Earth out of balance: The challenge of controlling corporate greed
When David Rothkopf came to Grist’s hometown of Seattle in 1999, he was a member of President Clinton’s commerce team, here to spread the gospel of free trade at the World Trade Organization (WTO) meeting. You may recall that the delegates didn’t get the warm welcome they might have imagined.
“I remember being at this black tie thing and was talking to Bill Gates … and the Sultan of Brunei walked in,” says Rothkopf, who was clearly impressed with the crowd. “And then a friend of mine walked in and said, ‘Somebody just punched me in the face.’”
Outside, the police had used tear gas to break up nonviolent protests against the WTO, and chaos and riots were spreading through downtown.
When Rothkopf made a return visit this week, we made sure he felt more welcome. (Pretzels! Tap water! The sultan would have felt right at home.) And this time, Rothkopf was singing a tune that might well have gotten him booted from the black tie affairs back in 1999, and put him in solidarity with the people in the streets.
Today, Rothkopf is CEO of both Garten Rothkopf, a global consulting firm that specializes in energy and climate issues, and FP Group, the company that publishes Foreign Policy magazine. He is also a visiting scholar at the Carnegie Endowment for International Peace. In his free time, he writes books, most recently Power, Inc., a sharp rebuke of free markets run amok and a loud call for rebalancing public needs and corporate interests.
The message will no doubt be music to the ears of all the “muppets” out there who have recently had their eyeballs ripped out by Wall Street fat cats.
Rothkopf still looks comfortable in a really nice suit — but at times he sounds weirdly like Noam Chomsky. “Corporations were given rights by people to serve society,” he told us, “and the moment they stop serving society, those rights can and should be revoked.”
What happened to this guy? Here are a few excerpts from our conversation that shed a little light on that question — and on a lot of other things happening in the world today:
On why he’s changed his tune on free markets:
As I watched, particularly during the last 10 years, I saw a bunch of alarms go off … By the indicators that people were using, things were going good: The stock market was going up. Companies were having bigger profits than ever. The problem was that people were suffering. Certain indicators like dropout rates in inner city high schools, our educational performance, the fact that our roads and bridges were falling apart — those things didn’t even show up in the mix.
On corporate power:
We’ve gone too far. Should executives receive incentives? Absolutely. Should a CEO be paid 350 times what the average employee makes? I think that’s a little over the top. Should a bank like Bank of America be allowed to grow to be 16 percent of the U.S. [Gross Domestic Product] and if it were to fail it would cause a catastrophe around the world? If it does, it should have to play by another set of rules.
I’m not against the ability of markets to create jobs or to spur innovation. I just think that when that has been done best, there was a regulator someplace, a government someplace — that there was a recognition that corporations do not exist by some divine right, but are in fact given rights by society to advance social objectives.
On financial reforms:
The question in my mind is, whether we will look back at the last [financial] crisis and determine that the worst thing that happened was not that it was too big, but that it was not big enough — that it didn’t motivate us to actually demand the kind of reforms that we need. [The Dodd–Frank Wall Street Reform and Consumer Protection Act] is the most limp financial reform you could imagine. The government hasn’t even appropriated the funds to enforce it.
We have more too-big-to-fail banks than we did before the crisis. We have more banks engaging in risky behavior and more activity in global derivatives markets than we did before the crisis. We haven’t learned the lesson of the last crisis, and I’m afraid that we will have to have another problem before we address it.
On small government:
I love it when Ron Paul says, “If we get rid of government, freedom will sweep right in.” That’s just not what happens. What happens is that a bunch of elephants stampede in because they’re in a position to take advantage of it. Meanwhile, if you get government out of the way, the people who need government, they don’t have it.
There’s this myth that government doesn’t belong in the marketplace. If that were true, there would be no canals, no railroads, no highways, no internet. The government was a critical partner in many of the biggest innovations in U.S. history.
But if you buy into that for 20 or 30 years, and you say, “smaller government, smaller government programs,” who gets squeezed by that? It’s the cities. And the problem is that, as that happens, it accelerates. Kids drop out of school. Neighborhoods decay. Businesses leave. The tax base goes down. Cops get fired. Teachers get fired. It’s a cycle of pain.
On the similarities between Occupy Wall Street and the Tea Party:
I think they’re all the same thing. They’re different people’s reaction to the same issue — I call it the politics of alienation. All of these groups feel like it’s the 1% benefiting at the expense of the 99%. And can you blame them? Last year was the first year of the recovery. Ninety-three percent of the benefits went to the 1%. Seven percent was spread among everybody else. That’s inequitable. That’s a broken system.
On the root of the problem:
All the politicians want to be No. 1. “America must be No. 1. We cannot let China overtake us.” But No. 1 at what? The biggest army in the world? Fat lot of good that’s gonna do anybody. The biggest economy? Fat lot of good that’s gonna do us. We might want the highest quality of life, the happiest people, the best educated people, free lasagna for everybody — I don’t know what the objective is, but I do know that we’re not having that discussion, and that’s where our problem starts.
On President Obama and the 2012 presidential election:
Obama is a mainstream, establishment candidate. Nobody took more money from Wall Street than him. You don’t see him going out and sticking his neck out on some big wacky policy. Even on health care, he laid back, he let the Congress drive where it was going to go, and he embraced the best deal that he could.
He’s done a very mediocre job. I’m not sure that he will do a better job in the second term. But I am absolutely certain that he will do a better job than the alternative.