I loved this poem as a young boy thinking about baseball in a much simpler era. It was post WWII and there were no major television networks. You read about the Majors in the newspapers—the clubs were in the East and the Midwest. Migration was to be many years in the future. The war was over and the newspaper was one’s major source of information. The Cold War had begun, but we didn’t have the troubling doubts about Presidential and Congressional leadership that today race across our phones, tablets and other Internet connected devices.

We got through the harrowing experience of Korea and we began to notice that there were few “mighty “ anymore. Information flowed more readily across the television networks. Government provided information was more carefully parsed. Idols fell more frequently from exposed clay feet. Still, most of America believed what Government told us. Witness the support polls for the Viet Nam war that continued high well into the 1970’s despite the nightly baths of tragedy that streamed over national television. Then came Watergate, the resignation of a corrupted Vice President and finally the first resignation of a President.

Today, we have a surfeit of what passes for news, much of it highly infused with the political opinions of the networks, newscasters and the overabundant ‘talking heads.’ The Web is full of “bots” that convey “information” that incentivized sources wish to provide for what seems to be a still gullible public. And, above all, we have a troubled Presidency, attacked as illegitimate by one side of the aisle and supported on the other by a much-threatened, confused and silenced party.

The massive waves of dissent that redounds across America remind us of our earlier, troubled era of the Viet Nam war and our painful exit. Viet Nam taught us not to believe in what our Government told us, and our agony stretched past the fourteen years of our troop involvement. Revelations about the extent of lying during the war dragged on for at least a decade following our exit. There might have been little joy in Mudville as the war wound down and American forces were withdrawn but our malaise continued well through the 1970’s. The decade was troubled by incendiary politics, slowing growth and inflation and the post mortems of government mendacity during the war. Troubles were not confined to America. South East Asia exhibited horrifying murders and genocide in Laos and Cambodia; the Middle East exploded in another war and the decade’s end was underscored by the cancellation of our participation in the Moscow Olympics over the Soviet’s invasion of Afghanistan and our covert support of the Mujahedin against the Soviets.

There was a seeming respite in the 1980’s and the evident beginnings of a huge technological computer revolution that was gaining ground at every step. Plus, we had a very likeable President who seemed to ‘take it to the enemy,’ with his adamant refusal to kowtow to the Russians; his famous taunt to Gorbachev to tear down the Berlin Wall (which finally fell a year after his Presidency) and his constant stress on the American exception. His term ended with palpable celebrations despite the Iran Contra investigation and the evident cover-up that had cloaked its continuance. The residue of distrust of Government did not subside. It might have been tempered during the Reagan era, but it did not vanish.

Another recession and a shortened Presidency following Reagan ushered in the booming 1990’s, troubled once again by an impeachment proceeding (that failed) and a shocking defeat of Government sponsored health care. Markets boomed, however, and whatever distrust we as a people had developed was often subsumed by a huge stock market rally. It was to some a “unipolar” world with a collapsed former enemy seemingly weakened irretrievably by the fall of the Soviet Communist Party and the liberation of its East European satrapies. China was the new Casey at bat, with its rather unique Chinese Capitalism moving millions of impoverished families into the penumbra of growing wealth. They moved from agriculture to newly built factories. A growing class of wealthy Chinese began to tour the world, replacing the seemingly moribund Japanese of a decade earlier. It all seemed glorious and the US seemed to escape the Asian collapse of 1997 as we sped to the Dot Com world. Even the recession of 2001-2002 didn’t humble us, but 9-11 made us aware that new threats had emerged with asymmetric warfare now ascendant.

The debacles in Iraq affirmed our suspicions that much of the information that Government provided was either wrong or intentionally shaded. While Bush II served two terms, he was widely undermined by a media that seemed to thrive on his malapropisms. The contrast to a well spoken, Harvard educated, social activist infatuated the press, but the Obama era was a watershed for acrimony between the two major parties.

Obama succeeded in passing Medicare, but its terms were unacceptable to the losing party. Obama withdrew forces from both Afghanistan and Iraq only to see Iraq collapse and the rise of ISIS. The divisions in our body politic were widening. Then came the campaign of 2016 from which we have not recovered at all.

Some see Trump’s capture of the Republican nomination as a political fluke while others blame it on a vast conspiracy fomented by Russian computers! His election is incomprehensible to the party that won the popular vote but lost in the Electoral College. They see conspiracy everywhere and our practicing “payback,” at every turn.

