On September 28th Bill Moyers’ guest was John Bogle. You can see the interview or read the transcript from here.
The setup for the interview is about private equity firms and he mentions the Sunday NY Times front page article: At Many Homes, More Profit and Less Nursing.
His introduction of Mr. Bogle is:
It’s this kind of capitalism that drives John Bogle up the wall, as you’re about to learn. John Bogle believes owners should be in charge — and accountable. He’s known and respected world-wide as the father of index funds and the founder of The Vanguard Group, one of the largest mutual funds anywhere, with over a trillion dollars in assets.
I make no bones about it. My opinion is that the focus is currently wrong 1. as it relates to purpose of an economy and 2. by the philosophy that studies it: economics. The focus of understanding resulting in the judgment of an economy, should be in how successful it is in fulfilling these two aspects of the constitution: insure domestic tranquility, promote the general welfare.
I’ll put it this way: to what purpose is there to knowing how to make horse power, greater efficiency, greater durability, the relationship of the parts in motion, the chemistry of fuels, the metallurgy, flow dynamics, etc., etc., etc. if not to serve people? Just because? Just to make more?
So picture me in my recliner (be kind), suspicious of what I will hear when Mr. Moyers asked:
BILL MOYERS: What should be the dominant? What is the job of capitalism?
JOHN BOGLE: Well, ultimately, the job of capitalism is to serve the consumer.
WHAT?!!!!!!!! There is someone with more money than God that thinks like me? But…is there a but? Don’t tease me like this. I’m the one saying we are making money from money and that such is of no substance especially as it relates to our purpose (see US Constitution).
Within his answer is:
But, we’ve moved from that to a big capital accumulation — self interest — creating wealth for the providers of these services when the providers of these services are in fact subtracting value from society. So, it doesn’t work.
You can mail my PhD diploma — thank you very much, to: … : )
He notes that Lord Keynes has gotten “misshapen”. How?
JOHN BOGLE: Well, it’s gotten misshapen because the financial side of the economy is dominating the productive side of the economy…We’ve become a financial economy which has overwhelmed the productive economy to the detriment of investors and the detriment ultimately of our society.
How bad is it?
It’s just gotten totally out of hand. My estimate is that the financial sector takes $560 billion a year out of society. Five hundred and sixty billion.
Did I hear this right, focusing on making money from money is not where it’s at? It’s hurting us?
I want to come back to the difference between the financial system and the productive system. The productive system adds to the value of our economy. And, by and large, the financial system subtracts. And, yet, it’s growing and growing and growing. And this short term thing where short term orientation in which trading pieces of paper is regarded as a social value. It is not a social value.
But what about labor? Do those at the top really get what they deserve?
And they get enormous amounts of pay for actually doing very little. I’m a
businessman. Listen, we all– we chief executives get an awful lot of credit
that we don’t deserve. Real work in companies is done by the people who are
getting themselves together and doing the hard work of making companies grow–
So, Milton knew of externalities, and a need for governance. Although it’s already in the constitution and should not be debatable. Cactus’ is showing us ideology matters. And now a person who makes money from money is telling us the current ideology has gone to far. What’s next? The World Bank seeing the light? Glad you asked. That is exactly what is next.