Out of Thin Air: Techniques in Upper Class Wheeling and Dealing: An Exposition
I'd like to briefly discuss a phenomena in corporate finance and law that I am going to call kamikaze capitalism. What I mean by that term is this: You (whoever 'you' may be) start a kind of... phantom enterprise, let's call it, that attracts loads of IPO dollars yet never has any capability or intention of offering the public a good or service of any kind. You have put together the enterprise---we can, in fact, call this literal paper entrepreneurialism---for the sole purpose of deceiving investors and making money. The way I interpret things, you are creating a paper enterprise for the sole purpose of crashing it.
But wait, here's the cute part: You do it in a way that makes it look like you have been personally damaged as well by the "surprising failure" of the company. But what you are really doing is, in a sense, "faking your own death." Let me explain.
I have a question for you. Have you ever watched C-Span and caught one of those congressional hearings, in which a people's representatives are questioning some CEO of a company that went bust under dubious circumstances? In other words, the scent of fraud is in the air, and it seems to be emanating from somewhere in the direction of him, the aforementioned CEO.
As he answers questions, you may have noticed that there is a line that the CEO (or former CEO more likely) comes back to, again and again, like some kind of safety blanket. He says, "I kept my stock." By saying this he wants to communicate to the public that whatever shenanigans were going on at his company caught him, the CEO, completely by surprise. By saying that he kept his stock he wants the public to understand that he, the CEO, never had anything but complete "faith" in the company, that he never believed that it was anything less than what he had always represented it to be.
Now, it is incumbent upon this CEO to say over and over again that he "kept" his stock in the company. That is because there are individuals and groups putting pressure on him for some kind of recompense. They believe that they were sold their stock in bad faith, that perhaps some critical information about the company had been deliberately withheld from them.
Here's a technique of kamikaze capitalism pioneered by Goldman Sachs.
Hypothetical Scenario: Suppose you (whoever "you" may be) started an Internet company, or telecommunications company, or some such. You issue an initial public offering (IPO) and your company's shares soar, head for outer space, man! Suddenly, your company, and in a sense, "you," are "worth" one billion dollars, let's say. But you have no cash in your pocket. Remember, the IPO is the investment in your company's shares not the return on investment (1).
If your stock collapses, you end up with nothing. But, if you sell a lot of your own stock, you might signal the market that the stock is headed for a downturn and that its time to sell. You don't want to do that. What you would like to do is, somehow, parlay that IPO into cash in your pocket without setting off the alarm bells in the market. What you would really like to do is sell your stock without selling your stock. That's right, I said you want to sell your stock WITHOUT selling your stock (2).
While this may sound metaphysically impossible, I assure you it is not. It turns out that one can separate legal ownership of stock from economic ownership of stock.
Step One: Deposit your shares with Goldman or some other investment house.
Step Two: Sign a contract that says that the bank, the investment bank, gets all of the capital gains on the shares if they go up in value.
Step Three: The investment bank loans you more than 90 percent of the value of the shares at 1 percent interest annually.
Step Four: You use that money to buy a diversified portfolio of stocks and bonds, which you have to hold in an account in the investment bank.
Step Five: You have now removed yourself from the risk of having all your wealth tied up in one place, while at the same time being able to "legally" represent to investors that your fortunes, like theirs, are indeed tied to the success or failure of the company (3).
"You have also," wrote David Cay Johnston, "replaced your Internet shares that did not pay a dividend with a mix of stocks and bonds that pay dividends and interest both to cover Goldman's fees and to put spending money in your pocket" (4).
But wait there's more!
Goldman Sachs, then, goes out and short-sells your company's stock in the market, something that you, as the head of a publicly traded company, are prohibited by law from doing. Remember, you are still bound by the agreement to give Goldman the capital gains of the stock. But with this short-selling Goldman has covered themselves on the other end as well. In other words, they make money if the stock price goes up, and they make money if the price falls (5).
Notice something here: Goldman may not KNOW that the company is a scam; the investment house may not WANT to know that the company is a scam; they may not CARE that the company is a scam. Whether the company is a scam or not, Goldman Sachs is covered on both ends.
Notice something else, rather insidious, here: The person founding the phantom enterprise in the first place is probably at least moderately wealthy to start with. After all, you know what they say: "It takes money to make money on Wall Street." This is somebody that we probably don't need to hold any telethons for.
