Remora

James Ridgeway, Village Voice's reliably left (if sometimes monotonous) political columnist, suggests something pretty cool in his column today. Ridgeway raps on the practical impunity surrounding the major looters of corporations. This means, rather predictably, wheeling out the very specimen and macrocosm of power used corruptly to avert justice: Ken Lay. Ridgeway hammers on this old theme. But then Ridgeway departs from merely adding his scolding to the unanimous condemnation of mankind and throws out an idea that should be embraced by some Dem, somewhere. This is the kind of idea that could really work:

"Beyond the political will to hold people like Lay accountable, we need a mechanism for going after the companies themselves, paving the way for placing them in receivership so they could be managed under public supervision until their acts were cleaned up. There is nothing unusual in this notion. Crooked unions go through it all the time. Corporations should get the same treatment. At the very least, firms with shoddy accounting and other dubious practices should be denied government business. For Enron, federal subsidies and contracts were the lifeblood that let the corrupt operation flourish. "

Ridgeway could easily have developed his idea a bit with regard to Enron. There was an interesting article last week in the Houston Chronicle about the way in which, in the last month of Enron's run, workers from the old pipeline division -- which was despised by the minions of Skilling, all of whom were New Economy rip-off artists who wanted to run an "asset-less' company, but battened like leaches on the money flow of the pipes (the only real money flow at Enron, except the continuous rain of currency into the pockets of the undeserving exec strata) --- anyway, how in a last burst of kick em in the teeth, these old reliable asset guys were cheated out of their deferred compensations in favor of the energy trader division. This division, by the way, was losing money. Anyway, according to the Chronicle article, Lawrence "Greg" Whalley, "then the chief operating officer of the company," made decisions that systematically skewed distribution of the money that was left in the deferred compensation accounts to those who, in Whalley's lawyer's rich phase, were "continuing to add value" to the company.

Now who were those people who were adding value to the company? Why, they were part of the trading group that was eventually sold to UBSWarburg -- which, coincidence of coincidences, is where Whalley ended up himself. So here we have a company, the heart of which is a money losing deal machine that is still sexy enough to be packaged and sold to another company. [note: the energy trading outfit did look enough like a moneymaker at the time, given the smoke and mirrors of Enron's accounting, to be perceived as a valuable asset -- hence its acquisition. And with the correct management, it might actually be an asset. But the real assets, what Enron sold to raise real cash, were the natural gas pipe lines. Period] Here we have people who were dispersed over the multiple trading divisions (such as the loony broadband division) who have bootstrapped their entire careers and credibility on the cash flow coming from the real assets of the company, the pipes. And we have those same usurping locusts, as the Psalmist might put it, who were systematically infiltrated into top managerial positions, reluctantly deciding that the retiring pipemen -- the guys who made real money -- are going to have to bite it, because Whalley's clique are skipping ship and want to carry home a few mill in Christmas money.

This is exactly parallel to corrupt Teamster union locals that have been taken over by the feds. The same principle of pirates at the top looting people at the bottom.

If Ridgeway's plan were put into execution, it would put a stop to self aggrandizing deals for the scum of the universe... ooops, I mean the up and coming entrepeneur types, like Greg Whalley. As for the Whalley's, one's mind drifts to ... uh, pornographic fantasies of punishment. How about having these hardballing execs prove their ability to 'add value' to their future employers by being stripped of all their assets, including their wardrobes, appropriately draped in street couture (say, urinous old trousers found abandoned under some park bench), their ATM cards and platinum credit cards sheered through, their cars long ago seized and sold, and set loose then on some mean Houston alley at three in the foggy morning. Then let these top dogs ply their ingenuity as they will.

Remora

I've just finished reviewing a book about Haiti. Maybe for that reason, I am sensitive this morning to the more egregious gestures of little Caesar-ism to which our present benighted administration is addicted. So I read the WP story about Bush's "economic forum" with a lot of sour amusement. This forum is apparently based upon the premise that of any two or more points of view, one of them is right; the right one, of course, is Bush's. This is a law of nature in Crawford Texas, it appears. As such, it would surely be ratified by our Supreme Court -- which has always displayed a touching concern for George Bush's feelings -- should it be taken before those august vampires.


