Steven Pearlstein: Blame for financial mess starts with the corporate lobby
Another great week for Corporate America!
The economy is flatlining. Global financial markets are in turmoil. Your stock price is down about 15 percent in three weeks. Your customers have lost all confidence in the economy. Your employees, at least the American ones, are cynical and demoralized. Your government is paralyzed.
Want to know who is to blame, Mr. Big Shot Chief Executive? Just look in the mirror because the culprit is staring you in the face.
J’accuse, dude. J’accuse.
You helped create the monsters that are rampaging through the political and economic countryside, wreaking havoc and sucking the lifeblood out of the global economy.
Did you see this week’s cartoon cover of the New Yorker? That’s you in top hat and tails sipping champagne in the lifeboat as the Titanic is sinking. Problem is, nobody thinks it’s a joke anymore.
Did you presume we wouldn’t notice that you’ve been missing in action? I can’t say I was surprised. If you’d insisted on trotting out those old canards again, blaming everything on high taxes, unions, regulatory uncertainty and the lack of free-trade treaties, you would have lost whatever shred of credibility you have left.
My own bill of particulars begins right here in Washington, where over the past decade you financed and supported the growth of a radical right-wing cabal that has now taken over the Republican Party and repeatedly made a hostage of the U.S. government.
When it started out all you really wanted was to push back against a few meddlesome regulators or shave a point or two off your tax rate, but you were concerned it would look like special-interest rent-seeking. So when the Washington lobbyists came up with the clever idea of launching a campaign against over-regulation and over-taxation, you threw in some money, backed some candidates and financed a few lawsuits.
The more successful it was, however, the more you put in — hundreds of millions of the shareholders’ dollars, laundered through once-respected organizations such as the Chamber of Commerce and the National Association of Manufacturers, phoney front organizations with innocent-sounding names such as Americans for a Sound Economy, and a burgeoning network of Republican PACs and financing vehicles. And thanks to your clever lawyers and a Supreme Court majority that is intent on removing all checks to corporate power, it’s perfectly legal.
Somewhere along the way, however, this effort took on a life of its own. What started as a reasonable attempt at political rebalancing turned into a jihad against all regulation, all taxes and all government, waged by right-wing zealots who want to privatize the public schools that educate your workers, cut back on the basic research on which your products are based, shut down the regulatory agencies that protect you from unscrupulous competitors and privatize the public infrastructure that transports your supplies and your finished goods. For them, this isn’t just a tactic to brush back government. It’s a holy war to destroy it — and one that is now out of your control.
For years you complained bitterly about the uncompetitive nature of an employer-based health-care system, the inexorable rise of health insurance premiums, the folly of medical malpractice and the unfair burden of having to subsidize the uninsured. But when your lobbyists and your bought-and-paid-for politicians had the chance to cut a deal that would have given you most of what you asked for, they walked away.
For years you complained bitterly about rising federal budget deficits and a corporate tax code that was too complex and burdensome. But when your crew had the chance to strike a grand bargain that would have fixed both those things, they not only rejected it but insisted on creating an unnecessary crisis that triggered a credit downgrade of U.S. Treasurys and a roller-coaster ride for stocks.
Please don’t tell me about your mealy-mouthed letter warning Congress not to play politics with the debt ceiling. By that point, the Frankenpols you created were not interested in your advice. The only thing that might have got their attention was a threat to cut off the flow of political money. You didn’t — and now they know they can ignore you with impunity.
I wonder how many of your fellow members of the Business Roundtable would accept a credible budget-balancing deal that had $10 of spending cuts for every $1 of tax increases. My guess is they all would. And what about the presidential candidates in the new, improved Republican Party that you helped create? In last week’s Iowa debate, every last one of them promised to veto such a deal. Good luck with that!
