Corporations and their executives are often harangued for focusing on short-term profits over long-term profitability. Greed is seen as the core of evil, responsible for every lost job and every foreclosed house.
Focusing on the short-term is bad management. At least if the immediate goals jeopardize or sacrifice distant and enduring goals. But this myopic affliction of greed is not limited to the boardroom or the trading floor:
Even the Federal Reserve has signaled that deflation is now a greater immediate threat than inflation, although the U.S. central bank's policy makers recognize the risks of inflation bubbling up again in a few years if they do not slow down the growth of money supply.
Greed drives Congress, too:
The Congressional Budget Office reports that the enormous debt that would be required to implement either the House or the Senate "stimulus" would slightly reduce economic output in the long run.
Barack Obama and Joe Biden have a plan to revitalize the economy.
- Immediate Action to Create Good Jobs in America
- Immediate Relief for Struggling Families
- Direct, Immediate Assistance for Homeowners, Not a Bailout for Irresponsible Mortgage Lenders
- A Rapid, Aggressive Response to Our Financial Crisis, Using All the Tools We Have
Those leading the fight against greed are afflcited just like their targets. Greed is universal. On Wall Street, the measure is money. In Washington, the measure is control. I do not see any moral difference between the two.
A difference I do see is that the greedy on Wall Street have competition. Sacrificing the long-term destroys companies and ruins careers. In some cases it can lead to time in prison.
The greedy in DC have no competition. Government short-sightedness still destroys companies, but it perversely advances political careers.
Those who blame economic woes on corporate greed are considering only part of the story. An expansive and unchecked government is equally culpable. Of course, the leaders from each group make speeches justifying their greed and near-sightedness. They paint a vision of how the short-term suffering is necessary for long-term success. And they proceed to grab all they can.
Short-sighted corporate executives don’t last. Despite a popular perception about the culture of greed on Wall Street, the big institutional shareholders who control corporate boards do not want to see their holdings wiped out to enrich their CEO. Hot-shot executives may be granted lavish compensation, but the motive is to hire the best decision-maker to improve profitability, not just the stock price.
The CEOs we hear about, like Ken Lay or Dick Fuld, are the exceptions. They’re in the news not because they’re just like every other executive, but because they’re so unusual. There are over 7,000 companies listed on stock exchanges. We never hear about 6,998 of those CEOs. They’re almost all decent managers, balancing short- and long-term interests in an ever-evolving global marketplace. The weak, the corrupt, and the evil are weeded out by the same process that selects them.
The public has almost no recourse to oust the bad managers in Government. The system has been rigged to make Congressional elections an easy contest for incumbents. We focus on the handful of races where the power structure has cracked, and convince ourselves that we can actually bring change to government. Last November, 96% of incumbents were re-elected. The only change is rhetorical.