The CEO Myth and Romney’s Misleading Rhetoric

The Health Care Renewal blog talks about how hospital systems today are often being run into the ground by executives that don’t know squat about health care. The nice folks at the blog were therefore pleased to tell us about an article by Gretchen Morgenson in the New York Times in September:

http://hcrenewal.blogspot.com/2012/10/more-reasons-to-doubt-how-ceos-are.html

http://www.nytimes.com/2012/09/23/business/ceos-and-the-pay-em-or-lose-em-myth-fair-game.html?_r=0

Morgenson in turn reported on a study conducted by Charles M. Elson and Craig K. Ferrere of the University of Delaware. These folks looked at the argument used by corporate boards to justify sky-high pay for their CEOs—that the CEO of one successful company is likely to jump ship and go work for another big firm unless well compensated, and so to decide fair CEO pay, the board needs to look at a wide range of comparable firms. That in turn assumes that the successful CEO has extensive general knowledge of how businesses work, and can easily transfer those skills from a company that makes automobiles to one that makes computers or pharmaceuticals.

Elson and Ferrere looked at the record and decided that this idea of easily transferable skill is a myth. CEOs, it turns out, do better by far when they stick to the company that they know and understand. If they try to take on a very different sort of firm, they usually flop. In short, it really does matter whether the company you run makes widgets or something else.

What does this have to do with today’s presidential politics? Somehow Gov. Romney has pulled the wool over most everyone’s eyes through his mantra that as a successful businessman, he knows what it takes to get the nation’s economy back on track. Now, this is wrong at almost too many levels to count. As Paul Krugman has pointed out repeatedly, what a businessman needs to know to run a firm and what government leaders need to know are radically different things. Krugman also recently pointed out:

http://www.nytimes.com/2012/10/19/opinion/krugman-snow-job-on-jobs.html?partner=rssnyt&emc=rss

--that Gov. Romney has had the gall to say that not only is he an experienced businessman; he’s also experienced in small business—pointing to the few employees Bain Capital had when it started up.

Now, my daughter may know something about starting up a small business. She worked for a while making artfully decorated cake pops for some local shops and private parties, and had to fill out a ton of forms to get the required permits. But if she was bankrolled when she started out to the tune of $37 million—the amount of dough that Bain Capital had at its disposal as a “small business startup”—then somehow I missed hearing that fact.

So Romney is wrong when he tells us that because he once ran a business, he knows how to be President and run the nation’s economy so as to make more jobs. But the Delaware study shows that he‘s even more wrong because he suggests that because he knew how to run one business, he must know all about all businesses. That, as their CEO survey reveals, is pure hogwash.

So why does the American voter so eagerly lap up this nonsense? That’s where we’re back to the seductive powers of the quasi-religion known as economism.

The Incoherence of the Republican Right; and How Economism Accounts for It

            This is a belated commentary on the first Presidential debate which addresses two points—first, why the Tea Party fringe that seems to have commandeered the Republican Party appears incapable of coherent thought; and second, in what way the ideology of economism helps us better understand that.

            I need to explain that I did not actually watch the debate, which does not matter, as the point I wish to make has nothing to do with what actually happened there, much less what I thought of it. The point is rather how (reportedly) the Republican base responded to Mitt Romney’s performance.

            The mainstream media helpfully informed us that Romney won the debate and in the process energized his party pumping enthusiasm into many voters who’d been lukewarm toward him since the primaries. The media also informed us that Romney “won” in good part by coming across as a moderate. Let’s assume all that’s accurate.

            Now, as best as I can recall the mood of the Republican right wing back in the spring, their main complaint was that Romney was too moderate for them and was not trustworthy as a true conservative. So, if this wing of the party was capable of coherent thought, the response to this debate should have been, “We knew it all along! We could never trust that guy. As soon as he had the nomination wrapped up, he runs right back to the center, just as he did when governor of Massachusetts.”

            So how is one to explain this sudden falling in love with the previously distrusted candidate, once he proves that the reasons for distrust were perfectly valid?

I propose that the reason is very simple—in the debate, he looked like he could defeat Obama. The right wing wants above all else to defeat Obama. Anyone who can do so is their darling of the moment.

