[Dryerase] Alarm!--It's Capitalism, Baby--Love it or leave it!

[Alarm!Wires]

It’s Capitalism, Baby—Love it or Leave it!

By Chris Kortright
The Alarm! Newspaper Contributor

“The fundamentals of our economy are sound.”—George W. Bush on July 30, 
2002

Crisis after crisis has shaken the image of capitalism.  Multinational 
corporations such as  Enron, WorldCom, Tico, Right Aid, K-Mart and Xerox 
have declared bankruptcy or losses up to $38 billion. These failures are 
not limited to the US. European companies like the French media 
corporation Vivendi Universal (with a debt of 20 billion euros) and the 
German industrial conglomerate Babcock Borsig are having problems, too. 
Wall Street investors have lost up to $6,700 billion during the sharp 
fall in stock values.

Attorney General John Ashcroft stated, “When financial transactions are 
fraudulent and balance sheets are falsified, the invisible hand that 
guides our market is replaced by a greased palm.” Ashcroft is separating 
fraudulent practices, as if they are somehow outside of the general 
tenets of capitalism. By separating the “invisible hand that guides our 
market” from the “greased palm,” Ashcroft isolates the frauds and their 
perpetrators, verbally placing them in the margins of the capitalist 
system. He is attempting to keep Americans’ faith in the system of 
capitalism.

The company failures should invoke the question of whether these 
problems of deception and book-cooking are a temporary hiccup within the 
workings of capitalism or a symptom of disease in the system in general. 
Are these events a systemic issue or are they just chance occurrences? 
Can President Bush solve these problems with reforms or does the system 
itself need to be completely altered?

Two months ago WorldCom declared bankruptcy after getting caught with 
their pants down regarding accounting discrepancies. WorldCom is the 
second-largest long distance telephone company in the US and the world’s 
largest provider of internet connections, operating in more then 100 
countries. They left a debt sheet of $90 billion, topping Enron’s $70 
billion bankruptcy, which just two months ago was the world’s largest 
corporate debt. Burdened with debt and pocketing smaller and smaller 
profits (which soon turned into losses) they  reported $3.8 billion in 
expenses as long-term investments. Last year, this fraudulent move 
allowed WorldCom to fake profits of $1.38 billion on Wall Street and 
safeguard its share price.

Setting an unusual precedent, on August 1 the FBI arrested Scott 
Sullivan, WorldCom’s former chief financial officer, and David Myers, 
its one-time controller. If convicted of all counts of fraud, conspiracy 
and false statements, Sullivan and Myers could each receive up to 65 
years in prison. If they enter into plea agreements with prosecutors, 
they could lower their sentences.

The interesting thing about the WorldCom bankruptcy and fraud case is 
that it fits securely into the basic logic of capitalism. Capitalism 
calculates with short-term profits and thereby ignores the social costs 
associated with the human and financial resources exploited for profit; 
this is basic cost analysis. Does WordCom’s short-term investment really 
contradict capitalist principles? If we look at the practice of 
capitalism and the logic that has established it as the dominant 
economic system globally, we will see that WorldCom’s actions do not 
contradict capitalism, but rather work within its structure.

On July 30, George W. Bush gave a speech about the newly-signed 
corporate reform legislation. He said, “A recession cost many American 
workers their jobs. And now corporate corruption has struck at investor 
confidence, offending the conscience of our nation.”  Some people have 
said that the very recession that “cost many American workers their 
jobs” was the motivating factor for corporations to “cook their books.”

By the year 2000, the market was saturated, setting the stage for our 
recent recession. This saturation is known as  overproduction. In a 
saturated market, commodity and service prices eventually fall below 
production costs and profits vanish into thin air. Corporate profits 
globally have fallen for the past five consecutive quarters; this is the 
largest drop in three decades.

But according to capitalist theory, recessions weed out the weaker 
corporations. They don’t threaten capitalist stability. According to 
economists who defend neo-liberal theory, recessions are not supposed to 
be all bad. Within capitalist theory recessions “free up” resources like 
capital and skilled labor, which are then shifted and redeployed into 
more effective capacities elsewhere.  Unfortunately for working people, 
the economic world is never equal and text-book neo-liberalism doesn’t 
exist in the  real world.

In the July 30 speech, Bush laid out a statement for working people. He 
said, “This law says to workers: we will not tolerate reckless practices 
that artificially drive up stock prices and eventually destroy the 
companies and your jobs.”

But is it possible for the US government to protect workers within the 
system of capitalism? Besides a few symbolic sackings for PR purposes, 
the bosses appear to be doing fine, even with this recession and present 
corporate shaming. By 2000, the average annual pay of CEOs at 362 of 
America’s largest corporations reached $12.4 million, a six-fold 
increase over a ten year period. The average CEO makes 475 times the 
salary of your average manufacturing or service sector worker.

Bush claimed: “America’s system of free enterprise, with all its risks 
and all its rewards is the strength of our country, and a model for the 
world. Yet free markets are not a jungle in which only the unscrupulous 
survive, or a financial free-for-all guided only by greed. The 
fundamentals of a free market—buying and selling, saving and investing—
require clear rules and confidence in basic fairness.” Like Ashcroft, 
Bush is arguing that the executives of the above corporations and the 
recent events are exceptions to the rules of capitalism. By keeping them 
on the margins and cracking down on a few, Bush maintains the faith of 
the American people in the general principles of capitalism.  He 
reinforces the idea that the system works, because they are able to 
“punish wrongdoers.”

These recent events, however, are not the work of marginalized or 
“deviant” actors of capitalism. They are an integral part of capitalism. 
This is capitalism. We either accept its rules of practice and absolve 
the WorldCom executives of any “evil doing”—they must not be held or 
tried because they were playing by the rules of their game—or we need to 
reevaluate the system we are in. There is no way that productive 
capitalism, or happy capitalism, can be made distinct from capitalism 
based on unrestricted speculation. This is capitalism baby—love it or 
leave it!

 All content Copyleft © 2002 by The Alarm! Newspaper. Except where noted 
otherwise, this material may be copied and distributed freely in whole 
or in part by anyone except where used for commercial purposes or by 
government agencies. 

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