Article 43
Sunday, September 30, 2007
The Soul Of Capitalism
Bill Moyers Journal
September 28, 2007
BILL MOYERS: Welcome to the JOURNAL.
Every week we hear of another publicly traded company being bought by a private equity firm. Some of those investment firms like Blackstone, the CARLYLE GROUP, and Cerebrus - have become almost as well known as the brand-name companies they’ve been snapping up, from Chrysler to Dunkin’ Donuts to Toys R Us. But private equity firms have no real interest in toys, cars, or baked goods. What they are after is big and quick returns on their capital. To get it, they buy a company and cut the wages, pensions and health benefits of the employees who work there.
TAKE A LOOK AT THIS front page story in Sunday’s NEW YORK TIMES for a glimpse of how this kind of capitalism works. Thousands of nursing homes have been bought up by private equity firms like Warburg Pincus and Carlyle. Profits were increased by reducing costs, then investors quickly resold the facilities for a big profit leaving and I quote - “residents at those nursing homes worse off, on average, than they were under previous owners.”
Exhibit #1: Habana Health Care Center in Tampa, Florida, purchased by a group of private equity firms in 2002. “Within months, the number of clinical registered nurses at the home was half of what it had been a year earlier...budgets for nursing supplies, resident activities and other services also fell...” “When regulators visited, they found malfunctioning fire doors, unhygienic kitchens, and a resident using a leg brace that was broken...”
Basing its report on state government data, the TIMES says 15 at Habana died from what their families contend was negligent care. But when families sue, they often can’t find out even who owns the nursing homes because of the complex corporate structures private equity firms have created to cover their tracks.
It’s this kind of capitalism that drives John Bogle up the wall, as you’re about to learn. John Bogle believes owners should be in charge and accountable. He’s known and respected world-wide as the father of index funds and the founder of The Vanguard Group, one of the largest mutual funds anywhere, with over a trillion dollars in assets.
FORTUNE magazine named him one of the four giants of the 20th century in the investment industry. TIME magazine called him one of the world’s 100 most powerful and influential people. Among his six books is this one THE BATTLE FOR THE SOUL OF CAPITALISM and more recently THE LITTLE BOOK OF COMMON SENSE INVESTING. In the current issue of DAEDALUS, the Journal of the American Academy of Arts and Sciences, he has a blockbuster of an essay on democracy in corporate America. You’ll find it on our WEB SITE. I talked with John Bogle when he was in town earlier this week.
BILL MOYERS: Thanks for joining me.
JOHN BOGLE: My pleasure.
BILL MOYERS: This story in THE NEW YORK TIMES this week. What do you think when you read a story like that?
JOHN BOGLE: Well, first, it’s a national disgrace. Simply put. And there are some things that must be entrusted to government and some things that must be entrusted to private enterprise. And what we see there, at least in my judgment, is that we’ve taken medical care, healthcare and going from making it a profession in which the patient is the object of the game ח preserving the patient “first do no harm” as Hippocrates would say or would have said and turn that into a business. And so, it’s a bottom line. I’ve often said we’re in a bottom line society. We’re measuring the wrong bottom line.
BILL MOYERS:What does it say to you that the real owners of the nursing home, the private investors have created this maze of smoke and mirrors that make it virtually impossible to find out who the owners really are?
JOHN BOGLE:Well, that’s so typical of much that’s going on in American finance, the way we structure these financial instruments, which are stock certificates or debt instruments. But it’s the same thing of the removal of your friendly, local neighborhood bank holding the mortgage and being able to work with you when you fall on hard times to some unnamed, often unknown, financial institution who couldn’t care less.
BILL MOYERS:These private equity firms that own these nursing homes wouldn’t even talk to THE NEW YORK TIMES. They won’t talk to reporters. I mean, there’s no accountability to the public.
JOHN BOGLE: There’s no accountability. And it’s wrong. It’s fundamentally a blight on our society.