"Bush Economic Forum to Exclude Critics, Officials Say" by Mike Allen

Bush, who sounds more and more like a ventriloquist's dummy -- hearing him, for instance, commemorate the nine rescued miners, I seriously wondered if he'd been exploring the wonders of hooch that morning -- has billed this summit, at Baylor University in Waco, as a call to Americans in all walks of life. Especially favored are those whose walks have included contributions to the Republican party in amounts of 100,000 dollars or more. Just your average Joe or Jane, don't you see? It is almost Dylan-esque: "Come mothers and fathers, throughout the land/ and don't criticize what you don't understand..." Indeed, this is the message of the last graf of the story:

"A media guide says the participants on the eight panels will have "diverse points of view," but the White House official acknowledged that there are limits. "I don't think there's any point in picking someone who has the opposite point of view," the official said."

Why is it that the Bush administration always exudes this air of a cheap coup? Maybe it it because they came to power on a cheap coup.
No, that's not true. That's a cheap jab.
The coup was very, very expensive. In fact, we all seem to be paying for it.

Remora

The career of a phrase.

Suppose, reader, that you are a brain surgeon. As you come into the operating theater, you lean over your patient, who is about to go under, and you tell him that, under the circumstances, if he pays you a fee on top of the fee you are getting to operate on him -- say about 100% of that fee -- he will promise to align his interests as a doctor with yours as a patient. Or suppose that you are a fireman. You mount the ladder, you meet the hollering woman in the fourth floor apartment, the flames are licking the curtains, and you tell her that for a fee -- say 100% of your current salary -- you will align your interests with her interest in being saved up to and including the promise to try not to drop her on the way down. Or say you work in an assembly line. You go to your foreman and propose that for a fee -- say 200% of your current salary -- you promise to align your interest with that of the company's, insofar as that involves making sure all the car parts are correctly fitted into place.

If you did that, you would lose your licence, as a surgeon, be fired and sued, as a fireman, or simply be dismissed, as a factory worker.

Ah, but if you are a CEO -- if you breathe and eat in that top level strata -- ah, then you are the type who might not really do anything for your salary. You might take your 2 mil a year and go to sleep behind your desk. Or you might take information you are privy to and give it to your competitors. Who knows with you CEOs? Marvelous, god like creatures, you rain and shine on all alike according to your inscrutable will. Or at least that seems to be the theory behind that supremely dumb phrase, "aligning the interests of management with those of the shareholders." If you read the business section, or even the front page of the newspaper, nowadays, you see that phrase thrown around with the utmost airiness, as if it is the most self evident thing in the world. The CEO, or CFO, or whatever, must be given stock options. Why? To align his interest with the shareholders. Here's an example of this kind of madness. It comes from my search for the phrase on Google. It comes from 1999. I wonder if Baxter International, or Deerfield Illinois, knows that they still have this announcement up on the web:

"DEERFIELD, Ill., May 4 -- Baxter International Inc. announced today that
142 senior managers have borrowed a total of $200 million in personal loans
to purchase 3.1 million shares of Baxter stock. The shares were purchased
at Baxter's closing price yesterday of $63.625 per share under a voluntary
plan that directly aligns the management team with Baxter's shareholders.
This shared investment plan was approved by Baxter's board of directors
earlier today.

This is the second time Baxter has implemented a shared investment plan.
In 1994 Baxter became one of the first companies in the world to use this
innovative approach to directly align management's interests with Baxter
shareholders. In that plan, 63 senior managers participated. Since that time,
several companies have implemented similar plans."

I put the phrase in italics, for those of you whose eyes glaze over when perusing the PR of obscure corporations. Baxter, in the annus mirabilis of 1999, was innovating all kinds of alignments of interest between management and shareholders. Here, for instance, is what they did for outgoing CEO Vernon Locke:

"In 1999, as Baxter International Inc.'s Vernon Loucks relinquished his CEO duties after 18 years, directors handed him a special stock-option grant of 950,000 shares "for the specific purposes of motivating" him "to implement a smooth transition of his responsibilities."

