Public benefits in restraining business-financiers (the modern incarnation of Robber Barons defined by US economist Thorstein Veblen) are rarely debated, despite corporate corruption and social injustices. ‘Politics of envy’ or ‘unfunded empathy’ spin, shouts down policies aiming to curb social-economic destruction. Pecuniary power-and-control motives are not empathetic. But, controls on looters might see less devastation of the people and land.
Firmly applied taxes and restraints on top business-financiers aim not to increase tax revenue per se (soak the rich) or pretend to soften steely consciences. The AMP charged dead people for life insurance, and the LNP Government ignores the fraud shown in Hayne’s Commission (and its own). Controls, however, enforce the law and stiffen laws against white collar crime; also slow down asset inflations, crashes and executive incompetence. Treasurer Frydenberg’s hectoring to business on share buy-backs came near to tears, given his LNP’s slick hatred of policies against perks, privatisation chaos and vicious corporate executives.
Effective New Deal controls show the current state of affairs could be otherwise, to widespread benefits and, given demands for urgent climate policies and wage increases, many prefer the logic of this extended view. I don’t doubt hostile resistance from demagogues not lacking in Australia.
This logic separates the corporation from its board and executive, because the two entities have different motives. The firm produces goods or services, usually efficiently, skilfully and creatively. But top-down orders contradict these cooperative motives, as whistleblowers inside firms, hospitals and public services, or US Democrat candidate Warren’s draft ‘Stop Wall Street Looting Act’ attest.
The aim of looters is to exact obedience from workforces and rip off bank clients, pensioners, workers, and no matter the inefficiencies and lawlessness that working firms and the public endure. They must knock out their own rival business-financiers’ firms. Some people cannot stand this, but many are compromised.
Looters’ motives are not for general profits alone, because rivalry is based on which corporation beats its competitors in above average profits, by inflicting damage. Vitality exists inside the corporation, but not among executive-financier types which aim to incapacitate. This can be by mergers, outsourcing or questioning competitors’ probity. The 1904 Theory of Business Enterprise by Veblen is applicable again: Qantas versus Virgin Australia (e.g.).
J.K. Galbraith remarked of the 1980s – so like the 1890s of Veblen’s day – that ‘Convenient Reverse Logic’ had returned. It starts at ‘the preferred remedy’ not with diagnoses of despair of low pay, redundancies, malnutrition.
Preferred remedies should not ‘involve a painful transfer of resources from the affluent’. These attribute poverty to how ‘the poor lack motivation’ because they are ‘already unduly rewarded’. Things are opposite for ‘the rich’. They ‘have not been working because they have too little’ income. Any ‘envy’ worsens conditions for the ‘poor’.
Self-justifying misconceptions and self-deceptions are difficult to turn around. The first is that progressive taxes ‘pay’ for social justice programmes. Sovereign governments (Mr Morrison’s, not NSW, say) can easily spend cautious money into existence. But they cannot manage the despoliation and asset stripping caused by (LNP) governments’ craven ‘light touch’ on financial markets, executive-run corporations, agribusiness, private equity and building industries. Taxes and controls on excessive play money with which to destroy are logical.
The second excuse is the ‘One per cent” on unjustifiable wealth, cannot possibly bring in ‘enough’ revenue. Perhaps not, but to reiterate, top taxes aim to control feckless business-financiers from soul-destroying. No one is stopping their getting proper jobs – engineering; physics; public design – just reducing gambling choices. Pump and dump tactics; shorting treasury bonds; or bull-bear activity are indebted looting.
Margin loans are bank advances to stock traders and wealthy gamblers. The danger is that when stocks collapse, banks ‘call in’ margin loans first, to lead, as on Wall St 1929, to speedier downhill spirals as traders sell, if they can. When the US Fed raised the ‘margins’ required before loans are made, it reduced fire sales: in the late 1930s to postwar, the Fed took requirements even to 100 per cent. Other asset requirements modernise the limits: other countries need legislation. Taxes can side-line bullies to a gated playground.
Since the 1960s, American firms’ business-financiers regained global power to withdraw efficiency and squeeze corporations in counterproductive ways. President Kennedy relaxed the 90 per cent progressive tax rate somewhat, although not carte blanche, since the cut was conditional on corporates investing. Today there are no conditions.
An old spin to excuse asset busts, environmental carnage and steep rise in inequality was “creative destruction”: It is ‘best’ if millions suffer a Depression because corporations have ‘creatively’ improved things. Few know the phrase was used by Joseph Schumpeter in 1911. He disliked Veblen’s claims that capitalism was inefficient and entrepreneurs no saints; or instead, that creativity arose from ‘workmanship’, use of ‘accumulated wisdom’ and social knowledge. But Schumpeter had a corollary of “destruction without function”, with the only aim of destruction being pecuniary gain for the 1% via imposing incompetence.
‘Business’ invests for profit; a claim on earnings. 2019 US CEO pay, not counting share options, is 221:1 worker on minimum wages. There is no market in corporate salaries, shareowners do not control them and rarely is there long-term investment. Banks need the low paid to borrow (NINJA loans e.g.), exemplifying dependencies of the powerful on the weaker. Modest investors are blamed for lacking wariness and middle-income earners are rendered redundant at the flutter of a KPI. Restraining logic sets aside wreckerswith only spoils to show.
Jocelyn Pixley is an Honorary Professor in Sociology, Macquarie University and see.