The failure of highly educated and highly compensated CEO’s, along with their corporate boards, to manage their companies’ future is stunning. It is more of an indictment of the status quo business model that some corporations have embraced than it is an indictment of capitalism per se.
Somewhere along the line, crony capitalism became business as usual in too many of America’s Fortune 500 companies. The 2008 financial crisis was never resolved and the ripple effect is beginning to noticeably reverberate. The lessons to be learned from PG&E, Sears, and banks too big to fail are important ones that have generational aspects that should not be ignored.
The United States population is currently around 327 million. That population falls into six distinct generational categories:
Greatest Generation — 3.79 million Born before 1928
Silent Generation — 28.32 million Born between 1928-1945
Baby Boomers — 75.52 million Born between 1946-1964
Generation X — 65.72 million Born between 1965-1980
Millennials — 79.4 million Born between 1981-1996
Generation Z — 73.6 million Born between 1997-2015
(Data from Knoema Corporation, July 30, 2018)
The Millennial Generation is now the largest, with expected immigration to increase this number significantly. It is worth noting that current estimates suggest that the peak number will be around 85 million, while 71 million of those were actually born in the United States.
Most of the Millennial Generation had come of age at the time of the so-called Great Recession of 2008. They were old enough and educated enough to understand as they watched politicians pick the winners and losers of Wall Street and the effect it had on their young lives. Who received the government bail-outs? Who went broke? Who went to jail?
A great many average Americans lost their homes and some millennials saw their chance to attend college disappear as well. President Obama’s Treasury Secretary, Timothy Geithner, was a Goldman Sachs alumnus. He orchestrated billion-dollar settlements from corporations that went to the government. While the Heartland seethed, very few of Wall Street’s elite were even held accountable, much less sent to jail. Just like the Great White Shark in the movie Jaws, a restless wave was forming. Once under water, it is just now starting to surface.
Sears Holdings Chairman Eddie Lampert was a Goldman Sachs intern. His turnaround of Auto Zone was so impressive, he was being touted as the next Warren Buffet. Not anymore. Sears is filing for liquidation. No need to be concerned for Mr. Lampert, he will do just fine. The employees, the mom-and-pop shareholders; not so much. Sears, once an icon of American prosperity and after 126 years, is history. While sad, that is exactly what should happen. The company’s executives failed to accurately gauge what their customers wanted in a changing demographic.
Pacific Gas and Electric is filing for Chapter 11 bankruptcy to protect itself from liability for damages that their negligence caused. According to an NPR report, PG&E is replacing its board and plans to sell off its natural-gas division. There have been reports for years that PG&E, one of the nation’s largest utility companies, has endured poor management decisions. Company strategy seemed to be indifferent to long-standing consumer complaints, regulatory oversight issues, and basic safety procedures that every energy company faces.
PG&E has a record of spending millions of dollars on lobbyists and campaign donations to elected officials, which they have every right to do. The prospect of PG&E now selling off assets to show good faith and corporate accountability, after years of trying to game the system, looks more like desperation rather than contrition. There are other utility companies in California, and perhaps the free market will create new ones. PG&E should fall.
That being said, I would hope that California taxpayers and the customers of PG&E also hold their government leaders’ feet to the fire. If all those paid junkets and campaign contributions that PG&E provided to politicians resulted in crony capitalism, Californians should demand their resignations if they still hold office. If not now, when?
Since the economic meltdown of 2008, we have witnessed the rise of populist movements amid increasing cynicism of basic governance. The Occupy Wall Street movement, the Tea Party movement, the Black Lives Matter movement, the #Me Too movement, while seemingly disparate events, all originally signified a sentiment of rage at the perceived status quo’s lack of justice. Most social movements become co-opted over time by political party hacks who prefer to be in charge of messaging.
There is a great deal of speculation that the millennials are turning to socialism as personified in Alexandra Ocasio-Cortez. The median income for a millennial, according to Business Insider, is $40,000/ year in both California and Colorado. In general, they do tend to be quite liberal but they are also quite young. More than half of the millennials that have registered to vote classify themselves as independents. Due to high levels of student-loan debt many have yet to establish the firm moorings that previous generations adapted as a matter of course.
As older generations wonder if the Republic is doomed, I think it is just as likely they will become fiscally conservative. The millennials are not a shy bunch and they seem to have little patience for business as usual.
Can you feel that restless wave rising? I can.
Valerie Maez writes from Lewis, Colo.
