Sunday, March 11, 2012

2012 - Interview with a billionaire

Already having enough ways to waste time, I try to limit my political interests to specific electoral contests.

But since an election is now pending -- and since our local newspaper, the Chicago Tribune, has offered this fine interview with local billionaire, Kenneth Griffith, I thought I might waste a few minutes responding to his ideas.

The first interesting topic to be raised were the recent tax breaks that the State of Illinois gave Sears and the Chicago Board of Trade to keep their central offices in Illinios.

Griffith said that"as morally corrupt as it is for me to imagine asking for that check, it is profoundly more corrupt for the state to pay it."

So then, the journalist, Melissa Harris, asked him whether he would speak about that moral corruption with his colleague, Eddie Lampert, the Chairman of Sears Holdings.

To which Griffith replied: That's not fair; given CEOs have duties to their shareholders. If the state's willing to hand out gifts, there are many who feel compelled to go get them.

But a payment that has been extorted could hardly be called a "gift", could it? Sears was threatening to move to another state in order to get the tax breaks that the Governor of Illinois eventually gave to them.

Currently, American law allows the states to pay companies to locate within them, but does not allow them to demand payment from companies when they pick up and leave. Perhaps that unbalance ought to be changed, but it does not appear that Griffith has expressed any interest in that larger issue.

It's also interesting to note that Griffith does not mention the duties that a CEO might have to anyone other than the shareholders.

The next issue to surface was gambling.

Griffith has made many contributions to local politicians and the one issue that he has raised with them is casinos.

He doesn't want any in the city of Chicago.

Melissa Harris then asked him how speculation in the stock market was any different from gambling in a casino, to which Griffth replied:

I think there's a huge difference. Gambling is entertainment. We have great destinations for that, like Las Vegas. Just not in Chicago. Financial markets, what one often refers to as speculation, is really the force by which we move capital to the best and highest use. Investors who find the best businesses to put their money behind are rewarded for their research. It's not the prettiest way you can ever imagine to allocate capital. But if you look across the entire world, it's the best way we know to allocate capital.

Ok - so if gambling is entertainment, one still might ask why it does not belong in the city of Chicago where entertainment is a major industry.

And businesses that own casinos can be traded on the stock exchanges just like any other, can't they? So wouldn't they qualify as "the best and highest use" as they attract investment?

Just how did that notion of "best and highest" get attached to financial investments anyway? That makes the financial markets part of an ideology, a belief system, rather than just the practical matter of either raising cash or looking for high returns on investment.

Griffith is more than a little sensitive about the morality of gambling, possibly because he recognizes that his own career was built upon taking risks for the benefit of nobody but oneself.

The next issue was his relationship with, and his admiration for, the Koch brothers "primarily because I share their fundamental belief that economic freedom is core to the ethos of our country. It's the idea that any person can pursue their dreams, whether it's starting a business or who they choose to work for. It's made America America. Our founding fathers came to the country for freedom and the Kochs embrace this idea of economic freedom in a way I rarely see put forth today

It would be more accurate to say that the founding fathers embraced the idea of freedom for some and slavery for others, and that the change to the idea of freedom for all required a civil war and then a hundred years of patience and determination.

But it's more important to realize that nobody is currently challenging anyone's freedom to "pursue their dreams, whether it's starting a business or who they choose to work for." -- unless those pursuits are deemed harmful to others.

Once upon a time, it was reasonable to be concerned about the USSR and Communism, but that disappeared in 1990, and actually was in decline for the 40 years previous.

Then Melissa Harris asks a good question:
Don't you also see how some of their (the Koch brothers) ideas are economically reckless, in that they involve pretty much a destruction of our regulatory system?

In response, Griffith totally avoided the issue of regulation, but raises, instead, the issue of government subsidizing green industry, like the support that was given to the now-defunct Solyndra company - reminding us how the principles of that company contributed to the Obama campaign and exemplified the Koch brothers' belief that
" it's a matter of principle first and foremost that where government finds itself involved, corruption finds itself at the table."

But happily, Harris holds him to her question and asks whether government has a right to regulate a company (like Midwest Generation) to keep it from polluting the Chicago neighborhoods near its facility - and Griffith must concede that :
"no company is entitled to engage in acts that hurt innocent third parties."
(regardless, one presumes, of how the revocation of that entitlement infringes on their right to pursue their American dream)

At this point, Harris returns to an issue raised earlier, the access and influence that wealthy contributor have upon the political candidates whom they sponsor.

Is it too much?

Those who have enjoyed the benefits of our system more than ever now owe a duty to protect the system that has created the greatest nation on this planet. And so I hope that other individuals who have really enjoyed growing up in a country that believes in life, liberty and the pursuit of happiness "

As you can see, Griffith is quite idealistic in his response, and I do feel that his idealism is genuine, if self serving. But he has, indeed, avoided the question which asked whether super-wealthy people had too much influence on the American political process, rather than whether each one had the responsibility to contribute as much as he could.

There are many highly responsible career paths, in education, the military, scientific research, medicine etc that will never make a person super-wealthy. So one might ask whether our political process is best served by skewing it towards the interests of those professions that specialize in building wealth.

At this moment in time, these values are under attack. This belief that a larger government is what creates prosperity, that a larger government is what creates good (is wrong). We've seen that experiment. The Soviet Union collapsed. China has run away from its state-controlled system over the last 20 years and has pulled more people up from poverty by doing so than we've ever seen in the history of humanity

Has Chinese capitalism run away from the state -- or has it been sponsored by a one-party system that controls and has been enriched by it? (sort of like the local politics of Chicago) And will it be sustainable without an endless pool of peasant workers willing to work for negligible wages?

Griffith's capitalist idealism is sustained by a rather narrow and distorted view of both American and world history.

Finally, Harris takes us to Griffith's primarily concern with politics: the regulation of the financial industry.

Is the crash of 2008 analgous to the pollution caused by unregulated factories?

Griffith pins it mostly on a corrupt and inept government programs, Fannie Mae and Freddie Mac, but allows that there was a "lack of discipline" on Wall Street that contributed to the disaster.

Here's the concluding exchange:

Q. How would you try to convey to someone on the street, that you and your ilk are not evil? How would try to explain to them that you're not just acting out of self-interest? What would you say to them to make them trust you?

A. (45 second pause.) I think if you look at the realm we're discussing, which is the political realm, I think it would be impossible to find an action by any politician intended to specifically favor either my firm or myself. That's not the driver of my involvement. And with respect to the role my firm plays, I'm proud that we've created well over 1,000 high-paying jobs in Chicago, and I'm very proud of the involvement of my leadership team in the city.

Since Griffith equates economic self interest with public interest, I'm one person on the street who is not inclined to trust him to act for anyone's benefit other than his own.

And if he has never sought a specific favor from a politican, I would guess that it's only because the opportunity has not yet arisen.

After all, in his mind, he would only be asking for "a gift"