About 5,000 New York University graduates filled Yankee Stadium last week to enter their journey into our economy. These graduates are going to be faced with an anemic job market as they venture into the American workforce. President Bill Clinton was there to speak to them and mentioned the normal commencement speech fluff, the future is what you make of it, change the world and work hard, but the other part of the speech that struck me as very insightful was when he spoke about how we got into the mess we are in.
Essentially the premise of his remarks was, today’s business schools are teaching the students to always put profits above people, and that the shareholders are more important than the stakeholders. In my view, this couldn’t have been said better.
I was probably the last generation of Americans until the present day who could have gotten an MBA, if I went to business school instead of law school, with the prevailing theory being that American corporations had obligations primarily to their stakeholders.
Ever since then we’ve been teaching our young people that your primarily obligation is only to the shareholder. The problem is that if you do that you ignore the other stakeholders.
That could be why wages have been virtually stagnant for the past 30 years, because the workers are stakeholders. It could be why communities have been unable to undertake economic transformations in many places, because communities are stakeholders. It could be why customers don’t care so much what the source of their purchases are, they’re stakeholders.
Ever since Americans have grasped onto the idea of University of Chicago’s Professor Milton Friedman’s theory of supply side economics, the middle class has been on a slippery slope of stagnant wages and outsourcing of manufacturing.
If corporations did business where the stakeholders held as much importance as the shareholders, America would be flooded with jobs. This would happen because the corporations would not be seeking low wage countries and turning their backs on America’s exceptional standard of living. They would pay their employees well after a hard day’s work.
Clinton also went on to say the other problem is the premise that the government messes everything up it touches.
The second wrong idea is that the only problem America has is that the government, especially the national government, messes everything up that it touches. It would mess up a two car parade.
There is no such thing as a good tax, no such thing as a bad tax cut. No such thing as a good regulation, no such thing as a bad deregulation. That contradicts the evidence in the United States and every other country in the world that only truly successful countries have both strong economies and effective governments, and a public/private partnership to share the future.
Governing is not a ZERO SUM game where every tax cut or deregulation provides jobs. If that were the case, America should have less unemployment today than we had in the 1970s when taxes were exceptionally higher. We have had the Bush tax cuts in place for almost a decade and they have been EXTENDED until 2012, still the economy is relatively stagnant. We should be expanding out of our seams.
The Republicans are still holding onto their belief that tax cuts create jobs and we should lower our taxes even further.
We still haven’t heard anything about America’s wage problem from the GOP and some conservative Democrats. This is a real economic problem with America. People don’t have discretionary income. When will the conservatives speak up for America’s working class and fight for better wages, as Eisenhower did in the 1950s.