The government is a protection racket for the 1 percent

The financial crisis was clearly good for some people.

“In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.”

The government is a protection racket for the 1 percent
Bill Moyers and Michael Winship
Moyers & Company
April 21, 2014

The evidence of income inequality just keeps mounting. According to “Working for the Few,” a recent briefing paper from Oxfam, “In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.”

Our now infamous one percent own more than 35 percent of the nation’s wealth. Meanwhile, the bottom 40 percent of the country is in debt. Just this past Tuesday, the 15th of April — Tax Day — the AFL-CIO reported that last year the chief executive officers of 350 top American corporations were paid 331 times more money than the average US worker. Those executives made an average of $11.7 million dollars compared to the average worker who earned $35,239 dollars.

As that analysis circulated on Tax Day, the economic analyst Robert Reich reminded us that in addition to getting the largest percent of total national income in nearly a century, many in the one percent are paying a lower federal tax rate than a lot of people in the middle class. You may remember that an obliging Congress, of both parties, allows high rollers of finance the privilege of “carried interest,” a tax rate below that of their secretaries and clerks.

And at state and local levels, while the poorest fifth of Americans pay an average tax rate of over 11 percent, the richest one percent of the country pay — are you ready for this? — half that rate. Now, neither Nature nor Nature’s God drew up our tax codes; that’s the work of legislators — politicians — and it’s one way they have, as Chief Justice John Roberts might put it, of expressing gratitude to their donors: “Oh, Mr. Adelson, we so appreciate your generosity that we cut your estate taxes so you can give $8 billion as a tax-free payment to your heirs, even though down the road the public will have to put up $2.8 billion to compensate for the loss in tax revenue.”

All of which makes truly repugnant the argument, heard so often from courtiers of the rich, that inequality doesn’t matter. Of course it matters. Inequality is what has turned Washington into a protection racket for the one percent. It buys all those goodies from government: Tax breaks. Tax havens (which allow corporations and the rich to park their money in a no-tax zone). Loopholes. Favors like carried interest. And so on. As Paul Krugman writes in his New York Review of Books essay on Thomas Piketty’s Capital in the Twenty-First Century, “We now know both that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference in outcomes can be attributed directly to government action.”

Recently, researchers at Connecticut’s Trinity College ploughed through the data and concluded that the US Senate is responsive to the policy preferences of the rich, ignoring the poor. And now there’s that big study coming out in the fall from scholars at Princeton and Northwestern universities, based on data collected between 1981 and 2002. Their conclusion: “America’s claims to being a democratic society are seriously threatened… The preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.” Instead, policy tends “to tilt towards the wishes of corporations and business and professional associations.”

Last month, Matea Gold of The Washington Post reported on a pair of political science graduate students who released a study confirming that money does equal access in Washington. Joshua Kalla and David Broockman drafted two form letters asking 191 members of Congress for a meeting to discuss a certain piece of legislation. One email said “active political donors” would be present; the second email said only that a group of “local constituents” would be at the meeting.

One guess as to which emails got the most response. Yes, more than five times as many legislators or their chiefs of staff offered to set up meetings with active donors than with local constituents. Why is it not corruption when the selling of access to our public officials upends the very core of representative government? When money talks and you have none, how can you believe in democracy?

Sad, that it’s come to this. The drift toward oligarchy that Thomas Piketty describes in his formidable new book on capital has become a mad dash. It will overrun us, unless we stop it.

Mergers and acquisitions: the world of the elite has changed, but not necessarily for the better

The world of the elite is not more democratic since M&A took over. Wealth is more concentrated than ever. When the doors to inner sanctum of American money were breached, the first thing the victors did was to slam them shut again.

"M&A has a deceptively mundane definition. It means taking control of a company, with or without the consent of the executives running it...

"The company assured the court that before any decision, no monies would change hands. Over the long weekend, the status quo would remain intact so that the judge could safely delay his ruling on the case until after the break. The judge, on Revlon's word of honor, agreed to postpone his decision until the Tuesday after Columbus Day..."

The Lucky Sperm Club: Jews, M&A and the Unlocking of Corporate America
By John Weir Close
Posted by Paul Solman
PBS
Jan. 2014

..."Since 1975, the US economy has been transformed in ways that are not yet well understood," wrote economics journalist David Warsh recently in his weekly Economic Principals column.

...They call themselves the Lucky Sperm Club. It is the 1980s and Shapiro is soon to be a member of the set of young lawyers at the rising firm of Skadden, Arps, Slate, Meagher & Flom who are fortunate enough to sit at the feet of Joe Flom, the guru of a generation, a gruff and slightly hunch-backed, recently obese, small man with both pitiable social insecurities and serene confidence in his prodigious intellect.

Flom and his arch-rival and co-conspirator, Marty Lipton, are inventing modern mergers and acquisitions, or M&A, which, because of these two men, will soon become both a craft with a name all its own and a phenomenon that has ruled global commerce ever since.

At Lipton's firm -- Wachtell, Lipton, Rosen & Katz -- a similar if unnamed group of young men is also ascending rapidly to top positions and growing ever richer, working directly and often virtually singled-handedly with powerful clients, with Lipton's genius always accessible. In all but name, the Lucky Sperm Club is rapidly spawning new chapters at other firms and banks around Manhattan and beyond as the emerging specialty gathers shape.

