American companies once focused exclusively on providing the best products and services. But today, most corporations are obsessed with maximizing their stock prices, resulting in short-term thinking and the kind of cook-the-books corruption seen in the Enron and WorldCom scandals. How did this happen? In this groundbreaking book, Lawrence E. Mitchell traces the origins of the problem to the first decade of the 20th century, when industrialists and bankers began merging existing companies into huge “combines”—today’s giant corporations—so they could profit by manufacturing and selling stock in these new entities. He describes and analyzes the legal changes that made this possible, the federal regulatory efforts that missed the significance of this transforming development, and the changes in American society and culture that led more and more Americans to enter the market, turning from relatively safe bonds to riskier common stock in the hopes of becoming rich. Financiers and the corporations they controlled encouraged this trend, but as stock ownership expanded and businesses were increasingly forced to cater to stockholders’ “get rich quick” expectations, a subtle but revolutionary shift in the nature of the American economy occurred: finance no longer served industry; instead, industry began to serve finance. The Speculation Economy analyzes the history behind the opening of this economic Pandora’s box, the root cause of so many modern acts of corporate malfeasance.
About the Author
Mitchell is John Theodore Fey Research Professor of Law at George Washington University.
What People are Saying About This
"An impressive work of legal, economic and historical scholarship that will enrich today's debate over corporate accountability and regulatory policy."--(Charlie Cray, director of the Center for Corporate Policy and co-author of The People's Business: Controlling Corporations and Restoring Democracy)
"Mitchell highlights two of the most pivotal events in our history of modern finance: the rise of Wall Street and investment banking as a key factor in American capitalism and the federal government's response to the ever more complex role of finance capitalism. Mitchell's writing is graceful, comprehensive, and persuasive that as significant as the story of trusts and the trustbusters has been, the rise of finance capitalism and ultimately its federal coordination through such agencies as the Federal Reserve System and the Securities and Exchange Commission may be even more important."--(Joel Seligman, President, University of Rochester and author, the Transformation of Wall Street)
"Professor Mitchell's provocative thesis is that the development of the modern American public corporation was not an organic process but rather occurred almost overnight at an identifiable point in time and as a result of identifiable political and economic forces. This important new work helps us understand the forces that continue to shape the dominant form of economic actor of our time."--(Stephen M. Bainbridge, William D. Warren Professor of Law, UCLA School of Law)
"Lawrence Mitchell's new work is full of fresh insight about the rise of what he calls 'American corporate capitalism.' Anyone interested in the development of our modern financial markets will be richly rewarded by a careful reading."--(Harvey J. Goldschmid, Dwight Professor of Law, Columbia University, former Member, United States Securities and Exchange Commission)