No doubt everyone’s heard of banks crumbling. Here’s what’s annoying me. In fact Lekhni and MumbaiGirl do a fantastic job of articulating it.
A few weeks back, a recent acquaintance remarked that she felt absolutely no sympathy for those who lost their high paying jobs on the Street or in the City because well they already had some money and she’d rather feel sorry for the small guys who are losing their jobs. Well, one can’t help but empathize with one group more, but I got the feeling that she was smug about the well paid people losing their jobs. Like it was some sort of redemption. She’d rather that a banker lose his job than a construction worker.
Though, what shocks me is that she is a student of economics. How can she not see that one banker losing his or her job means an entire stack of cards going down. The hairdresser, the person who works the tills at the supermarket, the cleaning staff, the real estate agent, everyone. Sure, no one’s asking for compassion – but why the glee? Why the joy in seeing someone out of a job?
What is that fantastic term – Schadenfreude. That’s what this is.
nehamaami 
enga oorla ithukku per ‘vayaru eriyarthu’.
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Whenever there is a slump in the stock market, art makes money. When people are out of jobs, they read more novels, watch more films, they have time to meditate.
So I am not gleeful, but I definitely am hopeful that the balance might tip in my favor.
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Nilu: We will distribute gelusil?
Grasshopper: Well.. do they really have money to spend on all that? Perhaps initially, but my guess is that frugality would affect the art market too. Especially when it comes to things like handicrafts etc. But if someone stands to gain financially from another’s misery, I have no argument against that.. but it’s when the glee is mostly because of some misplaced notion of the lack of morality in the other. Or something like that.
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Great term to define that saddistic feeling… its not that these high paid jobs come for free,there are so many tags n burdens attached to them. Frankly I dreamt of becoming a PWD engineer in some small hillock…now I am getting 10times wat a PWD engineer gets but have lsot too many things…folks shud realize no pain-no gain… timely post I say 🙂
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I guess it’s a hangover of all the religious values dinned into us since ages, camels through needle’s eye and all of that. The rich are bad, and need a lesson in suffering which will make them better people.
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The point is that when people have high paying jobs, they use the money to buy more houses, make more investments and thus they have more liabilities. So, when they lose jobs, the hit is actually below the belt. In the current economic scenario, they cant even sell off these investments. Howmuchever cash you have in the bank, the feeling that money may not come in this month end, can be unnerving. The glee may be ‘coz we feel it doesnt make any difference to them but once we are aware we would know – it does matter.
2 cents from an economist ! 🙂
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When a shopgirl loses her job, she loses her job. When an i-banker loses his job, his cook, au pair, trainer, gardener and a whole bunch of other sundry service providers suffer directly too. Pretty straight forward. No?
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You are right there is nothing to feel a sadistic satisfaction in looking at people who are well off losing their jobs. The whole economy is connected. It will have ripple effects throughout and that is something that a lot of people do not understand.
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How funny – before I scrolled all the way down your post I was thinking schaudenfreude.
I see the interdependency between those who have lots of money and those who have not quite so much (but enough to survive) every time I drive or walk down a suburban street: the gardening service, the dry cleaners, the coffee shops. All of these businesses are owned by and employ people who provide services to monied people.
Besides, even rich people are human beings. They add no less or more value to the world than other people. They are no less or more deserving of compassion. And perhaps we as a species ought to try to develop more compassion for our fellows.
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Thanks – this was provocative post and woke me out of my Friday-evening-after-a-hectic-workweek stupor!
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Neha, one can feel totally no sympathy without feeling any joy. Those two emotions are distinct. I for one feel no sympathy for the bankers , just as I expect people to have no sympathy for my job, because, as I wrote on Lekhni’s blog, its part of the job, the whole high risk-high reward thing. I think maybe its this part that your friend is alluding to? That’s its not entirely unfair for bankers to lose their jobs in bad times, whereas it might be a bit more unfair for the janitor who’s not earning the reward in good times to expect to get screwed when times are bad?