M&A has a deceptively mundane definition.

It means taking control of a company, with or without the consent of the executives running it. Since it is expensive to build a business from nothing, it is often seen as more profitable to take over what has already been built by others. In one stroke, you expand your business and eliminate a competitor.

If you're purely an investor, you can keep the company or sell it off for profit.

To gain control of a corporation in the modern era, you either offer to buy the stock from the existing shareholders or ask them to vote their shares in favor of your nominees for the board of directors, who, if elected, turn over the company to you.

That's basically it. It sounds simple, and it is, but variations proliferate as fast as the human mind can invent them.

M&A has grown rampantly in power and complexity to reach a global value of around $4.7 trillion at its recent highest point, more than the GDP of Germany, the fifth largest economy in the world. M&A has revolutionized corporate Earth and enriched the members of the guild as perhaps none of them ever imagined.

As explored in my recent book, "A Giant Cow-Tipping By Savages," modern M&A has not been driven by Scottish immigrants in Pittsburgh or French Huguenots in the Hudson Valley capturing entire swathes of the nation's resources in the absence of government regulation. To the contrary, in the late 20th century, M&A was driven by two Jews, Marty Lipton and Joe Flom, who had simultaneous epiphanies about how to take advantage of new government regulation -- in other words, how to turn the rules into an instruction manual for transforming the buying and selling of companies into a profession in itself. But rather than seek to buy, sell or keep companies themselves, they became the Sherpas, interpreting regulatory maps and making up new law as they went along.

As recently as the 1970s, Jews and all others not of the white Anglo-Saxon Protestant ascendancy were still excluded from any position of real power at the bar, on the bench, at banks and in boardrooms. America was still an agglomeration of ghettos: Italians knew Italians, Jews knew Jews, Poles knew Poles, Irish knew Irish, WASPs barely knew any of them existed and the Cabots spoke only to God.

"When I came to New York in the '70s, the WASP aristocracy still reigned," the Lucky Sperm Club's Shapiro recalls. "You didn't see an Asian face above Canal Street. You didn't see a black face in a law firm unless it was the mailroom. You certainly didn't see an Hispanic face. Swarthy Italians and Jews? They were not people you dealt with."

Yet again, as happened so often in their history, the Jews somehow found their own methods to carry them past such barriers, and once those blockades were destroyed, other demographics followed.

But it was primarily Jews who first became expert in taking over companies against the will of their existing executives. The white-shoe law firms and elite investment banks found this simultaneously distasteful and tantalizing in the same way medieval merchants viewed the lending of money at interest. Both groups were discouraged from joining in one of the most profitable enterprises of their day: the old merchants by, among other things, an ecclesiastical ban on the practice of usury; the new lawyers, by the establishment's social codes of behavior. Again, the Jews found themselves in control of an industry that then perpetuated the stereotype: the omnipotent, venal Machiavellian, hands sullied by the unsavory. But the business of takeovers paid the rent. And then some.

Yes, they were making money. And yes, that got the attention of the rest of Wall Street. But the takeover gang was also having fun. They were running through the streets wielding megaphones and announcing the revolution. They changed everything. Like West Indian slave revolts in the 1800s, which disrupted the fortunes of the likes of Jane Austen's Sir Thomas Bertram, the new M&A industry transformed public corporations -- the establishment's repositories of power and wealth -- into very public, very visible and very vulnerable sugar plantations open to all with the will, the intelligence, and sometimes, the personality disorders needed to gain entry.

M&A quickly divided itself into two separate but equally important gangs: the corporate acquirers who do the buying and the M&A advisers who show them how it's done. The former are the collectors. Like bower birds, who attract female mates with the colorful trinkets they gather to decorate their nests, these men began to collect compulsively: houses, wives, antique carriages, acres, books-by-the-yard, furniture, airplanes, companies. Dominant members of the species included Sir James Goldsmith, a British mogul with a secret terror of rubber bands who was reportedly the model for Sir Larry Wildman in the 1987 movie "Wall Street"; John Kluge, at one time the richest man in America after his breakup of Metromedia, who became infamous for his grisly pheasant shoot in Virginia; and Robert Campeau, known for bankrupting a swathe of North American department stores while fending off his own aging with the injection of fetal lamb brain cells.

The M&A advisers -- the lawyers and bankers who actually do the work -- are like vervet monkeys, more highly evolved than bower birds. Clever and quick social animals with a strict hierarchy, they have a special alarm for each species of corporate raider or, depending on the kind of deal, each potential target. Flom and Lipton and the lesser members of their respective monkey troops were the instant, and only, experts to whom judges and fellow lawyers would come on bended knee for explication of their alarm calls, the takeover assault weapons and the defenses against raiders that they were creating on the backs of menus at the hottest restaurants in town.

