Daniel Yergin's short memory

[Louis Proyect <lnp3@xxxxxxxxx>]

(Just like the CEO of Goldman-Sachs, Daniel Yergin now regrets the
'irrational exuberance' that marked the past decade or so. In fact, as
author of "Commanding Heights", Yergin was a prophet of privatization and
deregulation.)

Washington Post, June 30, 2002
Herd on the Street: A Quarterly Stampede
By Daniel Yergin

The thud you just heard was not just WorldCom -- which once soared through
the sky at $64.50 a share -- hitting earth and skidding to nine cents a
share. It was also the sound of the end of an era. The shock waves have
devastated employees and hit shareholders hard. They have also jolted the
broader public, now cynical about markets and worried about retirement
portfolios, and foreigners, who no longer look to U.S. stocks as a secure
redoubt. Coast to coast, business people talk perplexedly about the
"malaise," a phrase not heard in an economic context for more than 20 years.

The beginning of the end was more than two years ago, in March of 2000,
when the Nasdaq blew out at 5085 and began its long descent to its current
level under 1500. It continued through the autumn of 2000, when the bottom
suddenly fell out for many businesses, through the grievous shock of Sept.
11, through Enron and accounting scandals, and now to WorldCom's fall from
the heavens.
But what an era it had been, a triumph of economics over politics. Just a
few years ago, the wife of a prominent politician had noted her surprise
that CEOs had become more important and powerful than governors. Indeed for
several years, CEOs became merchant princes, some seemingly anointed with
supernatural powers.

Yet the 1990s had started off with a mild recession and deep pessimism that
the United States was losing out to Germany and Japan. It was not until
more than halfway through the decade that people began to believe it would
be a boom period. But the boom was built upon two decades of economic
reform -- reducing overly rigid regulatory systems, whipping inflation and
reshaping companies -- that had produced a more flexible, fleet-footed and
entrepreneurial economy. In the 1980s and 1990s, the United States created
almost 40 million new jobs.

But then two things happened. The focus on the quarterly performance of
corporations, a hallmark of American capitalism, was transformed. Though
derided in countries like Germany as "short-termism," it was a powerful
discipline. By the end of the 1990s, however, the discipline turned into
something more like a cult. Companies were expected to make each quarter
better than the last, or they would be punished with a sharp fall in their
stock price. If a company missed the "consensus forecast" by a few pennies,
this was treated by stock analysts and the business media as an apocalyptic
event.

full: http://www.washingtonpost.com/wp-dyn/articles/A64838-2002Jun29.html


Louis Proyect, Marxism mailing list: http://www.marxmail.org


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