Posted on 05/27/2006 7:44:06 AM PDT by RWR8189
couple hundred years ago, in his "Theory of the Moral Sentiments," Adam Smith contended that capitalism requires a moral and ethical center if it is to function effectively and to the benefit of all. About thirty years ago, supply-side economic philosopher Irving Kristol similarly emphasized the importance of capitalism's moral compass. His wife, the brilliant historian Gertrude Himmelfarb, wrote regularly about the importance of morality in society, culture, and the economy, a topic she covered in her standout book, "The De-Moralization of Society." Bea Himmelfarb sets off the Victorians in English history as an example of a moral society.
These authors and themes came to mind as I perused news accounts of convicted Enron crooks Kenneth Lay and Jeffrey Skilling. Of course, we all knew they were crooks before this week's verdict. But do they represent the moral core of American capitalism?
I think not.
Capitalism in this country has been under assault ever since FDR's New Deal 1930s, a time when a number of alphabet agencies attempted to control America's industrial and farming sectors. The experiment soon proved a dismal failure, with unemployment running 20 to 25 percent up until WWII. It was only when Roosevelt started unleashing businesses to produce wartime goods that the economy ultimately resurrected.
Still, the American welfare state would grow. In the 1960s and 1970s, the murderer's row of economic morons -- LBJ, Nixon, Ford, and Carter -- in allegiance with their liberal Keynesian advisors, concocted a socialist policy mix that ultimately led to wealth-destroying big-government stagflation.
Providentially, Ronald Reagan changed all that in the 1980s. The Gipper slashed tax rates, deregulated industries, and rescued the dollar, unleashing the forces of entrepreneurial capitalism. As a result, for the first time since the post-Civil War period (but for the brief Coolidge-Melon period in the 1920s), the American economic system became the envy of the world. Since the early 1980s, more than 46 million new jobs have been created, with inflation-adjusted GDP increasing $6.2 trillion, or 120 percent.
As deregulated stock markets democratized the American financial system, a great new investor class grew up. Roughly 20 million investors evolved into over 100 million share buyers, and they got rich in the process. Since 1982, according to the Federal Reserve, stock market wealth owned by family households appreciated by over $9 trillion, or nearly 900 percent. During this period, the Wilshire 5000 index appreciated nearly 800 percent.
This investor class has also become the nation's most powerful voting block. In recent elections, nearly two out of every three voters has been a stockowner. And yes, they are voting for capitalism -- meaning lower tax rates, limited government, and greater opportunities for entrepreneurship.
George W. Bush, a lineal descendant of Reagan, calls this the "ownership class." And though I can't prove it, I'm willing to bet that this group's demand for lower tax rates and entrepreneurial activity goes hand in hand with the cultural characteristics of hard work, thrift, personal responsibility, and law-abiding behavior.
Indeed, ownership is a self-help virtue, and it is held in much higher cultural esteem than the vice of government-dependant welfarism. This investor culture has at its core the very same ethical foundation that Adam Smith wrote about in 1759. This includes the rule of law that was so badly violated by Lay and Skilling, along with some other rotten apples like Tyco's Dennis Koszlowski, Worldcom's Bernard Ebbers, and Adelphia's John Rigas.
These crooks disregarded morality and the law, and in so doing, temporarily demoralized the stock market and American capitalism. They're the kind of people who would be celebrated by totalitarian socialists like Marx, Engle, Lenin, Stalin, Mao, Castro, Saddam Hussein, or even Iran's Ahmadinejad -- the natural enemies of American market capitalism.
But our government prosecutors are doing a fine job of re-imposing the rule of law and re-moralizing our economic system. Much more important than the misbegotten congressional regulatory scheme called Sarbanes-Oxley is the Justice Department's excellent work to simply enforce the laws on the books. Nothing concentrates the executive mind better than a 25-year jail sentence.
There are approximately 5.5 million businesses in this country, according to the Commerce Department. So our notorious front-page crooks really are few and far between. But a new spate of corporate fraud and insider self-dealing has sprung up, with some CEOs engaging in the practice of backdating stock-option grants and other related forms of anti-shareholder compensation chicanery. The biggest demoralizing miscreant is William McGuire, CEO of United Health Group. In Washington, book-cooking at Fannie Mae has still to be properly punished. So the G-men have more work to do. Theirs is a noble purpose.
Looking down from his perch in heaven, Adam Smith would be very proud.
Immorality is a toxin to a free society.
