Dough Henwood Defends Martha Stewart By Jeet Heer National Post (May 27, 2004) Things are finally looking up for Martha Stewart. Although the celebrity knick-knack maker was convicted earlier this year on a variety of criminal charges relating to covering up a shady stock-market deal, she might yet escape jail time thanks to the news that a key witness against her may have committed perjury. This reversal of fortune will please not only Stewart’s loyal fan base but also Doug Henwood, the maverick economic analyst whose latest book After the New Economy offers a lively and often brilliant account of recent financial history. In a spirited article in the February 9th, 2004 issue of the Nation magazine, Henwood noted that Stewart’s crimes were petty misdemeanors compared to the whole-scale larceny the Wall Street big boys got away with during the heady boom years of the 1990s. “Why are insider trading and related transgressions often treated more severely than defrauding retirees, lying to stockholders or, more prosaically, running a dangerous workplace?” Henwood asked. “The only obvious victim of Martha's alleged crime is the public's perception of the fairness of the stock market. The authorities would love to preserve the illusion that everyone is equal, and that the rich and well connected have no special advantage over the masses. But that's absolute nonsense. Though people on the left often cheer the prosecution of insider trading (which, remember, is something Stewart isn't even accused of), there's nothing particularly progressive about preserving the illusion of Wall Street's fairness. It is, therefore, in the interests of both individual justice and political clarity that Martha be found innocent.” Both the judicial system and the news media love a good scapegoat, a lone miscreant who can bear the blame for large failures in the system. In wanting to save Martha Stewart from being turned into a sacrificial lamb (someone roasted alive in order to expiate the sins of Wall Street), Henwood demonstrates his characteristically independent stance. It is interesting to note that Henwood’s argument bucks the standard line of both the political right and left. Among conservatives, there have been many who defended Martha simply because they don’t like the idea of a rich person being punished for anything. Among liberals and leftists, Martha was excoriated as a prime example of big business villainy. Henwood is fully aware of the crimes of capitalism, but he is also sensible enough to realize that Martha Stewart is being railroaded while genuine economic gangsters are allowed to flourish. “Give Martha’s Cell to Cheney,” reads a tee-shirt sold by the Left Business Observer, the sprightly newsletter Henwood edits. Henwood writes on business issues with freshness and originality in part because he has an unusual background for an economist. As an outgrowth of his graduate studies in English in the 1970s, Henwood was fascinated by the linkage between political economy and literature. He was intrigued by the way writers re-acted to the changing forms of economic life: for example, how Ralph Waldo Emerson’s celebrations of self-reliance emerged out of an entrepreneurial yeo-man society. Of special interest to Henwood was the great poet Wallace Stevens, who worked for many years as a surety bond lawyer for an insurance company. In pursuing the linkage between ecstatic poetry and mundane bean-counting, Henwood started delving into economic theory. Henwood’s economic turn took place in the early 1980s, when Ronald Reagan and Margaret Thatcher were changing the ground-rules of the capitalist system by breaking the welfare state consensus that had been created during the Second World War. Henwood was frustrated by fact that the mainstream left-wing response to Reagan and Thatcher was framed in backward-looking and out-dated terms. Abandoning his literary studies, Henwood morphed into an economic analyst, starting his newsletter Left Business Observer in 1986. Economic writing tends to be either very shallow (in the business press) or too abstruse (in academia). The business press is an intellectual wasteland, filled with cursory daily tidbits as informative as the weather channel (stocks up, dollar down, lots of sunshine), fawning profiles of C.E.O.s (who are often described in terms better suited to the hero of a Harlequin Romance) and mind-numbing rants about the virtues of the free market. However, the business press is at least readable. By contrast, in the last few decades most academic economic writing has plunged into the netherworld of murky jargon and mathematical abstractions completely removed from any human reality. Henwood avoids the pitfalls of both the business press and academia, but has the virtues found in both spheres. Like a good journalist, he always writes crisp and engaging prose, often with a bracing directness. As with the best professors, his observations grow out of long and honest wrestling with data and theory. He is never glib, but backs his arguments with genuine research. In his 1997 book Wall Street he made a real contribution to economic theory by renovating the idea that finance capital sits at the driver’s seat of the capitalist system. Given his expository skills, Henwood has gained a wide array of admirers, ranging from mainstream figures like Berkeley economist J. Bradford DeLong (who worked for the Clinton administration) to the radical political thinker Noam Chomsky, However, Henwood’s habit of challenging the status quo has made him some notable enemies. “You’re scum … sick and twisted” former Wall Street Journal executive editor Norman Pearlstine once told Henwood. “It’s tragic you exist.” To get a taste of Henwood’s writing, consider his account of the Enron debacle. As befits a former English graduate student, he starts off with an alert account of the paradoxes of public rhetoric. “Deregulators like Enron always portray themselves as vigorous free marketers, but there is nothing invisible about their hands,” Henwood notes in After the New Economy. “They spent millions on lobbying, and worked every level, from statehouses to the Senate.” Then we get a brisk account of the political shenanigans surrounding Enron. “In 1992, when she was chair of the Commodity Futures Trading Commission (CFTC), Wendy Gramm exempted Enron’s trading in electricity futures from oversight. Enron happened to be a big funder of her husband, Texas Senator Phil Gramm (another friend of the free market who drew public paychecks almost all his working life). Six days after that ruling, Gramm left the CFTC, and five weeks later she joined Enron’s board. In December 2000, Senator Gramm helped push a bill through Congress that deregulated trading in energy. Enron’s electricity trading business swelled, and some of the firm’s only real profits were made. Without owning a single California power plant, Enron came to control the state’s market. Rolling blackouts became the norm, prices skyrocketed, and the same state racked up billions in debt. Phil Gramm blamed environmentalists for the crisis. Finally, price controls were imposed and the bubble burst. Deprived of its cash cow, Enron hit the rocks a few months later.” In the tale of Enron, so nicely encapsulated by Henwood, we have a microcosm for how the free market often actually works: a large corporation, under a loose regulatory environment, was allowed to run a large scale con game. The victims of the scam were shareholders, employees, and the public at large. The beneficiary of the scam were a handful of corrupt managers and their political allies. Unlike the woes of poor Martha Stewart, the story of Enron illuminates what is genuinely wrong with our economic system. Despite the fact that Henwood never finished his doctorial work in English literature, his studies have not gone to waste. Aside from giving him an enviable command over language, Henwood’s studies impressed upon him the interrelationship between culture and economics. The economic power of companies like Enron comes from the fact that they manipulate not only the market but also public discourse. As Henwood repeatedly shows, the “new economy” bubble of the 1990s was blown up by high rhetoric. Utopian visions of a new golden age were conjured up to tout stocks and sucker the public into going along with many harebrained schemes. So in order to understand why the “new economy” boom faded, we need someone who can point out the discrepancy between the lavish promises and the tawdry reality. A master de-bunker, Doug Henwood is invaluable for anyone who wants to understand how our world really works. Doug Henwood’s newsletter Left Business Observer can be ordered at http://www.leftbusinessobserver.com.