I don't mean to say that everyone who starts a tech company, issuing an IPO, is perpetrating a scam. Such an assertion would be ridiculous. I am sure perfectly "honest" people start these kinds of companies with the full and sincere intention of providing a good or service that will make all of our lives better. I'm sure they issue the IPOs in good faith, but for whatever "perfectly legitimate" reason, they need extra funding for something or other, and so, engage in the process I have outlined.
First of all, what does it say about an economic system that compels deceptive behavior even from "perfectly honest, legitimate" people?
Secondly, I strongly suspect (and would be surprised if this wasn't the case) that this process, utilized with a more cynical spirit by financial wheeler-dealers, contributed mightily to the dot.com boom and bust of the late-1990s in the United States.
Nobel-prize winning economist and former Clinton administration official, Joseph Stiglitz, talked about the end of the bull market and the bursting of the dot.com bubble in one of his books. In March 2000, the NASDAQ Composite Index (of tech stocks) peaked at 5, 132. Stiglitz then wrote: "The next few years confirmed suspicions that the numbers were unreal, as the stock market set new records for declines" (6).
Stiglitz did not say this, but what that quote makes me envision is hundreds, or thousands of phantom tech companies having popped up, folded, and disappeared like tents, their sole intention having ever been to make money from the manipulation of the stock price, again, in the manner of what I characterize as "kamikaze capitalism."
Stock options. I would imagine that these phantom technology enterprises used this mechanism of corporate finance to boost their stock price further. We do know that household name companies---such as Microsoft, Starbucks, Cisco, Intel, Yahoo!, Enron, Worldcom, Adelphia, and many others---used stock options to either greatly limit reportable losses and massively enhance their profits (7).
A stock option is the right to buy company stock at below market prices, while pretending that nothing of value has changed hands (8). Without going into details, let me just say that if the going rate for a company's stock is $4 a share and the price rises to $8 dollars, your capital gain (investment profit) is $4. If I give you an "option" to buy it at below the market rate, say $2, when the share price rises to $8, your capital gain is more, it is $6. That's all this is.
Mind you, this is an "option," somewhat sublime. No actual stock is issued until it is exercised, that is, sold, which might be several years down the road (9). But I would imagine that these phantom, kamikaze operations I'm talking about are not looking "several years down the road.
Anyhow, the cute part about stock options are that they do not have to be accounted for as expenses, something the firm had spent or a liability it had incurred in order to do busines that year. By 2001 options accounted for about 80 percent of the compensation of American corporate managers. If Microsoft had been required to acknowledge the value of the options they issued that year, the effect would have been to reduce the company's profits by one third (officially $7.3 billion). The same mechanism allowed Starbucks and Cisco, among other organizations, to boost profits by 20 percent or more. Intel's profits would have been cut to one-fifth from the $1.3 billion to $254 million. Yahoo!'s losses would have increased tenfold from $983 million to $9.3 billion (10).
"Enron, WorldCom, and Adelphia were only the most flagrant and well publicized," wrote Joseph Stiglitz, "of many companies where the vaunted energy and creativity of the nineties would eventually be directed less and less into new products and services, and more and more into new ways of maximizing executives' gains at unwary investors' expense" (11).
I think Dr. Stiglitz was slightly mistaken here. Given what we've been discussing, I think it is more accurate to say that much of what passed for "the vaunted energy and creativity of the nineties" was actually largely fuelled by the frenetic activity of the kamikaze capitalists, who created paper companies for the sole purpose of making profit by stock market manipulation, and had never had any intention of actually providing a good or service for sale on the market. I believe that this is what was behind the fact that the stock market "set new records for declines" after March 2000. There was not ever a lot of "there" there.
Why is this the case?
The best, most cogent and succint answer I've ever heard comes from author and activist, David C. Korten. Korten wrote: "Finding ways to create new value in a sophisticated modern economy is seldom easy. Finding ways to create new value that will produce returns in the amount and with the speed demanded by a predaory financial system many times larger than the productive economy is virtually impossible. The quickest way to make the kind of profit the system demands is to capture and cannibalize existing values from a weaker market player" (12).
David Korten was specifically talking about leveraged buyouts there, but the quote applies to our topic. What he specifically meant, there, by a "weaker market player," is a company vulnerable to a leveraged buyout or hostile takeover.
