Today we notice many decisions of the Congress were partisan in nature and not so much about doing the right thing for the country, the people and the world peace. Congress’s right turning in ideology reflects the culture changes of America in the last 30 years. Below, I am citing paragraphs and viewpoints from the Book Can American Capitalism Survive? by Steven Pearlstein, Pulitzer Prize-winning columnist and Robinson Professor of Public Affairs at George Mason University.
A decade ago, 80% of Americans agreed with the statement that a free market economy is the best system. Today, it is 60%, lower than in China. One Spring 2016 Youth Poll found that only 42% of millennial supported capitalism. In another, a majority of millennial said they would rather live in a socialist country than a capitalist one. “They are not rejecting the concept of capitalism,” The organizer of the poll, Institute of Politics at Harvard’s Kennedy School of Government pointed out, “The way in which capitalism is practiced today, in the minds of young people – that is what they are rejecting.” In essence, part of the disquiet has to do with the market system’s inability to continue delivering a steadily rising standard of living to the average household, as it had for the previous half century. Another part of our disquiet reflects a nagging suspicion that our economic system has run off the moral rails, offending our sense of fairness, eroding our sense of community, poisoning our politics and rewarding values that easily degenerate into greed and indifference.
To understand how we got to this point, we have to travel back to the mid-1970s. After decades of dominating U.S and foreign markets, many of America’s biggest and most successful corporations had become complacent and lost their competitive edge. They were less efficient, less innovative and less willing to take risks. Excessive government regulation had raised costs and sapped the dynamism of sectors such as transportation, communication, finance and energy, with government officials dictating which companies could compete, what services they could provide, what prices they could charge and what profits they could earn. Overzealous antitrust enforcement had prevented mergers among rivals that would have allowed them to achieve economies of scale. Unions had pushed wages and benefits to unsustainable levels, driving up prices and draining companies of the capital needed for investment and modernization. Loose interest-rate policy at FED and overspending by Congress had triggered double-digit inflation (blogger opinion: remember the Vietnamese War and its huge cost posted on the country?)
All these happen in a time when European and Japanese are making inroads into the American market. So to support American business, Federal and state governments deregulated whole swaths of the economy, unleashing a burst of competition from upstart, low-cost rivals in airlines, trucking, freight rail, telephony, financial services and energy. Government spending was cut, along with taxes. Antitrust regulators declared that big was no longer bad, unleashing a flood of mergers and acquisitions. New trade treaties were negotiated that lowered tariff while opening overseas markets for American products. The transformation was messy, painful, contentious and often unfair, generating large numbers of winners and loser. Along the way, the old social contract between companies and their workers – and more broadly between business and society – was tossed aside. No longer could workers expect pensions, full-paid health insurance, job security or even a Christmas bonus from their employers. And no longer would business leaders feel the responsibility, or even the freedom, to put the long-term interests of their country or their communities ahead of the short-term interests of their shareholders. Corporate culture turned to become ruthless and increasingly self-centered.
Three ideas were used by political and business leaders to justify the dramatic changes in the relationship between companies and their customers, their workers, their investors and the rest of society. Beginning in the 1980s, these supply side economics, maximizing shareholder value and market justice were woven into the everyday rhetoric of economists, business leaders ad conservative politicians, providing the economic, political and moral legitimacy for dismantling the welfare and regulatory state and jettisoning a complacent business culture. In time, they came to be reflected in a wide range of government policies, corporate strategies and business practices. These pathologies are:
- #1. The government was significantly responsible for the decline in American competitiveness.
- #2.The sole suppose of every business is to deliver the highest possible financial return to its investors.
- #3. No matter how unfair it might seem to cut taxes for the wealthy, no matter how ruthless a company might have to be in its dealings with workers and consumers, no matter how unequal the distribution of income and wealth might become, we must ignore and dismiss such moral concerns as naïve and ultimately self-defeating.
Almost everything people now find distasteful about can be traced to these three flawed ideas. What began as a useful corrective has, 25 years later, become a morally corrupting and self-defeating economic dogma that threatens the future of American capitalism. When the competitiveness challenge has been overcome and the American economy was once again back on top in the mid-1990s, free market ideologues and those with vested economic interests continued to push these ideas to extremes never envisioned by those who first proposed them.
