Business and Democracy

                                                                                                                        Leadership, Values and Free Enterprise

                                                                                                                                           Timothy Stagich, Ph.D.

       Keeping the Free Enterprise System free is not just a special benefit for some businesses. It is a necessity for all businesses in a collaborative and increasingly interdependent marketplace. Even the largest of businesses benefit from a society and a market that are free and mutually prosperous based upon democratic values and principles that maintain a level playing field for all. An interdependent business environment is also a high synergy environment insofar as all businesses are mutually dependent on each other for their survival as well as future growth and success. And, it is our democratic values of fair business practice and equal treatment that help to maintain the respect for the right of every business to have the opportunity to succeed free from the undue influence and domination by other businesses. Free enterprise and fair levels of competition cannot exist in an environment where capitalism and profit making are allowed to run amok without concern for fairness and freedom. Most importantly, the free choice of the consumer is impeded by the domination of any one business at the expense of others. Leaders in business and government of a true democratic and free society must work to support these values by conscientious regulation and prevention.

       We seem to have forgotten these values in recent years as business has been allowed to grow out of control at the expense of the consumer as well as other businesses. It has taken the bankruptcy, for all practical purposes, of our financial institutions and the destruction of the economy, itself, to wake us up to the fact that regulation and democratic controls on businesses in a free society are essential. In recent years our government has repealed important legislation keeping free market controls on our banking system that led banks into questionable business ventures and the high risk buying and selling on Wall Street. And, the deregulation of our financial institutions has resulted in the development of the Credit Default Swap (CDS) System and the Derivative Market. Without the proper controls in a fee society this action has created a shadow banking system that is destroying any confidence and real trust in the marketplace.

       In the greed and haste to generate profits at any risk, Wall Street has self-destructed. Now, giant financial institutions such as Lehman Brothers and Merrill Lynch are financially destroyed with Lehman Brothers going bankrupt and Merrill Lynch being consumed by Bank of America. Also, AIG, financially bankrupt by the Toxic Assets of the Derivative Market, was unable to continue doing business without over a one hundred billion dollar bail-out by the government with taxpayer’s money. Finally, many of the major banks have been unable to continue without billions of dollars of government bail-out money. And, it will be many years before these once proud institutions will enjoy the trust and confidence of consumer investment as they had in the past. Trust cannot be restored overnight and in the present economy consumers are learning the only way to keep their investments growing is to move them from bank to bank and investment plan to investment plan based upon a banking and business system that takes every advantage of customers and shows little appreciation for the long term prudent investor. What can we do to restore real confidence again in our businesses and financial institutions?  

       The answer to this question lies in the commitment to a return to our Democratic roots as a free society and in following the example of our great leaders of the past who were successful at protecting our free market and our democratic values. Men like Teddy Roosevelt, Franklin Roosevelt, Harry Truman and John F. Kennedy understood the importance of protecting our free market economy from the undue influence of unscrupulous profiteers, giant business monopolies and high risk ventures.

       Teddy Roosevelt became known as the original “Trust Buster” and was concerned about how companies were growing out of control near the turn of the century. To prevent the undue influence and domination of markets, Roosevelt successfully broke up forty-four business monopolies during his administration as President. Also, Franklin Roosevelt, while successfully leading the nation out of the most serious depression in U.S. history, understood the importance of keeping banking institutions under control and passed the Glass-Steagall Act during his presidency that prevented the involvement of banks in the high risk buying and selling on Wall Street. He was clearly concerned about keeping banks as trusted places of deposit for prudent investors and consumers. Harry Truman became known in Congress for his work making the business of the Defense Department more accountable for the millions of dollars in defense spending. After conducting his own investigation of the out of control spending by the Department of Defense, he managed to pass a bill that required greater accountability of defense finances and taxpayer money. His honest reputation and hard work were the main reasons he was selected as FDR’s Vice President during the final years of his administration. Finally, John F. Kennedy, during his short time as President with the help of his Attorney General, Robert Kennedy, worked to limit price gouging by the Steel Industry at a time when their influence and power were growing and threatened to disrupt markets. As his predecessors, Kennedy saw what was necessary and had the courage to act to protect the American people and the public interest.

       Even the Eisenhower Administration during the booming post war era of the 1950s, warned the nation about the “undue influence of the military-industrial complex.” As the Supreme Allied Commander during World War II and continuing into his post war presidency, he could see the danger of large business influence on the government. All of these great leaders understood the importance of protecting democracy from the out of control growth and profiteering of businesses at the expense of the marketplace and the American consumer. However, in the following years right up to the present very little has been accomplished to protect prudent investors and the confidence of consumers from out of control domination and influence of banks and businesses.  

       The powerful banking lobby in Washington and the influence of Wall Street on Congress and both the Democratic and Republican Parties has taken the nation down a very dangerous and destructive road. Where are the great leaders of the past who are capable and committed to taking charge of this situation that has clearly spiraled out of control with mergers, acquisitions, deregulation and the infamous “shadow banking system” that has threatened to destroy what is left of our economy. In order to maintain Free Enterprise and democracy, capitalism must be tempered by leaders who understand the importance of regulation and building a marketplace based on consumer confidence and trust. We have accomplished this in the past. Hopefully, our new president, Obama, can return the country to an era of concern and belief in our democratic values and a marketplace where prudent investors can build for the future free from unscrupulous banking and business practice.

 Copyright 2009, Global Leadership Resources: For teaching and classroom use only.

Note: This article is based on the ideas, concepts and examples found in the book. The Price of Freedom: The Purpose and Power of Free Choice by Timothy Stagich, Ph.D.

                                                                                Discussion Questions
  1. Discuss the relationship among Free Enterprise, Synergy and Interdependence in keeping a healthy and fair environment for doing business in a democracy.
  2. Why is conscientious regulation necessary in a free market?
  3. How have monopolies threatened the free market and fair business practice in the past? How have they been handled by leaders over the years?
  4. How has deregulation contributed to the recent collapse of our financial system? What is necessary to prevent this from happening again?
  5. Discuss the accomplishments of past leaders such as Teddy Roosevelt and FDR that served to protect our democracy and Free Enterprise System from the undue influence and domination of businesses.
  6. What are the dangers of the powerful banking lobby in Washington and how has it influenced both political parties?
  7. How can we make sure that our future leaders do everything that is necessary to protect our Free Enterprise System and the consuming public from the domination and abuses by unscrupulous businesses and greedy Wall Street Executives?

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