Elizabeth Warren loves capitalism. But she loves duty, too.
The Democratic senior senator from Massachusetts rolled out her Accountable Capitalism Act in mid-August, though it was quickly overtaken by much less high-minded news — who knew Omarosa’s return could be so all-consuming? So far, most of the discussion around the bill has nitpicked its particular policy proposals. Could German governance practices work in the United States? Does the Commerce Department really need more responsibilities? How would this bill do in the Senate? (Answer: badly, considering the current Republican majority.)
All good and important questions. But what’s more interesting is the moral vision behind the bill. In an America where individual choice is sacrosanct, Warren wants to bring back obligation. Her bill is clearly meant to draw our minds (and our corporations) back to the duties we owe to one another — and to how we fail to live up to them.
But first, the specifics. The heart of the Accountable Capitalism Act is a requirement that companies with more than $1 billion in revenue obtain a corporate charter at the federal level, rather than basing themselves in the most loosely regulated state they can find. (Sorry, Delaware.)
This new charter is meant to address an epidemic of bad corporate behavior, especially the tendency of top executives to value profits over wider well-being. It would obligate executives to consider the interests of all corporate stakeholders — including employees, customers and communities — not just shareholders. It would require that at least 40 percent of company board members be elected by employees, an idea known as co-determination. The bill also contains provisions curbing stock buybacks, which tend to benefit only shareholders, and unilateral political expenditures.
It might sound like the usual wonkery. But in reality, it’s a distinct break from the neoliberal capitalism of the recent Democratic Party.
In the 1980s, Milton Friedman enshrined the idea of shareholder value maximization, which told businesses that their sole purpose was to maximize profit for their owners. Rather than pushing back against this obviously selfish, wealth-favoring theory, Democrats got on board. Sure, this framing might need a tweak here, a bit of regulation there, or the carrot of a tax break or two. But super-efficient big businesses would keep the broader economy chugging along for everyone — self-interest would mean we’d all win.
That, obviously, is not how it turned out. But Democrats haven’t been particularly courageous in pressing for reform. Instead, they timidly suggest that “enlightened” business leaders consider being good out of the kindness of their hearts — even while allowing them free rein to ignore any such request.
Warren’s “accountable capitalism,” in contrast, takes a much more hands-on approach to ensuring good behavior, and in the process makes important assertions about our individual moral tendencies. Its insistence on forced integration of corporate boards points to a firm belief that many, if not most, business leaders act selfishly simply because they can, and that they need to be forcibly curbed. And it posits that state intervention, not just suggestion, is the way to do it.
So, no, Warren’s bill isn’t the usual wholesale embrace of market freedom. But really, what has that brought us? Traditionally, Warren wrote in the Wall Street Journal, “corporations sought to succeed in the marketplace, but they also recognized their obligations to employees, customers and the community.” Today’s corporations seek shareholder benefit über alles. But because some 80 percent of stock market value is owned by 10 percent of the population, little of that benefit trickles down to the rest. Being able to pick and choose one’s obligations may benefit those at the top. But it impoverishes those at the bottom.
All that said, the Accountable Capitalism Act still relies on a fundamental belief that capitalism is good, even as a new generation of Democrats wants to upend that system altogether. On the left, winner-take-all competition — which Warren professes to “love,” by the way — is more and more seen as the root of our country’s ills, not something to preserve. A new wave of socialist candidates are loudly making that case.
But Warren isn’t out to get capitalism. She’s out to save it. The senator clearly believes that markets can create wealth. But the difference is that her moral imagination also accounts for wayward tendencies in the system. To her, the duties that we have to one another — that companies have to their workers, that corporations have to the country that helped them grow — are more important than scraping every last bit of profitability out of the economy.
In our winner-take-all system, highlighting our obligations to each other seems like a radical approach. But it shouldn’t be — it’s the basis of our social contract. If we’ve forgotten that, a moral rehab may be just what capitalism needs.