Part 3 – Thoughts on Fixing Capitalism along with Repeal and Replace

If I may be so bold as to try to lure your attention away from Trump and Mueller for a moment, consider Jamie Dimon’s lament, delivered a few days before Mueller delivered his report. Dimon is the chief executive of JP Morgan Chase, and wrongdoing by him and the CEOs of other big corporations is more responsible for Trump’s election than anything Russia dreamed of, as I’ll explain. “A big chunk of [Americans] have been left behind,” Dimon said, unveiling a new $350m program to train workers for the jobs of the future. “Forty percent of Americans make less than $15 an hour, 40% … can’t afford a $400 bill, whether it’s medical or fixing their car; 15% of Americans make minimum wages, 70,000 die from opioids.” All true, but $350m over five years isn’t even a drop in the ocean of Americans who have been left behind. Nor is it a large sum for JP Morgan, America’s biggest bank, whose profits last year alone amounted to $35bn. The annual budget of the US Department of Education is $70bn. Dimon’s own compensation package was $31m last year, and his reported net worth is $1.3bn.

 

Besides running JP Morgan, Dimon also chairs the Business Roundtable, composed of the CEOs of America’s largest corporations, whose 2018 profits broke all records. Due to vast amounts they spend lobbying and donating to politicians, these CEOs also have more influence over what happens in Washington than any other group of people. They were instrumental in gaining passage of the Trump tax cuts, which they predicted would generate a wave of corporate investment and boost wages. Instead, the tax cuts generated a tsunami of stock buybacks (more than $910bn last year, an all-time high) that boosted their own pay and the stock prices of their companies, but have done little for average workers. The Business Roundtable’s motto – “More than Leaders. Leadership” – suggests some higher purpose than making the rich richer, but CEOs like Dimon say their hands are tied. Their responsibility is to their shareholders.

 

But why, exactly? If Dimon and the others were serious about helping most American workers – whose real wages have been going nowhere for decades and job security is dwindling – they could use their outsized political influence to push for laws requiring CEOs to consider all their stakeholders, not just shareholders. Rather than make it harder for workers to unionize, they could fight to make it easier, and to give workers larger voice in management decisions and a greater share of the profits. Rather than reflexively seek tax cuts, they could push to raise taxes on corporations and wealthy Americans like themselves, so there’d be more school funding to prepare American kids for the jobs of the future. They could seek a higher minimum wage, a larger Earned Income Tax Credit, universal healthcare, and other measures to make left-behind Americans more secure.

 

If this sounds far-fetched, that’s only because we’ve come such a long way from the era of the 1950s to the 1970s when the heads of big American businesses viewed themselves as “corporate statesmen” and lobbied for measures to improve the wellbeing of all Americans. Those CEOs supported civil rights, argued that unions “serve the common good”, urged stronger environmental protections, and even backed campaign finance reform. But then came the 1980s – corporate raiders, Wall Street “greed is good” manipulators, Ronald Reagan’s market fundamentalism, union-busting, and a gusher of corporate money into politics. Since then, most Americans have come to believe the system is rigged in favor of big corporations and the Street, and they’re right. But nothing is stopping Dimon and other major CEOs from putting an end to the rigging. They could reduce the need for candidates to raise funds from corporate Pacs and the wealthy by supporting the House Democrats’ first bill, HR1, providing public financing for campaigns backed by small donors. They could push for stricter limits on the “revolving door” between industry and government, and laws requiring full disclosure of the sources of all campaign funding.

 

Why shouldn’t Dimon and other CEOs be in the vanguard seeking a constitutional amendment to limit lobbying and campaign spending? The answer is: nothing is stopping them except their own parched, self-serving notion of leadership as maximizing profits and shareholder value. Yet as heads of institutions with the greatest influence over American politics, they also have a duty to the common good and are uniquely positioned to advance it. For 40 years, CEOs of America’s largest corporations and Wall Street banks have abdicated this responsibility. We are now living with the consequences.  Jamie Dimon and the Business Roundtable can see those consequences as well as anyone. Rather than announce token jobs programs, they’d be better served seeking to increase the economic and political power of left-behind Americans – many of whom will otherwise continue to vote for demagogues who only make them feel powerful.

