Warren proposes new New Deal

Bill Knight column for Sept. 27, 28 or 29, 2018

            After November’s election, if the GOP retains control of the U.S. Senate, a ground-breaking proposal from U.S. Sen. Elizabeth Warren (D-Mass.) will probably be killed. But if voters elect a Democratic majority, the nation could get "a new New Deal."

            The original New Deal helped bring about Social Security and the National Labor Relations Act, the former providing for old-age assistance and the latter letting workers unionize without fear of losing their jobs. Together, they've helped some 85 percent of seniors (railroad workers, immigrants, and some government employees don’t receive Social Security benefits), and permitted about one-third of U.S. workers to join unions by the 1950s. Contributing to common prosperity, they were keys to developing the middle class.

            The health and stability of the middle and working classes have eroded in recent decades, even as the wealth and annual incomes of corporate CEOs and the 1% have skyrocketed.

            “Before ‘shareholder value maximization’ ideology took hold, wages and productivity grew at roughly the same rate,” Warren said. “But since the early 1980s, real wages have stagnated even as productivity has continued to rise. Workers aren’t getting what they’ve earned.”

            So last month she took a step toward restoring the economic standing of working and middle-class families by introducing the Accountable Capitalism Act, which would change U.S. corporations from entities that focus almost exclusively on maximizing shareholder value to enterprises with the mission to benefit all corporate stakeholders, from stockholders and workers to vendors, customers and communities.

            Its main reforms would move big corporations' charters from states to the federal level, where charters could be revoked; prohibit political expenditures by corporations without a 75-percent approval by boards of directors and shareholders; and require corporations to have 40 percent of its boards elected by employees.

            That last component mimics the “co-determination” business philosophy in Germany, where companies’ boards must be made up of half owner representatives and half worker representatives.

            “There’s a fundamental problem with our economy,” Warren said. “For decades, American workers have helped create record corporate profits but have seen their wages hardly budge. To fix this problem we need to end the harmful corporate obsession with maximizing shareholder returns at all costs, which has sucked trillions of dollars away from workers and necessary long-term investments.”

            Later, writing in the Wall Street Journal, Warren said, “Because the wealthiest 10 percent of U.S. households own 84 percent of American-held shares, the obsession with maximizing shareholder returns effectively means America’s biggest companies have dedicated themselves to making the rich even richer. For the past 30 years we have put the American stamp of approval on giant corporations, even as they have ignored the interests of all but a tiny slice of Americans. We should insist on a new deal.

            “Workers aren’t getting what they’ve earned.”

            In the past, there was a bipartisan consensus that corporations had responsibilities to workers and communities as well as stockholders. Today, shareholders extract more funds from corporations than the businesses devote either to investment in their operations or pay increases for workers, according to economist William Lazonick of the University of Massachusetts/Lowell.

            There is optimism.

            Harold Meyerson, editor of The American Prospect, said, “If and when this becomes a battle for public support, it’s a fight she can win. Even as many working-class Trump supporters voted against ‘Right To Work’ in Missouri, many working-class Trump supporters all across the country would support giving workers more say over corporate decisions.”

            And journalist Yves Smith, who worked in finance for more than 30 years, said, “Even if Warren’s bill merely winds up pressuring corporate executives and fomenting debate on ‘what are corporations for and whose interest should they serve?’ that would be a very salutary development.

            “Forcing them to be accountable to the communities in which they live is long overdue,” she continued. “And contrary to what lobbyists will lead you to believe, forcing them out of their tunnel-vision, local maximum focus will be good for investors too.”