupiers are not against the earned wealth of innovators like Steve Jobs, because Jobs produces a tangible product. Instead, they are more specifically against the unearned wealth of Wall Street financiers and moneylenders.
What does it mean to produce wealth according the Swetlitz? “Some financial tools and derivatives are far removed from the labor upon which they are based. The people who use these tools seem to merely be manipulating the labor of others, not making money through their own honest work.” His position is: if you create a tangible product, you earn it; it’s the men who shuffle money around who do not.
According to this logic, an individual who raises money for a company to create goods and services is not entitled to the profit earned from those products—the profit belongs only to those who do “honest work.” The premise here is that investing is not honest or laborious.
Investment bankers provide a vital service in an advanced and productive society: to raise capital and connect people with resources that they wouldn’t ordinarily be able to acquire on their own. Apple would never have gotten off the ground and out of Jobs’ garage if he had not been able to borrow money to produce the prototypes, which then became revolutionary products. Steve Jobs then created massive wealth for anyone owning shares after Apple went public—and this would never had been possible had his investors not taken a risk by loaning him money.
Is it dishonest to be compensated monetarily if the prototypes you financed changed the world? Although financiers are not usually involved in the conceptualization, manufacturing or sales of the product, they provide the necessary capital to make these things happen. Even Steve Jobs did not hand-craft modern Apple products. However, he provided the intellectual and creative capital that pushed his engineers to create their revolutionary products. Financial backers are not too dissimilar in their roles with businesses. They must make the difficult judgment of whether an investment has the prospect to make a profit, and act on their judgment. They provide the seed and the model to produce growth.
Ask any small business owner, entrepreneur, or low-income prospective college student how they would have paid their way if moneylending had been outlawed. What would the world be like if people couldn’t finance their desires, goals, or dreams? For a moneylender to connect capital with an individual pursuing his life goals, the moneylender must have incentive. Just as a carpenter is compensated for his labor on a house, a moneylender should be compensated for the risk he has taken with his money, and be rewarded for the intellectual skill of identifying good investments.
Most everyone agrees that if you work, you should be compensated based on your productivity, skill, and time. Financiers are no different: their work demands far more than forty hours a week, their skills are highly specialized, and the value of what they produce depends on their focused, creative performance. By and large, the people on Wall Street deserve much more than the attacks or dismissiveness they have lately received: they deserve recognition for the capital they create.
We should stop and rethink what constitutes unearned wealth in this age of “entitlements.” The wealth produced by hard-working financiers is not unearned. But the wealth stolen or demanded from another’s pockets at the point of a gun is unearned. Occupiers need to look toward Washington, DC, not Wall Street, if they are truly concerned with eliminating the unearned.
Image by Colegio de Estudios Superiores de Administración, from Wikimedia Commons.