Mises Daily Articles
Public Turns on Business
Lately, pundits and commentators have suggested that the scandals that brought down Enron, Global Crossing, and WorldCom simply are more proof that trade and enterprise are inherently corrupt and pose a danger to the public. Some have even seriously claimed they represent the failings of a society with too much freedom, as if there could be such a condition.
Until the latest recession, this was just a shared sentiment of the second-hand dealers in ideas, laboring mightily to miseducate the public, as usual. Now along comes polling info that of course provides popular approval for their views--though is it really surprising that the public would agree with the media's spin after they have spent month after month advocating their anti-capitalist take on events?
It's a neat trick: the media sell a certain viewpoint, then take a poll and cite public opinion to illustrate that, yes indeed, the public agrees with what it has been told, and that the only solution is more interventionism. This is a democracy, after all.
In her story "Polls Say Workers Uneasy With Economy, Executives" published on Tuesday, September 3, 2002, Kirstin Downey Grimsley highlighted the results of several recent polls conducted by various organizations. The American Enterprise Institute found that only 48 percent of the Americans asked agreed that "what is good for business is good for the average person."
And a Gallup poll in July found that 38 percent considered "big business" to be the "biggest threat to the future of the country," up from 22 percent in October 2000. This percentage had never before been so high in the 48 years of polling on that question. In contrast, in 1954, only 16 percent identified "big business" as the biggest threat, while 46 percent said "big labor" was the greater danger. In July 2002, only 10 percent rated big labor as the nation's greatest threat. Presumably, this is a result of the labor movement's failure to cartelize American employment--and its inability to shut down the economy with widespread strikes--and its subsequent focus on public-sector workers.
While all polls must be taken with a grain of salt, they are probably reliable as a gauge that the anti-capitalist mentality is alive and flourishing. But where would the public get the information it used to come to this conclusion that big business poses the most danger to Americans?
The vast majority of the American public have been fed a steady diet of economic ignorance, especially so since the bubble burst. And typically, it has been the media who failed the public again. From their reliably statist bent when it comes to economic questions and alleged free-market sins, to showcasing the fantasies and conspiracy theories of politicians who's only claim to expertise is gaining election to Washington or appearing on television, the general media have played an invaluable role as allies in the drive for increased interventionism in the wake of the bust and the 9/11 attacks.
But where were the "Big Media" during the boom phase? Certainly they weren't warning or educating the new "investor-class" that jumped into the stock market, as the middle class always does during a boom. George Reisman described what happened:
"... as the new firms swarm into the latest investment fad--in one era, canal building; in another, railroad building; in a third, electric power-plant construction; in a fourth, radio; and, most recently, in our day, the 'dot.coms' and the Internet--a host of observers is always on hand, in all eras, to trumpet the arrival of the 'new era,' or the 'new economy,' or the 'new' something or other that allegedly explains why it has become all right to throw all rational principles of investing to the winds...."
Lured by the prospect of easy riches in an ever-higher-rising stock market, "... a public many members of which believed that they knew something about investing because gains had showered down upon them..." once the bubble popped, would turn on a dime against the "greed" of CEOs that their stock frenzy had turned into media celebrities and household names.
The average person presumably fears "Big Business" because he knows for sure that the political system is corrupt and that his congressman is more likely to respond faster to a stack of twenties than to a handwritten letter from a lowly constituent. And the larger the firm, the more resources it has on hand to buy favors from the state against the interests of the common man. It may even be that, the larger the firm, the more it may have to buy influence just to stay in business.
Many firms do use their size to seek out favors from the state. But it is also a dirty truth that the alleged "friends of the working man" are perfectly content with the situation, in order to destroy that feature of capitalism that directly threatens their continued rule by misinformation and dependency--that is, the opportunity for individuals that actually free markets provide.
Sometimes statists claim that an age of "Big Business" requires "Big Labor" and "Big Government"--the former to protect the workers, and the latter to protect the ... what ? the general public? Or could it be,to protect Big Business from whatever might threaten the continued existence of those firms and their employees?
