Give Eddie Greenspan some credit: he never shies away from an argument he can’t hope to win.
He sees himself as a speaker of unwelcome truths and a defender of unpopular innocents — his recent, unsuccessful defences of Conrad Black and Garth Drabinsky being just two examples. He’s made a career of standing before hostile crowds and delivering a message they’d rather not hear. So it was perfectly in character last week when he walked into a conference of forensic investigators in Toronto and told the crowd that their work is just another form of “business bashing.”
“Police officers, crown attorneys and lawmakers started looking for this new fall guy, and the new object to focus public hysteria upon, and it’s clearly the business person’s turn,” said our new patron saint of lost causes. “Business people are the new bad offenders. ? [They] represent the crime wave of now, or so people think. Don’t treat them any better than heroin dealers, mafioso or child abusers. Most people believe corporate executives, by virtue of their position in a company, are simply guilty. Trials are unnecessary — we all know that they’re guilty.”
Greenspan puts too fine a point on it, of course. Many corporate executives (including some of his clients) did more than enough to justify the public’s enmity and a stint in the slammer. Every executive accused of wrongdoing has been afforded due process. And the suggestion that any of them have been treated like heroin dealers suggests that Mr. Greenspan doesn’t really know how the justice system treats the people who can’t afford his services. Still, there is an essentialtruth in what he says.
We humans are overreactors by nature, and nowhere is that tendency clearer than in the stock market, where the continual lurch between asset bubbles and crashes has only gotten more turbulent in recent years. When the manic becomes depressive, our culture of vengeance kicks in. We look for culpability in entire classes of people, rather than individuals. It’s not just that some executives are unscrupulous swine, or that some banks made disastrous bets on the credit markets. Rather, we let anger and regret convince us that corporate leaders are typically heartless psychos driven by greed, who conspired to crash the world economy and kick single moms from their homes so they could buy a bigger yacht.
It’s nonsense, but it focuses all the free-floating anger out there in the wake of millions of job losses and devastated retirement plans. It’s at moments like these that someone like Michael Moore can say, with a straight face, that “capitalism is evil,” and not only is he not laughed out of the room, but people actually pay money to see his films, and take his ideas seriously.
It’s also at moments like these that our laws and system of enforcement begin to seem inadequate to those with a thirst for retribution — and that’s the point Greenspan was getting at.
We cling to the irrational notion that effective law enforcement can eradicate crime. If crimes are still being committed, then our laws must need to be strengthened. If we are still catching crooks, we must need more cops, with even greater powers of investigation.
The reality that we struggle to accept is that fraud has always existed in business and alwayswill. Major scandals and market crashes are what professor and author Nassim Taleb calls “black swans.” They are unpredictable, painful, and they prompt human beings to concoct elaborate explanations after the fact as a way of feeling more in control. This global financial crisis was a black swan. So was 9/11. Bre-X, Enron, Livent — all black swans. The trick with such anomalies, Taleb says, is not to fool yourself into believing they can be foreseen or prevented, but to be prepared to deal with them when they inevitably come along.
Barack Obama and other world leaders can call for tough new regulations to crack down on financial market chicanery, but you’d have to completely ignore history to believe that such sweeping changes will work, let alone justify the cost to our economies. Eight years ago, the U.S. passed the Sarbanes-Oxley corporate law reforms to address public fear and anger in the wake of the collapses of Enron, WorldCom and others. Not only were those reforms staggeringly expensive to administer, they did nothing to discourage crooked CEOs from gaming the system.
You can triple the budget of market regulators, bury banks in red tape and invoke the death penalty for corporate fraud, but we will still have scandals and we will still have market crashes. Sucking up to blind anti-business sentiment is a can’t-miss political strategy right now, but it won’t make our markets any safer. It’ll only make things worse.
In this bloodthirsty climate, that’s pretty much a hopeless argument. But it’s one worth making anyway.
