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Unfortunately it is the same with other companies in the private sector. In spring 2007 my former employer in the manufacturing sector, a NYSE listed company, offered a very modest early retirement incentive for employees over age 50. The materials sent to the employees emphasized the fact the company had an employer subsidized retiree medical plan. As the company had been through 5 downsizings over the past 3 years, associated with moving its manufacturing operations to China and some of its administrative functions to India, several hundred employees took the early retirement program by the July 1 deadline. The company had ended its defined benefit pension plan the year before, replacing it with a 401K plan.

Once the deadline passed the company announced more operations be outsourced and the reduction of more than 1000 employees. On November 30, 2007 the company sent a letter to all of its retirees stating the company subsidy for the retiree medical program would end December 31, 2007 and the now unsubsidized retiree medical program itself would end in 18 months.

Due to accounting rules at the time, by ending the subsidy to the retiree medical plan before the end of the accounting year, the company removed $45 million in unfunded pension liability from the balance sheet — window dressing for the financial statements which dressed up the balance sheet for year end reporting purposes.

The cost cutting and outsourcing of jobs was applauded by Wall Street analysts following the company and the stock ended 2007 with about a 10% gain over 2006 despite no increase in sales or earnings. The CEO’s total compensation for 2007 was $8 million, a nice improvement over $3.5 million the prior year. His cash compensation was $2.5 million versus $850,000 the prior year as the Board awarded him a very handsome bonus and base pay increase for his financial engineering. Total employment at the company decreased 20% (4000 middle class American manufacturing jobs) thanks to his strategic leadership and financial insight.

Almost a year later the company stock price is less than 40% of its year end 2007 level. Each quarter in 2008 it has announced an earnings disappointment. Insiders know the new offshore operations are not as productive as the old US operations and the drop subsequent drop in product quality is resulting in lower sales and loss of market share. Total costs per unit have risen, due to the lower labor productivity in the offshore plants, high inflation in the country where production is now located, and significantly higher transportation costs. Publicly the company states these are temporary “start-up” issues, inside the company it is known the outside consultants, from a very prestigious blue chip consulting firm, who advised the CEO on his restructuring plan, totally underestimated the complexity of moving the operations or managing them from a distance. They also used static model assumptions that energy prices, inflation, and other economic variables would not change. None of them had any operations experience but they were brilliant with numbers and spreadsheets. The CEO, most of the executive team, and the Board were wowed by the brilliance of the recommendations and the “wealth” that would be created. Interesting the “wealth” had nothing to do with asset or people investment in the USA. All of the “wealth” consisted of projected short term stock price increases that would result from the disinvestment in the US and the transfer of technology and knowledge to another nation. All of this activity was being done for short term gains on Wall Street.

Today the plan is complete. The CEO is still in his seat, even though the share price is down 60%. While the stock options he was awarded last year are underwater, he will earn a handsome bonus this year for his hard work in completing the implementation of the plan which included an additional 2000 US workers being “downsized” in 2008. Cost per unit still remain above the levels achieved in the former US operations and sales continue to decline. The company blames the sales decline on a challenging economic environment.

Would anyone like to guess how many of the 6000 US employees this company eliminated in 2007 and 2008 voted for Obama? What about the small businesses in the small towns where the manufacturing operations were formerly located? Did those people vote for Obama or McCain? How about the 12,000 retirees who lost medical benefits? How about the remaining employees who are afraid of losing their jobs in the next round of downsizings? Could it be that these people who are living through this experience voted for Obama because they lost faith in the system based on real events in their lives and not the mainstream media message? Could it be the real reason Obama won was because this experience has been repeated thousands of times across this country in the last 7 years and people have decided they don’t like it and want change?