BILL MOYERS:What does it say that big private money can operate so secretly, with so little accountability, that the people who are hurt by it, the residents in the nursing home have no recourse?
JOHN BOGLE:It says something VERY BAD ABOUT AMERICAN SOCIETY. And you wonder the first question anybody would have after reading the article - HOW IN GOD’S NAME do they GET AWAY WITH THAT? Well, we have all these attorneys that are capable of devising complex instruments, and money managers who are capable of devising highly complex financial schemes. And there’s kind of no one to answer to the call of duty at the end of it.
BILL MOYERS: And we’re talking about some of the most powerful names in the business. I mean, these are formidable forces, right?
JOHN BOGLE: They’re formidable forces. But, I’m afraid--
BILL MOYERS: Respectable citizens, right?
JOHN BOGLE: Well, I mean, I don’t know about that. But, it’s certainly - it’s easy to say that greed is taking playing a part - greed has a role in a capitalistic society. But, not the dominant role and--
BILL MOYERS: What should be the dominant? What is the job of capitalism?
JOHN BOGLE:Well, ultimately, the job of capitalism is to serve the consumer. Serve the citizenry. You’re allowed to make a profit for that. But, you’ve got to provide good products and services at fair prices. And that’s the long term, that’s what businesses do in the long term. The businesses that have endured in America have done that and done that successfully.
But, in the short term, there’s all these financial machinations in which people can get very rich in a very short period of time by creating highly complex financial instruments, providing services that can be cut back easily as in the hospital article, not measuring up to basically their duty.
We all know that in professions, the idea has been service to the client before service to self. That’s what a profession is. That’s what medicine was. That’s what accountancy was. That’s what attorneys used to be. That’s what trusteeship used to be inside the mutual fund industry. But, we’ve moved from that to a big capital accumulation self interest - creating wealth for the providers of these services when the providers of these services are in fact subtracting value from society. So, it doesn’t work.
BILL MOYERS:So, the private equity nursing homes have added to their wealth. But, they’ve subtracted from society the care for people who need it.
JOHN BOGLE: That is exactly correct. Not good.
BILL MOYERS:THE WALL STREET JOURNAL editorial page celebrates what it called the animal spirits of business. And as if that’s the heart of capitalism. What do you think about that?
JOHN BOGLE:Well, I like the animal spirits of business. I mean Lord Keynes told us about animal spirits. And it comes out of a part of his work that says, “You know, all the precise numbers and the perspectives mean nothing. What determines the future of a business is its animal spirits.” You know, the desire for progress, the desire to create something new. That’s all good. But, it’s gotten misshapen. Badly--
BILL MOYERS: How so?
JOHN BOGLE: --misshapen.
BILL MOYERS: How so?
JOHN BOGLE: Well, it’s gotten misshapen because the financial side of the economy is dominating the productive side of the economy
BILL MOYERS: What do you mean?
JOHN BOGLE: Well, let me say it very simply. The rewards of the growth in our economy comes from corporate, largely - from corporations who are a very important measure, from corporations that are providing goods and services at a fair price innovating and bringing in new technology providing a higher quality of life for our society and they make money doing it. I mean, and the returns in business in the long run are 100 percent the dividends a corporation pays and the rate at which its earnings grow.
That still exists. But, it’s been overwhelmed by a financial economy. The financial economy, which is the way you package all these ways of financing corporations, more and more complex, more and more expensive. The financial sector of our economy is the largest profit-making sector in America. Our financial services companies make more money than our energy companies - no mean profitable business in this day and age. Plus, our healthcare companies. They make almost twice as much as our technology companies, twice as much as our manufacturing companies. We’ve become a financial economy which has overwhelmed the productive economy to the detriment of investors and the detriment ultimately of our society.
BILL MOYERS: By the financial sector, you mean?
JOHN BOGLE:Banks, money managers, insurance companies, certainly annuity providers. They’re all subtracting value from the economy. They have to subtract. To be clear on this now I don’t want to overstate it. To be clear on this, they have to subtract some value. But, the question is--
BILL MOYERS: What do you mean they subtract some value?
