Business Ethics, Big Government, and Democratic Capitalism: continued
Government: The Primary Stakeholder
America Loses Its Way
The United States is a democracy and government policy reflects the perceived needs of citizens.
During the first fifty or sixty years of the Republic, self-employed farmers and owners of businesses in small towns accounted for most of the citizenry.
With an open frontier, Americans had no taste for Big Government.
If a town needed a school teacher, people would agree to hire someone and would pitch in to build a 'little red schoolhouse.'
Property rights were a big issue, whether it was the right to own slaves or to hold debt backed by gold or silver.
Productivity gains in industry and agriculture reduced the number of people working on farms and living in small towns, and spurred the rise of factories and big cities.
By the second decade of the twentieth century, most Americans were employees, dependent on wages and salaries.
By the second decade of the 20th century, Americans began to look to the government for support.
Some corporations had vast power, overshadowing the government.
Workers and consumers demanded a new class of rights.
Labor unions, after bloody struggles, gained influence.
Instead of traditional self-reliance, Americans began to look to the government for support.
Hitler, Mussolini, and FDR
International financial mismanagement and the excesses of the 1920s led to the rise of Hitler in Germany, Mussolini in Italy, socialist government in Great Britain.
The Democrat Party, favoring government by the intellectual elite, put a former president of Princeton University, Woodrow Wilson, into power in 1913, and set up the Federal Reserve System and a graduated income tax.
In the 1930s, another Democrat, Franklin Roosevelt, with the enthusiastic backing of university professors, pushed Big Government to new limits.
Two generations later, American academics were still ardently supporting Big Government and the Democrat Party, supplying the economic theories that dictate many official views.
By the millennium, a plurality of Americans was dependent on government for food and shelter, although many might not recognized this dependence.
Government benefits come not only as welfare payments, but also in the form of salaries, wages, allowances, rights, and contractual payments to those living off the bureaucracy.
Ethics and Capitalism
When most Americans were in business, either as farmers or proprietors in small towns, there was a social consensus on progress, morals, ethics, and the future.
The desire to amass wealth drove capitalists in the nineteenth and early twentieth centuries, but not without benefiting the community and the nation.
There was a need for real achievement, beyond financial gain.
The Protestant Ethic said, 'Do good and you will do well.'
The blaze of the American Dream and a sense of honor, idealism, and patriotic fervor, had been fanned by moralists from Parson Weems to Horatio Alger, and from Norman Rockwell to Frank Capra.
This fire had turned to ash and died by the 1990s, as Ronald Reagan passed from the scene.
There are many reasons not to glorify the past.
A reading of history shows that the past, as in the Old West, was nothing like that painted by Frederick Remington or C. M. Russell, nor were our ancestors better or worse than ourselves.
What changed was people's perception of the world and national goals.
Today's promoters of traditional values, like William Bennett, have followers in the pre- and post-baby boom generations, but perhaps not enough to halt, much less reverse, the decline in moral purpose spurred by ethical relativism.
Great works need dedication, sacrifice, idealism, and a sense of duty – traits not readily found in a hedonist society.
The wisdom of Marcus Aurelius could not slow the decline of the Roman Empire.
Permissive Behavior and Hollywood
Over the last generation, American government reflected the attitudes of advocates of permissive behavior, led by and with the backing of Hollywood and the press.
The American Civil Liberties Union used the Constitution and the court to allow pornography, anti-religious sentiment and official racism, and encouraged the media to gorge youth on a diet of heedless violence, sexual promiscuity, and crime.
Since closing the Hays Office, movies with a moral message are rare.
Today, the cinema teaches young Americans that criminals win, the good lose, and entertainment calls for exploding cars, smashed heads and severed limbs.
Hollywood offers a virtual Roman arena to satisfy base appetites and dull the wits of the masses.
The Ideal Of Material Progress
Capitalists used to risk their fortunes and honor in projects tied to the idea of material progress.
To build railways across a continent, to dig a canal, to provide homes with indoor plumbing, electricity, and telephones, to supply the masses with automobiles – these were the goals that spurred entrepreneurial achievement.
However, nineteenth century ideals have faded.
We can still sense the dream of progress that once gripped the nation in this description of the New York World Fair of 1939-1940:
"From its inception to its closing ceremonies, the Fair promoted one of the last great meta-narratives of the Machine Age: the unqualified belief in science and technology as a means to economic prosperity and personal freedom.
Wedged between the greatest economic disaster in America and the growing international tension that would result in World War II, The World of Tomorrow was a much-needed antidote to the depression and confusion of the times.It provided the one saving grace, which all of America needed – it provided hope."
