But how can the economic and political power of the middle class be restored to save capitalism?
Capitalism can be saved through the formation of a new political party. For instance, did you know that the largest political party in the country is neither the Republican Party nor the Democratic Party, but the party of nonvoters?
Just consider the 2012 presidential election. Only 58.2 percent of eligible voters exercised their right to vote.
A third party could be founded to unite apathetic voters, returning a political voice to disenfranchised Americans. This party should endeavor to enable the economic success of the country’s majority.
But to do this, the party would need to reform America’s system of campaign financing, which currently allows wealthy individuals to leverage their money to influence politicians. Beyond that, the party would need to raise the minimum wage, give priority to labor agreements instead of creditor agreements and limit the size of Wall Street’s gigantic banks.
When that’s completed, the corporation too will need to be reinvented. As the system is set up today, the financial interest of corporations means lower pay for the average worker and extremely high pay for executives.
One strategy for changing this system would be to tie corporate tax rates to the ratio of what a CEO makes compared with the pay of an average worker. The greater the difference, the higher the tax. This would give corporations an economic incentive to increase the average wage of employees.
Capitalism is not lost. Yet if it is to survive, it will have to be reorganized to better distribute its profits.
Not so long ago, corporate leaders understood they had a stake in the country’s prosperity.
The October 1944 edition of Fortune magazine carried an article by a corporate executive that makes for amazing reading today. It was written by William B. Benton — a co-founder of the Benton & Bowles ad agency — and an editor’s note explained that Benton was speaking not just for himself but on behalf of a major corporate lobbying group. The article then laid out a vision for American prosperity after World War II.
At the time, almost nobody took postwar 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.
.. Today victory is our purpose,” Benton wrote. “Tomorrow our goal will be jobs, peacetime production, high living standards and opportunity.” That goal, he wrote, depended on American businesses 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.
.. These leftist-sounding ideas weren’t based on altruism. The Great Depression and the rise of European fascism had scared American executives. Many had come to believe that unrestrained capitalism was dangerous — to everyone. The headline on Benton’s article was, “The Economics of a Free Society.”
.. 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 fasterin the 1950s and 1960s than incomes at the top. Imagine that: declining income inequality.
And the economy — and American business — boomed during this period, just as Benton and his fellow chieftains had predicted.
Things began to change in the 1970s. Facing more global competition and higher energy prices, and with Great Depression memories fading, 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.
.. Even when economic growth has been decent, as it is now, most of the bounty has flowed to the top. Median weekly earnings have grown a miserly 0.1 percent a year since 1979. The typical American family today has a lower net worth than the typical family did 20 years ago. Life expectancy, shockingly, has fallen this decade.
.. Elizabeth Warren, the Massachusetts senator, is now rolling out a platform for her almost-certain presidential campaign, and it includes an answer to this question. It is a fascinating one, because it differs from the usual Democratic agenda of progressive taxes and bigger social programs (which Warren also supports). Her idea is the most intriguing policy ideato come out of the early 2020 campaign.
Warren wants an economy in which companies again invest in their workers and communities. Yet she doesn’t believe it can happen organically, as it did in the 1940s, because financial markets will punish well-meaning executives who stop trying to maximize short-term profits. “They can’t go back,” she told me recently. “You have to do it with a rule.”
.. require corporate boards to take into account the interests of customers, employees and communities. To make sure that happens, 40 percent of a company’s board seats would be elected by employees. Germany uses a version of this “shared-governance” model, mostly successfully. Even in today’s hypercompetitive economy, German corporations earn nice profits with a philosophy that looks more like William Benton’s than Gordon Gekko’s.
.. Is Warren’s plan the best way to rein in corporate greed? I’m not yet sure. I want to see politicians and experts hash out her idea and others — much as they hashed out health care policy in the 2008 campaign.
.. But I do know this: American capitalism isn’t working right now. If Benton and his fellow postwar executives returned with the same ideas today, they would be branded as socialists. In truth, they were the capitalists who cared enough about the system to save it. The same goes for the new reformers.
Donald Trump’s ‘look over there’ media strategy is a trap that keeps Democrats from focusing public attention on his bad policies.
We didn’t hear much about the administration’s secret plan to bypass Congress (and common sense) to give a giant tax break to Wall Street investors, a possible violation of the constitution and a betrayal of the president’s promises to stand up for the little guy. It’s the result of what I call the “Trump Trap.”
- He pledged to clean up the D.C. swamp, but he made it swampier.
- He said he would make health insurance better, but he actually asked a judge to strip it away from people with serious diseases like cancer and diabetes.
