Will Someone Tell America’s Emperors of Finance They Have No Clothes?

There are those that tout Keynesian and Chicago theories as our protection in this dire economic situation America finds herself. They claim these theories were successfully tested in the Depression, but we know that many experts equally believe that stimulus and money printing was not successful then nor will it be now. Friedman himself said that excessive money printing, like drug addiction, has to keep accelerating until ultimately failing in hyperinflation to sustain short term positive effects. No, evidence strongly leans toward the theory that what drew us out of the double dip depression of the thirties was that bombs destroyed worldwide industrial output creating demand for U.S. manufacturing, not the eerie monetary and fiscal voodoo policies we are chanting around the fire today. Prominent economists now say we are headed imminently toward our second dip.

I am warning my friends of dire inflation, but predicting inflation, after global merchants like the CEO of Wal-Mart disclose they cannot hold inflation back any longer isn’t fear mongering. I am simply a master of the obvious taking no credit for my discernment. However, to claim that all is well as the Emperor rides naked through the streets is simply blind loyalty to failed policies. I like the little boy who pointed out the Emperor flaunting of body parts that should never be displayed in a processional, am simply calling the tailor a fraud.

I hope that my fears are allayed but it seems there will more than likely be no return from the abyss. No government in history has been able to turn back once this extreme an acceleration of money supply has occurred. This drug crazed college experiment must unfortunately continue on for our economy will implode otherwise. We have no choice but to continue printing. However, let’s not rewrite history. If the real purpose of Henry Paulson’s “shock and awe” monetary policy was not to protect the wealth of his cohorts but to save the world’s financial system and to avoid the catastrophe of burning down of America’s house, then adding an unprecedented amount of dollar flow to an already bloated supply to eradicate the residue of his quick fix was the equivalent of burning down the entire city of Rome to drown out the awful fiddling of Nero.

Certainly, this disastrous repair of our economy would not have even occurred if it were not for repeated administrations allowing the deregulation and consolidation of the financial industry. I could never defend their malfeasance. Each time, the financial industry coalesced and bubbled into an interweaving quagmire of evasive tactical and strategic conglomeration, I scratched my head at the seemingly complicit nature of our regulators. Gone was the protection envisioned at the height of dismantling that occurred with the Depression. The multinational gold rush fueled the revolving doors between Wall Street and Capitol Street, creating a frenzy of Ponzi fever gambling America’s future for a few gold nuggets.

And if I will not defend almost criminal policies of creating businesses too big to fail, I certainly would not defend spending billions if not trillions to keep them in place. The banks that created the morass should have been allowed to fail along with the humanoids that crept within their demonic walls. Those bankers and banks that had enough souls to live through the implosion could have been propped up to continue on, sorely but not worse for the wear than today.

Ask the 8 million 99ers, that forgotten group that has a higher suicide rate than any other, if these policies were the right ones. Or perhaps we could get a positive response from the millions who have lost or will lose their homes through foreclosures even as scores of millions lose their life’s savings holding onto the obsolete dwelling boxes we used to proudly call our prime investments. Perhaps the elderly gents who used to own their own businesses who will now be bagging groceries for a living until they can no longer lift the cans of food, inflated by our QE2, off the checkout line into upper class grocery bags will proudly support our future path. Like Japan, we will drift into our forgotten decades and wonder if there was a better way out of the collapse of 2008.

America Must Lead the International Regulation of Multinational Corporations

In every world empire, there has been a concentration of state wealth and a transfer of that wealth from one great empire to the next e.g. Egypt to Rome; but it wasn’t until the emergence of the industrial revolution and the invention of the Charter Company that private entities gained wealth comparable to nation states. Now with the revolution of the MNC, the power of Corporate Nations has surpassed that of most States. Neither Hayek nor Friedman adequately addressed how classic liberalism would optimize a world where states bow to corporations and MNCs increasingly become international oligarchs.

Jump forward a hundred years and what role will states have? In the beginnings of the industrial revolution, charter companies had standing mercenary armies comparable and sometimes larger than the states that authorized their charters. In the Iraq war, Blackwater seemed to silently engulf Iraq with its private mercenary activities. How will the mercenary forces of the oligarchs compare on an international scale 100 years from now with the mercenary forces of the charter companies a hundred years ago?

It is true that America’s Federal Reserve has significant culpability in its role of allowing our Congress to irresponsibly expand the debt, but much of that debt was driven by and inextricably tied to a trade deficit caused by an emerging international wave of MNCs and a lack of understanding by industrialized nations’ trade negotiators of their eventual encompassing impact on nations. Given our macroeconomic naiveté, we had the choice to continue borrowing or to accept a slow but real decline in average home purchasing power. For some reason, the Fed was happy to support the former option.

Some conspiracists point to forces external to the U.S. as having responsibility for and benefit from the Fed’s irresponsibility. These central banking forces are more tightly controlled in a state financed imperial China and must continue to be if China is to rise as perhaps one of only a handful of states possible of maintaining parity with the MNC empires of tomorrow. For its 4000 year social isolationist protection, China will eventually seek policies to repel MNC dominance. If western industrialized nations are to survive, we must also collectively seek a strategy for containing MNCs within an international boundary of regulation.