But, for our purposes, "a weaker market player" should be understood to be the general public, because institutional investors handling worker pension funds, may be conned into investing in those phantom enterprises, whose raison d'etre is to make money through stock manipulation.
All of this, of course, gives the lie to something called the Efficient Market Hypothesis. The Efficient Market Hypothesis says that at every moment shares price themselves in the market by attracting the input of all information relevant to their values. More price changes depend on more information coming in (13).
The thing is that this "all information relevant to their [stock shares] values" presumed to be HONEST information. But as we have seen, from the general "inferred" (14) case study we've been considering, the very process of incorporation, "taking a company public," at least at times, compels you to provide FALSE information to the market. Moreover, this system of incorporation seems to be ripe for cynical manipulation through the process of deliberate, scamming phantom entrepreneurialship we've been considering.
I think the fuel that ennables this system of predatory phantom entrepreneurialship, we've been considering, is the American system of patents. Its a broadly held conclusion, by software development engineers in Silicon Valley and other commentators, that the American system of awarding patents is "broken" (15). For me, whether the American system of patents is "broken" or not, it seems to me to be founded upon a very flawed underlying assumption. Narrowly speaking, it is a concrete manifestation of the cultural triumph of the Objectivist, Ayn Randian, "Who is John Galt," lone, heroic genius entrepreneur surrounded by a lazy, ungrateful populace and a greedy, parasitical government bureaucracy mythos, blah, blah, blah...Okay.
The very flawed underlying assumption I'm talking about is the notion that there is any such thing as a wholly original idea. As you know, this current phase of capitalism that some refer to as neoliberalism, obsesses over the matter of intellectual property: Don't steal my idea!
There's a very good documentary movie you can watch on YouTube called "The Smartest Guys in the Room," about the collapse of Enron. The film is based on the book co-written by Bethany McLean and Peter Elkind. There's a point in the movie fairly early where Bethany McLean appears on camera to talk about Jeffrey Skilling, then the CEO of Enron. McLean explained that Skilling had had one crucial precondition that had to be honored before he agreed to take the job: they had to be allowed to use something called mark-to-market accounting.
Now this term, "mark-to-market" seems to have at least two different meanings (possibly more) from what I can tell. But the context in which Bethany McLean used the term in the documentary, talking about Jeffrey Skilling went like this: She said that Skilling believed that once you get a profitable idea, you should be able to "book the profits" from that idea right away. Otherwise, believed Skilling, "some lesser man" would be able to profit from an idea "some greater man had had in the past."
Well, I guess that means that "great" men have brilliant and profitable ideas, and "lesser" men do nothing but try to parasitically bask in the reflected glory of the John Galts of the world, in the Ayn Randian sense.
The first thing to say about all of this is that there is typical hypocrisy at work here, from the American side---which had always been operative throughout the history of capitalism on behalf of the rich, northwestern countries, but is, perhaps, more pronounced today, during this phase of neoliberal capitalism, or what some people call "late capitalism."
Once again we consult a text writting by Nobel-prize winning economist and former Clinton administration official, Joseph E. Stiglitz, where we read: "We scolded the developing nations about their disrespect for intellectual property laws that we, too, had scorned in our days as a developing nation. (The United States didn't get around to protecting the rights of foreign authors until 1891)" (16).
Well, if we apply the wisdom of Jeffrey Skilling, we have to conclude that in our history, before "we," the United States, became a nation of "great" men, we refused to acknowledge the fact that there was any such thing as a wholly original, possessable idea; and we content, as a nation of "lesser" men to bask in the reflected glory of our superiors, and profit from the ideas that "greater [men] had had in the past." But when we became a nation of "great" men, we reversed ourselves, now insisting that there was such a thing as a wholly original, possessable idea.
Another thing that infuses what I call the very flawed underlying assumption of the American patent system, in my opinion, is what I suspect is a general lack of awareness about how nations develop scientifically and technologically, that is, how they become modern, developed, comfortable "First World" countries in this way. The way this happens turns out to overwhelmingly be state subsidy and protectionism.
For example, two researchers, Winifried Ruigrock and Rob van Tulder did a technical study on this question, in the 1990s, finding that 'virtually all of the world's largest core firms have experienced a decisive influence from government policies and/or trade barriers on their strategy and competitive position,' and that 'at least twenty companies in the 1993 Fortune 100 would not have survived at all as independent companies, if they had not been saved by their respective governments,' through bailouts and state takeover (17).
