Fasten Your Seatbelts

The title of this blog is a reference to a scene in the movie “All About Eve,” when the character played by Bette Davis puts a cocktail party on high alert with the line, “fasten your seatbelts, it’s going to be a bumpy night.” That was how I felt after reading a recent commentary in the Wall Street Journal entitled “American Capitalism Is Fine, Thank You.” Except I wasn’t thinking about a cocktail party, or a bumpy flight. I was thinking about the 2020 presidential election.

As is obvious from the title, “American Capitalism Is Fine, Thank You,” the author, a Republican, is defending capitalism against a group of Democrats, who he says are “making the case for socialism” when they focus on issues like rising inequality and the lack of upward mobility. He accuses these Democrats of having a more positive view of socialism than capitalism, and cites a study that says “less than half of young adults have a positive view of capitalism.” He attempts to frame his comments as more than just a debate between “left-wing socialists and right-wing capitalists” but, judging from the readers comments – this is how the debate is setting up.

I am not neutral in this debate. I believe in capitalism. I also believe in American democracy. But capitalism and democracy are not the same thing. One is an economic system the other is a political system. They follow different logics — capitalism’s logics flow from the premise of unequally distributed rights to property and wealth, while democracy is about equally distributed civic and political rights. Capitalism is concerned with profit-oriented trade, hierarchical decision-making and financial mechanisms like stock markets that facilitate capital ownership. In contrast, Democracy’s concern is the common good and it operates through debate, compromise and majority decision-making, with constitutional mechanisms that facilitate a balance of power.

The idea that these two systems, capitalism and democracy, have become intertwined as American Capitalism is not surprising. The Wall Street Journal once called itself “The Daily Diary of the American Dream.” There has always been an interdependency between democracy and capitalism dating back to when Alexander Hamilton founded the New York Stock Exchange in order to sell the bonds that established the national treasury and fund the consolidation of state’s debt following the American revolution.

So the bumpy ride begins here. The author wants us to think “American Capitalism Is Fine, Thank You.” But is it really? And, why is it that anyone who brings attention to ways that American capitalism might work better is labeled a socialist? Can’t we do better? It’s hard to overlook an uneven recovery from the global economic crisis, or enormous ethical lapses by corporate giants like Wells Fargo and Facebook, which is necessary to do in order to blindly accept the claim that American capitalism is doing just fine. We can, and must, do better than this.

Doing better starts with recognizing the interdependencies between these two systems, capitalism and democracy, and understanding the long-term consequences of one system dominating the other. One does not survive without the other. So companies must be responsive to broad societal concerns like growing disparities in wealth and income, equitable inclusion, and privacy protection. And, when workers don’t earn enough to support their families, pay high-interest for credit, and retire with no savings, or when corporations reap profits by extracting value from other parts of the economy or harming the natural environment, we shouldn’t be surprised by expressions of anger and calls for reform.

For American capitalism to reach its full potential, we must recommit to its purpose, which is to create long-term value, not just for shareholders but also for other important stakeholders like employees, customers and communities. Our corporate leaders must not succumb to short-term pressures for exaggerated profits and inflated stock prices that benefit only a few, or neglect to make investments in employee development, innovation, and capital expenditures that are necessary for long-term, sustainable growth.

If the the 2020 presidential race is going to be dominated by glib, polarizing commentary that ignores the precarious interdependencies within our economic and political systems, and I fear it will, then fasten your seatbelts. We’re in for a long, bumpy ride.