Thrift? Thrift is not the cultural characteristic I'd associate with this society. For better or for worse, "throwing money away on garbage" is an important characteristic of today's Americans.
"Wealth" was obsolescent as it rolled off the presses.
I live at ground zero - the San Francisco Bay area.
Not to mention being an administration cheerleader who would be more fittingly wearing a pink tutu and waiving pom-poms on his program! He does, occasionally, have interesting guests but his pollyannish pronouncements become annoying very quickly!
"Capitalism in this country has been under assault ever since FDR's New Deal 1930s"
But it is Capitalism that fuels the Socialistic Welfare programs of the Left. Without all the hard working Capitalists, the Welfare queens and pimp drug daddies would not be able to live off the Fed. Gov. They would have to either find a real job or starve.
The goobermint has a vested interest in companies that make scads of money and pay huge amounts of taxes.
It's the corporate losers -- such as Enron, Worldcom and Qwest -- that the Injustice Department invariably guns for. Their overly-compensated executives may have indeed defrauded investors and stolen from employees whose 401(k) plans became worthless. But the biggest losers when the financial house of cards came apart were government tax collectors, and for that affront only criminal penalties are appropriate.
Kudlow is once again standing up for the entrenched welfare state and against the free market.
It's a good thing Larry's hero vetoed that one. Oh wait ... Nevermind.
is the Justice Department's excellent work to simply enforce the laws on the books. Nothing concentrates the executive mind better than a 25-year jail sentence.
Larry, please tell W to enforce the existing immigration laws before discussing morality.
Now that's funny, but they are either dead or retired, so there's nothing to be gained by kissing their butts.
. . . and also a commentator on WABC radio as we speak.In his opening rant about the Ken Lay verdict, Kudlow pointed out that the Enron fraud which came to roost early in the GWB administration happened on Clinton's watch.
Not only so, but notwithstanding a picture and a fund-raising thank-you, Bush was far less associated with Ken Lay than was not only GHWB but far, far less associated with Ken Lay than was the Clinton Administration. Clinton helped enable the Enron caper by changing two SEC laws, and Clinton held up a US foreign aid disbursement until the country paid up a bill from Enron.
Clinton cabinet members were so close to Enron that when when Ron Brown's plane went down Enron's stock price fell sharply. Enron investigated the drop, since there had been no material revelations that would explain it - and learned that knowledgable investors assumed that at least one senior Enron executive must have been on the plane with Secretary Brown. Enron then put out a press relase assuring investors that its management was intact.
Given America's strong fundamentals and the general state of its economy since Reagan, being a "pollyanna" about America's economic prospects really just amounts to being realistic. I agree with you in a micro-sense--- if I'm listening to investment guys on tv, I'll go with Kramer over him because as right as bullishness on the US is in the long term, it's not always correct in the very short term-- but in terms of bullishness on America and the right-headedness of Bush's tax cuts on the economy, well, I think Kudlow is right on track there. Remember, it's not as if Kudlow is some Irving Kristol/William Kristol (I wish he wouldn't call Irving a "supply side philosopher here!") "big government conservative"--- Kudlow has repeatedly criticized the Bush administration for overspending, signing bad laws like McCain-Feingold and not using the veto.
I take all investment advice with a "grain of salt". Kudlow's blindly ignoring the out of control budget deficit is his worst fault. "Don't worry..., be happy" sums up his professed outlook! He is but a political "spin-meister" and, having played the role myself..., I discount much of what he spouts!
He was a very long time in recognizing the investment shift to hard assets but has begrudgingly begun recognizing that trend!
As Kudlow is a perpetual bull, Kramer is a trader who caters to folks who move in and out of stock position daily. He comes up with "investment ideas" worthy of DD but, if you are a longterm investor, you need to recognize that he is not! He is a trader and readily admits that he is!
LOL!
Then how is it we have more in per-capita assets than any other country in the world? How has our household net worth more than doubled since 1995?
The government lost more than the shareholders? You act as though Enron, Worldcom and Quest don't have competition that will fill the void they left behind. Their loss is another companies gain. Those customers don't go away, they're absorbed by other companies who pay taxes on their newly increased volume.
Kudlow is once again standing up for the entrenched welfare state and against the free market
Obviously you know little about Kudlow and what he advocates. Maybe you should spend some time here to learn just how misguided you are about him. There are few greater champions of the free market than Kudlow.
I wholeheartedly agree. I highly recommend the book "How to turn 80 million workers into capitalists on borrowed money" by Kelso & Hetter--it outlines a plan to stimulate the growth of the 'ownership class'.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.