JOHN BOGLE:In other words, you’ve go to pay somebody something to provide a service. It’s just gotten totally out of hand. My estimate is that the financial sector takes $560 billion a year out of society. Five hundred and sixty billion.
BILL MOYERS: Where does it go?
JOHN BOGLE:It goes into the pockets of hedge fund managers, mutual fund managers, bankers, insurance companies. Let me give you this just one little example. If you didn’t make a $129 million last year I’m presuming that you didn’t. You don’t rank among the highest paid 25 hedge fund managers. A $129 million doesn’t get you into the upper echelon.
BILL MOYERS: And on the way here this morning, I saw a story that now a $1 billion will not get you in the FORTUNE 400. A $1 billion!
JOHN BOGLE:Well, I spend a lot of time thinking about that. I mean, you kind of asked the question, which I’ve asked in some of my work. What is enough here? And the society is out of control. I mean, in THE BATTLE FOR THE SOUL OF CAPITALISM, I talk about the frightening similarities between the American economy in America, our nation, at the beginning of the 21st century and Rome all those centuries ago around the 4th century.
BILL MOYERS: What are the comparisons?
JOHN BOGLE:We have an idea that we are the world’s value creator and leader. And I’m talking not just about economic value, but, we like to think of America as having the best values of integrity and citizenship in the world. We’re getting a little bit too much self interested. We have our own bread and circuses. And they’re a little different than the bread and circuses they had in Rome. But, we surely have our circuses whether it’s sports teams or casino gambling or the lottery in the states. And we see this not just in our economy, in our financial system. This very short-term focus on everything. You see it, sadly, in our government.
Everybody knows social security is going to run into crisis. We can’t run these federal deficits forever. But, everybody looks out two years and says, “Will I be elected two years from now or a year and a half from now?” And, the short term focus ultimately betrays the very values that we have come to be used to in this great nation of ours.
BILL MOYERS: You said the other day to someone that we think we can fight the war in Iraq without paying for it.
JOHN BOGLE:Well, we borrow the money to fight the Iraq War by some estimates and they’re not absurd estimates is running now towards a $1 trillion. We could be doing what the British empire did. We could be bankrupting ourselves in the long run. And--
BILL MOYERS: You see us as an empire?
JOHN BOGLE:Well, of course it’s an empire. We reach all over the world. We thought of ourselves in many, many respects as the policemen of the world. God knows we know we’re the policemen of the Middle East. And there are those say, even from Alan Greenspan on up or down, that oil is the root of that. I mean, these are great societal questions. Protecting oil, which is in turn polluting the atmosphere.
We have problems as a society. And we don’t have to surrender to them. But, we have to have a little introspection about where we are in America today. We’ve GOT TO THINK THROUGH these things. We’ve got to develop a political system that is not driven by money. I mean, these are societal problems for us that don’t have any easy answers.
But you don’t have to be an economist to know that a great deal of or a minimum in our economy is coming from borrowed money. People are spending at a higher rate than they’re earning, and we’re starting to pay a price for that now. Particularly in the mortgage side. But, eventually, that could easily spread and people won’t be able to do that anymore. You can’t keep spending money you don’t have. It gets a lot of it, you know, and it wasn’t that many years ago ח maybe a couple of generations ago that if you wanted something, you saved for it. And when you completed saving for it, you bought it. Imagine that. And that wasn’t so bad. But, now, we know that we can have the instant gratification and pay for it with interest payments, of course, over time, which is not an unfair way to do it. We’re going to pay a big price for the excessive debt we’ve accumulated in this society both in the public side and the private side.
And it’s no secret that this LACK OF SAVINGS in our economy - just about zero is PUTTING US at the MERCY OF foreign countries. China owns - I don’t know the exact number but, let me say about 25 percent of our federal debt. China does. WHAT HAPPENS when they start to buy our corporations with all those extra dollars they’ve got there? I mean, I think that’s very - these problems are long term, are VERY MUCH WORRISOME and VERY MUCH INTRACTABLE.
