Our current President embraces the existing corporate mindset for the nation, accepting as unchangeable the trajectory of business and industrial decisionmaking. By accepting only “deals” as a currency of change or bare-knuckle tariffs as behavior modification of our trading partners, the President fails to appreciate the history that brought us to our present situation and fails to identify possible structural weaknesses that could be strengthened. Among our ills are wealth inequality, resistance to climate change events, job exports to foreign nations, and stagnant economic growth for our national community.
Some observers are capable of summarizing such phenomena well, analyzing the predicaments, and noting possible solutions. David Leonhardt, an OpEd columnist for The New York Times [https://www.nytimes.com/2018/12/02/opinion/elizabeth-warren-2020-accountable-capitalism.html?action=click&contentCollection=opinion®ion=rank&module=inline&version=highlights&contentPlacement=4&pgtype=sectionfront], parsed the progress, downturn, and future of our prosperity in American Capitalism Isn’t Working. Citing an October 1944 article in Fortune magazine titled The Economics of a Free Society by William Benton, Leonhardt tells us:
At the time, almost nobody took post-war prosperity for granted. The world had just endured 15 years of depression and war. Many Americans were worried that the end of wartime production, combined with the return of job-seeking soldiers, would plunge the economy into a new slump.
Benton wrote, Today victory is our purpose. Tomorrow our goal will be jobs, peacetime production, high living standards and opportunity. That goal depended on American businessmen accepting ‘necessary and appropriate government regulation,’ as well as labor unions. It depended on companies not earning their profits ‘at the expense of the welfare of the community.’ It depended on rising wages.
This is not mere sentiment but the expression of the character of corporate social consciousness, aware of the national interests that fueled their success.
In the years that followed, corporate America largely followed this prescription. Not every executive did, of course, and management and labor still had bitter disputes. But most executives behaved as if they cared about their workers and communities. C.E.O.s accepted pay packages that today look like a pittance. Middle class incomes rose faster in the 1950s and 1960s than incomes at the top. Imagine that: declining income inequality.
Things began to change in the 1970s. Facing more global competition and higher energy prices, executives became more aggressive. They decided that their sole mission was maximizing shareholder value. They fought for deregulation, reduced taxes, union-free workplaces, lower wages and much, much higher pay for themselves. They justified it all with promises of a wonderful new economic boom. That boom never arrived.
An antidote to this economic straight-jacket requires political leadership and vision that sees beyond the forces and decision making that has brought us to this point. Certainly, that vision is not radical as it challenges the national corporate sector to focus upon fundamentals that, in the past, contributed to an unbounded prosperity and could do so into the future. One path forward is proposed in legislation by Sen. Elizabeth Warren (D-MA) “that would require corporate boards to take into account the interests of customers, employees and communities.”
As Leonhardt points out, Warren is not proposing any fuzzy idea but clearly understands that such economic renewal would not occur organically as it did post-WWII because “financial markets will punish well-meaning executives who stop trying to maximize short-term profits.” “You have to do it with a rule,” Warren told the columnist. The legislative rule would require corporate boards to ensure that the policy criteria noted be constituted of 40 percent membership elected by employees. This proposal parallels the successful model used in Germany. Although the rule might appear to some to be radical, further consideration argues that it is merely a logical and reasonable counterbalance to the present circumstances. It will be interesting to entertain the criticism, especially from trickle-down theorists and advocates of the status quo. At a minimum, a robust discussion of such a rule will draw voices from the wage-earning population to inform political and corporate leaders of that sentiment and will. That is a messaging pathway long too silent.
Join the discussion!