Ah, Vernon's successor is a man of sterner ethical character. In a Business Week report on executive compensation for 2001, Harry M. Jansen Kraemer Jr, the current CEO, practically put himself on a diet of bread and water:

Harry M. Jansen Kraemer Jr., CEO of Baxter International (BAX ), voluntarily cut his bonus by 40%, even though his company's stock climbed by 20% in 2001. The reason: Defective Baxter dialysis machines were linked to the deaths of more than 50 people. Kraemer, who earned total cash compensation of $1.6 million plus a grant of 600,000 options, says somebody had to pay the price for the dialysis machine deaths: "Fifty people died. If you have a problem, the buck stops somewhere, and it stops here."

Cutting your bonus -- your bonus, mind you -- down by 40%, while you receive your grant of 600,000 options is practically Christ-like in the world of CEOs, apparently.

So, to sum this sad and shabby tale up: never has piracy, never has the discreet looting of publicly held entities, been so delicately handled as it was in the 90s, and as it still is today. See how Baxter -- that ambiguous entity, that ontological anomoly -- practically glows with satisfaction. Begging their execs, who are probably paid quite a bit more than I am, to borrow money from their cash reserves, no doubt at a very reduced interest rate, and no doubt with some expectation that, if things turn south, all will be forgiven these shareholder aligning managers. Isn't it great to be king? Isn't incentive a wonderful thing, and isn't it to be extolled in 2 million to 4 million dollar houses from the Long Island to the Redwood Forest, as the unfortunately dis-incentivized Woody G. once sang? AH, here at last, we have found what we have been sailing the sea for lo these many years. The thing Marx couldn't imagine. The thing that makes all the U. of Chicago econ department light up like a Christmas tree. The very reductio ad absurdam of managerial capitalism.

LI is thinking of trying to do a more extensive search for the phrase, and selling an essay on that search, to some magazine, thus aligning our interests with those of John Q. Public. If you want to loan us money in the process -- say 50 million dollars -- please write me at RGathman@aol.com.
Hey, I might just accept your loan if the terms are good enough.

Remora

In the seventies, Christopher Hill published an excellent book about the Protestant radicals who provided the ideological shock troops in the overthrow of Charles I in the English Civil War. The title of the book was World Turned Upside Down, which is the refrain in this ballad of the war:

"Old Christmas is kickt out of Town.

Yet let's be content, and the times lament, you see the world turn'd upside down.


Let's talk about Old Christmas being kickt out of Town, shall we? Or rather, let's talk about kicking the bejesus out of Old Christmas, the bill of rights, common sense, the spirit of dissent, the independence of the legislature, the standards of right action, and other assorted matters of spiritual and political import.

We've come to such a pretty pass in this country, re the warmongering attitude, the stripping away of Civil Service protections in place since Chester Allan Arthur's time, and other such trivial supports of the national polity, that LI is forced to turn to the business press for some measure of dissent. Business Week, of all papers, the old Taft Republican Business Week, publishes a column by their Washington correspondent, Howard Gleckman, that hectors congress for surrendering its perogatives, right and left, to the executive. Gleckman presents a list of abdications: the fast track legislation Bush will be signing tomorrow, for instance; or the astonishing anomolies written into the act to make Heimat security a cabinet post. The latter is a really bad piece of legislation anyway -- there is no need for this re-organization, there's no need to add this cabinet post at all, given the Department of Defense, and certainly the composition of the law is outrageous. The discussion of the provisions entitling appointed officials to hire and fire at will has remained at this low level: conservatives: this is just to get the guv'mint out of the grip of civil service unions; liberals: this is an insult to civil service unions. Without any seeming consciousness of the reason why civil service was given a measure of autonomy vis a vis the executive in the first place, i.e. corruption. That's right, when hiring and firing can be done at will by elected officials, guess what? You soon have a system in which hiriign and firing becomes a marketable service. If commentators think that Bush is too high minded, and has employed cabinet members who are too high minded, to engage in corrupt practices (oh my! not our Commander in Chief!), they might want to investigate Ken Lay's ability to get the old head of FERC replaced, in 2001, by a more Enron pliable figure of Pat Wood III -- who moved from his Texas post, the path to which had also been paved by the ubiquitous Lay, to the national post after Lay reportedly threatened the old FERC head, Curtis Herbert, over the issue of deregulating the California Electrical Power market. But this is an issue that goes beyond Bush. It goes back to U.S. Grant, and it is an endemic illness to which democracies are heir. But trust the right to have no consciousness of the political tradition going back to Montesquieu -- which used to be called, in fact, the Burkean tradition, since its font was Burke's suspicion about ideological schemes designed to improve society by way of the government. Burke would likely have been appalled at the Homeland Security re-organization, but then again -- what right winger is even aware of Burke anymore?

