Senior Fellow of Real Clear Foundation Rupert Darwall Sees the Polity of Businesses Becoming Armed Tools of Political Agendas

Senior Fellow of Real Clear Foundation Rupert Darwall Sees the Polity of Businesses Becoming Armed Tools of Political Agendas


Live from Music Row Friday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. –  host Leahy welcomed Senior Fellow at the Real Clear Foundation, Rupert Darwall to the newsmakers line to discuss his recent article and defines the design of ESG.

Leahy: We are delighted to welcome to our newsmaker line from across the pond, Rupert Darwell, a senior fellow at the Real Clear Foundation. He just released a study on capitalism, socialism, and a thing called ESG. And if you haven’t heard about it, you got to listen up. It’s very important what he’s written. Rupert, thanks so much for joining us this morning.

Darwall: It’s my pleasure, Michael.

Leahy: ESG, it sounds like a food additive, but it’s much more dangerous. Tell us, what does ESG mean? And why should we care about it?

Darwall: ESG is environmental, social, and government. It’s a form of investing. It’s meant to be for the clean, moral, pure types that want to make the world a better place. And it’s a bit of a con, really, because what it says on the outside is ESG investing, you’re doing well by doing good.

So you’re going to make more money by doing the things that are going to make the world a better place. But actually, it’s all about that at all. It’s politics by other means. It’s the politicization of business and investing. And you’ll say goodbye to those higher returns because that’s just sales chatter.

But fundamentally, it’s about turning capitalism into something very, very different. And it’s also about political power. It’s about giving financial oligarchs on Wall Street and in the big state pension funds like CalPERS in Sacramento and the Neivers New York pension funds, enormous amounts of political power of business.

Leahy: Yeah, that’s exactly it. We’ve noticed, of course, I guess the publicly traded corporations, I don’t know, 90 percent of them seem woke beyond repair. They’re always preening about some moral issue, and it’s just highly destructive it seems to me. When did this really start being a thing?

Darwall: Well, there was a phase of it, I think, in the 1970s because Milton Friedman wrote a fantastic article saying the role of business is judged by how much money it makes for shareholders. It’s about profit. Because if you’re a good business creating and innovating things in the market that customers want, you’ll do well and that kind of thing.

It kind of then went through the 80s and 90s and then receeded. But it’s really come back with a vengeance now. And you may remember, a couple of years ago, the Business Roundtable issued that 181 CEOs signed the Business Round Table statement on stakeholderism.

The businesses are meant to serve a wide variety of interests and demoting the stockholder. So it’s really come in very powerfully. And, of course, the so-called climate crisis, this existential threat to life on earth kind of thing, businesses have got to emit zero. So it’s really kind of taken business and particularly financed by storm might say.

Leahy: I don’t know what your background is other than your finance guy in London and you write about it. I’m a graduate of Stanford Business School. I have an MBA from Stanford way back when. And what I’ve noticed is the ideas that are taught in business schools today seem much more socialist at the highest level than they were when I was in school.

Tell me what you think about this. You have a generation of left-wing socialists now that are influencing these hedge funds like Black Rock and are serving on corporate boards and are in the marketing departments and the finance departments of Fortune 500 companies and they’re forcing that ideology that they’ve grown up with upon these publicly traded companies. Do I have that right or is there another element to it?

Darwall: I think that’s a very important aspect of it. I would also point to there’s also kind of a revolving door between the corporate affairs department of large corporations. At the end of the Obama administration, you saw a load of Obama administration officials exiting the federal bureaucracy and jumping into the C-suites of corporations.

For example, you mentioned Black Rock. One of the Black Rock guys is now a very senior economic advisor in the Biden administration. So it’s kind of this revolving door. It’s this intertwining of business and politics. And in my view, the business of business, the business of business is business. It’s not politics. It’s not politics by other means.

