Two Capitalists Worry About Capitalism’s Future

James Dimon and Ray Dalio are among the most successful capitalists in the U.S. today. So when they worry aloud about the future of capitalism, it’s worth listening.

I believe that all good things taken to an extreme become self-destructive and that everything must evolve or die. This is now true for capitalism,” Mr. Dalio, founder of hedge-fund manager Bridgewater Associates, writes on LinkedIn.

Mr. Dimon, chief executive of JPMorgan Chase & Co., writes in his annual letter to shareholders: “In many ways and without ill intent, many companies were able to avoid—almost literally drive by—many of society’s problems.

Captains of industry have always opined on the issues of the day. Still, these latest missives are noteworthy for three reasons.

  1. First, the authors: Mr. Dalio anticipated the financial crisis; his systematic management and investment style has made Bridgewater the world’s largest hedge-fund manager. Mr. Dimon is arguably the country’s most successful banker, having steered J.P. Morgan clear of the subprime mortgage disaster to become the country’s most valuable financial institution.
  2. Second, the timing: They are speaking out at a time when the free-market capitalism that has served them so well is questioned by many Americans, including prominent Democrats.
  3. Third, the content. Mr. Dalio and Mr. Dimon love capitalism and aren’t apologizing for it. But they recognize the system isn’t working for everyone, and they have ideas for fixing it, some of which might require rich people like themselves to pay more tax. Yet they fear the federal government is hamstrung by intensifying partisanship. So they are putting their money and reputations where their mouths are by speaking out, backing local initiatives and hoping like-minded business leaders join them. In effect, they are breathing life into the shrinking nonpartisan center.

In an interview, Mr. Dalio says many business leaders “don’t want to get into the argument. I can understand that. I say to myself, Should I get in? I do think if everyone keeps quiet, we’re going to continue to behave as we’re behaving, and it’s going to tear us apart.”

Mr. Dalio’s essay was inspired by a longstanding interest in the parallels between the 1930s and the present:

  1. the growth of debt and
  2. the relative impotence of central banks, the
  3. widening of inequality and the
  4. rise of populism.

Capitalism, he says, is now in a “self-reinforcing feedback loop”:

  • companies develop labor-saving technologies that enrich their owners while displacing workers.
  • The haves spend more on child care and education, widening their lead over the have-nots,
  • whose predicament is compounded by underperforming schools,
  • the decline of two-parent families, and
  • rising incarceration.

Mr. Dalio thinks inequality has fueled populism and ideological extremism, which he fears means capitalism will be either abandoned or left unreformed.

His solutions start with taking partisanship out of the mix. He would like government to join with business and philanthropic leaders with proven track records to find, fund and evaluate projects with high potential social returns, such as early childhood education and dropout prevention. The rich might have to pay more taxes, provided the money is used to raise the productivity and incomes of the bottom 60%, or establish a minimum safety net.

Mr. Dimon is less introspective about the flaws of capitalism than Mr. Dalio and more impatient with the recent fascination so many Americans are showing with socialism. His letter, written in the blunt, combative style in which he speaks (it should be read aloud in a Queens accent for full effect), reiterates familiar complaints about excessive postcrisis regulation.

But, like Mr. Dalio, he worries partisanship has crippled the country’s ability to enact basic reforms that elevate economic growth and strengthen the safety net, such as

  • improving high schools and community colleges’ provision of useful skills,
  • more cost-effective health care,
  • faster infrastructure approval,
  • more skilled immigrants coupled with legalizing illegal immigrants, and
  • requiring fewer licenses to start a small businesses.

“Can you imagine me saying, I can do a better job for the Chase customer if I don’t get involved in details, the products, the services, the prices, how we treat people, how call centers work?” Mr. Dimon asks in an interview. “Policy has too often become disconnected from the analytics; we got slogans instead. It’s driving people apart.”

There’s a chicken-and-egg problem with these well-intentioned calls for nonpartisan problem solving: It requires a level of nonpartisanship that doesn’t exist; otherwise the problems would, presumably, have been solved.

If business leaders can’t persuade with words, they may by example. Mr. Dalio and his wife, Barbara, have donated $100 million to the state of Connecticut, to be matched by the state and other philanthropists, to create a $300 million partnership devoted to reducing dropout rates and promoting entrepreneurship in underserved schools and communities.