Skadden's Lucky Sperm Club adopted the Quilted Giraffe as its clubhouse -- at the time, the most celebrity-stuffed establishment in Manhattan. With sex in the bathroom and cocaine in the lost and found, the restaurant happened to track the same arc as early M&A from 1979 to 1990. And at Second Avenue and 50th Street, the Quilted Giraffe was also just six blocks from the offices of Skadden on Third Avenue. Along with the house red, Petrus and the Montrachet, the specialty was the "beggar's purse," an innocuous but seductive little crêpe confection bulging with beluga and crème fraîche, pulled into symmetrical creases by a drawstring of chives and topped with a gold leaf. It was the Proustian madeleine of the 1980s, typically $50 for each little morsel.

One autumn night in 1985, three of the Lucky Sperms, Stu Shapiro, Morris Kramer, Don Drapkin, and their progenitor, Joe Flom, could be found at their usual table, enjoying Havana's finest, smuggled in from Geneva in white plastic boxes, each with its telltale gold-foil ring removed. By this time, our hitherto ostracized takeover lawyers had taken their rightful place among the clout merchants of the day. Mick Jagger and Jerry Hall were at table eight near the door. Ivan Boesky and Mike Milken had just left. Henry Kissinger had lumbered into his limo after a long drinking session. Woody Allen had dibs on table seven, as on other nights did Mia Farrow, Diane Keaton and Adnan Khashoggi. Warren Beatty was, as usual, at table six. There was Jacqueline Kennedy in her blue Chanel suit with Jayne Wrightsman. You could see Donald Sutherland, Annette Reed and Brooke Astor. You could never see Bernie Madoff, who always ordered in and always at lunch.

Among the Lucky Sperm stars that night there was a certain air of schadenfreude. They were embroiled in their campaign to conquer Revlon for their client Ron Perelman and his company, known as Pantry Pride. Perelman at the time was an unknown adventurer and a serial acquirer.

In 1985, M&A was exploding into maturity in the courts and boardrooms, and the Revlon war epitomized this sudden transformation of both commerce and culture. Few American corporations in the mid-1980s embodied glamour and power more thoroughly and with more fanfare than Revlon, a global brand brought to full flower by its former leader, the self-aggrandizing and self-tortured Charles Revson and then by Revson's hand-picked successor, Michel Bergerac, who ensured that the company was the commercial and cultural lodestar of the establishment.

Bergerac created his own splendid court at Revlon's headquarters in the General Motors building, one of the most prestigious office addresses in the city. On the 49th floor, the Revlon rooms were done à l'Afrique. The walls were hung with heads of greater kudu and steenbok and the masks of the Urhobo, Bozo and Yoruba. The floors were covered with zebra and impala skins and dotted with elephants'-foot stools. It was a palace of the masters of all living things, the lords of all creation.

"There was this sense that we are the nobility. And who is this -- you should excuse the expression -- Jew from Philadelphia ...Who is he to interrupt our garden party in our Fourth-Floor-of-Abercrombie-&-Fitch-decorated headquarters in the city's fanciest building with the best views of Central Park in New York?" says Stu Shapiro about the predominant attitude within the Revlon kingdom they were trying to acquire.

"This Jew" -- Shapiro's client -- was Ronald Owen Perelman, salivating on his cigar, blurting out his ungrammatical fragments, daring to attack august Revlon, with its $2.3 billion in assets, from his perch atop a small, recently bankrupt Florida food chain with assets of barely $400 million. Perhaps most galling of all was the silly name of the upstart's company: Pantry Pride. The Revlon grandees called it "Pant-y Pride"; Ronnie was "Peril-man," pointedly pronounced in the French way by CEO Michel Bergerac so that it sounded like the name of a comic book super-villain.

Ronald Perelman, with the omnipresent cigar, in his townhouse two years after shocking the business elite with his coup at Revlon. Photo courtesy of Rob Kinmouth/Getty Images.

Revlon certainly had reason to feel impregnable, not only because of its size, but also because it had hired an army of the best New York M&A specialists who felt the same way: Arthur Liman leading a platoon from Paul Weiss, Marty Lipton of Wachtell and Felix Rohatyn in charge of a team from Lazard Frères. These advisers assured their client that they would never let Pantry Pride get its hands on Revlon. It was a lesson in how contempt and entitlement can fuel an arrogance that guarantees defeat.

At first, only one member of the board of directors saw "Peril-man" for what he was -- a Drexel-fueled, Skadden-led, adrenalin-stoked existential threat to the Revlon status quo. That Revlon board member was Ezra Zilkha, the scion of an ancient Baghdadi-Jewish banking family. Zilkha understood that Mike Milken, who turned his team at the investment banking gadfly Drexel Burnham into a West Coast Wall Street from his X-shaped throne at Wilshire Boulevard and Rodeo Drive in Beverly Hills, was funneling borrowed money from bond buyers into Pant-y Pride, charging the borrower (Perelman) atmospheric interest rates but undamming an unstoppable surge of cash from investors looking for fat returns.

Zilkha at first found allies on the board only in Lewis Glucksman, the legendary head of Lehman Brothers, and Aileen Mehle, the celebrated columnist who wrote under the name Suzy Knickerbocker. It would not be long before the entire Revlon board and management, and indeed, the wider establishment itself, became increasingly appalled at the savages about to slay their first mastodon.

