Is corporate America letting us down?

Reihan Salaam in National Review: I’ve been trying to make sense of the recent push, from Hillary Clinton and others on the left, against what’s been dubbed “quarterly capitalism,” or the alleged tendency of publicly held companies to act in the short-term interests of speculators rather than in the long-term interests of more patient investors, and indeed the broader economy. The basic concern, as I understand it, is that in the age of activist shareholders, publicly held companies are not investing enough in increasing their productivity or in developing innovative new products. Rather, they are seeking to extract as much value out of the enterprise as they can through stock buybacks and other measures that enrich shareholders, including senior managers. But is this really a problem? Is Corporate America letting us all down by slavishly chasing returns when managers should be investing for the long term?

One irony of the fact that the Left is embracing a critique of quarterly capitalism is that private-equity firms — which, among other things, buy publicly held companies outright to restructure them, with an eye toward making them more valuable — represent one antidote to short-termism. As you’ll no doubt remember from the 2012 presidential campaign, it wasn’t so long ago that private-equity firms were the villain of the day.

It turns out that privately held firms play an important role in the quarterly-capitalism debate. Critics of quarterly capitalism have pointed to research by the economists John Asker, Joan Farre-Mensa, and Alexander Ljungqvist. They find that privately held firms invest more than similar publicly held firms, which implies that the demands of the stock market are leading publicly held firms to underinvest. What we don’t know, however, is whether these firms are really as comparable as they appear to be.

A country of second chances

Doug Deason in the New York Times: When President Barack Obama visited El Reno federal prison in Oklahoma on July 16, he lamented that America’s prisons were filled with “young people who made mistakes that aren’t that different than the mistakes I made.” Many are there, he said, because they didn’t have the resources “to survive those mistakes.”

I am a Republican businessman, and President Obama and I do not see eye to eye on most issues. But I agree with him on the inequities of the criminal justice system. I learned about it firsthand. Like many 17-year-olds, I did something stupid. It was 1979, and I threw a party at the home of neighbors while they were out of town. (Their son had given me a key.) The party got out of hand, ultimately getting the attention of the police. I was charged with felony burglary.

My actions were wrong and irresponsible. They could also have ruined my life, affecting my ability to go to college or even get a job.

But unlike many in my situation, I was able to fight the charge. I ultimately pleaded guilty to a misdemeanor criminal trespass charge — a significant step down from felony burglary. My punishment included a six-month probationary sentence and a fine. When my probation was complete, my youthful indiscretion was expunged from my record. I was given a second chance.

Yet others aren’t always so lucky.

Because of this, my family has resolved to fight for change. Given a second chance, I have been blessed to become a successful investor in numerous ventures, including real estate, technology, entertainment and energy. My success has given me the opportunity to work with the Texas State Legislature and the governor’s office over the past year to pass a bipartisan “second chances” bill — a bill to help people who make mistakes like the one I made in 1979.

The Great Recession’s lasting impact

Robert J. Samuelson in the Washington Post: What we have is a global funk. It’s a hangover from the financial crisis and Great Recession, not gloom so much as worry and restraint. Because the economic damage — lost jobs, lower profits, foreclosed mortgages, depressed trade — exceeded anything experienced since the Great Depression, people now prepare for the unknown more than before. In practice, they save more and spend less.

The shifting psychology confounds economic models, based (as most are) on earlier business cycles. Instead of a vigorous recovery, we get the opposite. Weaker consumer spending undermines business investment because companies can satisfy demand without expanding. Weaker investment then further retards the expansion. The Pew data convince me that this vicious circle, long at work in the United States, has its international counterpart.

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