The woman's face trembles from what appears to be
early-stage Parkinson's disease. Combined with the charged words she speaks to
the filmmaker's camera, however, her shaking leaves the impression she is also
battling to control her anger and despair:
"They have families; have little ones.... Their livelihoods was there. They were making a good wage. And this company comes in and they knocked it all away. They knock their wages down, they take their jobs away, and then eventually they close the plant.
We feel like if he would have wanted to, he was in a position that he could have said, "Hey—these people still got time left." No, that was not the deal. They wanted the machinery; they didn't want us. And that's what they got.
Let's look deeper. Let's look deeper in his life. I think he's a money man...and he's gonna look out for the money people. He didn't look [out] for us little peons, anyway."
"He" is Mitt Romney and "this company" is American
Pad and Paper—"AmPad"—in which Bain Capital, the investment firm
Romney co-founded and led, once held a controlling interest. In July 1994 it
acquired SCM, a manufacturer of hanging folders and writing products with a
factory in Marion, Indiana. After the acquisition, according to a New York magazine
story on Romney's business career, AmPad fired all of the union workers [at the Marion plant],
more than 250 people in total, then hired most of them back at much lower
wages; for years, they had gotten health-care coverage as part of their pay
package, but now AmPad asked them to pay half of the costs. The whole plant
walked out.
In February 1995 AmPad gave up on solving its labor problems and closed
the Marion factory, moving its equipment to facilities in other states.
The remarkable thing about When Mitt
Romney Came to Town, the documentary featuring the woman from
Marion, is its provenance. The 28-minute film is a morality play, contrasting
smug, hyper-rich capitalists with salt-of-the-earth Everymen whose hopes have
been shattered by economic upheaval. Its portrayal of the suffering in Marion
is not, however, Michael Moore's sequel to Roger and Me (1989), his depiction of Flint,
Michigan's death spiral. Instead, When Mitt
Romney Came to Town is
a campaign commercial produced by Winning Our Future, a political action
committee supporting Newt Gingrich's presidential campaign. Thus the 1990s'
most prominent conservative, whom liberals hated and feared, is now supported
by donors who have put up a website deriding "Romney and his cronies"
as "predators" who "searched out vulnerable companies, took them
over, loaded them with debt, and collected obscene fees while doing so."
Gingrich expressed some misgivings about When Mitt Romney Came to Town, calling on Winning Our
Future, which is distinct from his presidential campaign, to "either edit
out every single mistake or pull the entire film." Another candidate was
less fastidious. Before ending his misbegotten quest for the GOP nomination
Governor Rick Perry called Romney a "vulture capitalist," not a
"venture capitalist," the difference being that after acquiring
troubled companies, Romney and Bain Capital set about "picking their bones
clean" rather than working to "clean up those companies, save those
jobs." Romney possesses an odd gift for getting other Republican
politicians in touch with their inner proletarian: in 2008 when Governor Mike
Huckabee was running against Romney he said, "I want to be a president who
reminds you of the guy you work with, not the guy who laid you off."
Liberalism
after Socialism
During Franklin Roosevelt's first term a worker who still had a job said,
"Mr. Roosevelt is the only man we ever had in the White House who would
understand that my boss is a son of a bitch." It's not surprising that
similar resentments echo in the worst economic downturn since the
Great Depression. Nonetheless, it's unusual to hear Republicans accusing other
Republicans of exploiting the workers.
America has had other recessions, some more severe at least by some
measures. Unemployment rose to 10.8% by the end of 1982 as the Federal Reserve,
with the support of the Reagan Administration, tightened the money
supply—interest rates would climb above 20%—in order to strangle inflation. The
Left-to-Right political spectrum remained intact during these downturns,
however. Liberals sought greater government intervention into economic activity
on behalf of FDR's "forgotten man," while conservatives emphasized
the government's capacity to do harm and the unregulated economy's capacity to
correct itself. The first sign that old rules had been suspended came in 2009,
when the moment of greatest economic peril gave rise to a populist movement on
the Right, as the Tea
Party strenuously demanded less government, not more. This was the first
serious economic downturn since the collapse of Soviet Communism, a denouement
that also marked the last gasp of socialism as an economic ideal. The New Deal,
by contrast, struggled to end the Great Depression at a time when some serious
people still took socialism seriously.
