The Wall Street Journal - 11.09.2019

THE WALL STREET JOURNAL. Wednesday, September 11, 2019 |A19

W

ho owns the vast
wealth of America?
Old folks. According
to the Federal Re-
serve, households
headed by people over the age of 55
own 73% of the value of domestically
owned stocks, and the same share of
America’s total wealth. Households
of ages 65 to 74 have an average of
$1,066,000 in net worth, while those
between ages 35 and 44 have less
than a third as much on average, at
$288,700.
A socialist might see injustice in
that inequality. But seniors know this
wealth gap is the difference between
the start and the finish of a career of
work and thrift, making the last
mortgage and retirement payments
rather than the first. Seventy-two

percent of the value of all domesti-
cally held stocks is owned by pension
plans, 401(k)s and individual retire-
ment accounts, or held by life insur-
ance companies to fund annuities
and death benefits. This wealth accu-
mulated over a lifetime and benefits
all Americans.
That means it’s your life savings on
the line—not the bankroll of some
modern-day John D. Rockefeller—
when Democrats push to limit compa-
nies’ methods of enriching their
shareholders. Several Democratic con-
gressmen and presidential candidates
have proposed to limit stock buy-

Warren’s Assault on Retiree Wealth

backs, which are estimated to have in-

creased stock values by almost a fifth

since 2011, as well as to block divi-

dend payments, impose a new federal

property tax, and tax the inside

buildup of investments. Yet among all

the Democratic taxers and takers, no

one would hit retirees harder than

Sen. Elizabeth Warren.

Her “Accountable Capitalism Act”

would wipe out the single greatest

legal protection retirees currently

enjoy—the requirement that corpo-

rate executives and fund managers

act as fiduciaries on investors’ be-

half. To prevent union bosses, money

managers or politicians from raiding

pension funds, the 1974 Employee

Retirement Income Security Act re-

quires that a fiduciary shall manage

a plan “solely in the interest of the

participants and beneficiaries...for

the exclusive purpose of providing

benefits to participants and their

beneficiaries.” The Securities and Ex-

change Commission imposes similar

requirements on investment advis-

ers, and state laws impose fiduciary

responsibility on state-chartered cor-

porations.

Sen. Warren would blow up these

fiduciary-duty protections by re-

writing the charter for every corpo-

ration with gross receipts of more

than $1 billion. Every corporation,

proprietorship, partnership and lim-

ited-liability company of that size

would be forced to enroll as a fed-

eral corporation under a new set of

rules. Under this new Warren char-

ter, companies currently dedicated

to their shareholders’ interest

would be reordered to serve the in-

terests of numerous new “stakehold-

ers,” including “the workforce,” “the

community,” “customers,” “the local

and global environment” and “com-

munity and societal factors.”

Eliminating corporations’ duty to

serve investors exclusively and forc-

ing them to serve political interests

would represent the greatest govern-

ment taking in American history.

Sen. Warren’s so-called accountable

capitalism raids the return that

wealth provides to its owners, the

vast majority of whom are present or

near retirees. This subversion of cap-

italism would hijack Americans’

wealth to serve many new masters

who, unlike shareholders, don’t have

their life savings at stake in the com-

panies that are collectivized.

After dividing retirees’ rightful

earnings eight ways to serve the po-

litically favored, the Warren charter

goes on to require that “not less than

2/5 of the directors of a United

States corporation shall be elected

by the employees.” With a mandate

to share profits with seven other in-

terest groups and 40% of the board

chosen by non-investors, does any-

body doubt that investors’ wealth

would be quickly devoured?

At best, every U.S. company with

gross revenues over $1 billion would

be suddenly coerced into operating

like a not-for-profit. But unlike legally

recognized Benefit Corporations, the

companies would be redirected to

multiple competing purposes. A new

Office of U.S. Corporations would de-

cide—and lawyers would sue to de-

termine—whether those interests are

satisfied, and only then would retir-

ees receive the remaining crumbs.

