Backtrack: Bubble capitalism – 2002 vs. 2011


Backtrack pulls stories from the archives of our predecessor, media.toolbox, which published media and advertising commentary between 1998 and 2008.

The question then: Bubble capitalism. Enron, WorldCom, auditors, faith in business leaders and stock market analysts, all just went pop. We wondered then if the damage could be repaired.

The question now: The credit crunch, the Global Financial Crisis, the Great Recession. We are still feeling the effects of the massive housing bubble and mortgage crisis in the US and Europe that lead to a massive global (tax payers) bail-out of the world’s financial institutions. Once again it’s clear big (financial) business had pulled a fast one on investors and consumers.

The story: When fairness suffers

Date published: 01|10|2002

Analysing the failings of leadership in the year big business became big scandal has become a national pastime in the US. The Washington Post quotes Felix G. Rohatyn, a governor of the New York Stock Exchange in the 1970s, who writes: “I do not recall a period of more generalised gloom in the financial community than the one we are going through now. The crisis of the New York Stock Exchange in the 1970s comes closest.”

great depressionWhile all the elements of the 1970s crisis are present today like shaky capital structures, the Israeli-Arab concern and a lengthy bear market, Rohatyn believes today it has more to do with the “financial integrity of the entire American business community that is suspect, together with its surrounding support system: its boards of directors, its accountants, its investment bankers, its lawyers and the media.”

Rohatyn declares that the most important economic issue facing his country today is the issue of fairness. Fairness is basic to moral leadership, something US business and government have long claimed to have on their side. “The outrageous compensation packages of many corporate managers and the symbols of abuse created by the Enrons, the WorldComs, the Tycos and the Global Crossings have shaken the faith of many Americans in the fairness of our system, and convinced our overseas critics that American-style capitalism and globalisation work hand in hand exploiting the less fortunate.”

A spate of corporate scandals both in the US and here at home have caused a crisis in investor and consumer trust in business leaders. Are CEOs simply convenient villains or is this a real crisis in business leadership? Rohatyn sees real crisis in leadership that purports to be moral but is not.

Tony Manning, a leading management consultant, takes issue, saying it’s important to acknowledge that every leader isn’t unethical, devious, or a crook. “A few bad apples have tainted the whole barrel. And for a whole host of reasons, conditions in the last half of the 1990s were ripe for their abuses,” says Manning. The media and the law are coming down hard on the miscreants, according to Manning, and standards of corporate governance are being raised everywhere.

Which is true, except for that leadership requires credibility, which in part stems from fairness, something Rohatyn equates with moral leadership. Faith, once broken, takes a long time to repair, Rohatyn writes.

Today’s business leaders will take a long time to rebuild credibility and faith lost due to the actions of their rotten counterparts and the financial system and global business environment that supported business excesses in the past.

A new era of corporate responsibility, transparency and fairness is required to restore our faith in the “captains of industry.” How long will it take before the damage will be repaired?

Take out: The support system Rohatyn describes as playing a role in the financial crisis of 2002 remains in place today. The media continuously fails to play a proper investigative role when it comes to the power of business in modern society. Investigative journalism remains focussed on political players, but as the cosy relationship between regulators and oversight and tender committees on one side and business on the other clearly show, money is the cookie crumb trail between one and the other.


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