Americans are dying sooner, increasingly self-medicating with drugs and alcohol, and committing suicide at alarming rates. The unifying factor for all of these conditions? Stress. These growing public health epidemics prompted CNN’s Emmy Award-winning chief medical correspondent Dr. Sanjay Gupta to take a closer look a the big contributing factor —constant daily stress — to understand how a loss of predictability and control are having detrimental effects on Americans’ health. His new documentary, “One Nation Under Stress,” which premieres Monday, March 25 on HBO, investigates the causes, the depressing trends and how we can better handle stress. Appearing on “Salon Talks” earlier this week, Dr. Gupta discussed why these self-inflicted deaths are happening in the United States at a uniquely higher rates than in the rest of the world. Gupta admits that we all need some level of stress to thrive and survive, and that stress itself is not the problem. Rather, it’s the constant nature of the stress that is killing us. In the film, he takes a close look at how animals employ stress and why humans have over-exerted the stress response so much that we’ve actually changed the composition of the brain.

 

We spend way more on healthcare than anybody else. Our life expectancy is falling, mortality was going up, and then when you really started to dig down into what was happening, even within the United States, you saw that it was, you have these different demographics, African Americans mortality, while it’s higher than whites, was falling. Hispanics have lower mortality rates, they’re still falling. Whites, and particularly working class whites, [mortality] was going up. They’re the only population of people in the developed world where that’s happening. It’s not the economy, because other countries have gone through economic forces, labor force changes, all these types of things. So what was so particularly unique to the white working class at this time in our history that was causing life expectancy to drop? That’s where stress started coming into the equation. Could the stress be the underlying force and why is it so specific to this group of people? That’s how it sort of hit my radar.

 

Suicides have gone up 30 percent over the last 20 years. There’s plenty of coverage on drug overdoses and opioid overdoses. Everyone’s heard about this now, but ever wonder why? Other countries have opioids as well. Why do we take so many opioids in this country? Why are we drinking ourselves to death in this country? That was the question that Angus Deaton, who won the Nobel Prize, and his wife Anne Case, that’s the question they were really asking. What is fundamentally different about America right now? That was the question they really want it to get at. Jobs left because of outsourcing and automation. Wages went down, and now they find themselves dying at a faster rate than any other population in the developed world. Those dashed expectations, the idea of having expected something and not received it turns out to be incredibly toxic stressor, much worse than simply not receiving something. Dashed expectations, broken dreams, unrealistic expectations, whatever it might be, seems to cause this relentless stress that is almost existential in nature. It’s not just about, “I got a meeting today, I’m busy. I’ve got to do a presentation.” It is about who you are, your identity, your value, who you represent to your parents, and your grandparents and everything. So it’s the notion of dashed expectations being really toxic, that was one of the factors that we really zeroed in on.

 

With the monkeys — I found this so interesting — there was an experiment done with what are called skinner cages. So two cages side by side, capuchin monkeys, those are the organ grinder monkeys, very smart monkeys, and they have to do a task, and the task is to give a rock to the examiner. If they give a rock to the examiner, they get a treat, and it’s a piece of cucumber. And these monkeys sitting side by side in separate cages, they can see each other. They do this over and over again for 20 times. At some point we start giving the monkey on the right a piece of grape instead. That’s a more desirable treat. The monkey on the left sees this a couple times, kind of then gets the cucumbers still and looks at it, some point throws the cucumber back at the examiner. Okay? That’s how primal this is, literally throws it back. Was perfectly happy with that cucumber 20 times in a row. Now that the monkey sees the other monkey getting a grape, he’s very upset. Starts literally rattling the cage. Stress levels go through the roof. Perhaps that’s not surprising. What was surprising though a little bit was that the monkey who was receiving the grape, their stress levels also went through the roof, just by being in this sort of unequal, inequitable situation.