But what we’re seeing is polity of businesses becoming armed tools of political agendas, which I think is very dangerous for democracy, because these questions should be decided through the ballot box and through the Constitution.

The United States has a brilliant, perfect Constitution, if you like, of representative democracy. And the second danger to capitalism because as businesses become woke, they become less innovative and doing less of driving the things that make living standards rise and which makes capitalism the greatest economic system there’s ever been.

Leahy: The title of your study is Capitalism, Socialism, and ESG. But I look at this interconnection between the very large, publicly-traded corporations and government and politics. And to me, the ism that comes to mind is more a form of fascism. What’s your thought about that?

Darwall: Corporatism, because both socialism in its extreme form and fascism, but they both see that the political ideology must trump everything and every aspect of society. And particularly economic ones should be the tools of the state.

Yes, there is. You are absolutely right. It’s a form of corporatism. It’s very nasty. It’s unrepresentative, as I say, it’s about usurping, the Democratic prerogatives of the people through the ballot box.

Leahy: The other element of this to me, for free markets and capitalism to work, the capital markets have to work for all sizes of companies. Large companies and small companies. And of course, startup companies, small companies, entrepreneurial companies, that’s where most innovation does occur.

It seems to me that the rise of ESG, environmental, social, and governance standards among larger corporations has kind of made the capital markets much more difficult for small businesses and those that are providing innovations. Do you see that as well, or am I just looking at it from a small business lens?

Darwall: No. I think what happens is that large businesses call for large woke businesses if you like. When they embrace this agenda they say, well, our business model could be under threat from startups, therefore, because we’re doing what the politicians want and because what Democrats in Washington want, we need protection from startups.

Inevitably you get distortions in markets. You have you know what economists call rent-seeking behavior and businesses trying to protect themselves from businesses that are unencumbered by ESG and are free to perform as they want. I think you’re absolutely right. It’s a big threat to the layer of new businesses which really have driven growth and innovation.

Leahy: The other thing is to look at alternatives to ESG. Is this just a huge group think among hedge funds and Fortune 500 companies? Is there anybody in that world that you see right now that is not embracing ESG? And what consequences are they facing?

Darwall: I would say corporate CEOs are very exposed to proxy battles. If they put their head above the parapet, they’re likely to have a shareholder and stockholder revolt at the next annual general meeting. So they’re quite nervous individuals.

They have to go with the flow. The greatest economist of capitalism was Schumpeter. He wrote that an incredible book, Capitalism, Socialism, and Democracy. And in that, he described the publicly traded corporation as capitalism’s vulnerable fortresses for exactly this reason in that you have a split between ownership and control.

But I think the ESG thing because it’s such a distortion of the capital markets, there will be people who come in and contrarian investors who can make lots of money out of the fools who follow the ESG sales pattern. Because when you have people investing for non-financial reasons, they make mistakes.

They’re the easy ones you can pick off. I think there’s an aspect of it that this is set up so that more savvy investors at some point will make a great deal of money from the investors chasing the fools gold of ESG investing on the basis that they’re going to do well by doing good, which is, as I say, is complete junk.

(Commercial break)

Leahy: Rupert, you mentioned before that ESG actually doesn’t perform well financially, and it’s a bit of salesmanship, if you will, for the left. And you mentioned that perhaps some more savvy investors will come up with contrarian views.

I just sent you an email that includes some information about just such a group based here in Nashville, as it turns out, called 2nd Vote Advisors. And basically, they manage funds and they have private funds that are exchange-traded funds.

One is focused on pro-life. The other is focused on Second Amendment-type issues. They say that without 2nd Vote Advisors as a counterweight to existing asset managers, a progressive ESG agenda will continue when investors can rest assured that we will never vote proxies in support of ESG shareholder initiatives. I don’t know if you’ve heard of 2nd Vote Advisors, but it’s almost as if you predicted they would come into existence.

