Former Washington Post columnist James Glassman and his sidekick, Kevin Hassett, want us to believe that the stock market is grossly undervalued.
In ‘Dow 36,000,’ the book that has received inflated reviews by a stock-market crazed public, Glassman and Hassett make the argument stocks will double, even quadruple, within a short period of time and that the Dow Jones Industrial Average should — and will soon — reach 36,000.
The book was published on September 20. On that day, the Dow closed at 10,823.90. As of this writing, the Dow stands at 10,019.71 — a 7 percent drop in less than a month. Way to go boys! You jinxed it!
All kidding aside, we take the view that the market is wildly overvalued. Glassman and Hassett think it should be 36,000. We think it should be more like 3,600.
Here’s why.
Corporate financial reports purport to measure profits and loss. Hundreds of billions of dollars in social costs — sometimes called corporate crime and violence — are for the most part externalized and don’t make it onto the balance sheet.
Thus pollution, corruption, fraud, worker death and disease, price-fixing, shoddy consumer products and false advertising are costs that should be borne by the corporate perpetrators, but instead are paid for by consumers, workers and individual citizens.
This happens because there is not an effective counterweight — law making, law enforcement or otherwise — to the growing corporate power that overwhelmingly dominates the political economy.
In his book, “The Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things” (Barrett Kohler, 1996) American University Accounting Professor Ralph Estes estimated these costs to be $2.6 trillion a year — that’s five times all corporate profits for the year 1992, the year of the study.
Let’s assume that Estes is off in his estimate by a factor of five, which he might be. The costs that corporations impose on the rest of us would still wipe out all corporate profits!
The science of estimating social costs is admittedly squishy. There is a big unknown factor. But at least Estes tries to put a number on it. The companies don’t even report the costs, and there is a dead political economy that allows corporations to impose these costs on living, breathing human beings at will, virtually without popular resistance and without a demand for a public accounting.
Glassman is currently housed at the corporatist think tank, the American Enterprise Institute. At a luncheon session there recently, and in a phone interview, we asked him if one of the assumptions he makes in Dow 36,000 is that the country would remain controlled by the corporate interests. Glassman said that while he didn’t have a crystal ball, he assumed that the “benign political environment” (read: ongoing control of our democracy by big corporations) would not be dramatically changed.
“There’s only a remote possibility that we are going to retreat on market-oriented policies,” Glassman said.
For example, he wouldn’t want to see a crackdown on corporate violence. Or, rather, he doesn’t see corporate violence.
A couple of years ago, Glassman wrote that the rich “don’t commit the violent crimes that require billions to be spent on law enforcement.”
We asked him whether he would include in his definition of violence cancer caused by petrochemical companies that pollute a city’s air and water. “No, I would not consider that violence,” he says.
Jonathan Rowe is a Washington journalist working on a book tentatively titled When Down Is Up: How Our Economic Barometers Mask Disaster, Divorce, Disease and Misfortune as Prosperity and Economic Advance (Doubleday, 2000).
Rowe says that Glassman is “a case study in the congenital inability of most reporters to look past the numbers and see what these Wall Street trends actually signify in people’s lives in concrete terms.”
“Glassman totally assumes that when the Dow goes up, life gets better,” Rowe told us recently. In fact, Rowe explains, it often gets worse.
Many of the growth industries in the economy — prisons, casinos, nursing homes — reflect a troubled society.
“The things that you and I would call misfortunes, as seen through the lens of the Dow Jones Index, are economic gain,” Rowe says.
Glassman says that the percentage of Americans owning stock has increased from 10 percent in 1965, to 20 percent in 1995, to close to 50 percent today. He thinks this is a good thing, because the more people own stocks, the more they will align their political views with the corporations they own, the more politicians will be beholden to corporations, thus creating an even more favorable political atmosphere for corporate stock ownership. Glassman calls this a virtuous circle.
Rowe says Glassman is talking about an economy that works like a retrovirus. “It turns us into agents of the disease,” he says.
Dow 3,600.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor. They are co-authors of “Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy” (Monroe, Maine: Common Courage Press, 1999).
