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Sunday June 30, 2002
The US faces a grave economic crisis. The confidence in the balance sheets and reported profitability of American companies has been shattered by an orgy of unprecedented corporate fraud, plunder and malfeasance that has demanded the connivance of its most reputable accounting firms, business leaders and banks. . . .
. . . The integrity of the entire system for channelling savings into investment is now in question as is that of corporate America, just as America's debts to foreigners and its own consumers indebtedness have reached unsustainable levels. The country has been living beyond its means and inventing value when none existed. No one can predict with certainty how this will unravel, although the faltering of American consumer confidence and the sell-off of the dollar are already pointers. The dollar is threatening to inherit the sobriquet of 'toilet currency' once borne by the euro.
The US can and eventually will recover, but only when it comes to terms with the harshest of realities. That it does not possess a uniquely enterprising economic and financial model. That the scandals now hitting the headlines are not a case of one or two bad apples, but reveal systemic weaknesses in its financial system and methods of corporate governance which need root- and- branch reform. That American business ethics are abysmally low and require the toughest of policing . And that the US, like other economies that have pursued unsustainable and foolhardy policies, must go through a period of painful and difficult adjustment. . . .
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The truth is that American business has bought the American executive and legislature alike.
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The states of the Confederacy remain the heartland of the distinct brand of American conservatism that combines Christian, market and America-first fundamentalism to a unique degree, reinforced in the South by a legacy of barely submerged racism.
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For most of the last decade, the result has seemed impressive, spawning what may only be transient US leadership of the hi- tech revolution. But now we can see the underlying weaknesses. Company directors awarded themselves fabulous share-option schemes and cut corners to manipulate their profits to meet investors' avaricious expectations, so supporting the share price and their own fortunes. The ruses were simple, ranging from booking next year's income as this year's to the sheer fraud, as in the telecoms sector, of falsifying sales altogether. The result was to propel an already fevered stock market to yet more stratospheric and unjustified levels: Wall Street is still valuing American companies more generously that at any time since 1929.
. . . While dividend distributions have doubled as a proportion of profits, investment in the core of American business was troublingly low; the US has less invested capital per employee than France or Germany.
Productivity is higher in both (the old East Germany excepted) and growing at least as rapidly. The consequence is America's intractable trade deficit. Great wealth and opportunity have been the privilege of the few. As the scandals unfold, ordinary Americans are left naturally concerned about the integrity of their pensions and the viability of their insurance companies. The structures that support ordinary peoples' lives - free health care, quality education, guarantees of reasonable living standards in old age, sickness or unemployment, housing for the disadvantaged - that Europeans take for granted are conspicuous by their absence. Mainstream America has been told that its threadbare and neglected social contract is the price it must pay for opportunity, liberty and wealth creation. The political reaction could be fierce . . .
1:51:22 PM Google It! 
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