Welcome to part 3 of a three-part series, looking at the likelihood of a fundamental transformation of the basic social contract in the United States, along the lines of Roosevelt’s New Deal.
D x V x P: A Formula for Change
Before you can have lasting, change, you need constructive dissatisfaction with the current state, a vision for the future state, and a process that removes obstacles from where we are and where we’d like to get to.
We can check the “dissatisfaction” box. We’re on shakier ground with a unifying vision for how we might move forward. With the advent of a new administration in Washington, nonetheless, there are no shortage of policy proposals intended to create significant changes to the American social contract.
Reimagining Capitalism – back to the future
In a recent interview, Rebecca Henderson notes, “one friend I talked to said, “You shouldn’t really call it (her book), Reimagining Capitalism, you should’ve called it Rediscovering the Capitalism We Had in the ’50s and ’60s, Only Without the Misogyny and the Racism, right?”
She suggests three vectors for change:
- Building true costs – to society and the environment – in prices.
- Enabling free and fair competition between individuals
- A strong and well-run democratic government that provides real checks and balances
And all of this in a context in which there is a strong civil society that can provide checks both on government and on markets.
You can revisit my Friday Fireside chat with Rebecca here.
Unions are making a comeback – in popularity, if not in numbers – even in tech. Workers successfully unionized at Kickstarter. Google has a union. Amazon is engaging in aggressive anti-union tactics. They definitely don’t have President Biden on their side, as he defends workers’ right to have a “free and fair” choice to join a union.
When you start having dog walkers, daycare center workers and sandwich makers forced to sign non-competes, it gives employers too much power. There is mounting pressure to outlaw this practice.
A pivotal moment for the Good Jobs strategy
Zeynep Ton has for some years now pointed out that good jobs and high performance are not incompatible. Both she and I have been dismayed at how many corporate leaders haven’t gotten the message. In an exciting development, she suggests, a golden opportunity is to use the post-pandemic “rebuilding” of the economy to create good jobs.
You can replay my Friday Fireside Chat with Zeynep Ton by going here.
Corporate Governance and ESG goals
Many voices are joined in denouncing the Milton Friedman doctrine. As Martin Lipton observes, “The Friedman doctrine precipitated a new era of short-termism, hostile takeovers, junk-bond financing and the erosion of protections for employees and the environment to increase corporate profits and maximize value for shareholders.” We’ve forgotten that maximizing shareholder value only works if other sectors (the social sector and government) are effective at limiting pure rent-seeking on the part of companies (where rent-seeking means to extract value, not create it).
One idea is to create a role for a company’s workers on boards. A recent research paper finds that companies in which workers are at the Boardroom table behave differently than those that don’t.
Another idea is to provide greater voting weight in shareholder-based transactions to long term shareholders. Roger Martin writes about this and it has been implemented in France.
You can watch my Friday Fireside chat with Roger at this link.
End buybacks and incentives to outsource
Blame for inequality, short-termism and even deadly shortcuts in basic operations (in the case of Boeing) has been attributed to buybacks. Bill Lazonick has talked about this for years. Outlawing buybacks is popular. Legislation is underway that would ban the practice.
There is also discussion of revisiting trade deals that make it profitable to outsource. Andy Grove warned about the inability to scale businesses in the US back in 2010, arguing that not doing so would ultimately doom American innovation. You can read my blog post about this here. As he asks – what good is it as a society if we have a few very well paying jobs and massive unemployment?
We’re also seeing an emergence of appetite to put new vigor into anti-trust enforcement. Google, Facebook, Amazon and others are getting very nervous about renewed enthusiasm to rein in their dominance in their respective fields. In a sign that this is more than just window-dressing, President Biden is putting big tech anti-trust crusaders in regulatory positions
Here’s an example of a local initiative from which we can learn: In 2007, Gavin Newsom (then mayor of San Francisco) and the board of supervisors passed a bill called “Healthy San Francisco” that required employers to pay for employee’s health care. As Jeffrey Pfeffer in his book Dying for a Paycheck recounts “When the program was put in place, the outcry was deafening…. None of the dire predictions came true…what did happen is that uninsured fell to only 3 percent of the city’s population and that the program ‘dramatically cut the use of city emergency rooms for routine care by the program’s participants, thereby saving money….employers cannot shift the cost of medical care from their books to those of the public….) (page 204).
For more, have a look at my Fireside Chat with Jeffrey at this link.
As my readers can see, once you start getting into the process of change, having created dissatisfaction and articulated a vision, the topics one could include is extensive.
With the risk of confusing preferences and predictions ever-present in my mind, I do see plenty of weak signals becoming stronger that we may well be on the brink of a modern-day re-enactment of the “new deal” which holds the promise of reducing inequality and restoring something of the balance that capitalism needs in order to thrive.
To be continued…