Maybe you will play along with me, and entertain the spaces I want you to imagine.
The one we know well won’t be hard for you to conceptualize. The selfish one. The profit motive, cash intensive one. But there’s the second space too. It is outlined by time, energies and outlays for group things. The things we call public. So, if you can, hold these two dynamic spheres, one of initiating activities toward private profits and a second contributing to yields for the group, in your mind for a minute or two.
The first part of the story is familiar to you. It’s about how private equity firms (there are many big ones like Blackstone, Apollo and Bain) go in and buy up old or floundering businesses and rip away any remaining social ties that may cling to them. Pensions? Gone. Employment contracts? No more. A trustee companion to the surrounding community? I think no longer.
An alumni from my alma mater, Gretchen Morgenson, is a senior financial reporter with NBC and can tell you all about sphere one in her book, The Hidden Force Behind Wealth Inequality in America. In the clip below she focuses on the results of private equity firms becoming the owners and custodians of nursing homes.
The claim that the private equity firms live in the for-profit sphere, and in turn are destructive to social riches is irrefutable. But it is by design. Perhaps it serves the same purpose as the destruction of ancient Sequoia trees in a forest fire. This is part of the process. But most would agree that there are many possible points of optimization in the process of externalizing social contracts and extracting their value through dollars to shareholders.
To come at the quandary from another angle, try to imagine where the flip side of the activities of private equity firms reside. Where in the two spheres is the opposite enterprises underway? Instead of extracting dollars and putting social benefits to rest, dollars are inserted into a network of social activity to substitute for care, education, food and so on.
A place where, at every turn, a community is propped up, rather weakly I might add, by subsidies is also messing with the spheres of activity. And in such a neighborhood where 60-70-80% of the residences live below the poverty level– actors are being stripped of the possibility of engaging in mechanisms of self accomplishment and achievement.
Whether the misuse of money is in the private sphere or the public sphere, the net result is, as Gretchen postulates, a dark force behind wealth inequality.
Solving problems across the entire economic landscape is preferable. Looking for optimizations in multidimensions will provide greater insights. Sorting the industries which favor the nature of the communal or the nature of the private will point out short comings. Understanding the role of subsidy intervention and the power of group relationships will create leverage.
All of this can be stretched across a framework of public and private spheres.