There was always Germany. The nation that is Europe's most powerful economy seemed the last bastion of honest, tempered capitalism. "Made in Germany" did not just signify robust and clever engineering; it said: Trust us, for no children or kittens were harmed in making this product, no employees were exploited, and no corporate bosses funnelled illicit gains into numbered accounts on sunny islands.
The message was partly bullshit, of course. Germany has had its share of corporate scandals in recent years. Siemens, the pride and joy of German industrial engineering, comes to mind. In 2008, it paid €1 billion in fines on both sides of the Atlantic for an epic bribery scandal. More recently, a German insurance company admitted to a job perk that, curiously, was not mentioned in the HR handouts. Its top salespeople were rewarded with a mini-holiday at a Budapest bathhouse brimming with prostitutes.
But, all in all, the scandals seemed tame and infrequent compared to the corporate and government sleaze-a-thons in Italy, France, Russia and elsewhere, or the epic scandals in the world's financial centres. The LIBOR interest rate and foreign exchange rigging scandals were recent standouts. Banks in Britain and the United States have paid billions of dollars in fines to settle allegations of naughty behaviour.
Then came Volkswagen, the builder of Herbie the Love Bug, the microbuses that still deliver surfer dudes to the California beaches, and the millions of Golfs that gave middle-class families reliable transportation with a touch of style and performance. Lately, VW branded itself as an advocate of "clean" technology that would make diesel a passport to guilt-free motoring.
The image was all blown away in September, when VW admitted to having installed "defeat" software in 11 million cars. The company's engineers designed the gizmo to trick regulators into thinking the cars were far cleaner than they actually were: The U.S. Environmental Protection Agency revealed that certain VW diesel-powered cars spewed out as much as 40 times the allowable limits of nitrogen oxides, the smog-producing gases that have been linked to respiratory diseases. Executives including CEO Martin Winterkorn lost their jobs, VW shares tanked, a blizzard of class-action lawsuits was launched and criminal indictments seem inevitable.
Virtually overnight, VW went from German corporate champion and symbol of benign capitalism to become the very face of greed. Even Milton Friedman, the economist beloved by Reagan and Thatcher, would disapprove. The only responsibility of business, he wrote, is to increase profits "so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
VW didn't meet Friedman's minimum standard, which is saying something. Deception and fraud were not VW's only sins; it also showed contempt for millions of its own customers, the very ones who propelled the company to the No. 1 position in the global automotive industry. No wonder that faith in global, shareholder-driven capitalism is waning.
VW's calculated dishonesty plays perfectly into the hands of the populist message shared by rising left-wing parties in Europe, surging U.S. presidential candidate Bernie Sanders and Pope Francis. Boiled down to its essence, their message is that rising profits do not bring rising prosperity for all and that endemic bad corporate behaviour calls for a new, and highly regulated, economic order.
In a passionate speech delivered in the summer in Bolivia, Francis called unbridled capitalism "the dung of the devil." He decried a system that "has imposed the mentality of profit at any price, with no concern for social exclusion or the destruction of nature." In the U.S., Sanders would break up "too-big-too-fail" banks, restore the Glass-Steagall legislation that had separated commercial and investment banking. And he would subsidize health care, child care and university tuition through a tax on Wall Street trades.
In the United Kingdom, Jeremy Corbyn, the new Labour leader, has received party support for the renationalization of the British rail system. Recent polls show that a majority of Britons, including many who support the Conservatives, would endorse such a move. Support for more privatization in continental Europe has all but vanished.
No one is suggesting that VW be nationalized because it broke the trust of the German people and its car customers around the world, deceived regulators and tarnished the Germany Inc. brand. But it should come as no surprise that the endless tales of corporate sleaze and deception have voters and taxpayers everywhere wondering if open markets and global capitalism are losing their legitimacy, and whether the push to deliver national assets into private hands has gone too far. The popularity of lefties like Sanders, Corbyn and the Pope is no accident.