The New York Times recently ran an expose of Goldman-Sachs’ venture into the commodities markets, and the result of the firm’s purchase of a company that effectively gave Goldman control over the spot market in aluminum. The upshot of the Goldman purchase is that, as a result, the price of aluminum – that essential metal for both aircraft and soft-drink cans – has doubled, as have delivery times, and the additional cost to consumers is roughly $5 billion annually.
Now… I can see the argument for large business takeovers that benefit someone besides the company taking over, and I can see some benefits to at least someone in corporate behaviors such as those of as Walmart that have driven out thousands of local stores through lower prices and lower wages to employees. The average consumer benefits by getting lower prices, even if the workers get screwed, and small store owners and employees lose their jobs. And there are cases where huge financial corporations do get caught for illegal manipulations, which appears to be the case in the recent charges by the Federal Energy Regulatory Commission that J.P. Morgan illegally manipulated the price of electricity. The Goldman aluminum case is a bit different. Prices are up, as are delivery times, and everyone gets screwed but Goldman. The thing is… it’s perfectly legal under existing law.
In fact, as Americans are slowly realizing, a great deal of the financial machinations that led to the financial crisis, from whose results which we are hopefully finally beginning to emerge, were also perfectly legal. It turns out that it wasn’t illegal to lend money to borrowers who could not repay those loans, at least so long as the documents weren’t fraudulent. It wasn’t illegal to collateralize and securitize those bad investments, and it wasn’t illegal to create such a mess than the government had to bail out those institutions in order to keep the banking sector from collapsing. These are facts hammered at me by more than a few legal, financial, and mortgage types over the past several years.
All this brings up a more fundamental question. Just because something is “legal,” does that make it right? Should you engage in legal but unethical behavior? All too many business types do this every day, and such behavior illustrates a basic change in American as well as other societies that has occurred gradually but inexorably over the past century or so. Once upon a time, much of the law was merely a limited codification that outlawed what society viewed as the worst excesses of human behavior. Human social codes and behaviors also exerted a certain pressure on individuals and businesses to be more ethical.
But as laws have swelled and become more complex and prescriptive, those social conventions have eroded, more and more people seem to have come to believe that, if the law doesn’t forbid something, it’s all right to do it. In turn, in the United States, and elsewhere around the world, people have reacted by attempting to put their own parochial religious and moral beliefs into the law… which generates more and more conflict of the type that the Founding Fathers wished to avoid by separating church and state.
Years ago, a political science professor I studied under observed that when people used power excessively and irresponsibly, society always eventually reacted to reduce or eliminate that power. We’re beginning to see that reaction… and the result is most likely to be something that few of us will enjoy. All because we’ve decided, as a society, that if it’s not illegal, we can do it… whether we really should or not.