(From "Welcome to Tomorrow", http://xroads.virginia.edu/~1930s/DISPLAY/39wf/welcome.htm)
For lack of trying, America never completely fulfilled the vision of clean, orderly urban life suggested by the Democracity diorama of the 1939 New York World's Fair. By 1942, the government took apart the Trylon and Perisphere, the great Art Deco symbols of the Fair, recycling their iron girders into battleships and tanks.
Even as late as the 1970s, Americans still thought of progress in material terms.
In May 1961, President Kennedy issued the last great industrial challenge to the nation, promising to send an American to the moon 'by the end of the decade' – a feat of enormous technological daring and patriotic brio.
The Space Race accelerated advances in microcomputers, satellite communications, material science, and engineering that shaped American life until the millennium.
Wars On Poverty And Vietnam
In November 1963, John Fitzgerald Kennedy was assassinated and Lyndon Baines Johnson took over the White House.
Johnson embroiled the United States in an unpopular and mismanaged war in Vietnam, while deflecting national aims from material progress to the redistribution of wealth.
In 1964, President Johnson announced in his first State of the Union address,
'This Administration today, here and now, declares unconditional war on poverty.'
In July 1969, Neil Armstrong set foot on the moon and within five years of fulfilling Kennedy's goal in space, Americans had moved away from the ideal of material progress towards the welfare politics of the Great Society.
The bizarre argument of distributive politicians to downplay the space program was,
'We need the money for poor people here on earth'
– as if investments in rocket ships provided jobs to Martians.
Distributive Politics
Reluctance to invest heavily in space slowed the rate of technological progress optimistically expected by an earlier generation from Stanley Kubrick's movie, 2001: A Space Odyssey.
Proponents of Big Government sneeringly derided the idea that material progress would benefit all as an example of 'trickle-down economics'.
Proponents of Big Government derided material progress as 'trickle-down economics'
This was a shift in purpose, from the idea that entrepreneurs should produce an abundance of goods for the nation, to the belief that government should redistribute wealth and micromanage ecological, sociological, and racial issues.
Distributive politics discouraged long-term investment that would have further improved material living standards.
In fact, by 1980 there were no dreams of technological progress equivalent to those of the 1880s.
The emphasis was now on making rules and passing wealth from one pocket to another.
Politicians adopted the language of economists to frame national purpose – increased Gross National Product, lower inflation, higher productivity, and greater employment – rather than describing in plain English how people might live better.
LBJ's Great Society
The Great Society was Roosevelt's New Deal reborn and gone amuck.
The War on Poverty and other Johnsonian initiatives did not call for corporate investment.
In two years, in what the historian Paul Johnson called 'America's Suicide Attempt', dozens of Great Society initiatives provided opportunities for expanding the bureaucracy and changing the American economy forever, including:
Community Action, Community Health Centers, Foster Grandparents, Green Thumb, Head Start, Indian Opportunities, Job Corps, Legal Services, The Aircraft Noise Abatement Act, The Child Safety Act, The Civil Rights Act, The Clear Air, Water Quality and Clean Water Restoration Acts, The Corporation for Public Broadcasting, The Department of Housing and Urban Development, The Department of Transportation, The Elementary and Secondary Education Act, The Equal Opportunities Act, The Fair Housing Act, The Flammable Fabrics Act, The Food Stamp Program, The Health Professions Educational Assistance Act, The Medicare Act, The Motor Vehicle Air Pollution Control Act, The National Endowments for the Arts and Humanities, The National Trail System Act, The National Transportation Safety Board, The Neighborhood Youth Corps, The Office of Economic Opportunity, The Product Safety Commission, The Rent Supplement Act, The Solid Waste Disposal Act, The Urban Mass Transit Act, Migrant Opportunities, The Voting Rights Act, The Wild and Scenic Rivers Act, Upward Bound, and VISTA Volunteers.
Now, as a result of Lyndon Johnson's Great Society, government for government's sake is for many the American ideal.
Despite thirty-four years of Great Society over-regulation and spending, President Clinton's Report to Congress in 2000 showed little progress in reducing poverty, improving education, or enriching the lives of the American family. In fact, the trend had been backwards.
President Reagan said,
'LBJ declared war on poverty and poverty won.'
Investment Discouraged
The bureaucratic overindulgence of the Great Society was empty of hope for the productive part of the nation.
Because of distributive programs and Johnson's failure to disengage from Vietnam, Americans became radically divided.
An activist, runaway judiciary forced parents to bus their children to distant schools.
This act of judicial absolutism set off a great internal migration – an exodus that echoed earlier population movements.
Fiscal incentives for home ownership, municipal finance, and interstate highways, no longer encouraged closing the frontier, but were perverted to the task of emptying American cities of the most useful citizens.
