WAYNE M. O'LEARY
The Mythology of the Market
George W. Bush was shocked (shocked!) by what transpired in June at WorldCom, the books-cooking telecommunications giant based in Trent Lott's Mississippi. He was mad as hell, G.W. said, and he wasn't going to take it anymore. How the president felt about Adelphia, Tyco, Global Crossing, Qwest, Halliburton, Xerox, Rite Aid, ImClone, Duke Energy, Merck, and the other corporations on the growing list of scandal-ridden American companies, he didn't say.
Regarding WorldCom, however, our peerless leader was adamant in his disdain. Corporations and their managers just have to be honest and above reproach, Bush insisted; he was fairly spluttering with indignation. This was rather comic considering that the president and his party have been in the forefront of efforts to uncouple the US economy from government oversight. They pushed a deregulated electricity market in California long after Californians had given up on it and begun calling for re-regulation. They terminated Justice Department efforts to pursue software monopolist Microsoft Corp. in court for antitrust violations. And they put in place a Securities and Exchange Commission (SEC) chairman, Harvey Pitt, and a Federal Communications Commission (FCC) chairman, Michael Powell, who from their first days in office counseled a kinder, gentler approach to regulating, respectively, Wall Street speculators and telecom manipulators.
This summer's Bush harangue on corporate responsibility, and the echoing harangues of Republican congressional stalwarts like Sen. Lott and Rep. Billy Tauzin of Louisiana, had an air of desperation about them; events, clearly, were spinning out of the GOP's control. The party that had long championed an unsupervised marketplace &emdash; capitalism in the raw &emdash; was coming face to face with the reality behind its rhetoric. Crooked accounting, untrustworthy management pronouncements, and illegal insider trading are not aberrations but merely symptoms of unregulated capitalism doing its natural thing, which is to run wild.
What capitalism unchained is perpetrating now is what it perpetrated in the 1920s and in the late 19th century, and what it always has and always will perpetrate: a pitiless search for vulnerabilities in the economic system that can be exploited for monetary gain. In his innocence (or feigned innocence) of that fact, George W. Bush has shown himself the captive of a laissez-faire mythology with deep roots in the American psyche. The mythology holds that rugged free-market entrepreneurs, honest men all, built the United States through dint of hard work and shrewd, calculated risk; government, of course, had nothing whatever to do with it.
This self-serving myth, comforting to America's monied class and financial establishment, conveniently ignores history. There were indeed all-American entrepreneurs (a fancy French word for businessmen), but their road to riches over the past 200 years was always paved with public investment and direct or indirect government subsidy, including federal and state-sponsored transportation systems (railroads, highways, canals), free grants of public land, easy access to public resources (timber, minerals, airwaves), cheap, government-generated electrical energy, beneficial tax treatment, and guaranteed defense contracts. Few entrepreneurs, in short, did it alone; they knew what to do with Washington's handouts, God bless them, but they took handouts nonetheless.
Moreover, the dominance of the laissez-faire capitalists was never total; it was offset by a counter trend that is just as deeply rooted in the American experience. Throughout our history, each spasm of entrepreneurial aggrandizement has been predictably followed by a public reaction, which takes the form of a period of government regulation and imposed limits on business activity. The reaction is always a result of the trusting and ever-optimistic American people learning the hard way about business excesses, recoiling in disgust, and demanding government redress. The post-Civil War Gilded Age with its colorful but corrupt robber barons was followed by the Populist revolt of the 1890s and the Progressive era of the early 1900s, replete with new federal agencies like the Federal Trade Commission (FTC) and Federal Reserve Board; the Jazz Age of the 1920s with its Wall Street mania, bigger-than- life speculators, and stock-market crash, which led to the Great Depression, was succeeded by FDR's New Deal of the 1930s and its regulatory SEC, FCC, and FDIC.
Although President Bush remains in denial &emdash; problems with the economy are not systemic, he asserts, but a result of individual malfeasance &emdash; the age-old pattern is reemerging. The wild and wooly stock market and boundless "New Economy" of the 1990s have given way to the puncturing of the dot-com bubble, a rolling exposé of fraudulent business practices, and the current market malaise; a period of activist, regulatory government will follow as surely as day follows night. The war on terrorism is postponing a final reckoning, but it will come.
Historian Arthur Schlesinger Jr. sees this as part of a regular cyclical pattern in which periods of unrestrained business hegemony allied with conservative government lead to eventual abuses of the economic system, or (as in the 1930s) to its temporary collapse, ushering in regulatory liberal regimes. If Schlesinger is right (and he appears to be), we are on the verge of one of those cyclical swings away from laissez-faire and toward government activism. The evidence of greed-driven excess in the system is overwhelming, and corporate corruption, which is now endemic, is only the most visible and sensational aspect of it.
Left to its own devices, capitalism will invariably drift toward monopoly, as it has, for example, in telecommunications, energy, and banking since those sectors were deregulated in the 1990s. It will also drown itself in speculation, and that is in evidence as well. Some statistics: A total of 500 dot-com companies have gone under in the wake of the high-tech implosion of two years ago, and the Nasdaq exchange, which measures the health of the so-called New Economy, has lost 70% of its value; it is now at its lowest level in five years. The more traditional Dow-Jones average is also down (by 2,000 points), and unemployment is up. Matters are obviously approaching critical mass.
Meanwhile, the public is starting to lose patience and demand reform. There is no more talk of privatizing Social Security, and two recent polls (by the CBS-NY Times organization and the respected Democratic pollster Celinda Lake) indicate that 80% of the American people now favor federal price controls on such things as electrical energy and prescription drugs. Other opinion surveys show overwhelming support for a crackdown on corporate America's financial shenanigans. Underneath the business-as-usual facade created by the terrorist war's enforced unanimity, a sea change in economic attitudes is taking place.
So where does that leave George W. Bush, who has steadfastly opposed federal restrictions on the "free market," who deregulated his own Texas energy industry as governor to please Enron, and whose business-oriented cabinet officials and agency heads are wedded to the laissez-faire economy? It leaves him in the unenviable position of becoming the potential historical successor to disgraced President Herbert Hoover, who unwittingly presided over the winding down of our previous great era of free-market excess.
Wayne O'Leary is a writer in Orono, Maine.