When corporate executives this past week decided to resign en masse from two highly visible White House advisory councils, it was not only another marker in Donald Trump’s fall into political and policy irrelevancy, although it was surely that.
More significantly, it is likely to be looked back upon as a turning point in the evolution of American capitalism — an acknowledgment from some of the nation’s top corporate executives that the single-minded focus on maximizing profits and share prices that has been their mantra for the past three decades is no longer politically viable or morally acceptable.
It is unlikely that any of smiling executives who posed for photographs with the president this spring at the first meeting of the White House Strategic and Policy Forum and the Manufacturing Jobs Initiative had been enthusiastic supporters of candidate Trump. Publicly, most had opposed the president’s positions on immigration, trade, climate change and gay rights. Privately, many thought him unsuited for the job.
Nonetheless, the president’s economic advisers had convinced the executives that they would be able to help shape the administration’s economic program. And the executives were eager to lend their support and legitimacy to administration efforts to boost their profits by lowering taxes and reducing regulation. The run-up in stock prices since the inauguration — the “Trump bump” — seemed to confirm that original calculation.
But two things have changed that cost-benefit analysis.
The first was that the president and Republican allies in Congress have made such a hash of things that businesses are unlikely to get tax reform or the regulatory relief that they imagined.
But the more surprising one was that Trump’s response to the protests and murderous violence by neo-Nazis and white supremacists in Charlottesville, Virginia, had been so offensive that, even if he were able to deliver for shareholders, customers and employees of these companies were no longer be willing to accept the moral compromise that went along with it.
In other words, it took Donald Trump to convince corporate leaders that maximizing profits for shareholders is not all that matters — that in the era of the internet and social media, other stakeholders have the power to force companies and their leaders to behave in ways that conform to social norms and are consistent with widely shared moral values.
The moral justification for “maximizing shareholder value” had always been a utilitarian one. It went something like this:
The magic of free markets is that, by allowing and encouraging producers, consumers and investors to act selfishly in ways that maximize their own income, the economy is led, as if by “an invisible hand,” in Adam Smith’s felicitous phrase, to a level of prosperity that makes everyone else in society better off.
This free-market system has lifted billions of people out of the subsistence poverty in which they were trapped for centuries. By generating the greatest good for the greatest number, free-market capitalism is the most moral economic system ever devised. And because of that, it is not necessary to judge whether actions of individuals or firms in the marketplace are moral or immoral. Business is amoral.
But in recent years, our confidence in the moral and economic superiority of free-market capitalism has been eroded. Here in the United States, we have watched the bursting of two financial bubbles, struggled through two recessions and suffered through several decades in which almost all of the benefits of economic growth have been captured by the richest 10 percent. A series of accounting and financial scandals, coupled with ever-escalating pay for chief executives, bankers and hedge fund managers, has generated widespread resentment and cynicism. While some have prospered from globalization and technological change, many have been left behind.
A decade ago, 80 percent of Americans agreed with the statement that a free-market economy is the best system. Today, it is 60 percent, lower than it is in China. One recent poll found that only 42 percent of millennials supported capitalism.
Part of our disquiet has to do with the inability of the market system in developed countries to continue to deliver a steadily rising standard of living to the average household. But another part of it reflects a nagging suspicion that the system has run off the moral rails, offending our sense of fairness, eroding our sense of community, poisoning our politics and rewarding values that easily degenerate into greed and indifference.
What happened over the past 30 years is that American-style capitalism became the victim of its own success. By the late 1970s, the U.S. economy had lost its competitive edge as innovation lagged, productivity sagged and costs soared. Under pressure from foreign suppliers, upstart rivals and unsatisfied investors, big corporations were forced to retool and restructure—and those that did emerged stronger than ever. In the process, “maximizing shareholder value” became the new business mantra.
But what began as a useful and necessary corrective for an economy that was losing its competitive edge has now become a corrupting dogma pushed to an extreme. For too many companies, “maximizing shareholder value” has provided justification for bamboozling customers, squeezing employees, avoiding taxes, despoiling the environment and leaving communities in the lurch. And for too many Americans, capitalism is now viewed as an unsavory system of organized greed in which it’s every man for himself.
It is that morally cramped model of capitalism that for a generation has been taught in business schools and economics departments, enshrined in corporate law and demanded by Wall Street investors and money managers. And it is the same model that led business leaders to abandon their much-needed role as stewards of the economy and hop into bed with the tea party and then Donald Trump.
Now, after decades of preaching that what was good for General Motors is good for America, corporate leaders have acknowledged that it might actually be the other way around — that what’s good for America is good for General Motors. However belated the conversion, their action this past week was courageous and impactful. We owe them our gratitude.