The fight had started with a knock at the door at Bergerac's townhouse by Ron Perelman on the night of June 14, 1985. He was soon shown the door. Bergerac would later say to an associate, "Can you imagine this guy, saying he's going to make me a rich man?" It may have been presumptuous, but it turned out to be true -- true, at least, that Perelman would make Bergerac a much richer man than he was already.

Revlon wasted no time. It quickly put in a poison pill, an amendment to the corporate by-laws which would make it more expensive for any bidder to get more than a modest percentage of Revlon's shares, and it began buying back as many as 10 million of those shares to keep them out of a predator's grasp, using notes or debt instruments in exchange for the stock. Unbeknownst to Ron Perelman, Revlon also opened secret talks with Teddy Forstmann of Forstmann Little, which provided money to managements in return for partial ownership, about dividing up Revlon between them, which would leave nothing left for Perelman to buy.

Again, Ezra Zilkha foresaw the future. He argued that the courts would see this arrangement as nothing more than a way to protect their own interests -- a new fence to keep the cow-tippers out of the milk-and-honeyed land of Revlon.

When the Revlon board met on Oct. 3, 1985, to approve its deal with Forstmann, which would leave the incumbents largely still in charge, Zilkha was in Jerusalem at the King David Hotel, joining in the discussions by phone and urging Bergerac to kill the plan before it was too late. The calls were agonizingly long, four to five hours at a stretch, exacerbated by a rabbi telephoning Ezra in the midst of it all to press him for a donation to a worthy cause. "The rabbi would have the operator interrupt my New York connection so he could talk to me instead," Zilkha recalls with a smile. "As you know, rabbis can be very persistent."

So can corporate raiders. On Oct. 9, after the board had joined hands with Forstmann, Arthur Liman of Paul Weiss convinced the three sides -- Teddy Forstmann, Ron Perelman and Michel Bergerac -- to come together to see if they could make peace. At around midnight, Perelman and his attendants were admitted to the Revlon sanctum, where they were seen as the revolting peasants. "I'll never forget those 20 or 30 guys coming off the elevators," Bergerac would later tell the writer Connie Bruck. "All short, bald, with big cigars! It was incredible! If central casting had had to produce 30 guys like that, they couldn't do it. They looked like they were in a grade-D movie that took place in Mississippi or Louisiana, about guys fixing elections in the back." Liman agreed: "What a scene. All the Drexels were in one room -- these guys with their feet up on Michel's tables, spilling their cigar ash on his rugs."

Worse even than their manners, it would soon emerge, was their new bargaining tactic, which Perelman announced that night. He was simply not going to do anything but win.

"We were sitting around in Perelman's office," one member of the team recalls, "which was in his townhouse in the 60s, filled with incredible art -- Modiglianis and Giacomettis, just unbelievable stuff -- and the deal was just kind of plunking along. Donny Engle and Leon Black [of Drexel] and [Skadden's] Don Drapkin and me. We were all talking strategy, and Drapkin suddenly had an idea. 'We'll raise them a quarter every time they bid,' Drapkin says. 'They won't be able to not sell to us because we'll raise them by the same amount every time. We won't care what it costs.'"

Of course, a quarter was not just a quarter. It was an increase of 25 cents for every share Revlon had outstanding, around $30 million for each increase of two dozen-and-one pennies. It was not only intensely irritating for Revlon, this "nickel-diming" racket, as target advisers called it, but it was also a shrewd and raw unsheathed show of financial power, backed as Perelman was, implicitly, by Milken's return-hungry investors.

And then Revlon sullied its own hands. As the Friday before the Columbus Day holiday approached, Revlon came before Justice Walsh, then a judge on Delaware's Court of Chancery. Its Forstmann alliance was under scrutiny. Would a Revlon deal with a leveraged buyout firm, in return for partial ownership of the company, be legal? The company assured the court that before any decision, no monies would change hands. Over the long weekend, the status quo would remain intact so that the judge could safely delay his ruling on the case until after the break. The judge, on Revlon's word of honor, agreed to postpone his decision until the Tuesday after Columbus Day.

But over the weekend, Revlon removed from the corporate treasury not only a tranche of Revlon stock but also $25 million in cash -- all earmarked for Forstmann to compensate him if his deal with Revlon were to fall through. There was no reason to have done this other than to remove the assets from the reach of the court's orders.

There is a little-used courtroom, more like an anteroom, off the Delaware Supreme Court chambers in Wilmington. The bench is large enough to seat all five judges, but the room is very small and very dark, and often very cold. It was to this place that then-Vice Chancellor Joseph Walsh, soon to move to the state's high court, summoned the two sides to the bar on Tuesday, Oct. 16, 1985. It was left to a Revlon adviser who had known nothing of his client's perfidy to face the cold ire of the judge who, learning of Revlon's removal of assets, quickly dismissed all of the company's pleas for succor.

The coup de grace in Delaware's Supreme Court was triggered by Skadden's Stu Shapiro. He argued that the Revlon directors had decided to protect themselves by giving away even more to protect themselves -- in this case, money to the owners of Revlon's traditional debt (its bonds and notes). These debt owners were angry at Revlon's plans to borrow additional money to finance their defense against Perelman's takeover since this new debt would jeopardize the company, and therefore, its bondholders.