In 1947, for example, the late Arthur Schlesinger, Jr., assured the
readers of Partisan
Review, "There seems no inherent obstacle to the gradual
advance of socialism in the United States through a series of New Deals."
(In A Life in the Twentieth Century [2001], Schlesinger described having
become an "ardent New Dealer" while a Harvard undergraduate in the
1930s, and remaining "to this day a New Dealer, unreconstructed and
unrepentant." Indeed, "I am somewhat embarrassed to confess that I
have not radically altered my general outlook in more than half a
century.") Schlesinger was confident about America's ability to achieve
"democratic socialism"—or "libertarian socialism" or, more
disquietingly, "a not undemocratic socialism." The "New Deal
greatly enlarged the reserves of trained personnel; the mobilization of
industry during [World War II] provided more experience; and the next
depression will certainly mean a vast expansion in government ownership and
control." Schlesinger voiced contempt for capitalists—even for their
ability to protect their own interests—and disappointment in the workers'
political will and skill. There was, however, a more promising vehicle for
achieving a not undemocratic socialism, the
"politician-manager-intellectual type—the New Dealer," provided he is
"intelligent and decisive."
By the time Schlesinger died in 2007 it had become impossible to imagine
a public intellectual this side of Noam Chomsky enthusing over "a vast
expansion in government ownership and control." In 1991 Paul Starr, a
Princeton sociologist and co-founder of the American
Prospect, wrote an article, "Liberalism After Socialism,"
advising that magazine's readers, "It is now indisputable that communism
impoverished the people who lived under it, and it is not clear how or why a
more democratically planned socialist economy would do much better—or that such
a system is feasible at all." Repudiating the vision Schlesinger had
embraced 44 years earlier, Starr contended that the "synthesis of
liberalism and socialism that once excited imaginations now seems almost
drained of content." As a result, he urged liberals "to give up on
the idea of a grand synthesis or a third way...between capitalism and socialism
or an alternative altogether ‘beyond' them."
The task for liberalism after socialism, according to Starr, is,
"Reform capitalism, yes; replace it, no." This is, of course, the
only possible mission left for the Left, once it concedes that no one has any
idea what to replace capitalism with.
To re-form capitalism, however, implies that it will be made to con-form
to...something, some intelligible standard of a just, efficient economic
system. Socialism, despite fatal theoretical and practical flaws, had an
elevator pitch. Socialists' efforts would culminate in a centrally directed
economy, where the government owned or managed key industries to advance the
comprehensive plans it formulated for blending economic growth with social
justice.
Liberalism's lack of an elevator pitch makes it impossible to describe
the culmination of liberals' efforts. Innumerable books, articles, and seminars
have tried and failed to define the central liberal idea that explains and
justifies all the individual reforms. None of this rhetoric or theorizing has
been able to demonstrate how liberalism after socialism amounts to something
bigger and nobler than just messing around. There are worse things for the
politician-manager-intellectual type to do than mess around, of course. But no
one can find coherence or inspiration in the liberal promise that messing
around today will pave the way for more messing around tomorrow.
Stuck
with Capitalism
Counterintuitively, America's political history since the fall of the Berlin
Wall suggests being incoherent and uninspiring is more of an advantage than a
burden for liberalism. In the five presidential elections before November 1989
the Democratic nominee won 43% of all the popular votes, added together,
compared to the 54.3% cast for the Republicans. In the five elections since
then, the Democrats have won 48.6% of the popular votes, compared to the
Republicans' 44.8%.
