Comparing graduates with similar SAT scores, grade-point averages, gender, age, occupation and everything else they can measure, [Harvard economist Lawrence] Katz and [Claudia] Goldin find Harvard grads who work in finance earn 195% more than similar graduates in other careers, or triple the pay. That's no typo: Going into finance means making nearly three times as much as your classmates with other careers.
In fact, pay on Wall Street and elsewhere in finance -- even more than those huge salaries of chief executives outside finance -- is a major driver of the widening gap between paychecks of the biggest winners in the economy and the rest of us. "Wall Street and legal professionals have contributed at least as much as, and probably more than, top executives of nonfinancial public companies to the widening of the income distribution," writes Steven Kaplan of the University of Chicago's Graduate School of Business. The top 25 hedge-fund managers combined earned more than CEOs of the Standard & Poor's 500 companies combined in 2004, he calculates.
Also: "In the 1960s and 1970s, graduates of Harvard University were much more likely to be lawyers, doctors and academics than to head for Wall Street."
If we deplete our stock of American intellectuals simply to make more money — without actually doing anything to make more money, such as research or innovate — where will we end up?
Where we are. Money worship is what got us here: to the subprime mess, to hedge fund managers wildly overcompensated and undertaxed, to international wars for SUV fuel and no-bid defense contracts, to monstrous CEO severance packages, to corporate ownership of life itself through court-sanctioned genetic patents, to a legislature and presidency whose campaigns serve only as an advertising windfall for television networks and a financial windfall for the lobbyists who write the legislation.
The American ship is sinking from the weight of its own economic narcissism. Our accountants and finance professionals have been richly rewarded for squeezing the last microscopic drop of profitability out of every other profession. That's why American newsrooms don't bother with news. That's why American old age homes imprison their residents as cheaply as possible. That's why American insurance companies refuse to pay out claims for sick people or destroyed homes. That's why we've proven that America is massively incapable of nationbuilding in Iraq or in Afghanistan or even in Louisiana.
So, thanks to the beancounters who know what things cost but not how to actually do anything, American is accelerating toward becoming a third world nation. And no one in the rest of the world will give a shit, and rightfully so, thanks to our cavalier attitudes toward Iraqi civilians, toward Sudanese refugees, toward the Chinese children who sew our clothing, toward the immigrants who work on our farms and in our hotels and hospitals and in those extremely profitable old-age homes, and toward anyone who isn't white and speaks English.
When the American bubble bursts, it could end up being a good thing — but only if the beancounters are pulled from their thrones and tossed back into the basement where they belong. Because American ingenuity and insight originate not on the balance sheet but in the laboratory, not in the boardroom but in the field of play, not on the spreadsheet but in the streets where human beings live and work. American inventiveness should concern itself not with "devising, selling and trading mortgage-backed securities so complex that no one, even those Harvard grads, can fully understand them," but with activities that enhance life itself.