Is there such a thing as an evolved capitalism? This is a question I’ve been wrestling with ever since the financial crisis of 2008. Back then, after Lehman Brothers collapsed and Morgan Stanley threatened to follow suit, a Wall Street broker told reporters, “The world as we know it is going down,”. And when American auto giants General Motors filed for bankruptcy, Michael Moore declared: “It is the end of capitalism as we know it.”
As you know, it was no such thing. The public bailed out the banks, and the capitalism that was unleashed in the 1980s, with Ronald Reagan’s and Margaret Thatcher’s loosening of the kind of regulations that could curb the greatest excesses or recklessness of the market, carried on.
Survival-of-the-fittest wealth- grabbing – or ‘rent seeking,’ as I understand it is called in economic circles – carried on. Income inequality carried on and continued to grow.
Although unbridled capitalism has been sold as a means of creating robust growth, our current system is failing most citizens on both sides of the Atlantic. In the US, the New York Times recently reported that some 90 percent of American citizens live on incomes that have stagnated or declined over the last 30 years. America has the greatest income inequality of any advanced country; Great Britain has the greatest income inequality of any country in Europe.
Not much of that wealth creation is trickling down.
And free-market capitalism isn’t even the driver of economic growth that it is made out to be. Even with President Trump’s giant stimulus of drastically cutting corporation taxes, growth is estimated to be under 2 percent in 2019.
Ignoring the social contract
Joseph Stiglitz, the economist, and author of People, Power and Profits: Progressive Capitalism for an Age of Discontent, blames this on a basic fraying of the social contract: “Just as forces of globalization and technological change were contributing to growing inequality, we adopted policies that worsened societal inequities.
“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. . . .We confused the hard work of wealth creation with wealth grabbing. . . .The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest.”
Stieglitz’s solution mainly looks to both a reinstatement of a number of the regulations that used to restrict Wall Street excess and expanded public programs (ie, paid for by government) to provide extra for those who are not making ends meet.
Many of the new Democratic contenders for the Democratic nomination for the presidency also look to big-spending government programs to even out income inequality and unemployment.
There is newly installed congressperson Alexandria Ocasio-Cortez’s bold Green New Deal, with its giant wish list of progressive solutions to so many societal ills – a program that virtually all Democratic presidential candidates are supporting – even though she offers extremely vague notions about how it will all be paid for.
Even Stieglitz is a bit ambiguous about the cost of these programs, writing that, well, we used to be able to help all Americans be middle class when we were a poorer country after World War II. We ought to be able to do it again.
The problem of redistribution of wealth is that, in this global economy, the main wealth creators can just up sticks and move to another, more favorable tax regime, just as some of the wealthy in Britain have already done, now with the Conservatives out of favour and the specter of a high-taxation, Labor government under Jeremy Corbyn a possibility.
Without the wealth creators to pay high taxes, there is less in the pie for all. Historically, lower corporation tax regimes always provide more money for governments because they are huge inducements for companies to stay put.
The third way
So, the conservatives and liberals seem to have only two ideas about capitalism – small-state, free-market regime or large-state entitlement and redistribution.
But perhaps, there is a third way that isn’t being talked about, a way to evolve capitalism to something that respects the social contract of our citizens while still rewarding risk-taking entrepreneurs who create wealth.
The problem isn’t inherently with markets per se – it’s with what we as a society choose to reward. Right now, we reward anything that makes money, no matter for what purpose and no matter who it hurts. But what if we didn’t?
What if the greatest rewards were given not to profits, but to companies that contributed to the national and international good?
Instead of a neutral tax system that simply cuts corporation tax, what if those tax advantages were only given to companies who offer solid solutions to cut pollution, employ the unemployed in the Rust Belts or wean us onto clean energy?
And what if we punished with higher taxes those companies that pollute the environment, promote dangerous drugs like opioids known to be addictive, or exploit cheap labor?
For the longest time, my husband Bryan Hubbard has been kicking around the idea of an alternative stock market that does just this: rewards the good, not just the most profitable. The greatest public investment would be for companies that do the greatest public good, and the smallest investment would be for those companies that do the greatest harm.
In this fevered climate of disruption and change, a new stock market would gain a great deal of support, particularly among the young.
We do need to bring back some government regulation to trim the worst excesses of market trading. But the real way to evolve capitalism isn’t to curb wealth creation and innovation, so that entrepreneurs no longer are rewarded for risk-taking, but to use the market to create a better society.
It can be done. Remember: money is neutral. It’s only what we as individuals and a society decide to label ‘success’ that determines whether it’s used for good or bad.