The
COVID-19 pandemic has revealed the inherent flaws of American
capitalism, a profit-driven system of winners and losers that is
unprepared to respond to a national emergency and ill-equipped to
address the basic needs of society. While the coronavirus has created
an historic economic crisis, a dire emergency of economic inequality
and injustice in this country long predated the outbreak. Capitalism
must undergo structural change. The nation has an opportunity to take
advantage of this transformative
event and pursue an alternative to the current system.
The
failures and shortcomings of American capitalism have made the
country particularly vulnerable to a plague. Over 47
million people
- more than 1 in 4 U.S. workers - have filed for unemployment since
mid-March. According to the Congressional Budget Office, the pandemic
is projected to cost the U.S. economy nearly $8
trillion
in real GDP through 2030, prompting calls for more federal
assistance
to states and businesses to stave off permanent job loss. The
coronavirus killed all jobs created since the Great Recession, and
the economic environment rivals the Great
Depression
in severity of unemployment. Research suggests many of these jobs
will
never return.
The newly unemployed now form mile-long bread lines as farmers
destroy crops
and euthanize
herds.
The
pandemic has exposed a U.S. economy lacking resilience, and a social
welfare system which has been gutted and lacks robustness thanks to
corporate lobbying and Reagan-era conditioning that government is
part of the problem. Although other countries have suffered greatly,
the U.S. was uniquely positioned for disaster as the only
wealthy nation without universal healthcare,
and because of the perilous decision by its political leadership to
choose massive
unemployment
with little relief beyond a one-time stimulus payment, much less a
plan for recovery. In contrast, European nations and Canada
are offering monthly government payments, providing as much as 90
percent of workers’ salaries for the duration of the pandemic.
Under
American capitalism, which operates on competition
and individualism
rather than collective action and social
uplift,
the U.S. is not protecting the health and economic security of its
citizens. The wealthiest nation in the world has failed to provide
adequate testing, contact tracing, ventilators, and masks during the
pandemic - because this is not profitable. In a mad rush to reopen,
state
governments and big business
are forcing workers to make a choice: Return to work and risk their
lives, or stay home, lose their unemployment benefits, and go hungry.
And while Wall Street enjoys bailouts and billionaires
profiteer
during the pandemic, poor and working people are suffering from years
of widening inequality, with no relief in sight. The U.S. economic
system was not designed for this moment.
These
times demand a reinvention of the corporation. A concept that has
gained ground of late is stakeholder
capitalism
or moral capitalism - the notion that business requires moral
leadership and cannot solely concern itself with the corporate world,
because all areas of society are interconnected. Whereas the business
world is driven by the supremacy of company shareholders and
increasing the return on their investment, stakeholder capitalism
dictates that members of the greater community are just as important
as those who own stock in the company.
Last
year, the Business
Roundtable
issued a statement from 181 CEOs “who commit to lead their
companies for the benefit of all stakeholders - customers, employees,
suppliers, communities and shareholders,” and redefine the
purpose of a corporation to promote “an economy that serves all
Americans.” Arguing the “American dream is alive, but
fraying” and advocating the free market as the best system for
job creation, economic opportunity, innovation, and the environment,
the group declares “Americans deserve an economy that allows
each person to succeed through hard work and creativity and to lead a
life of meaning and dignity.”
But
the free market has been anything but free, as the private sector has
long depended on government intervention, and workers are left to
fend for themselves. Corporations were rewarded with bailouts during
the 2008 financial crisis and exorbitant tax cuts in 2017 that
benefited the few, and were funneled into stock buybacks to give more
money back to shareholders rather than workers, who still face more
layoffs amid rising profits. Now the coronavirus has exposed the
precariousness
of workers,
as worker bargaining power has declined over the past decades and
given rise to the gig economy. According to a 2018
Federal Reserve survey, almost 40
percent
of Americans were unprepared for a $400 emergency, and a quarter
skipped necessary medical care because they couldn’t afford it.
Amid wage stagnation, working people have depended on credit cards to
survive.
While
the business sector can and should do better, labor advocates argue
that employers cannot rely on CEO morality to save them, as employer
benevolence
comes only through labor unions and organizing, and even the most
enlightened corporations are motivated foremost by profit and the
market. Capitalism is failing workers, they argue, pointing to
companies’ union-busting activities and the firing of labor
organizers who seek protections for workers that threaten to eat into
corporate profits. Democratic
control
of corporations through worker buyouts, employee ownership, and
worker
cooperatives
would fuel a more equitable distribution of wealth through good wages
and benefits and an
equal share of company profits,
center the needs of workers and the community, and address greed
and corruption
at a time when many companies are failing to provide a living wage.
COVID-19
has ushered in a new reality that makes going
back to normal
impossible and more state action in the economy inevitable. Under a
system of “managed
capitalism,”
the government would regulate the business sector more robustly; tax
corporations to pay for infrastructure, education, and other social
goods; and implement industrial
policy
in the mold of many East Asian nations such as Japan, China, and
South Korea. Industrial policy involves aggressive and heavy-handed
government intervention in the economy that incentivizes private
production of goods, subsidies to industries, protection of certain
sectors from foreign competition, and other measures, with
coordinated,
long-term goals.
A
sustainable and equitable capitalism would mean lower
pay
for CEOs, particularly of, but not limited to, companies receiving
government bailouts; higher
taxes
for corporations; and, like Belgium, Norway, Spain, and Switzerland,
a wealth
tax
that would raise trillions of dollars in revenue, tackle endemic
inequality, and redistribute wealth downward. Former presidential
candidate Elizabeth
Warren
proposed taxing a family’s wealth over $50 million at 2 percent
annually and at 3 percent on wealth over $1 billion, while Bernie
Sanders
proposed a tax on extreme wealth for people worth above $32 million.
Such a tax could pay for universal childcare and healthcare,
affordable housing, and other social programs.
Rethinking
American capitalism means overcoming an addiction to infinite
economic growth that is plundering the planet and imposing unbearable
environmental and societal costs. The country requires a planned
de-growth
of the economy that, unlike austerity and disaster
capitalism,
favors human well-being, including a cut in unnecessary consumption,
a shorter workweek, a low-carbon, less industrialized society to deal
with climate change, and a universal
basic income.
Other countries with a more robust social safety net have not
experienced the inequality, economic turmoil, and dislocation
Americans have faced in the so-called “land of opportunity.”
Transforming
the American economy requires a rethinking of the political system.
According to a 2017 report from the Harvard
Business School,
the U.S. political system is the primary impediment to solving the
country’s major challenges, a factor that has undermined U.S.
competitiveness and public trust in the federal government. Further,
the authors argue that the system is not broken, but rather is
delivering based on how it was designed. “The real problem is
that our political system is no longer designed to serve the public
interest, and has been slowly reconfigured to benefit the private
interests of gain-seeking organizations: our major political parties
and their industry allies,” the authors wrote, recommending a
restructuring of the election process and system of governing, and
diminishing the influence of money in politics.
American
capitalism cannot return to normal, because a system thriving on
inequality, greed, and abject cruelty rather than the common good is
inherently flawed and unsustainable. Throughout history, wars,
pandemics, and other crises
have acted as agents for social
change.
Rather than seek incremental reforms, the U.S. must shift course as
it is compelled to do, and pursue nothing short of an overhaul to
avert economic devastation and social unrest.a
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