Kudos to the latest issue of the The Economist, features an article describing how American capitalism is morphing. That certainly caught my eye - as any reader of this blog knows, I speak fervently against what I consider the excesses of capitalism... for instance 2001 crash of Asia Pulp and Paper in Singapore's largest debt fault, see here.
An alternative form of financing structure called the Master Limited Partnership is taking hold in America, one where the majority of income passes through to partners/ unit-holders annually, with the main benefit of lowered corporate taxes. (Any local reader familiar with S-REITs will note the similarities in structure). One of the key MLPs today is Kinder Morgan, an energy asset company founded by Richard Kinder of Enron fame/ infamy. (Aside, Enron has many illustrious alum. One that comes to mind is Ogan Kose, Accenture's senior global executive on commodity trading and risk management. They were truly the Smartest Guys in the Room).
Many investors - common and institutional - are however unable to invest in these MLPs, due to regulatory restrictions. These enterprises are also subject to less stringent regulations than the conventional incorporation company. The article rightly points to the potential for gaming of the system by holders of superior asymmetric information (owners, accountants, lawyers etc.), at the expense of people on the outside. More worrying is the observation of that these structures "survive on the whims of Washington" due to the layers of political and legal labyrinth that they are wrapped in. Here again, we see the potential for the creation, or dare I say, perpetuation, of a business-politics nexus.
Like The Economist, I'm doing what I can to shine light on the darker, opaque regions of capitalism where potential for malfeasance is rife.
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