Capturing the surplus

Posted: 12 May 2016 in Uncategorized
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Capitalism is a giant machine for pumping out the surplus from workers—just like feudalism, slavery, and other class-based economies before it.

That’s from one perspective. But the capitalist machine isn’t just about the “vampire thirst for the living blood of labor.” It also involves various mechanisms for capturing that surplus—in the form of dividends, CEO salaries, interest payments, and so on.

Another, increasingly important such mechanism is hedge funds. And boy are they capturing a lot of the surplus these days!

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The hedge-fund industry continues to balloon in size (after a dip during the financial crash in 2008, and even though 2015 was by all accounts a rocky year), with something like $3 billion dollars in assets under management.

And, as the New York Times reports, the pay of the industry’s leaders has soared.

JPMorgan Chase paid its chief executive, Jamie Dimon, $27 million in 2015. In another Wall Street universe, the hedge fund manager Kenneth C. Griffin made $1.7 billion over the same year.

Even as regulators push to rein in compensation at Wall Street banks, top hedge fund managers earn more than 50 times what the top executives at banks are paid.

The 25 best-paid hedge fund managers took home a collective $12.94 billion in income last year

Yes, billions, with a “b.”

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That’s the list of the top 10 (courtesy of Institutional Investor’s Alpha magazine)—from Griffin (at $1.7 billion) to Joseph Edelman (at $300 million) in 2015.

Not only are Griffin and company capturing a large share of the surplus (even when some of their funds actually lost money for investors last year, just by virtue of their sheer size).* They’re spending it—on everything from art and luxury housing to funding politicians and political campaigns.**

So, with the rise to prominence of hedge funds and other financial instruments, it’s time to revise our definition: capitalism is a giant, vampire-like machine for pumping out, capturing, and spending the surplus from workers.

*Ray Dalio made $1.4 billion in 2015 through Bridgewater Associates, the world’s biggest hedge fund firm with $150 billion of assets under management. Dalio, who founded Bridgewater, is frequently quoted promoting a strategy he calls risk parity. Yet Bridgewater’s risk parity fund, called All Weather, lost investors 7 percent in 2015.

**Griffin was the biggest donor to the successful reelection campaign of Mayor Rahm Emanuel of Chicago.

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