It was widely and correctly predicted at the time that the collapse of
Communism would take away the one issue on which all factions of the
conservative movement agreed, however else their concerns were disparate or
even irreconcilable. It was also understood that the demise of the Soviet Union
would reduce the political salience of national security, an issue that had
given Republicans an important advantage over a Democratic party that came to
rue but not reject McGovernism. The only Republican presidential nominee who
failed to win a popular majority in the five elections from 1972 to 1988 was
Gerald Ford. Even he came close, receiving 48% of the vote in 1976 despite
bearing the standard of a party whose previous nominee had brought the nation
Watergate. The only Republican nominee since the Soviet Union's dissolution to
win, barely, a popular majority was George W. Bush in 2004 with 50.7% of the
vote. In the first presidential election after the terrorist attacks of
September 11, 2001, Bush stressed national security over all other concerns,
making his argument a throwback to the successful Republican campaigns in the
final two decades of the Cold War.
The new political realities since 1989 have also reordered America's
domestic policy debates. Capitalism has won, in the sense that every
alternative to capitalism has lost. Being the only option left is not the same
as being one that's desired, however. The "triumph" of capitalism
seems to have done more to increase the number of people resigned to it than
the number committed to it.
Furthermore, if the post-socialist liberal prospect of endless messing
around does not impress, neither does it alarm. Europe's social democracies
have serious problems, which America will do well to avoid—but they don't have
gulags. The warning in Friedrich Hayek's The Road to
Serfdom (1944) will
never become obsolete: a slippery slope leads from government planning to
government tyranny. Limiting government defends the space necessary for
capitalism, and freedom generally, to flourish.
That contention is not sufficient to secure democratic acceptance of
capitalism, however. In a nation that has known democracy for over 200 years
the road to serfdom is too long, the existence of detours too plausible, the
prospect of tyranny too abstract, for avoiding totalitarianism to be the sole
basis for opposing this regulation or that redistribution. The political case
for free markets has always relied less heavily on the argument that inhibiting
capitalism engenders dictatorship than on the claim that unshackling capitalism
engenders prosperity. Freedom Works is the name of one group advocating limited
government. At the midpoint of the 1920s President Calvin Coolidge declared
that Republican policies of holding down government spending and taxes had
bequeathed "peaceful and prosperous industrial relations" in a nation
where "employment is plentiful, the rate of pay is high, and wage earners
are in a state of contentment seldom before seen."
Coolidge's successor was considerably more emphatic. Upon receiving the
Republican presidential nomination in 1928 Herbert Hoover declared:
We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. We have not yet reached the goal but given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.... This is the primary purpose of the economic policies we advocate. [Emphasis added.]
Ask to be judged for delivering prosperity, and prepare to be condemned
when something very different materializes. As Hoover admitted at the start of
his doomed 1932 reelection campaign, the nation was enduring "a time of
unparalleled economic calamity," bringing "greater suffering and
hardship than any which have come to the American people since the aftermath of
the Civil War." The GOP has been more and less competitive with the
Democrats since 1932, but has never again been the dominant party it was for
most of the 64 years separating the Civil War from the Great Depression.
"All of these rights," Franklin Roosevelt said of the
"Second Bill of Rights" he put forward in his 1944 State of the Union
address, "spell security." Their implementation will realize
"new goals of human happiness and well-being." Coolidge, Hoover, and
Roosevelt agreed on the basic point that greater economic security is always
desirable and increased vulnerability never welcome.
Sturdy
Self-Interest
Americans are no different from other peoples in wanting more rather than less,
preferring to stand on solid ground than traverse thin ice. The political
problem of economic security poses special challenges for the United States,
though, given the complex way it intersects with our principles and character.
American conservatives believe their entire political mission was laid out in a
single year, 1776, which saw the signing of the Declaration of Independence and
the publication of The Wealth of
Nations. Adam Smith's book, however, is a stern Declaration of
Dependence: "In civilized society [man] stands at all times in need of the
cooperation and assistance of great multitudes, while his whole life is scarce
sufficient to gain the friendship of a few persons.... [Man] has almost
constant occasion for the help of his brethren, and it is in vain for him to
expect it from their benevolence only."