BILL MOYERS: Your book is called THE SOUL OF CAPITALISM. Tell me what you mean by the soul of capitalism.
JOHN BOGLE: Well, I try in the book a little definition from Thomas Aquinas about the core of being he’s talking about the human soul, of course but, the core of being, the elements that give you meaning, the values that you have - the whole kind of wrap up of what makes a human being a human being.
And that happens in a much more, you know, a much less PROFOUND WAY IN A CORPORATION. There is in a GOOD CORPORATION and in capitalism a core of being of providing goods and services, at raising the standard living. And it’s done a very good job at that. I don’t want to demean that. You know, we went from the beginning of time, to around 1800, - the way people lived barely changed at all. And since 1800, the Industrial Revolution, and capitalism around that time has taken us to standards of living that are just that would have been UNIMAGINABLE to ANYBODY OF THAT DAY. We have all the perquisites and ease and freedom and safety of modern life. And so I salute capitalism for doing that. It’s just we’ve taken it too far. TODAY’S CAPITALISTS are different from yesterday’s capitalists.
BILL MOYERS: How so? What’s the big difference?
JOHN BOGLE:Well, I think much more they’re operating on their own. Instead of for the interest of whose money has been entrusted to them. It’s an element ח it’s what we call a bottom-line society, again. But I think it’s the wrong bottom line. I want to come back to the difference between the financial system and the productive system. The productive system adds to the value of our economy. And, by and large, the financial system subtracts. And, yet, it’s growing and growing and growing. And this short term thing where short term orientation in which trading pieces of paper is regarded as a social value. It is not a social value. Some of it has to happen, don’t mistake me.
BILL MOYERS: Right.
JOHN BOGLE: But not as much as we have.
BILL MOYERS: What does it say to you that people seem so indifferent to the fact that one tenth of one percent of the population owns most of the wealth in this country?
JOHN BOGLE:Well, in the long run, I believe it’s unsustainable. You know, this is not going to be, you know, a country like France, say, at the time of before the French Revolution. You know, the lords of France, the kings had probably the same kind of distribution of wealth we had today come by through long generations. Their own castles. We have those castles in America now. But it says to me that, in this society, it’s not sustainable. There will be an outcry.
Even Allen Greenspan says in his book he’s worried, new book-- he’s worried about this division in the society. He’s worried about dissatisfaction. He’s worried about violence in our society. You can only have so much of an advantage to those at the top of the pyramid, and so much disadvantage that’s at the bottom of the pyramid, before you start to get some very difficult things going on.
BILL MOYERS: This seems to me to be your great concern, that this self correcting faculty that is built into both democracy and capitalism is in jeopardy?
JOHN BOGLE:Actually, I think it’s fair to say it’s in jeopardy. But there’s one sense that it’s not in jeopardy. And that is, ultimately, the system will correct. The bigger the boom, I fear, the bigger the bust. In other words, you pay the price. It’s not a self sustaining system at this kind of a level.
BILL MOYERS: Do we need new rules?
JOHN BOGLE: One thing is, I believe, to have a federal standard of fiduciary duty for money managers. They’ve come from eight percent ownership of American business to 74 percent ownership of American business. It’s staggering, over unbelievable change. Without any rules as to how they’re supposed to behave. We have state laws of proven investing and fiduciary duty and things of that nature. But they don’t seem to be working. And our founding fathers actually thought about having a federal statute-- a federal corporate chartering statute. I think we probably need one because if some of the states step up and say improve their governance provisions, corporations will move to another state. So the state system I don’t think can prevail.
So a federal standard of fiduciary duty which demands that our pension trustees and our mutual fund directors make sure that those pension funds and mutual funds are operated in the prime interest of those who have entrusted their money to them. And that includes responsibility for corporate governance. And it will ultimately turn to be focused more on long term investing.