Darwall: It does sound like that. The smart investors will. When I say smart investors, investors that have got their feet on the ground, and they’re the best ones will see this as an opportunity. Because what will happen is that they will dump lowly rated ESG stocks, which means that they’re cheaper for others to buy.

There’s that thing that Ben Graham, the Warren Buffett guru, said, in the short term, a stock market is a voting machine, and in the long term, it’s a weighing machine. And at the end of the day, what will happen is it will be the cash flows that companies generate. The ESG investing movement is creating a massive investment opportunity for smart investors.

Leahy: But besides 2nd Vote Advisors, is there anybody promoting these contrarian options to ESG investments?

Darwall: That’s one of the things that’s needed to happen because what you’ve got is the big three index providers, ETF index providers led by Black Rock. You’ve got State Street and Vanguard. Those big three, which Black Rock is the largest asset manager in the world have gone woke.

Larry Fink is leading the charge on ESG, climate, and on stakeholderism. He has threatened encumbered management to vote against them if they don’t bow to the God of ESG. That means that if you don’t subscribe to that view of politics and that is what it is, it is essentially politics and ideology, you need to find the ETF provider who will vote your proxies the way that you want and not the way Larry Fink wants.

I think in time you will see alternative providers. The market should respond in the way that people who want politically free investing can have that demand satisfied. But as yet, I haven’t seen those ETF providers come over the horizon. America is still the most dynamic economy in the world, the freest economy in the world, and that over time that will happen. There will be a market reaction against this.

Leahy: How is it that a guy like Larry Fink, who is, in essence, a financially sophisticated left-wing ideologue, how is it that we have so many guys like that now?

Darwall: He was a bond trader who correctly spotted the diverse portfolio and index investing. These are both low costs and over time give very good performance. And he’s ridden that. And now he’s made as much money as he can ever hope to.

And he’s got the whiff of political power in his nostrils. And sitting in as chairman and CEO of Black Rock, he has the best of both worlds of having immense financial power on Wall Street and also access to every political leader he ever wants. So there is a lot of that.

There’s something that he said. Every year he writes to corporate CEOs just telling them what to think. And last year he wrote to them and said all this disclosure stuff, ESG and climate disclosure, and so forth. He says the goal cannot be transparency for transparency’s sake.

They normally say, well, the market needs more transparency and more data. Then he went on to say disclosure should be a means to achieving more sustainable and inclusive capitalism. Now, that is politics. That is pure politics and nothing to do with boosting investor returns or anything like that.

This is the guy acting as a politician wielding political power. The proxy votes that are embedded in ETF index funds, he’s stripping the proxies out of them, and he’s casting them according to his ideological prejudices.

Leahy: The founders, Alexander Hamilton, James Madison, Thomas Jefferson, didn’t agree on a lot. But one thing they did agree on that if an aristocratic manufacturing class ever arose in America, it would be bad for the constitutional Republic.

We have now this aristocratic leftwing financial class, and they have no constraints. I think what has arisen here with guys like Larry Fink is exactly the kind of aristocratic modern feudalism that Jefferson, Hamilton, and Madison would have absolutely loathed.

Darwall: I absolutely agree with that. These Wall Street oligarchs are essentially usurping, the prerogatives of the Democratic and constitutional political state. That’s exactly what’s going on. This is a parallel government that is not really accountable to anyone and certainly not accountable to voters. When Larry Fink talks about inclusive capitalism, he’s actually talking about exclusive capitalism, insider capitalism.

Leahy: Exactly.

Listen to the full interview here:

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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.







Tennessee State Senator Frank Niceley Talks About His Bill for Changing the Way We Elect Our U.S. Senators

Tennessee State Senator Frank Niceley Talks About His Bill for Changing the Way We Elect Our U.S. Senators


Live from Music Row Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. –  host Leahy welcomed (TN-17) Senator Frank Niceleyto the newsmakers line.

During the first hour, Niceley explained his current bill addressing the elections of U.S. Senators and its historical perspective. He later touched on the need for parents and educators to teach our children about the differences between a Republic and a Democracy.