Smith's famous solution to this dilemma was to render generosity
unnecessary by relying on the stronger, steadier force of self-interest: it is
"by treaty, by barter, and by purchase, that we obtain from one another
the greater part of those mutual good offices which we stand in need of." We
make these exchanges thinking all the while of how they will benefit us. A man bothers to examine how an exchange will help
the other parties to it, not because he cares about that outcome for itself,
but because it helps him devise ways to "show them that it is for their
own advantage to do for him what he requires of them." Thus, "It is
not from the benevolence of the butcher, the brewer, or the baker, that we
expect our dinner, but from their regard to their own interest. We address
ourselves, not to their humanity but to their self-love, and never talk to them
of our own necessities but of their advantages."
This constant need to induce others to act in ways that advance our
interests does more to promote economic vitality than it does to secure
psychological or political stability. "It is the manners and spirit of a
people which preserve a republic in vigor," Thomas Jefferson wrote in Notes on the State of Virginia, first published in
1785. For this reason he hoped the ever more elaborate division of labor that
Adam Smith had delineated would be held in abeyance by the American continent's
"immensity of land courting the industry of the husbandman."
Jefferson believed that, "Those who labor in the earth are the chosen
people of God, if ever he had a chosen people" because:
Corruption of morals in the mass of cultivators is a
phenomenon of which no age nor nation has furnished an example. It is the mark
set on those, who not looking up to heaven, to their own soil and industry, as
does the husbandman, for their subsistence, depend for it on the casualties and
caprice of customers. Dependence begets subservience and venality, suffocates
the germ of virtue, and prepares fit tools for the designs of ambition.
Free
Men
We should resist the temptation to dismiss Jefferson's fears by ascribing them
to agrarian mysticism. As Drew McCoy shows in The Elusive
Republic: Political Economy in Jeffersonian America (1980), Jefferson's apprehensions
about the tensions between a booming economy and a sturdy republic were widely
shared among America's founders. Even Benjamin Franklin, the prototypical
shrewd Yankee go-getter, wrote in 1773, "Farmers who manufacture in their
own families what they have occasion for and no more are perhaps the happiest
people and the healthiest." Franklin had earlier expressed the belief that
"no man who can have a piece of land of his own, sufficient by his labor
to subsist his family in plenty, is poor enough to be a manufacturer and work
for a master." (The word "manufacturer" in the 18th century
could signify anyone who made articles or materials, by hand or by mechanical
power, as well as the owner of such shops of factories.)
The husbandman, being in the ultimate commodity business, sells products
to customers who neither know nor care about his manners and spirit, which
means he has no reason to adjust them to please his buyers. Jefferson thought
it impossible for a man to spend his days cringing and flattering in front of a
boss's desk or from behind the counter to his customers, and then acquit
himself after-hours as a confident, candid citizen who discharges civic duties
by clearly assessing the objective public interest, rather than pursuing the
private concerns that dominate his working and waking life.
Arthur Miller's epitaph for Willy Loman, his protagonist in Death of a Salesman (1949),
describes the vulnerability of those unable to rely on heaven and their own
soil and industry for dignity and survival. All such must submit to the
life-long grind of winning and keeping the good opinion of the people to whom
they sell their products and services. That good opinion often needs to encompass
not just the quality and price of the goods or services for sale, but the
attractiveness and worth of the people who bring them to the market:
For a salesman, there is no rock bottom to the life. He don't put a bolt to a nut, he don't tell you the law or give you medicine. He's a man way out there in the blue, riding on a smile and a shoeshine. And when they start not smiling back-that's an earthquake.
By 1859 America's economy was more complex and less agrarian than the
one Jefferson had known in Virginia. The portion of the labor force engaged in
agriculture fell from 74% in the 1800 census to 53% in the 1860s. Nonetheless,
Abraham Lincoln contended that every American still had sufficient capacity to
avoid dependence and subservience. Speaking that year before the Wisconsin
State Agricultural Society, Lincoln—a recently defeated senatorial candidate
and a prospective presidential one—quickly dispensed with Jeffersonian praise
of the husbandman's singular virtues: "My opinion of [farmers] is that, in
proportion to numbers, they are neither better nor worse than any other
class." Lincoln believed that through their own industry men in all
occupations could secure their livelihoods and honor. Looking to heaven and
their own soil was one way, but neither the best nor only
way: "In these Free States, a large majority are neither hirers or hired. Men, with their families—wives, sons, and
daughters—work for themselves, on their farms, in their houses and in their
shops, taking the whole product to themselves, and asking no favors of capital
on the one hand, nor of hirelings or slaves on the other."
