Chapter 7

How Citizen Capitalism Mirrors American Values

ANY STRATEGY TO SHIFT A POLITICAL OR ECONOMIC SYSTEM unavoidably encapsulates certain values. A move toward dictatorship prioritizes control over personal liberty. A shift to freer markets promotes individual independence while arguably devaluing cooperation and community. Programs and proposals that are in harmony with a nation’s values are far more likely to enjoy political support and to be implemented than reforms that cut against widely held beliefs.

Citizen Capitalism is not only consistent with, but actively reinforces and promotes, multiple ideals and values that are thought of as being deeply “American.” Besides the discussed support for capitalism; openness and transparency; hope for and investment in the future; and acceptance of responsibility, especially the responsibility to acknowledge debts to prior generations, these values include egalitarianism, individual liberty, and civic engagement. Of course, these ideals are not exclusive to the United States. Many other countries and cultures share similar aspirations.

However, these values are deeply rooted in American history, psyche, and culture and are emblematic of America at its best. That said, throughout its history there have been looming gaps between American ideals and the lived reality many Americans experience. Most blatantly, there is a jarring discord between the celebration of individual liberty and the legalized slavery that persisted for nearly a century after the Declaration of Independence was signed. Indeed, what one values may be dependent on one’s economic, political, and/or racial vantage point. Today, many of us are increasingly concerned that they are drifting even further from the principles they hold most dear. Inequality is growing and social mobility is declining. There is rising distrust in business and the political system. For many, especially younger Americans, hope for the future seems hard to find.

Unlike many other policy proposals, Citizen Capitalism does not sacrifice one value to support another. For example, adopting some type of guaranteed income plan funded by mandatory taxes would promote greater equality, but at the sacrifice of liberty and responsibility. Rolling back environmental regulations prioritizes individual liberty and the capitalist approach, while putting the future at risk and ignoring our responsibilities to those who come after us.

It isn’t just about what Citizen Capitalism does. It’s also about how Citizen Capitalism does it.

Egalitarianism

The preamble to the Declaration of Independence famously asserts that “all men are created equal.” (For the moment we must forgive the Founding Fathers for thinking only of men, and only white men with property, at that.) The word “equality” can have many meanings. We use it to mean “equal opportunity” or “equal treatment” rather than identical outcomes. Few Americans believe everyone should have exactly the same wealth, health, education, and ability. The idea calls up the dystopian future Kurt Vonnegut envisions in his story “Harrison Bergeron,” where the attractive, athletic, and intelligent are handicapped with disfiguring makeup, chains, and noise-emitting headphones to keep the envious less-gifted from feeling badly.¹ Most Americans don’t find envy attractive and understand that rewarding merit and hard work inspires the productivity, innovation, and investment that ultimately benefits all. Americans are comfortable with a society in which anyone with talent, discipline, and a willingness to work hard can “rise to the top.” Indeed, equality of opportunity is one of the hallmarks of the American Dream.²

But as Nobel Prize–winning economist Joseph Stiglitz shows in his 2012 book The Price of Inequality,differences in drive and merit alone cannot explain the large and growing gaps we see today between the circumstances and prospects of the best-off and the least well-off Americans.³ It’s hard to win a race when your starting line is further from the finish than other contestants. The undeniable reality is that some citizens are given resources, opportunities, and advantages that others are not, and these differences in where they start can determine where they finish.

Most obviously, differences in the circumstances into which a person is born produce great differences in their ability to develop their own skills and pursue an education. The Horatio Alger story is not pure fiction, but it is much harder to rise to the top if you’re starting at the bottom than if you’re nearly on top to begin with.⁴ The children of the elite typically enjoy better nutrition, more stable and less stressful family environments, better early education, greater ability to pay for schools of their choice, and the luxury of taking unpaid internships rather than working part-time jobs. They have ready access to successful role models and useful social connections.

A more subtle source of inequality lies in the ability of the well-off to claim a much larger share of the enormous benefits bequeathed to current generations by prior generations. The US air travel system was built from the past contributions of multitudes, from the Wright brothers, to the founders of Boeing and Lockheed Martin, to the taxpayers who paid for our airports, air traffic control, and safety regulation systems. Yet relatively speaking, it is perhaps business executives and well-heeled tourists who enjoy a disproportionate share of the benefits. Jeff Bezos is rightly lauded for building a mighty corporation in Amazon. Yet he could never have amassed the enormous personal fortune he enjoys today if he had had to pay to raise and educate Amazon’s 500,000-plus employees. All citizens benefit from a stable society and criminal justice system that discourages fraud, theft, and burglary. But the wealthy, who have more to protect, benefit far more.