Only in Sen. Warren’s socialist heaven

would workers continue to sweat and

sacrifice while their rewards go to

publicly favored groups.

It is the fiduciary responsibility of

every investment adviser, pension

fund, 401(k), IRA and life insurance

company to tell its clients what

would happen to their investments

under Sen. Warren’s bill. Her plan

would devastate the income-generat-

ing capacity of every major company

in America and decimate their mar-

ket value in the process.

If the bill were passed, retirement

plans and investors could attempt to

sell their stocks and find new invest-

ments where their money would still

work for them. They could sell their

shares in the large companies subject

to Sen. Warren’s dispossession and

buy into smaller companies with re-

ceipts below the $1 billion threshold,

or look for investments abroad.

The problem is that everybody

else would be trying to do the same.

Investments built over a lifetime

would be sold in a fire sale, with lim-

ited alternatives purchased in panic

buying. While no econometric model

could give a reliable estimate of the

wealth destruction, no knowledge-

able observer could doubt that an

economic cataclysm would follow

such a policy. “Accountable capital-

ism” would hit present and near-re-

tirees first and hardest, followed by

American workers and the rest of the

economy.

Sen. Warren would roll back the

economic Enlightenment that gave

us private property and economic

freedom, and plunge us back into the

communal world of the Dark Ages.

Like the village, guild, church and

crown of yore, government-empow-

ered special interests would once

again be allowed to extort labor and

thrift. When capital is no longer pro-

tected as private property and is in-

stead redefined as a communal asset,

prosperity and freedom will be the

greatest casualties.

Socialism always destroys wealth;

it doesn’t redistribute it. Unfortu-

nately, this great truth is far from

self-evident. Whether current and

near-retirees will stand up and fight

for their retirement savings will ef-

fectively gauge the survival instinct

of our country, and our willingness

to preserve the economic system

that built it.

Mr. Gramm, a former chairman of

the Senate Banking Committee, is a

visiting scholar at the American En-

terprise Institute. Mr. Solon is a

partner of US Policy Metrics.

By Phil Gramm
And Mike Solon

CHRIS CARLSON/ASSOCIATED PRESS

Her vision of ‘accountable

capitalism’ would destroy

savings built over a lifetime

—and sink the economy.

Sen. Elizabeth Warren at a campaign event in Los Angeles, Aug. 21

OPINION

A Too-Comfortable End for Robert Mugabe

“Peace has come to
Zimbabwe / Third
World’s right on the
one / Now’s the time
for celebration /
‘Cause we’ve only
just begun.” So sings
Stevie Wonder in
“Master Blaster,” his
1980 hit single. And
he wasn’t the only
one who turned out
to be overly optimistic about the
southern African nation’s future un-
der its then-new leader, Robert
Mugabe.
Margaret Thatcher said that
Mugabe, who delivered independence
for the former British colony after
decades of white-minority rule, was
someone she could work with. And
Ian Smith, the former Rhodesian
leader whom Mugabe replaced, wrote
in his memoirs that his first encoun-
ter with the new prime minister was
encouraging. “He behaved like a bal-
anced, civilized Westerner, the an-
tithesis of the communist gangster I
had expected,” wrote Smith. “If this
was a true picture, then there could
be hope instead of despair.”
It didn’t take long for Mugabe to

drop the statesman act. His ex-

pressed goal from the beginning was

to transform his political party, the

Zimbabwe African National Union,

into a “a truly Marxist-Leninist

party” and make Zimbabwe a one-

party nation. Initially, he agreed to a

coalition government that shared

power with his rival, Joshua Nkomo.

But Mugabe reneged on the arrange-

ment. He secretly formed a military

brigade loyal only to him and

brought in North Korean instructors

to train soldiers. Nkomo was fired

from the government and his party’s

assets were seized. His followers

were branded “dissidents,” and sev-

eral were jailed. Mugabe was just

getting started.

