Tenneco CEO’s Wall St. Journal on "American Capitalism"
by Linda Beale
crossposted with Ataxingmatter
Tenneco CEO’s Wall St. Journal on “American Capitalism”
Gregg Sherrill, the CEO of Tenneco, Inc., seems to think that Capitol Hill and the White House are “bashing” the “entire free enterprise system”–saying that the business world has “taken a pounding on Capitol Hill and at the White House” but except for the copmanies that were part of the “easy credit and disguised risk that so spectacularly collapsed”, American business “has nothing whatsoever to apologize for.” Speaking up for American Capitalism, Wall. St. Journal Op-Ed, Jul. 15, 2010, at A17.
But the op-ed is a straw man argument tilting at windmills.
First, Sherrill notes a study cited by The Economist that finds that most Americans “prefer the free enterprise system to any collectivist alternative.” Reading that, you’d think that there was a major debate in this country about switching from capitalism to socialism. But there’s no such thing going on. Nobody is pushing a socialist agenda, in which the government would permanently take over means of production. Many politicians are reluctant to speak out strongly for the traditional American values of a market that is regulated for the common good rather than allowing corporate titans (and their wealthy elite shareholders) set the laws to suit themselves. In fact, the push for the last four decades (dating from Reagan’s swearing in) has been the opposite–to change America’s system of tempered capitalism to one of no-holds-barred “free markets” along the lines espoused by the Chicago School’s Milt Friedman, who didn’t care much about democracy but did care a lot about starving government and letting capital have a free reign no matter what the detriment to ordinary folks.
Second, Sherrill himself explicitly acknowledges that business cannot function “without the appropriate regulation and incentives government can provide.” That is what tempered capitalism is all about–encouraging people to establish and run businesses but restraining the more harmful aspects of rent-seeking profitmaking. Key to decent democratic government is the role of government in protecting consumers from overweening corporate power and the public interest from the kind of reckless private greed that can lead to the “socialization of losses, privatization of gains” that we have seen in the causes of our Great Recession. Forty years of Reaganomics bred negative attitudes towards government regulation fostered within government itself and gave brutal, greed-is-good capitalism a chance to wreak havoc on the economy and on the lives of vulnerable Americans not in the elite upper quintile.
But most of the rhetoric in the piece is straight from the “starve the beast”, free marketarian guidebook of the Cato Institute and other think tanks pushing the Chicago School version of “free enterprise.” It uses the rhetoric of “the moral case for free people and free markets.” It argues against enlarging government “in a way that would fundamentally shift its level of involvement in our overall economy.” Yet Sherrill knows that there is no such thing as “free” enterprise–since without contracts and social networks and societal restraints, his corporation would be nothing but a local business, involved in a dog-eat-dog world with everybody enabled to act like the Mafia and exact whatever “protection payments” brute force permitted. He also knows that “free market” is not synonymous with “free people”–in fact, there is a good deal of tension between the two terms, since a people is only free when the democratic freedoms that underlie our way of life are not subordinated to the power of megalithic market enterprises. Unrestrained markets with monopoly players are antagonistic to genuine human freedom: labor is treated as quasi-property (remember Lochner) and wealth is treated as quasi-god.
And finally, he knows that there is no consideration in the offing for an enlargement of government in a way that would “fundamentally shift its involvement in the economy.” First, government is inherently “involved in the economy”, since government must make decisions about revenues, expenses, programs and public interest every day, and every decision about taxing, spending, punishing, rewarding and encouraging behavior has economic consequences. second, corporations like Tenneco push avidly for government to fundamentall shift its involvement in the economy with every lobbying dollar spent, which is intended to influence government to enact business and corporate-favorable programs. Subsidies of the oil industry that exist right now–that’s government involvement in the economy. And the oil companies are fighting to retain all of them. Implicit and explicit guarantees of the financial system–that’s an incredible involvement in the economy, providing cheap funding for banks. And investment banks clamored to be eligible for the largesse, even as their version of casino capitalism spun out of control. So while the rhetoric warns about government involvement, the reality cozies up to government subsidies and merely frowns when government involvement means acting to balance the relationship between business and consumer, as in the fight against the consumer protection agency provisions of the financial reform legislation and the intensive lobbying by the auto dealer industry for an exemption (i.e., for permission to go on ripping off auto consumers as they have frequently been doing).
But the most pernicious part of Sherrill’s op-ed is his warning that “people will buy into the false perception that government can fix our current crisis, which will lead to policies making our economic recovery more difficult.” Business can’t fix the crisis alone, because business as usual has become too short-sighted and too intent on rentier profits. However, government, with economic stimuli targeted to those at the bottom who are hurt the most, can do much to avert the harm of the Great Recession for its people and to provide a path for a sustainable economy out of the recession. But this blather about fearing that people will depend too much on government covers an agenda on the right to make sure that government isn’t there to make a difference for the people, so that Big Business can continue its self-interested focus without the kinds of restraints that make democracy and the economy sustainable.
Buyer beware. Much that comes in the guise of setting the record straight about American capitalism is just more of the same attempt to mislead Americans into distrust of their government and reliance on Big Business instead.
The underlying attitude of guys like Sherrill about government is: “I want what I want when I want it”.
They want government to intervene in the economy when they want a bailout or a contract.
They don’t want government to intervene when they’re screwing all those serfs out there.
No big mystery here.
“Nobody is pushing a socialist agenda.”
That’s Rich! Am I supposed to believe that..or was that for fun?
