We can save our broken economic system from itself.
Despite the lowest unemployment rates since the late 1960s, the American economy is failing its citizens. Some 90 percent have seen their incomes stagnate or decline in the past 30 years. This is not surprising, given that the United States has the highest level of inequality among the advanced countries and one of the lowest levels of opportunity — with the fortunes of young Americans more dependent on the income and education of their parents than elsewhere.
But things don’t have to be that way. There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society.
In the 1980s, Ronald Reagan’s regulatory “reforms,” which reduced the ability of government to curb the excesses of the market, were sold as great energizers of the economy. But just the opposite happened: Growth slowed, and weirder still, this happened in the innovation capital of the world.
The sugar rush produced by President Trump’s largess to corporations in the 2017 tax law didn’t deal with any of these long-run problems, and is already fading. Growth is expected to be a little under 2 percent next year.
This is where we’ve descended to, but not where we have to stay. A progressive capitalism based on an understanding of what gives rise to growth and societal well-being gives us a way out of this quagmire and a way up for our living standards.
Standards of living began to improve in the late 18th century for two reasons:
- the development of science (we learned how to learn about nature and used that knowledge to increase productivity and longevity) and
- developments in social organization (as a society, we learned how to work together, through institutions like the rule of law, and democracies with checks and balances).
Key to both were systems of assessing and verifying the truth. The real and long-lasting danger of the Trump presidency is the risk it poses to these pillars of our economy and society, its attack on the very idea of knowledge and expertise, and its hostility to institutions that help us discover and assess the truth.
There is a broader social compact that allows a society to work and prosper together, and that, too, has been fraying. America created the first truly middle-class society; now, a middle-class life is increasingly out of reach for its citizens.
America arrived at this sorry state of affairs because we forgot that the true source of the wealth of a nation is the creativity and innovation of its people. One can get rich either by adding to the nation’s economic pie or by grabbing a larger share of the pie by exploiting others — abusing, for instance, market power or informational advantages. We confused the hard work of wealth creation with wealth-grabbing (or, as economists call it, rent-seeking), and too many of our talented young people followed the siren call of getting rich quickly.
Beginning with the Reagan era, economic policy played a key role in this dystopia: Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities. Even as economic theories like information economics (dealing with the ever-present situation where information is imperfect), behavioral economics and game theory arose to explain why markets on their own are often not efficient, fair, stable or seemingly rational, we relied more on markets and scaled back social protections.
We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.
If we don’t change course matters will likely grow worse, as machines (artificial intelligence and robots) replace an increasing fraction of routine labor, including many of the jobs of the several million Americans making their living by driving.
The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.
If we had curbed exploitation in all of its forms and encouraged wealth creation, we would have had a more dynamic economy with less inequality. We might have curbed the opioid crisis and avoided the 2008 financial crisis. If we had done more to blunt the power of oligopolies and strengthen the power of workers, and if we had held our banks accountable, the sense of powerlessness might not be so pervasive and Americans might have greater trust in our institutions.
The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest. It is as fatally flawed as the notion after the fall of the Iron Curtain that we were seeing “the end of history” and that we would all soon be liberal democracies with capitalist economies.
Most important, our exploitive capitalism has shaped who we are as individuals and as a society. The rampant dishonesty we’ve seen from Wells Fargo and Volkswagen or from members of the Sackler family as they promoted drugs they knew were addictive — this is what is to be expected in a society that lauds the pursuit of profits as leading, to quote Adam Smith, “as if by an invisible hand,” to the well-being of society, with no regard to whether those profits derive from exploitation or wealth creation.
Banks like JP Morgan Chase and Wells Fargo accepted Slaves as CollateralRachel Swarns of the New York Times joins us to discuss what she discovered when she followed the money trail of one of the nation’s top financial institutions all the back to the 19th century... RACHEL: In 1847, Godfrey died in the Midlothian Coal Mines. We still don’t know exactly how he died, but in New York Life’s accounting of the deaths that happened, they simply described, “burned to death.”
New York Life was good for its policy. And Nicholas Mills put in a claim and within months of Nicholas Mills’ claims— three months, actually— they paid up: $337. The folks at New York Life collected a lot of information, but not information that his family, today, might wanna know, or people looking at the institution of slavery might wanna know. They did not record his last name. They did not record where he was, or if he was, buried. Simply “burned to death” and “$337 payment.”
CHENJERAI: This payment to a Southern slave owner wasn’t coming from Charleston, or Richmond, it was coming from New York... And slaves were often used by people who went to a bank, wanted to get a loan, and had to, as we often do today, show some property for collateral, and would say, “okay, I got these 20 guys here. This is my collateral.”
That was a very pernicious system because, if you think it through, what happens when that guy defaults? Well, we know what happens if you default on your car loan today. The bank will come take it. The same thing happened back then.
JACK: Wait a minute. There were slave repo men?
RACHEL: There were slave repo men.
It’s very simple. You default on your loan, you have given up some collateral, the banks then become the owners of that property. And so the banks became owners of human beings, of these enslaved people. They took them, repossessed them, and tried to sell them, because it’s just like in foreclosures, you know, they don’t wanna hold on to these distressed properties. You know, they’re not in the real estate business. Banks are not really in the slave owning business.