 

And the point is, and I think you know there’s been plenty of data on this, but if you live in a society that has blatant inequality… I’m doing the exact same task as the next person and for whatever reason, we’re no longer being rewarded the same. We’re no longer being compensated the same. Something is unfair and unjust about this. No matter where you are on that spectrum if you’re the one benefiting from that, or you’re the one who’s not benefiting from that, it raises stress levels. Simply being in a society where there’s blatant, glaring inequality tends to be a very highly stressful situation, and we see that very visually with the monkeys, because it’s so primal, so reflexive, it really captures your attention. But you know what? We’re living that. That’s what we’re seeing in terms of the chronic nature of stress. There’s a thing called the Gini Coefficient, which basically measures how much inequity there is in a society. Among wealthy nations, the United States is the highest. Our inequity is similar to countries like Sudan, which are known to have high very unequal distribution of wealth. In the United States, we have that as well, and it’s very glaring in people’s face. And that is probably what is in part driving the stress levels as well.

 

I think that it’s unsettling and unstable to live in a society [with] glaring inequality, conspicuous wealth… I think that you have plenty of examples around the world of truly capitalistic societies that do not suffer the way the United States is suffering right now. They continue to have increasing life expectancy, they continue to have decreasing mortality and decreasing levels of stress. The United States is unique in this regard and that’s the part that fascinated me the most, because you could easily lay the story at the feet of the economy or labor forces or capitalism or the need for socialism or whatever. It’s really not about those things. It is more about when things just seem unjust. If people work hard and earn more as a result of that, that doesn’t seem to cause the same problems as we’re doing the exact same thing here and for whatever reason, for unfair reasons, somebody is being rewarded and treated differently than I am. That’s the real problem.

 

You can tie them. I think that the glaring inequality, plus the dashed expectations on top of that, end up being the two primary drivers that we really zeroed in on. I mean there’s other things as well. We’ve lost social fabric in this country, social structures aren’t as strong as they used to be. Our belief systems aren’t what they used to be in this country. We’ve espoused this idea of rugged individualism, but if you have to look at what’s unique about America and what’s probably driving these drops in life expectancy, dashed expectations, blatant glaring inequality, those two things in combination seem to be a big part of it. Yes, the community and the social cohesion. I mean people think of those as sort of euphemisms, nice things to add to an academic paper, but frankly you find societies all over the world that suffer from some of the same problems we do, and yet because of their social cohesion, they appear to be fairly protected. We don’t have that. We don’t have systems in place to nurture and foster social cohesion. If anything, it’s becoming more fragmented, more individualistic, more siloed off than before, and we’re seeing the impact of that. I think the thing that was really striking to us as we talked to scientists about this was it’s a lack of control. The lack of predictability that seems to be the biggest drivers of that sort of toxic stress that people feel.

 

I definitely think of my kids. I have three kids and if unrealistic expectations can cause a psychic stress so powerful that they can start to lead to decrease life expectancy, I will not do the same thing to my kids. I will not place unrealistic expectations on a generation having no knowledge of what the world’s going to be like when they become adults. We live under this belief that the next generation should do better than us, that we’re going to leave the world better than we found it, and that our kids’ lives will be better than our lives. That’s just not realistic in many places around the world, and by placing those expectations on people that can do a lot of damage, so there was a lesson for me and for everyone that I love in there as well.

When even leading economists are questioning the very idea of capitalism, you know the system is in trouble. In a recent article, Nobel economics winner Angus Deaton reviewed two books by other distinguished economists — Raghuram Rajan and Paul Collier — that argue that capitalism is fundamentally flawed. Rajan laments the demise of local communities in the face of big government and mass markets, while Collier discusses the tendency of meritocracy to concentrate talent and money. Meanwhile, income and wealth inequality is at the center of the well-known critique of capitalism by economist Thomas Piketty. Some critics of capitalism argue that the problem is monopoly power, while others say that capitalism is the culprit behind climate change. These critiques of the modern economy have some validity. But in the rush to bash capitalism — or to capitalize on the sudden unpopularity of the term — the critics haven’t done a good job of defining what capitalism means. Does it mean private property? Private ownership of industry? Market economies? Public asset markets and joint-stock ownership? Often, the term capitalism seems like simply a stand-in for whatever market-like features of modern economies someone doesn’t like.