As Corporate Citizens, Shouldn’t Multinational Corporations Pledge Allegiance to America?

Milton Friedman, America’s defender of free markets, said that “the social responsibility of business is to increase profits”.   American Multinational Corporations follow this principle to the detriment of America.  But why are they permitted to move jobs overseas, and why are they permitted to transfer American ingenuity overseas, ingenuity that if kept here in America, would outcompete other nations and provide ample jobs to all Americans?  The answer lies with our system of law.

A relatively immature concept of American democracy is the idea of the U.S. corporation as a citizen with all the rights of a person born or naturalized. As the legal concept was born prior to the birth of multinational corporations, it fails to adequately address the conflicting goals of MNCs and the country. With the initial premise of corporations as citizens, subsequent court rulings have further cemented MNC rights above those of American citizens.

America’s concept of citizenship implies a nationalistic loyalty to the collective citizenry of this country, ultimately giving one’s life in battle if called. Our test for naturalization of immigrants is an oath committing one’s self to this loyalty. We have a term of residency in which for five years, a person wishing to pledge allegiance to our country lives among other Americans before making this commitment.

And yet, the cost of establishing a U.S. corporation, with all the legal rights given to immigrants who have pledged their lives, is the cost of ink on paper and $150 dollars. The person controlling this legal entity is now free to buy and sell property including innovation created at the expense of the American educational system and history of American development. They can exercise all property rights including the gutting and transferring of American innovation overseas.

While America takes great caution to ensure that a person naturalized in our country has the best interest of America in their actions, our developed corporate and property laws do not require that MNCs take an oath of U.S. citizenship, such as the one taken by immigrants desiring to be part of our country, requiring the MNC to consider the interests of America as a corporate stakeholder.

A comprehensive multinational corporation reform bill should examine America’s corporate laws with regards to the new cross national boundaries in which they operate. If our multinational corporations do not intend to obligate themselves to the responsibilities of a U.S. citizens, perhaps it is time for America to view our multinational corporations in their true context.

Do Business Schools Graduate Business Leaders Who Disregard America as A Stakeholder?

In a recent Linkedin group discussion, a business school graduate questioned whether we should be discussing the politics of business on the  site; rather should we be using the group discussion for issues only regarding business development and networking.  I responded that global issues of jobs are the pivotal issues we should be discussing.  My response is below.

In March 1989, a federal grand jury indicted one our most infamous Wharton alumni, Michael Milken, on 98 counts of racketeering and fraud.  In 1993, after being released from prison for serving time on six counts securities and tax violations and paying $1.1 billion to those he abused, Mr. Milken founded the Prostate Cancer Foundation and then Faster Cures, making a difference in medical research processes.   Fortune magazine called him “The Man Who Changed Medicine” in a 2004 cover story on his philanthropy.

Mr. Milken had a second chance to atone for classic Wall Street greed that erupted into criminal activity.  Yet, had he not spent time in prison for his misdeeds, would his unethical financial manipulations been acceptable by Wall Street standards?  Many in America judged him as the poster child for the problems with business schools; that schools like Wharton send guys like him to Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs without adequately preparing them to deal with the ethics of business. 

My class certainly touched on the ethics issue, going as far as to review “Den of Thieves”, an eye opener account of how a few brilliant business school graduates harmed America.  While we all gained from courses that increased insights into ethical choices and their global effects on business, if the objective of these courses was to inspire the next generation of Wall Streeters to rise above recent activity that will be recorded by history as “Milken crack steroids”, they did not succeed.

I appreciate mutually beneficial Linkedin connections.  However, at this historic fulcrum, when our childrens’ future are being defined by  our nation’s business leaders, I have acted on a purpose beyond my personal business goals by starting a blog, www.jobvoucherplan.com  to advocate for the unemployed in America.  As I write, I sense Wharton grads’ responsibility to help set our country’s path.

Milton Friedman, avowed defender of free markets, said that “the business of business is business”.  Our grads, armed with his quotes have been enlisted by investment banks and multinational corporations to transfer capital and jobs offshore.  Brandishing his philosophy, our grads chide protectionists stating that America must out innovate others to advance our country.  They then use the shield of American property laws to transfer American innovations to offshore subsidiaries, favoring international shareholders without regard for America as a corporate stakeholder.

Michael Porter is now publicly modifying Freidman’s concept with corporate social responsibility, including countries as stakeholders.  Recognizing a stark difference in this business theory from Freidman’s, I am raising issues of corporate responsibility regarding country of origin, increased national security definitions of American innovation, reevaluation of property laws regarding intellectual capital, and defining corporations as U.S. citizens with citizen rights, but equally as important, with citizen responsibilities.

Assuming that the Wharton Alumni group is specifically for professional development, networking and career/business building, if discussing these topics helps us develop deliberated beliefs about these historic issues, does it fit the group intent?  Even if we take Milton’s distilled view of business as the basis of our overarching context for business, I would say emphatically yes.  At a minimum, dismissing these issues as politics, limits our responsibility to examine a greater context for business decisions we make.   More importantly, discussing these issues may assist Wharton business leaders to consider business alternatives that create maximum profits for global shareholders while exercising corporate citizen stewardship for America.