The crucial point for Lincoln was that the only Americans forced to ask
for favors were those who would not or could not take advantage of the nation's
abundant opportunities:
The prudent, penniless beginner in the world, labors
for wages awhile, saves a surplus with which to buy tools or land, for himself;
then labors on his own account another while, and at length hires another new
beginner to help him. This, say its advocates, is free labor—the
just and generous, and prosperous system, which opens the way for all—gives
hope to all, and energy, and progress, and improvement of condition to all. If any continue through life in the condition of the hired
laborer, it is not the fault of the system, but because of either a dependent
nature which prefers it, or improvidence, folly, or singular misfortune. [Emphasis added.]
Creative
Destruction
Lincoln was describing a reality that had existed, but which was giving way to a
new and very different one. The census of 1800 did not even have a category for
manufacturing workers but by 1860 they accounted for 14% of the labor force,
with another 8% in trade. After seven subsequent decades of industrialization,
the Depression was not only an economic calamity but marked the final
disappearance of the world that Jefferson and Lincoln had known and hoped to
perpetuate, one where "the system" condemned no one to "continue
through life in the condition of the hired laborer." The percentage of the
labor force engaged in agriculture continued to decline, to 22% in 1930 (and
less than 2% by 2010), while 37% were in manufacturing or trade. Employment in,
and dependence on, large enterprises manufacturing goods or providing services
became the rule. The official statistics do not give distinct categories for
the self-employed, or the size of enterprises, but a reasonable inference is
that fewer and fewer employed Americans worked alongside their employer in
small enterprises, while more and more worked with hundreds or thousands of
others for a boss that none of them ever met or could realistically hope to
emulate. As the late political scientist John Wettergreen put it:
The Great Depression [struck] a fatal blow against the
bulwark of Jeffersonian democracy, the middle class—that is, the small-business
men and small farmers who had been assumed by politicians of all types to be
the backbone of the nation. One should not be complacent about this; the Great
Depression, together with World War II, left us what we have been ever since, a
nation of wage workers; 95 percent of us are without independent means of
subsistence in the Jeffersonian...sense.
One of the New Deal's forgotten battles was to re-secure a defensible
space for those who were not wage workers. The Second Bill of Rights included
planks that would codify that concern by committing the government to guarantee
"The right of every farmer to raise and sell his products at a return
which will give him and his family a decent living," as well as, "The
right of every businessman, large and small, to trade in an atmosphere of
freedom from unfair competition and domination by monopolies at home or
abroad."
Even the liberal legal scholar Cass Sunstein, who devoted a book to
celebrating the 1944 State of the Union Address as the greatest speech of the
20th century, was dubious about this effort. Rather than guarantee farmers'
profits, he would have government acknowledge, "In fact some farmers
should go out of business. There is no more reason to guarantee ‘every' farmer
a reasonable profit than to make this guarantee for computer companies,
airlines, or real estate agents." It follows that some airlines, real
estate agents, and other enterprises of all types should also go out of business,
and even that some entire industries that once made profits and played a valued
role—travel agencies and video rental stores are examples—should disappear.
One of today's most committed champions of the New Deal, then,
acknowledges the futility and damage from attempting meteorological
interventions meant to abate what economist Joseph Schumpeter called
capitalism's "perennial gale of creative destruction." Lest we miss
the point, Schumpeter resorted to lectern-thumping repetition in Capitalism, Socialism, and Democracy (1942): "This process of Creative
Destruction," which is "the essential fact about capitalism," is
one that "incessantly revolutionizes the economic structure from within,
incessantly destroying the old one, incessantly creating a new one." Marx
and Engels had made the same argument a century before in the Communist Manifesto:
Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.