“In Mugabe’s drive for a one-

party state, at least 10,000 civilians

were murdered, many thousands

more were beaten and tortured, and

an entire people were victimised,”

writes British historian Martin Mer-

edith. The government bought out

the country’s five biggest newspa-

pers, and journalists who were criti-

cal of the regime were shown the

door. Radio and television likewise

became outlets for government pro-

paganda. Judges who crossed

Mugabe were threatened or forced

to resign and then replaced with

party loyalists.

Within two years of taking office,

the corruption scandals had already

begun. Mugabe and fellow klepto-

crats were setting up foreign bank

accounts and siphoning millions from

the state treasury. A no-bid govern-

ment contract to renovate the capital

city’s airport was awarded to

Mugabe’s nephew. Bureaucrats and

cronies plundered the national oil,

electric and telecom companies until

there was nothing left. In 1987

Mugabe gave himself the power to

dissolve parliament, declare martial

law and run for office indefinitely.

The freedom fighter had become just

another African tyrant.

Areas of the country that sup-

ported Mugabe’s political rivals were

denied food during droughts. Before

elections, militias were dispatched to

intimidate voters. The homes and

businesses of people who backed the

opposition were raided. Criticizing

the president was considered a crim-

inal offense, and police banned polit-

ical rallies that the government

didn’t want to take place.

Mugabe was willing to do what-

ever it took to maintain power, no

matter the damage, and perhaps

nothing was more damaging to Zim-

babwe than his relentless attacks on

white farmers, which only served to

drive away the country’s most pro-

ductive citizens. “We are going to

take the land and we are not going to

pay a cent to any soul,” he said. But

Zimbabwe did pay. White farmers

grew 90% of the country’s marketed

corn, 90% of its cotton and most of

its other export crops. In all, they

produced some 75% of the country’s

agricultural output. They were the

engine of the economy, and when

they began to leave it cost Zimbabwe

dearly.

Corn production fell by nearly 70%

between 1981 and 1983. By the end of

the decade, inflation was running al-

most 20% a year and the unemploy-

ment rate in urban areas was nearly

50%. In the 1990s inflation reached

60%, more than half of adults were

jobless, and the wages of those who

were working fell by 22%. The nation

was 10% poorer at the end of the de-

cade than it was at the start, and

more than 70% of the population

lived in extreme poverty and lacked

basic needs. By the mid-2000s, Zim-

babwe, a country that had the most

broad-based economy in Africa when

it became independent, would have

the world’s highest inflation rate, its

lowest life-expectancy and the fast-

est-contracting economy outside a

war zone.

Mugabe was unrepentant. In a

2003 speech, he said he would act

like a “black Hitler” to quell his polit-

ical opponents, if that’s what it took.

“If that is Hitler, then let me be a

Hitler ten-fold. Ten times. That is

what we stand for.”

After 37 years in office, Mugabe

resigned from the presidency under

pressure in 2017. He was allowed to

keep his mansion and ill-gotten mil-

lions. He died last week, surrounded

by family and friends, in a Singapore

hospital at the age of 95. It’s a happy

ending he didn’t deserve.

Zimbabwe’s brutal dictator

impoverished millions but

died in a hospital bed

surrounded by family.

UPWARD
MOBILITY
By Jason L.
Riley

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Alternatives to Google? Your Search Returned No Results

G

oogle once honored the Cana-
dian philosopher and media
theorist Marshall McLuhan
with a so-called “Google Doodle” for
predicting the internet’s invention in

1962. McLuhan’s work was so influen-
      tial that he coined many of the
      phrases people use to talk about the
      internet today: “the medium is the
      message” and “surfing” the web. He
      also predicted that the internet
      would transform the world into a
      “global village.” But McLuhan never
      guessed that a single company might
      become that village’s gatekeeper and
      use its power to become the wealthi-
      est person in town.
      We all know Google is a search en-
      gine, but it may be more accurate to
      describe the tech giant as an adver-

tising company. Each year more than

90% of Google’s $117 billion in reve-

nue comes from online advertising.

For reference, the entire market for

online advertising is around $130 bil-

lion annually.

