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FIGHTING WASTE AND EXCESS IN THE
PRIVATE SECTOR
Herschel Hardin Leadership Campaign
Policy Circular 7 • July 11, 1995 |
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Contrary to conventional wisdom, the most extravagant waste and unproductive bureaucracy in our economy are in the corporate private sector. This is structural waste, built into the way this sector does things. Its abuses are striking, especially when set against the productive and useful work being done in the much maligned public sector. Atop this waste is as intrusive, sprawling, and self indulgent a bureaucratic order as ever existed. This is what I call the New Bureaucracy large, ever growing, and unchecked a phenomenon of our times.
We should make a point, as a society, of eliminating this waste and creating a leaner private sector in the process. The waste begins in the corporate executive suite, with its extravagant CEO salaries and bonuses, and self serving devices like "golden parachutes." (Those luxury boxes in the SkyDome and in other sports palaces are just the most ostentatious display of this self indulgence.) Other bureaucratic devices come into play, like expensive lobby organizations, mass media institutional advertising, and political contributions, to protect and enhance the corporate bureaucracy's advantages.
Extravagant CEO compensation is particularly objectionable. It symbolizes the increasing compensation difference between those at the top of corporate bureaucracies and wage earners in the same firms. This in turn exemplifies the growing gap between rich and poor. The "corpocracy" is a natural target for democratic socialists who are trying to establish a more egalitarian society.
Takeover games and other shuffling of papers assets "mergers and acquisitions" is another branch of this bureaucracy, one that has mushroomed in the last decade. Investment dealers, management consultants, commercial banks, institutional investors, lawyers, and accountants all are involved.
Stock markets are a full fledged bureaucratic world, moving shares back and forth in an endless churning by speculators and institutional investors. They sustain an entire infrastructure in turn, from stock brokers and analysts to regulators. A turnover of only 15 to 20 per cent per year, if that, is needed to maintain a "liquid market" in stocks. Those were the trading levels on the New York Stock Exchange in the 1950s and 1960s. In the peak year 1987, including trading in futures and options, the turnover of stocks listed on the NYSE exceeded 330 per cent. This difference is unnecessary makework. Activity remains inflated. Stock markets, in fact, have played a limited or negligible role historically in economic development in the West. Their churning should be reduced and they, themselves, as institutions, should be de emphasized in the media and in economic discussion.
Commodity speculation (futures trading), foreign currency trading, interest rate speculation, and the concoction of ever more esoteric financial "products" extend the pattern. There has been much talk recently about short term foreign currency trading and its destabilizing impact, but such trading represents only a small piece of the waste in these kinds of activities.
Closely allied to the stock exchange bureaucracy are institutional investors. Except for the most addicted individual speculators, they are the greatest paper churners of them all. What some of them win for their accounts in this manoeuvring, others lose. Nothing is gained over all except an expansion of their activity.
The unkempt and unchecked growth of advertising and marketing is another part of this private sector waste. Leapfrogging marketing expenditures ultimately cancel each other out, as the contending parties match each other's spending, but the process, by its own momentum, keeps inflating anyway.
Television has brought a sea change to advertising, turning it into an office of propaganda, with a pernicious effect on society and, ultimately, politics. This commercialism has moved into sports and culture as well, with what is euphemestically called "sponsorship." It is even trying to invade schools, libraries, and parks.
These are activities which may be handled efficiently but which in themselves are economically wasteful. They hide behind free enterprise ideology, which is why their waste continues to exist. If committed in the civil service, such excesses would raise screams of horror and indignation. Imagine, for example, if we paid a deputy minister a million dollars a year or more in compensation and then agreed to pay the same compensation to their estate for several years after their death (an occasional practice, known in the corporate sector as a "golden coffin").
One new indulgence for corporate communications is limited edition perfumes, at $120 an ounce, blended especially for one's company. Imagine, again, if that deputy minister ordered up vials of shiveringly expensive, custom blended Essence de Public Works Department. The Reform Party would be shouting its head off. Yet given free enterprise ideological protection, the private sector can so indulge with impunity. The cost, of course, comes out of our economy and hence, ultimately, out of our pockets.
Through tax measures, we can cut back this waste and simultaneously generate revenue. In some cases, like television propaganda, we can eliminate the waste altogether, by doing things in a different way (in this instance, by financing television non commercially). By attacking the hypocrisy of such waste and ostentation, we can help create a society where such practices would no longer be acceptable.
We would at the same time be making an even more important point: that the corporate private sector is not sacrosanct but is a bureaucracy open to abuse. It does some things well, perpetrates waste and excess with other things. By demythologizing the private sector in this way, we, as a society, would be freer to make collective decisions based on practicality and fairness, as between the public and private sectors.
And the bonus: The NDP, which is not captive to free enterprise ideology, would be making point after political point and, in the process, changing Canadian society for the better.
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