Until a few weeks ago, Stephen Schwarzman was unknown except to his own family and to those people who worked for him or with him.
Now he’s world-famous and burdened by the fact that while a lot of people admire him and envy him, a lot of people also hate him.
The source of Schwarzman’s fame is that he’s become richer, faster than anyone in memory.
He runs a company called the Blackstone Group. It’s a private equity firm (more about that in a moment). It’s just made a public share offering, a most successful one, of which Schwarzman, as the principal shareholder is, naturally and properly, the principal beneficiary.
But a beneficiary on a scale without precedent. He’s now worth just under $8 billion (U.S.). That’s on top of last year’s earnings of $398.3 million.
Besides those who wish they were him and those who now hate him, there is a one group of naysayers who are especially interesting.
According to the Financial Times of London, a lot of other top executives of private equity companies are enraged at Schwarzman because he’s drawing attention to the fact that they … are sitting on gigantic golden eggs.
Apparently, these types are worried that the politicians, egged on by the mob, or the proletariat, or ordinary types like most readers of this column, will feel they need to “do something” about those like Schwarzman who make incredible fortunes by financial juggling while making not a single product nor providing a single new service to the public.
What private equity firms do, mostly, is buy companies and make them more efficient, then sell them at a profit. Mostly, the way they make these companies more efficient is by firing a lot of employees.
…
Call it the post-capitalism era. It’s about capitalism all right. But it’s capitalism disconnected from labour or from the factors of production (equipment, buildings), or from the nation-state in which the companies happen to be located.
It is, rather, capitalism functioning in a self-enclosed loop, feeding off itself, endlessly mutating and above all multiplying exponentially.
And because this capital is global, no one has a clue what it – private equity firms, hedge funds, and the new “sovereign wealth” funds set up by some nation-state governments (like China) to escape their own regulations – is doing.
Its principal effect is to make a small number of people, like Schwarzman, unbelievably, unimaginably, wealthy.
Even the old wealthy types are dumbfounded. The retired chair of Goldman Sachs recently described the salaries of CEOs as “shocking” and “outrageous.”
In his book Richistan, Robert Frank calls this new class “financial foreigners.” They may live in the U.S., or London or Hong Kong or Toronto, but they really live in their own space, with their own health system, own transportation system … even their own time system (watches that cost up to $600,000).
Why do these people even pretend capitalism does anything to improve society anymore? They acknowledge that their riches and existence lie entirely with the fact that they are not competing or trying to improve things, but rather just cannibals eating off of the corpses of real companies that try to make a real difference.
What’s funnier is that they all know this, and fear that ordinary people will recognize it as well and try to do something to rectify it.
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