For its part, J.P. Morgan has under Mr. Dimon combined commercial and philanthropic resources to finance affordable housing, small business and infrastructure and job training in Detroit, announced $600 million in workforce development grants since 2013, and boosted salaries for lower-end employees. Mr. Dimon, in his shareholder letter, called on fellow CEOs to “take positions on public policy that they think are good for the country.”

It doesn’t always work. The Business Roundtable, which Mr. Dimon chairs, successfully pressed Congress and President Trump for lower business taxes, but unsuccessfully for more infrastructure and legalizing illegal immigrants. Says Mr. Dimon: “We should give it the best shot we’ve got.”

The President’s Self-Destructive Disruption

his repeated use of the word “fake” to describe news coverage when he actually means “unpleasant” and his style of rhetoric in front of the United Nations, where he called terrorists “losers” and applied a childish epithet to the head of a nation in whose shadow tens of thousands of American troops serve and with whom nuclear war is a live possibility, are all cases in point. There is no way to formalize conventions of maturity and dignity for presidents. Custom fills that void.

.. When he violates such customs, Mr. Trump is at his most impulsive and self-destructive. It may sound ridiculous to invoke James Madison or Edmund Burke when we talk about this president, but that is part of the problem. Mr. Trump could profit from the wisdom of his predecessor Madison, for whom the very essence of constitutionalism lay not in what he derided as “parchment barriers” — mere written commands there was no will to follow — but rather “that veneration which time bestows on every thing.” The Constitution, in other words, would be only as strong as the tradition of respecting it.

.. Burke is generally seen as the progenitor of modern conservatism, but Mr. Trump, who came late to the conservative cause, is said to be so hostile to custom that his staff knows the best way to get him to do something is to tell him it violates tradition.
.. demagogic campaign rallies masked as presidential addresses
.. because many elements of his base associate these customs with failed politics, every violation reinforces the sense that he sides with them over a corrupt establishment.
.. Historically, conservatism has tended to value light governance, for which custom is even more essential. Aristotle writes that “when men are friends they have no need of justice.” In other words, rules enter where informal mechanisms of society have collapsed. The philosopher and statesman Charles Frankel summed it up powerfully: “Politics is a substitute for custom. It becomes conspicuous whenever and wherever custom recedes or breaks down.”
.. Since Woodrow Wilson’s critique of the framers’ work, progressive legal theory has generally denied that the meaning of the original Constitution, as endorsed by generational assent, wields authority because it is customary. Much of libertarian theory elevates contemporary reason — the rationality of the immediate — above all else.

.. The president’s daily, even hourly, abuse of language is also deeply problematic for a republic that conducts its business with words and cannot do so if their meanings are matters of sheer convenience. The unique arrogance of Mr. Trump’s rejection of the authority of custom is more dangerous than we realize because without custom, there is no law.

The Bannon Revolution

Bannon’s grand ambitions should inspire the same soul-deadening déjà vu, the existential exhaustion, with which Bill Murray’s weatherman greeted every morning in Punxsutawney, Penn. They should bring to mind both Friedrich Nietzsche’s idea of eternal recurrence and his warning that if you stare deep into the abyss, it stares into you.

.. What Bannon is promising is what the Tea Party actually delivered, in a past recent enough to still feel like the present: a dramatic ideological shake-up, an end to D.C. business-as-usual, and the elevation of new leaders with a sweeping vision for a new G.O.P.

.. The ideological shake-up took the form of paper promises, not successful legislation. The end to D.C. business-as-usual just created a new normal of brinkmanship and gridlock. And when the Tea Party’s leaders — Ted Cruz and Rand Paul, above all — reached out to claim their party’s presidential nomination, they found themselves steamrolled by a candidate who scorned all their limited-government ideas and offered, well, Trumpism instead.

.. when it comes to governance, Trumpism turns to have two fatal weaknesses:

  1. the dearth of Trumpists among elected Republicans, and
  2. the total policy incapacity of Trump himself.

So having failed in his appointed role as Trump whisperer and White House brain, Bannon has decided to do the Tea Party insurgency thing all over again, except this time with his

  • nationalist-populist cocktail instead of the
  • last round’s notional libertarianism.

.. Maybe the Tea Party was a dead end, but some Trumpist primary candidates will finally produce a Republican Party capable of doing something with its power.

.. His professed nationalism, with its promise of infrastructure projects and antitrust actions and maybe even tax hikes on the rich, is potentially more popular than the Tea Party vision ..