Bipartisanship is non-existent even at the water’s edge, despite the long period of foreign policy cooperation that had stretched some 60-odd years through even the early 2000’s. Economic policy is a one party game and immigration policy changes are blocked at every turn. Unless the polls are wrong again as they were in 2016, it seems quite likely that come January 2019, we will have totally divided government and the increased likelihood of rule by executive order. We may see a rancorous attempt at Impeachment. The mists are too thick to see past 2019 into 2020’s Presidential contest, but the level of distrust and disenchantment with Government is surely rising.

Meanwhile, as Government becomes more a story of the regulation derby, it also must mean, “who you know” becomes far more important than “what you know.” Voter disenchantment can only rise. If Trump’s victory lay in his recruitment of those voters who felt increasingly disenfranchised and unheard at senior government levels, what is likely in 2020 and beyond? A split of legislative and executive power may produce a kind of quasi-stability, but it cannot produce joy in Mudville. There will be no “mighty Casey” in our future.

The lamentable state of democratic order in America is hardly confined to our shores. Some 25-odd countries, all of who possess some sort of democratic republic structure seem to be suffering as well from widespread voter disaffection. Prior to Trump’s election, troubles in Australia and Canada produced similar symptomology. Those elections went different “political directions,” (one right, one left) but that is a key to understanding the current dilemma in democratic republics. Next is the Brexit upset and then Greece! Then comes the wide disaffection within the EU, including perhaps the failure in Italy. The rise of right wing anti-immigration parties in Sweden, in Hungary, in Austria and even in France and Germany, play a recurring theme. Dis-affection with Government, mistrust of Government, political fragmentation and consequential rule by executive order are now widespread across the democratic universe.

When the “national interest” becomes fragmented, “special interests” invariably rule by default. In the absence of term limits on legislators, particularly in the US, staying in office become a perpetual money-raising game. Those who have access to money can buy media time and a vast proliferation of Internet ads. Media consultants may provide strategy and tactics to electoral candidates, but they drive an increasing wedge between the average voter and the elected. The voter begins to think he is a chump. How long before that distrust mushrooms into support of an extremist candidate?

Trump’s 2016 election strategy was derided by the “liberal media,” but despite its odious historical comparisons to Germany in the 1930’s, it provided a vehicle for disaffected voters. They crossed over, because he brought them a road to travel on. He emphasized how unlike them were his opposition. He was “fighting” the establishment (for himself, to be sure) but for “them!” He gave them a hope that they would be “heard,” and they repaid him by crossing over. He perpetuated an invalid economic narrative that they were the “victims” of globalization and too many immigrants sucking away their jobs and undermining their pay structures. It was wrong, but it was credible.

He is not the first politician in history to construct a faulty but believable narrative. His ostensible wealth and previous success did not transmit to the disaffected that he lived in a very different world than his would be voters! On the contrary, it spoke of his success in besting the powers that be in the liberal cities where he built his hotels and buildings. He knew the “game!” He didn’t deny playing that game. He trumpeted his success in winning those concessions. He was a Master of the Game, and in spite of their hugely different class backgrounds, his crossover voters ate up his rhetoric.

When Media America constantly questions how he regularly insults accepted liberal norms, they see their champion. That is his strength and in a hugely fragmented body politic. His “minority” politics thrives. The consummate testament to his strategy is that the Democratic Party is now fragmented between espousers of “socialism” (despite its continuous history of failure wherever it has been tried) and capitalist democrats who know how to win with the money provided from “special interests.”
It may be that the November elections will feature a Republican defeat in the House and possibly an overturn in the Senate, but that will mean a two year era of rule by executive decree and constant legal appeals to the Courts to overturn Trump inspired orders. This can only mean more fragmentation and a deeper division of the electorate.

It is hard to judge whether the current level of political invective and disharmony has historical precedent. Certainly the decade before the outbreak of the Civil War showed how extremism and the lack of bi-partisanship could rip apart a country. But, 1860 and 2020 are separated by more than time. News traveled slowly in 1860. “News,” or whatever passes for that much- trammeled noun, travels instantaneously today. Truth loses out continually to immediacy—as Trump has learned. The Washington Post may flash four or five “Pinocchio’s” each day, but working class voters in Ohio are likely to ignore that. Beside, the “press” is a kept lady in their view. It doesn’t belong to “their kind.” It really doesn’t matter, despite the constant rant of the critics, how much Trump lies or distorts the information. Germany’s history proved how a “big lie” can work, and sadly, it continues to be proven day in and day out here in America. It is alleged that Trump rises early to “tweet” America its new truths. That is not accidental. He sets the agenda, irrespective of the truth table that accompanies the tweet.

