Matthew Yglesias has an interesting article on Vox entitled “Elizabeth Warren Has a Plan to Save Capitalism.” It is well worth your time.
The gist of the article is that Warren is pushing a piece of proposed legislation that attempts to make large corporations more responsive to the needs of their workers and the community, not just their shareholders. The bill would require corporations with revenues exceeding $1 billion to apply for and receive new federal charters. In order to get a charter, the corporations would have to agree to limit share buybacks, CEO compensation, and self-interested political activity, and boards of directors would have to include a minimum number of representatives from labor and the public.
It’s an interesting idea. My questions about it are as follows:
- Is it conceptually sound?
- Is it politically feasible?
- How well would it work, in practice?
My responses are as follows:
- Yes, the bill is conceptually sound. It is true, as Warren asserts, that: (a) the creation of a corporate entity is a legal privilege that can be conditioned by the government in the public interest; (b) corporations have been afforded new constitutional rights, including rights under the First Amendment, without accepting any countervailing responsibilities in the recent past; (c) the proposal looks a lot like a model that works in Germany; and (d) the move towards a shareholder value form of governance over the last fifty years has coincided with an increase in corporate profits, and a loss of power and income for labor.
- There is nothing about this bill that is “socialist,” but it would be portrayed as such in hysterical terms by the GOP. Getting it through Congress would require a blue wave election, which in turn would mean complete failure on the part of the Trump administration.
- I’m skeptical about how well the bill would actually work in practice. Measures to control corporations are typically gamed successfully by management, and putting the burden of enforcement on dissident left-wing shareholders isn’t necessarily going to succeed.
On the whole, I prefer direct and transparent measures which redistribute wealth and power to this kind of indirect interference with the market, but I am willing to keep an open mind on the subject. Make your case, Ms. Warren. I’m listening.