Remember way back last fall when your big concern was with regulatory uncertainty, which you continue to use as the excuse for letting all those profits build up on your balance sheet rather than investing in equipment or hiring workers. Whatever uncertainty you can pin on the Obama administration and the Democratic Congress now looks like small potatoes given the uncertainty caused by your political shock troops as they challenge every new regulation all the way to the Supreme Court. They’ll try to prevent or roll back implementation of others with appropriations riders, just like they did with the Federal Aviation Administration — and we know how well that worked out.
In your name, they are also refusing to confirm nominees to dozens of key vacancies in the executive branch and independent agencies. Among them is President Obama’s choice for Commerce secretary, John Bryson, who for 18 years was chief executive of the largest electric utility in Southern California and served as a director at Boeing and Disney. His sin, apparently, is that he was co-founder of a respected environmental organization, the Natural Resources Defense Council, and — get this — actually believes the scientific community when it says global warming is a problem.
I can just hear it now: “Mr. Bryson, are you now, or were you ever, a member of an environmental organization?” How does it make you feel to know that you’ve helped to revive McCarthyism in American politics?
Your culpability, however, extends beyond the breakdown in Washington.
For the past 30 years, there has been a steady financialization of the American economy in which the interests of so-called shareholders have become the single-minded focus of large corporations, to the virtual exclusion of the interests of customers, employees and the society at large.
Early on, some of your predecessors were willing to put up a fight against the Wall Street cabal, but in time they bought you off with exorbitant perks and pay packages that nearly rival their own. This occupation of Main Street by Wall Street was confirmed again last week as anonymous traders and hedge fund managers went on a riotous spree, wielding false rumors and high-frequency computerized trading to loot pension and retirement accounts and rob consumers and real investors of whatever confidence they had left.
I suppose there are some schnooks who actually believe that those wild swings in stock prices last week represented sober and serious concerns by thoughtful, sophisticated investors about the Treasury debt downgrade or European sovereign debt or a slowdown in global growth. But surely such perceptions don’t radically change each afternoon between 2 and 4:30, when the market averages last week were gyrating out of control.
The only credible explanation for that is speculation, herd behavior and market manipulation by traders looking to make a quick million — financial wiseguys who could not care less what impact it might have on the real economy. And other than J.P. Morgan’s Jamie Dimon, I didn’t hear a peep of protest from you on CNBC, or a speech to the Economic Club of Chicago or even a simple letter to the editor of the Wall Street Journal. A cameo appearance at the White House doesn’t quite cut it.
It’s not just that you have remained silent as the financial sector has sucked away much of the profit generated by the private sector, stolen away much of the nation’s best talent and transformed the process of capital allocation and formation into a casino. Even worse, through organizations such as the Chamber and the Business Roundtable you reflexively provided them with crucial political support that allowed them to beat back regulators who tried to restrict their growth, curb their risk-taking or put a stop to the kind of fraudulent activity that nearly sank the recovery, and from which it will take years to recover. Given your role in society and in the economy, your silence amounts to complicity.
The truth is you’ve become them. Instead of focusing your attention and ingenuity in developing new products and services, you’re spending most of your own time on financial engineering — buying up companies at one moment because of synergies and cost saving, then spinning them off the next moment because they no longer fall in to your “core mission.”
The big innovation at Kraft these days is to separate its over-processed food (Jell-O, Velveeta, Oscar Meyer) and unhealthy snacks (Cadbury chocolates, Oreo cookies, saltine crackers) into two companies.
Conoco-Phillips, which embraced hyphenation when it decided to merge into a vertically integrated oil company, has now decided that the world would be a better place if it spun off its refining and distribution business from exploration and drilling.
And let’s not forget Medco, the pharmacy benefit manager, which was bought and then spun off by Merck into an independent company again until it was scooped up by Express Scripts, one of its biggest competitors.
I’m not exactly sure how we’re going to generate more jobs and generate stronger growth in this country, but I’m fairly certain those kinds of bold initiatives aren’t going to do the trick.
Hey, but don’t worry about us. Enjoy that fly fishing in Montana. You deserve it.