Google’s dominance stems in part

from its control over the marketplace

for online advertising. It owns all, or

most, of the components of that mar-

ketplace: the tools websites use to

sell advertising space on their sites;

the tools advertisers use to buy that

space; and the auction system used to

connect buyers and sellers. Google

also owns some of the most highly

trafficked addresses on the internet—

such as YouTube and its own Google

website—where advertisements are

placed.

In other words, if you want to par-

ticipate in the global village market-

place—to connect with your custom-

ers—your only practical choice is to

pay Google to give you directions to

your customers’ houses. When one

company holds such a commanding

and unchallenged grip on a $130 bil-

lion online market, it is the responsi-

bility of antitrust enforcers to ensure

the interests of consumers are being

protected.

Yet concern for the online adver-

tising and publishing industries alone

isn’t what inspired 47 attorneys gen-

eral from both major political parties

and all regions of the nation to

launch an investigation into Google’s

business practices this week. Google’s

enormous profits, driven by its domi-

nance in online advertising, enable it

to touch nearly all of us, every day.

We search with Google. We email

with Google. We “sign in” with

Google. We adjust our thermostats

with Google. We even talk to Google.

My fellow attorneys general and I

launched this investigation because

Google’s enormous economic power,

fueled by advertising, gives it unprece-

dented influence over Americans’ lives.

It has the power to control what we

read and manipulate the people and

companies we do business with. It can

compromise our privacy. It can crush

its competition, and consumer choice,

merely by submerging competitors’

websites in a murky sea of search re-

sults. Information is power, and Amer-

icans are beginning to realize how

much power Google has over them.

To be clear, the question isn’t

whether Google is too big. Economic

success, when earned fair and square,

should be celebrated. But whatever

the merits of Google’s product offer-

ings, we must ask now whether its

dominance has been achieved and

maintained through business prac-

tices specifically designed to thwart

competition. That is what our inves-

tigation will seek to determine in the

coming months as we examine docu-

ments from Google.

The British pastor Charles Spur-

geon once wrote that “a village is a

hive of glass, where nothing unob-

served can pass.” We are simply ask-

ing Google to pull back the curtains

and let us see if the village gates are

truly open.

Mr. Paxton is Texas attorney gen-

eral.

By Ken Paxton

Our investigation will find

out whether the internet’s

gate keeper is, in fact,

blocking the entrance.

From “A Terrorist Pearl Harbor”

by the Journal editorial board, Sept.

12, 2001.

The world is a different place af-

ter the massive terrorist attacks on

the United States yesterday, much as

it was after the bombing of Pearl

Harbor nearly 60 years ago; a new

kind of war has been declared on the

world’s democracies. Just as Munich

led to World War II, so attempts to

buy peace in the Middle East are

surely behind this attack.

The scope of the terror assault

would have been unimaginable be-

fore yesterday. Multiple suicide

squads conducting multiple airline

hijackings, taking control of planes

and diving them and their passen-

gers into high profile targets in New

York and Washington. The nation’s

airports closed down, movement in

and out of Manhattan impossible.

Uncounted number of innocent civil-

ians killed, grief for many American

families, anxiety for even more and

almost universal inconvenience.

For the dead we can only grieve,

and repairing the physical damage

will take many years. But even

within sight of the World Trade Cen-

ter, life went on, albeit fitfully, yes-

terday. The airlines will fly again, al-

beit not quite as before, and new

buildings will be built. Modern in-

dustrial society, for all the talk of its

vulnerabilities, has a certain resil-

ience. Returning to our normal way

of life as quickly and as completely

as possible is one part of the answer

to the monsters who plan and perpe-

trate such ghastly events....

What most needs to be recog-

nized, though, is that the terrorism

has a political purpose. It is in-

tended to intimidate America into

standing aside humiliated while the

Arab despots and fanatics destroy

Israel and thereby prove that free-

dom and democracy are not after all

the wave of the future. We can

honor yesterday’s dead by rallying

our diplomatic, moral, financial and

as necessary military resources to

insure that that purpose is convinc-

ingly defeated.

Notable & Quotable: 18 Years