The Wall Street Journal - 19.08.2019

THE WALL STREET JOURNAL. Monday, August 19, 2019 |A19

Trump Isn’t the One Dividing Us by Race

immigration and health-care sys-

tems (Sen. Cory Booker); “Mi-

chael Brown was murdered by a

white police officer in Ferguson,

Missouri” (Sen. Elizabeth War-

ren); whiteness is “the very core”

of Mr. Trump’s power, whereas

his “predecessors made their way

to high office through the passive

power of whiteness” (Ta-Nehisi

Coates in the Atlantic).

Liberal opinion deems such

rhetoric fair comment, even obvi-

ous truth, not “racially divisive.”

America’s universities deserve

credit for this double standard.

Identity politics dominate higher

education: Administrators, stu-

dents and faculty obsessively cat-

egorize themselves and each

other by race. “White privilege,”

often coupled with “toxic mascu-

linity,” is the focus of freshmen

orientations and an ever-growing

array of courses. Any institu-

tional action that affects a “per-

son of color” is “about race.” If a

black professor doesn’t get tenure,

he’s a victim of discrimination; a

white professor is presumed to be

unqualified.

That interpretive framework ex-

plains asymmetries in how the po-

litical and media elites analyze the

Trump phenomenon. Susan Rice,

President Obama’s national security

adviser, recently denounced Mr.

Trump’s “almost daily attacks on

black and brown people.” But “al-

most” and “black and brown” are

superfluous. Mr. Trump’s attacks on

his fellow 2016 candidates—and on

more-recent adversaries as homo-

geneous as Robert Mueller, Rep.

Adam Schiff, Joe Biden and Ms.

Warren—were as nasty as anything

he’s directed at Rep. Elijah Cum-

mings or Rep. Ilhan Omar.

But according to the academic

template, to criticize a “person of

color” is inevitably “about race.” Mr.

Buttigieg ran afoul of this rule after

firing South Bend’s black police

chief for secretly taping officers’

phone calls. The idea that the mayor

fired the chief because he was black

is absurd, yet Mr. Buttigieg inevita-

bly faced charges of racial insensi-

tivity. Likewise, advocates and the

media deemed Mr. Trump’s nonra-

cial denunciation of Baltimore’s

leadership racist. Never mind that

the victims of the city’s almost daily

drive-by shootings are black. Race

shields minority politicians from

criticism.

Ms. Warren recently provided an

unwitting summary of academic

identity politics. Mr. Trump’s “cen-

tral message” to the American peo-

ple, she declared, is: “If there’s any-

thing wrong in your life, blame them

—and ‘them’ means people who

aren’t the same color as you.” She

has in mind a white “you,” but

change the race and you encapsulate

the reigning assumption on college

campuses—that white people are the

source of nonwhite people’s prob-

lems, and any behavioral or cultural

explanations for economic dispari-

ties are taboo.

The academy’s reflexive labeling

of nonconforming views as “hate

speech” has also infiltrated popular

rhetoric against Mr. Trump. The

president’s views on border control

and national sovereignty are at odds

with the apparent belief among

Democratic elites that people liv-

ing outside the country are enti-

tled to enter at will and without

consequences for illegal entry. To

the academic and democratic left,

however, a commitment to bor-

der enforcement can only arise

from “hate.” Such a pre-emptive

interpretation is a means of fore-

closing debate and stigmatizing

dissent from liberal orthodoxy.

Identity politics, now a driving

force in the Democratic Party,

celebrates the racial and ethnic

identities of designated victim

groups while consigning whites—

especially heterosexual white

men—to scapegoat status. But its

advocates should be careful what

they wish for. If “whiteness” is a

legitimate topic of academic and

political discourse, some individ-

uals are going to embrace “white

identity” proudly.

To note the inevitability of

white identity politics in no way

condones the grotesque violence of

men like the El Paso killer. But the

dominant culture is creating a group

of social pariahs, a very small per-

centage of whom—already un-

moored from traditional sources of

meaning and stability, such as fam-

ily—are taking their revenge

through stomach-churning mayhem.

