Class War in America: the Book

Economic absurdities that
Democrats must expose:

...because it's wrong to penalize success and hard work.

...therefore, we should eliminate the capital gains tax.

...After all, they came from, and understand, business.

...even though it is based on pitting the worlds' workers against each other.

...union bosses are only out for themselves.

...and the more the rich have, the more will trickle down to everyone else.

...Democrats are communists, or at least, socialists at heart. when we tax wealthy investors, we lose jobs. investors, not workers, create wealth. we should give them all the tax breaks possible.

...Democrats just want to tax and spend today.

General Issues:

...check out this 2-minute video.

...It's a mountain, and a terrible defense of globalization.

...for those of Indonesia, Mexico, China and India.

...and how not to do it again.

...and the "crisis" is just a ploy by those who want to destroy it.

...Republicans' most important propaganda technique.

...and get the media on your side

This Site

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License.

Feel free to download this material for personal, not-for-profit, use. If you duplicate it for others, attribute it to Charles M. Kelly, and with a link to this site. Print copies are still available at Amazon and Barnes & Noble, and used copies are widely available on the internet.


Corporations Should Run Our Country?

Only Republicans and conservative Democrats can read The Wall Street Journal, Forbes, Fortune, Barron’s, or Business Week and conclude that corporate bureaucrats are better stewards of our country than are government bureaucrats.

Actually, they’re probably just pretending that they believe in such an absurd notion. After all, it is only by discrediting government that they can convince voters to turn control of our country over to corporate executives and their supporters.

The reason Republicans and conservative Democrats are comfortable with fraud, greed, and a callous disregard for the public interest—that corporations demonstrate daily—is that they are the primary beneficiaries of these behaviors. They are the corporations, and they make sure that they and their CEOs and top executives always make money, even from the disasters that result from their actions.

By destroying the public’s confidence in government, they have created a free-for-all, everyone-for-himself economy—an economy in which the rich, powerful and organized can take advantage of the poor, unorganized and uneducated.

Go back and read Newt Gingrich’s explanation that, to do what he wanted, government first had to be completely discredited—ethically, programmatically, managerially, philosophically. Imagine how incredibly easy that would be to do if the descendants of Newt were able to cite government actions that were as bad or as numerous as the corporate actions publicized daily in the conservative financial press.

First, consider just a few of some of the more noteworthy ones. Each of the following paragraphs contains excerpts of a separate article from a conservative financial publication:

“The problem is chronic.… [I]t takes more than a year for the full impact of a decline in raw-milk prices to reach consumers. And the dairy industry has become a frequent target for antitrust investigations. Economists and Wall Street analysts say grocers, who generate about 6% of their sales from dairy products, are taking advantage of lower raw-milk costs to sweeten their bottom lines.”1               

“Houston Securities Firms Sold Risky ‘Toxic Waste’ for Wall Street Giants …Without the Houston firms’ success in dumping toxic derivatives on unwitting investors, Wall Street never would have had other, safer mortgage securities to peddle to sophisticated buyers.”2

“Investigations of misleading sales tactics rock the insurance industry.… Why the temptation to cloak whole life insurance products as savings plans? Consumers respond better to such offers, but whole-life policies can be far more profitable for agents and companies…. Agents can get a first-year commission of 55%, or $550 on a $1,000 premium, for a whole-life policy. Selling a $1,000 annuity gets them 2%, or $20.”3

“‘Upcoding’—the practice of upgrading the seriousness of a medical malady by filing Medicare bills…that will carry the highest price—appears to be endemic in the industry.… But David Friend, a health-care consultant with Watson Wyatt in Boston, focuses on the abuses: ‘Oh, I grant you, there are shades of gray, but when hospitals cross the line, they know it,’ he says. That they devote so much energy to beating the system is ‘a pathetic commentary on our times,’ he says. ‘These guys should be figuring out how to better treat patients in their hospitals.’”4

“The problem [child labor] was highlighted last week when the government announced civil fines against six Texas farming companies. In a routine sweep, agents found children as young as six years old picking onions in the Rio Grande Valley.”5

