A Capitalist Wo(man) Can Care About the Common Good & Wall Street Bull

Frans Hals, Banquet of the Officers of the St George Militia of Haarlem (1627)

Frans Hals, Banquet of the Officers of the St George Militia of Haarlem (1627); It is not enough when a man can say, “Oh, I labor, I have my craft,” or “I have my trade.” That is not enough. But we must see whether it is good and profitable for the common good, and whether his neighbors may fare the better of it. –John Calvin, Sermons on the Epistle to the Ephesians (sermon on Eph. 4:26-28)(1558)

The ideological battles in America have become so intense that — looking ahead five years — uttering the term ‘common good’ might get a thinking person hauled in to testify before the 21st century equivalent of the McCarthy commission.

Only a socialist even considers the concept of ‘common good’ and we will have none of those in America. Chrystia Freeland, editor of Thomson Reuters Digital introduces us to Roger Martin’s new book Fixing the Game: Bubbles, Crashes and What Capitalism Can Learn From the N.F.L.

Dean of the Rotman School of Management at the University of Toronto’s business school, Roger Thompson steps outside contemporary business thinking of how to best rule the universe, asking whether the rules of the capitalist game are working for the system as a whole.

This book represents a departure from my previous three books in that they were largely devoid of criticism,” Martin writes. “In this book, I am critical of some institutions (for example, hedge funds). However, I want to be clear that I bear no ill will to the people inside them.

Economic Touchdowns With Updated Rule Books

Martin uses the National Football League for his comparative metaphor, arguing that the NFL is constantly tweaking the rules of the game to ensure the best collective outcomes for the league. The NFL is not playing by its original rule book (aka the American Constitution in metaphor speak). No commissions would ever propose to going back to the first set of rules, now adapted as the game evolves.

When a brilliant coach or player devises a technique to strengthen defense, for instance, the commissioners alter the rules to offset that advantage. With similar understandings of human nature and social organizations, some rich parents don’t make their children rich millionaires for fear of ruining their lives.

Capitalism’s rule makers, says Martin, must be likewise perpetually alert to these sorts of business innovations — the kind of thing lionized in the traditional business advice best seller — and change the rules of the game to neutralize their impact.

Say what?

Reuters’s Freeland recommends reading ‘libertarian economist’ Tyler Cowen’s essay ‘The Inequality That Matters’.  I find it long and a bit tedious, but there are relevant take-aways.

Investigating the subject of America’s growing two-class society, Cowen cites Robert J. Gordon,

 … an economist from Northwestern University who is hardly known as a right-wing apologist, wrote in a recent paper that “there was no increase of inequality after 1993 in the bottom 99 percent of the population”, and that whatever overall change there was “can be entirely explained by the behavior of income in the top 1 percent.”

The real issue (aside from debates about what exactly has been accomplished by the Bush tax cuts, she said) is the divisions within the one-percent; and the real-real issue is Wall Street, not salaries of celebrities and sports stars who see their salaries rise and fall, based on measurable performance.

(In 2004) … the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount. The authors also relate that they shared their estimates with a former U.S. Secretary of the Treasury, one who also has a Wall Street background. He thought their estimates of earnings in the financial sector were, if anything, understated.

Financial Junk Thinking

America celebrates a dangerous dynamic of short-term trading and investing, backed up by bail outs and risk reduction from the government and the Federal Reserve. I have yet to understand exactly what value is created with most of the get-rich schemes — except that Americans want high-yield returns on investments, so let’s create some that no one can understand, but the numbers are exciting.

Key Wall Street executives demand less regulation — not more — and shorter big-returns on investments. Who holds a stock these days except women?

This is not good. “Going short on volatility” is a dangerous strategy from a social point of view (writes Cowen) For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

The libertarian economist also ends up agreeing that unfettered capitalism — especially engaged in by people providing no real value except mathematical schemes that promise high returns — is not good for the common good.

Hold the Roundup Socialists Posse Please

The Republican War on Women should not focus on next rounding up all the people who believe that we can be entrepreneurs, capitalists and still care about the general wellbeing of others. When body-bagging men get done taking full control of our reproductive systems, they will next start on our minds.

Rather than saying America is about every guy for himself, and he who outwits the rest of us wins the game — as long as he’s in financial services — there is another option.

For all the talk about God in America, I think Jesus Christ preached a very different gospel. The Scandinavian countries get it. We don’t. But at least two thinking men this morning have written that considering the concept of ‘common good’ doesn’t de facto make a person a Communist.

‘Common good’ tends to be a more female concept, which is why it’s heresy on Wall Street. John Boehner can stand weeping at the podium of Catholic University, as he did yesterday. Yes, yes he had a private conversation with the Virgin Mary, which makes him an insider kind of guy, a real patron of the people.

What means more is that over 100 university professors and leaders have endorsed a document calling Boehner’s policies ‘anti-life’ — a phrase used by politicians appealing to Conservatives opposed to abortion. The professors charge him with working against the goals of Jesus Christ.

‘Mr. Speaker, your voting record is at variance from one of the church’s most ancient moral teachings,” the letter says. “From the apostles to the present, the magisterium of the church has insisted that those in power are morally obliged to preference the needs of the poor. Your record in support of legislation to address the desperate needs of the poor is among the worst in Congress. This fundamental concern should have great urgency for Catholic policy makers. Yet, even now, you work in opposition to it.’ via NYTimes

Anne