Denmark has decided to freeze its economy for a few
months, with the government subsidizing employer costs like salaries so people
won’t be laid off during this crisis. And providing for the unemployed. When
you have a welfare state in place, and when economics is about income and
costs, keeping cash flow flowing, it seems plausible that decisive action like
this could work.
But
the American economic model is casino capitalism. Masters of the Universe buy
and sell pieces of our economy every day, putting the financial system,
originally supposed to fuel and support entrepreneurship, on a roller coaster
ride we all hope will go well. Our retirement system works like this: the
Department of Labor has encouraged American workers to hand over a portion of
hard earned wages every month to gambling professionals. These professionals
are good at their jobs, but it’s a guessing game and a roller coaster ride for
everyone.
When
companies get very big, and their stock is publicly traded, and their ownership
is diluted among many, Short-Term-Shareholder logic takes over. Growth is king.
Margins must continue widening. Revenue must increase and costs must be cut.
Corporate decision-making is ruled by a nebulous greedy monster that has no
face: it’s the crowd. Corporate decision-making becomes irrational, drawn to
behaviour that puts profits over everything. Over human life, even.
Imagine
if instead of human shareholders we had robots programmed to seek only profits.
At a time like this, companies would be programmed to keep their workers
working, and at maximum productivity. If a competitor firm had its employees
wiped out by a virus, so much the better. Money money money.
My
cousin who is a single mother of two with rent to pay has already lost both her
jobs. Do the robots at the top care?
This
pandemic puts us at a crossroads. Will we jump into a competitive bloodbath
feet first? Will we condemn our citizens to a looting war, to a Lord of the
Flies world while the rich retreat to island paradises with heaps of cash? Or
can we recognize that we are brothers and sisters, interconnected and in
community?
When
Europeans came to the United States, they brought a mentality of conquest and
growth, and immediately began expanding their wealth on the back of slave labor.
They wiped out the philosophies of the indigenous peoples who had been in
America before: philosophies not without violence, but where life is cyclical
like the seasons and to be shared in community.
Short-Term-Shareholder
culture will destroy us. We should not keep going down this path. The practical
question of how to switch gears so late in the game, and now as our
house-of-cards economy is about to crumble, is the hardest to answer.
But
there are models and there are people with answers. The simplest, clearest
existing models are in Scandinavia. I started by citing Denmark’s answer to
this economic crisis, which can work for Denmark where there is a welfare
system in place.
Here
is some of the way forward, in bullet points:
-introduce
checks and balances to the shareholder model. The new (already existing) model
is stakeholder capitalism. Corporations and societies must create value for all
stakeholders: workers, the public good (first and foremost care for the
environment and recognition of our proper place within nature), community,
consumers, families, and so on. There are ways to do this. Multinational
corporations can use the Integrated Reporting model to report on deployment of
six capitals: financial capital; manufacturing capital; human capital; social
and relationship capital; intellectual capital and, natural capital. And on
value creation for all stakeholders.
-companies
will also need to map their growth against planetary boundaries such as CO2
emissions limits, toxic chemical impacts, and ozone.
-regulate,
regulate, regulate. No share buybacks. Heavy taxation on pure financial
profits. No offshore wealth hoarding, risky speculation with other people’s
money, senators selling out just ahead of the crash they are overseeing, etc.
-build
new models for financial stability in retirement that are removed from
gambling. This could include providing services to the elderly for free.
-rebalance
inequality. The many side effects of inequality (for example, that the
increased cost of living means smart people no longer choose to be teachers)
need to be addressed, first of all by reducing inequality through tax policy,
but in many specific ways as well.
-break
up monopolies, oligopolies, and concentrations of power, particularly in tech.
-for
the love of God, healthcare for all.
We
have to do all this, AND freeze our economy like Denmark, overnight. There is
certainly no time to lose.
March 21, 2020
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