So—how does economism help to explain all this illogic?

The absolute, unmitigated hatred of Obama, among the denizens of the right wing, requires some explaining. Clearly, in my view, some of it is racially motivated, as much as all try to deny it. I really doubt that if Obama was white, there would be the “birther” gang out there; and that so many would apparently believe he’s Muslim despite his insistence that he’s nothing of the sort.

But the fact that so many on the right felt so comfortable in saying from the very moment of his inauguration that defeating him was their absolute number one priority—never mind if they wrecked the nation in the process—seems to me to indicate a key premise of economism at work.

Economism is warmed-over religion disguised as economic science. The two religious traditions from which economism draws—see our “economism primer,” http://theeconomismscam.blogspot.com/2012/09/economism-primer.html---both coalesce around the idea that God determines the way the world is down to the smallest detail.

So this visceral hatred of Obama seems to arise from a deep conviction that Obama represents something unworthy in the eyes of God. This could be for some voters because he is pro-choice or accepting of gays. For many voters, this would be because he seems antithetical to the unregulated free market. For some it would be both. But from God’s point of view, this man is an “Obamanation” as the book title has it, and he must go.

For people who get their marching orders directly from God, or think they do, all of this hangs together and makes good sense.

The Economism Frame at Work: The “Assault” on Texas Higher Education

Paul Burka wrote the cover story for the October issue of Texas Monthly, “The Battle over UT” (http://www.texasmonthly.com/preview/2012-10-01/feature, subscription required for full article). I’m sure this veteran political writer (or so I gather) thought that he was presenting a reasonably balanced account of Gov. Rick Perry, Jeff Sandefer and his Texas Public Policy Foundation, and the conservative assault on Texas’s flagship universities, University of Texas and Texas A&M. In actuality the article is highly biased, and in seeing why, we understand how “frames” work in political discussion.

Linguist George Lakoff explained frames in books such as Moral Politics. In framing a political statement, we may think we’re using neutral language, but may in actuality be adopting language that adheres to the key assumptions of one side of the debate. That means that anyone who wishes to argue the other side starts off at a disadvantage, because the debate has already been laid out in terms favorable to the other side—terms that make it sound like the other side is sensible and its critics are muddle-headed. If, for example, we frame the debate over immigration policy as, “Are you in favor of upholding the law of the land, or do you endorse amnesty?” then we’re doing the sort of framing that Lakoff objects to.

Burka’s article is shot through with the economism frame. He accepts as unassailable the assumptions that:

·         A college degree is a commodity

·         The goal of college is to “buy” a degree and then use it to get a good job

·         What you learn in college can be precisely quantified by standardized tests

·         It makes sense to argue that a college should be run as if it were a business

Defenders of higher education’s role in a democratic society by creating an educated, critically thinking populace automatically sound old-fashioned and out of touch as soon as you adopt this frame. Philosopher Martha Nussbaum, for example, in her valuable book, Not for Profit: Why Democracy Needs the Humanities, obviously has nothing worthwhile to say according to the economism formula.

Perhaps the worst example of one-sided framing comes at the end of this long article when Burka seems to accept the notion that the old-fashioned university faculty types represent an elitist view of higher education while Sandefer and his gang, who want to hold down tuition and make more on-line learning available, are the populists in this contest. Thomas Frank, in his One Market Under God (which I discuss at length in The Golden Calf), shrewdly dissects economism’s claim that it represents populism and true democracy via the marketplace, since in the free market, the consumer can purchase whatever she wants. By contrast, any form of government regulation is elitism, with other people telling you what to do. Yeah, right, says Frank, the US corporation is a wonderful example of democracy—Bill Gates assures us that we’ll have the widest possible choice of operating systems for our computers and we can pick whichever one we want. And if Bill Gates’s employees didn’t like the way he was running Microsoft, they could take a vote and get rid of him.

