On these occasions, corporate or government apologists are quick to jump on the seeming contradiction. The original speaker, whether a demagogue or one who genuinely concerned about the current state of affairs, is quickly dismissed as a conspiracy theorist.
But there is no contradiction, because slowly but surely big business and the government have merged here in the USA and other nations. We should all be familiar with it by now, whether we call it a kleptocracy, crony capitalism, or by some other name.
Crony capitalism works on multiple, interrelated fronts.
First, corporations finance the campaigns of everyone who has a shot of getting elected, giving the most money to incumbents. They also spend billions lobbying those politicians that are in office.
What do they get in return? The laws that are passed are usually favorable for the corporations doing the lobbying, and often the laws are written by the lobbyists themselves. For example, Altria (MO) had its lobbyists distributing summaries of regulations displaying "an intimate knowledge of the bills far in advance of any public notification." Could it be because they drafted or had a lot of input in the drafting of the bills?
Second, there's the revolving door between big business and high ranking positions in the government. It involves someone going back and forth between being an industry executive, attorney, lobbyist, or other agent and either heading an agency that regulates the industry or being an elected representative.
For example, Michael R. Taylor worked for the FDA as an executive assistant to the Commissioner. He left the government to work for a law firm that represented biotech firm Monsanto (MON). There, he established the firm's food and drug law practice. A decade later, Taylor returned to the FDA as Deputy Commissioner for Policy. He then got a promotion, working for the USDA as Administrator of the Food Safety and Inspection Service. Taylor left this post for a short stay at his former law firm before joining Monsanto as Vice President for Public Policy. Taylor is back at the FDA, now Deputy Commissioner for Foods.
Do you think Taylor has any conflicts of interest while he works for the government regulating the very industry that holds his next job? Was it mere coincidence that the policies Taylor worked on for Monsanto became FDA policies?
(Taylor is, of course, one among many in government who works for Monsanto. For example, Craig Stapleton, former US Ambassador to France and the Czech Republic, wanted to punish France for resisting Monsanto's genetically modified seeds.)
So that's the agritech business. How about energy? Here's one example. Steven Chu is the current Secretary of Energy. Before this post, he had founded the Energy Biosciences Institute at Berkeley, funded by a $500 million grant from BP (BP) of Gulf oil spill fame. BP's chief scientist, Steven Koonin, made the grant. Guess where Koonin works now? That's right, the Department of Energy as Chu's undersecretary. Care to wager where both of these gentlemen will work after they leave their government posts? (Speaking of BP, the oil giant has friends in the British Government too.)
Name an industry and a regulatory agency. You'll find that the regulators have worked or will work in the future for the very companies that they regulate. There are thousands of examples of the interconnectedness of government and big business.
Since this post began with banks let's end it there.
The Business Insider, fraudster Henry Blodget's outfit, has a small list of revolving door bankers, going back to 1934. The real list is much bigger.
The following is from Rolling Stone:
Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats. At the Hilton conference, regulators and banker-lawyers rubbed elbows during a series of speeches and panel discussions, away from the rabble. "They were chummier in that environment," says Aguirre, who plunked down $2,200 to attend the conference. [Gary Aguirre was an SEC investigator who got fired for questioning why the agency didn't pursue an insider trading case against John Mack, now chairman of Morgan Stanley.]
Aguirre saw a lot of familiar faces at the conference, for a simple reason: Many of the SEC regulators he had worked with during his failed attempt to investigate John Mack had made a million-dollar pass through the Revolving Door, going to work for the very same firms they used to police. Aguirre didn't see Paul Berger, an associate director of enforcement who had rebuffed his attempts to interview Mack — maybe because Berger was tied up at his lucrative new job at Debevoise & Plimpton, the same law firm that Morgan Stanley employed to intervene in the Mack case. But he did see Mary Jo White, the former U.S. attorney, who was still at Debevoise & Plimpton. He also saw Linda Thomsen, the former SEC director of enforcement who had been so helpful to White. Thomsen had gone on to represent Wall Street as a partner at the prestigious firm of Davis Polk & Wardwell.
Two of the government's top cops were there as well: Preet Bharara, the U.S. attorney for the Southern District of New York, and Robert Khuzami, the SEC's current director of enforcement. Bharara had been recommended for his post by Chuck Schumer, Wall Street's favorite senator. And both he and Khuzami had served with Mary Jo White at the U.S. attorney's office, before Mary Jo went on to become a partner at Debevoise. What's more, when Khuzami had served as general counsel for Deutsche Bank, he had been hired by none other than Dick Walker, who had been enforcement director at the SEC when it slow-rolled the pivotal fraud case against Rite Aid.
"It wasn't just one rotation of the revolving door," says Aguirre. "It just kept spinning. Every single person had rotated in and out of government and private service."
To say that the government owns this or that corporation and to say that this or that corporation owns the government is not a contradiction. It is to say the same thing. Many of the higher ups currently at big business will fill government posts in the future. And many current government workers in positions of power will in the future get corporate jobs in the same industry they're supposed to regulate, and the cycle will continue.
The knee jerk reaction is to say that all these people are evil. I'm inclined to think so, but the whole system is broken and corrupt.* The only incentive, as Mr. Aguirre found out, is to work in the interest of big business to the detriment of everyone else. As far as the system goes, the door revolvers are no more culpable than the poultry workers who mindlessly debeak baby chickens all day. If they won't do it, someone else will.
Disclosure: At the time of writing I might've been guilty of some hypocrisy by owning shares of Altria (MO).
*The system designers were aware of this problem from the start. James Madison, for example, in the Federalist 10 gave a halfhearted argument that while special interests posed a threat they would be so numerous as to cancel each other out.