Joseph E. Stiglitz, co-recipient of the 2001 Nobel Prize in economics, teaches at Columbia University and is the author of “People, Power, and Profits: Progressive Capitalism for an Age of Discontent.”
I prefer another name, “progressive capitalism,” to describe the agenda of curbing the excesses of markets; restoring a balance among markets, government and civil society; and ensuring that all Americans can attain a middle-class life. The term emphasizes that markets with private enterprise are at the core of any successful economy, but it also recognizes that unfettered markets are not efficient, stable or fair.
It is no surprise that the extremes of capitalism and its dysfunction have given rise to questions such as: Can capitalism be saved from itself? Is it inevitable that the materialistic greed that it breeds will lead to ever-increasing pay packages for chief executives? Or that those with money will use their political influence to shape our tax system so that the richest pay proportionately less than everyone else? Progressive capitalism can, I believe, save capitalism from itself — if only we can get the political will behind it.
Research over the past 40 years has explained why markets on their own don’t deliver rising economic benefits for all. Adam Smith, the founder of modern economics, recognized how, if unregulated, businesses would conspire against the public interest by raising prices and suppressing wages. Yet he also suggested that at times markets would lead, as if by an invisible hand, to the well-being of society. Now we understand why markets often fail to deliver on their promise and why Smith’s invisible hand often seems invisible: because it simply isn’t there. Modern theories of industrial organization have taught us how firms construct barriers to entry to enhance their market power. Twenty years into this new century, the empirical evidence is overwhelming: There is increasing market concentration in sector after sector, with increasing profits and increasing markups in prices.
American democratic socialists are probably slightly to the right of the center of European social democrats. Forty years ago, France’s “socialists” under François Mitterrand disavowed classical socialism as they privatized many of France’s government enterprises. But virtually every European politician now recognizes that access to medical care is a basic human right. This new breed of American democratic socialists — or call them what you will — is simply advocating a model that embraces government’s important role in social protection and inclusion, environmental protection, and public investment in infrastructure, technology and education. They recognize the public’s regulatory role in preventing corporations from exploiting customers or workers in a multitude of ways, whether it’s through data collection by the new tech companies or excessive risk-taking, as exemplified by banks in the run-up to the 2008 financial crisis.
Of course, while reforms that curb such excesses and make greater investments, for example, in science and technology will increase growth rates in a sustainable way, they will not suffice to restore the middle-class lifestyle increasingly out of reach for large numbers of Americans. That’s why democratic socialists talk about reforms in education (including doing something about the $1.5 trillion of student debt), in housing, in ensuring access to employment for everyone who is able to work, and in retirement programs.
My generation sometimes forgets that the Cold War ended 30 years ago with the fall of the Berlin Wall. Those hard-fought, ideological battles are long over. Millennials respond to the label “democratic socialist” in a pragmatic way. They say, if it means ensuring a decent life for all Americans, then we’re for it. If it means ensuring that we have a future — because we work to curb climate change — we’re for that, too.
Some on the right will respond that it’s just a 21st-century version of economic populism. That it’s popular is clear — many of these ideas have the support of a majority of Americans, especially the young. But variants of these ideas are economically feasible — indeed, the kinds of investments and regulations that are being advocated are necessary if we intend to have sustainable shared prosperity.
A key component to the democratic socialist agenda is democracy. Democracy is more than having elections every four years. It includes systems of checks and balances — ensuring that no one, not even a president, has unbridled power — and a deep belief that no one can be above the law. It also includes protections of the rights of minorities, and a Congress and a healthy news media holding everyone to account. But it also embraces fair representation, because a system of voter suppression, gerrymandering and money-dominated politics, where the views of the minority can dominate the majority, is antidemocratic.
Whatever it’s called, it’s an appealing combination. No wonder the president spends so much time issuing slurs against it.