If you want to know the real scoop about what’s elitist and what’s populist in the American university, read Christopher Newfield’s essential book, Unmaking the Public University. His thesis would seem to be a wild conspiracy theory if he had not documented and supported it so thoroughly. On his view, in the late 1960s, the elite, wealthy white males that were used to running America the way they saw fit got into a snit. Women and minorities were increasingly rising to positions of power in an expanded and highly educated middle class. The skittish one-percenters looked around at where these people were coming from, and discovered the source of the problem—the large public university. So they decided that two things had to happen if they were to remain in control. First, the university had to be robbed of its essential funding. Second, equally important, the university as a source of knowledge had to be delegitimated in the eyes of the populace. Newfield makes a good case that the entire assault on affirmative action in the 1990s (for instance) was a part of this delegitimation process.

Burka admits that he’s personally biased because he’s a part-timer at UT-Austin, teaching one course a year on politics for low pay and no benefits and outside the tenure system. He’s the sort of faculty member that would be the only employee of UT if Sandefer had his way. Burka talks movingly about how faculty like him usually have something many tenured professors lack—real-world experience. That is supposedly the reason why Sandefer wants to hire so many of them. The fact that such profs are for the most part cheap and docile labor couldn’t possibly be the real reason conservatives love them so much. (My own personal bias is the opposite of course since in my day job, I’m a tenured professor teaching humanities in a professional school.)

The final bit of evidence that Burka has totally swallowed the economism frame is what he proposes to do about the future of the university. Suppose that you agreed with all the following:

·         The large public university is a huge public good, producing both education for the masses and essential research.

·         In today’s world the university, like everything else, is increasing expensive to maintain.

·         Raising tuition to pay for the increased costs adds unacceptable levels of debt to young people just starting their careers, and excludes many others from even getting a degree.

Now, if you agreed on all those things, a logical conclusion would be that we have to belly up to the bar and pay for a public good with more public money—that is, taxes. That would be logical unless you’d adopted the economism frame, where raising taxes is taboo. So the possibility that the real problem in Texas, despite its relatively booming economy, is inadequate public funding for its schools (K-12 even worse than higher ed) gets completely left out of Burka’s discussion.

Am I a defender of the status quo? I believe that universities need to do more to cut costs while retaining quality, must address the tuition problem more aggressively, and that faculty need to be more accountable for how they spend the taxpayer money entrusted to them. But we need open-minded discussions of how to do all that—not warmed-over economism.

Who's Entitled?

The Democrats are like a dog with a bone, with Romney's secretly-videotaped speech in which he labeled 47 percent of the American public as non-tax-paying moochers who think they're entitled. As I said previously, this speech is fair game as it comes straight out of the economism playbook, and Romney has made it clear all through this campaign that economism is in fact his religion. (Okay, so maybe he's a Mormon on the side.) But let's for now take a somewhat closer look at this question of just who in our society think they're "entitled."

Academics (those troublemakers again) have recently done several studies about the ethics of the rich vs. regular folks. Here is a blog post based on just one such study:
http://hcrenewal.blogspot.com/2012/07/quantitating-corruption-of-finance.html

What these studies find, routinely, is that wealthier research subjects generally are more likely to cheat, and feel more entitled to get ahead, so that any means they need to use to get ahead is all right with them. Yet when we talk in our society, for example, about "entitlement programs," we always seem to talk about programs that aid the poor and middle class; we never seem to treat the wealthy (the cherished "job creators" of the Republicans) as "entitled" folks. These recent research results simply add more evidence of a pervasive double standard, fueled by the ideology of economism, that the rich are different and better than the rest of us.

Now, when I say something like this, I am likely to get the response, why am I picking on the rich? Do I believe that all rich people are rotten? Do I believe that all poor people are angelic?

Well, I happen to believe that some rich people and good and some are bad. I happen to believe that some poor people are virtuous and hard-working and some are bastards. I imagine that most of us, if we thought about it, would believe the same. So why is it even necessary to go through the motions of saying such an obvious truism?

The reason one has to say such things is that economism has had its way with us for so long that its defenders have had an incredibly easy time of it. The rest of us drank the Kool-aid and agreed that what economism preaches is simple common sense and must be true. So they got lazy about thinking of arguments that actually support economism in any substantial way. (That's just as well for their peace of mind, as economism is so full of contradictions, and so thoroughly undermined by real-world evidence, that trying to seriously defend it is a real headache.) So all it takes is a person like me questioning a single feature of the economism's religious ideology, and the defenders go berserk, figuring that anyone so crazy as to doubt economism must be trying to destroy civilization as they know it.

