Sam Uretsky

The Making of a Conservative

The line is probably from Mignon McLaughlin: “A man becomes a conservative as soon as he has something to conserve.” A lot of people are becoming conservative (new meaning, which equates with “business friendly,” rather than old meaning, which had more to do with fiscal responsibility), out of desperation. It’s one of the many sad consequences of the recession that we may be handing guardianship of the henhouse back to the foxes.

Economic indicators look good. Really good. If President Obama were a Republican, the Texas delegation to Congress would want his face on the $2 bill. Corporate profits are up 8% and retail sales up by around 10%. The Standards & Poor’s index of 500 stocks is up a dramatic 74% compared with the nadir in March 2009, and industrial productivity was up by 6.9% in the fourth quarter of 2009, which implies that an increase in hiring will follow. Arguably, things would be even better, or would have gotten here faster, if the economic stimulus package had been larger, and less had been in the form of tax cuts, but success is success.

In spite of this, a Bloomberg poll indicates that only about 33% of those people who own stocks, bonds and mutual funds believe the value of their portfolio has grown in the past year. Given the size of the gains in the S&P and Dow, these people are either wrong or day traders. 

Logically, the perception must be wrong, but the underlying feeling is probably right. The stock market drop took almost 50% out of retirement plans, and savings accounts that were paying 5% to 6% are now bringing in less that 1%. Those people who knew when to get out of the market and when to get back in are doing well, but more people waited too long to get out, and too long to come back, and are looking at net worths that have been sliced in half, and a future marked by at least austerity and possibly poverty.

And, a lot of people, who should have their savings in FDIC-insured accounts, are being forced into the stock market because there’s no real choice. These are people who rely on interest and dividends for their income, and can’t get by on a high-yield certificate of deposit that pays 0.84% a year. People who can’t afford to take risks are investing in stocks and mutual funds, taking gambles they can’t afford, in order to squeeze a few extra percentage points of income. The stock market, in any of its manifestations, is unsafe. General Electric proved that the best widows-and-orphans stock can’t be trusted. Enron and Lehman Brothers showed that diligent study of balance sheets is no protection against creative (but legal) accounting. 

Everybody knows, or should know, that stock ownership is a fraud. In theory, you own a minuscule portion or a huge corporation — in practice, you’ve put a $2 pari-mutuel bet on the third race. You don’t get to use the company jet for your vacations, or the company apartment when you want to see a Broadway show. If you really owned the company, you would at least get a discount on company products, and decide how much to pay your employees. In practice, major corporations are run for the benefit of the management, and the nominal owners are going along with it. In spite of public outrage about the size of corporate bonuses and CEO salaries, there hasn’t been a meaningful stockholder revolt. Shareholder proposals for things like say-on-pay (letting the shareholders express an opinion on whether the CEO is really worth the money they’re being paid) or asking for reports on the environmental are routinely voted down. Proxy materials with a proposal for say-on-pay are usually accompanied by a note from management saying that the Compensation Committee is doing a careful job making sure the salaries are appropriate to recruit and retain the best people, and having the owners give their opinions would hurt the morale of the CEO and CFO. Corporate management doesn’t want to report on its political activities or environmental activities, and people who use hemp shopping bags and wear sweaters indoors all winter are asked to write to their congressmen opposing the latest EPA regulations. According to the Web site CorpGov.net, one CEO sent a letter to shareholders saying that giving shareowners an advisory vote on his paycheck could put the company “at a serious competitive disadvantage and could erode the value of your investment.”

And the small shareholders go along with this stuff, because when you have to get by on savings and Social Security, that quarterly 5% looks awfully good compared to the 0.05% you can get from Wells Fargo High Yield Savings. 

Translation: Conservatives are bought, not made.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.

From The Progressive Populist, May 15, 2010