Overcoming racial divisiveness will

be difficult. But the primary respon-

sibility rests with its main propaga-

tors: the academic left and its imita-

tors in politics and mass media.

Ms. Mac Donald is a fellow at the

Manhattan Institute and author of

“The Diversity Delusion: How Race

and Gender Pandering Corrupt the

University and Undermine Our Cul-

ture.”

By Heather Mac Donald

PHIL FOSTER

L

ong before the El Paso
massacre, President
Trump’s political oppo-
nents accused him of sow-
ing “division” with his
“racist language.” Mr. Trump “ex-
ploits race,” “uses race for his gain,”
is engaged in a “racially divisive re-
prise” of his 2016 campaign, stokes
“racial resentments,” and puts “race
at the fore,” the New York Times has
reported over the past several
months.
Yet Mr. Trump rarely uses racial
categories in his speech or his
tweets. It is the media and Demo-
cratic leaders who routinely charac-
terize individuals and groups by
race and issue race-based denuncia-
tions of large parts of the American
polity.

Some examples: “As race domi-
nates the political conversation, 10
white Democratic candidates will
take the stage” (the Washington
Post); Mr. Trump’s rally audiences
are “overwhelmingly white” (multi-
ple sources); your son’s “whiteness
is what protects him from not [sic]
being shot” by the police (Sen.
Kirsten Gillibrand); white candidates
need to be conscious of “white privi-
lege” (South Bend, Ind., Mayor Pete
Buttigieg); “white supremacy mani-
fests itself” in the criminal-justice,

He hardly mentions it,

while his adversaries are

obsessed with ‘whiteness’

and ‘white privilege.’

Dissent Against Beijing Is Becoming a Firing Offense

Hong Kong

T

he police wanted to limit
Sunday’s protest to Victoria
Park, which can accommodate
only 100,000. But by the official
start time, the demonstration had
spilled over into the Central metro
station, four stops away, where
hundreds gathered to wait for a
train. When they finally arrived at
their destination, the streets were
so crowded that walking a few
blocks took hours. But attendance
would be tallied as participants
passed through the park before
their unauthorized march to the
Central business district. So they
inched forward, determined to reg-
ister their dissent.
The Civil Human Rights Front,
the pro-democracy group that orga-
nized Sunday’s peaceful protest, es-
timated more than 1.7 million partic-
ipated. That’s especially remarkable
considering the risk.
Some protesters have sustained
serious injuries at the hands of po-
lice and plainclothes thugs. More

than 700 demonstrators have been

arrested to date, and some face

charges of “rioting,” which can carry

a 10-year sentence. And protesters’

livelihoods may be on the line too,

owing to Beijing’s pressure cam-

paign on corporate employers.

The most notable target is Cathay

Pacific, one of Hong Kong’s flagship

companies. The airline needs 3,200

employees for daily operations, but

some 1,500 were absent during a

general strike, said Carol Ng, a vet-

eran flight attendant who is chair-

man of the Hong Kong Confedera-

tion of Trade Unions.

China’s aviation authority an-

nounced that any Cathay employee

involved in the protests would be

forbidden to staff flights to or from

the mainland, which account for

about a fifth of the airline’s trips.

Rupert Hogg, Cathay’s chief execu-

tive, resigned late last week after

saying employees “who support or

participate” in protests—even on

their own time—could face disci-

pline. The airline has fired at least

four people. Cathay’s chairman,

John Slosar, personally declined my

interview request via a LinkedIn

message.

Ms. Ng sums up the message

from Beijing: “Go back to your job,

keep your mouth shut.” If a major

company was “required to back

down in front of the political pres-

sure, what’s next? A medium- or

small-sized company will be forced,

or will be instructed, to take sides,

and more and more dismissal cases

you can imagine happening across

the city.”

She expects it won’t work: “I

don’t think Hong Kong people will

agree to keep their mouths shut.”