When I came into this business in the 1950’s, it was a BUSINESS FOCUSED on the wisdom of long term investing. We changed in that period to a business that is focused on the FOLLY OF SHORT TERM speculation. And think about this for a minute. If you’re a true investor holding a company for the long term, you’re well aware that the value in that company is company’s earnings compounded over time, developing new products and services, developing efficiencies-- trying to size up the proper corporate strategy, you know, making the company more valuable. But, in the folly of short term speculation, you’re just thinking will that stock be worth more or less six months from now or a year from now?
Give you a very specific example. In the first 15 years I was in this business, the average mutual fund held the average stock for seven years. Call that long term investing. Now, the average mutual fund holds the average stock for one year. That’s short term speculation. So, if you’re a speculator, you don’t care much about ownership interest. You don’t care so much about corporate governance. Why vote a proxy, for example, if you’ll not even be holding a stock in three months?
The other part of it is,and this is really makes it a very difficult problem to solve. And that is a little about of I guess it’s Pogo - we have met the enemy and they are us. These mutual fund companies-- these management companies are now owned largely by corporate America. Or international corporations Deutsche Bank - AXA, big international companies who have bought their way into the US financial system, which is don’t mean to demean that. But, they own these public corporations - giant public corporations like insurance companies, big banks - foreign insurance companies and banks own 41 of the 50 largest mutual fund managers.
Now, what is the job of a corporation when they buy into a mutual fund management company? It’s to earn a return on the capital they invest in that company. It’s not to earn a return on the capital of the investors who invested with that mutual fund. Now, in fairness, they want to earn as much money as they can for the fund shareholders. But, not at their own expense.
What we’ve done is have you know, what I call in the book, a pathological mutation of capitalism from that old traditional owners’ capitalism to a new form of capitalism, which is manager’s capitalism. The evidence is quite compelling that today corporations are run in a very important way to maximize the returns of its managers at the expense of its stockholders.
BILL MOYERS: Its CEOs.
JOHN BOGLE:Its CEOs, well, the upper level of five or six top officers. And they get enormous amounts of pay for actually doing very little. I’m a businessman. Listen, we all-- we chief executives get an awful lot of credit that we don’t deserve. Real work in companies is done by the people who are getting themselves together and doing the hard work of making companies grow--
BILL MOYERS: And, yet, these--
JOHN BOGLE: every day.
BILL MOYERS: These are the people who most often get laid off, right?
JOHN BOGLE:They get laid off. And, of course, the ironic part of that is they often get laid off used to be called downsizing. But, of course, in today’s America, it’s called right sizing. They get laid off. That reduces expenses. That increases earnings and that means the CEO gets more.
Just think about the country for a minute. For an agricultural economy, 95 percent, 98 percent agricultural when this country came into existence. And even by 1850, half agricultural. Now it’s about, they moved from agricultural economy, to a manufacturing economy, to a service economy. And now to a financial service economy. And the financial service economy is what troubles me. Because it’s diverting resources from the investors to the capitalists. To the entrepreneurs. To Wall Street. To the investment bankers. The hedge fund managers. To mutual fund managers. And that is a negative to our societal values.
Where agriculture and manufacturing and services, I mean, I’m perfectly willing to give a high value, for example, to art and poetry and literature. They add value to society. It may not be easy to measure it in a society that measures too much of what’s not important. And not enough of what is important. As the sign in Einstein’s office says - “There are some things that count that can’t be counted. And some things that can be counted that don’t count.”
BILL MOYERS: John Bogle, thank you for joining me.
JOHN BOGLE: My pleasure.
Credit: Eduardo Felix
Section Dying America •
View (0) comment(s) or add a new one •
Printable view • Link to this article •
Home •
AT&T Wins Treasury Networx Contract
How much do you want to bet AT&T - PUPPETS OF BIG CORPORATE INTERESTS and of SECRET US GOVERNMENT WIRETAPPING - get a lot more US government contracts in the future?