But it goes deeper because the same technical study found that government intervention has 'been the rule rather than the exception over the past two centuries... [and] has played a key role in the development and diffusion of many products and process innovations --- particularly in aerospace, electronics, modern agriculture, materials technologies, energy, and transportation technology,' as well as telecommunications and information technologies in general, and in an earlier period, textiles, steel, and energy. Ruigrock and van Tulder found that government policies 'have been an overwhelming force in shaping the strategies and competitiveness of the world's largest firms.' Other technical studies came to the same conclusion (18).
Just to take one example from the American experience, let's look at electricity. Commercial supplies of electric power began to made available when the state opened up the Manhattan Pearl Street Station in 1882. By 1900, though, the use of electricity in manufacturing was negligible. By 1914 the figure was still below 40 percent. But during World War I (1917-1918) the United States federal government built power plants of unprecedented size. A large number of "interconnections" of electric light and power systems were made (19).
Between 1919-1929 the percentage of electric power used in manufacturing rose from 55 to 82 percent. In 1935 federal subsidies went to bring electricity to the countryside for the first time. During the 1920s and 1930s, the widespread, deep, and consistent use of electricity made devices like vacuum cleaners, dishwashing machines, clothes washing machines, that had actually been invented in the 1850s and 1860s, became practical (and profitably saleable) with electric motors (20).
Aviation and radio were also developed this way in the 1920s and 1930s through the U.S. military system. This was also true of the so-called 'American System of Manufactures,' in which mass production was made feasible by the use of interchangeable parts, which got its start through innovations made by firearm producers under contract to the U.S. War Department. Out of this process came all kinds of new machine tools like milling machines, forging machines, edging machines, and the like, all of which first appeared in the firearms industry (21).
Let's notice something: We're talking about a period of 1882 (when the state opened up the Manhattan Pearl Street Station to unlock commercial use of electricity) to 1935 (when the rural electrification act was enacted, during the Great Depression. That means that people lucky enough to have been born between 1900-1910, would been been in their mature years in the 1920s and 1930s. This means that they would have been available to "get in on the ground floor" of the fantastic commercial opportunities just emerging in aviation, radio, household appliances, interchangeable parts manufacturing (utilized by Ford in the production of automobiles), and machine tools, all initiated by state action.
Remember, we're looking at 1882-1935. Here its interesting to note that of the Fortune 500 corporations on the 1994 list, more than half of them were founded between between 1880 and 1930, with a far smaller number established between 1945 and 1975 (22).
Let me start with an observation: The human brain cannot think of a new innovation or invention every twenty minutes or so.
Because this is true we don't have the situation of every generation having an explosion of technological innovation all over the place, creating entrepreneurial opportunities, fortunes, and thousands of jobs here, there, and everywhere. We don't even have to mention the fact that we live on a planet with finite resources. It is this scenario that accounts for the fact that "[f]inding ways to create new value in a sophisticated modern economy is seldom easy. Finding ways to create new value that will produce returns in the amount and with the speed demanded by a predatory financial system many time larger than the productive economy is virtually impossible," as David C. Korten put it.
The financial system becomes predatory and many times larger than the productive economy when there is not enough productive activity to invest capital in. There's all kinds of reasons for this: limits of the human brain, limits to nature, market saturation, and geopolitical barriers to trade and investment.
This gives us the situation of economic stagnation, which is probably capitalism's natural condition (23), in which vibrant growth and broadly shared prosperity are the exception rather than the rule. Now, what this means is that the corporate sector, both financial and industrial (which also engages in finance to make money), and their helpers---lawyers, accountants, public relations people, the business media and the broader mass media in general, lobbyists, politicians, and the courts, and academic economists---have to do things and advocate doing things which will tide them over between epoch-making generations of exploding scientific and technological innovation (24), which come far between each other because, again, the human brain cannot move that fast; the brain cannot and does not operate at the speed of capitalism.
By the way, it really helps if the religious infrastructure or any institutions that advocate for what are called "traditional values" can support all of this, even portray it as "God's Will" (25).
By "tide them over," I mean maintaining a certain rate of profit, and therefore income and wealth, upon which they have built their careers and lifestyles outside of work of varying levels of expense. It is essential, then, that these "things" the corporate sector has to do be portrayed as either good, neutral, or at worst the unfortunate but unavoidable fallout of free markets and democracy, or what is sometimes called market democracy.
