Chevron posts record profits. Wall Street is not happy!

I was reading the Contra Costa Times yesterday, and came across an interesting story. It seems that Chevron is reporting record quarterly profits for the 2nd quarter of 2008, to the tune of $5.98 billion. But Wall Street is unhappy that their per-share profit was 13 ¢ less than what was expected, and so they're dumping Chevron stock because they can't meet performance expectations. It doesn't matter that Chevron's been breaking records, Wall Street has to have more!

Lest this be mistaken for an isolated incident, ExxonMobil is facing similar demands. This captures what's wrong with the American economy (and, incidentally, the global economy, since the American economy is the world economy, and vice versa); it's not enough that Chevron, ExxonMobil, et. al. are ripping the heart out of indigenous communities the world 'round (this includes the US, where the indigenous communities are largely people of color whose ancestors have only been here a few generations), destroying the biosphere around them, and destroying their cultures. Wall Street demands more. But why are financial markets so damned important? Who cares about Wall Street? Corporations apparently do.

Most corporations have significant amounts of shares owned by voting blocs of major institutional investors, e.g. banks and private equity firms. These firms have no interest in the management of the company except as a profit-making enterprise, and therefore impose requirements on the officers of the company, who have a fiduciary duty to the shareholders to provide the latter with a return on their investment (called "creating value for the shareholders"). Officers, such as CEOs, CFOs, et. al., can be removed if they aren't performing to the expectations of the investors. Piss off a big enough group of investors, and you find yourself faced with a shareholder revolt. That this doesn't happen often is a testament to the hegemony that the major financial players have over executives. Business school is designed to teach you how to run a business properly, and above all else this means ensuring that enough of your investors are satisfied enough with the return they're getting on their investment.

It doesn't matter how you accomplish this. The only thing that matters is that you provide your most powerful investors with enough of a return to keep them from breathing down your back. But these investors, who are, after all, in the business to get rich, aren't satisfied with getting the same rate of return; first, there's inflation, which means that a given return this year isn't worth as much as last year, and is worth more than it will be next year. But there are so many other opportunities for investment out there, and the option for re-investment must be open. This is a second factor. But perhaps the most telling point is that, with the way the economy fluctuates, and the periodic (and it seems increasingly frequent) crises, these investors want their money now before they can't get it anymore because the value that was once possessed by this company is lost, and anyway it's best to be rich now and not later.

The venality, the sheer avarice, is overwhelming. This is the "free market" that our "leaders" seek to protect. Is it worth saving?

Mea Culpa and more Propaganda Model

Ok, so the promised follow-up post on Ron Paul never materialized. Months later, it's no longer such a pressing issue, as McCain has sewn up the nomination. Obama has all but sewn up the Democrats'. Ron Paul has once again been relegated to the sidelines (where he belongs, IMO, but not for the reasons he's been relegated there). But Glenn Greenwald posted something a couple weeks ago (I don't have regular internet access, so I'm having to play catch-up) which I think highlights a favorite topic of mine when it comes to media behavior, namely Chomsky and Herman's propaganda model of journalism. To wit, on July 21st, Glenn wrote

There are all sorts of reasons why our presidential elections center on personality-based sideshows (even Washington Post ombudsman Deborah Howell said as much about her own paper's coverage today). Those gossipy matters are easier for our slothful, vapid media stars to digest and spout. They require very few resources to cover. The campaign consultants who run national political campaigns are experts in P.R. strategies for packaging personalities and indifferent to policy debates, etc. etc.

(emphasis mine).

This is my obligatory plug for this theory that I find so powerful a tool for understanding why the major commercial media outlets so such an execrable job of covering politics. See my first post for a summary of the theory. What Glenn talks about in his post fits right in with the "official sources" filter that Chomsky and Herman posit as part of their model. Because media outlets are for-profit, in our stock-market-driven economy, their parent companies do everything they can to reduce the cost of doing business while maximizing revenue (mostly selling ads) because their shareholders demand it. Forget long-term sustainability; we're after the most bang for our buck now, before the market goes south on us again (because it inevitably will). Who wants to wait ten or twenty years to see a good return on their investment, when there are so many more profitable investments to be made in the interim?

This provides me with a neat segue to my next topic, Chevron profits and why they're not enough...