Wall Street as the Moral-Collectivist Sewer

Thursday, December 28, 2006
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A gentleman’s interesting post about political capitalism on an email list put me to some thoughts while I drove home tonight.

What about accounting scandals? Enron, yes. That’s what people talk about. But I’d offer a suggestion that what folks deem The Enron Problem is not best pigeonholed as “Enron” nor “Enron-Worldcom stuff,” but rather, what more correctly frames those anti-free market doings is the collective, moral sewer of the whole of Wall Street itself. The problem is more directly Wall Street and the Big Business-Big Guv alliance, not Enron or any other micro-participant of The Game.

The accounting scandals – Enron, World Com, Qwest, Global Crossing, Computer Associates, Tyco, Adelphia, Sunbeam, etc. – are all very real and have indeed “happened” in a way that makes the word “scandal” accurate. They happen because of market interventions that force and/or skew business decisions (see taxes and stock options, for instance), yes, but they also happen as a direct result of the partnership that has been forged, over the years, between Wall Street, the corporatocracy, and government. Wall Street has become the messenger that delivers the negotiating terms from Government to big business and vice versa. Wall Street is essentially an all-embracing term for everything under the banner of Big Guv’s regulatory-corporatist structure.

What we have is a government that oversees consumer “confidence,” and a cabal of Wall Street accomplices that help to enforce the rules of the game via the willing hands of myriad players that sell their souls for $$$$. Yet Wall Street “visions” play right into the critical Austrian’s hands when we witness the time preference distortions created by the Fed Reserve-Wall Street-Corporatocray combination. These time preference distortions create impossible and/or unrealistic goals, forcing the willing corporatist players to go along to get along – that is, they shatter long-term value and stability in favor of short-term gains that pad pockets and meet expectations, and they do this by creating mirages through accounting chicanery. Otherwise, they get left behind and are deemed a failure. Graham & Dodd are long forgotten.

Accounting, not being an exact science, can be manipulated to lay many a puddles on the dry road. The executives of Enron (and other companies engaged in fantasy accounting) knew exactly what they were doing down to every last detail. That is, unless one wants to believe the PhD’d (in economics, I believe) Ken Lay when he said, “I didn’t understand how to interpret the balance sheet.” Lay, by the way, proved his lack of free-market mettle while he worked in the Pentagon and as a federal regulator in the natural gas industry. Though Lay never should have seen a federal court and its fateful prosecutors, in a libertarian world, he would have spent many-a-years in civil court, being financially shredded to the bone for breaching that highest standard of care known as fiduciary duty. To the shareholders, he was a crook.

Accounting snafus and scandals happen because of Wall Street and the way in which it has been manipulated to provide for the biggest gains in the shortest time period, thus serving the low-attention span, high-time preference, frenzied, speculating public their daily dose of feel-good “confidence.” Wall Street is the nerve center that controls and steers the battering ram right through the heart of the free market. As Warren Buffett once said, “As far as I am concerned, the stock market doesn’t exist. It is only there as a reference to see if anybody is offering to do anything foolish.” Buffett reads the War Street Journal because he says it does an excellent job of “keeping track of all kinds of short-sighted foolishness.” Amen.

A pure Austrian focus on Wall Street’s political capitalism – and the underlying crises – is desperately needed, IMHO.

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