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Are corporations taking over the world?

Are Wall Street merger mavens and big corporate interests are gradually usurping government's role? For many readers, it's obvious: all you've got to do is "connect the dots." Answer Desk, by John W. Schoen.

So who really is running the world these days? Answer Desk readers have plenty of opinions. Some, like Marilynn in Baltimore, suspect that Wall Street merger mavens and big corporate interests are gradually usurping government's role in setting up a "New World Order" that will ultimately have the greatest impact on average Americans' lives. For many readers, it's obvious: all you've got to do is "connect the dots."

Most times when one mentions a "New World Order" it is brushed off as a conspiracy theory. There seems to be a rush to mega-mergers and private equity buyouts. Do you think that there really is a plan for a "New World Order" where governments are replaced by a kind of corporate serfdom?
-- Marilynn, Baltimore, Md.

Mega-mergers and buyouts seem to run in cycles. In the 1960s, led by a wave of railroad mergers, huge “conglomerates” gobbled up smaller companies. The "junk bond" merger mania of the 1980s was built on something called a "highly confident" letter: You didn't even need to have the money, you just announced to Wall Street that you were "highly confident" you could get it. Then you went to one of your cronies at a savings and loan, they printed up the paper you needed, and investors eagerly snapped up that paper because, after all, it was a "done deal." The inevitable collapse of the S&L industry cost taxpayers over $100 billion to clean up.

The current merger craze is, in many ways, the flip side of the 1990s IPO mania. Instead of taking new, private companies public, money is flowing into funds that are taking established, public companies private.

There are a number of reasons for this, not the least of which is that investment bankers get big fees whether the company goes public or private. The hangover from the IPO bust also made it tougher to bring a company public — especially after Congress passed laws that make it harder for companies to make up earnings and otherwise mislead potential investors. Private equity firms are also reading the same playbook that the '80s raiders used: Buy an "underperforming" company, chop it up, sell off pieces, squeeze profits out of what's left and — Voila! — take it public again. More fees all around.

As for corporations muscling governments out of the way, there's nothing particularly new about that either. Some large, global companies have as much reach and influence as half the members of the United Nations, with revenues that match or exceed the GDP of many  countries. As for our government's pliability, just take a look at how much money flows from the industries that get government help (agriculture, banking, energy, etc.) to the members of Congress passing laws that make these companies more profitable.

The part we have trouble with is the idea that this is all part of a "plan." Conspiracy theorists believe oil prices are determined by a select group of powerful, wealthy men who secretly conspire to amass bigger personal fortunes at the expense of the rest of us. Global trade laws, this thinking goes, are dictated by a secretive band of CEOs and IMF officials who work out their deals in palatial Swiss mountain retreats. Wall Street, in turn, is a single, unified entity that sets the country's monetary agenda via placement of one of its most powerful in the White House (Robert Rubin under Clinton, now Henry Paulson under Bush) where he can pull the strings of the elected politician puppets we citizens fancifully believe are really in charge.

The master plan (isn't it obvious by now?) is being carried out by the Federal Reserve Bank —an illegal, unconstitutional self-perpetuating body, answerable to no one, that traces its lineage back to original robber baron, John D. Rockefeller. Meanwhile, representatives of the various nodes in this network of global corporate power brokers periodically fly their Gulfstreams to a super-secret golf resort on an unmapped military base in Arizona and collectively plot the next move. The Answer Desk in-box is peppered weekly with the gripping details of this ever-evolving conspiracy.

So let's get real. There is no doubt that industries and large corporations have tremendous —and in some cases excessive and unreasonable — influence over the political process and the rules of the game, both in the United States and around the world. We're not a big fan of government regulation: Letting Congress loose to write rules about anything makes us nervous. (See: the U.S. tax code.) But there are also plenty of examples of government policy that have been hijacked by industry to the detriment of consumers. Bank and credit card fees are completely out of control. A national energy policy that pays only lip service to conservation is foolish in the extreme. Health insurers who deny legitimate claims should have to pay steep penalties — or go to jail — for doing so.

But each of these companies or industries is just acting in their self-interest, which is what a market-driven, for-profit system encourages them to do. And there's no evidence we can find that individual examples of corporate self-interest overtaking the public good are in any way broadly connected, other than the laissez-faire, deregulatory environment of the past three decades that has allowed them to flourish.

The history of capitalism shows that the pendulum swings between loosening regulation to foster economic growth and empowering regulators to cap excesses and set stricter rules. If we had to guess, we'd say the public is in the mood for more regulation these days. But market-driven economies are notoriously difficult to manage and control. (See: The former Soviet Union and, perhaps, China.)

Many conspiratorially inclined readers accuse us of being naïve in not "connecting the dots" and "seeing the obvious." If, for example, oil prices are rising and oil companies are raking in billions, the cause and effect, we’re told, is undeniable. But there no evidence that publicly traded oil companies — which collectively produce less than a quarter of the world's daily oil supplies — have any control over the market price of crude. Even as pump prices popped above $3 a gallon, any elected state attorney general — Republican or Democrat — would have loved to grab headlines by prosecuting gasoline retailers for “price gouging.” To our knowledge, not a single such case has been proven.

That’s not to say that individual companies don’t break the law from time to time and screw consumers. That’s why there are laws against such behavior. But when a prosecutor (or a journalist) "connects the dots" they’re supposed to provide detailed evidence of those connections. If any reader has such evidence — showing, say, that public oil companies are secretly setting global crude prices — please let us know.

In the end, the suggestion that powerful corporate forces are acting collectively to usurp representative government gives the alleged conspirators too much credit. In cases where corporate self-interests have achieved undue influence over public policy, we see that as a failing of government. That, in turn, is the failure of voters to do the hard work involved in: 1) basing their opinions on facts, not speculation; 2) finding and supporting candidates who understand and discuss frankly the issues involved, and 3) voting accordingly. And that failure of voters, even those who bother to show up, is at least in part attributable to the current (and, we fear, ascendant) tendency of readers to convince themselves there's a fire when all they can come up with is a few puffs of smoke.