Ripoff 2002

The Face of Cutthroat Capitalism

Revolutionary Worker #1164, August 25, 2002, posted at

"The capitalist market is impersonal. It isn't accountable to people. It doesn't consult with you about your needs. It doesn't care whether you lose your job, house, retirement pension or your health coverage. `Hey if those things stand in the way of market efficiency so be it.' I have heard lots of rants about the so-called "socialist command economy.' But what could be more commandist than the market dictating that 500,000 workers (yes half a million workers!) lose their jobs in the telecommunications industry?"

Raymond Lotta, Maoist political economist, speaking to the RW

The U.S. economy is supposed to be The Model for everyone else. The official gospel is that free-market capitalism is irresistibly superior. The hype has been intense.

But for over a year, the U.S. economy has stalled, revealing to millions some hard and ugly truths about the inner workings of capitalism. Almost 2 million have been laid off. A massive bubble of over- capacity and speculation has burst and the stock market has tanked since its peak two years ago--wiping out over $7 trillion in investments and savings.

Telecommunications, the golden industry of the computer age, is in crisis. Once giddy dot.coms are thudding to earth in bankruptcy.

Where this will go is unclear. New bankruptcies are threatened in the airline industry. Debt crises have brought Brazil and Argentina toward loan default.

Meanwhile, scandals--mind-boggling stories of corporate fraud and arrogance--erupt again and again. A corrupt system of corporate accounting lies exposed. Arthur Andersen--one of the top five accounting firms in the U.S.--fell apart when its involvement in the Enron frauds surfaced. Corporate CEOs take the fifth before Congress. A couple low-level capitalists have even been made to do the "perp walk," in handcuffs, before TV cameras.

Gambling with People's Lives

"On November 30, we were given the right to move Enron's matching funds for our retirement savings plans from Enron stock to another fund. My personal account amounted to $46.01. Another friend, with almost 20 years service, had $102. This is absurd, sad, and I think, criminal."

Enron employee after being fired, January 2002

"Will you ever be able to retire?"

Time magazine cover headline

For years, the U.S. stock market has been absorbing wealth like a relentless black hole-- attracting capital from all over the world and the savings of millions within the U.S.

Stock market hype approached mania. A generation grew up that had never seen stocks go down. In whole industries, managers and middle class professionals accepted "stock options" instead of raises. Prophets of privatization called for shifting Social Security itself into stocks.

Now, as Karl Marx wrote, "After the debauchery comes the blues." For millions of people, savings have evaporated; jobs have disappeared; and old age looks like a time of poverty. This stock collapse is falling hard on the lives of people.

At one end of the age spectrum, millions of 20-somethings built life plans around high tech and suddenly find themselves with low wages instead of stock options. At the other end, millions of older people watched life savings evaporate day after day--along with their plans for retirement security.

Only 16% of the U.S. population currently has lifetime pension benefits beyond Social Security. Half the U.S. workforce only has tiny Social Security payments coming in their old age.

Now many who had accumulated a little wealth are stunned. The Boston Globe estimates that the average 401(k) retirement plan has lost about a quarter of its value in the last two-and-a-half years.

One corporate vice president described to the RW how $500,000 in stock options lost over half its value, while the federal collectors still expected more than $200,000 in taxes. Wiped out over a few months.

At Coca-Cola, for example, 81% of the employees' retirement was invested in company stock--and that stock dropped 31% over three years. Meanwhile, CEO M. Douglas Ivester left with a package that included $17 million and lifetime payment of his country club dues.

Capitalism claims it is the most efficient way of "creating wealth"--but the crisis reveals how its workings produce profound insecurity and waves of ruin.

Deceit Behind Closed Doors

"The U.S. financial disclosure system is the best in the world. Investors can be confident in the system."

Harvey Pitt, U.S. Securities and Exchange Commission Chairman, February 2002

"Is Wall Street Corrupt?"

Headline in Business Week , June 2002

"Until recently, America was pretending that it was offering the world an indisputable model of success. More than a thousand U.S. companies have admitted that they published false figures in the '90s. That means the much-hyped and lucrative growth of Clinton's "New Economy" may prove to be a hot-air balloon, and one overblown with foreign money."

Dnevnik newspaper, Sofia, Bulgaria, June 26

The U.S. ruling class and its global instruments like the IMF have hammered countries around the world demanding "transparency." Part of the superiority of U.S.-style capitalism over either state capitalism or socialist planned economy rests, they say, on openness and reliable numbers. Countries are told to lay out the facts of their economic life and allow international banks to "cherry-pick" the most profitable sectors to buy and exploit.

Now we can see what a lie American-style "transparency" is.

Worldcom--the Texas "dynamo" that controls half the internet--revealed in June that its managers had hidden over $4 billion in costs to improve their "bottom line." Worldcom CEO John Sidgmore said these were "errors." Then, a few weeks later, Worldcom announced that the real number had been over$7 billion !