The good news is that finally us crazies are coming out of the woodwork.

The Truth about CEOs

NBC News brought us up to date yesterday about a university study of CEO pay:
http://bottomline.nbcnews.com/_news/2012/09/27/14125675-lavish-ceo-pay-doesnt-work-as-intended-study?lite

Basically what these folks from the University of Delaware found is:

• If you assume that you have to pay a company CEO huge megabucks because other companies pay their CEOs those sums, your company will not perform any better and is probably wasting its money.
• If you want your CEO to do well, pick somebody who actually has experience in the business you're in. Don't hire a successful CEO from a totally different type of company.

Now, if we lived in a sensible world, these observations would produce the usual response when we read about an academic study: "Everyone already knew that anyway so why did these silly professors have to get a grant to study this?" But we don't live in a sensible world. We live in a world where economism has somehow morphed itself into everyday common sense, and so we do need to learn these lessons.

Why are the lessons of economism at odds with these very sensible findings--and how have those beliefs led to out-of-sight CEO pay and the creation of an overclass of the wealthy to whom all other Americans so willingly defer? First, as I explained in The Golden Calf, economism has repackaged old religious beliefs that go toward imagining that if you're rich, you must be especially favored by God. So it's simply God's will that you'll be showered with riches and that the rest of us should kiss the hem of your whatever.

The more subtle answer is that economism is joined at the hip with the most simplistic form of neoclassical economics, which in turn believes that everything of importance in the world can be predicted by means of its mathematical models. These models are basically the doctrine of the supposedly free market. This worship of neoclassical economics and its presumed mathematical precision (a precision purchased at the cost of grossly misrepresenting the real world) leads to the impression that it's possible to be an expert in the free market, and to have a sort of financial wisdom that transcends any specific industry. On this basis, people readily imagine that if you managed to make a ton of money as CEO of a widget company, you can become president of a hospital system and be equally successful (at making money at least, even if none of the patients get any healthier).

Let's for a minute apply this to Mitt Romney. He's running for president on the platform that he, much better than that idiot Obama who never "met a paycheck" as they like to intone, knows how to get the American economy moving forward again. And how does he know this? Presumably because he was successful, in terms at least of personal wealth accumulation, as an executive of a certain sort of firm, a venture capital company.

Again, let's assume for a minute we lived in a sensible world. In that world people would note two things. First, being president of the U.S. is quite different from running a business, and there's no reason whatever to believe that somebody skilled at one would be skilled at the other. Second, what Romney proved to be good at was doing one very specific form of financial dealing--which actually amounts to leveraging huge amounts of debt and then forcing others to pay off that debt for you, as Matt Taibbi explained for us in detail in the August 29 issue of Rolling Stone (subscription required).

Maybe some day we will live in a sensible world again.

Romney’s 47 Percent—Right Out of the Economism Scripture

            I was about to write a comment about the now-infamous video of Mitt Romney speaking in Boca Raton, FL about the 47 percent of Americans whom he’d write off in the election, but Paul Krugman sort of beat me to it in his New York Times economic column:

http://www.nytimes.com/2012/09/21/opinion/krugman-disdain-for-workers.html?partner=rssnyt&emc=rss&_moc.semityn.www

            Has Krugman read The Golden Calf? I know he has a copy, since like most aspiring authors, I sent copies to several important figures whom I had quoted in the book, hoping that some of them would see fit to give the book a little notice (dream on, as it turned out). But I have no idea whether he has actually looked at it. In any event, he was writing things before that book appeared that anticipated many of the messages in it, and since the book has appeared his columns seem to channel ideas in the book even more.

            The gist of this latest column is that today’s Republicans have a deep and serious disdain for ordinary working people, so it’s not in the least out of character for Romney to say what he did. If you work for someone else, by definition, you’re not one of the “job creators” that the Republicans idolize. Forget that those capitalists and investors would never have a dime if the working stiffs of America weren’t the world’s most productive workers, and hadn’t slaved away so that those guys could be rich while seeing their own income stagnate ever since 1980.

