Smart Capitalism is an agenda big business should pursue
Corporate America is waking up to the realization that income inequality, taken to its logical extreme, spells the death of capitalism. Salesforce CEO Marc Benioff, the Business Roundtable, BlackRock’s Larry Fink, JPMorgan Chase’s Jamie Dimon and others deserve credit for advancing a long overdue conversation about corporate social responsibility and income inequality.
Calling on the wealthy to give back more in charity and taxes, and asking corporations to consider employees and communities as among their stakeholders, are important steps. But we will not reduce inequality just by redistributing wealth on the back end. We also must create more opportunity on the front end.
Let’s start with a few basic principles of what some call Smart Capitalism:
- Government is not the enemy of business, but rather a critical partner — one that can address social challenges left unsolved by markets.
- Rather than framing public expenses as a cost, we must view many of them as investments and evaluate them based on returns.
- We maximize returns on public investments when we invest in all Americans, not just some. Too much focus on propping up the stock market has primarily benefited the 15% of Americans who own 85% of the financial assets, while too little strategic investment has moved opportunity further out of reach for the rest.
What would these investments be? Start with the obvious: America once led the way with K-12 education for all. This produced the best educated and most productive workforce in the world. This wasn’t a cost; in fact, it generated a huge return and made us strong.
Today, global competition demands that our education investments be smarter: early childhood, results-based K-12 education systems, two-year community college programs with certifications for good-paying jobs, state university tuition, trade school programs, job re-training and apprenticeships.
What else? Our roads, bridges, trains, subways, airports, water systems and energy grids all need massive upgrading — and we must build a new digital infrastructure for the 21st century. A renewed infrastructure will make it easier to create economic value across all industries for businesses large and small. Infrastructure investment spreads opportunity broadly and connects rural communities into the network of opportunity enjoyed by urban hubs.
The computer chip, the internet, global positioning satellites, vaccines and many lifesaving drugs and medical devices came about because of U.S. government investment in basic science research. The return has been so world-changing that it is incalculable. Yet, America has significantly decreased R&D investment as a percentage of our economy. It’s time to put government back in the research business, or we will soon find America’s centurylong domination in technology and innovation eclipsed by our competitors.
By broadening access and increasing portability of health care, we can improve productivity and economic mobility. Creating a public option for health insurance will foster competition that leads to increased coverage and reduced costs. Healthier employees who are not afraid of going bankrupt from unforeseen illness are more productive.
Arguments over climate change obscure the opportunities inherent in new forms of energy. The old energy paradigm benefited from government investments and regulation when it was key to our economic growth. Now we need new forms of energy that are healthier for our planet, cheaper, decentralized and inexhaustible. The pursuit of alternative energy will itself create new industries and better-paying jobs. A long time ago, America led the world into a new energy paradigm, and now we have an opportunity to do it again.
Our country is stronger when we have healthy levels of competition and a balance of power. We must create a more level playing field between labor and capital, and small versus large companies. We can ease the burden on the bottom 85% by reducing the regressive payroll tax and expanding the earned income tax credit. And we must update antitrust laws to meet the needs of the age of technology and globalization, while requiring big companies to treat workers better. Big companies are not the enemy, but as I tell my kids: With greater power comes greater responsibility.
This agenda is not about altruism, but rather proceeds from the understanding that our economy — our society — is an ecosystem. When one part suffers, the whole is affected. Empowered citizens result in a stronger nation of increased economic productivity, more innovation, better health outcomes, a better functioning democracy and more cohesive communities. Economic policy that benefits primarily the top 15% has weakened us. America simply does better when we invest in 100% of our citizens.
As business leaders, we cannot cure what afflicts our country by going it alone. We must empower government to play its critical role. Corporations have proven adept at influencing government toward their own benefit. Now it’s time to use that influence to get government to make the strategic investments, and enact smart regulation, that will make our nation truly strong again. We need to remember that the greatest return comes from government and business working together to invest in all Americans.