Notes from all over

BW offers a "scourging" of the business press for its lickspittle attitude towards the New Economy boys during the bubble years. Readers of LI have already been here -- of course, they are all secretly sneaking glances at this weblog and ripping us off! The brutes! Isn't it stifling in this cabin? Where's my bundle of ivory... The snakes! The snakes!

Uh, forgive us, a touch of that old tropical fever, you know.

Anyway, Ciro Scotti winds into a denunciation of the biz press from the very odd angle of Pat Buchanan's rhetoric. Scotti borrows Buchanan's phrase about Bush -- that he is a corporation bellhop. While this is about as nice an image as you can expect on the hustings nowadays, I don't see it as being so insightful that Scotti needs to press it. And though Scotti wishes to come off as suitably tough and disgusted in the column, Mr. Take no prisoners, he actually --- takes no prisoners. That is, he names no names, but contents himself with generally derogating the young. Young guys, infatuated with young dot-commers, are to blame for everything. We advise you not to buy that story. The credulity of the business press derived from their general Reaganite faith in deregulation and the power of the markets, in themselves, to produce utopian outcomes. The business press suffered from a structural deficit of scepticism which was not confined to young tech enthusiasts. Blinded by rhetoric, and attached to a particularly insolent version of the managerial class -- the class indoctrinated, since the 80s, with the idea that their greediest impulses were synonymous with good business -- the business press has suffered a collapse in credibility that the managers of that press still don't understand. We recommend that Mr. Scotti read a few of our previous posts, instead of old Pat Buchanan speeches: our Glassman nominee of July 23 was Nelson Schwartz, and on August 2 we named James Glassman himself (although the latter is, we admit, a pretty obvious call -- it is like calling Bozo a clown). We've thought of pursuing some other journalists, notably Geoffrey Colvin, the Welch apologist at Fortune Magazine whose puff piece on Welch (with a heading that has the true, bullying ring of a General MacArthur explaining his Korean strategy: "VALUE DRIVEN Welch's Decision: The Inside Story. Most advisors told Jack Welch to shut up and tough out the news reports. He didn't. Here's why") is in the line of his general attitude towards Welch. Down on your knees about sums it up. Eventually we will do that. LI's motto is: what if they held an inquisition and nobody came? Because, of course, this is where we release our inner Torquemada.

Since we are going over old posts and new business articles, we read John Cassidy's New Yorker article, The Greed Cycle, yesterday, and we're impressed with it -- as apparently a lot of people have been. It is not, unfortunately, on line. Here's a preview of it at the Connection. The kicker at the end of it is Paul Volcker coming out for abolishing stock options. What attracted interest in the piece, however, was the seemingly rational explanation of how executive pay suffered the fortunate elephantiasis that now routinely produces Nicks tickets for the exec and wastepaper baskets from France for his mistress. Althought I have heard the statistic a thousand times, apparently Cassidy's discovery that that the Fortune 500 CEO earns 500 times more than the average employee he CEO-s has gotten spread about. I've heard the figure misquoted on NPR this morning (by an oddly cheerful commentator who defended Jack Welch) and seen it in editorials.

We have ambiguous feelings about Cassidy: his articles on Marx and Hayek were fascinating, but he, too, seemed to swallow much of the new economy propaganda during the bubble years. The core of the article is about the academic justification for changes in the compensation structure of the executive class from the seventies (when the corporation structure was pretty much as described in Galbraith's New Industrial State) to the nineties, and the part played in that by academic gun Michael Jensen. We want to read Jensen's '91 piece in the Harvard Business Review (which Cassidy quotes for its inspirational line about not compensating the CEO like a bureaucrat -- oh my no, you have to compensate him like an entrepeneur! like a movie star!) for an upcoming dissection of same. Suffice it to say that Cassidy takes up the issue of compensation by referring, ever so discretely, to the matter of competition in the executive labor market. Jensen, a Chicago alum, should, of course, have been a true fan of competition, but his work showed that the exec market was different, due to what the executive did. It was more like paying a contractor than paying an employee. We think that this is a fatally mistaken analogy. And we also think that the unspoken class bias in the Chicago school, which invariably lays the onus of competition in the labor markets on the poor or the middle class, and invariably sees the augmentation of the wealth of the wealthy as an automatic good, must be pointed to -- again and again.