Since the Marxist program for controlling and then expropriating this
rollercoaster has failed and been abandoned, we are left to devise the best way
to survive and enjoy the ride. The liberal response aims to mitigate creative
destruction by regulating the process itself, and by redistributing some of the
gains made by those shrewd or lucky enough to participate in rising firms and
industries to those obtuse or unfortunate enough to have thrown in their lot
with declining ones. The conservative position is that liberalism's
interventions do more harm than good, stifling prosperity and jeopardizing
liberty: we are better advised to accept creative destruction as a package deal
that will ultimately help everyone, even those it harms in the near- and
mid-term. As Mitt Romney is shown saying to a group of college students in the
Winning Our Future film, "Creative destruction does enhance productivity.
For an economy to thrive as ours does, there are a lot of people who will
suffer as a result of that."
Take
This Job
Neither position deals with our situation adequately. Believing that
spontaneous order is a better bet than liberalism's engineered disarray,
conservatives contend that the problem with messing around is that it routinely
leaves things a mess. Worse still, if politician-manager-intellectual types get
carried away with their use of plenary government power to build the society
they think we want or should want, they may wind up impoverishing or even
imprisoning us.
Having said everything there is to say about the harm government can do
to us, conservatives would do well to give equal emphasis to the harm it can do
to itself. When government undertakes tasks for which it is ill equipped it
squanders the authority necessary for carrying out its core responsibilities.
Pervasive rent-seeking, bad for our economy and worse for our republic, should
be discouraged instead of rewarded. If government becomes integral to securing
every advantage and assuaging every grievance, then governance becomes
impossible. We do our republic no favors by promoting the belief that
government can and should acquire, as FDR said in 1936, "the vibrant
personal character that is the very embodiment of human charity," in order
not merely to "share the wealth" but to impart "the true sympathy
and wisdom [that] helps men to help themselves."
A republic's government cannot be that sympathetic and wise, and should
not be that powerful. Given the extent and limit of the president's important
constitutional duties, there's no reason for him to know or care that my boss
is a son of a bitch, nor for me as a citizen to care whether he cares. Barbara
Walters revealed, idiotically but clarifyingly, the depths to which a regime
committed to embodying human charity will descend when she concluded a television
interview 35 years ago by imploring president-elect Jimmy Carter, "Be wise
with us, Governor. Be good to us."
When an American says, "Don't tread on me," he's supposed to
be warning, not pleading. Someone who hates his job should not seek help from the
president, the National Labor Relations Board, the Equal Employment Opportunity
Commission, or the California Task Force to Promote Self-Esteem and Personal
and Social Responsibility. He shouldn't, in general, beseech some
politician-manager-intellectual type to be wise with him and good to him.
No, what an American who is miserable at work, all day and every day,
ought to do is walk into his boss's office and tell that son of a bitch to take
this job and shove it. The country song by that title, though remembered as an
anthem of defiance, was actually a lament for the prohibitive cost of defiance
in a nation of hirelings. The song's protagonist makes clear that after working
"in this factory for nigh on fifteen years," he knows what he wants to
tell his boss before walking out the door. But it is precisely what he hasn't
said, and probably never will, because he only wishes he had the
"guts" and the "nerve" to quit so boldly. For the handful
of listeners unsure why workplace courage was difficult to summon, the singer
on the 1977 country hit had fortuitously changed his name in the 1960s from
Donald Lytle to Johnny PayCheck.
We should want a society where people lacking a hero's guts and nerve
still have ways to find employment they don't detest. The point is not to build
an insolent nation but a free one. No longer possessing an immensity of land
courting the industry of the husbandman, we must still contend with Jefferson's
dilemma: we can't count on people whose adult lives are spent biting their tongues
as employees to speak their minds as citizens.
The single most important requirement for minimizing the number of
people stuck and stifled in dead-end jobs is a strong economy and a tight labor
market. If there are attractive employment opportunities elsewhere, no one will
waste nigh on 15 years seething about working for the "dog" or
"fool" that David Allen Coe's lyrics described—Jane or Jack Paycheck
would have long since moved on to a better gig. And even the fools who run the
enterprise the Paychecks quit would eventually realize they'll have to comport
themselves so as to attract and retain the workers their business depends on.
