The American Interest

Corporate America in Crisis

The ongoing turmoil in America’s stock markets and a series of corporate scandals have attracted considerable attention from commentators and editorialists all over the developed world, who fear that economic instability in the United States may plunge the world’s top businesses into a vicious cycle of doubt and deferred capital investment.  With the world’s stock markets still reeling from a long list of corporate scandals that have destroyed some of America’s biggest companies, one comfort appeared to remain: America’s economic recovery seemed strong.  On the last day of July, however, that reassurance was brushed aside as well, when survey data published by the Federal Reserve confirmed indications of a slowing and even faltering recovery.  Some analysts claimed that the bottom has been reached: “It’s a time of maximum pessimism, so I must buy more US stocks,” declares the Sydney Morning Herald’s James Bone.  Others—the majority—were markedly more nervous, as the Dow touched its lowest point since October 1998, thus officially wiping out all of the nominal gains made in the dot-com explosion of the late 1990’s.

The Financial Times saw the passage of the Sarbanes-Oxley Act as “only the first mouthful to feed what looks like an increasingly large appetite for far-reaching overhaul of US corporate governance on the part...

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