            What I had been about to add to that observation was that what Romney was captured saying in Boca Raton was vintage economism—so again, it’s not as if he was misquoted or that they caught him on a bad day. The creed of economism allows people like Romney an easy conscience when casting aspersions against so many of their fellow citizens.

            Using its two religious roots, the Protestant ethic and English evangelicalism, economism has concluded that where anyone is in the economic pecking order is exactly where they ought to be, for two reasons. The first reason is overtly religious. Both of the above religious doctrines held that God designed the world down to the last feather on the last sparrow. If the people who fall into the tax categories that Romney poo-pooed happen to be those who generally make less than $50,000 per year, and by the merest coincidence, Republican donors had to pay $50,000 a plate to attend the dinner in Boca Raton where Romney spoke, well, no reason at all for the donors to feel embarrassed. God made them rich because they were especially worthy, and he made the others poor because they were especially sinful.

            That’s the first reason. The second reason is that economism believes devoutly in neoclassical economics, which in turn teaches that everything about the economy can be exactly predicted by its neat mathematical models. Those models show that so long as you have a free market, then whatever happens in the world is the best possible thing that could have happened. If the market is free and the 1 percent are fabulously wealthy and the rest of us are miserable, then that outcome is the best possible way that the world could be organized. The only fly in the ointment is what happens if the market is not, in fact, ideally free. But that’s a minor change of the subject, as the devotee of economism then goes into a rant that the entire problem is due to the market not being free enough, and that hated government regulation is what is messing everything up.

            So the Republican donors can take their pick. They can all have an easy conscience because it’s God’s will. Or they can all have an easy conscience because precise mathematical laws prove that the world is ideal the way it is. Or for that matter they can believe in both. After all, they paid fifty grand for a place at the table—might as well throw in an extra ideology as a bonus.

So Why No Jobs?

A number of reports on the US economy agree that in recent months, companies have been sitting on huge wads of cash. They have not, for the most part, used any of that cash to expand their workforce. Nevertheless profits are up, because existing workers are more productive than ever before—this coming on top of figures I noted in The Golden Calf, that American workers already were leading the rest of the world in productivity.

Economism teaches us that if we just lower taxes on the rich and on corporations, they will be the “job creators.” So why no jobs, if they are so flush with funds?

The students of economism offer us an answer. The problem, they allege, is uncertainty. Right now these companies have money, but who knows about tomorrow—maybe those nasty Democrats will raise taxes again, or enforce some new regulations. It’s not enough that the job creators have a lot of money; they have to be in the right frame of mind. This excuse as to why we don’t have jobs, when all the conditions seem to be just what economism ordered, is what economist and columnist Paul Krugman memorably labeled the “Mom, he’s looking at me funny” rationale.

So, says the political right wing, if you want jobs, it is not enough to put wads of cash in the hands of employers. You also have to ease their uncertainty that anyone could ever take that cash away from them. So be sure to elect Republicans to control both the White House and Congress, and then to appoint only pro-business, activist judges. And while you’re at it, dismantle American electoral democracy to be sure that the guys never get voted out of office (something economism believes but doesn’t like to say out loud).

It is part of the brainwashing job that economism’s acolytes have pulled off on American society that all this can be said with a straight face. So let me see if I can state the rather obvious flaw in this reasoning, even if no one in the political debate in the U.S. seems willing to go there.

Economism claims that the unregulated free market is this powerful force for good in society, and that if we just let it alone, it will do everything we desire. Everyone will be prosperous, except of course for those who don’t deserve to be, because obviously they didn’t work hard enough or didn’t have the right entrepreneurial moxie. Or God doesn’t like them.

Then when we line up all the ducks in a row the way economism says, and there are still no jobs, we are supposed to believe that the problem is uncertainty and lack of confidence. Somehow this incredibly powerful free market thing is so weak and unreliable that it will fall apart if it sees its own shadow.

So you can have a (so-called) free market that grandly sweeps all before it. Or you can have a free market that’s so wimpy and undependable that you have to make really nice to it to get it to do what you want. One way or the other, guys—make up your minds.