Ah, LI is getting into a temper. But to return to Gleckman's column. The juice in it is in the last three grafs, which are directed against the inevitable drift to war against Iraq. Here it is:

"But the real test will come in foreign affairs. The nation is already fighting an undeclared war against terrorism. Not only are U.S. forces at risk in Afghanistan, but they are also fighting in the Philippines and most likely other nations as well.

The need for formal congressional approval for such a shadow war is admittedly murky. But there should be no confusion when it comes to what the White House has led us all to believe is its next step: a war against Iraq. Congress has a responsibility to enact a declaration of war before such an operation begins. Bush's father was wise enough to seek a congressional OK for his 1991 attack on Iraq. Now, the current President Bush should do the same.

There is little sign, though, that he will do that. And, sadly, there is even less indication that Congress will insist upon it. If Bush's Iraqi invasion goes badly, we will all come to regret both the President's power grab and the Congress' acquiescence. And, like LBJ and FDR before him, Bush will learn a costly lesson about the limits of the Imperial Presidency. "

Well, he might learn a lesson. We don't care about Mr. Bush's education. It failed to make a mark on him in the impressionable years, obviously, and we doubt any imminent changes are in the offing. The man's level has been exposed for all of us to see for some time now. We are more concerned with the lack of any good reason for this war. There is no reason to think that war is the best way to accomplish disarming Saddam Hussein, if that is really what the U.S. wants to accomplish. And we are concerned about who will bear the brunt of the inevitable bad consequences of a war fought by the U.S. alone -- in spite of the American press' assurances, via no doubt unnamed sources in the administration, that Europe and several Middle Eastern allies will just be all tickled pink about the deal. We are concerned that the U.S. is following a visibly incompetent leader as he pursues a comic book foreign policy against the "axis of evil."

Remora



We like the LA Times -- we love LA -- we don't subscribe to the dismissive La La land stereotype -- but it is difficult for defenders of Southern California seriousness (with our pistols a-blazin'!) to read about the Post-nomadic economy, as breathlessly revealed in the Sunday Times, without, uh, wondering who put the marijuana in the arugala.

First comes the bio -- which we have copied faithfully from on-line:

"Joel Kotkin, a contributing editor to Opinion, is author of "The New Geography: How the Digital Revolution Is Reshaping the American Landscape." He is a senior fellow at the Davenport Institute for Pu"

PU is what you get in Mr. Kotkin and Ms. Susanne Trimbath's take on the new new economy, the one after that recent nasty spate of nomadism -- you remember, reader. There you were, out there with your spear, your seal coat, your tatooed cattle, wandering through desert sands and ice floes and such. Well, no more! Here's what is coming up:

The post-nomadic trend reflects changes that were building up before the stock
market's current turbulence and Sept. 11. As Americans have aged and
become ever more capable of settling where they wish, because of the rise of
digital technology and the dispersal of economic activity, fewer of them than
ever are willing to pick everything up and move in pursuit of quick riches.
Fewer than 15% of Americans change addresses in any given year, down from
a high of 20% in the 1970s. Contrary to popular reporting, most baby
boomers, suggests demographer William H. Frey, "age in place." That is, they
stay where they are. This development suggests that residential property may
be the "gold" of the emerging economy because the home has become more
important to people financially. [LI remark: that homes become the "gold" of an economy as people retain them longer must be a feature of this great new post nomadic paradigm. In the old, stinky paradigm, that houses are built and sold added value to them as investments. But no longer! Mr. Kotkin has discovered that a frozen market is a golden market. Is that great or what? We are all hoping that the Davenport Institute of PU puts him up for a Nobel Prize next year. If they can extract him from his rocking chair, that is -- the man doesn't want to contravene his own paradigm by acting all nomadic, you know).

