The Speculation Economy

"A fascinating account of the early twentieth century emergence of a stock-market-oriented economy." —BusinessWeek

 


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 of the first decade of the twenty-first century. How did this happen? 


 


In this groundbreaking book, Lawrence E. Mitchell traces the origins of the problem back to the first decade of the preceding 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.