Schadenfreude is never a good emotion but it might be a very accessible emotion especially when the target is a disliked one. I-bankers may be unfairly disliked because they are just very rich, or they may be (perhaps less unfairly) disliked because they may be arrogant. Its probably both and bankers are as much to blame as anyone else for propogating this stereotype of being arrogant and dislikeable.
The point about other people losing their jobs is a relevant point, but I think its just hard for people to see right now. And theoretically one could argue taht if wealth were more evenly distributed, you’d have many more hairdressers etc in business (and perhaps with less volatility?).
n!
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n!, you seem to have several answers. Who asked you the question though?
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Nilu: Its important to first know the answers. One can always find the questions. Go back and read your D Adams.
n!
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Important for whom? You? In that case, I am sure there are several agony aunts available. Try one. Though, I am not sure if Neha is one — I might be willing, provided you pay a fee.
If you think it’s important for others or the world in general, I can help you with that therapy as well. Worry not.
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While the concern of all is touching, I am more worried about closet commies like Obama, Brown using this as an excuse to prop up their faltering election campaigns by attacking the bonus system. For all the talk of banker compensation, the monthly salary of any banker is nothing extraordinary. The January payout is what makes the life of a banker worthwile.
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In a departure from my regular politics, I had voted for Boris to be Mayor. Yes, he renewed the Oyster contract but he also stopped alcohol on public transport and I will be pleased if LHR moved to the estuary 😉
Meanwhile here is his piece:
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/09/23/do2301.xml
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Muttal – its not just a closet commie thing, people are annoyed with headlines announcing CEOs refusing to take a paycut during the bailout process. Even hardcore libertarians I know are getting annoyed. I guess true to their creed they want the market to correct itself.
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Gigi – Let me try to defend the indefensible. Dick Fuld, CEO of Lehman when it collapsed had made roughly $500m in his 14 years there. After the collapse, he sold shares that were worth $250m 1.5 years ago for as little as $500,000. Rough calculation says he’s lost 1/3rd of his life savings. I would think it would have been more or less the same for Lehman employees at all levels. So, would you say the CEO got off lightly? I am not sure.
Also remember, this loss itself was strong enough incentive for John Mack of Morgan Stanley to be ready to surrender to a Wachovia which itself was struggling.
Now I am not defending any of these guys at all. All I am saying is as inefficient as it is, the market economy is the best we’ve got!!
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Neha, I think you were referring to comments made by me when you wrote this blog. And yes although I wuld be the first to admit that my grasp of economics may not be the most sound I do agree with N! on this issue. Many highly paid people in financial services know the risks involved in the industry and have benefited massively since the early to mid 1990s. Of course this is going to affect everyone but the superior asset positions, not to mention the experience and education of those working in the city mean that it is much easier for them to weather the downturn. I simply don’t buy the more you have, the more you have to lose argument. The poorest and most vulnerable in society always have the most to lose. I was out socialising in the city last week after the Lehman collapse and was chatting to former employees and they didn’t feel that sorry for themselves either….They were drinking and enjoying themselves (I am not saying this is a representative sample) and talking about new opportunities already available to them.
As for the Schdenfreude, I admit it is not an attractive emotion. Let me try to justify it (badly).It has felt for a long time in the UK that those guys (because it is mostly guys) that work in the City are the brightest and best and that the rest of us doing less high profile and less profitable jobs are somehow inferior. So admittedly my Schadenfreude is a result partly of an inferiority complex….but it is also the result of a complex mix of other factors.
If you take a look at extracts from Polly Toynbee’s new book, Unjust Rewards, she highlights the arrogance, the unwillingness the pay taxes (progressive taxation is at the heart of any European social contract) and the extent to which the most highly paid in the City are out of touch with British society. When asked how much one has to earn in the UK to be in the top 10% of earners, her sample said nearly £200,000 p/a. The actual figure is between £40,000 and £50,000. This demonstrates not only being out of touch with the lives of well over 90% of the British population but also with economic reality in general. Of course it would be wildly inaccurate to say that the attitudes and opinions of the people she interviews in her book are representative of everyone who works in the City but it makes pretty uncomfortable reading nonetheless.