“The Agriculture Department temporarily shut down some or all operations at 34 meat and poultry plants during the first three months of this year, after inspectors found the food contaminated by feces or the plants operating in dirty or unsafe conditions.”6 

“These people…have never gotten much individual notice for their roles [in the S&L disaster]. They were midlevel figures, some of the thousands of ordinary people—lawyers, consultants, regulators, congressional staffers, state officials, investment bankers—who helped create the crisis, often by calculating their own self-interest first.… Their tales suggest that while some of those caught up in the event were crooked or incompetent, many more were people who simply took a narrow view of their responsibilities in return for hefty fees or powerful jobs.”7

“More Companies Are Paying Lavishly To Tee Off with Golf Greats …For one-day outings, prominent players on the PGA Tour, and LPGA Tour commonly command fees of $25,000.  Many charge more…Justin Leonard [$50,000].”8

“High-Risk Lenders Land with a Thud …Liberal loans and lax accounting lead to widespread losses.… The financial carnage is piling up.… First, the pack of companies throwing money at high-risk car buyers ran into a wall. Now, home-equity lenders are getting clobbered…. ‘I’ve never seen anything like the collapse of an industry this quickly,’ laments George C. Evans, a 40-year finance veteran.”9

Some corporate CEOs are paid too much because of “interlocking directorates.” “It turns out that when an executive of company A serves on the board of company B, and when an executive of company B serves on the board of company A, the CEOs of both reap a special benefit.… With those in charge of fully 123 of the very largest publicly traded companies blessed in this way, the virus of crony capitalism seems to have infected some of those stocks we love to hold.”10

Mergers of investment companies “should create efficiencies of scale and lower costs for everyone involved. [Some analysts] say just the opposite could be true—at least for the average fund investors. Merger savings rarely get passed along to the small investor. Instead, fund consolidation could ultimately boost fees as a few powerful distributors increasingly control access to investors, and thus charge fund firms more to list their wares with them.”11

Nationwide, unscrupulous life-insurance agents have persuaded existing policyholders to roll their proceeds into unnecessary new policies…. “‘It’s not plausible for the companies to say it’s just a bad apple. They create a climate for this sort of thing,’ says Joseph Belth, editor of the Insurance Forum newsletter. He contends that ‘what goes on in the life-insurance business is a national scandal.’”12 

Scam artists were able to take “Some big firms for millions by playing on [their] eagerness to do deals.… LBOs were good targets because swindlers didn’t have to put up much money of their own but, once having acquired a company, could easily convert corporate assets, such as inventory, accounts receivable and real estate, into cash. And most victims, after being taken, were too embarrassed to admit it.”13

“A lot of preapproved credit card offers are coming back to haunt the issuers.… A record 1.1 million Americans filed for personal bankruptcy last year, up 29% from 1995.… The credit card industry is reaping the bitter harvest from the easy-credit solicitations it sowed.”14

“This shadowy retail tactic—called a stocklift or buyback [paying retailers to take competitors’ goods off a chain’s shelves]—is spreading. Makers of everything from party napkins to bicycle chains are lifting truckloads of competitors’ products everywhere from Kmarts to Revco drugstores.… ‘Buybacks are a necessary evil in gaining market share,’ says Michael Brooks…. Companies are generally reluctant to discuss stocklifting. When pressed, they frequently point fingers at one another.”15

“Exxon’s Restructuring in the Past Is Blamed For Recent Accidents …‘Today the system is overworked and undermanned,’ contends William Randol, a former Exxon employee who now is a Wall Street oil analyst…. Then there was the March 24 wreck of the Exxon Valdez, whose captain is accused of drinking on the job. That debacle, dumping some 240,000 barrels of crude into pristine Alaskan waters, has so far cost almost $3 billion to clean up.”16     

“In fact, lending to the little guy—via credit cards, home-equity lines, on-the-spot furniture loans and other installment plans—has become far more profitable than nearly any other banking activity.… Still, it is clear that these lenders’ profits depend, at least in part, on the ignorance of their customers, who care more about the size of monthly payments than interest rates.”17      

“Alyeska Record Shows How Big Oil Neglected Alaskan Environment …Over the years, Alyeska has gradually and quietly scrapped many safeguards and never even built others that it told Congress it planned.… ‘Based on my experience with Alyeska,’ says James Woodie, who has been both Coast Guard commander for the port of Valdez and an Alyeska marine superintendent, ‘the only surprise is that disaster didn’t strike sooner.’”18

These brief examples were selected because they represent what has happened, or is happening, within entire industries or segments of our society: savings and loan, dairy and supermarket, life insurance, financial securities, mutual funds, health maintenance, CEO compensation, consumer credit, retail sales, oil production, and the environment. Some were recent and some were classics in our corporate history, but all illustrate the diverse and pervasive nature of corporate-inspired disasters.

