December 1, 2020

Market and Financial News Aggregator

Corporate America’s deal with the Devil

4 min read

Last week, 30 chief executives of America’s top 100 largest companies hastily came together in an online dawn meeting to discuss President Donald Trump’s unsupported claims that the US election had been “stolen” from him.

The executives were trying to figure out how to best leverage their personal and organisational influence to ensure a peaceful transition of power, a hallmark of the US political system. Some participants felt that worries of a potential coup were overblown. Others thought they weren’t. Most just wanted an end to election turmoil. Within days, other groups, like the US Chamber of Commerce, were calling for Mr Trump to stop delaying the transition. Business, as always, hates uncertainty.

Reading the news, I had conflicting feelings. On the one hand, I was glad that business leaders were thinking about the importance of liberal democracy in America and how to defend it. I also couldn’t help but feel that some of the corporate concern was a bit “too little, too late”. Most big business trade groups had been supportive of the Trump administration when it was getting ready to pass what turned out to be the largest corporate tax cuts since the George W Bush era.

I also worried that, even if people like me were glad that business elites were finally taking seriously the disruption to the election process and, moreover, were thinking about how to ensure a smooth transition, there were still over 72m people who voted for Mr Trump and some of them might not agree.

I suspect that when those people read about a bunch of multinational CEOs getting together to throw around their political weight, a good chunk of them would likely think something along the lines of: “It’s true! There is a cabal of wealthy and powerful people running the country and they have influence that I don’t. They are the ones thwarting democracy.”

Sadly, they wouldn’t be delusional to think so. Anyone with a pulse knows that in the US today the system is rigged in favour of the wealthy and powerful. One particularly illuminating paper published this month by the Institute for New Economic Thinking quantifies the problem. Building on a persuasive 2014 data set, it shows that when opinion shifts among the wealthiest top 10 per cent of the US population, changes in policy become far more likely.

Using AI and machine learning, INET academics Shawn McGuire and Charles Delahunt delved deep into the data. They found that considering the opinions of anyone outside that top 10 per cent was a far less accurate predictor of what happened to government policy. The numbers showed that: “not only do ordinary citizens not have uniquely substantial power over policy decisions; they have little or no independent influence on policy at all”.

This, of course, is how we ended up with Mr Trump as president. He wasn’t the cause but the symptom of a pendulum that had swung too far towards corporate concentration, and corruption in both politics and business. We have had decades of legislative tweaks to everything from tax policy to corporate governance and accounting standards that have favoured capital over labour. Supreme Court decisions such as the Citizens United case have also dramatically increased the amount of money funnelled into political campaigning. This has left the nature of America’s political economy perilously close to an oligopoly.

Look no further than the way in which Uber, Instacart, Lyft and other digital groups this month got their way with Californian labour law. Together they spent $200m to push through Proposition 22, a ballot initiative that exempts many gig workers from benefits. These companies may well now take their efforts to other US states.

As Karl Marx observed, it is only under threat from the masses that the owners of the means of production recognise their common interests. Corporate America got what it wanted from Mr Trump, namely tax cuts and deregulation. Big business in America now knows that there’s nothing more to be got from him. So they are eager for him to go, taking with him those disruptive tweets of which they were sometimes the target.

They are also eager for president-elect Joe Biden to come into office and normalise trade and foreign affairs, as well as deal with the Covid-19 crisis. Mr Trump’s inept handling of the pandemic, now raging again in the US, has been terrible for the economy and for business. CEOs are desperate for Mr Biden to get the situation under control, even if he does roll back their tax cuts.

I believe Mr Trump will eventually go. But the cynicism and anger of many left behind voters who supported him will remain. Business leaders are right to call for the president to respect the election results. But the corporate activism shouldn’t stop there. Rather it should begin.

I’d love to see business work with the Biden administration on a way to build a good national healthcare system similar to what most European nations enjoy. That would benefit individuals such as those gig workers, as well as companies that have to carry the burden of healthcare costs. Or how about engineering a public-private solution to the US’s $1.6tn student debt crisis?

If companies used their power in these ways, they might not have to worry as much about the next Trump.

rana.foroohar@ft.com

 




2020-11-22 11:00:44


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