Middle class white and black families scrambled to the safety of new suburbs and gated communities, leaving behind people at the bottom of the bell-shaped curve, abandoned to disorderly lives of crime and drug dependency.
Inner Cities Left To Decay
Large public investment now created a nation of beautiful, flower-bordered superhighways that linked giant malls, parking lots, and look-alike real estate developments, achieving bland, boring, uniformity – while the old, inner cities – once the heart of culture and progress – were left to decay.
The Johnsonian regulatory bog of environmental, health, safety, and consumer rules induced business to produce abroad rather than in the United States.
Great parts of the Northeast were converted into a Rust Belt.
As the less educated lost better paying industrial jobs and moved into less productive services, the disparity between rich and poor increased.
Deindustrialization Encouraged
While Washington issued rules that augmented the cost of domestic production, foreign governments enticed American industries with friendly laws, tax holidays, free land, protection against competition, prohibitions against unionization, and expedited licensing.
When capital moved offshore, it stayed there, shifting from country to country, as opportunities appeared.
American and foreign governments were eager for American industry to move abroad.
American tax laws and accounting rules allowed offshore profits to stay untaxed for years, although the earnings could be reported to shareholders and be used to justify higher stock prices and executive bonuses.
Both American and foreign governments were eager for American industry to move abroad.
While anti-industrial rules discouraged domestic investment, government officials helped American entrepreneurs find safe havens abroad.
The Departments of State and Commerce opened doors to U.S. investment in other countries.
The World Bank and International Finance Corporation urged foreign governments to treat American corporations fairly and insured losses against expropriation.
State banking authorities made rules that had the unintended result of encouraging big city banks to expand overseas rather than in the United States.
American corporations abroad had local services of Citibank, Chase Manhattan, Bank of Boston, and others.
The Pivotal Seventies
The seventies were a great turning point in American history.
Pension fund reforms set the precedents for the boom in IRA and 401(k) plans of the eighties, creating the hegemony of institutional investors.
Financiers introduced two great financial innovations, asset backed securities and money market funds.
Trading in options and futures was standardized and made efficient.
By the 1980s, institutional investors dominated Wall Street, driving the long bull market with support for corporate buybacks while exploiting mutual fund investors' blind faith in equities.
The enormous cost of the War in Vietnam – the first major war that America lost – brought inflation that weakened the U.S. dollar.
In 1971, President Nixon took the United States off the gold standard and the era of rapid globalization and unstable floating exchange rates began.
The U.S. government gradually adopted pro-Israel policies, backing the takeover of Palestinian homes and lands by Jewish settlers from Europe and America.
This U.S. position brought strife and war to America itself, since much of the world's oil was in the hands of Israel's Muslim enemies.
In 1973 and again in 1977, Muslim nations caused oil shortages that put American motorists in gas lines and emptied the highways.
Jimmy Carter: America Shamed
Iran shamed President Jimmy Carter by seizing the American Embassy and holding U.S. citizens hostage with impunity.
American banks struggled to recycle the petrodollars that foreign oil exporters had amassed.
This resulted in the foolish lending to Latin American governments that almost sank American international banks during the 1980s.
Deindustrialization was the natural outcome of Johnson's Great Society programs.
By the 1970s, Europe and Japan had recovered from the World War and countries like Brazil were no longer dependent on the U.S. for manufactured goods.
American reserves of gold, oil, along with industrial power had dwindled.
The feckless Jimmy Carter casually gave away the Panama Canal, ignoring the heroic achievement and engineering leadership of earlier generations.
American Engineering Fades
By 1980, the Machine Age was ending.
Most of the great American engineering achievements – the Golden Gate Bridge, the San Francisco Bay Bridge, the George Washington Bridge, the Lincoln and Holland Tunnels, the Interstate Highway System, the BART subway, the World Trade Center, the Sears Tower, the Triborough Bridge, the Verrazano Bridge, the great zoos, museums, and concert halls, Saint Patrick's Cathedral, and Rockefeller Center – were built before the 1980s.
In the following decades, the greatest engineering feats were outside the United States – the Petronas Towers in Malaysia, the Itaipu Dam in Brazil, the Akashi Kaikyo Suspension Bridge and the Kansai International Airport in Japan.
The 1980s and 1990s were times in which economists replaced tangible symbols of progress by statistical goals.
Numbers like the GDP or CPI fail to carry the optimistic image of a man in space, 'two cars in every garage', a golden spike at Promontory, Utah, or pouring water from the Great Lakes into New York harbor on completion of the Erie Canal.
The twentieth century was the American Century, but national purpose quietly faded after the War in Vietnam, the Arab Oil Shocks, and the tragic political circus of Watergate.
Not until September 11, 2020 and the terrorist attack that destroyed the World Trade Center did the nation again come together in one purpose.
Essay: continued >
