Hi everyone,
In edition #4 of my bi-weekly newsletter, I will utilize my previously untapped knowledge of the career paths that influential yet often hidden figures in government follow. I plan to use this peculiar knowledge, obtained through days worth of habitual Wikipedia and LinkedIn surfing, to imply a broader assertion as to why both party establishments are so impenetrable, while trying not to sound like a conspiracy theorist. As a current college student myself, I will also reflect on the pressures that might coerce one into following such career paths and the labyrinthine morality of it all.
First, a quick story from history which I have told before and will continue to tell until I have completely indoctrinated everyone.
In the 1960s and 70s, there was a paradigm shift in politics in which parts of the left and the right united to defeat the policy consensus that had been formed during Franklin D. Roosevelt’s administration. The pre-existing consensus consisted of government investment in the economy, decentralization of corporate power, and increased labor rights, among other principles. To keep it simple, it was going well for a while but by the late 1970s things got worse and people began demanding change. In the upper echelons of society, politicians, think tanks, academics, and industrialists responded to this demand for change by mobilizing to replace the pre-existing consensus with a new one that still remains today.
With the new consensus, the private sector began winning by very wide margins and could not at all be stopped. Finance became more deregulated, the consolidation of corporate power was unchecked, workers’ unions were decimated, and it was all for the sake of the ‘consumer.’ The surge in power of the market became more influential than ever in shaping people’s decisions and philosophies. Political Scientist Robert Putnam actually tracked that the usage of the word ‘I’ sharply increased in literature during the 80s and I’m sure one could find an upswing in Ayn Rand book sales as well. The rise of individualism aside, there was also a dramatic shift in employment patterns among our country’s top universities because of this power of the market, which will come back later.
One of the worst side effects of the new consensus not yet mentioned was the horrific influence the private sector acquired over the government. The conventional perception of private sector influence in politics is the massive campaign donations a Hollywood producer or a business magnate might make to corrupt a politician’s decision-making. But the corporate influence I want to focus on is the kind that is reflected across the people who gain political power in the first place.
Among the faces in government today, there is a clear divergence in officials’ career paths. While the overwhelming majority of them have law degrees, the political careers of older politicians such as Senate leaders Mitch McConnell or Chuck Schumer began straight out of law school in political campaigns, congressional staff jobs, or federal clerkships. Since the establishment of the new consensus, however, a more market-driven path to political power was paved for people, starting from their graduations at top universities and culminating in their appointment or election to political office. Newer faces who followed this path ended up beginning their political careers only after their stints at investment banks, consulting firms, or corporate law firms. Whether it is the politicians that we elect or the technocrats that politicians rely on to govern, there is a certain homogeneity within the paths they followed that needs to be discussed because:
Employment decisions driven by the market are paving a path through finance, consulting, and BigLaw to political power and the results are not good.
Oftentimes being tasked with regulating the industries one used to work in creates a conflict of interest. But every once in a while it doesn’t.
It reflects devastating realities about where power is concentrated in America.
While both parties have contributed to paving the current market-driven path to power, the Democratic party for decades has probably been more explicit in its acceptance of former corporate lawyers, bankers, and consultants who successfully follow the path. The Clinton administration, in its embrace of the financial world, appointed former Goldman Sachs board member Robert Rubin and reappointed investment banking veteran Alan Greenspan to its top economic policy positions. Obama continued the trend in naming former corporate lawyers, CitiGroup bankers, and McKinsey consultants to his own administration’s top policy positions. Not to even mention the sheer number of deputies, assistants, senior policy advisors, and counsels that both administrations would appoint who almost all rose from similar market-driven paths.
The Market-Driven Path — How Our Brightest Are Becoming Corporate Robots
Last weekend, I wrote a paper for one of my classes about the decades-long phenomenon of undergraduates from America’s top universities, as ‘leftist’ as they are, fleeing to investment banking and consulting firms after graduation, which are not necessarily known for their public displays of leftism (PDL). It started in the 1980s as the new consensus was forming, when investment banks such as Goldman Sachs began advising corporate mergers and acquisitions less and discovering new trading strategies that bypassed the relaxed regulatory oversight of finance more. Transitioning from dealmaking to trading helped banks increase profits and pay themselves more, from the CEO to the analyst level.
