This morning in a criminology seminar we discussed a section of Crime and the American Dream by Richard Rosenfeld and Steven F. Messner (the section in this book). Their “thesis is that the anomic tendencies inherent in the American Dream both produce and are reproduced by an institutional balance of power dominated by the economy” (Rosenfeld and Messner 2011: 179). The dominance of the economy, they argue, weakens other institutions like the family, the government, and education, and the American Dream encourages unrestrained individualism and innovation. The cultural and institutional preferences given to individual economic success, along with the breakdown of other institutions which might foster community oriented values leads to a loss of social control and high levels of criminal behavior.
After class I opened up nytimes.com and this was the lead story: “Confidence on Upswing, Mergers Make Comeback.”
Notice how it is about uncertainty in the markets, and how now that the economy has recovered (has it recovered for everyone?) corporate leaders are more willing to take risks on mergers. They have more money now to spend, partially, because when the economy went bad they laid off employees and saved money. Now they can spend it. However, there are still risks, and you’ll notice how they talk about ‘restructuring’ corporations if mergers go wrong. Restructuring, or my favorite euphemism of the day ‘rightsizing,’ often means people lose their jobs.
Given the class conversation about how family/school/government dependence on ‘the economy’ can lead to major disruptions in folks’ lives when jobs are lost, tax bases shrink, or policy is made to serve business interests more so than family intersts (see this essay about the FMLA), my attention was drawn to a few paragraphs in the article:
A central reason for the return of big transactions is the mountain of cash on corporate balance sheets. After the financial crisis, companies hunkered down, laying off employees and cutting costs. As a result, they generated savings. Today, corporations in the S.& P. 500 are sitting on more than $1 trillion in cash. With interest rates near zero, that money is earning very little in bank accounts, so executives are looking to put it to work by acquiring businesses.
While Wall Street has an air of giddiness over the year’s start, most deal makers temper their comments about the current environment with warnings about undisciplined behavior like overpaying for deals and borrowing too much to pay for them.
But there are still plenty of cautionary tales about the consequences of overpriced, overleveraged takeovers. Consider Energy Future Holdings, the biggest private equity deal in history. Struck at the peak of the merger boom in October 2007, the company has suffered from low natural gas prices and too much debt, and could be forced to restructure this year. Its owners, a group led by Kohlberg Kravis Roberts and TPG, are likely to lose billions.
Even Mr. Buffett made a mistake on Energy Future Holdings, having invested $2 billion in the company’s bonds. He admitted to shareholders last year that the investment was a blunder and would most likely be wiped out.
“In tennis parlance,” Mr. Buffett wrote, “this was a major unforced error.”
That unforced error, I’d guess, probably had negative consequences beyond balance sheets and stock portfolio hits. I’d guess people who didn’t ruin the company will lose jobs, they’ll have trouble paying bills and saving for retirement, they’ll experience disruptions in their health care, and in general experience increased levels of stress. Their lives will be less certain, and maybe they’ll be motivated to do something to fix the problem. Maybe they will innovate and come out better off. Maybe their innovations will be criminal.
As I typed the post above, this Woody Guthrie song played randomly. I feel compelled to share it! (Gotta listen to the end.)
Rosenfeld, Richard and Steven F. Messner. 2011. “Crime and the American Dream.” Pp. 178-187
inCriminological Theory: Past to Present, 4th Edition, edited by Francis T. Cullen and Robert
Agnew. New York: Oxford University Press.