.. But this imaginative exercise collapses when you look at Bannon’s own record and the candidates he’s recruiting.

.. At the White House, Bannon did not manage to inject much heterodoxy into any part of the same old, same old Republican agenda. But he did encourage the president to pick racialized fights at every chance.
.. his new grass-roots populism promises to be more of the same:
  • a notional commitment to some nebulous new agenda,
  • with white-identity politics and the
  • fear of liberalism supplying the real cultural-political cement.
.. Especially because the would-be senators he’s recruiting are a mix of cynics and fanatics who seem to share no coherent vision, just a common mix of ambition and resentment.
.. if you believe figures like Roy Moore and Erik Prince are going to succeed where Trump is obviously failing, I have some affidavits attesting to Harvey Weinstein’s innocence to sell you.
.. He and his allies are the latest group to recognize the void at the heart of the contemporary Republican Party, the vacuum that somebody, somehow needs to fill.
  • .. The activists and enforcers of the Tea Party era tried with a libertarian style of populism.
  • Paul Ryan tried with his warmed-over Jack Kempism.
  • My friends the “reform conservatives” tried with blueprints for tax credits and wage subsidies.

.. now they, too, need to reckon with a reality that has confounded every kind of Republican reformer since Barack Obama was elected: Our politics are probably too polarized, our legislative branch too gridlocked, and the conservative movement too dysfunctional and self-destructive to build a new agenda from the backbenches of Congress up, or even from the House speaker or Senate majority leader’s office.

.. Our system isn’t really all that republican anymore; it’s imperial, and even an incompetent emperor like Trump is unlikely to restore the legislative branch to its former influence. So if you want to remake the Republican Party as something other than a shambolic repository for anti-liberalism, the only way it’s likely to happen is from the top down —

  1. with the election of an effective, policy-oriented conservative president (which Donald Trump is not),
  2. surrounded by people who understand the ways of power (which Bannon, for all his bluster, didn’t) and
  3. prepared to both negotiate with Democrats and bend his own party to his will.

.. I would not be wasting my time trying to elect a few cranks and gadflies who will make Mitch McConnell’s life more difficult.

Instead I would be looking for the thing that too many people deceived themselves into believing Trump might be, and that Bannonite populism for all its potential strength now lacks: a leader.

Trump’s 7 months of self-destruction

President Trump, with at least two years of full Republican control of government at the national and state levels, has systematically damaged or destroyed his relationship with — well, almost every group or individual essential to success.

Trump’s undisciplined and incendiary style has left the most powerful man in the world with few friends — not onein the United States Senate, for instance.

  • The public: Gallup has his approval at 34%, down from 46% just after the inauguration.
  • Republican congressional leaders — Senate Majority Mitch McConnell in particular.
  • Every Democrat who could help him do a deal.
  • The media.
  • CEOs.
  • World leaders.
  • Europe.
  • Muslims.
  • Hispanics.
  • African Americans.
  • Military leaders.
  • The intelligence community.
  • His own staff.

And who’s happy?

  • Steve Bannon.
  • Saudi Arabia.
  • Breitbart.
  • David Duke.

Why Trump’s Vengeful Tweeting Matters

He’s crass, vicious, and petty.

.. It’s a sad symbol of our times that one feels compelled to actually make an argument why the president is wrong here. The pitiful reality is that there are people who feel like the man who sits in the seat once occupied by George Washington, Abraham Lincoln, Dwight Eisenhower, and Ronald Reagan should use his bully pulpit for schoolyard insults and vicious personal attacks. But this is what we’re reduced to. So, here goes. –

.. First, it is simply and clearly morally wrong to attack another person like this. I’m tired of hearing people say things like, “This is not normal.” Normality isn’t the concern here. Morality is. It doesn’t matter if Mika has been “mean” to Trump. Nor does it matter that we can point to any number of angry personal attacks on Trump from others. We have to get past the idea that another person’s bad acts somehow justify “our” side’s misconduct. Morality is not so situational. Trump is under a moral obligation to treat others the way he’d like to be treated, to love his neighbor as he would love himself. Yes, he can engage in ideological and political battles, but to attack another person in such vicious terms is to cross a bright line.

