NY Investment Bank Salaries = Vietnam's GDP

I found the discusson in this year's Barron's Roundtable somewhat unsatisfying and unfocused. But one comment by Marc Faber leapt off the page (or rather the screen):

Marc Faber: I'm less worried about that [an asset bubble] than this: The five brokerage firms in New York -- Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns and Goldman Sachs -- paid out $36 billion in 2006 bonuses. Compensation and bonuses together roughly are equal to Vietnam's GDP.

Marc's interpretation of this remarkable statistic was as follows:

I see a bipolar world in which there's the typical household in the U.S. or Western Europe, and then this huge wealth concentration. It will lead to a political backlash one day.

But what about the wider implications for the relationship between the developed and developing world? I'm still processing this.

Interested to hear readers' thoughts -- please leave a comment below.

Comments

[lonie]

Mr. Jackson:

I don't begrudge people making money and i have made my fair share thru the stock market and could perhaps made more if outlandish salaries weren't out of line. This is not exactly my point.

Due to the greed of a small percentage of world population , Globalization, Politics ,and other factors,inflation has left at least half the world population in an economic shambles.

Example: Farmer in Yunnan province China in 1998 was averaging 2300 Yuan income a year.In 2006 he made 2800 Yuan,an 18 % increase. Inflation has doubled and for many things such as electricity three times,rice three times.

About 500 million are in this fix and i have been told that they were much better off 20 + years ago.

China says there is 5 % unempoyment but that only counts the people that formerly worked for state owned enterprises or government. There is about 150 million wandering the country looking for work that they call ( excess labor ) , and if they find work there is a good chance they will be cheated out of their meager pay. My wife tells me you can get common labor just for food.

Many times i have seen a donkey cart and a Mercedes s-600 sitting side by side at a traffic light.I know what the rich guy thinks,he don't give a crap. I immagiane what the donkey cart driver thinks,perhaps this; a 1,200,000 Yuan car,i make 2800 a year and can barely survive.Why,i couldn't even buy a wheel for it with my 2800 Yuan.

What you hear in the news and from government is not necessarily what is really happening .

I have lived in China since 1998 and am married to a Chinese and what i get told by the averege and what is in news is generally far apart.

Mr.Faber's point is well taken by me and should be a concern of all the well off in world,for it will be the well off that go down the hardest when the poor finally pick up their " shovels and clubs ",which is already happening in China,most just don't hear it.

The ones Mao's china was supposed to help are the ones being screwed and it is happening all over the world.

Dempse Ross 1/14/07

[Dave Fisher]

Good Point and I too Agree with your thoughts on this!

Dave

[DavidJackson]

Thanks for your comment, Dempse.

[Nova Law]

Where would you rather work, David? As an investment banker in Manhattan or as a pice paddy farmer in Vietnam? Because that's what Faber's foolish comment comes down to.

[DavidJackson]

Mark Faber actually made a different point: he said that he thought the income disparity in developed countries was a problem, not the disparity between developed and developing countries.

I agree with your point though. All of us who have grown up with the amazing opportunities offered by the US or European countries have a lot to be grateful for. As Warren Buffett frequently says, his stock picking abilities would have been useless if he'd been born elsewhere.

[Nova Law]

Indeed. I was yesterday re-reading Buffett's 2005 Berkshire Hathaway Annual Report. In his concluding paragraph I read him crediting his being born an American as one of the principal components of his success. It is nothing to be ashamed of, as neither is being born in the United Kingdom or even in Vietnam. Knowing and being proud of where you come from is an important component of success.

Faber's comment would be more impressive to me if he would adopt the tactic of Buffett - drawing only a 100K per year salary and donating the sum of his life's work to a charitable remainder trust. Without that, it sounds much like a rich guy feeling sorry for having so much money. But while he's free to feel like that, I draw the line at his attempt to reach into my pocket and to steal my money for the "benefit" of Vietnamese rice paddy farmers.