In his commentary, AIG bonuses follow an American tradition, Julian Zelizer cites long-standing tradition as the real culprit in the AIG bonus scandal. While both parties are trying to paint the other as complicit, Zelizer makes the cogent point that the Fed’s long-standing tradition of avoidance when it comes to the management and profit-making of big business has been the real enabler.
Zelizer wrote: “In many ways, the bonus scandal was utterly predictable and would likely have happened regardless of which party was in power. And if history is a guide, the populist outrage over the bonuses may not fundamentally change the federal government’s relationship to private business. Traditionally, American politicians in times of crisis have resisted aggressive interventions by government into business which would tamper with managerial prerogatives and profits.”
Government is loath to insert itself into cartain factors of business – well, big business at least. While public assistance for the poor comes with more restrictions than you can shake a stick at, and small business assistance the same, big business seems to believe that they have carte blanche with tax-payers money. Public assistance for corporate America is not new – it has been a regular part of the financial landscape for a very long time. We can carry on about entitlement programs as much as we want, but big corporations have operated in their own entitlement system through tax welfare.
Despite Charles Wilson’s declaration as CEO of General Motors that “what is good for General Motors is good for the country”, GM and a host of other corporations fail even the most rudimentary test of good citizenship, payment of taxes. In the 1998 tax year, 44 of the US based top 200 corporations paid well less than the normal 35% rate of tax on profits, and seven – GM, Texaco, Chevron, PepsiCo, Enron, Worldcom and McKesson – paid less than zero after receiving tax rebates. This is significant because, next to employment, taxes are the most basic way in which companies participate in the social infrastructure. Corporations, as dominant cultures, thus have a history of minimizing both employment and financial support of society in relation to earnings.
The real culprit in this debacle is a long-standing attitude about commerce in general that bestows God-like reverance on some pie-in-the-sky hope that business will, out of the goodness of its heart, conduct itself for the good of society as a whole. The only people who should possess this kind of trust in the benevolence of corporations are large volume stockholders – and it is evident that they should start to worry. Self-policing of practices and norms is only effective when the participants operate with an ethic of common-good. As has been proven time and again, once management becomes arrogant all restraint is off.
The bottom line is that a “free market” system is not a free-for-all. It is only effective if the participants remain ethical – refusing to place profit above the common good. When that breaks down, it is incumbent on government to intervene and intervene hard. The focus of government, in this instance, should be in mandating standards of conduct that particular businesses have shown they are incapable of following voluntarily. When government is “of the people, by the people, for the people”, it is required to step into the unenviable territory of legislating protections for the people.
Theologically, the madates for ethical business and government practices found in the scriptures are never aimed at protecting business and business owners – they are always about protecting the people. It seems God knows something about business atht we are, yet, loath to grasp.
 E.D. Hirsch, Jr., Joseph F. Kett, and James Trefil, Editors, The New Dictionary of Cultural Literacy, Third Edition. (Wilmington, MA: Houghton Mifflin Company, 2002)