The Speculation Economy: How Finance Triumphed Over Industry - Hardcover

Mitchell, Lawrence E.

3.71

17 ratings by Goodreads

9781576754009: The Speculation Economy: How Finance Triumphed Over Industry

Hardcover

ISBN 10: 1576754006 ISBN 13: 9781576754009

Publisher: Berrett-Koehler Publishers, 2007

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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.

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From the Back Cover:

"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.

"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

"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

"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

About the Author:

Lawrence E. Mitchell is Theodore Rinehart Professor of Business Law at The George Washington University Law School. After practicing corporate law for several years in New York, he entered academia and has been a leading corporate and business law scholar for twenty years. One of the founders of the progressive corporate law movement, named after his 1995 edited collection, Progressive Corporate Law, Mitchell has written extensively on a variety of topics ranging from corporate governance and the stock market to the history of anti-Semitism in the New York bar. His books include Stacked Deck: A Story of Selfishness in America and Corporate Irresponsibility: America’s Newest Export, as well as casebooks on corporate law and corporate finance. At George Washington, Mitchell created the Sloan Program for the Study of Business in Society to support multidisciplinary research in corporate law, and the Institute for International Corporate Governance and Accountability to explore a range of issues arising from globalizing capitalism. He is a sought-after speaker in academic and nonacademic settings, and a frequent commentator in the news media. Mitchell holds a B.A. from Williams College and a J.D. from Columbia Law School.

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