---
AT&T Wins Treasury Networx Contract
By Corey Boles, Associated Press
Government Executive
September 25, 2007
AT&T Inc. said Monday it has won the first contract in a radical overhaul of the U.S. government’s telecommunications infrastructure in a deal that could ultimately be worth $1 billion to the phone giant.
The company has been appointed by the U.S. Treasury, one of the largest government departments, to build a new Internet-protocol-enabled telecommunications network.
The contract is worth an initial $270 million to build the IP platform, but if the Treasury requests additional services, such remote access for its staff and IP-enabled telephone service, that price tag could rise.
AT&T provides some service to the Internal Revenue Service, but now it will be responsible for linking up all 12 agencies that sit under the auspices of the Treasury Department.
The contract is part of the NETWORX Universal contract, which could be worth up to $20 billion to the three participants in the bidding. In addition to AT&T, Qwest Communications International Inc. and Verizon Communications Inc. were awarded the right to bid for contracts.
Sprint Nextel Corp. missed out, a blow for the company, which had been a major provider of telecommunications services to the federal government. It later was included on a short list for a smaller infrastructure upgrade program.
The companies previously said they expected contracts to start being awarded by federal government departments in the fourth quarter, but the Department for Homeland Security is the only major department to announce it is receiving bids.
Shares of AT&T slipped 26 cents to close at $42.27 Monday.
Section News •
View (0) comment(s) or add a new one •
Printable view • Link to this article •
Home •
AT&T Doesn’t Have To Care
When is the Internet not the Internet? When your ISP can’t be bothered to see to it that your e-mail traffic gets through, answers one reader, speaking about the company formerly known as SBC and now calling itself AT&T.
By Ed Foster
Gripeline
September 27, 2007
“Is it my imagination or is the U.S. infrastructure imploding?” the reader writes. “Recently on several occasions I have not been able to reach customers on the Internet—people that I am in touch with every day or several times a week. In the first case, I called my ISP, AT&T, to ask what the problem was. They investigated my line. They investigated my router. They investigated my computer and declared ‘no problem.’ But I continued to insist that there was a problem. Finally, I downloaded a 30-day free route tracer and tracked down the culprit.”
The problem wasn’t exactly AT&T’s fault “It was a router on a leg not owned by AT&T but by another backbone owner,” the reader writes. “It had a 15-second transmission lag. No, not a good 15-ms transmission lag - a 15 second read lifetime transmission lag. All my efforts were timing out. My helpful ISP said ‘See no problem. It is their problem. We are asking them to fix it.’ And eventually it was fixed or it evolved or something.”
Then just recently the reader again had a problem. “Once again I called my foreign technical helpers at AT&T,” the reader writes. “They investigated my line. They investigated my router. They investigated my computer and told me ‘We cannot figure out why your computer has this problem.’ I told them that they must have a router issue. The DNS was resolving correctly but my pings were timing out. So they put me on hold to investigate. Sure as the day arrives, they returned and told me that router FTWOCXAR was down and would be back up in about three hours. I asked why I was not being routed around the down router. No answer. I pointed out that the router above that router must be misprogrammed because it was not rerouting traffic - just sending it to the down node. No answer. When I asked who I could take these concerns to get them addressed, they told me they were making a note of it. Thank you. Have a nice day.”
“I have realized something,” the reader concludes. “We have a plan. We have implementers. But we have no overseer to make sure that the implementers actually do their job correctly. When they do not, that is when the Internet is not the Internet.”
At least in terms of buying up the baby bells, the company formerly known as SBC has gone a fairly long way to stitching the old AT&T back together again. And maybe they’re also getting a bit of that monopolist’s swagger back. As Lily Tomlin’s Ernestine character used to say, “We don’t have to care—we’re the phone company.”
If a monopolist or would-be monopolist is ruining your day, tell us about it by posting your comments on my website or by writing me at Foster at gripe2ed.com.