An entire book, or encyclopedia, could consist of a listing of individual corporate disasters that resulted from incredible ambition, greed, incompetence, fraud, and outright thievery well beyond anything we find in government. The following is a minuscule sample of what could be presented:

A railroad merger that caused “one of the largest railroad-service breakdowns in history,” which “forced hundreds of…customers—from chemical suppliers to grain sellers—to curtail production, lose sales or pay for other means of transportation, with a total cost to the nation’s economy of an estimated $1 billion so far.”19

Four months after the above news report, a pair of University of North Texas economists estimated that this same merger had cost U.S. companies $2 billion.20

When an investment bank bought a major corporation, it “drew off millions, loaded [the corporation] with debt, then quietly bowed out.” The corporate stock traded as low as 33 cents on the dollar, and a series of layoffs cost thousands of workers their jobs. The investment bank made more than $120 million in fees and another $56 million in a special dividend.21

Five companies and “numerous executives” pleaded guilty to roles in a price-fixing cartel.22  

A major drug chain encouraged its pharmacists “to tack 50 cents or more onto the price of each bottle of pain pills, antibiotics or other treatment purchased with a no-refill prescription.”23

“Even for Wall Street, the greedy excess was shocking,” when a computer company took an aftertax charge of $675 million to pay its CEO and two other executives at the company. Before the charge, the company earned $194.2 million; after the charge, it lost $480.8 million.24  

“In one of the largest legal settlements involving a Big Five accounting firm, [a major accounting firm] agreed to pay $185 million to settle claims it committed fraud and gave incompetent advice in the bankruptcy-court reorganization of [another corporation].”25 

A medical equipment manufacturing unit “evidently marked cracked [heart valve] parts as repaired when they hadn’t been.… Interviews with former…workers and examination of internal… documents indicate that manufacturing records for many valves were falsified. Critical work on these valves—work recorded as having been done—apparently never was.”26

“Today, less than three years after the merger was announced, [the company] itself is in need of therapy. Its market value has plunged by more than $1 billion, to less than $750 million…and continues to post big losses.… This is a lesson in shoddy corporate governance and how it can really infect an entire organization.”27

“In March, [the company] and its top two executives pleaded guilty to defrauding some 10,000 customers by puffing up the value of their homes with misleading appraisals.… ‘The fraud permeated the company from top to bottom,’ says Ross M. Gaffney, head of the FBI’s Miami white-collar crime unit. ‘It was not just a few sales guys defrauding people.’”28  

A mining company’s stock surged, split 2-for-1 and hit $18 in 1987. “But then the mine leaked cyanide into Colorado’s rivers and streams. [The company] abandoned the mine in 1992, leaving the Environmental Protection Agency to repair the toxic damage. The estimated cleanup bill: $148 million.”29

“The fall of [company] is a cautionary tale of incompetence and greed. It demonstrates how directors and managers with the best of credentials, and their high-powered advisers, can’t always be counted on to guard the interests of shareholders.”30

“Prompted by a growing number of consumer complaints, the [California Department of Consumer Affairs] conducted a yearlong undercover investigation of billing practices at 33 [auto repair] centers from Los Angeles to Sacramento. It found that its agents were overcharged nearly 90% of the time, by an average of $223. The department said [the company] pressured repairmen to over-charge by setting punitive sales quotas.”31

“A state court judge in Boise, Idaho, upheld a $9.5 million punitive-damages award against [automobile insurance company], saying the insurer knew its refusal to pay a woman’s medical claim was based at least partly on a ‘completely bogus’ outside medical review…. ‘All of the insurance companies in the country are selling the concept of independent medical reviews, and some may be frauds,’ added Eugene Anderson.”32