 

The really important question, therefore, is not whether capitalism is broken, but what should be done to fix the U.S. economic system. For much of the 20th century, the big idea was to construct an alternative system — socialism, communism or anarchism — from the ground up. But that approach largely failed, for any number of reasons. Economic systems are complex constructs that evolve over time — even a very smart group of people is going to make huge mistakes if they try to engineer something totally different. And the implementation of radical social change is never easy — revolutions tend to be violent and chaotic, and the people who wind up in power are often those who are most concerned with preserving their dominance rather than providing for the material welfare of the people they rule over. Instead, it seems overwhelmingly likely that the most successful approach will be to modify the current system — to reform rather than revolt. Whatever the result, it will be a mixed economy, where government and the private sector’s roles are both altered somewhat to address the most pressing issues. As for what those modifications should be, I tend to think that there are basically two changes that the U.S. needs to focus on. The first is sustainability: no system, capitalist or otherwise, will last long if climate change make the planet uninhabitable. Switching to a low-carbon economy will require major inputs from both the public and private sectors. The second major challenge is to make Americans feel less materially insecure. Instead of looking at aggregate economic numbers — gross domestic product, or the share of wealth held by the 1 percent — we should look at the basic determinants of material comfort and security. Here, we can see that a few big-ticket items weigh heavily on Americans’ household budgets. Even as consumer prices overall have risen more slowly than income, the prices of health care, tuition, and child care have risen much faster:    

 

In 2016, Trump’s vowed he would revitalize a Great Lakes region buffeted for decades by global economic trends that hollowed out the manufacturing sector and ravaged paychecks. He also took a hard line against the North American Free Trade Agreement and China’s trade practices. That pitch proved just strong enough for him to win: Trump’s 77,000-vote margin of victory in Michigan, Pennsylvania and Wisconsin delivered his Electoral College victory over his Democratic opponent, Hillary Clinton. “A lot of these blue-collar Democrats do feel that the president has stopped the U.S. from getting sand kicked in its face,” said John Brabender, a Republican consultant who works on campaigns in Pennsylvania. “But these are incredibly fluid voters and the race will probably come down to them once again. If those Democrats switch back in places like Pennsylvania and Michigan, it’s going to be really hard for the GOP to hold onto the White House.” Wisconsin Democratic Senator Tammy Baldwin said many people in her state “felt hopeful during the 2016 campaign that they were being seen and heard” by Trump in a way that they didn’t with Clinton. But she argued that Trump’s tax overhaul gave disproportionate benefits to upper earners and corporations, and that his efforts to roll back health insurance subsidies mean “working people know they’re getting the short end of the stick.

 

“Trump’s weakened standing reflects the region’s continuing struggles. Michigan is a case in point. Last fall, General Motors Co., announced plans to end production in two southeastern Michigan auto plants. Data from the U.S. Commerce Department’s Bureau of Economic Analysis shows that personal income growth in Michigan during Trump’s presidency is among the lowest of any state. And in recent weeks, Trump started a Twitter attack on the United Auto Workers, blaming union leaders for GM’s decision to idle a plant in Lordstown, Ohio. “The optimism and excitement you heard from workers two years ago is mostly gone,” said Mark Gaffney, former Michigan president of the AFL-CIO. “A lot of those people haven’t abandoned him. What you hear now is, ‘He’s being picked on by the liberal media.’ But his support is diminished.”Local leaders in Michigan said Trump’s electoral prospects will hinge on whether positive economic developments filter down into paychecks, as Trump promised they would. “While so many numbers, from GDP to unemployment, say the economy is good and growing, the wage gains have not worked their way through system yet,” said Gaffney, the former Michigan AFL-CIO president. “There are guys sitting here two years after Trump saying, ‘Where’s my raise?’ That’s a problem for Trump.”