Leahy: We are joined now by State Senator Frank Niceley. Senator Niceley, thanks so much for joining us this morning.

Niceley: Well it’s good to be here Michael.

Leahy: Well, you have been involved in Tennessee politics for some time. You’ve I guess you were first elected to the State House of Representatives back in 1988. You were elected to the state senate in 2012. And you are really one of the conservative icons of the Tennessee General Assembly.

Niceley: Well, thank you I guess. I don’t know what that means. But you get you need to remember I was gone 12 years  in the middle.

Leahy: That’s right.

Niceley: A lot of it that does a politician more good. I think everyone should go home and some of us should stay home and few maybe can come back. I was in exile for a while and that I think I may learn more in exile than I did when I was in politics.

Leahy: So your you are UT graduate. And you’ve been farming for much of your career. Tell us about that 12 years that you were not in politics. What did you learn in that 12 years that you were not in politics?

Niceley: Well, you start to really know who your real friends are when you get beat. And I was just thinking the other day about what Donald Trump is going through now and what I went through in 1992 and it doesn’t hurt so bad when the opposite party beats you for one year which when your own party turns on you a little bit, that’s what hurts.

I’ve always been fairly conservative. And in 1990 I was probably a little more conservative than the Republican Party in Tennessee would ready for and certainly not as much as the Democrats are ready for. But anyway, I’m back and persevered. Tennessee a well-run state – probably the best-run state in the nation. Everybody wants to change something and occasionally I think we need to change something. And then I get to think, why change anything? We’re the best-run state in the nation. We owe less money. We have the lowest taxes. We’ve got enough money to take care of retirees. Why change much?

Leahy: That’s a good point. There is one proposal that you’ve made several times. I don’t know if you’ll have it introduced in this current session of the Tennessee General Assembly. But you want to go back to the way the election of United States senators was before the Constitutional Amendment that came in 1913 that provided for direct election of United States senators. You have had in the past proposals to make the election of a United States senator here a function of how the members of the Tennessee General Assembly vote. Tell us the rationale for that. And is that something that’s on your agenda to propose this session as well?

Niceley: Well it is. And the problem is that you have to give everybody a history lesson every time you start talking about it. But more and more people are beginning to realize that the Founding Fathers were smarter than we are. And the Founding Fathers, I don’t know how they did it. I’ve been on a lot of committees. I’ve never been on a committee that could hold a candle to them.

But they wanted the U.S. Congress – the House of Representatives – to represent the people with direct election. And they wanted a U.S. Senate to be the state’s house. They wanted the Senate to represent the states. Most people don’t realize for the first 115 years or so, the U.S. senators were elected by the state legislatures. And in 1913 we had a surge of progressivism.

We got the income tax and the Federal Reserve and we changed the way we elected our senators and we drifted away from being a Republic toward being a democracy. Well, democracy was a bad word in 1776. No one talked about democracy. It’s not mentioned in the Constitution, the Declaration of Independence or any state constitution mentions the word democracy.

But 1913 is an unlucky year and in unlucky 13 we changed the way that will we selected our U.S. senators. Now, the Seventeenth Amendment says you have to have an election. And we would still have an election. People say well you’re trying to take away my right to vote. No, we would still have an election in the fall. What my proposal would do would be to change the way that we select our nominees.

Instead of having a primary, we would have basically a caucus. Like some states have a caucus and some states have primaries. And some states have jungle primaries like California and Louisiana where you have a primary and the two top vote-getters run against each other in the fall, even if they’re both Democrats or both Republicans.

But basically what we would do is we would let the state legislature, the Republicans would dominate the U.S. Senate nominee for the Republican side the Democrats for the Democrat side. It would keep these U.S. Senators from having to run through a primary. If you get to thinking about it, a man of the caliber or a woman of the caliber that we’d want to send to the Senate probably doesn’t have time to run around the state for a year and a half in a primary.

