The thing is, the politician and the CEO have the essentials in common: Both crave success, and both will go to great lengths to achieve it. Sadly, however, when I say "great lengths" I don't necessarily mean great sacrifice, or great effort. Make no mistake, while you may adore Emerson's romantic adage "it's the journey, not the destination", for the congressman and the corporator it's all about outcomes. To hell with the climb, if they can helicopter to the top of the mountain while sipping champagne and slurping caviar, that they'll do.
Now, when I say "old-fashioned" corporate scheming, I'm not referring to the plotting of some regulatory rent amongst the senator and his big-monied supporters, I'm talking about the painstaking figuring out, the research, the development, the major capital investment involved in creating and bringing to market the next greatest thing. That's the stuff that'll put people to work, that'll incite the spirits of competing corporate executives, that'll grow the economy at a pace you'd expect coming out of a "Great Recession".
Sadly, however, while they say corporate balance sheets are awash with cash, CEOs have been to this point opting to use their liquidity to boost stock prices by slurping up their own shares (buy backs), pouring out higher dividends to shareholders, and here and there buying up a rival or two. Not that these are at all bad things, it's what they tell us about business confidence (the kind of confidence that puts capital and people to work) that's a bad thing, there ain't none.
So what does a company do amid great uncertainty? Where does it focus its resources when the risk of regulatory expansion makes capital expansion too risky an undertaking? Well, in addition to my references above, it focuses on the source of its angst---and that would be the regulators of course, or let's just say Washington.
And, alas, if you think share buy backs and dividend hikes are paying off, you ain't seen nothing yet. According to CNBC's Jeff Cox:
Investors looking to beat the S&P 500 need only track the companies that are spending the most money lobbying Washington.
Doing so would have generated profits that easily beat the indexgenerating alpha, as it's known among investing prosevery year for more than a decade, according to data from Strategas, which uses a proprietary measure it calls the Lobbying Index to track those companies.
"This Index has outperformed the S&P 500 for 15 consecutive years. Not only has the Index outperformed the S&P 500 in the first year, but holding that same Index leads to outperformance in the second and third years as well," the firm said in a research note Wednesday. "In our opinion, this consistent outperformance suggests that the market cannot properly value the return from company lobbying activities."
From 2002-13, the index turned in an average annual return of 17.4 percent, compared to the S&P 500 gain of 6 percent, according to Strategas.
$3.2 billion: that's how much politicians raked in from corporations looking for favors in 2013 alone. My, the incentive to regulate! Imagine what that kind of money, each year (and that's off its peak of $3.5 billion in 2010), might accomplish were it invested in things other than political campaigns.
Ah, but would it even come close in terms of shareholder returns when compared to that garnered by graft? That I don't know. But I can tell you for sure, more folks would have jobs. Productive jobs. And the economy would be producing more of the stuff folks, at every rung of the economic ladder, enjoy. Not to mention what the competition for our business---as opposed to the competition for the affections of politicians---would inspire in terms of innovation going forward.
Things would just be a whole lot better right about now, particularly for folks who don't have the wherewithal to participate in the stock market. The folks who politicians pretend to help through, that's right, regulation. What a wonderful scam: Promise to help those in need by regulating the actions of businesses, which guarantees huge political donations from the businesses who aim to write those regulations. End result, politicians help themselves to billions in corporate donations and shareholders get richer as their share prices climb, while those in need remain in need. Now you know why the number of pages in the Code of Federal Regulations has grown from 19,000 in 1949 to 169,000+ today, it's hugely profitable!
So, are you angry at those corporate colluders? Okay, I sympathetically get that. But they're just doing what they believe is in their own best interest. As is the politician. The thing we need to understand is who has control over the process, and who is beholding to the public at large.
With that in mind, I'll close with an excerpt from . For a little history on bank regulations and theory as to what led to the 2008 financial meltdown, read the entire piece:
Joseph Stiglitz, the Nobel Laureate economist, is a champion for big government and equality of outcomes. In a recent interview with CNBC, he railed against the rent-seeking activities of large financial institutions (I totally sympathize) and suggests that adding yet more regulations is the answer (I totally reject). He doesnt seem to get that rent-seeking, from wherever (corporations, unions, environmental activists), is a byproduct of big government. The more influence political actions have over industry, over the economy, the more the incentive to lobby favor.
Make that two excerpts:
But heres the thing, make that a couple things: One; suffice it to say (as I did above) that the larger the government, the larger the lobby. And the more successful the lobby, the larger the lobbying entity or industry. But where should we focus our anger; on the CEO or the Congressman? The CEO is forever courting the congressman and vice versa. But we (the people) hired the congressman. Im thinking hes the one we need to kick in the rear. Seriously, when a spouse cheats, whom do you blame the spouse or the home-wrecker? The spouse, not the home-wrecker, took the vow. The cheater therefore is the spouse (the congressman).