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.
- 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.
- 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.
- 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:
- the growth of debt and
- the relative impotence of central banks, the
- widening of inequality and the
- 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.
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.”
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.
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:
- the dearth of Trumpists among elected Republicans, and
- 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 —
- with the election of an effective, policy-oriented conservative president (which Donald Trump is not),
- surrounded by people who understand the ways of power (which Bannon, for all his bluster, didn’t) and
- 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.
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.
- World leaders.
- African Americans.
- Military leaders.
- The intelligence community.
- His own staff.
And who’s happy?
- Steve Bannon.
- Saudi Arabia.
- David Duke.