There’s no question that the U.S. economy of 1970 was less than rigorous in its use of management and workforce. The regulated commercial banking sector had a very easy life; the famous “borrow at 3%, lend at 6%, be on the golf course by 3 pm” quip was pretty close to reality except in the big financial centers. The automobile industry and other unionized sectors suffered from “blue-collar blues” so that when I went round the GM plant in Framingham, Mass. in 1971 I was fascinated to see workers asleep between the assembly lines. Management life in those sectors wasn’t much more strenuous either, unless you were really serious about office politics. After 1970, all this was forced to change, by deregulation and international competition. Yet one is forced to ask: has the U.S. economy really achieved industriousness, or has it been side-tracked into short-termism and greed?

In William Hogarth’s 1747 series of 12 engravings “Industry and Idleness” the fate of the Idle Apprentice Thomas Idle is considerably crueler than that of a 1970’s unionized worker or golf-playing manager; he ends up being hanged for murder at Tyburn. On the other hand, Francis Goodchild the Industrious Apprentice enjoys riches and respect, marrying the boss’s daughter and becoming Lord Mayor of London (unlike in 2012, the coach appears to make it through the procession without the wheels falling off!) However the important difference from a modern success story is that Goodchild’s industriousness is both persistent over his whole lifetime and accompanied by a sound set of moral and ethical values. Goodchild attends church regularly, keeps his master’s accounts diligently, has a solid family life and abstains from the vices of drunkenness, gluttony and gambling.

Goodchild’s 2013 would-be successor resembles him in one respect, at least; he avoids gluttony, which is now thoroughly unfashionable. However the life-long devotion to toil, the solid moral values and the abstention from excess generally are more or less absent.

The changes since 1970 in the U.S. economy have been more successful in changing workers’ behavior than management’s. On the shop-floor only 7% of the private sector workforce is unionized, and by and large sleepers are absent from modern factory floors – for one thing, there are so many robots that the few remaining humans all have real jobs to do.

Even in the private sector however the Goodchild paradigm has been missed, because of the ephemeral quality of most private sector jobs. When large organizations randomly “cut headcount” at frequent intervals without any overpowering need to do so, virtue and diligence become rewarded with lengthy periods of odious “networking” to find somewhere else to be virtuous and diligent. Needless to say, in such an atmosphere integrity tends to be eroded, and employees look for ways to cut corners and thereby achieve “drop dead” money at an early age so that they never need to network again.

In the public sector unionization has risen sharply, and in areas such as education sleepers abound. The increase of administrative staff in relation to mainline teachers in both public schools and colleges has created a plethora of new jobs in which slumber is the most productive possible activity for the occupant, since any achievements are almost certainly highly damaging to the institution’s proper function and expensive for the taxpayer. Of course, the public sector also contains perverted Industrious Apprentices, whose goals like that of EPA senior manager Al Armendariz, are something like “finding businesses not compliant with the law and make examples of them” — Armendariz compared his strategy to a Roman crucifixion. As soon as the government gets involved, we learn that idleness may sometimes be a relative virtue!

Nevertheless for management, incentives have been re-written, so that the 1970 manager’s ambition of improvement to the golf game is no longer permitted (for one thing, golf is now regarded in top management circles as being hopelessly sedentary and not expensive enough.) Two factors in particular have changed the outlook: the plethora of takeovers of previously satisfactory public companies by private equity groups and the proliferation of massive stock option schemes.

Takeovers give top management the same job insecurity as ordinary employees. However unlike ordinary employees top management can do something about it; it awards itself massive “golden parachutes” – at which point it doesn’t really mind being taken over, since the rewards are so great. Takeovers by larger companies are however not especially attractive for top managers, because they turn them into middle managers in the larger organization – bad for the ego, and in the long run for the earning capacity.

However takeovers by private equity groups are extremely attractive, because they give managers the opportunity to become an “entrepreneur” and achieve entrepreneurial levels of reward. Needless to say, once the company has been taken over by private equity, short-term gains become uppermost, as debt must be paid off and the company prettied up for a sale to a larger company, another private equity group or the general public. Any Goodchilds in this environment soon get chewed up; their solid long-term virtues are no longer required, as the objective for both company management and the private equity group becomes the quickest exit possible at some substantial multiple of the original equity stake.

For those managers not lucky enough to be bought out by private equity, there are stock options. In the 1990s, when the cost of options did not have to be reported on the income statement, they were a pure greed mechanism as management could siphon off more than 100% of shareholder profits through options. Since the accounting reforms after 2000, they have been somewhat more controlled. However they are still a massive deterrent to long-term oriented Goodchild behavior.

For one thing, Goodchild management produces steady progress, a moderate increase in profits each year, which is normally rewarded by a modest and persistent increase in the stock price. By and large, this is not very interesting to option holders – even five years of modest increases do not provide a real bonanza. In modern companies therefore, management adopts a different technique; it leverages the company, engages in an acquisition spree, and runs it on a short-termist basis, producing bursts of magnificent profit which cause the stock price to soar, interspersed with periods of massive loss and writeoffs, in which the stock price collapses.

For ordinary shareholders with no inside knowledge, this is very unattractive. They are subject to very high volatility on their holdings, receive few or no dividends (which are unattractive to option holders, because they don’t get them) and frequently buy in periods of euphoria, when prospects look best, and sell in despair at the bottom.

For management however, this volatility is a godsend; they can cash out their options during periods of euphoria and then reload when the share price collapses, granting themselves rights over a substantial percentage of the company at the bottom. Many option-rewarded managements have discovered they can exacerbate this tendency even further, by carrying out stock buybacks at the top, goosing the price even further, and being “forced” to undertake emergency share issues at the bottom, depressing the share price and allowing management to acquire options over correspondingly more shares.

Needless to say, a Goodchild can’t survive in this environment. Tom Idle doesn’t do very well either, unless he joins a bank trading desk and cashes out at 40. However a third character unmentioned by Hogarth, Samuel Shyster, does very well indeed. With Tyburn no longer an option and excellent lawyers available to fight off any SEC investigations, Shyster is the true top management model for a modern Hogarth to depict – contrasting him perhaps with Orville Outsider, the unfortunate private shareholder whose savings and pension are inexorably eroded by Shyster’s activities.

You want final proof? In this generation there has been one and only one obvious example of a Francis Goodchild, diligent all his life, happily married with five children, highly successful in both business and public service, and “giving back” by donating more than a tenth of his earnings to charity. The Republicans, with their usual ham-fisted misreading of the zeitgeist, nominated him for President last year. And Mitt Romney got slaughtered.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)