by Eric Englund
Upon entering college in 1980, I discovered what I believed to be the world's greatest newspaper. It was The Wall Street Journal and I enjoyed it so much because of its pro-capitalist flavor. Although I was a busy student, I still managed to squeeze in some time to read the Journal's high quality articles and its thought provoking editorials. Upon graduation in 1984 (with a degree in business administration), I believed that reading The Wall Street Journal had become a lifetime habit. It was simply a pleasure to read a pro-capitalist newspaper (every weekday) when most others had become left-wing oriented. However, I have noticed that my habit has been broken. Over the past few years, I have read too many articles that left me wondering if this great newspaper has capitulated and joined the anti-capitalist camp. Now, I find myself reading this newspaper perhaps once a week (usually the Friday edition). In my opinion, the April 26, 2002 edition of The Wall Street Journal, has left little doubt that this once-great newspaper no longer is the pro-capitalist institution it once was. What lead me to this saddening conclusion was the front-page article titled u201CMany Banks Boost Earnings With u2018Janitors' Life Insuranceu201D (authored by Theo Francis and Ellen Schultz).
Before going to the gym on Saturday morning (April 27th), I read the above-mentioned article and found it to be uninteresting. This article didn't strike me as something that belonged on the front page of The Wall Street Journal. Initially, I believed that the thrust of the article was simply that banks are purchasing life insurance on their employees and then collecting death benefits upon the passing of employees (I said to myself, u201CSo what?u201D). Being that my undergraduate degree is in risk management, I didn't find anything unusual about a company collecting life insurance proceeds upon the passing of an employee. Over the 18 years I have spent as a surety bond underwriter, I have had the sad experience of having clients (e.g. construction companies) collect a life insurance death benefit when a key employee had passed away. The proceeds of such life insurance policies have either been used to fund the search for a new key employee (in order to make sure the company stays viable and keeps its doors open) or to help fund the process of liquidating the company in an orderly and honorable fashion (indeed businessmen do want to see that contracts are fulfilled even after they have died). While exercising at the gym, I couldn't shake away the thought that such an article was considered to be front-page news by the editors of The Wall Street Journal. Then it struck me that I was looking at this article with a pro-business paradigm. What if I re-read this article from an anti-capitalist perspective? In other words, if I hated profits but loved taxes, then would this be a newsworthy/front-page article? At this point, I couldn't wait to finish my 65-minute workout and read the article again from this anti-business perspective. So here it goes.
A classical Marxist attack on capitalism pertains to the assertion that capitalists exploit laborers. The argument goes as follows: The profit a capitalist generates comes from the surplus value generated by laborers. Therefore, the higher the profit, the higher the rate of laborer exploitation. Now if an employer profits from the death of a laborer as well, then capitalism has become all the more ghoulish. To add insult to injury, these death benefits aren't even taxable and, thus, aren't subject to redistribution by the central government (how awful!). Capitalist exploitation is hitting dangerous new heights (now even the dead are being exploited). So here is the u201Cevidenceu201D of exploitation conveyed by this front-page Wall Street Journal article. The following banks enjoyed additional earnings, in 2001, due to having u201Cjanitorsu201D life insurance programs in place:
- KeyCorp — $15 million in additional net income
- Sovereign Bancorp — $18.2 million in additional net income
- SouthTrust Corp. — $15.4 million in additional net income
- Washington Mutual, Inc. — $31 million in additional net income
At the end of this article, WSJ.com's question of the day is posed: u201CShould companies be allowed to insure employees' lives without their knowledge?u201D Now we have a story! Capitalists are not only exploiting laborers, they are also exploiting the dead. Moreover, this exploitation is being perpetrated in a shadowy and unseemly manner. By gosh, this does belong on the front page of The Wall Street Journal. This is important information if you are an anti-capitalist. Heck, this article's subtitle u201CJanitors Insurance: Profiting When Employees Dieu201D definitely serves to inflame my hatred of capitalism (ouch, that was a bit painful).
Now it is time to go back to the pro-capitalist mindset. Here is what was blatantly omitted from this article. First and foremost, two parties (i.e., a bank and a life insurer) agreed that the bank had an insurable interest in its employees. Therefore, these u201Cjanitorsu201D life insurance contracts were entered into voluntarily with the belief that the insurance contract would be mutually beneficial. The authors of this article didn't even bother to mention that insuring against the death of an employee could benefit the remaining employees. For example, the additional earnings enjoyed by the above-mentioned banks could result in the following:
- Larger employee bonuses
- Larger raises for employees
- Improvements in employee benefits
- Improved management continuity
However, none of these possibilities will be raised if an anti-capitalist paradigm prevails especially when writing a story in which companies are generating tax-free earnings.