Will an impeachment stop this game? Highly unlikely, unless one believes that the Senate could convict? If the Mueller investigation finally comes up with compelling evidence of an actual conspiracy between the Russians and the Trump campaign, perhaps that could turn the tide. So far, despite the Cohen and Manafort agreements to “cooperate,” no one has seen any substantive evidence that will document such a conspiracy.

The foregoing points up how important the Regulatory State has become, ironically even more important under Trump than before. The growth of Government is the prime source of political corruption. The more we allow Government to enter our lives, the more political corruption will occur. All regulatory efforts create two incentives: one to prohibit and one to avoid the prohibition. In turn, this makes the money flow that influences the legislators and the regulators in a particular direction. Lobbying and campaign finance are not an accident. They are market’s reaction to impending or actual legislation or regulation. The Smithian dream of a huge market of small firms each competing in its own way falls victim to the nightmare of much, much larger firms with very large resources to not only “listen” for changes in Congress and the regulatory establishment, but to promote those changes that are instrumentally important to the particular firm. The banking industry is a perfect example. The cost of compliance rising rapidly since Dodd Frank drives small banks into the arms of larger banks, better able to defray the cost of compliance. It is no different in a host of other industries.

At the end of the day, Pogo (a comic strip character from my forgotten age) was right: “I have seen the enemy. It is us.” The great tragedy of American politics is that “redress of grievances” produces excesses of Government intervention and regulation. If something is wrong with your corporate or personal life, get a Congressman or Congresswoman to address your grievance. If you are poor, there are many NGO’s that will pick up your cry. If you are poor and a member of a racial minority that’s even better. If you are not employed in the manner you feel you ought to be employed, find a “loudspeaker” to vent your case. Are you potentially harassed by your employer, find a media stringer to write your story of abuse and a class action lawyer to take your case!

The growing abundance of “Government Remedies” breeds the cabal of corruption that we witness daily in our political governance. Is there a way to reduce corruption and cronyism? There is no silver bullet, but there are some things we could do if we understood the problem and were willing to unite to limit its incidence. That is the subject of another essay. This one, like today’s baseball games, is already too long.

Once one begins thinking about the recurrent failings of corporate governance, particularly of large public companies, it is hard to stop thinking about the many, repeated occurrences of corporate misgovernance, “disorganized crimes,” as we have so titled them.

The Wells Fargo charade is only the latest, but sadly, not the last one in this recurring story. Without the special knowledge that will inevitably be dredged up over many months by investigative reporters and public displays of Congressional mourning for account holder losses, we are forced to merely conjecture about how the Wells Fargo saga took place and to explain how long it lasted.   Surely, some of the executive management team, and certainly some of its ‘distinguished’ Board of Directors were familiar with the many occurrences of pas corporate misgovernance, particularly since the Enron affair. “Learned nothing and forgot nothing, as Talleyrand once remarked about the Bourbons of the French revolution

Perhaps the Board was blinded by the apparent ease of Wells’ passage through the financial crisis of 2007/2008 or mesmerized by its former CEO’s railing against Wells Fargo’s forced acceptance of Government funding in 2008[1]   Wells had an enviable post-crisis record of earnings growth and was the darling of investors such as Warren Buffett.

Undoubtedly, such an exalted status creates sizeable insulation from thoughtful probing by a Board. But, that is precisely the point. Shareholders who are lulled by apparent earnings prowess and “above suspicion” accolades are those most vulnerable to the shock of corporate misgovernance. So are Boards of such impeccably credentialed public corporations.  Being lulled is not an excuse.   Weakening earnings are not the usual antecedents of corporate shock. It is almost always just the reverse. A firm that “stands out’ among its peers should evoke some thoughtful examination. ‘How does my company do so well when its competitors struggle’

It is a rare Board that will question the sources of apparent and long-standing success, ignoring the proverbial wisdom of “pride goeth before a fall.” Sadly, that is when the common shareholders need their Boards to work especially hard in understanding the daily operations and risks taken by corporate management.

Cross selling was not the sin. The failing was using a highly publicized incentive program for employees to do the cross selling and such incentives were bound to push excessive and perhaps illegal behavior on the part of the ‘cross-sellers” without a very careful examination of the details of that cross selling program. When an employee is incentivized to induce customers to take on additional “features,” even when they have no interest in such opportunities, there is an implicit warning sign that should not be ignored by the Board.   Incentives are powerful behavioral devices. Without constant supervision and a careful delineation of proper responsibility, it is simply obvious that some employees and some of their managers will overlook how the cross sale is achieved

Employees and managers are not angels. They are human and subject to greed and avarice. So are we all. Boards surely must know that from their own, individual experiences. Why believe otherwise that each employee and each manager, rewarded for increased cross selling, would not step over the line Apparently some managers knew where the line was and employees were indeed “fired,” for behaving irresponsibly and possibly illegally.

