The Cubs, and what else has gone wrong

This started out as private correspondence, but the originator encouraged me to make it public. And so, I have. – Bob

Dear Bob …

Well the season has ended. Even so, the Cubs did fairly well.

Compare them to the Tigers, which went from the division champs last year to the last in the league. If any team is a professional team, then surely the Cubs should be in that group, unless you define professional as achieving the playoffs year after year (I’m referring to the shot you took at them in “Of businesses and marketplaces,” Keep the Joint Running, 4/14/2008). Actually the Cubs did a lot better than some businesses recently.

As I re-read that article, I found some very telling items, considering what Congress and the Senate has been up to lately:

“Americans expect business marketplaces to be fair, level and impartial as well. We expect rules to be written so as to favor no one competitor over the rest. We expect enforcement of the rules to be fair and equitable as well.”

Well, no, actually we don’t. Not anymore. Now we expect businesses to back up their ability to lobby for rules favorable to themselves with large campaign contributions. We worry about regulators viewing those they regulate as their customers. And, we are told on a regular basis that regulation never works anyway, due to the cleverness of the regulated.

“… we’d have experienced one Enron each year since Sarbanes-Oxley took effect …”

Considering the number of BIG companies that have gone belly up or been bought out recently, it looks like we are catching up.

Sarbanes-Oxley does not seem to have made any difference. I don’t suppose it was supposed to address these problems.

– Cub Fan

Dear Fellow Cub Fan …

If I were to be fair about it, I might concede professional status to the Cubs. Sadly for the Cubbies, fairness has no more to do with the question than asking someone’s ex-spouse about their character.

Except that I’m still a Cubs fan, more or less. Still, with nine consecutive playoff losses under their belts, I think I’m allowed some sour grapes.

SOX compliance (there’s a pun there, but I’ll forego it): I’m pretty sure the issues at stake in the current round of failures don’t fit the SOX mold. The problems had to do with re-pricing assets, not with mis-stating them.

Beneath even that, this mess has highlighted a deep, deep flaw in the American economy: For I don’t know how long, it’s been based on the assumption that the financial sector can create wealth, as opposed to allocating it.

A big part of what happened is that American capital was invested in the financial sector — the financial sector, that is, invested in itself. This means, among other things, that the geniuses making investment decisions in the financial sector figured investing in financial instruments (that consisted of other financial instruments, which themselves were composed of … that’s right, more financial instruments) … was a better place to put capital than research and development, product development, building new factories or refurbishing old ones … in any of the places that do create new wealth.

So now we have a lot of illusory wealth that’s evaporated, and too little foundation for creating new wealth.

That’s a big hole to climb out of.

– Bob