With the ability to compensate their entry-level analysts better, investment banks shifted their recruiting strategy. Before the 1980s, students graduated from college and would commonly join government positions in the Department of Justice and the CIA or pursue post-graduate degrees in law, medicine, and business. Analyst positions at investment banks that did not require any particular major or expertise, other than the ability to withstand arduous working conditions, were not particularly appealing to Harvard and Yale graduates who aspired to make a positive impact on the world. Despite probably having a net negative impact on the world through its manipulation of different markets to inflate the wealth of investors, investment banks still found a way to win at college student recruiting. To attract these idealist, ambitious, elite graduates, Wall Street began solely recruiting at a handful of top undergraduate universities projecting an image of prestige, backed with high compensation, that capitalized on students’ lapses in their knowledge of the labor market and the social pressures surrounding status. Everyone from Anthropology majors to Physics majors started applying for a job at an investment bank and often got it, in part because of the elite brand from their college that they carried but also because they were, of course, smart. Concurrently, college tuition prices began exploding and more students were taking out student loans they needed to pay off after graduation.
Considering these factors, a Harvard graduate joining Goldman Sachs, for example, may have been a market-driven decision. If they had loans to pay off, Goldman’s high compensation provided the financial security that most other jobs, particularly those in the public sector, could not (I know very few Harvard students take out loans, it's just a scenario). More importantly, they were joining an elite family of fellow Ivy League graduates and could leave the firm with Goldman Sachs on their resume and the supposed skillset that an analyst develops, which could apparently be applied anywhere. This, along with a flavor of ‘corporate social responsibility,’ is the representation of themselves that banks sold to college students in their relentless pursuit on top campuses. It’s what writer Anand Giriharidas called a ‘win-win’ in his book Winners Take All. The ‘win-win’ describes the illusion of the mutually beneficial situations that corporations began proposing, in this case, to college students in their efforts to recruit them.
Joining Goldman Sachs is a ‘win-win,’ in that you are getting paid, acquiring prestige, and learning important business ‘skills,’ while also contributing to projects that ‘invest in human capital’ to address issues such as the racial wealth gap. Forget that Goldman Sachs was a key player in causing the 2008 Financial Crisis and forming the response to it (through its influence in the Obama years), which left millions of people, disproportionately African-American, without homes. Despite the apparent flaws, the illusion of the ‘win-win’ seems to work. Currently, more than a third of Harvard undergraduates will enter consulting or finance-related careers while only 6% enter the non-profit/public sector. Even in the wake of the 2008 Financial Crisis, when movements such as Occupy Wall Street ignited on campuses, the number of students flocking to banking careers rebounded within a few years back to its previous rate.
It is through no fault of their own that students pursue these careers. The market compels them to do so. In law, a similar phenomenon takes place. The large majority of students from the coveted T14 law schools join corporate law, or BigLaw as it is often called. Just as the market does not favor college students who choose to work in the non-profit/public sector with high compensation, the same is true at a magnified scale in law school. Approximately 95% of law school students take out loans to attend and nearly 75% had at least $100,000 in student loans at graduation. The market corners law students into careers where they can earn the biggest salaries, which occurs in corporate law. After ‘doing their time’ and paying off their loans, some will continue in corporate law. Others will join the government with the shiny logo of their corporate law firm on their LinkedIn profile and their enhanced donor network of fellow associates, attorneys, and partners relieving any barrier to their entry.
Hence, the modern Democratic party.
But why is joining BigLaw, banking, or consulting and then entering politics a bad thing, especially when the market compels you to do so?
The Complexities Behind ‘The Revolving Door’
Recently, it was revealed that Purdue Pharma, the shameful pharmaceutical company responsible for the rise in opioid abuse, received consultation from the one and only McKinsey & Company, the world’s most prestigious management consulting firm and a coveted job destination for college graduates. McKinsey helped specifically in marketing Purdue’s Oxycontin painkiller drug and pricing strategy to help shore up sales. Of course, on McKinsey’s website, the firm calls for ‘bolder action to combat the opioid epidemic’ — which they directly contributed to exacerbating.
Now, if a first-generation college student coming from a low-income background is presented with a job offer from McKinsey & Company in which they will earn a base salary of $85,000 a year, the financially sound choice is to obviously take it. But the morally sound choice may be more ambiguous. It probably depends on how much Ayn Rand they read.
Corporate law, the largest feeder into the political system, is no different. After law school, newly minted law school graduates who are qualified and lucky enough to join a BigLaw firm as an associate enjoy six-figure salaries but are also subject to immense amounts of grunt work for senior associates and partners, sky-high billable hour quotas, and treacherous work-life balances. If they stay in it long enough, however, they get to directly represent some of the most powerful corporations and institutions in the world. Yay. They will defend the most malicious actors, including Exxon, AIG after the financial crisis, and BP in the aftermath of the Deepwater Horizon Spill, among others. In other words, BigLaw is the army defending the big and powerful. Even Jeffrey Epstein needs a lawyer and if you think he stops anything short of being represented by one of the most prestigious BigLaw firms you would be wrong. The lawyer who defended Epstein actually served in both Bush administrations, fun fact.