One of these "things" is the kamikaze capitalism which I've been talking about. All of these political, economic, social, and cultural phenomena crystallize in manifestations of the surrealistically absurd in the U.S patent system, which, as I mentioned, is the motor ennabling what I have called, again, "kamikaze capitalism" at the start of this essay.
One of the surrealistically absurd manifestations in the U.S. patent system involves Ken Dart, president of the foam cup maker, Dart Container. Economics reporter, David Cay Johnston, informs us that he owed his family fortune to U.S. patent laws that allowed his company to patent every design detail of every variety of paper cup they produced, and then pursue competitors who dared to make anything remotely similar "in the seemingly generic business of foam cups" (26).
This tactic is called rent-seeking by economists. When an economy becomes overloaded with this kind of activity economists speak of a rentier economy. What's wrong with the U.S. patent system, "broken" or not, is that is it vulnerable to excessive rent-seeking, which, in turn, opens the door quite naturally for "kamikaze capitalism," in which one launches a "phantom enterprise," for the sole purpose of capturing royalties without having the capacity or the slightest intent of actually providing a good or service for the market.
Rent-seeking is one of the things you get when capital perceives a dearth of productive activity. The corporate sectors gets to a place where they feel they need to "milk" what they already have "for all its worth." You've got to use that tea bag over and over and over again.... Okay!
Another example of rent-seeking, which does not involve patents, nevertheless operates on the same "kamikaze" principle. Not to speak ill of the dead, but this involves George Steinbrenner.
During his time in the White House, President Ronald Reagan had wanted to build up the Navy to a strength of 600 ships. This required new vessels to refuel other ships at sea. The Navy awarded a contract for two refueling ships to a Louisiana shipyard. It built the ships on time and on budget. Two other ships were to be built in Philadelphia, but the contractor went broke (27).
George Steinbrenner lobbied to get the hulls towed to his Tampa, Florida shipyard to be completed. A Captain Karl M. Klein, the Navy officer overseeing the contract, flew down to Tampa to have a look at things. 'I was shocked,' Klein said. 'I knew it wouldn't work.' Captain Klein went on to say: 'This shipyard was full of debris. It was literally littered with excess and unusable materials, some of which didn't even belong in a shipyard. There was no indication of any attempt to keep the shipyard clean' (28).
In order to get the contract Steinbrenner had been required to own computer software that scheduled the complex tasks of building a ship to ensure an orderly flow of work and payments to suppliers. But Captain Klein said, 'They had no usable scheduling software.' David Cay Johnston breaks in to say: "More amazing was that Steinbrenner was no newcomer to shipbuilding. He had spent his entire adult life pocketing subsidies under a federal law designed to make sure that the nation had the infrastructure and skills to build ships, even if it was cheaper to build them overseas" (29).
Captain Klein began documenting all of the violations. But Steinbrenner had friends in high places to run interferrence for him, as it were: Senator Daniel Inouye of Hawaii (Democrat) and Representative John Murtha (Democrat), himself a former Marine officer. The Navy was ordered to continue to pay Steinbrenner, who then received an additional Congressional earmark, which sent millions of more dollars his way, despite the fact that the ships were not even close to being completed; furthermore, Steinbrenner wasn't even paying his vendors (30).
Steinbrenner was quoted as having repeatedly said: 'When you buy a shipyard, you hire one welder, one fitter, one painter, and 12 lawyers. In all the Navy paid out more than $450 million for two hulls rusting on the James River, for work that was never completed, in other words (31).
I just can't resist mentioning, here, the novel by the late Mario Puzo, "The Godfather." There is a line in there when Don Vito Corleone, the head of the Corleone Crime Family was scolding his oldest son, Santino ("Sonny"), who had been caught in an act of uncomfortably visible law-breaking. Don Vito Corleone said, "Don't you want to finish school? Don't you want to be a lawyer? A lawyer can steal more money with a briefcase than a thousand men with guns and masks."
Anyhow, The Senate Permanent Subcommittee on Investigations held a hearing in 1995. Captain Klein showed up, all eagerness to testify, but Steinbrenner, claiming ill health, evaded the hearing. As Klein was taking the stand, Steinbrenner's lobbyist called a press conference outside the courthouse. Three weeks later, Steinbrenner went to Washington, where he was allowed to testify in private (32).
