Reimagining Capitalism: Bold Ideas for a New Economy
The Nation asked a playful question and got back serious answers. Imagine you have the ability to reinvent American capitalism: Where would you start? What would you change to make it less destructive and domineering, more focused on what people really need for fulfilling lives?
We put the question to an eclectic list of people who are known for thinking long term—public-spirited veterans of business and finance, optimistic activists, inventive policy thinkers. Their responses provide a provocative sampler of smart ideas—concrete proposals for reforming the dysfunctional economic system in fundamental ways. These brief essays should stimulate imaginations and maybe start some healthy arguments. At the very least, they demonstrate that the nation is alive with fresh thinking and bold outlines for big change.
The problem, of course, is that none of these ideas have any traction in regular politics. Both parties are locked in small-minded brawls, unable to think creatively or even to tell the truth about our historic economic crisis. Republicans are lost in preposterous nostalgia for small, simple government. Democrats have their own delusions: they insist that regulation will somehow fix whatever is broken, ignoring that the failure of regulation was a principal cause of catastrophic breakdown.
Politicians argue over big government so they can avoid talking about big capitalism, the larger source of our predicament. But reality is not cooperating with their evasions. Despite the so-called recovery, the economic pathologies generated by unbounded capitalism during the past thirty years are expanding. Falling wages and surplus labor, swelling trade deficits and foreign indebtedness, deepening inequality and the steady destruction of the broad middle class—the political system does not have an answer for any of these.
At some point, it will become obvious that our economy will not truly recover until American capitalism is refashioned, stripped of its self-aggrandizing excesses and made to serve the interests of society rather than the other way around. As our commentators observe, this will require deep structural change, not simply new policies. Their essential approach is to reach into the guts of corporate capitalism and fix the wiring. That means changing both rules and operating values. It involves democratizing reforms that will compel business and finance to share decision-making and distribute rewards more fairly.
This vision can be called “inclusive capitalism,” as one essay suggests, or a genuine fulfillment of “democratic capitalism,” as another author proposes. Whatever it’s called, the essence is a fundamental redistribution of power and money. Obviously, this will require a stronger government (though not necessarily a bigger one) that stops subsidizing the maldistribution of wealth and income through its tax code and spending programs. Government has to recover some of the economic levers it purposely abandoned in the era of deregulation, a move that encouraged the obscene inequalities.
Neither party has the stomach to tackle any of these propositions. The public may not even be aware that there are promising alternatives, since no one prominent in politics ever talks about them. What voters do know, however, is that the system no longer works.
The failure of old certitudes creates the space for new thinking. The Nation intends to seize this moment and foster a free-running conversation about how to build a more humane economy. We have the space to revive some long-neglected heresies and inspire fresh departures. The old language of left-liberal politics—“cooperation” and “collective action,” “human sympathy” and the “common good”—has been suppressed, even ridiculed, for thirty years. We must reintroduce and explain these concepts to younger generations who are thirsty for hope and substantive commitments. And we should be receptive to what they, in turn, can teach us. Our contributors’ responses to the question we posed were so enthusiastic they spilled out of our pages and onto our website, where this conversation will continue, we hope, with reader input. This special issue is not a one-shot deal.
Some of the reform ideas presented here may sound like obscure technical fixes, but they actually address the root causes of corporate irresponsibility. Kent Greenfield of Boston College Law School explains how major corporations distort the original purpose of the “limited liability” law to shield themselves from accountability. Former trial lawyer William Lerach offers a simple way to crack the protective shield—create independent “public directors” who will act as boardroom watchdogs. Sarah Anderson of the Institute for Policy Studies recounts how a tax on financial speculation would curb the financial system’s reckless excesses while producing vast revenue for public spending.
Reforms may also create new business and financial institutions committed to serving the public interest. Activist Barbara Dudley describes the campaign to create a State Bank of Oregon equipped to provide low-cost lending the private sector does not cover, and designed to protect local money from Wall Street. Law professor and Maryland State Senator Jamie Raskin explains how Benefit Corporations liberate businesses to adopt broader priorities than simply maximizing profits.
As several contributors explain, the operating culture within a company is often determined, for better or worse, by the structure of its ownership or the corporation’s size and scale. Barry Lynn of the New America Foundation argues for a revival of anti-trust law to protect customers from the brutality of monopoly capitalism. Pioneering activist Joe Costello looks at the ways mega-corporations exploit intellectual property laws to stifle competition and calls for an “open information” policy to encourage the free flow of ideas. As financial consultant Vincent Panvini Jr. explains, the owners of small businesses typically act more responsibly than big-time CEOs because they have a personal stake in the companies they run; he suggests reckless behavior by the big boys could be curbed if they faced similar risk. Christopher Mackin, who advises businesses and labor unions on how to create employee-ownership plans, looks at the growing number of companies that have followed this path.
