The Spitzer Factor

These officials draw inspiration from the stunning reform victories won by New York State Attorney General Eliot Spitzer, who has blistered financiers and corporate moguls with his continuing exposures of scandal. When Spitzer demanded and won reformed operating rules from Merrill Lynch, the pension-fund leaders embraced the principles and applied them as their own new rules for the banks and financial houses handling their money. More recently, Spitzer exposed a bid-rigging scandal in the insurance industry. Four pension funds, led by AFSCME, nominated an independent director for the board of Marsh & McLennan and the firm accepted him--a former federal prosecutor now collaborating with the AG on reforms.

Spitzer intends to run for New York governor in 2006. Angelides intends to do the same in California (though his prospects were dimmed by the abrupt rise of Gov. Arnold). The two men can be seen as representative figures, since each is trying to revive an important dimension of the reform tradition their party has virtually abandoned. Like the earlier Progressives, Spitzer seeks to tame the abuses and excesses of American capitalism, using inventive approaches and toughness (who else is taking on his home state's most powerful industry?). Angelides is more like a New Dealer--an economic liberal who seeks to transform the system more deeply. He boldly espouses basic principles of economic liberalism (and forgotten principles of sound investing) without apology.

With both Spitzer and Angelides running in 2006, Democrats will hear from aggressive campaigns that could provide building blocks for regenerating a reform-minded party. Angelides, for instance, articulates--actually resurrects--old wisdom about the nature of economic development. Public investment and private enterprise are not at war with each other, as the right has taught people to believe. They are mutually reinforcing and the key to insuring equitable opportunities for all (if you doubt this, check out the history of the world's sixth-largest economy--California).

If Democrats looked more closely at the issues that Spitzer-Angelides bring to corporate governance, they would find a powerful rebuke to George W. Bush's loose talk about "democracy" and the "ownership society." While Bush calls for democracy worldwide, he is smothering the ownership rights of corporate shareowners at home. In behalf of business-financial elites, the White House has bullied Securities and Exchange Commission (SEC) chairman William Donaldson (a GOP financier himself) for favoring the proposal to allow major institutional investors like public pension funds to nominate independent directors to corporate boards. If that proposal is killed, as appears likely, reformers led by the Carpenters Union will be pushing a more direct initiative at the corporations: requiring that directors and CEOs who run unopposed at least win with majority support from the shareholders. How radical is that? Too radical for the status quo's moguls and titans. They know that majority rule would allow a broad coalition of institutional investors to withhold their votes and veto entrenched managements.

A Way to Talk About Power

Converting obscure financial issues into broadly understood political issues requires deft translation, but will speak to a very broad audience of abused Americans. It's a way to talk about excessive corporate power--a major public concern, according to polls, yet seldom mentioned--with concrete examples rather than abstractions.

Labor seems to understand the potential politics better than most. Numerous unions are getting engaged, and a few have committed real resources to organizing and educating. Now some fifty AFSCME members are pension trustees around the country. SEIU has a staff of ten field organizers nationwide who stay close to pension boards and the relevant elections. Together, the two unions backed a librarian elected by co-workers to Ohio's retirement board, gaining a 5-to-4 majority at the $65 billion fund. Three new labor-friendly members were elected in New Mexico, two more in Maryland.

Oddly enough, this small-d democratic brand of politics is well suited to the daunting realm of finance capital. At its best, organizing is about building "relationships with power," and Wall Street itself functions daily on the power relationships among major financial players--the people who make the deals and decide who gets what, who's in charge, whose values will be reflected in how a company operates. The problem is, the millions of workers who, collectively, are major corporate shareowners do not get a seat at the table appropriate to their wealth. (The same orphaned status applies to most small investors, who turn over their savings to mutual funds that proceed to ignore their interests.) Creating trustworthy financial intermediaries that speak reliably for their clients is a fundamental reform in itself.

In this convergence of rising politicians and activist elements, are we glimpsing the vanguard of a new kind of reform politics? My answer is: yes, maybe. This reform impulse is different because it seeks to change the system from within, using workers' capital as the driving wedge. Yet it is also traditionally liberal in that the latter-day reformers seek to leverage government's regulatory system and build popular support for new and stronger regulatory legislation (though not yet in Washington).

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