The Greed Patrol Is Back

Poor George W. Bush. It’s the family curse, a mangled strand of Kennebunkport DNA: Getting splattered, smack in the middle of a presidential term that otherwise seems to be going pretty well, by the fallout from an economic downturn that isn’t his fault.

Ten years ago, they jeered at his father--”It’s the economy, stupid!”--even though, in the 1992 election year, the country was slowly emerging from a recession (linked to a stock market crash that had long preceded his presidency), not entering one. This time around, the market started to tumble--and the corporate accounting in some places started to go funny--in early 2000, months before butterfly ballots, the “Grecians” and the rest of it. Nonetheless, liberal pundits insist on linking both the current weak economy and the continuing Enron/WorldCom/Arthur Andersen/Merrill Lynch horror show to Bush fils, in particular, and to conservative policymakers, in general.

Here is Salon magazine in high moral dudgeon: “As the stench of corporate rot grows thicker across the land, more Americans are coming to the grim realization that the Bush presidency is part of the problem, not the solution.” Bush’s 1990 sale of his Harken Energy Corp. shares--an action the Securities and Exchange Commission cleared of insider-trading implications in 1993 during the Clinton presidency--has been trotted out in yet another effort to prove that Bush and his fellow Republicans must have something to do with today’s bad economic news. We get sententious moralizing from American Prospect’s Robert Kuttner in the Boston Globe: “The career of George Bush himself epitomizes the kind of self-dealing and insider enrichment that men like [former Enron CEO] Ken Lay and [former WorldCom CEO] Bernie Ebbers raised to new heights. Bush can tactically shift his current policies, but he can’t erase his own record.”

And the word “greed” is back. As in “decade of ... “--remember the 1980s? The G-word had been on an eight-year vacation after being worked to exhaustion by pundits during the administrations of Ronald Reagan and Bush pere. Salon again, like a broken record: “Republican excess and Gilded Age greed.”

The plain fact remains that what we are witnessing in this summer of ugly corporate revelations is the unraveling of a Clinton-era phenomenon. Back then, in the late 1990s, it wasn’t called “greed.” It was called “prosperity.” It was the linchpin of a phenomenon called the “new economy,” based on the promise of a never-ending, wealth-creating high-tech explosion, and everyone wanted a part of it. Your kids’ baby-sitter did a little day-trading on the side. Nearly everyone else withdrew, borrowed, dug out from under the mattress or stole every dollar he could lay his hands on and threw it into the stock market, which duly soared. In January 2000, the Dow Jones industrial average reached an all-time high of 11,722.98, and the Nasdaq composite index peaked in March at 5,048--more than three times its value today.

A Santa Ana wind of hype blasted through the land. When WorldCom’s stock, now trading between 12 and 20 cents a share, hit $60 in 1999, CNBC reporter Maria Bartiromo yelped with glee from the New York Stock Exchange floor, “Folks, how high can we go?” Talk about excess: Overjoyed Americans treated themselves to PT Cruisers, gated-community McMansions, personal trainers and Prada handbags--or earned good money supplying the newly rich with fine wines, maid service, estate planning, liposuction, feng shui bathrooms, whatever they wanted. The new economy was a job machine if nothing else, and everyone benefited, high and low.

There was no one more eager to take credit for all this than President Clinton. At the 2000 Democratic Party convention, he played the rave master to roaring crowds of fans, promising that the party would go on forever if Americans would only vote for Al Gore. “Are we going to keep this progress and prosperity going?” he called out to wild cheers and applause. “Yes!” they shouted. “Yes, we are!” chanted back the happy-talking Bill. Greed was good in August 2000, because it had a new twist: Democratic excess. Not surprisingly, Lay contributed to Democrats as well as Republicans during the 2000 election. Few of the liberal intellectuals who had groused about corporate acquisitiveness during the Reagan years were heard to complain about the exact same phenomenon during the Clinton years.

Much was wrong with the mind-set of the new economy, including the notion that there was any such thing as a “new economy.” One false assumption was that there would be no down cycle in the ever-expanding waves of high-tech prosperity, so it was safe to build or buy a vast infrastructure (via vast debt) now and wait for the inevitable huge profits to roll in later. Then, to keep your investors (read: Wall Street) happy in order to attract the capitalization to qualify for credit, you had to show constant “growth” by some means or other. This did not require offbeat accounting practices, but the temptation was there. And although fiber-optic networks are the coming thing, there is a capacity glut, at least for now. A paradigm new-economy enterprise, Qwest Communications International Inc., seems to have fallen into every new-economy pitfall: $26.4 billion worth of debt, miles of never-used fiber, a stock slide from $66 to $1.77 in two years, coupled with quarterly losses totaling $5.2 billion, and now, an Enron-like criminal investigation into manipulations of its balance sheet.

There seems to have been plenty of wrongdoing all around, at Qwest and elsewhere. It seems nefarious to help yourself, as Qwest’s ex-CEO Joseph Nacchio did in 2001, to $101.7 million in salary, bonuses (for what?), exercised options and so forth when your company cannot make a nickel, and the jobs and pension plans of 57,000 modestly compensated employees are on the line. And George W. looked stupid, or worse, when, defending a Harken overstatement of earnings while he sat on its board in 1989, he declared Monday, “I still haven’t figured it out completely.” (He made up for the gaffe on Tuesday by promising tough measures to “end the days of cooking the books” at corporations.)

The underlying problem, however, isn’t Bush or Republicans. It is, instead, us. Greed, the itch to get rich, is a constant of human nature, not its most attractive feature (Christian theology brands it a deadly sin), but a feature nearly impossible to eradicate. As Adam Smith pointed out, that can be a good thing, for acquisitiveness is the engine that fuels capitalism, creating jobs and making possible the current unprecedented U.S. prosperity, even in today’s economic downturn, which has, so far, proved to be very mild. When we can grab a little of that prosperity for ourselves--let loose our own greed, so to speak--as we did during the 1990s boom, we like it fine.

We should not forget, though, that greed does have a deadly, venomous side that can spawn lying, cheating, looting the corporate treasury and chiseling employees out of the comfortable retirements they deserve, as is alleged to have happened at Enron. To curb these ills, we need a stringent network of criminal sanctions and enforcement mechanisms and a culture in U.S. business that rewards the honorable. Blaming the president, or his father, or the political party to which they belong may vent the steam of outrage, but it’s not going to help.