Capitalism Without Conscience
"It is just the tip of the iceberg."
Such is the well-worn cliché that has become the mantra of the moment, as soothsayers from think tanks, the media, politics, academia and even the business world, assess the current wave of corporate scandals.
I think what we're seeing is actually just the tip of the tip of the iceberg. Because beyond the financial frauds that have endangered jobs, retirement funds and the stock market, the "profit uber alles" mindset is endangering the health and safety of the American people.
"In the long run," said President Bush in his finger-wagging speech to Wall Street earlier this month, "there's no capitalism without conscience" -- an assertion that makes you wonder if his severance package from Harken Energy included a pair of rose colored glasses. Of course there's capitalism without conscience, President dear. And plenty of it.
Market forces have no intrinsically moral direction, which is why, before he wrote "The Wealth of Nations," Adam Smith wrote "The Theory of Moral Sentiments." Ethics should precede economics. But it doesn't have to. And it's not inevitable that it will. We know this because we've seen the results of capitalism without conscience: the pollution of the air we breathe, the water we drink, and the food we eat; the endangerment of workers; and the sales of dangerous products -- from cars to toys to drugs. All in pursuit of greater and greater profits.
For example, did you realize that 20,000 people -- many of them children -- are killed every year by defective products? Or that such products cause close to 30 million injuries a year?
We are up in arms -- and rightly so -- about corporate greed that leads to massive shareholder rip-offs, but shouldn't we be even more irate about corporate greed that leads to loss of life?
The giant drug companies have been among the worst culprits, harming their customers with a wanton disregard for human life matched only by the tobacco companies and firearms manufacturers.
You don't still think there's capitalism without a conscience, Mr. President? Take Schering-Plough. In May, the company agreed to pay a record $500 million fine for repeatedly violating FDA regulations regarding quality assurance, manufacturing, equipment, laboratories, packaging and labeling. Other than that, they apparently ran a very tight, conscience-laden ship. After all, they haven't been accused of any accounting scandals. Not yet, anyway.
Even more damning, the drug giant is also currently under criminal investigation, reportedly for the literally breath-taking allegation that it caused the deaths of 17 people -- including a ten-year old boy -- who died while using asthma inhalers the company manufactured and distributed, even though it knew the inhalers might not actually contain any asthma-fighting medication.
According to FDA reports, the ten-year-old victim had an asthma attack, "reached for his inhaler and obtained no relief," then died shortly thereafter. I'd like to see Schering-Plough try to work that suffocating little tableau into one of their gauzy, omnipresent TV ads.
There has got to be a very special place in hell for corporations willing to sacrifice the health of their customers on the altar of increased profits. If so, a toasty spot should be reserved for the folks at Wyeth who have been desperately trying to develop a drug that causes mass amnesia ever since a new study revealed that women using its wildly profitable hormone replacement drug, Prempro, showed heightened risk of breast cancer, heart attacks, strokes, and blood clots.
The corporate crime is not that Prempro -- which, along with its sister pill Premarin, pumps more than $2 billion a year into Wyeth's coffers -- has proven more harmful than beneficial. It's that the company has aggressively marketed them despite growing concerns about the drugs' safety.
Indeed, the company secretly funded the writing and promotion of "Feminine Forever," the 1966 book that helped turn hormone replacement into a national craze and Wyeth's estrogen pill, Premarin, into a cash cow. Touting estrogen as a "wonder drug", the book's author, Dr. Robert Wilson, wrote that women taking estrogen "will be much more pleasant to live with and will not become dull and unattractive". What's a little breast cancer if it means you can avoid becoming dull and unattractive?
And witness the "conscience" -- more like "depravity" -- with which the company promoted Duract, a painkiller it manufactured and marketed in 1997 -- even though research proved the drug could cause serious liver damage. Duract was an instant hit, with over 2.5 million prescriptions written in the 10 months before the drug started racking up liver-related deaths and was yanked off pharmacy shelves.
If signing off on a false balance sheet will soon be enough to supposedly land a CEO in the slammer for 20 years, what should the sentence be for allowing liver-damage and deaths in the name of milking ten months' worth of profits out of a defective, deadly product? Or how much time should an executive do who signs off on working conditions that lead to 56,000 deaths a year from on-the -job accidents or work-related illnesses such as black lung and asbestos poisoning?
Earlier this month, Treasury Secretary and former Alcoa CEO Paul O'Neill couldn't have been clearer about the need to establish very different corporate priorities: "If you go and look at Alcoa today you will find it's the safest company in the world. Because I said to the people 'I don't care about how much it costs. If there's a safety hazard or risk that we know about it should not be budgeted. It should be taken care of tomorrow morning'."
What if O'Neill's leadership mandate became the norm in American business? That, Mr. President, would truly be something approaching capitalism with conscience, where the profit motive doesn't come at the expense of the public interest.
Few now dispute that it's time for American business to clean up its act. The debate rages over the extent of the reforms that are needed. Will we settle for a few simple gestures on accounting and SEC enforcement or will we seize the moment to bring corporations to account for their anti-social behavior?
We have the chance to clean things up before an even grosser and deadlier corporate crime wave starts grabbing the headlines -- and public confidence in our business leaders sinks even lower than the free-falling Dow.