I am a strong believer in free markets. However, large company capitalism as practiced in the US today is a perversion of Adam Smith’s invisible hand. CEO’s are disconnected from customers and operations. They sit in ivory towers, surrounded by financial people who have never produced anything or sold anything. To them the world is numbers on a spreadsheet. The stockholders are not really individuals who have made a long term investment in the company. The shareholders are large Wall Street mutual funds and hedge funds. These institutions invest cash short term. Their goal is to make a buck in the next quarter and move on. The bright wizards making investments for the funds care nothing about the long term direction or health of the company they are investing in, just the next quarter’s earnings. They win by churning their portfolios and trading paper. Their capital is employed in speculation, not creating assets that produce real wealth. They are as detached from the companies they invest in as they are detached from the millions of individual citizens who have entrusted their IRA and 401K savings to the funds they manage. While their fiduciary and moral obligation may be to those millions of individual investors, most of the financial wizards of Wall Street have no moral compass. They are not in their jobs to be responsible stewards of the money the little investor has given them to create wealth. They are on Wall Street to earn big bonuses and create personal wealth.

About 100 years ago the US experienced another financial panic, the Panic of 1907. JP Morgan, a real capitalist and banker, stepped in to calm the markets, not the US government. During his career Morgan provided capital to finance the building of railroads and factories — hard assets that provided jobs and real wealth in the US economy. Today’s capitalists are financial guru’s. They invest in paper instruments, not real assets that create jobs and wealth in the economy. Companies to them are not factories and people, they are numbers on a piece of paper. These modern capitalists are not going to provide the capital to build factories to make the windmills and solar panels Obama envisions providing jobs in the next decade. Factory investments require a commitment of capital for decades. These people are moving billions of dollars in seconds on the next uptick or downtick of the price of a stock. They don’t understand products, factories and customers and creation of true economic wealth — nor do they care to.

This financial collapse has exposed the myth of the service economy. To have a strong economy we must have a strong industrial sector. To preserve the republic we need a strong middle class with the belief that a free society gives them a path to economic prosperity based on their own hard work. Those middle class jobs are dependent on a strong manufacturing infrastructure inside this country. In today’s world the financial sector does not believe in investing in US manufacturing, even if it is cost competitive. Likewise, government policy provides incentives to export US jobs and manufacturing know-how.

Obama spoke about hope and change. When hundreds and thousands of US companies make decisions like my former company and collectively send millions of people to the unemployment line so a few people at the top can benefit inordinately, the average citizen does lose hope. When they see in their own companies or watch the consequences of this behavior in their neighborhoods, they begin to feel the system is rigged and lose faith in the system. Once that faith in the system is lost, they will vote for change.

I submit that it was not the media or Obama’s charisma that caused a majority of US citizens to vote for the change message from a socialist who has been very open about the direction he wants for the country. While he did not wear the socialist label around his neck, he was very clear about the economic policies he would pursue. People did not vote for the class envy message of the Democrats, they voted because they believe American capitalism, as they see it currently practiced, is not working. I believe most middle class people before voting seriously asked themselves if the direction of the country over the past 7 years had improved their standard of living and the chances for their children to have a better standard of living than they enjoy. The answer for many who formerly tended to vote Republican was no. As long as majority of US “capitalists” behave as though the most valuable employee is the one you fired last week, and line up at the government trough for a bailout when their actions drive their companies in a ditch, the average voter will not have faith in the system. Without faith there is no hope and without hope there is a demand for change. The average American believes that America is the land of opportunity and if the system is mostly “fair” he/she can become wealthy through hard work. As long as the system is perceived as “fair” they don’t want to tax the rich inordinately because they want to be rich. It is when the behavior of the wealthy, particularly the economic leaders (company executives, bankers, Wall Street wizards) behave as though they have rigged the system and are acting in their own self interest to the detriment of the country, that the average voter will turn away from freedom to socialism.

In this time of soul searching, Conservatives must consider what kind of “free” market will provide a higher standard of living for the average voter. Is our free market one that invests primarily in economic activity in the USA or is it one that moves US middle class jobs overseas and indulges in an orgy of paper trading that destroys the hard earned savings of US citizens and trades their jobs for multimillion bonuses on Wall Street? If it is the latter, don’t expect yes votes for the conservative movement anytime soon. The voter has peered behind the curtain and they don’t like what they see.