Shapiro argued that the board members, facing not just bondholder anger but threats of lawsuits aimed at their own personal fortunes, had blinded them to their duty to get the best deal for the company's shareholders, the actual owners of Revlon. And, as they bought more and more Revlon stock, the owners were increasingly Ronald Perelman and associates -- investors whose loyalty was not to management or employees or the community, but to "maximizing shareholder value." It has been the maxim of corporate America ever since.

When the court stripped away Revlon's defenses, such as the deal with Forstmann, there was nothing for Revlon to do but turn over the keys to the kingdom to the dreaded Perelman for $1.8 billion. The consolation prize was that $1.8 billion was, at the time, an astonishing fortune. Bergerac and friends would be rich after all, as Perelman had promised.

After his oral argument triumph, Stu and his father (and fellow Skadden partner) Irving Shapiro were having a drink at the Rodney Square Club in Wilmington, co-founded by the elder Shapiro at a time in the not-so-distant past when Jews were not welcome in the city's other exclusive clubs. Renowned Delaware attorney A. Gilchrist Sparks III, Revlon's advocate, came over to their table to congratulate Stu on his performance. At that point, the court had not yet ruled, but Sparks knew it was to be Shapiro's day. It was fitting that a luminary in M&A, with an initial as a first name and a Roman numeral after his surname, would tip his hat to a Jewish lawyer at this club founded in response to discrimination after an M&A victory against an established elite.

A devastated Michel Bergerac came to see Ezra Zilkha at 30 Rock just two hours after the Revlon board met for the last time before Ron Perelman and his team took over.

"What has happened?" Bergerac said as he let himself down into a chair. "You have just made yourself $35 million with your golden parachute and the sale of your stock, Zilkha told his friend. It's November, Zilkha went on quickly. With me, you can talk any time, but it is almost tax season. I will call my Peat Marwick people for you. Go now and see how you can defer your taxes. "And that," Ezra recalls, "is exactly what Michel did."

Revlon was a triumph for Stu Shapiro, who won one of the most important court victories in the history of mergers and acquisitions. For Drexel, it was one of the first and most successful junk bond takeovers of a major corporation. For Shapiro's mentor and adviser throughout the Revlon saga, Joe Flom, it was sweet vindication. A brilliant Harvard law student and a law review editor, now the leader of fearsome Skadden, the young Flom had been routinely turned down by the law firm mandarins of the day, sometimes even told that his "background" was the "problem."

These old-line firms, among sundry other gatekeepers, from co-op board members to restaurant maîtres d'hôtel, could no longer stop Flom and his confreres, furious to succeed. "In the early '60s," Flom once remembered, "we were supposed to do an underwriting for a client, but when the client called his investment banker, he was told there were only seven [law] firms -- all old Wall Street firms -- qualified to do underwritings for the bank. So I figure... we've got to show the bastards that you don't have to be born into it."

And that's just what they did. The control of corporate America was arguably democratized in the process. And shareholders, regardless of identity or motives, gained an upper hand they have yet to relinquish, almost three decades later.

The ugly truth about the late, great American WASP--and the rest of the human race

Joseph Epstein demonstrates a limited ability to see the similarities between WASPs and the rest of the human race. He thinks WASPs are somehow different and superior to everyone else.

The problem with Mr. Epstein's analysis is that when WASPs were in power, every year presented a global financial crisis. Mr. Epstein presents himself as a sycophantic Anglophile with little pride in his own heritage. Perhaps he is not able to see in himself the envy he attributes to the Irish.

Or perhaps he does see it. I suspect that Mr. Epstein is more clever than he appears to be. I can't help thinking that his entire book is a satire. I think he looked deep into the hearts of everyone he knew, including himself, and told the ugly truth about the irrational, devious, envious thing that is the human heart.

UPDATE written ten minutes later:

Oh dear. I just learned a bit about Mr. Epstein's personal history. He doesn't seem to be a person who has much perspective on himself.

In 1970, when he was only 33 years old, long before he could rule out the possibility that one or more of his sons would be homosexual, he wrote, "if I had the power to do so, I would wish homosexuality off the face of the earth, because I consider it a curse, in a literal sense." He ended that Harper's Magazine article with, "There is much that my four sons can do in their lives that might cause me anguish, that might outrage me, that might make [me] ashamed of them and of myself as their father. But nothing they could ever do would make me sadder than if any of them were to become homosexual."

So I must change my opinion about the following essay being a satire. It's not. This guy is dead serious. And somehow, I am quite sure that Mr. Epstein found plenty of reasons to be ashamed of his sons. He has a limited capacity to appreciate the marvelous lives lived by people who are not heterosexual WASPs.

Mr. Epstein wrote one book about envy, and another about snobbery. He not only likes to think about who is superior to whom and who deserves to have more wealth, but also to talk at length about people who share his preoccupatons. I imagine that Mr. Epstein sheds more light on his own thinking than he intends. But these are important subjects, and it's good to get them out in the open.

Epstein seems remarkably similar to Justine Sacco, although he takes a lot longer to get to the point. Ms. Sacco managed to express herself clearly in one succinct tweet.

SECOND UPDATE: I tried to find out how Mr. Epstein's worries about his sons have worked out, but I can't find anything about his children. He never seems to mention them.