Section Dying America •
View (0) comment(s) or add a new one •
Printable view • Link to this article •
Home •
Saturday, September 29, 2007
Democracy Hollowed Out Part 17
The internet is the greatest thing for freedom of speech. AT&Ts TOS strikes at the heart of the public’s concerns over the power that corporations have when it comes to determining what the public sees and hears through communications media.
New AT&T Terms Of Service: We’ll Cut Off Your Internet Connection For Criticizing Us
By Cory Doctorow
Boing Boing
September 29, 2007
AT&T has brought down new TERMS OF SERVICE for its network customers. From now on, AT&T can terminate your connection for conduct that “tends to damage the name or reputation of AT&T, or its parents, affiliates and subsidiaries.”
So AT&T customers aren’t allowed to write/podcast/vlog critical things about AT&T, its BILLING PRACTICES, or its cooperation with illegal NSA wiretapping, on pain of having their connections disconnected.
5.1 Suspension/Termination. Your Service may be suspended or terminated if your payment is past due and such condition continues un-remedied for thirty (30) days. In addition, AT&T may immediately terminate or suspend all or a portion of your Service, any Member ID, electronic mail address, IP address, Universal Resource Locator or domain name used by you, without notice, for conduct that AT&T believes (a) violates the Acceptable Use Policy; (b) constitutes a violation of any law, regulation or tariff (including, without limitation, copyright and intellectual property laws) or a violation of these TOS, or any applicable policies or guidelines, or (c) tends to damage the name or reputation of AT&T, or its parents, affiliates and subsidiaries. Termination or suspension by AT&T of Service also constitutes termination or suspension (as applicable) of your license to use any Software. AT&T may also terminate or suspend your Service if you provide false or inaccurate information that is required for the provision of Service or is necessary to allow AT&T to bill you for Service.
Democracy Hollowed Out
PART 1 - PART 2 - PART 3 - PART 4 - PART 5
PART 6 - PART 7 - PART 8 - PART 9 - PART 10
PART 11 - PART 12 - PART 13 - PART 14 - PART 15
PART 16 - PART 17 - PART 18
Section Privacy And Rights •
View (0) comment(s) or add a new one •
Printable view • Link to this article •
Home •
Why Lead In Toy Paint?
The flow of dangerous products from China is not a surprise, nor is it the fault of the Chinese system. It is the inevitable result of a corporate globalization system that mistakes low prices for low cost. Someone always pays.
Why Lead In Toy Paint? Its Cheaper.
The New York Times,
September 11, 2007
Mothers and fathers all across the country have been recoiling in horror at the news that some Chinese-made toys theyve been buying for their little ones contain lead paint. These are not cheapie toys, either Җ they bear such labels as Mattel and Disney, and theyre sold in Toys ғR Us, Wal-Mart, and other mainline stores. Why in the world would these corporations allow lead paint on products for children?
Can you say: Profits?
For years, U.S. companies have rushed to China to get the toys they sell to us, because in China, labor is dirt cheap, environmental rules are ignored, and product safety regulations are not enforced. In other words, by taking shortcuts on the manufacturing of toys, the corporations get the products on the cheap, yet still sell them at relatively high prices to us Ԗ thats a shortcut to big profits.
In fact, this is the Wal-Mart model that has been hailed as the Glorious Global Model Җ go to China for your products and constantly pressure suppliers there to keep cutting costs no matter what the ultimate cost. The mantra of globalization is cheap-cheap-cheap. And lead paint is far cheaper than unleaded. Never mind that lead is toxic, especially for small children Ŗ it is linked to mental retardation and behavioral problems.
Do you really think that Wal-Mart, Mattel, and the rest dont know this? Of course they do. Do you think they were innocents, totally unaware of what their Chinese suppliers have been using for paint? The best you can say about them is that the profiteers didnҒt care enough to ask, didnt care enough to test. Just get the product cheap, thatҒs all that matters.
Section General Reading •
View (0) comment(s) or add a new one •
Printable view • Link to this article •
Home •