The Hong Kong Confederation of

Trade Unions includes more than 90

affiliates representing some 190,000

workers. On Sunday night Ms. Ng

told me in a WhatsApp message that

“it seems nearly 70 to 80% of our

affiliates were there” demonstrat-

ing. One of them, the Hong Kong

Professional Teachers’ Union, also

estimated 22,000 of its more than

100,000 members attended a protest

for educators on Saturday.

Officials worry that the political

crisis will have an economic impact

on Hong Kong. On Aug. 9, Beijing-

backed Chief Executive Carrie Lam

warned that “a small minority of

people” with “no stake in the soci-

ety which so many people have

helped to build” could spark a

downturn. On Thursday Hong Kong

announced a spending package of

US$2.4 billion aimed at stimulating

the economy, which includes a one-

time electricity-charge subsidy of

HK$2,000 (about US$255) for every

ratepayer.

Isaac Cheng, vice chairman of the

pro-democracy party Demosistō, an-

ticipated the move in an interview

earlier in the week. “One, they’re us-

ing fear to rule the people,” he said.

“Two, they’re using economic bene-

fit to attract people.” That strategy

has worked in China, where the gov-

ernment derives its legitimacy from

increasing prosperity, not the con-

sent of the governed. But there’s “a

cultural difference” in Hong Kong,

which understands the higher “value

of democracy, freedom and human

rights,” Mr. Cheng said.

The Hong Kong government “is

trying to distribute money to pacify

the people,” says Cyd Ho, a trustee

of the 612 Humanitarian Relief

Fund, which helps pay medical ex-

penses and provides other support

to protesters. Last week, after the

announcement of the power subsidy,

the fund saw a surge in HK$2,000

donations, she said.

Hong Kong people understand

their protests carry economic risks,

both for themselves and the city as

a whole. But the economy is “our

bargaining power to our govern-

ment,” Kenny Poon, a 29-year-old

protester, told me Sunday. “Our slo-

gan is, ‘If we burn, we burn to-

gether.’ ”

Ms. Melchior is an editorial page

writer for the Journal.

By Jillian Kay Melchior

Four airline employees

have already lost their jobs

for joining Hong Kong’s

pro-democracy protests.

OPINION

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The SEC Threatens to Go Soft on Internal Controls

S

ometimes the best argument
for an idea is also the most
damning.
In May, as the Securities and Ex-
change Commission weighed a pro-
posal to exempt more small compa-
nies from certain audit requirements,
Republican SEC Commissioner
Hester Peirce, who favors the exemp-
tion, tweeted: “If an investor in a
small biotech company had the op-
tion of having her money go to an
audit of internal controls or the hir-
ing of another scientist, what would
she choose?”
Ms. Peirce presents the exemption
as a simplistic choice between pro-
ductive and burdensome costs. But
her example unintentionally shines
light on the actual problem the SEC
faces: Left alone, many companies
will shift resources away from the
thorough accounting practices that
protect investors.
The real choice at stake with the

exemption policy is whether inves-

tors would prefer management to

have total leeway over company dol-

lars, or whether they’d feel better

knowing a small portion of the com-

pany’s revenue (about 50 cents per

$1,000) was dedicated to a thorough

audit of internal controls. Unlike au-

dits of financial statements, internal-

controls audits involve a close re-

view of a company’s processes to

assure it produces reliable financial

information, achieves efficient oper-

ations, and complies with internal

policies.

There’s no doubt that hiring an

auditor exacts a cost on a company

and its investors. Proponents of the

SEC proposal say each affected com-

pany would save about $210,000. It’s

true that some companies don’t have

enough revenue to sustain that cost

easily, but in any case they are at-

tracting large sums of investor dol-

lars. If they want to raise money in

public markets, they need to observe

the same laws as everyone else. After

all, the costs of undetected fraud and

malfeasance are often far greater.

This is not a theoretical point. An

analysis last month by professors at

Stanford, Wharton and other major

business schools found that more

than 100 companies eligible for relief

from audit requirements had already

had to restate their earnings by a to-

tal of nearly $300 million. These

companies wiped out almost the

same amount from their investors’

market value.