I found that "Joseph Epstein and his wife live in tree-lined Evanston, Illinois..." And that Mr. Epstein also talks about his mother and father, but I can't find anything about those sons whose futures he spoke of as holding such terrible possibilities for disappointment.



The Late, Great American WASP
The old U.S. ruling class had plenty of problems. But are we really better off with a country run by the self-involved, over-schooled products of modern meritocracy?
By Joseph Epstein
WSJ
Dec. 21, 2013

The U.S. once had an unofficial but nonetheless genuine ruling class, drawn from what came to be known as the WASP establishment. Members of this establishment dominated politics, economics and education, but they do so no longer. The WASPocracy, as I think of it, lost its confidence and, with it, the power and interest to lead. We are now without a ruling class, unless one includes the entity that has come to be known as the meritocracy—presumably an aristocracy of sheer intelligence, men and women trained in the nation’s most prestigious schools.

The acronym WASP derives, of course, from White Anglo-Saxon Protestant, but as acronyms go, this one is more deficient than most. Lots of people, including powerful figures and some presidents, have been white, Anglo-Saxon and Protestant but were far from being WASPs. Neither Jimmy Carter nor Bill Clinton qualified.

WASPs were a caste, closed off to all not born within it, with the possible exception of those who crashed the barriers by marrying in. WASP credentials came with lineage, and lineage—that is, proper birth—automatically brought connections to the right institutions. Yale, Princeton and Harvard were the great WASP universities, backed up by Choate, Groton, Andover, Exeter and other prep schools. WASPs tended to live in exclusive neighborhoods: on upper Park and Fifth Avenues in New York, on the Main Line in Philadelphia, the Back Bay in Boston, Lake Forest and Winnetka in Chicago.

WASP life, though, was chiefly found on the eastern seaboard. WASPs had their own social clubs and did business with a small number of select investment and legal firms, such as Brown Brothers Harriman and Sullivan & Cromwell. Many lived on inherited money, soundly invested.

The State Department was once dominated by WASPs, and so, too, was the Supreme Court, with one seat traditionally left unoccupied for a Jewish jurist of proper mien. The House of Representatives was never preponderantly WASP, though a number of prominent senators—Henry Cabot Lodge and Leverett A. Saltonstall, both of Massachusetts, come to mind—have been WASPs. Looking down on the crudities of quotidian American politics, Henry Adams, a WASP to the highest power, called the dealings of Congress, the horse-trading and corruption and the rest of it, “the dance of democracy.” In one of his short stories, Henry James has characters modeled on Adams and his wife Clover, planning a social evening, say, “Let us be vulgar and have some fun—let us invite the President.”

[Maura Larkins' comment: What a vulgar thing to do. I'm not talking about inviting the President; I'm talking about calling it vulgar to invite the President. Mr. Epstein thinks this attitude is exemplary? Who taught him to think like this? It must have been some WASP wannabes. Perhaps a parent? Or high school or college classmates?]

So dominant was WASP culture that some wealthy families who didn’t qualify by lineage attempted to imitate and live the WASP life. The Catholic Kennedys were the most notable example. The Kennedy compound at Hyannis Port—the sailing, the clothes, the touch football played on expansive green lawns—was pure WASP mimicry, all of it, except that true WASPs were too upstanding to go in for the unscrupulous business dealings of Joseph P. Kennedy Sr. or the feckless philanderings of him and some of his sons.

[Maura Larkins' comment: WASPs don't do dirty business deals? How does Mr. Epstein come up with this stuff? How, exactly, does he think America was built? By blacks, Asians, Irish and other poor Europeans who created, on Native American land, the value that WASPs turned into their personal wealth through every dishonest trick they could come up with. And philandering? Are you kidding, Mr. Epstein? You sound like the worst kind of finger-pointing, deluded, self-righteous prig. The Mayflower Madam is probably falling off her chair laughing.]

That the Kennedys did their best to imitate WASP life is perhaps not surprising, for in their exclusion, the Irish may have felt the sting of envy for WASPocracy more than any others. The main literary chroniclers of WASP culture—F. Scott Fitzgerald, say, or John O’Hara—were Irish. (Both Fitzgerald and O’Hara tried to live their lives on the WASP model.) But the pangs weren’t limited to the Irish alone. To this day, the designer Ralph Lauren (né Lifshitz) turns out clothes inspired by his notion of the WASP high life, lived on the gracious margins of expensive leisure.

The last WASP president was George H.W. Bush, but there is reason to believe he wasn’t entirely proud of being a WASP. At any rate, he certainly wasn’t featuring it. When running for office he made every attempt to pass himself off as a Texan, declaring a passion for pork rinds and a love for the music of the Oak Ridge Boys. (His son George W. Bush, even though he can claim impeccable WASP lineage and went to the right schools, seems otherwise to have shed all WASPish coloration and become an authentic Texan, happily married to a perfectly middle-class librarian.)