In the Bill…according to Akin (R-MO):
H.R. 4173 perpetuates financial bailouts. In reality, the bill allows the FDIC to bail out selected creditors. To pay off the creditors of a “too big to fail” financial institution, the bill gives the FDIC the authority to borrow an amount equal to the value of the firm being liquidated. For some larger institutions this could amount to $2 trillion (of taxpayer money) per institution. This “solution” actually incentivizes failure, as mismanaged institutions have a taxpayer bailout as a safety net. In contrast, House Republicans have pressed to end taxpayer-funded bailouts by creating an enhanced form of bankruptcy for large non-bank financial institutions, forcing participants to plan for the possibility of failure and face stiff consequences for mismanagement.
H.R. 4173 Fails to Address the Biggest Single Cause of the Financial Crisis. Mismanagement of Fannie Mae and Freddie Mac were among the root causes of the housing and financial market melt-down, costing American taxpayers more than $145 billion so far. The Congressional Budget Office (CBO) predicts that the cost could reach $380 billion or more if the Obama Administration continues using Fannie and Freddie as a place to store bad loans made by banks. And yet, despite this, H.R. 4173 virtually ignores these problem areas – authorizing only a study. Such a study will only delay reform and limit any opportunity for meaningful recovery in the housing market.
H.R. 4173 Increases Government Control. This measure empowers the government to seize private firms and to funnel taxpayer funds to “rescue” them. It also creates a “consumer protection” czar whose agency will control consumer credit and financing. In addition, the Democrat’s bill creates an “Office of Financial Research” that is charged with monitoring the financial activities of private citizens while providing taxpayer funded research about consumers to Wall Street. None of these activities have sufficient oversight or accountability.
H.R. 4173 Destroys Jobs and Threatens the Economy. Economists have also estimated that H.R. 4173 will reduce new job creation by 4.3 percent because of the way it constricts access to consumer credit, a move that is particularly damaging to small and seasonal businesses
It troubles me that Wall Street needs the US taxpayer to cover its risky behaviors.
Your comment seems to be adverse to the FDIC borrowing to cover insured claims by depositors which implies sector insurance premiums would be used to cover the risk, not the tax payer.
Before the FDIC, when banks were insolvent they shuttered their doors and the communities as well. Get rid of the FDIC? The FDIC is funded by premia collected from insured banks, the FDIC a self funding entity will pay off their own borrowing. Where is the beef? Who should pay for “deposit insurance”? A short answer why making it impossible to insure against risk, i.e. perpetuate bail outs is a good thing.
Ummmmhh, No! I think it was Lehman going under due to the weight of owing a trillion bucks with no collateral. Maybe the $145B of bad loans queered Lehmans and Bear Stern’s collateral, but I think that is a vague link. How many FHA loans are under water is it 1 in 4 or some level more or less? I do not think the velocity of the paper from FHA was that huge. On Wall St a few hundred billion fall off the table nearly every day. And Bernanke’s helicopter threw out $4T.
You gotta explain to me that lack of control correlated to the collpase is a good thing. It is risk, but as above in your view insurance and risk are nothing.
Let’s leave all the ingredients in place for another BS or Lehman collapse.
Maybe next time let AIG go! Would not bother me much I am military trained and can play if it gets real wooly.
The above may be why Scott Brown held out. I am sure an outsider figured it out. What changed Brown’s mind?
And if the 4.3% lost employment are guys making up CDO’s there is need for no such non productive finance sectoir jobs. They got the US where it is.
There is no correlation, unless you can show it, to say that regulating finance will slow the snail pace at which the over capacity will be worked off so that people can begin getting to some of the $4T Ben is keeping in US banks.
I think the point is, we allowing for the control of credit, money flow, and actually encouraging more risk…not a good thing for anybody….It’s throwing the baby out with the bath water.
There is no question, and even I want it, that the financial system needs govenment oversight, and regulations in place that allow risk and profit, but prevent socializing and collapse…..I just think that this bill misses the mark, and it appears on the surface this bill wasn’t even written with that focus in mind.
I haven’t studied the Bill yet, but my trust level of our fearless leaders is in the Red-Zone…so I am quite skeptical. I am a person who enjoys understanding political strategy, and the overall Blood Sport of Political Gamesmanship. In theory this is supposed to be a good thing for the masses….but it has “Back-Fire” written all over it, especially if one has a healthy understanding of the agendas involved.
Charging excessive interest is not only evil it is bad for business. It lowers demand and increases defaults. Econ 101 shows that charging the highest price does not bring the most profit. Interest rates should be set to the rate that is best for the con sumer, the banks, credit card companies and the overall economy. It should not be set at a rate that is design to punish the poor for wanting things. The banks and the credit card companies would make a lot more profit is they charged a lower interest rate so I wonder what their agenda is.
The more U.S. CEO’s open their mouth the more I am convinced they are not only completely overpaid but most should just be replaced by some company janitor. GE’s clown of a CEO is among the worst after his latest blather. This is a guy who convinced shareholders for years that he was running a great industrial company and not a bank while all of the time using GE capital earnings to cover shortfalls in industrial earnings, told shareholders the dividends were safe and when banks were getting bailed out ran to the Government to get some of that money(even though the money they got was not Tarp). Now he runs around saying he didn’t get Tarp money which is correct but conveniently lets out that he got other federal funds. Some of these guys are just pathological liars.
This guy Sherrill is the head of a state chartered, state subsidized collective, and he’s bashing collectivism! Wow! Talk about whose ox is being gored. If he doesn’t want Tenneco to operate as a government established limited liability corporation, he should get the government off his back and get his government corporate charter revoked. He wants all the benefits of government, but doesn’t want to pay for it with cash or regulation. What a whiner. I swear that the loud end of nursery is full of CEOs.
Disclosure: I actually own 38 shares of Tenneco. My parents used to give me change from stock splits back in the 50s and 60s, and it was a nuisance to sell the left overs. Way back then Tenneco paid taxes, made a profit and didn’t whine quite so much.