And so on and so forth...
Coming back to the permissive U.S. patent system---and I'll close with this---we see one of the funniest examples of the surrealistically absurd. In the year 2000 (that's 2000 A.D., not B.C.), twelve years ago, someone was able to take out a patent on toast. You heard me, toast, otherwise known as "thermodynamically reconditioned bread" (33).
Thank you so much for reading. :D
1. Johnston, David Cay. Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit The Super Rich --- And Cheat Everybody Else. Portfolio, 2003. p.268
5. ibid, pp.268-269
6. Stiglitz, Joseph E. The Roaring Nineties: A New History of The World's Most Prosperous Decade. W.W. Norton & Company, 2003. pp.5-6
7. ibid, p.116
8. ibid, pp.115-116
9. ibid, p.116
12. Korten, David C. When Corporations Rule the World. Kumarian Press, Inc., and Berrett-Koehler Publications, Inc., 1995. p.207. If you're interested in some of my analysis about exactly why it is so very difficult to "[f]ind[..] ways to create new value in a sophisticated modern economy," you might check out another essay I've written on the topic called "Corporate Thuggery: Patent Gangsterism." http://wingedcentaur.hubpages.com/hub/Corporate-Thuggery-Patent-Gangersterism. Basically, the idea is that the human brain cannot think of a new idea or innovation every twenty minutes or so, though I argue that the capitalist system---in this case specifically the patent award system---forces human beings to effectively PRETEND that the exact reverse is true (that the human brain can indeed think of a new innovation or invention every twenty minutes or so). This is a psychic-social trap which creates various kinds of social, economic, political distortions, to put it mildly. And so on and so forth. One of these economic distortions is the practice of what I call patent hoarding or patent gangsterism perpetrated by the American business elite.
13. Phillips, Kevin. Bad Money: Reckless Finance, Failed Politics, and The Global Crisis of American Capitalism. Viking, 2008. p.74
14. I use the word "inferred," here, in acknowledgment of the fact that I have not really proven anything. I have been engaged in a process of inference, much the way theoretical scientists infer the existence of, say, certain kinds of energies, gravitational forces, other kinds of chemical and physical processes, and the like, as a way to try to begin filling in the blank between what the phenomena in the natural world, which we cannot explain, and what we definitively know about natural processes surrounding a particular perplexing phenomena. That is what I have done in this essay. I acknowledge that I have provided no specific cases of phantom entrepreneurialship, in which guilty parties have been proven in a court to have launched an enterprise with no intention of providing a good or service, which issued IPOs solely for the purpose of getting money through stock manipulation. But, since the very process of incorporation seems to compel deceptive behavior, the dissemination of misleading information even from "honest" people, what we have here, it seems to me, is a system open to exploitation by people of a straightforwardly unscrupulous bent, whose aim all the way through is robbery.
15. Let me recommend a great episode from the public radio program, "This American Life." The whole hour is devoted to the question of the America patent system. The episode is called, 'When Patents Attack.' http://www.thisamericanlife.org/radio-archives/episode/441/when-patents-attack
16. Stiglitz, Joseph E. The Roaring Nineties. p.22
17. Chomsky, Noam. Profit Over People: Neoliberalism and Global Order. Seven Stories Press, 1999. p.38
19. Phillips, Kevin. Wealth and Democracy: A Political History of the American Rich. Broadway Books, 2002. p.243
21. ibid, pp.244-245
22. Reich, Robert. SuperCapitalism: The Transformation of Business, Democracy, and Everyday Life. Alfred A. Knopf, 2007. p.19
23. See Monthly Review article, "The Explosion of Debt and Speculation," 2006, Volume 58, Issue 06 (November) by Fred Magdoff. http://monthlyreview.org/2006/11/01/the-explosion-of-debt-and-speculation. The article is very importantly subtitled, "Stagnation and Finance," the idea being that when the productive economy (the 'real' economy) sits there, twiddling its thumbs, so to speak, the corporate sector has no choice to to focus more and more and more on finance and financial speculation. The article suggests that perhaps this is the natural state of capitalism in between rare periods of technological and scientific innovation, which creates entrepreneurial opportunities, thousands of jobs, here, there, and everywhere, and fortunes for industrialists. The author, Kevin Phillips, also give plenty of evidence covering several centuries of economic history that this is indeed the case, without drawing the conclusion about the long-term viability of capitalism---see Phillips, Kevin. American Theocracy: The Peril And Politics Of Radical Religion, Oil, And Borrowed Money In The 21st Century. Viking (Penguin Group), 2006. pp.3-4, 11-15; and by the same author: Wealth and Democracy: A Political History of the American Rich. Broadway Books, 2002. In the introduction of this book, considering the leading world economic powers of the Spanish Hapsburg empire (which had included Flemish and Italian commercial centers), its successor the Netherlands (Holland), its successor the United Kingdom, Phillip wrote that all of them showed a tendency to "dangerously elevate finance while turning away from more humdrum industry and commerce." The United States and Germany picked up the baton from England, and Phillips, gives a breakdown of the financialization (and consequent stagnation of its real economy) from the start of the Reagan era, 1980 (Wealth and Democracy, pp.88, 91-92, 97, 104, 138, 142-143) and additional information concerning 15th century Spain (Wealth and Democracy, pp.175, 179).