That George H.W. Bush felt it strategic not to emphasize his WASP background was a strong sign that the decline of the WASP’s prestige in American culture was well on its way. Other signs had arisen much earlier. During the late 1960s, some of the heirs of the Rockefeller clan openly admitted feeling guilty about their wealth and the way their ancestors came by it. By the 1970s, exclusive universities and prep schools began dropping their age-old quotas on Catholics and Jews, lessening the number of legacies automatically admitted, and using racial preferences to encourage the enrollment of blacks. The social cachet of the Episcopal Church, a major WASP institution, drained away as its clergy turned its major energies to leftish causes.

Calling something elite, which was how WASPs of an earlier era preferred to think of themselves, became a denunciation. Being a WASP was no longer a source of happy pride but something distasteful if not slightly disgraceful—the old privileges of membership now seeming unjust and therefore badly tainted. An old joke has one bee asking another bee why he is wearing a yarmulke. “Because,” answers the second bee, “I don’t want anyone to take me for a WASP.”

The late 1960s put the first serious dent into the WASPs as untitled aristocrats and national leaders. For protesters of that generation, the word WASP didn’t come into play so much as the word Establishment, heretofore chiefly an ecclesiastical term. The Establishment was the protesters’ enemy and target. The Establishment was thought to have sent the country into Vietnam; it was perfectly content with the status quo, with all its restrictions on freedom and tolerance for unjust social arrangements; it stood for all that was uptight and generally repressive in American culture.

The Establishment took its place in a long tradition of enemies of American life. This list has included, at various times, Wall Street, Madison Avenue and the military-industrial complex—vague entities all. But there was nothing vague about the Establishment. They were alive and breathing, and they had such names as John Foster Dulles and Allen Dulles, W. Averell Harriman, McGeorge Bundy, Dean Rusk, Joseph Alsop, C. Douglas Dillon, George F. Kennan and Robert McNamara. The WASPs ruled the country, and for those who didn’t much like the country or the directions in which they saw it tending, the WASPs were a great and easily identifiable enemy.

The last unashamed WASP to live in the White House was Franklin Delano Roosevelt, and he, with his penchant for the reform of American society, was considered by many a traitor to his social class. He is also likely to be the last to reside there. WASP culture, though it exists in pockets of private life—country clubs, neighborhoods, a few prep schools and law firms—is finished as a phenomenon of public significance.

Much can be—and has been—written about the shortcomings of the WASPocracy. As a class, it was exclusionary and hence tolerant of social prejudice, if not often downright snobbish. Tradition-minded, it tended to be dead to innovation and social change. Imagination wasn’t high on its list of admired qualities.

Yet the WASP elite had dignity and an impressive sense of social responsibility. In a 1990 book called “The Way of the Wasp,” Richard Brookhiser held that the chief WASP qualities were “success depending on industry; use giving industry its task; civic-mindedness placing obligations on success, and antisensuality setting limits to the enjoyment of it; conscience watching over everything.”

Under WASP hegemony, corruption, scandal and incompetence in high places weren’t, as now, regular features of public life. Under WASP rule, stability, solidity, gravity and a certain weight and aura of seriousness suffused public life. As a ruling class, today’s new meritocracy has failed to provide the positive qualities that older generations of WASPs provided.

Meritocracy is leadership thought to be based on men and women who have earned their way not through the privileges of birth but by merit. Careers open to the talented, is what Napoleon Bonaparte promised, and it is what any meritocratic system is supposed to provide.

The U.S. now fancies itself under a meritocratic system, through which the highest jobs are open to the most talented people, no matter their lineage or social background. And so it might seem, when one considers that our 42nd president, Bill Clinton, came from a broken home in a backwater in Arkansas, while our 44th, Barack Obama, was himself also from a broken home and biracial into the bargain. Sen. Ted Cruz, the man who leads the tea party, is the son of a Cuban émigré.

Meritocracy in America starts (and often ends) in what are thought to be the best colleges and universities. On the meritocratic climb, one’s mettle is first tested by getting into these institutions—no easy task in the contemporary overcrowded scramble for admission. Then, of course, one must do well within them. In England, it was once said that Waterloo and the empire were built on the playing fields of Eton. The current American imperium appears to have been built at the offices of the Educational Testing Service, which administers the SATs.

Whether Republican or Democrat, left or right, the leading figures in U.S. public life today were good at school. Bill Clinton had Georgetown, Oxford (as a Rhodes scholar) and Yale Law School on his résumé; Barack Obama had Columbia and Harvard Law School. Their wives, respectively, had Wellesley and Yale Law School and Princeton and Harvard Law School. Cruz went to Princeton and thence to Harvard Law School. Players all—high rollers in the great American game of meritocracy. Their merit resides, presumably, in having been superior students.

But is the merit in our meritocracy genuine? Of the two strongest American presidents since 1950—Harry S. Truman and Ronald Reagan—the first didn’t go to college at all, and the second went to Eureka College, a school affiliated with the Christian Church (Disciples of Christ) in Eureka, Ill. The notion of Harry Truman as a Princeton man or Ronald Reagan as a Yalie somehow diminishes them both.

