Capitalism 5.0

>> Tuesday, May 18, 2010

At the center of the short-lived American Capitalism 5.0 model was the notion of shareholder value. Instead of being treated as social institutions chartered by government to carry out important functions in the economy, corporations were treated as the purely private property of shareholders. And in the absence of other measures to indicate the approval or disapproval of thousands or millions of mostly anonymous shareholders, stock and bond prices were treated as the measure of success or failure. Corporate executives who were compensated with stock options had a personal incentive to do whatever it took to crank up share prices. If that meant producing a superior product at a lower price while paying good wages to American workers, fine. If it meant transferring production to a foreign police state with low-wage labor while laying off the U.S. workforce, or breaking up the company and auctioning off its assets to the highest bidder, well, that was OK, too, if share prices went up.

-Michael Lind, "American capitalism 6.0: The search for a new model",
Salon, May 18th, 2010

There's actually not much to add: I think it's a fairly nice summary of the history of American capitalism, an on-point (if not necessarily original) indictment of what's been wrong with the most recent phase of American capitalism, and the above paragraph (which I liked as a summary, though, again, not necessarily original) was too long too tweet. The article doesn't quite live up to its rhetorical subheader ("The form of capitalism the U.S. has pursued for three decades has been discredited. What's next?"--the answer would seem to be that Lind doesn't know, either), but it's worth a gander if you have a few minutes.

Well: one point I would add or emphasize or ask you to note if you read Lind's piece is that he's right about the early version of American capitalism being a mixed enterprise system, with the entrepreneurial capitalism some conservatives laud and the finance and managerial capitalism we're really more familiar with being historical epochs, and not necessarily enduring ones. The fact takes special significance in light of so many members of the, ahem, teabagger persuasion taking it for granted that capitalism, by which they probably mean 19th Century entrepreneurial capitalism, is somehow inherently American or constitutionally decreed or was somehow on the minds of the Founding Fathers when it wouldn't actually be descriptive of the American economy until the Founders were dead or dying (of course, it's also hard to tell if the teabaggers mean anything, or know what they mean, given just how tenuous their grip on history actually is; something I've remarked on previously).


Leanright,  Tuesday, May 18, 2010 at 2:01:00 PM EDT  

"Shareholder" is such a broad term. Do you mean the type that serve as officers for the company? Or the mailroom associate who's invested for his retirement, by participating in the 401(k)? Shareholders come in all shapes and sizes, and creating shareholder value also benefits the lower tiered employees of an organization.

I get your point, but increasing shareholder value CAN benefit people in all walks of life. Isn't it true that manufacturing a produce overseas as a lower cost results in lower prices for the American consumer? If China can manufacture an item for 14 cents an piece, why would I pay $2.00 a piece to make it here? I understand keeping Americans working, but profits are what keep companies operating. Without profits, companies go away, jobs go away, and "shareholders" suffer.

Now, I know you're going to tell me in your elloquent way that I'm wrong, and yes, I've deduced this to a very simple scenario. I agree with some of what you've said, assuming the "shareholder" only sits in an ivory tower on piles of cash, and doesn't work in the warehouse opperating a forklift.

Eric Tuesday, May 18, 2010 at 2:25:00 PM EDT  

Dave, the problem isn't that you're "wrong," the problem is that you're missing Lind's point, possibly because you're reading what you think he'd say and not what he said: he didn't say shareholder value couldn't produce benefits or even that it didn't produce benefits. He said that in the absence of other metrics to ascertain the desires of shareholders, share value became an exclusive metric to measure success, and it's a piss-poor one, indifferent to the consequences (good or ill) of raising shareholder value as an end unto itself.

You might want to read the quote again, and the article it comes from.

John the Scientist Thursday, May 20, 2010 at 9:58:00 PM EDT  

O have a lot of beefs with his thinking, starting with the fact that he thinks shareholder value is being maximized in the current system. The fact that it's not is at the heart of the problem.

Entrpreneurial capitalism is still alive and well, it just isn't allowed to get to the robber baron stage anymore. Those companies that do get fairly large however, emulate many of the robber baron's charactieristics. Being on the inside of some of this shit, I'm not terribly impressed with his analytics. When I recover, I'll see if I can write something coherent.

cologr: An older woman who dresses flashily to attract younger men

John the Scientist Thursday, May 20, 2010 at 9:59:00 PM EDT  

I mean share value, not shareholder.

I've been through 4 mergers, every one's dragged share value down even more - all my options need snorkels they are so far underwater. Take that back, they need air tanks.

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