At a time when our country feels increasingly divided, Idaho is fortunate to have leaders like House Speaker Scott Bedke who demonstrate a commitment to improving civility. We would like to thank Rep. Bedke for taking part in the Leading with Civility leadership summit earlier this month, where a bipartisan group of 23 state legislators discussed ways to address rising incivility and polarization in politics.
At a time of extreme partisanship, it is more important than ever that our elected officials establish relationships across the aisle, respect one another and work together – even though they will disagree. When elected officials can’t get along, they struggle to solve crucial problems facing their constituents. We are grateful for Speaker Bedke’s dedication to civility and we hope that he will continue to lead by example in Boise.
Morally, the only proper reaction to last weekend’s events in Charlottesville, Virginia, is outrage. Legally, the analysis has to be more nuanced. To help prevent further violence while preserving freedom of speech, we need to distinguish three categories, all of which seem to have been in play in Charlottesville: terrorism, peaceful protest and provocative action aimed at producing street violence.
The most horrifying is also legally the simplest. The car attack on peacefully assembled citizens was a terrorist act, modeled it would seem on Islamic State-inspired vehicle attacks in Europe.
It should be prosecuted as a federal hate crime, insofar as it can be shown to have been motivated by racial or religious prejudice. But that’s not all. The car attack should also be prosecuted as terrorism, defined by federal law to cover acts of violence intended to affect the course of politics.
If it can be shown that the driver conspired with others, including members of white supremacist groups, they too can be prosecuted, even if they weren’t specifically planning the car attack. That’s the beauty of conspiracy law: You can be held liable for the acts of co-conspirators.
Peaceful protest is on the surface also legally simple. Under the standard set by the U.S. Supreme Court in the 1969 case Brandenburg v. Ohio, protesters in public places have the right to say whatever they want, no matter how horrifying — provided that they don’t intend to incite imminent violence in a manner that is likely to have that effect.
Even peaceful marches that are experienced by onlookers as intimidating are generally covered by this free-speech right. The Supreme Court has carved out a sort of one-off exception for cross-burning, which it held in 2003 could be criminalized when shown to be bound up in intimidation. But the court hasn’t expanded that ruling.
That means a march through a public place, even accompanied by torches reminiscent of the old Ku Klux Klan, like the march through the University of Virginia campus, is constitutionally protected. The same is true of peaceful counterprotest. The words may be offensive and repulsive, but the content of the speech is sacrosanct.
The government may impose reasonable time, place and manner restrictions on such speech. That certainly includes requiring a permit to march. It has also been interpreted by the courts to allow local governments to ensure security by designating certain spaces for protest — where potential antagonists can be kept at a distance. That has been controversial when police kept protesters far from political parties’ national conventions.
But Charlottesville shows that keeping a safe distance between protesters and counterprotesters is all-important to keeping the peace.
That brings us to the hardest category, legally speaking: provocative speech that is aimed to produce conflict.
In a World War II-era case, Chaplinsky v. New Hampshire, the Supreme Court carved out a free-speech exception for what it called “fighting words.” The idea was supposed to be that the government could criminalize speech that would provoke a reasonable listener into immediate retaliatory violence.
On the surface, the fighting-words exception would seem to allow the police to arrest people who are in one another’s faces, yelling epithets intended to provoke violent response. In fact, the man arrested in the Chaplinsky case called a police official a “damned fascist.”
In practice, however, the courts are loath to invoke fighting-words doctrine, which seems to contemporary ears to place the burden of avoiding violence on the speaker, rather than on the person who actually throws a punch. Consequently, it’s very difficult for police departments to make arrests based on civilian provocation of other civilians.
What police can do is get between people who are trying to goad to one another into violence. And the moment anyone lays a hand on anyone else, an arrest can be made for disorderly conduct or assault.
This kind of policing is very hard, and it calls for careful judgment and officer training. When all sides are riled up, violence can start easily, and it can be very difficult to tell who started it, even with the benefit of ubiquitous video cameras.
The presence of legal guns at otherwise legal marches makes the difficulty of policing much, much greater. It’s important to note that laws permitting open carry don’t legalize intimidation by arms. They also don’t allow the organization of military groups, like armed militia.
It’s one thing to walk down the street carrying a gun. It’s another to move in military formation as part of a maneuver designed to control space or to intimidate.
Police can and should be vigilant about the difference. They should use all the tools at their disposal to avoid fluid situations where protesters and counterprotesters are face to face, hurling insults and potentially coming to blows. Otherwise, there could easily be a tragedy in which someone opens fire.
The bottom line is that the First Amendment allows and must allow the police to keep the peace. Law and order is the baseline of liberal democracy. Without that, free speech is meaningless.