The Market For Virtue

Jayati Ghosh

 Of large corporations, corrupt business practices and ‘barons of bankruptcy’.

 IT had to happen, of course; the only surprise may be that it did not happen sooner. The most rapidly emerging market today in the core of capitalism, the United States, is the market for virtue. Virtue defined not in terms of personal life, but simply in terms of being untainted by any whiff of financial scandal, any association with the unsavoury business practices that have come to dominate public perceptions of Wall Street. And because such virtue is relatively hard to find among public figures, the proud (if temporary) possessors of such virtue command very high scarcity values, and some of them have lost no time in cashing in on this as fast as and lucratively as possible.

One year after the spectacular collapse of the multinational giant Enron, the revelations of dubious commercial behaviour that emerged have been revealed to be just the tip of the iceberg. This has truly been an annus horribilis for large capital in the US. Some of the largest and most apparently successful companies, the ones that earlier rode the crest of the positive wave in the stock markets, were the ones that went under most dramatically. The extent of major corporate bankruptcies in the US has topped $600 billion in the past year alone.

But more than the bankruptcies themselves, what caused public revulsion against some of these large corporations was what was revealed about the skulduggery that appeared to have become a regular feature of business practice. In addition, the huge personal financial gains made by the corporate executives involved — the “barons of bankruptcy” as they are now known — even as the companies they controlled went into liquidation, added to the perception of the deep corruption pervading Wall Street.

Some of those who shout regularly about corruption being endemic mainly in the developing countries may have been surprised to discover the extent to which what are mildly called “conflicts of interest” have dominated public life and business in the US. Even president George W Bush is not immune, having been associated with what could be considered as insider trading for personal profit when he was governor of Texas and on the Board of a certain company.

More recently, major public figures such as the Chairman of the Securities and Exchange Commission and other public regulators have been forced to resign because of the taint of scandal. All this has put an even higher premium on apparent honesty, since the list of financially “virtuous” public figures in the US is now so small as to be embarrassing.

IT is this background that explains the latest metamorphosis of Rudolph Giuliani, the former mayor of New York. He began his career as a lawyer and public prosecutor in New York, most famously attacking the king of junk bonds, Michael Milken. As mayor of New York he became well known first for being very tough on crime (even when there were suspected racial overtones to the toughness). Subsequently, the terrorist attacks in September last year catapulted him to international limelight, when he was widely lauded for his apparent courage under pressure.

This made him something of a folk hero and icon in the US, a society that is desperately short of such icons at the moment. And the former mayor, who gave up his job early this year, has lost no time in marketing his virtue. He has already published a best-selling business book called Leadership and started his own company “Giuliani Partners”. He has become an established figure on the celebrity lecture circuit, charging in excess of $100,000 for each appearance.

A movie mythologising him is under production. Such a myth is even more commercially important, since “action dolls” based on his character are already on sale in department stores across the US, just in time for the Christmas rush. The Rudy Giuliani brand, with its declared combination of honesty and courage, is clearly flourishing at the moment.

But of course, the ironies and subtleties of current capitalism are so pervasive as to make everything into its opposite. Those buyers who are willing to pay the most for the use of this brand are the ones with the greatest public need of it, that is the very companies that have caused this desperate public search for virtue in the first place. And they are willing to offer rates that presumably make all the other offers look puny in comparison.

That is why, some months ago, the investment bank Merrill Lynch hired him as its attorney. Merrill Lynch has been under public scrutiny for “questionable” (that is, plainly corrupt) investment research practices that actually harmed the interests of those who were investing with them. Who better to fight their legal cause than the man the US immediately recognises as the epitome of virtue?

Now, Giuliani is about to take up the job of Chairman of another company that has become eponymous with financial scandal, WorldCom, which is now at best a disgraced and bankrupt telecommunications company. It remains to be seen whether the brand power of the former mayor will be enough to overcome the stench of corruption that rises from that heap. If not, the search will begin for other public figures who can fulfil this role, probably at even higher market rates.

(Courtesy: Frontline, December 07 - 20, 2002)