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How capitalism faces an age of populism

The past few years have seen a marked rise in populism, as leaders like President Trump have grown anger at the growing chasms in society to seize power and reshape America’s institutions. Even President-elect Joseph R. Biden Jr., the embodiment of the Washington establishment for decades, has embraced populist elements in his platform. (After all, the heart of his “Build Back Better” plan is “Buy American”.)

As former Democratic Senator from North Dakota Heidi Heitkamp said, more and more people are asking government and business leaders, “What are these guys doing for me?” The answer, as they see it: “It looks like they’re really focused on themselves.” This attitude, and the anger it stirs up, has put increasing pressure on fundamental systems like capitalism and democracy, with the potential to reshape society in countless ways.

As part of the DealBook DC Policy Project, The New York Times brought together a virtual panel of executives, academics and policymakers like Ms. Heitkamp in early December – “people who, for much of the outside world, can be defined. as belonging to the American elite. society, ”said moderator, Times Opinion columnist Bret Stephens – to discuss what executives could do to respond and counter this outrage, or risk burning even more.

The participants:


The loss of confidence in traditional institutions is increasing.

Richard Edelman, whose corporate “trust barometer” has measured the reputation of institutions for two decades, noted that trust in high-level institutions has declined significantly in recent years. People no longer rely on “Moses-like” statements from above, he said.

Government and business have failed to build confidence, the panelists agreed. When the topic came to the adoption by American companies of “stakeholder capitalism,” which powerful business groups like the Business Roundtable hailed, Kevin Sharer – a former member of the group when he was running Amgen – said expressed skepticism. “I don’t think much of the manifesto,” he told the panel. “It was a nice press release. Is something going to change? I do not think so. Tying executive salaries to items associated with stakeholder pledges would be more effective, he said.

We have seen this before: the panelists put into perspective the forces that fuel populism.

Mr Stephens noted that there had been tectonic shifts in industry before, including the rise of industrial and financial economies in the 19th century, which prompted the populist backlash led by William Jennings Bryan.

We are able to handle this transition, said Véronique de Rugy of George Mason, but the problem is that we are in the middle of this change, with little visibility on the endpoint:

“It’s going to be very disruptive, especially because we are in a period that is not unique, that we have seen before. The old institutions are being swept away and we have not yet replaced them with new institutions. It’s traumatic. “

Amid the inequality exacerbated by the pandemic, Ms Heitkamp noted that Congress had yet to agree on a new round of economic stimulus, further eroding the trust and support the public had in existing institutions:

“By not delivering packages now when people are literally lined up for food, can you disagree with that attitude? Can you disagree that this isn’t an incredibly valid point when you watch Wall Street booming and America’s richest people are doing very well during the pandemic, and the rest of the world? America is in trouble?

She added: “This is rightly seen by many as a broken system.” (Since the panel was convened, Congress has negotiated a new aid package, but a breakthrough remains elusive.)

The panel suggested a number of areas that should be focused on. Common areas of agreement were on the broader allocation of capital, to make education more affordable and to invest in retraining programs.

Steve Case, the former director of AOL whose investment firm focuses on investing in start-ups between the coasts, said the flood of money pouring into Silicon Valley and New York – with few resources for companies based elsewhere – had upset Americans across the country. :

“The only way to change the landscape is to make the playing field level, so capital is distributed more widely, start-ups are created more widely, jobs are created more widely and you really level the playing field. , this gap, this mistrust and this anger will only grow.

For Danielle Allen of Harvard, the gap between the financial aid possibilities of cash-strapped public universities and top private universities has been particularly difficult for the middle class:

“It has been very good for people at the lower end of the socio-economic ladder and tolerable for people at the higher end, and the people in the middle have been in a huge rush. So in that regard, I think it’s important to rebuild the strength of public universities, the flagship universities in the state, to relieve some of the pressure on waiting for elites to carry the load.

Another problem is the disappearance of many traditional middle class jobs. Mr. Edelman chose the financial services and retail sectors. “Twenty-five thousand stores are going to close this year in the United States, and it’s going to be worse next year,” he said. “And similarly, in financial services, bank branches are going to raise a toast. We don’t need so many people.

This makes programs aimed at giving workers new skills all the more necessary, added Mr. Edelman: “If we don’t manage this recycling issue properly, we are in another populist revolution.

But James Tisch, whose family-owned hotel company employs more than 18,000 people, warned of a potential problem: overtraining and onerous work permit requirements: “To get a job to cut hair in the state from New York, you’ve got to do a thousand or 1,500 hours of class, of classroom work, and that’s just absolutely crazy, ”he said. “Give people proper training, but don’t take six months or nine months off to learn what we would all agree to be generally easy-to-learn professions.

The government has a big role to play, for better or for worse.

Mr Tisch’s warning about onerous government demands echoed an idea that followed throughout the debate: the role that policymakers play in addressing the roots of populist anger. Mr Sharer warned that the government must play a specific – but limited – role in the economy: it should not, for example, tell Pfizer what technology to use to develop a vaccine against the coronavirus, but it should provide money to help make it and make sure the patent laws work. “The government has a role to play, but the closer the government gets to very specific sector solutions, the more we are at a disadvantage, and I think the American innovation ecosystem is our greatest strength,” he said. -he declares.

Ms de Rugy went on to one particular policy area where an overhaul might help, which she admitted to be an “unsexy answer”: zoning laws. One of the problems, she said, was that areas with higher wages tended to have more expensive housing, in part because of more restrictive permits, making it difficult for workers on low wages. salary or jobless to move in search of more lucrative jobs. By simplifying and relaxing some zoning practices, “I think we would see more capital flows”.

Ms Allen took a different angle, calling for expansion of public credit through the Federal Reserve and other levers in Washington:

“Think of a postal banking system with public credit that supports innovation in places that do not have access to credit in the same way as coastal urban centers. That would be what I would focus on.

And maybe a bigger shift in philosophy on attitudes towards is needed.

For Ms. Heitkamp, ​​the dignity of work needs to be redefined, because much of today’s populism is rooted in how people feel they are contributing to society. Too many people think that if their work does not have the elite marker, their social value is diminished – even if they have a blue collar job, like construction, earning “tons of money.” Because of a labor shortage.

“We need to understand how we redefine success as individuals by doing what you need to do to thrive and make a contribution to society,” she said.

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