The Economist: Elizabeth Warren wants to remake American capitalism

[Celerity]

As it stands, the Democratic front-runner’s programme has too little time for markets or business



https://www.economist.com/leaders/2019/10/24/elizabeth-warren-wants-to-remake-american-capitalism

Elizabeth warren is remarkable. Born into a struggling family in Oklahoma, she worked her way up to become a star law professor at Harvard. As a single mother in the 1970s, she broke with convention by pursuing a full-time career. In an era of rule-by-tweet, she is an unashamed policy wonk who is now a front-runner to be the Democratic nominee for president in 2020. Polls suggest that, in a head-to-head contest, more Americans would vote for her than for Donald Trump. But as remarkable as Ms Warren’s story is the sheer scope of her ambition to remake American capitalism. She has an admirably detailed plan to transform a system she believes is corrupt and fails ordinary people (see article). Plenty of her ideas are good. She is right to try to limit giant firms’ efforts to influence politics and gobble up rivals. But at its heart, her plan reveals a systematic reliance on regulation and protectionism. As it stands, it is not the answer to America’s problems.

Ms Warren is responding to an enduring set of worries. America has higher inequality than any other big rich country. While jobs are plentiful, wage growth is strangely subdued. In two-thirds of industries big firms have become bigger, allowing them to crank out abnormally high profits and share less of the pie with workers. For Ms Warren this is personal. Her parents endured the Dust Bowl and the Great Depression in the 1930s and later her father’s career collapsed because of illness. As a scholar, she specialised in examining how bankruptcy punishes those who fall on hard times. The idea that animates her thinking is of a precarious middle class, preyed on by big business and betrayed by politicians feasting on the corporate dollar in Washington, dc. Some Republican and Wall Street critics claim that Ms Warren is a socialist. She is not. She does not support the public ownership of firms or political control of the flow of credit. Instead she favours regulations that force the private sector to pass her test of what it is to be fair.

The scope of these regulations is jaw-dropping. Banks would be broken up, split between commercial and investment banking. Tech giants such as Facebook would be dismembered and turned into utilities. In energy there would be a ban on shale fracking (which, for oil markets, would be a bit like shutting down Saudi Arabia), a phase-out of nuclear power, and targets for renewables. Private health insurance would be mostly banned and replaced by a state-run system. Private-equity barons would no longer be shielded by limited liability: instead they would have to honour the debts of the firms in which they invest.

This sectoral re-regulation would complement sweeping, economy-wide measures—a 15% social-security levy on those earning over $250,000, a 2% annual wealth tax on those with assets over $50m, a 3% tax for those worth over $1bn and a 7% extra levy on corporate profits. Meanwhile the state would loosen owners’ control of companies. All big firms would have to apply for a licence from the federal government, which could be revoked if they repeatedly failed to consider the interests of employees, customers and communities. Workers would elect two-fifths of board seats. Ms Warren is no xenophobe, but she is a protectionist. New requirements for trade deals would make them less likely. Her government would “actively manage” the value of the dollar.

snip

[mysteryowl]

1. "America has higher inequality than any other big rich country."

This must be addressed.

[Fiendish Thingy]

2. I'm sure the Economist intended this to be a negative critique of Warren...

But it only makes me like her more.

Hopefully she can convey her goal of remaking American capitalism to the public effectively.

[crazytown]

3. "a precarious middle class, preyed on by big business,

and betrayed by politicians feasting on the corporate dollar in Washington, DC "

Anyone want to take issue with this?

[crazytown]

4. "Ms Warren champions some ideas this newspaper supports"

"Ms Warren champions some ideas this newspaper supports. One reason for inequality is that lucrative corners of the economy are locked up by insiders. She is right to call for a vigorous antitrust policy, including for tech firms, zero-tolerance of cronyism, and an end to non-compete agreements that limit workers’ ability to gain higher wages and switch jobs. Given inflation, her plan to raise the federal minimum wage to $15 over five years may be a reasonable way of helping poorer workers. The rich should indeed pay more tax, although we think the practical path is to close loopholes, such as a perk for capital gains known as carried interest, and to raise inheritance taxes, not a wealth tax. And while a carbon levy is our preferred way to fight climate change, her plan for clean-energy targets would make a big difference."

[BeyondGeography]

5. Not going to sign up to read this, but if they don't address this part of the great American rip-off

the article is an absolute joke:

Over the last decade-and-a-half, firms have sent 94 percent of corporate profits out to shareholders, in the form of buybacks, as well as dividends, leaving companies to argue that there is little available for employee compensation or investment(Lazonick 2014). Specifically, William Lazonick (2014) examines the corporate practices of 449 companies that were listed on the S&P 500 continuously from 2003-2012. He found that companies used 54 percent of their earnings to buy back their own stock and spent an additional 37 percent on dividends of their earnings.

http://rooseveltinstitute.org/wp-content/uploads/2018/03/Stock-buybacks.pdf

Understand this, under the banner of “shareholder values” a small group of owners have appropriated everyone’s productivity gains for themselves. Oh, sorry, just 94 percent. So when people wonder why they move sideways-to-down while a small slice continues to moves skyward there it is. Some call it the free market, others call it organized theft. I want a President who sees it from the latter perspective and will work to do something about it.

[Celerity]

6. here is some more, it is not at all totally negative

Ms Warren champions some ideas this newspaper supports. One reason for inequality is that lucrative corners of the economy are locked up by insiders. She is right to call for a vigorous antitrust policy, including for tech firms (see article), zero-tolerance of cronyism, and an end to non-compete agreements that limit workers’ ability to gain higher wages and switch jobs. Given inflation, her plan to raise the federal minimum wage to $15 over five years may be a reasonable way of helping poorer workers. The rich should indeed pay more tax (see article), although we think the practical path is to close loopholes, such as a perk for capital gains known as carried interest, and to raise inheritance taxes, not a wealth tax. And while a carbon levy is our preferred way to fight climate change, her plan for clean-energy targets would make a big difference.

[BeyondGeography]

9. Well that's a nice breezy paragraph

Thanks for posting it. If she did something substantial on all those fronts she would reverse 40 years of Reaganism and be an American hero.

I like her starting point on all of this. She has instilled fear in people who have overplayed their hand because she is credible. She will not negotiate with herself and give away her power in dealing with these issues. She will have to compromise or at least prioritize, but I trust her combination of knowledge and commitment will give us the best results.

[mnhtnbb]

7. Sounds good to me!

What has capitalism--unregulated--and greed brought us?

A corrupt wannabe fascist Russian mafia loving pretend real estate tycoon for a president. The country is being torn apart by racism, bigotry, and hatred for women who refuse to be servile to old white men, people of color, immigrants with dark skin or non "Christian". Our government is broken. Is it beyond repair? I hope not but I'm worried in a way I never have been in my almost 70 years on earth. The environment is heading towards a climate change that is going to make life for the population of billions unsupportable.

It is time for change. A big change. That is why I support Elizabeth Warren.

[Bhphoto]

8. Capitalism per se isn't evil

There must be protections against predators.

[abqtommy]

10. Whoever wrote this for The Economist seems to think that Elizabeth Warren's policy plans

are a bad thing. I don't.