One of the more unusual, if less-noted, stories of the past year was the continuing (and confounding) trend of those in the vanguard of a successful U.S. market economy—CEOs and institutional investors—aggressively promoting anti-capitalist principles. Whether it be the interests of “stakeholders” usurping those of corporate shareholders, “woke” sensibilities informing business decisions, or the current vogue for Environmental, Social and Governance (ESG) investing, senior “capitalists”—itself a term difficult to define—have become increasingly vocal and passionate in advocating policies that, in many instances, run contrary to the core principles of a market-based economy.
That they do so is not merely puzzling or oxymoronic, it actually risks doing harm inasmuch as it confuses various audiences—particularly a media not always well-versed in economics—and gives rise to a belief that “if even those who benefit the most from it believe there’s something wrong (or at least significant room for improvement), who am I to think differently?” The subtleties as to why “capitalists” might not be the most effective cheerleaders for “capitalism” require further scrutiny.
It is instructive to think of a market-based economy as analogous to a board game or a team sport. CEOs, institutional investors, and other market participants didn’t invent the game, they “play” it. To extend the analogy, neither are they coaches, referees, or color commentators. While often expert practitioners, they can’t always “teach” the game, or even adequately explain it.
The sports world is filled with examples of Hall of Fame players who failed miserably as coaches or in the front office. While there is certainly no shame in this, in the corporate context, it is important to understand that skilled practitioners command no special moral authority as it relates to speaking to the “merits” of the game, or to how it might be improved. They play (and succeed) at the game because they are good at it—no more, no less.
As such, while often understood by themselves and others to be “the smartest guys in the room,” corporate managers and investors can’t credibly speak for free markets. Does not their proficiency at the game, however, confer some unique or superior ability to speak about them?
Perhaps. But as they are by training typically “doers” and not theorists (economists, political scientists, or philosophers), it’s essential to consider the lens through which they critique—and, increasingly, propose modifications or improvements to—market-based capitalism. While opinions on most matters are as varied as the people holding them, critiques of capitalism from within its walls are typically informed by one of three sensibilities, which I’d categorize as self-interest, (misplaced) altruism, and ignorance.
Many of the arguments advanced by market participants having the result of limiting competition, increasing regulation, stifling innovation and otherwise restricting the workings of the market’s “hidden hand” are ultimately meant to entrench incumbency. While such enterprises initially may have prevailed over the competition on a level playing field, once having succeeded they frequently seek to limit competition and engage in various behaviors designed to extract economic rents from their position at the top of the heap. While CEOs are customarily deft at framing such policies as working in service of some other more appealing objective, the practical impact and underlying agenda is to advantage the advocate and disfavor competitors, customers, suppliers or the general public.
By contrast, rather than pursuing anti-capitalist policies motivated by self-interest, “altruists” may find—whether or not they admit so consciously—that the notion of unfettered markets doesn’t animate them. While ostensibly “good” at the game of capitalism, they espouse many ideas more compatible with collectivism than with free markets—beliefs that promote leveling and redistribution, identity politics, the primacy of social responsibility and ESG, and the like. Such CEOs and investors view markets as a beast to be yoked for the benefit of the common good, whether they plainly articulate this view or leave it unstated. Whether this yoking is better administered through the traditional democratic levers of taxation or regulation, or “mainlined” into their own organizations without such democratic accountability, is a question they often fail to consider.
As for the last sensibility, I will note that captains of industry are hardly stupid. But neither are they (usually) intellectuals. Skill at “the game” requires that they know the rules but not necessarily why the rules exist. So why not change them, for any reason, or none?
Some titans of modern capitalism well known to readers of business publications are rightly caricatured as incarnations of pure Id, albeit channeled into productive commercial enterprise. While commercially commendable, demonstrated mastery of the game doesn’t necessarily merit taking their advice or suggestions for systemic overhaul or transformation.
This is not to suggest that a market-based economy should exist unexamined. Nor is it to assert that its most masterful practitioners are without useful insights to offer about it. While we all benefit from a market-based system, one of the peculiarities of modern American society is that those who benefit from markets the most—and from the freedoms of a democratic republic that allow a largely open and free economy to flourish—are not only its least effective advocates, they increasingly seem to want to do it harm. There may be a lost Aesop’s fable that speaks to such an irony, although I’m not aware of one.
So the next time a pronunciamento at odds with centuries of material and democratic advancement issues from the commanding heights of Davos or the Business Roundtable, or the U.S. Chamber of Commerce offers head-scratching endorsements to progressive congressional candidates committed to the promotion of socialism and destruction of capitalism, remember that the messengers’ labels don’t dictate the message, and reject the embedded appeal to authority of such messaging. The ideas they offer may or may not have merit—but only for what they are, not who they come from.