Guest Post by Phil Kiper: Coronado the Capitalist

Coronado the Capitalist

I have always thought of myself as a capitalist, but a few days ago I stood in the New Mexico Museum of History in Sante Fe and read a small plaque describing the invasion of Francisco Vazquez de Coronado into what is now New Mexico and Arizona in 1540.  He began in Mexico with 350 soldiers along with 1000 or so Mexican indians who were intimidated or coerced into joining him on his quest. He headed north in search of the mythical “Seven Cities of Gold”.  His expedition lasted two years, covered some 5000 miles, and cost hundreds of Native American and Spanish lives.  He found no gold and returned to Mexico City in disgrace.  Native peoples of New Mexico came to expect violence in future encounters. 

He did not return in disgrace because of the incredible violence he perpetrated on native peoples whom he slaughtered and often tortured for information about the fictitious cities of gold.  He returned in disgrace because he did not return capital (gold) for the expenditures of his investors.  No one questioned the atrocities.  He failed because he did not deliver expected financial gains.  His expedition was a textbook capitalist venture.  

I was taught that it is always risk versus reward in capitalism.  That is true, but there is a third element, humanity.  There is often a severe human price to pay for financial gain.  History has recorded scores of these.  Coronado lived 500 years ago, but there is still a human price to pay for the return of capital.

If you think these things surely must not happen in today’s modern age, you should think again.  If you want to learn of one recent example, just watch the Netflix series, “Dirty Money.”  The episode, “The Wagon Wheel”  exposes the horrid abuses of Wells Fargo Bank leading up to their exposure by whistleblowers and a free American press in 2016.  Their practice of “cross selling” set unrealistic quotas on low level employees and put huge pressure on managers to sell an impossible number of products or face losing their jobs.  As a result of this, employees signed clients up for multiple products they did not request and had no reason to need.  They specifically preyed on elderly adults, non-english speaking Americans, and college students.  When these sources ran out, they just made up random social security numbers and assigned numerous products to each.  

In reality, it was costing the company money, but investors loved the growth, and stock prices flourished. When the truth finally surfaced, the CEO, John Stumpf, resigned, not fired, and received a “golden parachute” retirement package of $115 million.  Congress conducted hearings and leveled fines, the last of which was $1 billion.  That must have been tough on Wells Fargo.  Just recently Congress gave Americans a huge tax cut which helped few middle and lower income Americans but allowed Wells Fargo to recoup their losses, plus a few billion, with plenty of money left over to buy back their stock at a reduced price due to their transgressions.

I guess I am still a capitalist.  It is the best way to gain wealth for individuals willing to borrow or spend capital and take the risk of losing it all.  If they win, they often employ thousands of people and make the world a better place.  I am afraid that what is happening now is that employees in America are not being compensated fairly by their employers who are making huge gains in the value of their stock even when their companies are not profitable, see Amazon for example.

Capitalism must be checked and closely regulated by our representatives in government and our free press.  I am afraid the lessons of Coronado have not been learned.  If Coronado had some lawyers and had paid millions to the campaigns of the Spanish leaders, he could have spun his adventure, bumped up his stock prices and resigned with a “golden parachute” instead of in disgrace. What a loser!