As Adam Smith explained, it is not from the benevolence of the employer that we
expect to be paid competitively and treated respectfully, but from his regard
to his own interest.
Who's
In Control?
If there were a prosperity button the government could push, the problem of
being trapped in, much less desperate to fill, bad jobs would have been solved
long ago. There appears to be no recipe that guarantees the strong growth and
low unemployment Americans enjoyed in the early 1960s, middle 1980s, or late
1990s. Until that formula is discovered, we must concede that macroeconomic
policy proposals do not get us to the heart of the matter. Too many people are
dubious about capitalism, despite the awareness that there are no alternatives
to it. C.S. Lewis acknowledged that every new cancer diagnosis made it a little
harder to believe in God. In the same way, every downsizing or home foreclosure
makes it a little more difficult to accept that giant corporations and
investment banks are led by an invisible hand to promote society's best
interests simply by pursuing their own. Recessions make the destructiveness of
capitalism more palpable than its creativity. And if, in a nation of employees,
we feel diminished and vulnerable when economic necessity keeps us stuck in a
bad job, that fear turns into terror when a firing or plant closure raises the
prospect of being homeless, without health insurance, or otherwise consigned to
society's shadowy margins.
Conservatives need to address these doubts with a compelling account of
democratic capitalism. The liberal understanding of that concept is
long-settled. In 1932 Franklin Roosevelt said, "The day of the great
promoter or the financial Titan...is over.... The day of enlightened
administration has come." Its work will consist of "modifying and
controlling our economic units."
The results of that 80-year experiment are in: administration is seldom
enlightened enough to carry out the broad mandate FDR gave it, and democracy is
less likely to temper than be corrupted by this administration. The
"economic units," that is, do not submit meekly to being modified and
controlled. Rather, they have every incentive to use every available political
means to modify and control the enlightened administrators ostensibly modifying
and controlling them.
Entrepreneurial energies that would otherwise be devoted to improving goods and
services; strengthening relations with investors, suppliers, and customers; and
discerning and responding to market signals will, of necessity, be redirected
to winning friends and gaining influence among regulators and legislators.
In the competing conservative version, democratic capitalism means that
more and more people have a stake in the system, in a way that is neither
mediated by government nor limited to being hired laborers dependent on other
people's capitalist practices. The woman in Marion, Indiana is correct—as a
general partner of Bain Capital, Mitt Romney was a "money man" looking out
for the "money people." Specifically, he had raised millions of
dollars when Bain Capital was founded, not by persuading individuals and
institutions to donate to a charitable organization, but by persuading them
that the risk they would lose some or all of their money was outweighed by the
prospect they would realize a handsome return on it. Romney would have violated
his obligations to those investors by perpetuating an enterprise Bain could not
make profitable in order to avoid disrupting the lives of its employees or the
equanimity of the city where it was located.
The woman's complaint that Romney had the capability yet failed in his
duty to care for AmPad and Marion's "little peons" does not hold up
under scrutiny. The fact she feels that American economic life has reduced her
and her friends to peonage, however, is a sentiment no one who cares about
capitalism's political prospects, or America's republican future, can
disregard. A nation of employees becomes an electorate that listens—bemused,
skeptical, or infuriated—as competing elites argue about whether the partisans
of enlightened administration or the partisans of spontaneous order will do
more to augment the quantity and quality of the nation's jobs.
What's missing from both appeals is a democracy of agency. One small
group of Americans, with degrees from famous colleges and boundless confidence
in their own intelligence and motives, proposes to regulate capitalism; and
another small group, equally credentialed and self-satisfied, proposes to
practice it. The rest of us are left to make an Election Day choice on the
basis of incomprehensible arguments we can't evaluate, and spend all the other
days of the election cycle hoping that the group that won meant what it said,
knows what it's talking about...and has more good luck than bad.
