I came across an article from Reclaim the American Dream: Issue Brief: Inclusive Capitalism. It offers a progressive critique of present capitalism and a progressive vision of what a fair market would look like. It’s not a deep analysis, but some good points are brought up.
Here is an issue brought up just yesterday by my business management, capitalist-loving, fiscal conservative father:
“In that era, CEOs of America’s corporations did not pay themselves vast sums of company stock, as they do today. That was frowned upon as unethical insider trading, because obviously top corporate executives have inside information on new products about to appear or other major moves on the horizon.”
This is about how and where companies invest their money. Obviously, CEOs have come to see one of the best ways to invest money is by paying CEOs more. That is problematic, even ignoring the charge of “unethical insider trading” and the related moral hazard my dad mentioned. The problem isn’t just that CEOs make more money than they are worth (i.e., more than the value they contribute to the company), but that money invested in CEO pay could have been invested elsewhere.
Companies used to invest more in workers, for example. Besides ensuring their workers were healthy and safe, they did on-the-job training. It wasn’t just a time when economic mobility was high in the larger society. Mobility within companies was also higher. It used to be much easier for someone to start with an entry level job and work their way up into management.
Companies used to see employees as long term investments and employees tended to stick around for that reason. As my dad has told me, some Japanese companies still have this attitude, looking to hire people who will be long term members where the company commits to the worker in expectation that the worker will commit to the company. It’s an ethos of social trust and responsibility, a company as a kind of community.
But it goes way beyond just about the value seen and invested in employees. There used to be a mentality that a company should go to great effort to reinvest back into the company itself. That has changed so now it is seen as a priority to ensure shareholders get profit, no matter the long term damage done to the company. There has been a loss of not just social responsibility but also long term vision.
“Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back (company) shares for what is effectively stock-price manipulation,” economist William Lazonick reported in the Harvard Business Review in late 2014.
“The contrast between what business does today and what it used to do is stunning. In a study of hundreds of major U.S. companies, Lazonick found that in the late 1970s and early ‘80s, major U.S. companies ploughed close to half of their profits into expanding their businesses, funding R&D, retraining workers and paying them more, and paid out the other half of profits to shareholders.
“But from 2003 to 2012, Lazonick found, shareholders got 91% of corporate profits and growth got only 9%. That is a disastrous ratio the American economy.”
The focus of companies used to be on making the best products possible. Now the emphasis is more on sales and profit, with little sense of pride in doing quality work that contributes to society.
Drug companies, for example, spend more on advertising than they do on R&D; and that doesn’t even count the money they spend on lobbying, campaign donations, and maybe some astroturf. As the above data shows, this shift from investing money back into companies has become the norm.
That reminds me of what made early Quaker businesses so distinct, as they put quality of product before all else and on religious grounds were against manipulative and deceptive advertising. For a Quaker, being a businessman was a divine calling, not just a way to make money. The good and the goods of a business couldn’t be separated from moral goodness of religion and the social goodness of community.
Then again, there is the left-wing perspective. My favorite voice from the left is Joe Bageant. His writing is always amusing and insightful. One of his pieces on capitalism is Waltzing at the Doomsday Ball. With his typical style, he begins by getting straight to the point:
“As an Anglo European white guy from a very long line of white guys, I want to thank all the brown, black, yellow and red people for a marvelous three-century joy ride. During the past 300 years of the industrial age, as Europeans, and later as Americans, we have managed to consume infinitely more than we ever produced, thanks to colonialism, crooked deals with despotic potentates and good old gunboats and grapeshot. Yes, we have lived, and still live, extravagant lifestyles far above the rest of you. And so, my sincere thanks to all of you folks around the world working in sweatshops, or living on two bucks a day, even though you sit on vast oil deposits. And to those outside my window here in Mexico this morning, the two guys pruning the retired gringo’s hedges with what look like pocket knives, I say, keep up the good work. It’s the world’s cheap labor guys like you — the black, brown and yellow folks who take it up the shorts — who make capitalism look like it actually works. So keep on humping. Remember: We’ve got predator drones.”
From that perspective, it is, always was and always will be a sham. I’m sympathetic with that. When the US economy was doing its best, the US military was being ruthless around the world and even back at home the police state was being ruthless toward minorities and the poor. The American Dream was never fully a thing of substance for so many.
I do think ‘capitalism’ has become a problematic word at this point. There is no way to separate it from its long history of imperialism and colonialism, exploitation and oppression. If we honestly care about being free people in a free society with free markets, whatever that might mean, we probably better drop the baggage of capitalism.
Looking back, the capitalism of generations past can seem like a wondrous thing, at least for those who weren’t one of the many being trampled upon. It is true that many benefited and the economy grew. No one doubts that. But at what cost? Maybe what we have become was an inevitable result of what we once were. We just couldn’t see it coming. The tide that raises boats also drowns, and when the tide goes back out as it always does we are left with a bunch of stranded boats and dead bodies.
Maybe we need to rethink the whole thing, not just pine for what used to be. Still, might we salvage some lessons learned from the past?