Yesterday my wife and I went to Best Buy to replace a dead cordless telephone. This led to a conversation about the fact that I’d recently read that Best Buy isn’t doing too well lately, and is trying to make sure it does not follow the trajectory of Circuit City. This, in turn, got us to talking about a contemporary mystery.
In the case of a Best Buy, as opposed, say, to Bank of America, et. al., there is no such thing as too big to fail. These folks operate on a narrow margin, and when the buying power of the American people declines (after all, how may Ipads can any one member of the 1% need), sales, particularly sales of discretionary purchases, must, perforce, decline. As Krugman and his liberal commie always right ilk keep telling us, the problem with the economy is on the demand side, and it seems to stand to reason that a demand problem would be most pronounced when it comes to products people can do without.
It follows, as the night the day, that it is in the interest of Best Buy, the corporation, to increase demand. And demand, in a recession, is increased, as everyone knows, by getting money into the hands of people who are going to spend it, i.e., into the hands of the poor and those who are fast becoming poor. That means government spending. You know, stimulus.
So, here’s the mystery: Why aren’t the Best Buys of the world, or at least of the U.S., lobbying hard for the type of stimulus spending upon which their very survival may depend? Even if their survival is not at stake (e.g., Apple) they could surely be making more money if more money was being spent.
Could it be that there’s a disconnect between the short term interests of the highly paid people who run these companies and the interests of the companies themselves? After all, if one is in a position to drain multimillions from a company over the course of a few years, as all of these CEOs are, one really has very little interest in the long term survival and growth of the company, and one certainly doesn’t care much how the stock performs once the options have been exercised.
Recently, digby wrote about the fact that Wall Streeters, feelings hurt and feeling misunderstood, are withholding money from Obama, who they have talked themselves into perceiving as someone who is working against their interests. She notes that a number of people have posited a number of reasons for this reaction, but concludes:
It’s always possible that it’s a combination of all these things. But what’s most interesting to me is that in all these cases, these people care nothing for the health of the financial system itself and only care about their own personal wealth, which they falsely believe has been stymied by government rather than the self-created systemic problems that caused the 2008 crash. That indicates that rather than being people who make decisions on the merits; we are dealing with irrational, irresponsible fools who are blaming the wrong culprits; indeed, they are blaming the very institution that kept the system alive so they could live to pillage another day.
I mostly agree, but I don’t think they are necessarily irrational. They are very rationally preferring policies that allow them to drain as much money from the swamp as quickly as they can, conditions left behind being totally irrelevant. That’s rational, provided one has a very crabbed conception of one’s self interest.
From a societal point of view the question is: how do we structure things so that we align the interests of these people with those of the corporations they run, if not with those of the society as a whole. That, it seems to me, could be done relatively easily. They make too much money too fast. If the corporations can’t keep compensation out of the stratosphere, that objective can be easily achieved by bringing tax rates back where they were in the 50s.