Capitalism will receive and deserve greater political support by
steadily becoming something more people do and fewer people have done to or for
them. The necessary changes will have more to do with the conduct and even the
sociology of capitalism than with public policies. The most fundamental change
would be for Americans to become a nation of savers. Household savings rates in
the U.S. have been below 5% for most of the past two decades, among the lowest
rates in the developed world. The best safety net is the one families build and
own, giving them the wherewithal to get through tough economic times and take
the risks of seizing more promising employment and business opportunities.
A
Nation of Investors
Economist Martin Weitzman advocated another idea to moderate the business cycle
from within. In The Share
Economy (1984), he
proposed a system where employees' compensation would be based, in large part if
not entirely, on receiving an agreed-upon percentage of the employer's revenue
stream. During good times paychecks would automatically increase, while the
automatic reductions during downturns would curtail the need for layoffs.
Weitzman's principal concern was to provide a stabilizing macroeconomic
alternative that would see the business cycle move gently rather than violently
between inflationary booms and recessions.
But the share economy also strengthens capitalism at the microeconomic
and even moral level. In the "wage system" Weitzman wants to replace,
employees receive a stipulated amount of dollars, which employers generally try
to continue for as long as business conditions permit...and then reduce to zero
when that compensation level becomes unsustainable. The share system, by
contrast, would banish "the illusion that the welfare of a firm's
employees is independent of the economic condition of the employer." In an
economy where employees prosper when their firms prosper and suffer when their
firms suffer, all become, in effect, capitalists. It is not from the employer
or employee's benevolence but from their mutual self-interest that we expect
them to work together to expand the pie they've agreed to divide.
The greatest monument to the illusion that employees can and should
prosper regardless of the economic condition of their employer is the rusting
ruin that's the American labor movement. In Which Side
Are You On? (1991),
labor attorney Thomas Geoghegan lamented that the failure to take the biggest
equity position it could in the industries where it represented workers
"was the longest-running mistake in the history of labor, the unwitting,
almost Gandhi-like renunciation of power." Geoghegan's explanation is that
unionists were so strongly committed to the idea that workers and employers'
relationship had to be adversarial that they never accepted the possibility of
it being collaborative. "The attitude in labor was: collective bargaining
is for adults, stockholder meetings are for kids."
And despite all the rhetoric about "solidarity," labor's
acquiescence in the layoffs that Weitzman's share economy would obviate
reflects an "I've-got-mine" outlook, red in tooth and claw. As
Geoghegan wrote, "Once people become unemployed, even if they were always
good union members, they are out of the labor movement. They become lepers, or
untouchables: they become, at least potentially, scabs."
Non-spurious solidarity was economically important when America was a
nation of joiners. From Mutual
Aid to the Welfare State (2000),
by historian David Beito, shows how social capital and economic capital can
reinvigorate one another. He describes how fraternal societies in the late 19th
and early 20th centuries, emphasizing "mutual aid and reciprocity,"
pooled members' resources to provide life and health insurance, and to
establish clinics, hospitals, orphanages, and homes for the elderly. As Beito
chronicles, once the New Deal asserted that the government, not voluntary
private organizations, was the proper source of this kind of assistance,
fraternal organizations, their endeavors made redundant, went into a steep
decline.
Conservatives should promote the revival of that approach, and foster
others, to make Americans true stakeholders in our private enterprise system.
To paraphrase John Dewey, the cure for the ailments of capitalism is more
capitalism. "More capitalism" means steadily increasing the number of
Americans with a piece of the action, while decreasing the number whose only
connection to free enterprise is filling the jobs that successful ventures
create and being laid off from ones that faltering enterprises destroy.
The word "invest" originally meant to endow with authority, as
when donning garments that showed military or clerical rank. Conservatives want
more Americans, and ultimately all Americans, to be investors, endowed with
authority over their families' destinies and the economic life of the nation.
Advances toward that result mean advances toward the goal Lincoln described 153
years ago, when many Americans could aspire to be self-employed. Today, most of
us spend most of our lives as hired laborers. That fact makes it all the more
important to constantly extend and deepen confidence in our economy as a just,
generous, and prosperous system, one which opens the way and improves
conditions for all, giving energy, progress, and hope to all.
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