NEW YORK – Fox Business has gleefully reported that former US President Barack Obama will accept $400,000 from the Wall Street investment firm Cantor Fitzgerald to speak at a health-care conference this September. Those most disappointed by this news include people whom I hold in high regard. For example, Senator Elizabeth Warren says that she is “troubled” by Obama’s decision, and Senator Bernie Sanders finds it “distasteful.” But Obama’s decision, I believe, does have some redeeming features.
I have met Obama twice, and was struck on both occasions by his natural warmth and grace. The first time was on November 7, 2010, when then-Indian Prime Minister Manmohan Singh hosted a dinner for Obama at his New Delhi residence. At that time, the Indian economy stood out for having recovered quickly after the 2008 financial crisis. When Singh introduced me as the Chief Economic Adviser of the Government of India, Obama showed his facility for repartee. He pointed to his treasury secretary, Timothy Geithner, and told me, “You should give this guy some tips.”
Our second meeting came in January 2015, a few weeks before Obama would make another official visit to India. Obama’s advisers invited me to the White House to brief the president on the state of the Indian economy, as part of a three- or four-person discussion on Indo-US relations. That meeting is now one of my most memorable ever, because I think Obama took the advice that I offered. That alone encourages me to offer him another bit of advice, now that he has accepted the controversial speaking fee.
Obama’s arrangement with Cantor Fitzgerald is a clear demonstration of how business economics has changed in the last few decades. In this age of globalization and information overload, everyone is scrambling for everyone else’s attention. That special hamburger on your restaurant’s menu is of no value if people do not know about it. With so many producers vying for customers’ attention, marketing and endorsements have become all the more important – and expensive.
What is true for burgers is also true for consultancy and financial-services firms. Brands and communication now occupy a more elevated place than in any previous era. If you can signal to people that something about your company is special in today’s digital, globalized world, you can rake in large profits.
For Cantor Fitzgerald, hosting a fresh former president serves as such a signal. The firm cut a deal with Obama, by offering him a share of its soon-to-be expanded pie. If Obama had asked for a much lower fee – say, $50,000 – he would have avoided criticism, but by handing a Wall Street investment firm an extra $350,000.
Of course, some observers will simply treat Obama’s appearance at the September conference as an endorsement of Wall Street – a downside that should concern him. To be sure, if Obama had accepted an invitation from the National Rifle Association, no one could view his decision as anything but a betrayal. But Wall Street is different, because it is an integral part of the new world economy, and cannot simply be excised. It needs to be repaired, with carefully crafted solutions.
Companies started using former presidents to boost their brands in the 1970s, and the practice became starkly visible after Ronald Reagan accepted $2 million from a Japanese company to deliver two lectures. At the same time, the value of producing the good or service to be sold has diminished in relative terms, as marketing, advertising, and deal making have become top priorities. This is obvious in the fact that CEOs today make 200 times more than their company’s typical worker, whereas in the 1950s, they made only 20 times more.
It is heartening that some people whom the system has enriched agree that it needs to change, and even advocate for that outcome. They are confronted with essentially the same question that the philosopher Bertrand Russell asked in his controversial 1932 essay for the New York American: “Should Socialists Smoke Good Cigars?” (For the record, Russell’s answer was yes.)
Still, more people need to recognize that the changed world economy has given rise to extreme inequalities that, like excessive CO2 emissions, constitute a “public bad.” And they need to acknowledge that the task of reducing inequality, like fighting climate change, cannot be left to the market. We need smarter regulations, higher taxes on the rich – which is the opposite of what US President Donald Trump wants to do – and targeted limits on corporate honchos’ incomes relative to their workers.
For the most part, our current predicament is not the fault of any single person or group. But developing and promoting a progressive agenda is now a collective responsibility. My answer to Russell’s question is that, in a poor country, idealists fighting for greater equality should try not to smoke expensive cigars; but if they are hopelessly addicted, they must not give up their idealism just because they cannot give up cigars.
The same goes for Obama. He must continue to criticize Wall Street and the systemic trap that we are in. Now that he has accepted the $400,000, he should use it to fight inequality and to promote a more progressive agenda, so that his successors do not even receive such offers. Kaushik Basu, a former chief economist of the World Bank, is Professor of Economics at Cornell University.
By Kaushik Basu