.. Second, it’s not classist or elitist to make this moral argument. It’s no justification to argue that Trump simply speaks the way “real Americans” do, or that he’s brought into public the language that “everyone knows” people use behind closed doors. People of every social class and economic standing have the same moral responsibilities, and our society suffers when we relax those responsibilities, whether for a steelworker in a mill outside Pittsburgh or the real-estate developer in the Oval Office.

.. Third, even if your ethics are entirely situational and tribal, Trump’s tweets are still destructive. Attacking Mika like this doesn’t silence her or anyone at MSNBC. It doesn’t move the ball downfield on repealing Obamacare. It does, however, make more people dislike Donald Trump. It’s a misuse and abuse of the bully pulpit, all the more galling because it comes at a time when the positive parts of his agenda truly do need public champions.

.. Fourth, please stop with the ridiculous lie that this is the only way to beat the Left. Stop with any argument that this kind of pettiness is somehow preferable to the alleged weakness of other Republicans. There are thousands of GOP office-holders who’ve won their races (including by margins that dwarf Trump’s, even in the toughest districts and states) without resorting to Trump-like behavior. In fact, at the state level many of these same honorable and moral people are currently busy enacting reforms that the national GOP can only dream about.

.. The election is over. Trump isn’t running against Hillary Clinton anymore. Americans are no longer faced with the awful choice of either pulling the lever for an unfit candidate or voting for someone who has no chance of winning. If there were ever a time for Republicans to show some backbone, to tell their president that some conduct is out of bounds, it’s now, early in his first term, when he has time to turn the page and put his past misconduct in the rear-view mirror.

.. while also condemning Trump’s vile tweets and criticizing his impulsiveness and lack of discipline. A good conservative can even step back and take a longer view, resolving to fight for the cultural values that tribalism degrades. Presidents matter not just because of their policies but also because of their impact on the character of the people they govern. Conservatives knew that once. Do they still?

The Justice Department Is Killing Trump

It is, in addition, a scandal born of Trump’s desperation to publicize information that is true and that a president is fully entitled to publicize — such as the facts that the president had been assured by the FBI director on multiple occasions that he is not a criminal suspect

.. True, his media-Democrat enemies cast every story in the worst possible light. But there’s always a story, isn’t there?

.. That is largely Trump’s doing. The tweet-tirades about phantom wiretaps (which undermined his credibility

.. The multiple conflicting explanations for Comey’s removal. The bizarre decision to meet Russian diplomats the day after Comey’s dismissal and, shamefully, to berate the former director in their presence. And, of course, more tweets, such as the self-destructive suggestion of a Watergate-resonant White House taping system (that almost certainly does not exist).

.. Four key decisions, three of them made after the president was inaugurated and the Justice Department came under his control, at least nominally, have done immense damage to his administration — in conjunction with Trump’s belief that fires are best doused with gasoline.

.. After his (self-induced) nightmare over the Hillary Clinton e-mails investigation, Comey was reluctant to announce that Trump was not a suspect; he feared that if Trump’s status later changed, he would have to correct his announcement

.. during congressional testimony, he made an unnecessary announcement about the Russia investigation that led the media to report, and much of the public to believe, that Trump was a suspect in possible crimes. Once he did that, it was unreasonable to refuse to correct this misimpression by publicly acknowledging that Trump was not a suspect.

.. It is all well and good to agitate over a “duty to correct,” but Comey glides past the more basic duty not to make gratuitous prejudicial statements in the first place.

1. The Flynn Investigation and Interrogation

because Kislyak, as an operative of a hostile foreign power, was under FBI surveillance, the bureau knew (and informed what the New York Times furtively described as “Obama advisers”) that Flynn had done nothing improper in these discussions — i.e., no quid pro quo involving a lifting of Obama-imposed sanctions

.. the Justice Department had the FBI interrogate him about the Kislyak conversations even though it had recordings of them and thus did not need Flynn’s input.

.. Reportedly, Flynn misled the FBI agents about whether sanctions had been discussed (just as he misled Vice President Mike Pence — which led to Flynn’s dismissal).

.. Still, there appears to have been no justification for considering him a suspect and interrogating him as such.

That is what led Trump, in the immediate aftermath of the painful decision to fire Flynn, to lean on Comey to drop the investigation. That, in turn, is the spark that lit the obstruction fire.

2. The Sessions Recusal

.. in overreaction to false allegations that he had perjured himself at the Senate hearing, Sessions bowed to media-Democrat demands and announced a recusal more sweeping than it needed to be.

