Trust Corporate America? Why should I?

A recent survey showed the continuing decline in trust in almost all institutions of the US. Of course, the president is doing a lot of damage, and helping to drag congress lower from a low base. The only group widely trusted now is the armed forces. There seems to be almost no scrutiny of the military in the US, just thoughtless adulation. Their public relations people have done a great job.

Here is a thought. What tends to happen in countries where no one is trusted except the military? The answer is obvious – military coups. The way things are going, that is not a possibility to discount just now. A lot of the public would actually support a coup. In a minor way, it has already happened, because most of the power in the white house now resides with military veterans.

Noting the survey, The Economist focused on a different institution where trust had diminished, that of corporations. Seemingly, there has been something of a collapse of trust in corporate America. Having lived here for five years, I am amazed that there was any trust to start with.

Look at the most egregious scandals of the last fifty years and corporate America’s fingerprints are all over them. We should start with the tobacco industry, now known to have covered up and manipulated evidence about the toxicity of its product over a generation. Surely this scandal could never be repeated? Actually, it has already, by the sugary drinks industry. The playbook has been almost identical, and the outcome rather similar as well.

One clue came in a profile I once read of a senator from Georgia whose name I don’t remember. The profile made play of a fridge in the office of this lawmaker, which was bursting with Coke, duly offered to all visitors as a sign of friendship. We can only surmise what benefits the Coca Cola Company has received in return for its modest generosity.

This is how things work in the US. One area where Trump is absolutely right is his plea to “drain the swamp” in Washington. Sadly, almost all his actions so far have had the opposite effect.

Chief among the generally detrimental acts has been the way the administration has attacked regulation. It is true that excessive regulation hampers consumers and can also add government costs and create barriers to entry, but the purpose of most regulation is to protect consumers, and it is that type of regulation that is being swept away. This has been most obvious in the energy sector so far, but there will be plenty more to come in the finance sector.

The three biggest contributors to the swamp are lobbyists for energy, finance and health, and it is no surprise that the first two of these are leading the assault on regulation. The third one, health, is the real reason why health care reform is so elusive. The parties argue about how to allocate costs – essentially between richer and poorer people – but the true scandal is the total cost of the system. No matter how it is allocated, Americans will receive a raw deal. And the high costs are basically a result of the equivalent of those Coke fridges stuffed into the offices of congress, supplied instead by health care providers. They make sure that the high costs remain built in.

I have not finished with scandals. Shkreli with his drug prices was just the one who went further and got caught. Wells Fargo with their phantom accounts and default unnecessary products is the same story. You can add the companies supplying water to Flint, or lobbying to build yet more homes on flood plains in Houston, or to reduce building code requirements against fire – in London for Grenfell Towers or the US. A common theme is companies acting to the edge of regulations that they have worked to minimize.

I worked in an energy corporation for 28 years, during which we had our share of scandals such as Nigerian exploitation and South African tacit support for apartheid. I was occasionally embarrassed about where Shell ended up in an argument, but nearly all the time I could see how reasonable trade offs led to that position, and I could trust my fellow employees. This changed with Phil Watts and the reserves inflation scandal – the first time that personal incentives and stock market pressure pushed someone over a line.

The 1990’s saw all these factors come into play. Executive play ballooned. Pension fund calculations led to minimal growth expectations of 6% real for everything, a clearly unsustainable level. And politics was taken over by capital at the expense of labour, and, I would argue, of citizens. That Georgia senator is more beholden to his donors that his voters, and that leads to trouble.

If I were to advise US political thinkers, especially on the left, I would advocate putting the citizen at the centre of their platform. This is hardly a radical idea, but it would represent a clear departure from where things lie today, even for Democrats, who have their own corporate buddies such as accident chasing lawyers and protectionist trade unions.

A citizen first program could be distinctive. It could be effective too – look at how the risk of customer defection led companies to renounce Trump’s white supremacist tendencies and earlier LGBT discrimination. The people have power, if we remember how to use it.

One simple example of a citizen led policy would be to legislate that an advertised price for any good or service represented the final payable price. Wow, what a revolutionary idea! Most countries have this already, but I was shocked when I first visited the US and was asked to pay $10.80 for something priced at $9.99 – because of taxes. The label should read $10.80! And if I order a theatre ticket online listed at $59, then $59 is what I should pay, not $89 including nebulous fees.

For corporate policy, the key theme for my party would be to promote competition. Competition drives innovation and service and better deals for citizens. In most US sectors, competition has declined, due primarily to lobbying for a skewed playing field by incumbents. Peter Thiel gave it away in Zero to One – any smart entrepreneur these days is only interested in pursuing a business that can become a monopoly. Monopolies feed themselves not their customers. Policy should minimise monopolies. That is also why trade is generally a good thing, since it generates competition and better deals for consumers.

The stock market has risen because policy – enacted and intended – is giving yet more power to corporations at the expense of citizens and further expanding inequality. Jobs, they cry! That is the excuse for every removal of regulation or reduction of worker influence or curtailment of trade and competition. Instead, start with the citizen and competition and jobs will follow. They will be good jobs too.

Obama sort of had this idea when he argued that all his policy decisions were made with the criterion of what it would do for the middle class. But I don’t think he articulated this clearly enough nor pursued the logic far enough. Some groups of white citizens in unstable jobs certainly did not feel he delivered for them. Democrats are looking for a distinctive theme, and for sure Bannon is right when he notes that focusing on minority rights and historical injustices will not resonate. So let us instead start with citizens, all citizens, and see where it leads.