But post-nomadism is also about values that place greater emphasis on family,
faith and community. At the height of the 1990s stock boom, according to the
Zogby International poll, only one in three Americans defined their "American
dream" in spiritual, as opposed to purely material, terms. By 2000, a spiritual definition was embraced by 42% of Americans. After Sept. 11, the percentage grew to 52% of adults."

When you get poll numbers like that opting for the spiritual, the game is up! Here I'd think that after September 11th, an increasing segment of the population would be reaching for their de La Mettrie, rejecting the afterlife, spewing contempt on the intellectual bankruptcy of the concept of "soul," throwing themselves into libertine lifestyles of finite sensuality, and ever more aware that man is doomed to a brief career of organic vicissitude, after which the worms will go in, and the worms will go out. And what do you know -- Americans start doing American dreamtime as a spiritually defined thing.

Remora

Sorry, sorry, sorry. Blogging without a computer of one's own -- to change Virginia Woolf's title around a bit -- is a difficult enterprise. We come here, to this library, and we plunge into the news, and we see the stray tasty morsel -- the story from Business Week, the Nick Tosches fan site, etc. -- but trying to capture what we want from these sites is totally frustrating. Plus, we can't take off all our cloths in the library -- some screwy policy. And how can we write with cloths on? It feels unnatural.
Plus the lack of coffee.
Plus the lack of beer (after coffee).

But okay. Remember, last week, we nominated some biz journalists for the Glassman award. That prize is named after our favorite fearless forecaster, the man who co-wrote Dow 36,000 and is still ticking away, like a watch that tells the correct time once in a century, at the Washington Post. Yesterday, we were overjoyed to see this conservative pantaloon defending his thesis on the Wall Street Journal op ed page.


It takes the tiniest bit of gall to defend the ideas set forth in that 1999 book in 2002. And there's the pesky problem with the 7 to 8 trillion dollars lost in the popping of the high nineties bubble. But Glassman is having none of it. He's still forecasting that Dow 36,000, although, uh, there's no date set for it now. Rather like the launch of the starship enterprise and various of H.G. Well's scientific romances, Glassman's Dow number is set for sometime in the indeterminate future.

What is interesting is not his popcock prediction, however. It is the political coloring that he gives to investing in the stock market. With Gilder and Larry Kudlow, Glassman is a new economics conservative. Let's quote from the next to last grafs of his piece:

"If anything has changed since our book appeared, it is increasing respect for the debunked strategy of market timing. Robert Shiller, the economist whose book "Irrational Exuberance" appeared in 2000, has been celebrated as a Timer Saint. But Mr. Shiller was bearish while the market was setting new records. His theory was laid out with fanfare in 1996, when, with the Dow at 5427, he said his data "implied an expected decline in the real Standard and Poor Index over the next 10 years of 38.07 percent." But six years later, despite a long bear market, the Dow is up about 60%; the S&P, 40%.

"Our noisiest critics, Paul Krugman in the New York Times and various Slate.com scribblers, willfully distort our arguments. And no wonder. If Americans continue to embrace long-term stock investing, the role of the state as dispenser of retirement benefits will shrink or disappear. And the "war" between capital and labor will be over. Unfortunately, many politicians and journalists have a vested interest in spreading fear and chasing people out of stocks -- even though stock investing is the most reliable route to accumulating wealth."

The "war" between capital and labor is one of those Old Economics things. And it was recognized by Old Economics conservatives. That's why the stereotype of the conservative, from the thirties to the sixties, was of a Taft voting, bondholding Republican. This kind of conservative wanted to stand athwart the stream of history, with a bond paying a secure dividend, and yell halt. While the difference between bonds and stocks -- and Glassman's silliness about what the stock market is about -- has a technical aspect around which Glassman, et al weave their tales, the synbolism of stock conservativism is more important.