It is far more likely that excesses were known to top management and judging by previous cases of corporate misgovernance were at a loss as to how to put the genie back in the jug. I personally know of one case of an employee resigning because he felt that Wells was behaving improperly.   Surely, there will be many others that will come forth to tell a story about how Wells managed to induce their employees to cross sell, rewarded their achievements and ignored internal protests that there was “fire in the hole.”

All of this brings to our attention once again what we should expect our Boards to do: look closely, ask hard questions and report fairly to the shareholders that seemingly wonderful earnings stories are founded on truly good corporate behavior.   And, when there is smoke, look intensively for the fire and not be afraid to pull the alarm when the fire is detected.

The clawbacks of corporate rewards have begun. Shouldn’t the Wells Fargo Board be subject to the same mechanisms ‘No pain, no gain.” It is time to assess penalties on the watchdogs whose job it is to police issues of corporate governance.  Quis custodiet ipsos custodies

[1] Former CEO and Chairman Kovacevich (allegedly raged against Henry Paulson, the US Secretary of the Treasury, forcing the 9 largest banks to take in multi-billion dollar infusions in 2008 under the Secretary’s threat that a bank’s refusal to accept such funds would trigger severe reactions by particular regulators. (See Andrew Ross Sorkin, Too Big To Fail, p.525. Sorkin quotes Kovacevich as follows. “”I’m not one of you New York guys with your fancy products. Why am I in this room, talking about bailing you”’ At which point Paulson replied, “Your regulator is sitting right there.” Later, “And you’re going to get a call tomorrow telling you you’re undercapitalized and that you won’t be able to raise money in the private markets.”

It is amazing how often politicians misleadingly cite the Founding Fathers to advocate their own parochial positions. It is as if they have either not read or not understood the dilemma faced by the writers of our Constitution prior to and after its adoption. The Constitution is an inherently contradictory document. Perhaps, that is its most unusual virtue. Contradictory might strike some as an unfair characterization of a truly remarkable political achievement, but consider the problem: how can parochial and national interests be reconciled in a single national state

One can highlight the contradiction by reference to how the Founding Fathers answered the problem posed by Montesquieu with regard to governance in a democratic Republic. Montesquieu cited the dominating interest of the majority that could lord over the rights of the minorities as the primary defect of early Republics. His view, largely accepted by the Founding Fathers, posed an intellectual as well as a political challenge in arguing for passage of the Constitution.

Majoritarian dominance on domestic policy had often resulted in irreconcilable conflict that shattered the commonality of purpose of a democratic nation-state. The Federalists answered that critique by claiming that with 13 separate sovereign states, the likelihood of a dominating majority that could tyrannize over the minority views would be unlikely, because it would require the majority to prevail in a majority of the sovereign states. That might have been true if issues were strictly internal. It clearly is not the case when the dangers to a Republic emanate from abroad. It is also likely that the growth of the State, particularly in the 20th and 21st centuries, has created so many separate minority interests that a national election demands a slice and dice approach that negates articulating a well defined national Interest. The current campaign has highlighted the absence of an articulated overriding national interest, while each candidate slices and dices their parochial visions to create a majority win.

Historically, matters of national defense or foreign policy were clearly relegated not to the sovereign states but to the Presidency, subsequently ratified by a majority of national representatives. Most of the time that distinction allowed the US to achieve a seemingly definitive internal policy. A significant exception was the issue of slavery. The Founding Fathers chose to ignore slavery in the hopes that it would die a natural death over time. Unfortunately, their denial didnt work and slavery had to be killed on the battlefields of the Civil War. It had become an insuperable obstacle to the continuation of the Union.

Lincoln foresaw the problem in his losing 1858 campaign against Douglas. He went on to become the Republican nominee in 1860 and was elected because a strong minority, third party arose to divide the Electoral College, making Lincoln a minority President. Lincolns greatness as President emerged through his relentless drive to preserve the Union in spite of the secession of the slave states. His ability to focus on a strictly national issue enabled him to slowly overcome the various sectarian interests in the North. His term in office was never quiet. It was quite unruly as he coped with divisions even within his own cabinet as well as between the various abolitionist minorities within the Congress.¹

Success in creating a true national interest that could override sectional or parochial interests often eluded later Presidents, the most evident of which was Wilsons notable failure after Versailles to include the United States in the League of Nations despite his own authorship. Subsequent national commitments, such as Viet Nam or Iraq have exposed that contradiction more than once. Defining a true national interest except during true national emergencies has been exceedingly difficult given our fractionated citizenry.

