Never before in the history of this country has so much economic wealth been concentrated in the hands of so few people. So too, it is becoming increasingly clear that these same people also wield grossly excessive political influence that is corruptive and corrosive to democratic principles and endangers the well-being of our democracy.
This is the very definition of an oligarchy, where a small group of people have control of a country or institution.
People have a sense that this country is headed in the wrong direction, but they incorrectly identify the reasons for this, believing the problem to be party affiliation or extremist points of view. The unprecedented concentration of wealth and power is more to blame, because it restricts wealth generation by average Americans, and negates the value of their votes.
The figurative rape of America is an ongoing phenomenon that must be stopped, but how?
Revisions to tax laws that favor the wealthy, an end to the glorification of uncontrolled wealth acquisition, the requirement that the source of the dark money that overwhelms our political system be identified – these ideas would begin to address the gross economic inequities that currently exist and begin to illuminate how dark money from unknown sources has corrupted our political system.
In addition, the absence of any sense of social responsibility within large corporations has become an accepted norm, a dehumanizing and ruinous evolution of our capitalist system that will prove self-destructive in the long term. We must have a return to conscientious capitalism.
The murder of a health insurance executive for being instrumental in denying necessary medical coverage to insured people, and thereby causing preventable deaths, may or may not prove to be a seminal moment for our society.
Hopefully it will be, so this act of murder and this loss of life will have not been in vain.
This tragic event has clearly exposed how decisions are being made in corporations to increase profits without regard to the destructive effects these decisions have on individuals as well as on society as a whole.
There is a clear disconnect between the financial health of large corporations as measured by the performance of the stock market, and the economic – and in this particular case physical health – of the average American. The stock market surges to record levels, but the quality of life of the average American is unaffected, or even becomes worse.
This disconnect underscores how large corporations are able to benefit at the expense of society as a whole.
Large corporations are protected from their social abuses by favorable laws, clever lawyers, and friendly politicians. There is no incentive for corporations to have a social conscience. Those who make the profit-driven decisions that are harmful to our society are personally rewarded by obscenely high financial compensation, as are the members of corporate boards of directors.
Up until now, there was no downside to profit-driven decisions. But now it is clear that the rich and privileged are no longer off limits and untouchable. Unfortunately, their response has been one of indignant outrage and an increase in personal security, not a response of self-reflection and repentance. There is no acknowledgement of cause and effect.
Which brings us to capitalism as it exists in America.
Unique to this country is how capitalism has somehow become equated with patriotism. Socialism has become a pejorative, a label used to dismiss people and ideas without the need for thoughtful consideration or discussion.
However, one thing is true – socialism is the basis for all societies. Roads, bridges, ports, airports, public water and sewer, regulated electricity and natural gas, Social Security, Medicare, Medicaid, police, fire departments – everyone benefits greatly from these socialistic publicly funded programs made possible through the taxes that we pay.
Another thing is also true – capitalism is the basis for all business, regardless of the size of the business. All businesses require some amount of capital, i.e. money, to even begin operation, and may require additional capital to expand or respond to changes in demand for its goods or services.
Every business must make a profit to stay in business. No profit, no business. Even businesses structured as non-profits must make a profit, limited though it may be.
Access to capital is critical to a robust and vibrant economy, as is the opportunity for businesses to make a profit. So, if capital is good, and profit is good, then what is the problem with capitalism?
The problem arises when the desire to make a profit becomes more important than the actual products and services being provided by the business. Profit is a natural byproduct of a well-run business. However, when making a profit becomes the primary focus of a business, then the actual products and services being provided become secondary.
Small businesses are limited in the profit that can be made by competition and the laws of supply and demand. The quality of the products and services provided by a small business, and the relative cost of its products and services, are significant factors in establishing a business’s reputation. A poor reputation due to poor quality or excessively high prices can have a direct effect on whether or not a small business stays in business.
Everything changes when a business becomes a corporation with stockholders, and this is when the need to focus on profitability becomes an overriding focus for all too many businesses. The requirement to satisfy stockholder demands for a greater and greater return on their capital investment has had a negative effect on many aspects of the American economy.
How so? The quality of products and services being provided has suffered. The financial focus on short-term profits measured quarterly has limited long-term product and service development, innovation, and improvement. Manufacturing has been off shored to reduce labor costs. Regulations intended to protect the environment, workers, and end users have been cleverly ignored. Legal barriers to competition and employee unionization have been established.
This single-minded focus on increasing shareholder value has had a profound, negative effect on our capitalist system. There is no social accountability for the decisions being made in corporate boardrooms. Many of these decisions end up having a damaging effect on the quality of life for millions of Americans, whether through unemployment, lower wages, polluted water, poisoned land, avoidable death, and other decision-based negative outcomes.
There are movements within the corporate world that attempt to bring a sense of responsibility to the way that corporations make decisions, such as B corporation certification, but they rely on voluntary commitment, which has proven to be quite rare.
The Corporate Social Responsibility (CSR) initiative and the Environmental, Social and Governance (ESG) initiative are worthy stakeholder-based programs, but they are self-monitoring and do not bring with them the regulatory strength of law nor financial inducements that would encourage corporations to adopt them.
There needs to be a new type of corporation created that includes stakeholders as well as shareholders, codifying the goals of CSR and ESG, requiring that there be members on the Board of Directors representing the most critical stakeholders – the employees and the public – e.g., a workers representative, and an independent CSR/ESG representative whose responsibility would be to certify that the corporation is meeting socially responsible requirements.
In addition, there needs to be a substantial financial incentive for corporations to change their registration and their mindset to become an SS corporation (Shareholder-Stakeholder), most effectively done through taxation – e.g., a 10% corporate income tax rate for SS corporations, and a 40% corporate income tax rate for S corporations.
Under this new system, corporations could continue to avoid any pretense of social responsibility, but they would need to pay a much higher tax for the privilege.
What a refreshing change it would be if corporate board meetings did not focus on how to make the most profit, but instead focused on how to do the most good.