As Murray Rothbard wrote:
"With a few honorable exceptions, big business jostles one another eagerly to line up at the public trough.... Big business support for the Corporate Welfare-Warfare State is so blatant and so far-ranging, on all levels from the local to the federal, that even many conservatives have had to acknowledge it, at least to some extent.... Big businessmen tend to be admirers of statism... because a good thing has thereby been coming their way. Ever since the acceleration of statism at the turn of the twentieth century, big businessmen have been using the great powers of State contracts, subsidies and cartelization to carve out privileges for themselves at the expense of the rest of society...."
"... the vast network of government regulatory agencies is being used to cartelize each industry on behalf of the large firms and at the expense of the public.... The liberal reforms of the Progressive-New Deal-Welfare State were designed to create what they did in fact create: a world of centralized statism, of 'partnership' between government and industry, a world which subsists in granting subsidies and monopoly privileges to business and other favored groups."
Of course, it's not the size of a business that is the problem; rather, it is its relationship with the state. This is something the media fail to comprehend. It's difficult to know whether Enron was from the start a taxpayer-looting ring or if it simply became one later as opportunities arose. With its extensive collection of celebrity/media "consultant" boards, troupes of lobbyists, and a Rolodex of politicians always eager to lend an ear, Enron tapped into the security of the federal government's public/private initiatives of loans and subsidies from the public treasury.
What is easy to know, however, is that Enron was a typical example of the distortion in expectations and corporate planning that accompanies the boom phase of the fiat credit business cycle. WorldCom and Global Crossing met the same fate, as their executives and shareholders bought into the "New Economy" pitch from the very same media organizations and pundits that have now become their most ferocious critics -- now that their hindsight is 20/20, that is.
Certainly the "Big Media" had no clue that the surging Dow and Nasdaq and overvaluation of these firms signaled widescale manipulation of banking and credit by the federal government. The Big Media were the biggest cheerleaders for Greenspanism and their pet project, the Clinton presidency. And when the edifice collapsed, business took it on the chin, as usual, with accusations of "greed," thievery, and corruption.
What the American public does not know or understand is that what they are calling for with a new round of interventions in the form of new regulations, agencies, and other controls is the creation of a new round of government and industry partnerships, where the state "partners" with business to further isolate them from the consequences of free-market activity, under the popular notion that business cannot be trusted to oversee its own affairs. The state will act as monopoly partner in reassuring the public of the reliability of its corporate partners.
As Reisman points out, big businessmen, rather than being a threat, are instead the most valuable representatives of the free-market system, because it is these men who have demonstrated the talents and abilities necessary to coordinate the vast amount of information that the structure of prices provides to the system of production to create ever more efficient and profitable processes that raise the standard of living for consumers.
And rather than the image pumped up by the Big Media--that many firms were sunk by the "greed" of their CEOs--Murray Rothbard again made the point about the nature of corporate management: "[the shareholders] hire managerial labor to supervise their workers.... A manager is just as much a hired laborer as any other worker. The president of a company, just like the ditchdigger, is hired by the owners [of the company]."
The vast sums paid to these now-disgraced CEOs was, on the one hand, capital that belonged to the owners of the firm, and on the other, the reflection of the competitive pressures on wages created by the inflationary boom. The shareholders ratified compensation packages for what they believed was a worthwhile exchange--to attract and keep managers who could create profits and prevent losses, which is the goal of every investor.
Absent the Fed and fractional reserve banking, the fear of "Big Business" would be misplaced. Without the regime of privileges, subsidies, guarantees, and legislative loopholes, where mutually beneficial exchange is replaced with coercion and exploitation, business could not find shelter from the entrepreneurial actions of talented and ambitious individuals, and the laissez-faire system would be able, without exception and equivocation, to refute the accusation that what is good for business isn't good for the average person.
"Big Government," which used to be feared but seems to be a rarely heard concern nowadays, is the real threat and danger to the public. And it gains support and assistance from the media, who act as loyal apologists for the collusion between political interests and businessmen under the deception of "protecting the public."
Which is the greater threat to American liberty, prosperity and happiness: Big Business, or the clueless Big Media? With their broadcast licensing privileges to restrict competition and cartelize the presentation of the news, to their access to politico's that the average person could never have, the influence of the print and broadcast media themselves starkly illustrate the dangers of politicized "big business."