The fact that Donald Trump is now offering digital trading cards with pictures of himself as a superhero for $99 each tells you everything you need to know about Trump and about NFTs.
The recent FTX crypto market implosion by Samuel Bankman-Fried provides another case in point. Months ago, FTX was huge. Now it’s a hole in the pockets of countless people who put their money into it. (Until a few weeks ago, Bankman-Fried was one of the richest people in the world.)
Crypto as a whole is proving to be little more than a giant zero-sum game. As with NFTs, the current value of crypto depends on whether buyers believe it future Buyers will be even bigger suckers.
A large and growing sector of the US economy produces nothing of value. Nada. zilch. Each winner comes at the expense of a current or future loser. The only things this “zero-sum” sector produces are many of the nation’s ultra-rich. Money moves from one set of pockets to another – mostly upwards, into the pockets of the ultra-rich.
Much of Wall Street is expanding this zero-sum economy. Derivatives, private equity, hedge funds and funds of funds are creating a few incredibly wealthy people who might disappear tomorrow and for all the net worth they produce could hardly be missed.
Corporate law is another part. Highly paid lawyers representing one company fight high-paid lawyers representing another. Huge sums of money are spent on these escapades. But there are no societal gains unless you equate it with the victory of one company over another Justice.
management consulting? Advising companies on how to make more money by cutting wage bills, abandoning communities, busting unions, outsourcing abroad and hiring more temporary workers adds no value. Some economists call this “efficiency,” but when you factor in the social cost inflicted on everyone else, it’s a zero-sum game.
Public relation? How much value is created by convincing the public that a particular company or wealthy individual is nicer or more worthy than we otherwise believe?
Then there’s the so-called “wealth management” industry – it advises rich people on where to park their money and avoid taxes. More zero-sum games.
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In reality, the huge and growing zero-sum economy is costing us a lot of money. It leverages the time and energy of some of the nation’s most educated people. They do it because zero-sum work pays so much compared to, say, teaching, or social work, or healthcare, or journalism, or art, or science, or many other things that improve people’s lives.
One might think that a rational society would heavily tax zero-sum labor while subsidizing labor that generates much social good.
But you would be wrong, because the political power of the zero-sum economy creates one even bigger zero-sum game.
Right now, for example, big business and private equity lobbyists are pushing Congress for a retrospective tax break that would remove restrictions on how much interest payments companies can deduct from their debt. (The limits went into effect this year as part of the compromise that got us Trump’s big giveaway to the rich in 2017.) If the lobbyists get their way, the revenue loss could be about $20 billion a year, or about $200 billion over 10 years.
Much of this windfall will end up in the pockets of private equity professionals who take over companies with mountains of debt, which they then pull out of company earnings to minimize tax payments. These people already get special treatment in the tax code, as they are allowed to treat their income as capital gains, which are subject to lower taxation.
I just got off the phone with a staffer on the House Ways and Means Committee, who told me she thinks it’s likely that this tax break will be added to the Omnibus Funding Act, which is now working its way through the final days of this Congress. She admitted there was “no justification” for it, but sighed, “that’s how the game is played.”
And who do you think is paying more taxes to offset what these portly cats are doing Not Counting? The rest of us