Reaction Is Swift, but Does It Run Deep?
Our slumbering government has stirred. A few supposed corporate “perps” have been humiliated and dragged off to face the music. The president and Congress have lumbered into action, claiming ignorance and professing wisdom at the same time. So we’re feeling better about the business of business.
And as for the markets? Well, they’ll just have to take care of themselves.
Not so fast.
Even when you’re in its stranglehold, history has a propensity to collapse around itself. Weighty problems boil over day after day, and the sludge gets reduced to a single idea or phrase, like “corporate greed” or “Watergate.”
That’s how society manages information overload. But before we get too far down this path, we still have time to ask: Have we gotten to the heart of the problems in our free-enterprise system? Or are we like the family that finds termites in the house and settles for a fast coat of paint?
No, I’m not an expert on these matters, but look what a slaughterhouse mess the experts have made of things. I’m just one of millions who dread the upcoming quarterly statement on my 401(k), and I don’t think we’re getting our money’s worth in the payback of reform.
What bothers me most about the halfhearted response from Washington is the official supposition, the shared and rigid ideology, that things are supposed to work this way. Businesses grow and collapse; stocks go up and down, the unrestrained free market will take care of our collective interests.
Really? The very best we can devise is an economy that periodically creates handfuls of winners and millions of losers?
Those house rules might have been acceptable when the markets were casinos for wealthy elites. But now the rest of us have been dragged in, with our retirements. Remember, 1% of the population holds almost 40% of the wealth these days. Which leads to this matter of “executive compensation.”
The only way to attract talent is to pay these folks fortunes--yes, real fortunes. Or so we’re told. I guess we’re supposed to believe that they will stay home and pout if they don’t get $100 million?
As I said, I’m no economics theorist. But I know a little about human nature. It seems pretty clear that the single-minded, and plainly mindless, competition for money brings out the worst in people. Yet for all the hot air in Washington, we’ve heard barely a peep of protest about those ongoing tax cuts that will benefit these same income elitists the most--the richest 1% and the rest of the top fifth of our population, which has already amassed all but 17% of all the personal wealth in the U.S. For all the talk about reform, the reigning law of the land means that rich executives can expect only to get richer.
Oh, but the new threat of prison terms for white-collar crimes will keep people in line from now on. Well, I’m a law-and-order man and I’m all for getting tough on criminals. And I’m sure that finaglers will be more cautious now.
But let’s not forget Michael Milken, whose outrages made him one of the few Wall Street scammers to actually pull prison time after the last round of business scandals. Since then, he has become a philanthropist, and I see he’s back in the news raking in more money from a fresh stock offering.
Likewise, we can presume that the government’s vaunted new accounting board will get us only so far. I stumble right away on this matter of stock options, which clearly fueled the fire under a good number of cooked corporate books.
Yet Congress and the president both have resisted the common-sense idea that options should show up on the ledger as an expense. They’re too complicated to include in corporate statements, we’re told.
In truth, the value of stock options are no more difficult to calculate than gas mileage. Any option holder in America who couldn’t figure the value in a heartbeat using nothing more than a drug-store calculator doesn’t deserve to receive them. Corporations simply don’t want to disclose these costs because profits will look weaker if they are more forthright, which I thought was the aim of accounting reform in the first place.
A cynic would say there is a simple reason that the government hasn’t dug deeper or acted more boldly: Today’s politicians are either part of the wealthy elite or are beholden to them for political donations.
Oops, wait, I almost forgot. Congress and the president dealt with that crisis and “reformed” the campaign finance system last March, didn’t they?