24. Just to take few examples of the corporate sector doing "kamikaze capitalism" type activities and their helpers advocating and justifying them...
1. The business media: A major center-right business periodical, The Economist magazine, advocated a strategy of rent-seeking. Author David C. Korten wrote that the Economist: "suggested that the appropriate strategy for those who own the rights to products or processes in a fully globalized economy is not to produce anything. Instead, they should simply license rights to the products and processes for an amount sufficient to yield the same profits they would have made if they had produced the products locally or for export" (When Corporations Rule the World. p.125).
2. The Courts: The Case---Dodge v Ford Motor Company of 1919. Henry Ford wanted to build more factories in order to "employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their home. The shareholders, however, were not inspired. They took Henry Ford to court. The Michigan Supreme Court ruled that Ford could not devote the company to his personal goal of creating more factory jobs, if this meant reducing the profits of the company (White Collar Crime: Opposing Viewpoints. Opposing Viewpoints Series. ed. by Kelly Wand. "Corporations Need Regulatory Restraint," by Ted Nance. Greenhaven Press, 2009. p.61).
3. U.S. Congress (House and Senate): "Getting government help can be vastly more rewarding than anything many companies can do in the private sector. That's one reason, for example, why they spend so much money lobbying the U.S. Congress for earmarks---those special, targeted spending provisions often stuck into legislation moving through the Capitol. In 2005, on average, companies received as much as $28 in earmark revenue for every single dollar they spent on lobbying expenses. That's a much better rate of return than many could get producing and selling products," --- from Javers, Eamon. Broker, Trader, Lawyer, Spy: The Secret World of Corporate Espionage. Harper, 2010. pp.159-160
25. For work on how the religious establishment in America has effectively (and I stress the word EFFECTIVELY) justified the financialization of the American economy (even if "they" did not quite understand the nature of that which they were justifying) and wealth accumulation by that means, you could do worse than to consult: Posner, Sarah. God's Profits: Faith, Fraud, and the Republican Crusade for Values Voters. Polipoint Press, 2008. Also, along those very same lines, there's a nice article in a past edition in The Atlantic magazine, December 2009 issue called "Did Christianity Cause the Crash?," written by Hanna Rosin. The article talks about how the "prosperity gospel" movement of the 1990s, made its contribution to having made working people sitting ducks for adjustable rate, subprime mortgages. When one believes "The Lord will provide," and that "The Lord moves in mysterious ways," finance doesn't really have to make any sense because its a "miracle!" http://www.theatlantic.com/magazine/archive/2009/12/did-christianity-cause-the-crash/307764/
Again, Kevin Phillips provides additional support. He wrote: "In the United States, the pro-wealth policies of the right have enjoyed substantial low and low-middle-income support, particularly among religious voters enlisted by the cultural facets of conservatism" (Wealth and Democracy, p.xiii).
26. Johnston, David Cay. Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit The Super Rich --- And Cheat Everybody Else. Portfolio, 2003. p.233
27. Johnston, David Cay. Free Lunch: How The Wealthiest Americans Enrich Themselves At Government Expense (And Stick You With The Bill). Portfolio, 2007. p.73
30. ibid, pp.73-74
31. ibid, p.74
33. See radio program mentioned and linked to in footnote number 15.
Thanks again, and if you made it this far, you definitely deserve a reward.
Relax your mind and shake your groove thing with this CLASSIC from The DMX...What What, Where my dogs at?
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