Who Really is Ruining Capitalism?

I believe it was the great writer and critic H.L. Mencken who said he would gladly embrace Christianity if it weren't for all of the Christians.

In a similar spirit, Auburn University history professor Wayne Flynt makes a compelling argument that no one harms modern capitalism like capitalists.

Flynt, in an op-ed piece titled "The Capitalists Threaten Capitalism," argues that the history that led to the Great Depression in the 1930s almost repeated itself in the eight-year reign of George W. Bush.

Flynt focuses on Duncan U. Fletcher, a U.S. senator from Florida who led the effort to reshape the country's banking system not long after Franklin Roosevelt became president in 1933.

One of Fletcher's first acts was to hire Ferdinand Pecora as chief counsel of the Banking Committee and instruct him to conduct a wide-ranging investigation of private banks and investment houses.

Pecora's two-year probe produced findings that laid bare the corruption that was rampant in the U.S. banking system. Fletcher was so appalled that he hauled some of the nation's barons of finance, including J.P. Morgan and John J. Raskob, before his committee. Writes Flynt:

Their testimony infuriated ordinary citizens. J.P. Morgan, reputedly the richest man in America, paid no income taxes from 1930 until 1933. To avoid taxes, financiers sold stock to near relatives at low prices, declared a loss on their income taxes, then repurchased it at the sale price. Banks and investment houses cultivated unsavory relations with cooperative politicians. Only personal friends of Morgan, most of them officials of the Republican Party and the U.S. Chamber of Commerce, were allowed to invest in his investment banks.

Notice the reference to the Republican Party and the U.S. Chamber of Commerce in the sleaze that caused massive financial woe. Does that sound familiar? It does to Flynt:

Fast-forward to 2008, when the prevailing business structure included derivatives, subprime mortgages, bundling, Ponzi schemes and golden parachutes for failing CEOs. As Americans are gradually learning more and more about such practices, their reactions are not much different from public response to the Pecora investigation, though the names are different: Jeff Skilling of Enron; Richard Scrushy and a succession of CFOs at HealthSouth; Bernard Madoff, former chair of NASDAQ and accused swindler of perhaps $50 billion; Christopher Cox, chairman of the U.S. Securities and Exchange Commission who admits the SEC ignored complaints about Madoff for a decade and did not provide vigorous oversight or aggressive enforcement of regulations; various CEOs who dismissed workers while drawing huge salaries and bonuses even as their corporations lost money.

Such chicanery, Flynt says, helps explain the November 2008 election results. And it presents a lesson that Americans should heed:

Of course, few put any faith in the now-failed policies of socialism that became fashionable in the 1930s. But the past few years have furnished us a useful education in the excesses of capitalism as well: its greed, avarice, hubris, overstretching, manipulation of credit, insider-trading, wire-pulling, politician-buying and influence-peddling. As a famous balladeer sang during the 1930s, some people rob you with a gun, and some with a fountain pen (make that a computer these days).

Wayne Flynt is a true Alabama treasure. You might not equate Alabama with world-class social science, but Flynt belongs in any discussion about the nation's foremost historians. He is perhaps best known for his book Poor But Proud: Alabama's Poor Whites, which received the Lillian Smith Award.

Flynt's most recent op-ed piece leaves us with this question: Will Americans finally understand who truly threatens their way of life? The rise of one of the most insipid characters in American political history might not be a good sign. But Flynt remains ever hopeful:

Perhaps Joe the Plumber was worrying about the wrong problem during the campaign. When pondering the future of capitalism, Joe probably has less to fear from the alleged radicalism, socialism and liberalism of Barack Obama than he does from the avaricious predators who directed America's economy for the past few decades.