It’s no surprise that BigLaw corporate lawyers will become involved in matters where they facilitate malicious things — someone has to represent the villains in court. But what is troubling is how BigLaw feeds into our political system.
Right?
Speaking from experience, when you read the Wikipedia biographies of most new faces in politics, odds are that you will find out about their stint at a BigLaw firm. In the Trump administration that promised to ‘drain the swamp,’ there were 75 corporate lawyers in key positions that posed ‘revolving door concerns.’ Corporate lawyers also were in charge of nearly every major division of Trump’s Department of Justice. In the Biden transition team, half of his Department of Justice agency review team features corporate lawyers from BigLaw. Biden’s recently announced Chief-of-Staff, Ron Klain, is also a former partner at a BigLaw firm.
BigLaw is a feeder into the Democratic Party, especially. It’s no coincidence that corporate law firms are mostly liberal-leaning and consistently max out their donations to Democratic party candidates. The level of influence that a donor network could have on someone’s platform has been well-documented and is no different for an ex-corporate lawyer looking to attract BigLaw’s donations to his campaign for political office. But what about the ex-partner at a BigLaw firm who looks to enter government in obscure yet influential appointed positions in the Federal Trade Commission? Or in the case of finance, someone who was a former co-head of finance at Goldman Sachs heading the commission that regulates U.S derivative markets which Goldman operates in?
Both of these examples are the real-life cases of Richard Feinstein, the former Director of the Bureau of Competition in the FTC, and Gary Gensler who was the chairman of the Commodity Futures Trading Commission (CFTC) under Obama for five years. Feinstein, who now defends corporate mergers and works in the antitrust division at Boies, Schiller, and Flexner, oversaw a period of massive corporate consolidation and anti-competitive mergers in tech in particular, while Gensler was an unexpectedly fierce regulator who became credited with reviving the CFTC’s efforts to regulate financial markets.
Contrary to what many think, judging the conflict of interests that a ‘revolving door’ between government and the private sector may highlight is not black and white. Whether defending malicious corporations for years conditions one to think differently on matters of regulating them depends from person to person. For Congressman Ro Khanna, who spent five years at O’Melveny & Meyers before joining the government there is seemingly zero conflict of interest standing between him and holding corporations accountable. Former DOJ Deputy Assistant AG Carl Shapiro, meanwhile, now consults for Google and Intel after watching them grow in market power when he was in a position to enforce antitrust laws.
I could give countless examples and counterexamples of where the ‘revolving door’ between government and BigLaw, finance, and consulting goes wrong, with there being more of the former than the latter. But ultimately, the aggregate effect of people’s private sector experience on their government experiences is obvious, yet at the same time unclear. Judging by the interests that our government prioritizes, it may be safe to assume that most who enter government through the ‘revolving door’ are more corporate-friendly than others. Despite this assumption, one cannot always be written off because of their Wikipedia biography. They should be written off because of what they do. What has their record in government been like? What have they written? What have they said on certain policy matters? Have they changed their mind before? Asking these questions about former administrations’ appointees and the incoming Biden administration’s appointees is the closest we can get to understanding whether they governed well or how they might govern.
The trouble is not whether an individual official has come from BigLaw, finance, or consulting. The real trouble is the proportion of government positions that are filled by former members of firms in these sectors because it results in a government that has little exposure to the problems that people in the area between New York City and San Francisco experience. The trouble ultimately lies in the concentration of power that firms within these sectors possess.
As long as BigLaw, finance, consulting, and now tech, with the incoming administration, pump their people into government with every administration, things are unlikely to change much. Even though there are examples of righteous actors who come from the aforementioned sectors who aspire for constructive change, the ‘revolving door’ is still destructive because it reflects our country’s impenetrable power structures that define who truly makes an impact.
Hate the players. But hate the game more.
Hating the game means understanding the incentives at play that drive our most talented towards engaging in distributive economic activity rather than creative economic activity, right out of undergrad. The smartest undergraduates are incentivized to move to New York City or San Francisco to sell derivatives that simultaneously crash the U.S housing market while enriching some investors. Or to consult a pharmaceutical company on how to better market addictive opioids. The smartest law students are incentivized to help defend the banks, consulting firms, and corporations in case they are prosecuted in the former scenarios I just described. All of these activities are examples of distributive economic activity because they circulate money upward or within the same elite circles, rather than create economic opportunities for people.
Creation should be emphasized over distribution, which won’t happen until the incentives change. How this happens is another newsletter for another day. Until the incentives change, if they ever do, you can complain on Twitter about Joe Biden’s appointees being ex-Blackrock advisors all you want — just know it won’t do much.
Note: Of the two concluding sentences I thought of, I chose the more pessimistic one. Positivity is too corny. I just couldn’t do it.