An encouraging debate over capitalism in America occurred last week on the Open To Debate Substack. A Harvard economist, Jason Furman, and a successful venture capitalist, Nick Hanauer, were asked if Capitalism in America is broken. In their opposing answers to the question, the proponents exhibit how the Declaration’s Creed can accommodate divergent views on provocative questions.
To start, both support market economics independently of their position on Capitalism. The Declaration’s creed names “pursuit of happiness:” as an unalienable right, which suggests free enterprise as endemic to our identity, and aligns easily with market economics. Capitalism, both Hanauer and Furman agreed, is a system of corporate ownership. The observer might note that Americans called our economy “capitalist” to distinguish it from Soviet Communism during the Cold War. But the term carries some sense of Karl Marx’ image of a class “expropriation of the means of production,” which is not part of our founding tenets. We used the term in opposition to Communism’s coercive state ownership of enterprises, but don’t need to in order to comport with our founding. Both Hanauer and Furman address Capitalism independently of any questions of market economics.
In talking about capitalism, the difference between the two could seem either esoteric or highly charged, depending on one’s focus. Furman pointed out the unprecedented wealth that Americans enjoy and the progress that capitalist societies have made. He attributes discontent to recent disruptions of 2008 and then Covid, and the nature and effects of social media and politics. The system has defects, as all systems do, and they are best addressed by measures we have used before in our capitalist history, of higher taxes in certain channels, or better regulation – including reductions in regs that impede economic activity (e.g. unnecessary licensing of providers such as florists or building permit processes). Capitalism, in this view, works.
Hanauer’s complaint is that financial capital is becoming an ever larger part of our economy, controlled by and enriching capitalists, while wages are a shrinking part, with inequality contributing both to demoralization in society and moral degradation as well. He calls for a rejection of the theoretical claim that corporations exist solely to maximize shareholders’ monetary value, citing that doctrine as license for no-holds-barred amorality or worse on the part of the corporations. They operate on the premise that any claim to enhance shareholder value justifies socially unacceptable conduct. He touts a “market humanism” as an evolved mindset.
Both approaches are conceptually compatible with our creedal founding; American comity can be capacious enough to allow true debate and possible compromise between them, in policy and practice. Furman’s approach, that clearly immoral, unjust, or economically inefficient effects can be regulated or taxed, lines up with the idea that governments exist to protect rights. Its role in the economy, then, is to fix these “externalities” and injustices that can occur under liberal governance, but that the market is the best underlying system. Government preserves the rights and even the welfare of the governed, and interferes only as necessary to do so. And capitalism can run its course, mobilizing resources to generate wealth, within those constraints.
Hanauer’s approach says that no regulation or taxation would undo the moral turpitude that has taken over the economy, that mere rules will still leave the moral license to advance greedy corporate and financial practice to the point of corruption. Only a change in norms of economic doctrine will do this. He recommends redefining a corporation, the legal vehicle for limited liability of owners, to specify service to social needs as an object of the legal structure. In this formula, he essentially asserts that the population needs government to re-structure the incentives of corporate ownership, in order to secure our rights.
Politically, the debate was intriguing in that, while Hanauer did mention a Democratic presidential hopeful and Furman blamed Donald Trump’s “Big Beautiful Budget Bill” for blunting the benefits of capital, either political party could conceivably embrace either formula and demonizing the other in the usual partisan vitriol. The “right” could call Hanauer a proto-socialist imposing an ideological doctrine, or the “left” could deride him as a tinkerer, recommending ethical eyewash as though it would in itself restore morality to the system. Conversely, Furman could be called a laissez faire apologist for capitalism in its sins, or conversely, in his tax and regulation recommendations, as a meddling interventionist in the free market. What the politicians actually would do with these ideas, and on what political calculations, could provide extensive fodder for a swath of commentators.
The debate was richer than this sketch, and could be richer still. Hanauer noted the rise of stock buybacks, illegal until the 1950s, as a sign of Capitalism’s degradation. And he omitted mention of the Benefit Corporation idea, in which corporate charters explicitly declare commitment to social goals as well as profits. Furman’s assertion of Capitalism’s unprecedented material benefits might have engaged the “working hypothesis” of conservative economist Oren Cass, citing lifestyle and moral losses that have accompanied the market evolution away from manufacturing.
Either way, however, the two views of Capitalism can both carry our founding ethos, and any political implications cannot, a priori, be assigned to “either of the two” political factions. Furthermore the debaters were amicable, and responded to each other’s point respectfully and substantively. America can, in fact, consider questions like the appropriateness of Capitalism without falling into partisan rhetoric.
Common Conviction 