- His tax cuts ballooned C.E.O. salaries and stock buybacks, but real wages are still frozen.
.. But you wouldn’t know it from watching the news. That’s because his unnecessary insults and controversies create a constellation of outrages that deflect accountability for his actions.
.. A person you probably don’t remember is Cheryl Lankford, who also spoke at the convention. She lost her husband, Army Command Sgt. Maj. Jonathan Lankford, to a heart attack while he was serving in Iraq. Left alone to raise their son, Ms. Lankford used her survivor benefits to enroll in Trump University, hoping Mr. Trump’s advice could jump start her career. After paying more than $30,000 in tuition, she got no training. Like so many Americans, she thought Mr. Trump could improve her economic future, but he swindled her and thousands of others. Now the swindle is happening on an epic scale.
.. we tried to get out of the way of the negative coverage of Mr. Trump and his outrageous comments about Mr. Khan.
But the result was that people heard his message, not ours. So much so that after the election, some people thought Mrs. Clinton never talked about people’s economic lives. But she did. It just went into the black hole of the Trump Trap.
.. Mr. Trump never attacked Cheryl Lankford or the other people suing Trump University. Instead, he disparaged the Latino judge in the case, so we spent a week talking about how racist he is, not about how he had cheated working people.
.. Mr. Trump will say and do things that demand a response from anyone who values decency and morality. The result is that he decides what gets attention — and he’s not held accountable.
.. Third, we Democrats have to pick fights that highlight Mr. Trump’s malfeasance. When the president seeks to take away health insurance from seniors or people with cancer, we can’t let that go unnoticed.
.. Candidates: Beware the Trump Trap. The president has promised to spend a majority of his time campaigning this fall. He will call you names. He will come at you with outrage after outrage. It will be very tempting to wear this as a badge of honor to reap the rewards of social media attention and campaign donations. You will think he is drowning in backlash. But
Candidates: Beware the Trump Trap. The president has promised to spend a majority of his time campaigning this fall. He will call you names. He will come at you with outrage after outrage. It will be very tempting to wear this as a badge of honor to reap the rewards of social media attention and campaign donations. You will think he is drowning in backlash. But he will really just be making the debate about anything other than his own failings or the lives of the voters you wish to represent. Your vision and motivations will be obscured and vulnerable to subterfuge.
Before you give Mr. Trump more rope, make sure the debate is on your terms, not his.
According to Gallup, in the first week of January 2004 more than half of surveyed Americans were satisfied with the direction of the country. Within a few weeks, however, that number had fallen below 50 percent. It has never recovered. Since the 2008 financial crisis, it has not cracked 40 percent.
.. Brill describes a slow-motion process of perverse meritocracy in which, as one law professor tells him, “the elites have become so skilled and so hardworking that they are able to protect each other better than ever before.” Or, as Brill labels it, “Moat Nation.”
.. Brill focuses on the legal shifts and stalemates that ushered in the country’s current predicament
.. The rise of executive compensation practices linked to stock prices encouraged executives to prioritize short-term profits over long-term investments. A series of Supreme Court cases, ending with Citizens United, enabled corporate speech to play a powerful role in national politics. The growth of super PACs and lobbyists in Washington guarantees that any piece of appropriate regulation will be watered down — first in Congress and then in the implementation stage.
.. The federal government’s approach to fraudulent financial firms has shifted from the criminal prosecution of executives to the levying of fines.
.. the number of times the phrase “unintended consequences” appears in the book. Many of the legal and regulatory changes that Brill excoriates have counterintuitive beginnings. Who helped spearhead the growth of the commercial speech movement? The consumer advocate Ralph Nader, who sued the Commonwealth of Virginia to allow pharmacies to advertise drug prices. “Talk about boomerangs,”
.. the very first political action committee was created in 1943 by a labor union.
.. efforts to bring more minority members to Congress as “another reform effort that boomeranged,” because minority Democrats allied with Republicans to rewrite congressional districts and eviscerate districts held by white Democrats.
.. Brill blames the tortoise-like pace of government rule-writing on due process run amok.
.. Brill argues that interest groups have weaponized due process to guarantee gridlock.
.. In almost all of “Tailspin,” a well-intentioned liberal reform goes badly off the rails.
.. Brill never quite makes the connection between laws and norms.
.. many of the trends that Brill identifies, like political polarization, have their origins in the erosion of norms, not laws, and the real question is whether Americans can trust one another enough not to abuse less legalistic systems.
.. On this point, Steven Levitsky and Daniel Ziblatt’s “How Democracies Die” is probably more instructive.