Nothing gets made but money

Opinion: October 20, 2012 at 12:00a.m.

There I was last Sunday morning, innocently reading the paper, when the presidential campaign reached out and dragged me back in.

I was trying to avoid political stories. A guy spends all week reading and writing about politics and talking to politicians, come Sunday he needs a break, or else his nose starts to twitch. So I turned to the business pages.

There I read that Ralcorp Holdings had appointed Keith Meister to its board of directors. Meister was described as a former lieutenant of Carl Icahn, the corporate raider fondly remembered in these parts for stripping TWA of its assets in the 1980s, helping shove it into bankruptcy. Every time a St. Louis airline passenger has to change planes in Dallas or Chicago, he can thank Carl Icahn.

“Corporate raiders,” like “arbitrageur,” is so 1980s-Ivan Boesky-Gordon Gekko. These days they call them “hedge fund managers,” or sometimes “private equity fund managers” or (less politely) “vulture capitalists.”

Private equity fund

My nose started to twitch. Mitt Romney made his pile managing a private equity fund. Still, I kept reading.

Keith Meister, 39, having left Icahn’s firm a couple of years ago, now runs his own hedge fund, Corvex Management. It was started with $250 million in seed money from George Soros, the bete noire of the right. Again my nose twitched.

Corvex has been buying a lot of Ralcorp’s stock. Imagine how happy Ralcorp’s executives must have been when Corvex’s ownership stake hit 5 percent and they had to offer Meister a seat on the board.

“Welcome to Seal Harbor,” they would say. “Glad to have you aboard, Mr. Shark.”

Meister has made no secret of the fact that he’s not particularly interested in the delicious private-label foods that Ralcorp manufactures. He’s in the business of making money, not off-brand peanut butter. He has suggested that the company sell itself off, merge with another company or otherwise “reallocate capital more efficiently,” as The Wall Street Journal put it.

“Reallocating capital more efficiently” is read in executive suites as “get your resume updated.” Plants can get closed. Workers get laid off. However, investment banks make money doing mergers and acquisitions. The share price goes up and stockholders make money. This is modern-day capitalism in its purest, creative-destruction form: Nothing gets made but money.

Again, my nose started twitching.

Ralcorp is one of the fragments of what once was Ralston-Purina, a great old-school capitalist company. In 1893, young William H. Danforth, recently graduated from Washington University, got into the horse and mule feed game.

Thus was born Purina Mills. No Gilded Age lily, Will Danforth shoveled feed into bags himself. No tax incentives for him.

He bought from local growers. He traveled and sold and employed local men as millers and as drovers. He rebuilt after the Great Tornado of ’96 and two years later made a deal with Webster Edgerly, a whole-grains kook who called himself “Dr. Ralston” and his movement “Ralstonism.” The new company, Ralston-Purina, added human foods to the product line.

Animal chows

Service in World War I convinced Will Danforth that there was magic in the word “chow.” After the war, he insisted that his animal feeds were animal chows. He adopted a red and white checkerboard pattern to reflect his “four-square” belief in balance among the physical, mental, social and religious aspects of life.

He built a great company and turned it over to his son. They employed tens of thousands of people, who raised families and retired on pensions. He made a great fortune. His grandsons, William H. Danforth II and John C. Danforth, now elderly men themselves, have given most of that fortune away to the great benefit of St. Louis.

These days most of your great tycoons don’t build things as much as they buy and sell them, employing fewer people more “efficiently” and enriching people like themselves who wouldn’t know which end of a mule to feed. In recent years, the financial sector has reaped 30 percent of the nation’s corporate profits.

It could be argued that the country would benefit if public policy were focused more on building things and employing people, not on enabling those who swoop in to shoot the wounded.

Kevin Horrigan is a columnist for the St. Louis Post-Dispatch. Distributed by MCT Information Services.