When managers reported recently

acquired assets under the SEC’s loos-

ened requirements, their companies

produced a lower return on assets

and had a higher likelihood of a

goodwill impairment, in addition to

a greater chance of a financial re-

statement. The subpar return of in-

vestments in such companies suggest

investors view exemptions nega-

tively. Another study, led by Temple

University business professor Law-

rence D. Brown, indicates that a ma-

jority of investors see weak material

internal controls as a red flag that

indicates a higher potential for fi-

nancial misreporting.

Predictably, Congress’s decision to

waive the audit requirement for

some companies going public re-

sulted in significant investor losses.

From 2014-16, exempted companies

had a restatement rate of 11.2%,

while similarly sized companies still

subject to the audit requirements

had a rate of 6.2%, according to SEC

figures.

A fair-minded investor might look

at these figures and see an audit of

internal controls as a form of insur-

ance to reduce the risk of wealth-kill-

ing financial restatements.

More than four decades after the

SEC first required audits of internal

controls, and a decade and a half af-

ter the Sarbanes-Oxley Act

strengthened the requirements,

more than 1,000 companies have re-

ported they do not have adequate

internal controls.

Good internal controls are essen-

tial bulwarks against sloppiness, er-

rors and irregularities. An audit

might make sure that inventories are

reported accurately, or that vendors

are legitimate, or that cybersecurity

policies and antihacking protocols

are implemented effectively. Audi-

tors may review internal emails to

detect potential fraud. They can see

into the regular operations of a com-

pany and, if empowered, call out the

kinds of mistakes or malfeasance

that leads to major financial restate-

ments and other market-moving

events.

Why should investors care if a

company follows internal controls

carefully as long as its revenue and

profit are rising? Because what hap-

pens inside a company inevitably af-

fects everything else—its revenue,

its earnings and its valuation.

Consider what happens to seem-

ingly successful companies with

sloppy internal controls that allow

potentially criminal and fraudulent

activity. In time, that activity is dis-

covered, and the company’s past re-

sults are called into question—and

potentially wiped out by regulatory

and legal action. The names of Enron

and WorldCom are receding into the

mists of memory, but anyone who re-

members those incidents will tell you

this: Had there been adequate audits

of internal controls at those compa-

nies, the damage would have been

far less—and investors wouldn’t have

lost billions.

Mr. Levitt was chairman of the Se-

curities and Exchange Commission,

1993-2001.

By Arthur Levitt

A proposal to exempt

certain companies from a

full audit would encourage

fraud and hurt investors.

From “Why Elizabeth Warren Is

Trump’s Weakest Opponent” by Josh

Kraushaar, National Journal, Aug. 18:

Often the vulnerability of a politi-

cian is reflected by the desperate

caliber of their spin. When a cam-

paign can’t even put together a con-

vincing case with cherry-picked evi-

dence, it’s easy to conclude that

their argument doesn’t pass the

smell test.

Elizabeth Warren, trying to de-

flect widespread worries that she’d

be the Democratic Party’s riskiest

best to take on President Trump, is

the latest example of a candidate

without a plan to address her biggest

problem.

In a New York Times story on the

subject, Warren’s campaign offered

two arguments as to why she’d be a

formidable challenger against

Trump. Her team has pointed to her

hotly contested victory against Sen.

Scott Brown in 2012, which quieted

skeptics who were wary of her can-

didacy at the time....

If a candidate’s strongest case for

electability is that she won a Senate

seat in the most Democratic state in

the country—in a banner year for the

Democratic Party—then she’s got an

electability problem.

The fact that Warren is still hang-

ing onto her victory over Brown is

revealing. It would be the equivalent

of Republicans reveling over defeat-

ing Sen. Doug Jones of Alabama in

next year’s election—a result that

many GOP officials expect, given the

conservative nature of the state.

Notable & Quotable: Warren