I think that to be bothered by the disproportionality of the salaries and bonuses is also justified. Of course people work long hours in the sector, but do they work 10 or 20 or 50 or even 100 times as hard as a teacher or a nurse or a private sector employee in a different sector? You don’t have to be a ‘Commie’ to passionately believe that an excess of inequality in any society can have very negative outcomes in terms of crime and social mobility amongst other things. In fact some economists suggest that too much inequality is inefficient because it leads to de-motivation and a withdrawal of effort which then has a negative economic impact. Although many factors have influenced increased inequality in the UK over the last 10 years, I am sure that massive salaries and bonuses in the City have contributed.
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n!: I am talking of the collapse of banks and the credit crunch that seems to cause the joy. This “I told you so” flooding editorial space. Like I said no one expect people to feel sorry for bankers, especially those who’ve made their money, but what about the kids who entered the job sector last year? The other thing is, I don’t think half of us even understand what an investment actually buys and sells or facilitates. This isn’t about having more hairdressers, or anything else. It’s about what happens to people when financial institutions fall.
My question, while rhetorical, is not really an economic one. It’s more about understanding how the system of finance operates. It’s so easy for the smug middle class to sit back and say ‘Oh look, the bankers are getting it now’, but the poorest of the lot probably don’t care.
Yani: For starters, the person mention in the post wasn’t you. We had our conversation before the credit crunch really bared its fangs. Before Lehman Brothers crumbled and before people started losing their jobs en masse.
People are entitled to their economic idealism. Just as I am to mine. However, what I found unpalatable was the lack of understanding that one banker losing his job results in a big house of cards falling. All over zone 4 construction has stopped midway and migrants find themselves trapped. They are not entitled to benefits, not entitled to council housing in many cases, don’t have enough money to go back and have lost their jobs here.
The issue of dispropotionate wealth distribution is different from the financial system collapsing. If anything, the collapse of the financial system has more to do with the wrong ways to address the lack of propotionate distribution.
As for Schdenfreude, nothing specifically wrong with it. So long as it’s acknowledged. Instead we have schdenfreude masquerading as “knowledge of the economy”. Yes, fundamentally this was caused due to an element of recklessness, but paranoia in the market has an equally large hand.
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Oh and Lekhni’s post is really interesting and thought provoking. Especially the bit about those employees with less than five years experience and coming from India (or indeed other parts of the world) being the most vulnerable to being laid off. I think part of the Schadenfreude already discussed comes from a perception that the City is an old boys network made of of white upper middle class British men (I’m British myself)….yet I admit that this perception (perhaps prejudice?) is outdated.
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Yani: Yes, I thought her post was extremely thought provoking. Besides, not everyone in an I-Bank is a trader or a CEO. There are those that work with research, sales and the whole lot. And nevermind how insecure the lesser well-off will feel about their savings in a bank. And everytime the interest rate is reduced, saving money loses that much more incentive. I read something in the paper today about how the falling house prices bit is good because it means first time buyers can finally buy a house – which doesn’t make any sense. They probably won’t end up having jobs to secure the mortagage payment with.
Oh, and what it does to family dynamics. There was something in the Times today about how the credit crunch is good because it reduces the number of divorces. (Fantastic. So wonderful! Aaaargh!)
I am ranting now, I know.. but yes, thanks for pointing out that it is not a network of upper class white British men. In fact most of the people I know of who are in ibanks are anything but that. And I don’t just mean in the social circle.
In the end there won’t be much of a difference to the wealth of CEOs. In a world where Nick Leeson can write about ethics in the financial market, just about anyone who is really responsible escapes pretty well.
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I think that you’re definitely right to concentrate on the wider picture. The high profile events of the last few weeks have obviously caught the attention of the media and I suspect many commentators are still reeling as it has all been quite unbelievable but I’m sure that the debates will become more nuanced.
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I don’t like this n! person. Or that Lekhni.
They seem to make several points.
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