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Hurrah for Capitalism, Its Many Warts and All

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By ROGER COHEN International Herald Tribune Published: March 14, 2007

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NEW YORK We know a lot about the heroism in the

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aftermath of the 9/11 attacks. Those who were in this city will not soon, or ever, forget the smoldering, floodlit ruins of the towers or the helmeted figures who labored through the night in the rubble with a human stain.

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Until recently, however, we knew less about more squalid activities conducted in the shadow of death, business deals that testify to the inexhaustible human urge to make a buck, even from the consequences of mass murder. It is now clear, thanks to groundbreaking reporting by The Wall Street Journal, that executives at several U.S. corporations chose to profit from the brief stock market collapse that followed New York's Armageddon by backdating stock options to the period when their shares were at a post-attack low. Options, designed to give employees a direct financial interest in the success of their companies, afford those who get them the right to buy shares at a stipulated price. If the stock goes up after the grant, the recipient can make a profit, sometimes a very large one, by cashing in the options. Because a lower exercise price makes the potential gain greater, it's more attractive to get options when a stock is down. Hence the temptation for unprincipled executives to backdate options to favorable dates - in effect, pretend an option was granted earlier than it was in order to take advantage of a low point. Doing so is illegal, but in New York, as elsewhere, money talks. One conspicuous low for many stocks was the week after two planes- turned-missiles killed close to 3,000 people down the road from Wall Street. When markets reopened, the Dow had its worst week since 1940 - another time of war - and fell more than 14 percent. War is hell; it's also opportunity. There's always booty in the ruins. Paintings and statuary get carted off; people make it overnight. The dead are gone and what they owned is up for grabs. War is a loose regulatory climate. The provenance of things gets murky and where they end up may be murkier still. So perhaps it's not surprising that war in its modern guise should produce its own form of profiteering, in this case executives backdating options to a time of bloody mayhem to make a financial killing. That is what happened at several companies including, as reported by The Wall Street Journal, KLA-Tencor, where options supposedly granted at the semiconductor maker's low on Oct. 2, 2001, were in fact backdated from a later, less advantageous time. Many other corporations have now admitted doing the same thing. Several expletives come to mind, none printable. What gives in the head of somebody conspiring to make a bundle from the agony of his or her fellows? What craven, scruple-free mechanism in the mind kicks in to allow unconscionable business to be done around a corporate table by educated folk in leather chairs?

The answer, alas, is something as fundamental to the psyche as the noble instincts that led other people, in the same moment, to respond to tragedy with self-sacrifice. Light and dark have ever vied in human nature to the point that skepticism is only reasonable. The skeptic knows that given the choice of saving lives or making money, some will go one way, some the other. The utopian believes, against the evidence, that human nature can be molded to a selfless appreciation of the common good. Any pondering of the limitless capitalist greed behind the backdating scandal may lead to the conclusion: To heck with this, there must be a better system. Perhaps communism or the "Socialism or death" of President Hugo Chvez of Venezuela constitutes a better option. People have made that call in the past; some still do. But the fact is that such idealistic appeals, whether genuine or manufactured, bet too highly on the goodness of man. They resonate but are betrayed by reality. Repression in the name of the ideal becomes the only option. Instead of fraternity you get the gulag. And there's no free press around to unearth the dirty deeds. In his novel "I Married a Communist," Philip Roth writes: "He tells you capitalism is a dog-eat-dog system. What is life if not a dog-eat-dog system? This is a system that is in tune with life. And because it is, it works. "Look, everything the Communists say about capitalism is true, and everything the capitalists say about Communism is true. The difference is, our system works because it's based on the truth about people's selfishness, and theirs doesn't because it's based on a fairy tale about people's brotherhood. It's such a crazy fairy tale they've got to take people and put them in Siberia in order to get them to believe it." The Soviet Union is now gone, consumed by its contradictions. But Chvez is still around with his socialist slogans and his invective against "the most cynical, most murderous empire that has existed in all of history." Sitting on a mountain of oil revenue, much of it earned through unabated sales to the United States, the Venezuelan caudillo inveighs against the American capitalist monster. The faintly comical parallel odysseys of Chvez and President George W. Bush through Latin America presented one man with an interesting choice. That was President Luiz Inacio Lula da Silva of Brazil, a former metal worker, a man of the left, a politician who made his name fighting military dictatorship. He chose Bush. Not, I suspect, because he loves the American president, but because life has led this self-taught man to know a coup plotter, an absolutist with militarist instincts and a facile deliverer of dangerous slogans when he sees one in the false-egalitarian, Chvez. Having been on the receiving end of capitalism's harshness and greed, Lula knows it's the worst system except any other that's been invented, just as the United States is the worst bastion of a precious freedom except any other that's been found. E-mail: rocohen@nytimes.com Tomorrow: Alan Riding looks for culture in France's election campaign. E-mail: rocohen@nytimes.com
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