That symbolism goes something like this: far from standing athwart the stream of history, the stock conservative wants to surf on it, as ever more technical marvels produce prosperity for all of us. The divide of class was not just a Marxist construct -- traditionally, conservativism has recognized and embraced the governing class -- the owners. Conservatives of the Burkean variety have always believed that this class isn't defined simply by their statistically greater wealth, but by such emergent qualities as leadership, a concern for order, and the guardianship of tradition.

Stock conservatives have a different dream. In this dream, the workers on the other side of the divide take on not only some small share of ownership, but the Burkean role alloted to the owners.

For this to actually occur, the workers have to operate like the owners. For instance, they have to keep their capital in stock, aligning their interests with the interests of corporate America. If they keep their money in bonds, even corporate bonds, their interest are eventually going to be aligned with the Treasury department -- that is, with the government.

This isn't a bad thing for the Burkean school. Burkeans aren't opposed to government tout court -- rather, they claim it as the natural heirs of rule.

If, indeed, the slug of losses mount so that the working class falls away from the role of owner envisioned by the stock conservatives, there will definitely be a shift in the intellectual framework of American conservative expression. The Buckleys will once again come to the forefront.

LI doesn't think this will happen. But LI, unlike Glassman, has no crystal ball in the house...

Remora

Dave calls LI this morning to complain about our lack of posts.

What can we say? Here we sit, in the library. Our new computer is supposedly trucking to us as we write. Our old computer, with its invaluable (at least to LI) hard drive, sits at Mac Alliance like the corpse of the family's beloved pooch, with the service people gently urging us to do the needful, bury the damn thing, etc.

But let's send out a brief recommend to this Business Week article on the failed telecosm - or did the "cosm" in George Gilder's once much quoted phrase hint at a Bataille like orgy of waste, an economy of excess that we will all have to live with, now


The first two grafs present the grim picture -- or grim for some.

"Telecom has been a disaster for just about everyone.
Investors have lost some $2 trillion as stock prices
have tumbled 95% or more from their highs. Half a
million workers have lost their jobs during the past
two years. Dozens of debt-laden companies, from
Winstar Communications to Global Crossing, have
collapsed into bankruptcy. And on July 21, the
sector sank to a once-unimaginable low when
WorldCom Inc., the company that embodied the
industry's power and promise, filed the largest
bankruptcy claim in U.S. history.

"Yet a small group of CEOs and financiers managed
to save the family silver before the house burned to
the ground. Philip F. Anschutz, founder of ailing local
and long-distance upstart Qwest Communications
International Inc. (Q ), reaped $1.9 billion from
company stock sales since 1998. Former Qwest
CEO Joseph P. Nacchio sold $248 million worth of
stock before he was pushed out of the scandal-plagued company in June. Global Crossing founder Gary Winnick sold $734 million of his shares before
his company filed for bankruptcy in January. And former WorldCom CEO
Bernard J. Ebbers borrowed some $400 million from his company before he
was ousted in April--and that loan remains to be repaid."

The story connects the dots to the fall guy du jour -- Salomon Smith Barney's own analyst of the year, all around neutral observer, and general pig, Jack B. Grubman. The man with the Midas touch in 1999, although all that was glittering turned out not to be gold -- more like the stuff you pitchfork out of stables. Dross, as Freud knew, was the other side of gold -- too bad the investors Mr. Grubman sold down the river weren't conversant in Freud, in spite of his loss of stock in the last decade, eh?

As for the inventor of the Telecosm, hmm. Poor Old George Gilder is still plugging away at the spectator, and on the Telecosm lounge he purveys some recent email from believers who urge each other to keep the faith, to recognize that new paradigms sometimes take, well, hits. Big hits, in fact. Massive, tsunami size ones. I imagine less, shall we say, sanguine gamblers have abandoned the Telecosm lounge, and the Gilder Technology report, for the more secure predictions that emerge from horoscope charts, haroscopy, and other forms of divination.