Federal prosecutors say companies conspired “to rig prices and squelch competition in the international market for graphite electrodes, an essential component in electric-arc furnaces used to produce steel.”33

“The State’s top insurance official, Neil D. Levin, described a company…out of control: Its financial reports couldn’t be trusted, its reserves against future medical claims were inadequate, internal financial controls were seriously deficient and management lacked the mettle needed to turn things around.”34

The Tip of the Iceberg

Note that these examples represent only a small fraction of similar reports that regularly appear in The Wall Street Journal, Forbes, Fortune, Barron’s, and Business Week. Although they paint a dismal picture of the behaviors of many persons in the business world, their significance probably doesn’t come close to the day-to-day incompetence, fraud, and illegal behaviors that remain unreported—hidden from public view.

Many articles in these publications stress the effects of business behaviors on investors; otherwise they probably wouldn’t be reported. Barron’s, Forbes, and Fortune, especially, seem to go out of their way not to cover business events that negatively affect workers, consumers, the environment, or the public at large. While The Wall Street Journal and Business Week are more comprehensive in their coverage of news events, even they don’t deal with much of the local business incompetence and dishonesty that are reported in daily newspapers across the country.

Such reports provide only an inkling of the billions upon billions of dollars that the owners and managers of America’s businesses are extracting from our economy—with absolutely no regard for their workers, the general public, and often with no regard for their own investors. To put this in perspective, note that the FBI estimates that burglary and robbery cost the United States $3.8 billion a year. Certainly, that’s a lot of money, but a relatively small figure compared to the costs of some of the more egregious examples you just read about.

Also note that these corporate misdeeds are not exclusive to little-known or fly-by-night companies. Many are respected blue chip companies that are operating in the relatively unregulated environment that conservatives have created for our country.

In other words, although the documented evidence of general incompetence and malfeasance of corporate executives is enormous, it doesn’t come close to describing how massive it really is.

So, when conservatives claim that government is bad and that we should let corporations freely run everything—check out the pages of their own financial publications. As you read, think to yourself: “Would I want these egomaniacs to be in charge of the Post Office, the Internal Revenue Service, or our National Park Service?”

“Would I want to turn over the responsibility for the environment, our health care system, food handling, the testing of drugs, and so on—to these corporate bureaucrats?”

And, while we’re on this subject, just what have our newly discovered corporate virtues of greed and materialism already done for worker safety, health care, drug safety, and the costs of auto repair, homes, insurance, medical prescriptions, banking, and on and on?

The excessive enrichment, incompetence and dishonesty of top executives always comes out of the hides of workers and the public in the form of lower moral standards, higher prices, inconvenience, corporate bankruptcy or significant financial loss, loss of jobs, low wages, poorer working conditions—and, above all, loss of what should have been an ethical business competition in the free marketplace.

This is not to say that corporate disasters are always caused by incompetence or dishonesty. Sometimes unpredictable events or simple bad luck play a role. However, the same is true of government. Yet, count on it, any time the government makes a mistake, conservative demagogues will rise in mass to politicize the situation.

Unmanaged competition can create conditions in which the lowest moral standards of just one major corporation can become the norm for an entire industry. If a single corporation reduces its costs by using child labor—others can’t be competitive unless they also use child labor. If another company’s sales persons use deceptive-but-legal sales practices—others will lose market share unless they also use deceptive practices.

From the abuse of workers to the destruction of the environment—what’s legal has become the minimum standard for corporate behavior. Even then, some of our most prestigious corporations have proved that they are willing to risk violating the law if it will benefit the bottom line.

Probably the most significant difference between corporate and government bureaucrats is that government bureaucrats have the welfare of the general public as their charter. Although—like their corporate brethren—some are incompetent, dishonest, or unlucky, they have as their organizational goal the betterment of society.

The charter of corporate bureaucrats, on the other hand, is to do anything to maximize profit, even if the net result is harm to workers, their communities, or the society at large.

That’s why the federal government must set, and enforce, sensible minimum regulations for business practices.


Now go to: