In typical fashion, Chamath Palihapitiya went on CNBC last week and shook things up by saying that corporations and hedge funds should be allowed to lose their shirts as this recession continues to set in:
This is a lie that has been purported by Wall Street. When a company fails, it does not fire their employees. It goes through a package bankruptcy. Right? If anything, what happens is, the people who have the pensions within those companies, the employees of these companies, end up owning more of the company. The people that get wiped out are the speculators who own the unsecured tranches of debt, the folks that own the equity, and by the way, those are the rules of the game because these are the people who purport to be the most sophisticated investors in the world. They deserve to get wiped out. But the employees don’t get wiped out. The pensions don’t typically get wiped out.
He keeps going.
Just to be clear on who we are talking about. We’re talking about a hedge fund that serves a bunch of billionaire family offices. Who cares? Let them get wiped out. They don’t get to summer in the Hamptons? Who cares?
Chamath did a nice job here calling out the double standard we’ve kept alive in this country. Over 16 million people have filed unemployment claims in less than a month. These folks have to figure out their next move. Yet, a number of corporations don’t want to have to go through the same struggle. To their advantage, these corporations have the tools to finesse the situation and get the capital they need to get those resources.
Martin Luther King’s Poor People’s Campaign was an effort to ensure poor folks had a job, unemployment insurance, healthcare, and more. He sought to address an economic system in which poor folks are dispensable. Now, Dr. King was not a capitalist. Chamath is a thorough one. I think there is an overlap though. Capitalists need to lose the double standard for how they’re treated when hard times come, so that when folks follow the formula for advancing in society according to capitalist standards, they don’t wind up grasping at a mirage. Corporations can’t tell folks to follow a capitalist path while they operate with selective socialism.
Dr. King saw that there needed to be a mass movement to shift the needle on this issue—put pressure on the powerful to see the importance of being straight with how the economy is structured. The people have to be paying attention and applying pressure to ensure our system operates well for us. This passage from a letter Thomas Jefferson wrote to British minister Richard Price comes to mind:
“I did not at first believe that 11. states out of 13. would have consented to a plan consolidating them so much into one. A change in their dispositions, which had taken place since I left them, had rendered this consolidation necessary, that is to say, had called for a federal government which could walk upon it’s own legs, without leaning for support on the state legislatures. A sense of this necessity, and a submission to it, is to me a new and consolatory proof that wherever the people are well informed they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.”
In order to set things right, regular people need political machines working on their behalf to ensure the Business Roundtable members stick to their promise to stakeholders and go toe-to-toe with entities like the Managed Funds Association. I’m not sure that we have machines like that right now. What organizations come to mind for you that could get the job done?