During the “dog days” of summer, in what was likely an opening salvo of the 2020 presidential campaign, Sen. Elizabeth Warren of Massachusetts introduced a proposal to alter American capitalism radically. If enacted, large firms would have to incorporate at the federal level and live by a charter that forces them to consider the interests of all stakeholders equally. Workers must take 40 percent of the seats on the company’s board. The support of 75 percent of both shareholders and board members would be necessary for the corporation to engage in politics.
This is a big deal — not least because many believe Warren has a good chance of being the Democrats’ next presidential nominee. As you can imagine, I have strong views on the plan. Here’s one about the senator’s understanding of the economy: It is already the case that shareholders get paid only after governments, vendors, employees, and creditors have taken their cut. And what of her plan to hinder corporate political activity and level the playing field: Even with the recent Janus decision that prohibited public-sector unions from taking dues out of the paychecks of workers who were not members, labor’s leadership is today as free to distribute money from their organizations’ political coffers as are corporate boards and managers.
But I really want to talk about the broader significance of Warren’s Accountable Capitalism Act. By offering this proposal, the senator joins a number of politicians of the current era, including President Trump, eager to display a lack of understanding of the modern world and confidence in the American way. These leaders’ solutions to their perceived problems rest on a fantastical desire to turn back the clock — both Trump and Warren seem to pine for the rapid growth, greater economic equality, somewhat paradoxical social inequality, and American hegemony of the immediate postwar period.
They want to go back to a time when the world bent readily to American will. American liberal value — free markets, free minds, free movement, and free worship — provided inspiration, a path forward for many countries as they recovered from the devastation of World War II or shrugged off the bonds of colonialism. Others bowed to American economic and military might — strength augmented by international institutions like NATO, the IMF, and World Bank.
Neither Trump nor Warren have a time machine, of course. We cannot go back. And that’s the problem. The crop of leading politicians today, especially on the left but notably Trump as well, are offering solutions that try to obstruct the movement of political, economic, and social tectonic plates. No amount of American power, model behavior, or ingenuity can change their course these days.
These leaders misread our circumstances. The advantages in human capital we have enjoyed for around a century are no longer so great. The world has caught up, in its educational systems, its technical training, and increasingly its technological knowhow. Globalization and the internet revolution have ensured this. The key is to change America at the margins to ride these forces. American economic, political, and social institutions maintain our edge. They permit robust economic growth, attract talented and productive people, and provide crucial freedoms. Trump and the Warren crowd want to revive the 1950s and 1960s, when our foreign-born population was small, trade much less, unions strong, families always nuclear, and workers without college degrees highly paid. No amount of government policy can do that.
Their efforts also betray a lack of confidence. Trump speaks a good game, but he becomes more energized when talking about the past than the future. Leftists argue the “arc” of history is in their favor — they want to be called “progressives” after all — but they largely offer up industrial-era economic policies, repackaged with a heavy coating of identity politics.
America has never been a revolutionary country. Our “Revolution” was an assertion of independence and the ideas of John Locke that were at the heart of British political culture. The Civil War was an internal squabble over an American anomaly, slavery. The Progressive Era and New Deal did not lead to the kind of pervasive welfare state and broad nationalization of business that emerged in Western Europe following World War II.
The last time we lacked this confidence was in the 1970s. Ronald Reagan provided the remedy. He did not have all the answers. But it’s interesting that much of the successful world followed his lead by emphasizing the core ideas of political and economic freedom. Since then, presidential and congressional majorities of both parties have largely embraced this reinvigorated American model, making adjustments at the margins to accommodate developments.
Desperate times often call for big changes. But regardless of whether these times are bad, our experience tells us not to abandon the values that made America great.