So this would kind of eliminate the primary and we would have an indirect election for the nominee. And it would be a tough vote. I mean, I would have people wanting to vote for Michael Patrick Leahy and have people want to vote for this one of that one. It’d be a tough vote for the legislature. But it would the U.S. senators who would probably pay a lot more attention to the state legislatures than they do now.

Leahy: That’s the key point, isn’t it? Because under the current system the United States senators don’t really pay any attention or very little attention to the desires of the state legislature. That’s how I read it.

Niceley: Yes, very little. But we’ve got two great senators right now but there’s nothing personal about this. And I hope there our senators wouldn’t take it personally if they do a good job. I’m sure we would nominate them back. But you know in the big scheme of things, say 10 red states decided to do this, it would have one congressman that would say it would change Washington overnight if the U.S. senators started paying attention to what the state’s really wanted and needed instead of who they listen to now. Who probably are the big contributors.

Leahy: I like your proposal Senator Niceleybecause what it does is it goes back to the founder’s original intent to have the state’s sovereign in many areas. I find that since 1913 the national federal government has usurped many many powers that the founders meant to be powers of the states. What do you think of that?

Niceley: You’re exactly right. And that was a big fear. If you go back and read the original papers the big fear was that the federal government would usurp. We need to teach our children what usurp is. And we may have to teach our high school teachers what usurp means. And you don’t pour it on your pancakes. (Leahy chuckles) But they worried about the federal government usurping the powers of the state.

And their fears were right. I mean that’s what they’ve done. When the final history and I say well what happened to the United States of America? Everybody will have a different opinion. Well, it was this and that. I think it was that 1913. It was a bad year. And one of the bad things that year was the way we changed electing our U.S. senators.

Leahy: Yeah, I think you’re exactly right Senator Niceleyin that regard.

Niceley: Most people don’t realize the value of a republic. … “Republic” has been kind of pushed back in the corner somewhere and everybody talks about “democracy.”

But “democracy” is nothing more than two coyotes and a sheep voting on what’s gonna be for lunch. (Leahy laughs)

Leahy: That’s good.

Niceley: A Republic protects the rights. If you don’t like the way Tennessee’s operating my go to Oregon. if you don’t like Oregon, you know go to Michigan. It gives us somewhere to go. But when the federal government takes over and they come down with this one-size-fits-all, there’s nowhere to go.

Leahy: Well, it sounds like I am going to invite you to be our special guest at our fifth-year event. You probably haven’t heard about it. We hold a Constitution Bee every year here for high school students. And now last year for the first time we opened it up to high school students around the country. We gave away educational scholarships last year.

The winner got $10,000 educational scholarship. Second place gets $5,000 and third place gets $2,500. We’re going to hold this year’s National Constitution Bee in Brentwood on October 23. I’d like to invite you to come and be a guest speaker to our kids and talk a little bit about your view of the difference between a republic and a democracy.

Niceley: I’d be glad to. That would be great. And I mention this when I make speeches around the Lincoln Day dinner. It’s up to us to educate our children. We can’t depend totally on the school system. The parents have got to educate them. And there are several words that these young people need to know and that they need to understand and to be able to know exactly what they mean.

Usurps is one. Democracy. Republic. We throw them around but a lot of time they go over the head of our children and they don’t understand what we’re really talking about. But one advantage of this proposal that I have is that it would take care of term limits. People say well we need term limits. Well, those term limits are another way of depriving you of your right to vote. If you have a good politician and if you should ever be lucky enough to get a good politician you’d certainly want to keep them.

Well if you’ve got mandatory term limits they’d be gone with the rest of them. But back in the days when the state legislatures nominated or elected the U.S. senators, they didn’t stay very long because of different reasons. The legislature would get tired of them or they got tired of being up there and all they could do was the work of the states.

Listen to the full first hour here:

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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio