The Herbalife Chronicles

Dear Friends,

 

It seems to me, the news story about Bill Ackman shorting Herbalife stock, then going to the purchasable Massachusetts Senator Ed Markey, and getting him to gin up an investigation into Herbalife’s business practices, is a perfect example of how government undermines job creation and economic expansion. The crooked Senator who facilitated the ill gotten gains, Ed Markey, got a huge donation to the Democrat senatorial reelection campaign fund, and I am sure other undisclosed benefits and perks as well. That government can be so easily used by sordid businessmen is a testament to the corruptibility of the ruling class. This can be a teachable moment if the lesson is well illustrated to the public. If this kind of corrupt practice is dismissed, the damage to our economy, prosperity and posterity will be magnified by our discounting it.

 

The power of regulation gives government, and thereby those in it, the power to effect firms for the better, if they have political favor, and negatively if they don’t. Politicians and bureaucrats are human beings. As human beings they are self interested. When a person’s self interest is benefited by an action, especially when there is little or no oversight, as is the case with government officials, it is human nature to use the power invested in them to benefit themselves. In this politicians and bureaucrats are no different than you or I. We all have that monkey on our backs. For the rest of us, the police, laws and the likelihood of severe punishment is a strong disincentive, a disincentive that doesn’t exist for the political elite.

 

This is largely why the political elite so love regulation. Regulation allows them to benefit their cronies and punish their detractors. If a person is in a position to help a senator get reelected they have that senator’s favor. Regulation is one of the means the political elite can benefit their patrons. All a politician needs to do, is pass a regulation that protects their patron’s business from competition, gives them an unfair advantage in a transaction or subsidizes them directly. Regulation gives the politician a way to benefit their backers tit for tat.

 

Herbalife, their employees and their shareholders, are the direct victims of Bill Ackman’s scheme while the rest of us are dupes as well. This affair bears witness to the unseen victims of political corruption. Shareholders are mostly retirees, pension funds, savings and people’s IRA’s. Those of us with IRAs pensions and/or savings, are stolen from. Money we had to work hard for, is taken directly from our accounts, and given to the connivers who manipulate the system. Clearly, the incentive is to manipulate the system, instead of working hard, with all the negative consequences to society, our economy and good government that come with it.

 

Employees loose their jobs, have to take pay cuts and at the least, their lives are made more stressful. Those of us who participate in the market system by the sweat of our brow are just as victimized by this corruption as stockholders. Our jobs are destroyed, so that corrupt millionaires can get richer at the cost to workers, investors and retirees, our economy is damaged, economic growth is slowed, jobs are lost, people’s lives are disrupted… and corruption is rewarded. The answer is to severely punish those in government just as you or I would be if we damaged society by stealing.

 

The results of political corruption are far worse than stealing a ten dollar bill from a liqueur store, while the consequences for the criminal politician, are nonexistent. As I have offered before, a Fourth Branch or in other words, a constitutionally empowered police of government, would investigate and prosecute political corruption, just as local police and district attorneys investigate and prosecute infringements of the law by you and I. The ability of our lawmakers to participate in this type of damaging behavior used to be limited in our Constitution, as it was originally written, but politicians who are not held to any standard at all have corroded those limits, through years and years of political corruption. Until we can force our political leaders to follow the Constitution, by whatever means, we must react loudly and angrily, else our economic prospects will continue to be eroded… as effectively as the Constitutional limitations on government have been.

 

 

Sincerely,

 

John Pepin

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