A continuation of my thoughts expounded yesterday on America and its relationship with Big Business.

When Adam Smith was forming seminal thoughts on markets, the business of business was producing better mousetraps more efficiently than competitors.  Since then we have grown into the most affluent society the world has known.  There is so much money sloshing around our economy that one can become rich exploiting human psychology by convincing people they need to own your product, even when they really don't.  Pet rocks are but a minor example of this.  The "science" of exploiting our psychology in order to generate sales is called marketing and it was birthed along with the advent of mass communication.  Marketing began with the rise of newspapers, but it really took wings in the 1940s and 1950s with the rise of the radio and television industries.

I've often thought that if you want to increase sales, you need to appeal to three basic human desires:  sex, wealth, and the wish to be physically attractive.  One need only peruse the articles and magazines in any supermarket check out line to grasp the veracity of this.  If I ever write a booklet to be sold in supermarket checkout lines, the title will be "How to Improve Your Sex Life, Make Money, and Lose Weight" ©. It has a certain cachet, and I suspect it will be a moneymaker if I can only come up with enough blather to fill its' pages.  Perhaps even you, erudite TPM reader, are perusing this blog as the title aroused your own curiosity, and in the end who wouldn't want to be richer, thinner, and have better sex?

Marketing stuff we don't really need has resulted in basements and garages across our country that store hundreds of thousands of 'home exercise systems' which have been used on average about 5 times before they were moved to the garage and listed for sale on Craigslist or Ebay.   Marketing has produced the pocket fisherman for those who might want to cast a line during a stroll through Central Park, but don't want to advertise their intent to the cops by carrying a full rod and reel.  Billy Mays and numerous over the hill athletes have made second careers from selling Americans products that they ultimately had little use for.  It's a big factor in why almost 70% of our economy consists of "domestic" spending. It may also account for the large percentage of credit cards that are cut up by bankruptcy courts each year.

I think the zenith of our consumerism was following the terrorists' attack on the WTC, when George W. Bush prescribed his antidote for what ails America: "go shopping" he extolled.  To a person of his abilities I suspect shopping seemed as valid a means to defeat terrorism as any.  Perhaps he was unable to fathom how terrorists or anyone would not wish to emulate a culture that drowns the loss we suffered that day in Prada and Blahniks. 

Regulation and taxation are a gun the American public holds to the corporations head as they in turn hold their own guns to America's head.  The corporation's gun is the unspoken threat to take their toys and go home to some other country with a more "pro-business" environment.  Our relationship with Big Business is tenuous and uneasy at its' core.  It amounts to a global game of chicken with large multinational corporations arrayed against their xenophobic, disorganized client states.   If the business environment becomes too unwieldy for Big Business, they can potentially relocate elsewhere without losing sleep.  What that looks like is that they actually don't go anywhere, but they move more operations off shore.  Liberian registry of ocean going vessels won't hold a candle to any country which offers corporations safe haven, (lower taxes, and lax regulation, and banking laws).  At that point we might begin a complex game of cat and mouse with import tariffs and subsidies to our own industries.  It is only the dread of the devil Business doesn't know which plays to our advantage here but you would be deluded if you believe there are still quintessentially American corporations.  They may once have been, but they've since gone global. 

Corporations all ready enjoy considerable advantages with existing tax laws.  Loopholes in tax code allow them to defray taxes by keeping money earned overseas out of the country.  If we were privy to knowledge of off shore accounts held by corporations in banking havens around the world, it would make Allen Stanford look like a piker.  Until the international community comes together in a unified confrontation of these banking and tax loopholes corporations will continue to concentrate economic wealth and power that will eventually challenge the power of the client states in which they operate.

We have long heard how Business's primary obligation is to the shareholder.  As we are not a Socialist society, that shareholder is not the citizenry of the US.  The obligation for short-term profit has driven American and world business since the 1980s when corporate takeovers, arbitrage, and greenmail became household words.  Quarterly stock prices now outweigh long term planning in defining corporate strategy.  In some cases it is to a company's advantage to have greater liabilities than assets so as not to appear too attractive to takeover artists who thrive by breaking up once robust companies.  A case in point is 131 year old  Simmons Bedding.  The company was flipped seven times in the past 20 years as private equity firms were able to squeeze $750M in profits out of the company before driving it into bankruptcy.  Over a quarter of the firm's employees have been laid off to date.  But the shareholders have been well served, so it's all good, right?

Executive compensation is now tied to stock prices which in turn are dependent on the companies quarterly statements, and our corporate executives have let us know that they and the other "talent" will go elsewhere if they aren't compensated appropriately.  What they haven't explained is where it is, exactly that they will go, given that US executives are compensated at a far greater rate than executives anywhere else in the world. 

The idea of executive compensation, and the intrinsic value of executives if their remunerative demands aren't met raise other questions.  Our country was founded by men and women who put their personal fortunes and often their lives at risk for the common cause.  Now we are beset with leaders of the business community who will cut and run, or so they say, if their demands for compensation aren't met.  I believe we would be better off without allies aligned in such mercenary terms.  

Businessmen would have us believe that their corporation is altruistic and spend considerable sums on public relations to portray the company as such.  In the final analysis business has always been in business for itself.  Altruism only comes into the equation when the corporation's public relations are in need of a pick-me-up.  

Today most of our federal legislation is crafted to a large extent by corporate lobbyists, but business is as much adversary as it is ally in crafting public policy.  Much of the wording of such legislation is designed to facilitate the affected businesses ability to conduct their business which in itself is not a bad thing, however when legislation works against the public good we need to reevaluate.  Much of our legislation governing the financial sector and protecting our financial system from systemic gaming was dismantled between 1980 and 1999 at the behest of corporate lobbyists and their legislative shills.  These legislative acts, fueled by a particularly powerful school of economic thought which has come under sharp criticism for its' inability to see the growing economic meltdown, set the stage for us to see just how greedy corporations could be and in turn the economic collapse we now labor under.  We are naive to turn the crafting of federal legislation over to the industries that such legislation governs.  The sooner we acknowledge that fact the better off we will be as a society. 

On some level the only real power we exercise in our democracy is in the voting booth.  As the world changes and corporations assume more power and wealth I am coming to the conclusion that we possess another very real power.  That is the power of our pocketbooks.  How we choose to spend our money, or if we choose to spend it at all, is an equally powerful tool in shaping the world we inhabit today.  More subtle votes are cast as we make decisions about our purchases.  Each of us should spend a little more time analyzing our expenditures.  Try to separate out real need from the advertising that invades most of our homes and cars on a daily basis in the form of television and radio.  These small economic decisions may change our world as much as voting politicians into or out of office.  [Note:  That's a good video linked to in the last sentence]  Perhaps you'll find you don't 'need' as much as you thought you did and you might save money in the process.  In time you may find you have a financial surplus of your own, and can do further good works with that as well.  Hopefully we can begin to change the world and our economy from a model dependant on ever expanding markets and populations, and the pollution and depletion of our finite resources, which that model entails.

Note:  I haven't seen Michael Moore's film as of this writing, so I am not sure if I'm covering some of the same ground here, but I suspect perhaps I am.