On July 9, days after the Worldcom scandal broke, George Bush explained that the CEOs involved were only a "few bad apples." But as investigations deepened, the capitalist managers explained that "new accounting methods" had become "industry standards"--i.e., everyone was doing it.

Merck, the drug giant, fraudulently recorded more than $12 billion in revenues it never collected. After Arthur Andersen collapsed, federal prosecutors accused two more accounting firms, KPMG and BDO Seidman, of helping hundreds of corporate clients escape billions of dollars in taxes. The SEC is investigating Bristol-Myers for inflating its revenues by $1 billion last year. The global oil services firm, Halliburton, and its former CEO Dick Cheney have been accused of inflating corporate revenues by over $400 million.

The U.S. economy is marked by a degree of fraud unprecedented since the 1920s. Fraud has emerged as a survival tactic of corporations that concentrate huge chunks of capital for the larger ruling class and vast funds gathered from the masses. These are desperate gambles that intensified as the economy started to stall.

As competition for new investment intensified, capitalists simply cooked their books. It was easy-- no one was checking. The accountants were on board. Major bank lenders like Citigroup and J.P. Morgan Chase participated. The heads of the government--from the SEC chief to Vice President Cheney--had a hand in this themselves while in "private life."

The Face of Evil-doers

"It's the worst fallout ever from corporate fraud. Trillions of dollars in value has been ripped from the stock market--more than the GDP [gross domestic product] of many countries. Investors have been had by corporate leaders whose moral compasses were confounded by greed."

Business Week, August 6

"It isn't a matter of just a few crooked or greedy individuals; it wasn't just a handful of CEOs and CFOs...but a huge supporting cast as well: auditors, lawyers, investment banks, management consultants, portfolio managers, stock analysts, institutional investors, and financial journalists."

Singapore Business Times, July 2002

Scandal revealed to the world the faces of real, living capitalists, behind the impersonal facades of corporate giants.

Meet Kenneth Lay--founder and chairman of the energy giant Enron, lifetime family friend of the Bush dynasty, pirate captain behind much of the California energy crisis, multi-zillionaire with a half- dozen palaces, and secret co-author of the Cheney Energy Plan for America.

For years, the schemes and decisions of such men went on behind closed doors, while they played "philanthropist" and "corporate celebrity" in public.

The propagandists of capitalism preach that one of the system's big advantages is (supposedly) "accountability." But these scandals show how untrue that is. Those at the controls of corporate wrecks have floated away on golden parachutes--while many ruined in the wreckage had no responsibility to "account" for.

The corporate heads have been untouchable. The average pay of the ten highest-paid CEOs in the U.S. last year was $155 million. CEO pay generally has mushroomed from 10 times that of the average pay of employees two decades ago to become 410 times as large today. When corporations face bankruptcy, CEOs have repeatedly cashed in massive stock holdings before making the announcements.

It is now known how Ken Lay and his fellow managers built Enron as an elaborate pyramid scheme. And as the declining economy pulled the plug, Ken Lay sold about $70 million worth of Enron shares just before it collapsed. Meanwhile he and his cohorts froze the investments of their employees. Enron employees and stockholders lost about $40 billion as the company tanked--thousands of people lost everything, including jobs, savings and pensions.

This is a widespread phenomenon. President Bush himself made a fortune by bailing out of Harken Energy with $850,000, right before the stock lost 75% of its value.

A Nation article documents that Citigroup's CEO Sanford Weill pocketed more than $482 million between 1998 and 2000--while his stock plan had a unique "reload" feature: "Each time Weill cashed in his options, he automatically received new options to replace them." Meanwhile the Federal Trade Commission has charged Citigroup with illegal lending practices that could total $500 million.

High-tech giant Lucent Industries axed at least 42,000 jobs last year, while CEO Richard McGinn got $12 million after his firing.

There is fury in the middle classes over these CEOs, their greed and shameless corruption. And meanwhile, the government is scrambling to deflect that anger by seeming to "do something."

The SEC recently required that the CEOs of the largest public corporations legally swear that the financial numbers in their corporate statements were true. William Lerach, an attorney specializing in shareholder lawsuits, said: "There's so much wiggle room in the language of the certification." The sworn statements by the chief executive officers and chief financial officers begin with the words, "To the best of my knowledge..."

Congress passed a "Corporate Reform Bill" on July 25. The proof that it is completely and utterly toothless is the simple fact that it has been praised by the corporate world, the Bush White House, and was passed by 423-3 in the House and 99-0 in the Senate.

Day by day, month by month, for over a year now--the smirk and swagger of U.S. capitalism has competed with the shock of scandal and the gloom of recession. It is harder and harder to hide that this system--which boasts about openness, efficiency and wealth creation--operates as a heartless shell game of robbery, false promises and dog-eat-dog calculations.

This article is posted in English and Spanish on Revolutionary Worker Online
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