Progressives’ alphabet soup ingredients are DEI hiring and ESG investing. Both often are illegal, and the latter is medieval.
“Diversity, equity and inclusion” became fashionable in corporate America, and enforced in academia. There, refusing to take DEI loyalty oaths provokes exclusion as punishment for deviations from this orthodoxy: Equity is group entitlements — inevitably, a racial spoils system. As Kamala Harris joyfully explains, “Equitable treatment means we all end up in the same place.”
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ESG’s defects begin with illegality. The 1940 Investment Advisers Act required advisers to have one overriding concern: their clients’ financial interests. This fiduciary principle was reaffirmed in the 1974 Employee Retirement Income Security Act, which stipulates that those entrusted with investors’ money have the duty to deploy it “solely in the interest of” and “for the exclusive purpose of providing benefits to” the investors.
ESG attempts to vitiate this duty, and disguise ESG’s illegality, by asserting that a corporation’s shareholders are just one set of “stakeholders.” And shareholders are inferior to stakeholders whose supposed superiority derives from having no financial stake in the corporation’s performance. Stakeholders include employees, suppliers, customers and (per the Oxford Reference Dictionary) “members of the wider community.” So, a stakeholder is anyone who claims to be affected, at whatever remove, by any corporate activity.
Investors are supposedly enabled by ESG to do good while doing well. Leave aside the Everest of unsurprising evidence that ESG investments do substantially less well than investments made for the purpose of maximizing returns for investors. Now, about doing good:
The greatest good, in terms of alleviating suffering, in all of humanity’s history has been done in recent decades by market-oriented, profit-seeking capitalists: by private wealth serving private interests. In 1975, half the human race lived in what the World Bank calls extreme poverty ($2.15 a day, adjusted for inflation). Today, fewer than 1 in 10 persons are so afflicted.
Former senator Phil Gramm and his colleagues in refuting ESG note: Between 1990 and 2020, the globalized market dynamism ignited in the previous decade by Ronald Reagan and Margaret Thatcher pulled up from abject poverty an average of 128,000 people every day.
I’m honored to be a guest in the latest episode of Geoff Graham’s podcast, Yeoman.
Yet economics teaches there’s no free lunch. Millions of Americans use credit cards as convenient and ubiquitous payment networks, and they don’t owe interest because they pay off their balances at the end of each month. Debit cards are an alternative. People in a pinch also use credit cards to cover emergencies or financial shortfalls.
The interest rates on credit cards reflect operating costs, including nonpayment. A 10% cap would effectively cut off people with less-than-pristine credit scores. After Illinois capped many consumer interest rates at 36% “all-in APR,” a study in the journal Public Choice said “financial well-being declined” for residents who lost access to short-term, small-dollar loans.
Why do Messrs. Trump and Sanders think it’s helpful to limit credit access and send folks to the pawn broker or leg breaker instead? Card companies might respond by raising fees, which is what happened to free checking after Democrats regulated debit swipe charges in 2010.
In a new paper, Scott Lincicome, Marc Joffe, and Krit Chanwong expose the folly of subsidies. In their words, their
paper finds, among other things, that the growth of these corporate incentives is likely owed to their enduring political attractiveness and to new federal industrial policy initiatives. It also finds that state and local subsidies routinely create problems beyond their high budgetary (taxpayer) expense.
Bob Graboyes nicely explains just how young a country America really is.