.. Sessions was not consulted on Comey’s March 20 testimony. He was thus unable to direct the FBI director not to make a misleading announcement that suggested Trump was a suspect

3. Comey’s March 20 Testimony

(a) the FBI was conducting a counterintelligence investigation of the Russian government’s efforts to interfere in the election;

(b) this probe included “investigating the nature of any links between individuals associated with the Trump campaign and the Russian government, and whether there was any coordination between the campaign and Russia’s efforts”; and

(c) the FBI would further assess whether any crimes were committed.

.. The then-director began his statement by asserting that he had been “authorized by the Department of Justice” to make this announcement. As noted above, Sessions had by then recused himself, but Rosenstein was not yet confirmed — that would take another month. On March 20, the acting DAG was Dana Boente, a longtime prosecutor whom President Obama and his attorney general, Eric Holder, had appointed

.. It is hard to imagine that Sessions would have authorized Comey’s March 20 announcement – certainly not unless it acknowledged that Trump was not a suspect.

.. had the Justice Department refused to authorize this unnecessary and misleading announcement, Comey would probably still be FBI director, there would be no obstruction investigation, and the Russia counterintelligence probe might be winding down toward a finding that there had been no Trump campaign collusion.

4. Rosenstein’s Appointment of a Special Counsel

.. Rosenstein saw that he was being made the fall-guy for a decision

.. Having cultivated good relations on both sides of the aisle, Rosenstein had been confirmed by the Senate with overwhelming bipartisan support (94–6); suffice it to say, he is not the type to let Democratic hyperbole roll off his back.

.. making a counterintelligence probe the linchpin of a special-counsel investigation sets no practical limitations on the special counsel’s jurisdiction. Counterintelligence is an information-gathering exercise; it does not have the definitive parameters of a criminal investigation, which focuses on concrete factual scenarios in which indictable crimes have been committed.

.. Rosenstein’s flouting of the regulations means Mueller’s investigation is a fishing expedition. It is already straying far afield from suspicions about Trump collusion in Russia’s election-meddling — which, we need to remind ourselves, is the purported rationale for the probe

.. The probe’s focus has morphed from collusion to obstruction

.. Mueller has also broadened his scope to include the scrutinizing of financial activities of Trump associates, reportedly based on hunches about possible bribery and money-laundering. These, in turn, are based on the assumption that there was collusion

.. there are conflicts of interest that are apt to discredit the investigation, regardless of whether they technically require disqualification.

.. Rosenstein selected Mueller despite the latter’s close friendship with and professional ties to Comey. Now that obstruction is suddenly the focal point of the probe, Comey is clearly a central witness.

.. Mueller promptly made tin-eared hires: lawyers who, despite their impressive prosecutorial credentials, are Obama and Clinton donors. One of them, Andrew Weissmann, is also plagued by the scorched-earth reputation he developed as special prosecutor in the Enron investigation, particularly the infamous prosecution that destroyed the Arthur Andersen accounting firm — which Weissmann indicted on very thin proof for, yes, obstruction of justice . . . only to have the conviction thrown out by the Supreme Court.

.. the staffing decisions make it inevitable that much of the public will suspect prosecutorial bias even if all the lawyers perform responsibly.

.. President Trump can be an erratic and intemperate client

.. If the president has learned nothing else, it should be the importance of filling the Justice Department, and the rest of his administration, with his own appointees. To say the prior administration laid traps for him, and that he has blundered his way into them, is putting it mildly.

The guardrails can’t contain Trump

Donald Trump’s character — volatile, impulsive, often self-destructive — had not changed since the campaign. But it seemed as if the guardrails of our democracy— Congress, the courts, the states, the media, the Cabinet — were keeping things within bounds.

Then came the past 10 days. The country is now caught in the internal maelstrom that is the mind of Donald Trump. We are in the realm of the id. Chaos reigns. No guardrails can hold.

.. Layers of falsehoods giving the impression of an elaborate coverup — in the absence of a crime.

.. Trump insists there’s no there there, but acts as if the there is everywhere.

.. Trump had three top officials come out and declare the disclosure story false. The next morning, Trump tweeted he was entirely within his rights to reveal what he revealed, thereby verifying the truth of the story.

.. The White House hurriedly issued a statement denying the story. The statement was unsigned.

.. this would be seen by millions as an establishment usurpation to get rid of a disruptive outsider. It would be the most destabilizing event in American political history