Apart from mathematics, which demands a high IQ, and science, which requires a distinct aptitude, the only thing that normal undergraduate schooling prepares a person for is… more schooling. Having been a good student, in other words, means nothing more than that one was good at school: One had the discipline to do as one was told, learned the skill of quick response to oral and written questions, figured out what professors wanted and gave it to them. Having been a good student, no matter how good the reputation of the school—and most of the good schools, we are coming to learn, are good chiefly in reputation—is no indication of one’s quality or promise as a leader. A good student might even be more than a bit of a follower, a conformist, standing ready to give satisfaction to the powers that be so that one can proceed to the next good school, taking another step up the ladder of meritocracy.

What our new meritocrats have failed to evince—and what the older WASP generation prided itself on—is character and the ability to put the well-being of the nation before their own. Character embodied in honorable action is at the heart of the novels and stories of Louis Auchincloss, America’s last unembarrassedly WASP writer. Doing the right thing, especially in the face of temptations to do otherwise, was the WASP test par excellence. Most of our meritocrats, by contrast, seem to be in business for themselves.

Trust, honor, character: The elements that have departed U.S. public life with the departure from prominence of WASP culture have not been taken up by the meritocrats. Many meritocrats who enter politics, when retired by the electorate from public life, proceed to careers in lobbying or other special-interest advocacy. University presidents no longer speak to the great issues in education but instead devote themselves to fundraising and public relations, and look to move on to the next, more prestigious university presidency.

A financier I know who grew up under the WASP standard not long ago told me that he thought that the subprime real estate collapse and the continuing hedge-fund scandals have been brought on directly by men and women who are little more than “greedy pigs” (his words) without a shred of character or concern for their clients or country. Naturally, he added, they all have master’s degrees from the putatively best business schools in the nation.

[Maura Larkins' comment: Who designed those schools, Mr. Epstein? Yes, exactly. Your friend thinks anyone is a pig who acts like a WASP without having the right bestowed by birth to be a leech on society.]

Thus far in their history, meritocrats, those earnest good students, appear to be about little more than getting on, getting ahead and (above al) getting their own. The WASP leadership, for all that may be said in criticism of it, was better than that.

The WASPs’ day is done. Such leadership as it provided isn’t likely to be revived. Recalling it at its best is a reminder that the meritocracy that has followed it marks something less than clear progress. Rather the reverse.




Wall Street Journal Op-Ed Bemoans The End Of White Rule In The United States
By Adam Peck
Think Progress
December 21, 2013

There are a lot of problems in Washington, D.C these days, but not many solutions to them. Inefficiency, an allergy to cooperation, and stiff resistance to pragmatism have all ground the federal government to a stand-still. But one op-ed contributor to the Wall Street Journal knows what the real problem is: not enough rich, white men.

In Saturday’s paper and online, author Joseph Epstein mourns the collapse of what he describes as the “genuine ruling class, drawn from what came to be known as the WASP establishment,” (WASP, the commonly-held acronym for White, Anglo-Saxon Protestant). Instead, he argues, we are living in a meritocracy, governed not by an elite subset of the uppermost crust of society but rather by a group of people who overcame some kind of adversity and achieved success thanks to their own merits, not based on what family they were born into. This, according to Epstein, is a tragedy.

Epstein’s embrace of white privilege (or is it power?) is almost too transparent, resembling something closer to satire than to outright racism. And yet he gives no reason to believe that he isn’t completely serious when he argues that modern day “corruption, scandal and incompetence” are hallmarks exclusive to this new era of non-white rule. Or when he memorializes the virtues of keeping those not born into the “WASPocracy” away from the halls of power. Or when he faults the leadership of the country’s top colleges for its role in ending white rule by “lessening the number of legacies automatically admitted, and using racial preferences to encourage the enrollment of blacks.”

Instead, Epstein argues, we should return to an era of WASP rule. Why? Because rich, white men born into rich, white christian families would never lead the country astray:

A financier I know who grew up under the WASP standard not long ago told me that he thought that the subprime real estate collapse and the continuing hedge-fund scandals have been brought on directly by men and women who are little more than “greedy pigs” (his words) without a shred of character or concern for their clients or country. Naturally, he added, they all have master’s degrees from the putatively best business schools in the nation.

Thus far in their history, meritocrats, those earnest good students, appear to be about little more than getting on, getting ahead and (above all) getting their own. The WASP leadership, for all that may be said in criticism of it, was better than that.

Epstein’s contempt for minorities — namely, that they don’t belong anywhere near positions of authority — isn’t reserved simply for race. Back in the 1970s, Epstein penned a story for Harper’s Magazine in which he expressed his desire to “wish homosexuality off the face of this earth.” He added, of his four sons, “nothing they could ever do would make me sadder than if any of them were to become homosexual.” Those comments led to sit-ins and protests outside of Harper’s offices, and Epstein has never apologized (and in fact dismissed his critics, some 30 years later, as simply incapable of understanding his own “textured thought”).

Perhaps that explains why Epstein reserves so little space (50 of his 2200+ word essay) to the shortcomings of WASP rule: he simply doesn’t care that many of the leaders from his idyllic “WASPocracy” looked the other way on issues of racism, homophobia, poverty and inequality when they were in power.

And while the U.S. Senate — historically the wealthier and less diverse of the two chambers — may not be sufficiently white for Epstein’s liking (only 95 percent of U.S. Senators are caucasian), they still do a very good job of tending to the needs of their fellow rich people instead of the needs of middle class and low-income families.