Can Elizabeth Warren's Big New Idea Save Capitalism (and America) From Itself?
This isn’t socialism, but it's an attempt to make the brutal "free market" a little more responsive to the needs and demands of the workers who toil within this flawed economic system
Big U.S. corporations posted record profits again in 2017 — it’s just what they do these days, seemingly regardless of whether the president or Congress are Republican or Democratic, or whether or not the average working schlub is doing OK. And that’s even before Big Business reaped the billions in benefits from the new federal tax cut that’s about to explode the deficit in Washington. The Dow Jones is still hovering near its record high — thanks to a bunch of stock buybacks that are corporations’ favorite use of all those dollars just lying around, since that enriches their CEOs and their wealthiest shareholders.
Very little of this remarkable windfall has trickled down to the everyday middle-class workers like you and me.
The latest evidence came Thursday from the liberal-leaning Economic Policy Institute, which found that CEO pay at the biggest American corporations skyrocketed another 18 percent in 2017, to a lofty average of $18.9 million, much of that fueled by stock options and buybacks. And hey, everybody deserves a raise, right? But here’s the thing: While CEOs have seen their salaries soar 72 percent during the comeback from the Great Recession — 2009-2017 — the average workers has gotten a measly 2 percent raise, according to the EPI.
Some of this is all the logical end game of ideas that have become increasingly enshrined in America’s political and economic culture since the early 1970s — a) that the only true goal of a corporation is to make the maximum amount of money for its shareholders and b) as espoused colorfully by Mitt Romney and ratified by the U.S. Supreme Court, corporations are people with all kind of rights that sentient, breathing human beings would love to have, with the ability to spend millions to elect a political candidate and call it “free speech.” Corporations may be considered “people” in 21st Century America, but that hasn’t made them good citizens, let alone the kind of person you’d like to have a beer with.
Enter Massachusetts Democratic Sen. Elizabeth Warren with the biggest and boldest idea of the 2018 midterm election season — a bill called the Accountable Capitalism Act, which essentially says that if corporations are people, those people are going to have to follow a few rules of the road so that the rest of us aren’t stuck in the rush-hour traffic, chocking on the polluted air of a failing system.
In a year where the debate between a knee-jerk defense of a kind of papal-infallibility capitalism and newish — and too often vague — calls for a brand of democratic socialism is running second as the Big Political Story, only trailing the Cheeto-colored Twitter fingers in the White House, Warren’s Big Idea would split the difference. In a sense, her bill calls for new rules that would force a return to an old hierarchy, the era of a worker-powered middle-class prosperity that benefited so many Americans in the decades right after World War II.
“For the past 30 years we have put the American stamp of approval on giant corporations, even as they have ignored the interests of all but a tiny slice of Americans,” Warren — who is expected to coast to re-election in the Bay State this fall — wrote in an op-ed for the Wall Street Journal. “We should insist on a new deal.”
The Accountable Capitalism Act only targets larger corporations with more than $1 billion in revenues, which would cover a few thousands companies that primarily dominate economic life in America. Some of its key provisions:
- Corporations covered by the bill would be required to obtain a federal charter of corporate citizenship from a new office of United States Corporations, within the Department of Commerce. That charter that would require the firm to take the interest of all stakeholders — including employees, customers and its neighbors, and not exclusively the shareholders — into account.
- These corporations would also be required to allow workers to elect at least 40 percent of the board of directors.
- To make the kind of large political donations that have been allowed under the Supreme Court’s Citizens United ruling, the corporation would need the approval of 75 percent of its shareholders and 75 percent of the board (which, under the new scheme, would mean some of the workforce representatives would have to sign on).
- The ability of corporate executives to pay themselves handsomely through quick sales of stock would be restricted, by requiring C-suite denizens to hold onto shares for at least five years and three years after a stock buyback.
Her ideas about capitalism worked in the 1950s and ’60s for a variety of reasons, some of which can’t be replicated (the post-war weakness of Europe) and some of which shouldn’t (economic gains didn’t flow toward non-whites or promote women in the workforce). The big driver of the decline of the American middle class has been the erosion of labor unions, which once stood as a force to make sure that workers got a raise, and more equitable benefits.
To be sure, there’s no way that any measure that seeks to reign in the power of CEOs and corporate investors goes anywhere in the current Congress. And even if Democrats regain some measure of power in 2019 and then retake the White House in 2021, Warren’s bill is probably more of a conversation starter than what could ultimately emerge from the legislative meat grinder.
But it’s a conversation that need to be had, right now. Modern capitalism is sick, sending almost all of its benefits to shareholders even though, as Vox points out in its lengthy analysis, 80 percent of the wealth in the stock market is held by only 10 percent of the population and half of Americans own no stock whatsoever. A democracy can only function when it benefits all the people, and currently the majority of people are workers getting left behind.
The elephant in the room is whether this is the opening salvo in a Warren campaign for the Democratic presidential nomination in 2020. If so, good for her. A campaign should be about ideas, and this measure is a bold and worthy one.
In liberal political circles, Warren and her presidential ambitions may be a little like the love interest in a rom-com that vanishes for most of the plot, only to emerge in the last 20 minutes as the right one who should have been noticed all along. She’s smart and combative, and mostly unspoken reasons for Democratic reluctance — her age (she’ll be 71 on Jan. 20, 2021) and that the GOP will attack her as “a socialist” and with Trumpian blasts of misogyny and racism over the overblown controversy about her heritage — seem silly. Let’s be honest — any Democratic nominee will be attacked as a socialist and with some other mix of awfulness, depending on his or her identity, so whoever that person is sure as hell better be a fighter.
Anyway, it’s hard to be branded a socialist when you’re fighting for accountable capitalism — which is really just a fancy phrase for a fairer deal for workers and the middle class.
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