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Two Studies That Bring America Into Focus

Two Studies That Bring America Into Focus

If there is one thing that’s important to America, it would have to be a civic talent for bringing into focus both the state of America’s challenges and the state of its capabilities.  Not in the superficial manner of a State of the Union address, but rather in the manner of a personal physician or a personal trainer. 

Where are we weak? Where are we strong?  Where are we ailing? Where are we healthy?

To this end, I strongly recommend the book Capitalists Arise!: End Economic Inequality, Grow the Middle Class, Heal the Nation by Peter Georgescu and David Dorsey.

Peter Georgescu is the retired CEO of Young & Rubicam, one of the world’s largest advertising agencies (and now known as Y&R).  His instincts tell him that America is in decline and that the nation’s business community has lost its way.  He sees this as a silent national emergency, and he has written Capitalists Arise to get the story out there – both the story of what’s going wrong and his call for righting the ship. 

The symptoms of decline can be seen in any number of international comparisons that measure the performance of the world’s most advanced economies, currently thirty-five or so in number. They can be seen in the deterioration of the family and personal health, especially in the nation’s poverty zip codes.

And they can be seen in the deteriorating rates at which American corporations invest in  their own future. 

American capitalists have been drawn into an economic world in which stock market returns are all and nothing else matters, Geoergescu argues, and in knuckling under to these demands, they are behaving in ways that hollow out America’s future.

Once our business leaders held themselves responsible for the well-being of all their stakeholders – their customers, their employees, their suppliers, and the framework of law within which their businesses were to operate honorably. 

Today’s corporate executives live in terror of the stock market.  Quarterly returns are everything.  Stock buybacks are the key to happy stockholders.  A company that invests for the long-term, they believe, will be savaged by investors lusting only for short-term profits.

America worked well when its corporate leaders practiced the arts of stakeholder capitalism.  But the shift from stakeholder capitalism to stockholder capitalism has bent America's future toward a path of continuing decline.

I agree with Georgescu's contrast but I use different terms to express it. America came out of the Second World War with an economy that practiced Prosperity Capitalism, i.e., with an economy that had been optimized for rising incomes for the entire workforce. 

But from Reagan’s day forward, ours has become an economy of Enrichment Capitalism, i.e., an economy optimized for enriching America’s ownership elites.

This switch, from Stakeholder Capitalism to Shareholder Capitalism, from Prosperity Capitalism to Enrichment Capitalism, has put the interests of the nation’s stockholding elites ahead of the interests of the nation as a whole.

Our economy, in other words, has been systemically optimized toward very shortsighted ends.

And our politics?  Alas, here, too, we find ourselves in the grip of a political system in which the shared aim of both parties is to prevent the rise of a third party movement that might upset the entire apple cart.

And to help us bring this into better focus, we have recently received help from one of the Harvard Business School’s most eminent professors, Michael Porter, and from the CEO of a family-owned firm, Katherine Gehl. They have co-authored a study that bears the title Why Competition in the Politics Industry Is Failing America: A strategy for reinvigorating our democracy. (You can find a pdf copy of their study here

Porter has developed a framework for analyzing the competitive dynamics of almost any industry, and here he applies that framework to the duopoly (dual monopoly) of today’s two-party system.  In normal industries, barriers to entry are low enough that new entrants rise to the top with some regularity.  But in politics the barriers to entry are so high that America hasn’t seen a genuine third party emerge since before the Civil War.  

Take, for example, the “Sore Loser Rule.” Let’s say a Tea Party challenger upends a Republican incumbent in the Republican primary.  In a state with a Sore Loser Rule, the defeated incumbent has no right to enter the general election contest as an incumbent.  Forty-four states have Sore Loser Rules.  Connecticut is one of the exceptions.  When Joe Lieberman was defeated in a Democratic Primary a few cycles back, he ran as an Independent in the general election and got re-elected.

Co-conspirators atop the hierarchies of both parties have set the threshold for participation in Presidential Election Debates so high that legitimate third party candidates will almost always be denied the chance to make their case to the public.

And then, as a way of adding insult to injury, there’s the Hastert Rule, by which a Republican Speaker of the House won’t permit a vote on any issue that doesn’t already have support from the majority of his own party. Positions that would draw enough support from the center of both parties to pass are, therefore, regularly killed. Under the Hastert Rule, the U.S. Congress doesn’t serve the American people. It is regularly held hostage to the views of those on the extreme edge of the Republican Party.  Everyone else in the nation is effectively disfranchised.

The two-party duopoly survives because the two private organizations that run it, the privately incorporated Republican Party and the privately incorporated Democratic Party, have enough clout to shut out any other possibilities.

There’s more – much more – to the story that Gehl and Porter tell in their analysis of the private political duopoly that has bent the nation’s democracy to its own ends. And much they have to say about the framework within which Americans could have a much more honest and honorable democracy.

But you can explore the details for yourself.  Let’s pause for a moment and take stock of where we are. We, the people.  And our country.

We have a political system whose central aim is the protection of two powerful sets of lobbyists and campaign workers and think tanks and candidates and elected officials and hyper-partisan voters.  It’s not the system we need, but it’s the system we have.

And we have an economic system whose central aim is the enrichment of the nation’s shareholder elites, even if that forces CEOs to underinvest in their companies and, collectively, underinvest in America’s future.

And we therefore have a nation in decline, a nation whose status relative to its peers has slipped, badly, in one international comparison after another. We are a nation in decline because our economy is out of focus and our political system is out of focus. Peter Georgescu tells part of the story.   Katherine Gehl and Michael Porter tell part of the story. 

Inform yourself.  Read Georgescu’s book.  It’s not perfect – what is? – but it’s an extraordinary contribution.  And read the Gehl & Porter analysis of America’s “Politics Industry” and how it has protected itself from any hope of reform.

We cannot get America unstuck from within the paradigms that got us stuck in the first place.  The key to genuine success for America does not lie in doing what we already know, but with more fervor.  It lies elsewhere.  It lies in the act of imagining the altogether new and using that as the north star around which we create a truly healthy future for our nation and ourselves.

We are in a paradigm shift moment, and it behooves us to awaken our paradigm shift imaginations.