Greed

On his Substack page my friend Mike Mitchell gives one good reason why corporations are so often despised by the common people.

Citing a PBS documentary titled Age of Easy Money he explains that the "easy money" being referred to is a result of the Federal Reserve's attempt to stimulate economic expansion by lowering the interest rate businesses have to pay when they borrow money.

At low interest rates, the hope is, businesses will be incentivized to borrow money to expand operations, provide more and better goods and services and in the process create jobs.

Unfortunately, that's not quite how it has worked out. Mike writes:

According to the documentary....Large corporations definitely took advantage of the opportunities to borrow large sums of money with little cost, but instead of using it to create jobs and build better infrastructure (that is, for the sake of their country and fellow citizens), many used the money to buy back large portions of their own stock to raise their companies’ net worth.

He goes on to quote a number of reporters and other experts in support of this claim and interested readers are urged to go to the link and read the quotes for themselves, but I'll share one quote from a Wall Street Journal reporter named Dion Rabouin:

As a corporation you realize all that matters is the stock price. So what do we have to do to increase the stock price? And more often that is buying back the stock.

So it used to be the Fed would lower interest rates. Businesses would then take on more debt. They would use that debt to hire more workers, build more machines and more factories.

Now what happens is the Federal Reserve lowers interest rates, businesses use that to go out and borrow more money, but they use that money to buy back stock and invest in technology that will eliminate workers and reduce employee headcounts.

They use that money to give the CEO and other corporate officers big bonuses and then eventually issue more debt and buy back more stock. So it's this endless cycle of things that are designed to increase the stock price rather than improve the actual company.

One reporter Mike cites says she “can’t fault the companies much,” but Mike says that she should. He comments:

She also says, “this [low] interest rate environment creates very strong economic incentives to do exactly what [businesses are] doing.” Yes, but only if “what they’re doing” is driven by the principle of profit maximization as the priority around which all business operations are oriented.

The more common word for profit maximization as the top priority is “greed.” I know that claim will evoke some eye rolling and accusations of naïveté from hard-nosed business types, but that’s probably just greed in self-defense mode.

There is a sense of inevitability in saying we can’t fault the corporate executives in such an “interest rate environment” for spending on themselves and forgetting about the millions of their fellow citizens whose financial priorities are rent and food rather than second homes and diversified portfolios. But this is not inevitable.

Mike closes with a quote from our second president, John Adams, in 1798. Here's part of it:

Because we have no government armed with power capable of contending with human passions unbridled by…morality and Religion. Avarice [and] Ambition…would break the strongest cords of our Constitution as a Whale goes through a Net. Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.

Indeed, a society untethered to a moral sensibility anchored in the will of a transcendent God who will hold us accountable for how we treat our fellow man and how we use the blessings that we've been given, is a society in which anything goes.

Any policy is right as long as it works, and in this case "works" means "makes me wealthy."

A culture marinated in 165 years of Darwinian evolution can't help but learn the lesson that it's all about survival of the fittest. It's all about amassing wealth for oneself and, if there is no God, if we've all evolved up out of the slime with no higher purpose than to survive and pass on our genes, why are the corporate panjandrums wrong to think this way?