If you are thinking about the world after this bout of COVID-19, then I recommend taking insights from Prof. Robert Kuttner. In his 2018 book Can Democracy Survive Global Capitalism (New York, W.W. Norton & Company Inc, ISBN 978–0–393–60993–6) , Kuttner blends history, policy, and prognostics. Global capitalism is built on a number of potent myths. These have created a corporatist system that subverts states, reduces workers into “human capital”, and spawns Neo-Mercantilist competitors like China. Adam Smith’s invisible hand has been crushed by corporations without borders and mercantile states.
And, so we entered the pandemic with price gouging private medicine in the US, budget starved public medicine in Europe, and 80% of active ingredients for certain medicines produced in China and India. The failures in the West, when it comes to COVID-19, are built on 40 years of deregulation and privatization. Kuttner wasn’t prescient. Rather, his well-documented description of how our fathers build a mixed economy and hobbled finance to serve the real economy establishes what we have lost.
Kuttner argues that the mixed economies of Europe are substantially degraded after 1990. The COVID-19 pandemic tracks Kuttner’s arguments well. The United States with a moribund labor movement has unemployment in excess of 22%. The United Kingdom where unions still have power, it is only 4%, expected to double. But, Germany, where labor sits on the boards of major companies, has suffered the least.
When labor has an empowered seat at the table, management finds it more challenging to ship high value added work to low wage countries. Moreover, it becomes more challenging to deconstruct important worker protections including retaining, apprenticeships, … Kuttner discusses useful policies to re-engage labor and improve incomes. He also debunks claims about automation being the primary threat to jobs.
As for free trade, Kuttner reminds us of the obvious. Our corporations wish to trade freely and enjoy dispute resolution systems that override local courts and laws. But, our competitors join the same treaties to impoverish us.
I can quibble with Kuttner. He believes that the Basel accords are trivial. I think that they have obliged banks to hold much more capital than they would like. He doesn’t believe that there is bankruptcy for countries. I believe that countries and their creditors arrive at non-judicial debt relief with write-downs as in the 1980s Latin American debt crisis, or non-judicial refinancing of the banks as in the new money “provided to Greece” during the early 2010s. I do agree with his argument that austerity is rarely the right solution for an economic crisis when people are out of work.
What is coming next? We have been brewing stakeholder capitalism for a while. This shows up in European codes of corporate governance and in the United Kingdom’s Wates Principles of Corporate Governance. These are a good start, but without the force of law, Kuttner worries that these won’t get past the start and we will let slip existential challenges like climate change. Kuttner’s reminder is that capitalists are inclined to Friedman’s dictum that shareholder value is the end all and be all. COVID-19 has given us a reset opportunity, time to value stakeholders: workers, owners, customers, those who share the environment,… equally.
If it all goes wrong, Kuttner warns us that capitalists have not been bothered by Facism in the past, they don’t mind authoritarian China, and they aren’t bothered by totalitarianism that allows them to profit. In other words, he fears that we are on track to a subversion of American democracy. The evidence is the Trump presidency. About this, Kuttner warns that:
“… America faces three broad alternatives. Trump could well be forced from office before his term ends. At the other extreme, he could continue turning America into an autocracy relaying on a national security crisis, real or contrived. Or opposition could continue gaining ground.”
As we stumble towards the 2020 presidential election, strategists already worry that Trump can undermine the election, defer the election, seek to avoid a transition. Kuttner’s warnings feel very real.
Kuttner offers us deep lines of inquiry, is capital a public good? Is finance a public good? Do capitalists owe citizens for the public commons from which they profit? Returning back to these questions we can begin to ask what the Founders meant when they began by “We the people,…”. This is the opportunity for us to reclaim our republic from corporate lords, internet princelings, and financial dictators.