Perhaps the most significant override of sectional and parochial interests came in the four-term Presidency of FDR during the Great Depression. One might generalize this occurrence to suggest that only when the threat to the nation is sufficiently large can a truly national interest prevail over the suppurating sores of factional domestic interests.

This leads us to consider the implications of the current election and the presumptive nomination of two candidates who seem to evoke excessive dislike by the electorate. The Clinton-Trump election will be a raucous exhibit of our constitutional contradiction once again. Low growth, prospective budgetary crises in the future, and a continuing military campaign against Jihadi terrorism, notwithstanding, there are still insufficient threats to weld together a truly national interest policy agenda. That will create a policy-making dilemma of epic proportions. It may even create a breakdown of both major parties and the creation of a viable third party, as it did more than 162 years ago.² The current election campaign seems excessively disjointed from the two major parties traditional platforms. The divisions are sufficiently serious as to give rise to a serious possibility of a third party once again.³

Historically, third parties have not prospered in America because they often are built around rather narrow ideological interests. Such parties are unable to play the dice and slice politics necessary for a majority electoral vote. This time, however, the presumptive nominee of the Republican Party is displaying a sharp break with traditional Republican views on the Budget, Welfare, Taxation, International Trade and Foreign Policy. Trumps success is seemingly built by his appeal to hysteria, fear among working class voters over jobs and an apparent willingness to disdain the support of women and minorities. It has led to a revolt among current Republican Party officials that is broad and likely to grow. If, in fact, the Republican Party loses both chambers and the Presidency, the party will either unify along more traditional lines or that the traditionalist faction will re-emerge as a new party that can appeal to conservative Democrats, Libertarians and (insulted) minorities. Perhaps that will constitute the healing of American politics that will allow our system to confront its current challenges

The gridlock that has emerged during the Obama administration is not exactly the failure, that political soothsayers have claimed. The failure of the Republican Party to disown and disable Obamacare, suggests that large sections of the voting public do indeed want some sort of national health care program. The difficulty is that wanting and paying are two, distinct issues. Similar considerations apply to reforming Social Security. Furthermore, paying for it, involves two rather distinct views of taxation and its consequences.

As the cost of these current programs accelerates, whoever succeeds in November will have to deal with an ensuing budget deficit likely to grow over time.⁴ Some economists do believe that the source of the low growth pattern of recent years is the excessive growth of the Regulatory State that inhibits small business and tends to cartelize various industries among big business that can cope with the cost of regulation. Whether the market will force an address to budget deficits early in a new Administration is not yet clear, given the desultory state of the world economy. However, one can certainly hypothesize a set of conditions that will force the budget issue into primacy. Rising wage costs, possible inflationary expectations and/or growth accelerating in the emerging markets and China could produce much higher long term interest rates and create a budgetary nightmare for the incoming Administration whatever its party colors.

The Federal Reserve has recently embarked upon considerations of the world economy as an excuse for keeping interest rates abnormally low. Low growth overseas has allowed the FOMC to vacillate, but domestic conditions could put the so-called Bond Vigilantes back on their horses. Rising long term interest rates will play havoc with the Federal budget, particularly if the US low growth performance persists. The Democratic Partys recurrent preoccupation with deflation could be rattled if actual inflation begins to emerge. Claims of deflation will then quickly turn to cries of stagflation that can create a division in the ranks of the Democratic Party.

The constitutional contradiction to which we have pointed in the actual practice of American politics could then be transformed into a national issue under appropriate conditions. Then, the pressure will grow to create a new party or radically transform the old parties. The American genius of responding to significant challenge may once again emerge, but it is unlikely to be a subtle or quiet transformation.

1. Doris Kearns Goodwin documents those divisions in her Team of Rivals, as did Gore Vidals Lincoln. The conventional view is that Lincoln was the ablest” lawyer in a cabinet of lawyers. He managed to outlawyer them all! [↩]
2. The modern Republican Party emerged in 1854, running its first candidate in 1856 (Fremont), who lost. Four years later, Lincoln won in a minority election with three separate national parties running candidates. [↩]
3. See our post “Political Disaster as Opportunity [↩]
4. Underlying these spending issues, as well as the apparently neglected equipment replacement and modernization costs ofour national defense, is the apparent low growth situation that pervades recent economic history. While one candidate for the Republican nomination put out a 4% growth program, the public didnt respond to it and Jeb Bush dropped out of the race [↩]