Achieving a more equitable distribution of incomes and wealth is fundamental to creating a just society. As professors Richard Freeman of Harvard and Joseph Blasi and Douglas Kruse of Rutgers suggest, enormous progress can be made simply by eliminating tax subsidies for corporations that distribute generous profit-based bonuses to the top officers but little or none to the employees down below. Ray Carey, the retired CEO of ADT Inc. and author of Democratic Capitalism, proposes ingenious reforms to protect retirement funds from Wall Street’s empty speculation.
The most threatening challenge to capitalism is arguably the finite carrying capacity of the natural world. If the industrial system is not transformed, the destruction of nature will limit economic growth and eventually bring down the entire system. Leslie Christian, who operates Portfolio 21—an investment fund that adheres to rigorous new standards for sound investing—explains why companies that do not change are doomed. Dirk Philipsen, a historian at Virginia State University, dismantles the great fallacy that GDP is an accurate measure of progress. A sustainable economy depends on people understanding his message and acting on it.
In pivotal ways, the government must claim a more aggressive role in the economy. Instead of passively handing out subsidies to privileged private interests, Washington should devote its energies to producing things that private capital won’t pursue. Public Citizen president Robert Weissman argues that Washington must support the production of public goods—if only to help nudge the private sector—and flex its muscle in times of crisis, demanding obligations in exchange for bailouts and encouraging innovative experiments to serve the public interest.
L. Randall Wray, an economist at the University of Missouri, Kansas City, argues that government must act as the “employer of last resort” so that every American who wants and needs to work can get a job. A permanent government commitment to full employment would profoundly alter the harsh tides of capitalism—sharing the costs of downturns with everyone instead of dumping the losses on the unemployed. Full employment is possible, humane and also rational economics, Wray argues.
Does all this sound too fanciful? Skeptics can make a strong case for their doubts, and one has to respect the possibility that they are right. An eloquent dissenter, Eugene McCarraher of Villanova, insists that capitalism cannot be reinvented and must instead be replaced with something better. What needs reinvention, he suggests, is “our moral and spiritual imagination.”
In other words, the new politics does not start in Washington. Trying to persuade policy elites and incumbent politicians to take these ideas seriously is a waste of time. Reform politics has to start on the other end, with the experiments and experiences of ordinary people.
That approach is the hard work of authentic democracy. It makes no promises of success but can be ennobling even in failure. It allows us to become citizens again, discovering how it feels to pursue our convictions liberated from the dead zone of status quo politics. The usual efforts to prop up timid politicians without frightening them often have a self-silencing effect. Advocates with bold ambitions are marginalized. Good ideas get worn down if they are never discussed. Sincere convictions atrophy when one is not allowed to express them.
So let’s talk about these ideas and see if anyone wants to take them seriously. This should be fun, claiming a personal role in reimagining the future. Our first great task is to change the way we talk about what’s possible.
Jamie Raskin: “The Rise of Benefit Corporations”
William Lerach: “To Guarantee Corporate Responsibility, Open the Boardroom Door”
Sarah Anderson: “Cut Wall Street Down to Size With a Financial Speculation Tax”
Robert Weissman: “The Government Nudge: A Public Role in the Private Sector”
Dirk Philipsen: “Rethinking GDP: Why We Must Broaden Our Measures of Economic Success”
Christopher Mackin: “Employee Ownership: The Road to Shared Prosperity”
Barbara Dudley: “In Oregon, a Grassroots Campaign for a State Bank”
Kent Greenfield: “Reforming Limited Liability Law”
L. Randall Wray: “The Job Guarantee: A Government Plan for Full Employment”
Joseph Blasi, Richard Freeman & Douglas Kruse: “Inclusive Capitalism: Improving Benefits and Performance With Smarter Incentive Pay Plans”
Leslie Christian: “A Richer Shade of Green: The Wisdom of Sustainable Investment Funds”
Vincent A. Panvini Jr.: “Performance-Related Compensation for Corporate Executives”
Joe Costello: “Open Source Politics: Safeguarding the Free Flow of Information”
Eugene McCarraher: “The End of Capitalism and the Wellsprings of Radical Hope”