RACHEL: We are talking about, you know, there, there are contemporary banks that have this history, you know.
CHENJERAI: Could you, could you name them?
RACHEL: So some of the banks that were involved in this business, banks who accepted slaves as collateral were J.P. Morgan Chase and Wells Fargo.
.. CHENJERAI: So this how the descendants are responding? How are the insurance companies responding to this?
RACHEL: You know, no one really wants a call from a reporter saying, talking about…. their ties to slavery. It’s, it’s just not … A lot of people are looking-
RACHEL: … for coverage from the New York Times. This is not an issue where anyone is happy about a connection.
This information about slave insurance and these records came out in the 2000s, when states and municipalities required companies to disclose their ties to this period of time. So, you know, there was some trying to say, “well this is old news, there’s no reason to delve into this.” In some ways, it’s no surprise that-
.. There was a lawsuit that was filed particularly against New York Life and other companies that was dismissed in 2004, after a judge ruled that the black plaintiffs had been unable to establish a direct link to the companies that they had sued, and that the statute of limitations had run out.
With the advance of genealogy and the digitization of records, it’s now possible, difficult, but possible, to trace these people, and their descendants to the present day... JACK: And in terms of just Americans coming to grips with this history, how should we- how do we tell that story?
RACHEL: You know, I think, with a lot of these issues, you know, there is the moral question, right? And what do we do with that, as, as Americans? It is simply true that African Americans were not paid for labor, right? For a long time. (laughing).
.. Ta-Nehisi Coates obviously did that really provocative piece about reparations and arguing for reparations. And he actually was at a conference and he was talking about that debate in American society and saying… You know people were saying, “Well, what would it look like?” and he said, “You know, we can’t really talk about what reparations looks like if there is no consensus that there was a debt.”And I think that’s where America is right now is trying to figure out is there a debt? And part of the work that I do, and the work that a lot of people are doing in this area and looking at these kinds of connections between slavery and today, is just illuminating those kinds of connections.
Women should be at home taking care of their children, some of the executives said they had been told over the years by Jay Welker, president of Wells Fargo’s private bank and head of the wealth-management division since 2003. Qualified women had recently been turned down for several top roles that went to male applicants. When the women raised concerns, they felt ignored.
The meeting represented most of the 12 regional managing directors in wealth management, out of 45, who are women. Above them, all seven senior managing directors overseeing regions are men. The other senior wealth-management roles held by women are positions that, because they don’t run a line of business or oversee profits and losses, lack the same prestige and responsibility that comes with making money for the bank... Some of the executives said part of the investigation focuses on at least one formal human-resources complaint against Mr. Welker over gender bias. Some of the executives said Mr. Welker often called women “girls” or told them to put their “big girl panties on.”.. The “meeting of 12” and the internal investigation show how the #MeToo movement, which has shaken up Hollywood, politics and business, is spilling into a broader discussion about whether women are being fairly promoted into senior roles where they can influence an organization’s culture.The conversation is particularly acute in industries that, like wealth management, have long been dominated by men.. Wells Fargo’s wealth and investment management unit, which includes the wealth-management division, was already in tumult before the gender bias investigation. Whistleblowers have alleged that financial advisers there pushed clients into products or investing platforms intended to generate more revenue for the bank and bigger bonuses for employees rather than the best returns for customers
The social media giant has asked large U.S. banks to share detailed financial information about their customers, including card transactions and checking account balances, as part of an effort to offer new services to users.
Facebook increasingly wants to be a platform where people buy and sell goods and services, besides connecting with friends. The company over the past year asked JPMorgan Chase JPM +0.33% & Co., Wells Fargo & Co., Citigroup Inc. C +0.28% and U.S. BancorpUSB +0.43% to discuss potential offerings it could host for bank customers on Facebook Messenger, said people familiar with the matter.
Facebook has talked about a feature that would show its users their checking-account balances, the people said. It has also pitched fraud alerts, some of the people said... Facebook has told banks that the additional customer information could be used to offer services that might entice users to spend more time on Messenger.. Facebook said it wouldn’t use the bank data for ad-targeting purposes or share it with third parties... Banks face pressure to build relationships with big online platforms, which reach billions of users and drive a growing share of commerce. They also are trying to reach more users digitally. Many struggle to gain traction in mobile payments.Yet banks are hesitant to hand too much control to third-parties platforms such as Facebook. They prefer to keep customers on their own websites and apps.
.. As part of the proposed deals, Facebook asked banks for information about where its users are shopping with their debit and credit cards outside of purchases they make using Facebook Messenger,.. Alphabet Inc.’s Google and Amazon.com Inc. also have asked banks to share data if they join with them, in order to provide basic banking services on applications such as Google Assistant and Alex.. Bank executives are worried about the breadth of information being sought, even if it means not being available on certain platforms that their customers use. It is unclear whether bank customers would need to opt-in to the proposed Facebook services or what other privacy protections might be offered... In recent years, Facebook has tried to transform Messenger into a hub for customer service and commerce,