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The unlikely crusade to save capitalism from itself

David Ignatius on

WASHINGTON -- "Evolve or die," wrote hedge-fund billionaire Ray Dalio in a manifesto published in April titled "Why and How Capitalism Needs to be Reformed." With each passing month, more business executives have been joining this unlikely crusade to save capitalism from itself.

The loudest reform call yet from inside the system came this week from the Business Roundtable, which represents the chief executives of 192 of the nation's largest companies. Most of its members signed a statement declaring that making profits for shareholders isn't a corporation's sole responsibility. Instead, companies have a broader mission to serve customers, employees, suppliers and communities, too, the statement said.

Jamie Dimon, the chief executive officer of JPMorgan Chase and chairman of the Roundtable, led the signers who agreed: "Many Americans are struggling. Too often hard work is not rewarded." Dimon had earlier warned in this year's annual letter to his company's shareholders that the American dream was "fraying for many" because of stagnant wages and income inequality.

Business leaders seem to recognize the crisis: The system isn't delivering. President Trump's election reflects a populist rage that threatens America's future prosperity and stability.

Many progressives have responded cynically to the billionaires' revolt. Dalio, after all, founded Bridgewater Associates, one of the world's biggest hedge funds, and Dimon runs America's biggest bank. Talk is cheap, critics argue, and if these CEOs really feel the system is in trouble, they should reduce their pay and give more to their workers and communities.

The skepticism is understandable, but it misses the larger political point: Corporate America fears the system is failing. As Dalio wrote, this is an "existential" moment. The guardians of capitalism seem to realize that they must respond to right-wing populists and left-wing progressives alike or face a worsening political crisis that is already hobbling the country.

The corporate panic about capitalism could be a turning point, opening the way for a future president to begin fixing the problems of stagnant wages and inequality that are at the core of America's disarray. Democratic presidential candidates have been strewing proposals for radical change across the campaign trail: Some are well-considered, but many are wildly impractical and doomed to fail. America's historical experience teaches us that economic reform succeeds when it goes mainstream, and that's what's happening now.

Today's corporate reformers share the same concern about saving a broken capitalist system as did President Franklin D. Roosevelt in the New Deal Era and President Theodore Roosevelt in the Progressive Era. Dalio made the historical analogy in his manifesto: "We are now seeing conflicts between populists of the left and populists of the right increasing around the world in much the same way as they did in the 1930s when the income and wealth gaps were comparably large."

A detailed agenda for change was published earlier this year by the Aspen Institute's Economic Strategy Group, which includes 60 prominent business leaders, policymakers and economists. The group's report described "rising frustration with American politics, a populist backlash [and] social fragmentation." To respond, it offered practical plans for reform, such as a "Higher Wages Tax Credit" that helps employers offset the cost of raising minimum wages.

 

This year's corporate revolt was previewed in "Can American Capitalism Survive?" a 2018 book by Washington Post writer Steven Pearlstein. "The dirty little secret is that nobody dislikes the move to shareholder capitalism more than corporate executives and directors," he wrote, because it forced them "to abandon their role as proud stewards of the American system."

Dalio has even questioned the profit motive, the capitalist holy of holies, arguing that while "usually an effective motivator and resource allocator ... it is now producing a self-reinforcing feedback loop the widens the income/wealth/opportunity gap to the point that capitalism and the American dream are in jeopardy."

FDR embodied the confident save-the-system mindset America needs now. Biographer Jean Edward Smith recalls that in July 1932, as the Bonus Army of angry veterans marched on Washington, Roosevelt fended off attacks from Huey Long, a demagogic left-wing populist. FDR told his speechwriter Rexford Tugwell that Long was "the second most dangerous man in this country. ... He screams at people and they love it."

Tugwell pressed his boss about who, then, was the most dangerous man. Roosevelt named the right-wing demagogue, Gen. Douglas MacArthur, who had routed the Bonus Army from its camps. "Did you ever see anyone more self-satisfied? There's a potential Mussolini for you."

Calm, reassuring, Roosevelt saved capitalism by reforming it, redeeming his campaign pledge to "the forgotten man at the bottom of the economic pyramid." Where is such a leader now? The ground is ready. Even the moguls know it's time for change.

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Follow David Ignatius on Twitter: @IgnatiusPost.

(c) 2019, Washington Post Writers Group

 

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