The mindless animosity toward all regulation, for example, has now provided a rationale for handing over the keys to independent regulatory agencies to lobbyists and executives from the very industries they are supposed to regulate. In a very real sense, the foxes have been put in charge of the chicken coop, and their ambitions go well beyond “reforming” the agencies or “restoring a balance” between government and business. Their aim is to hollow out these agencies from the inside – to maintain the fiction that the government is still protecting workers, consumers, investors and the environment while, in reality, trusting markets to restrain predatory business behavior. These antiregulatory zealots speak only about the cost of regulation but never the benefits; of the jobs lost but never the lives saved; of efficiency but never fairness.
After gaining control of both the White House and Congress in 2016, Republicans moved aggressively to rescind dozens of Obama-era regulations that would surely strike most Americans as fair and reasonable. These include a rule setting strict environmental standards for oil and gas drilling in national parks and wildlife refuges, a rule barring federal student loans at for-profit colleges whose graduates never get jobs and a rule requiring financial advisers to act in the best interest of their customers. They include a rule preventing mines from dumping debris into nearby rivers and streams and a rule preventing cable and phone companies from collecting and selling information about the Internet sites visited by their customers. They even set out to repeal a long-sanding rule preventing restaurant owners from taking waiters’ tips for themselves.
So virulent is Republican opposition to regulation that Don Blankenship, the former chief executive of Massey Energy – a man who spent a year in federal prison for conspiring to violate mine safety rules in connection with a 2010 mine explosion that killed 29 of his workers – used his conviction as a springboard for seeking the Republican nomination for the U.S. Senate in West Virginia. Rejecting the findings of the federal jury and a panel of mine safety experts, Blankenship blamed government regulators for causing the explosion.
Supply side tax fantasies, meanwhile, have so warped the thinking of Republican politicians that many genuinely believe they can create jobs and raise wages for the struggling working class by lavishing a trillion dollars of tax relief on businesses and investors – the very businesses and investors who have spent the last 25 years eliminating working-class jobs and driving down working-class wages. The jihad against taxes has progressed to the point that any Republican politician who even contemplates raising any tax at any time is certain to be vilified by the conservative media and driven from office by an unforgiving and well-financed conservative mob. Even long-cherished conservative ideals such as balancing budgets and investing in infrastructure have been tossed overboard in the relentless pursuit of tax cuts, which are now the reflexive Republican solution to any problem.
A similar single-mindedness has taken hold in the private sector around maximizing shareholder value. For too many corporate executives and directors, that mantra has provided a pretext for bamboozling customers, squeezing employees, evading taxes and engaging in endless rounds of unproductive mergers and acquisitions. It has even provided a pretext for defrauding shareholders themselves. We saw such prevalent phenomenon in the 1990s like in the case of Enron, WorldCom, HealthSouth and Waste Management concocting elaborate schemes to inflate reported revenues or profits. It has become the end would justifies any business means.
The obligation to maximize shareholder value has also led business leaders to abandon their role as proud stewards of the American system. In today’s business culture, it is hard to imagine them as stewards of anything other than their own bottom lines. But it wasn’t always this way. During the decades right after World War II, America’s major corporations had worked through national organization such as the Committee for Economic Development, the Business Council and the Business roundtable to support proposals to help increasing federal support for education and basic research, guarantee worker pensions, protect the environment, improve workplace safety and set a national goal of full employment. Although most of the chief executive were Republicans, business organization took pains to be bipartisan and maintain close ties to politicians of both parties. Some of the motives were self-serving, such as reducing the lure of socialism or unionization, but there was also a genuine belief that companies had a duty to balance their own interests with those of society. As then GM chairman Charlie Wilson famously put it: “I always thought that what was good for the country was good for GM and vice versa.” Big business, for a long time, used to be a stabilizing force, a moderating influence in Washington.
The above mentioned three flawed ideas had developed a pathology so serious that eventually caused financial crisis of 2008. American capitalism felt more and more like a morally corrupt and corrupting system in which the prevailing ethic is every man for himself. Old-fashioned norms around loyalty, cooperation, honesty, equality, fairness and compassion no longer seem to apply in the economic sphere. As workers, as consumers and even as investors, they feel cheated, manipulated and disrespected. How can we cure those pathology and move forward with the version of capitalism that can truly motivate the society for fair and justice competition and provide better living standard for the majority? How can we regain the social contract and trust that bind a harmonious society?