Finally, the top reaches of American society enjoy a third advantage unavailable to many—the ability to use lobbying, campaign contributions, and media outlets to influence legislators, regulators, and popular opinion in order to change legal rules to favor themselves. Examples are legion. Industrial agribusiness has successfully lobbied the US Congress to subsidize the production of corn-based ethanol.⁵ The tobacco industry has used supposed “Smokers’ Rights” movements to ward off efforts at tobacco regulation, along with extensive lobbying and funding of dubious research denying the health consequences of smoking.⁶ The federal tax code has been twisted to offer special protections for the very wealthy. As multibillionaire Warren Buffett observed in the New York Times, there’s something wrong with a system that allows him to enjoy a federal tax rate significantly lower than the rate his secretary pays.⁷

Individual Liberty

Americans are devoted to liberty. We see this in the moniker “Home of the Free” and in Founding Father Patrick Henry’s famous 1775 declaration, “Give me liberty or give me death.” Citizens of New Hampshire still echo Henry’s passion with their state official motto of “Live Free or Die.”

The irony is that, in creating any state power—whether it be the United States, New Hampshire, or a small township—people create a government with power to coerce them. The state’s ability to limit personal liberty is inherent in almost every government act, from war, to taxation, to a police officer issuing a loitering or traffic ticket. So it is understandable that many Americans fear government power to limit liberty. They are reluctant to solve problems with regulation, preferring to leave matters up to the workings of markets. This is especially true for those who follow philosophies like libertarianism or free-market economics.

The tension between government action and personal liberty has ensured that for far too many years, debates over social and economic problems like inequality and environmental degradation have been dominated by two warring factions. One side favors government solutions. The other believes the government cure would be worse than the disease, and matters are best left to be solved (if at all) by market forces. The divide between the two perspectives is often bitter and partisan. Many on the political Left assume only government intervention can do the job, and that anyone who claims otherwise is lacking in intelligence, ethics, or both. Meanwhile, many on the political Right view such ideas as socialism at best and thinly veiled dictatorship at worst. In the words of anti-tax activist Grover Norquist, they want to shrink government until it is so small they can “drown it in the bathtub.”

The debate between government and market solutions is old, tired, and divisive. Citizen Capitalism offers to cut through the conflict and the noise. This is because Citizen Capitalism relies on an entirely new alternative strategy for solving our biggest social and economic problems: private ordering. It’s a strategy that leaves far more room for personal liberty than government solutions do and also one that allows us to solve certain large-scale problems that market solutions are not well-suited to solve, like environmental damage, large-scale infrastructure projects, inequality, and political dysfunction.

Respect for personal liberty is in its DNA. For example, rather than employing taxes or other coercive government measures for funding, Citizen Capitalism relies on the voluntary contributions of individuals and corporations. They are free to donate assets to the Fund or not as they see fit, and in chapter 4 we explain why many are likely to choose to donate. Nor is anyone required to become a citizen-shareholder. It is up to each individual to decide whether they want to accept the burden of registering. Finally, citizen-shareholders are free to decide how they want to use their share income: spend it, invest it, or give it away.

In this fashion, Citizen Capitalism incorporates many of the most desirable elements of both government and markets approaches. It relies on the kind of individual decision-making characteristic of markets, simultaneously making possible coordinated collective action to achieve large group goals. It offers an alternative approach to social and economic problems that can break through the impasse between Right and Left that has so long dogged debates over how to make the United States a better nation.

Personal liberty is a fundamental American ideal, but it would be a mistake to interpret “liberty” to mean irresponsibility. (“I’ll do whatever I want, the hell with you.”) A willingness to collaborate and associate to solve common problems has been integral to American culture from its earliest days. As Benjamin Franklin supposedly said just before signing the Declaration of Independence: “We must, indeed, all hang together, or most assuredly we shall all hang separately.”

Civic Engagement

More than a half century after Franklin spoke, the French diplomat Alexis de Tocqueville, who had traveled extensively in the United States, wrote his famous ethnography Democracy In America. In this treatise—which is routinely taught in college classes today—Tocqueville observed:

Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light the truth or developing a sentiment with the support of a great example, they associate. Everywhere that, at the head of a new undertaking, you see the government in France and great lord in England, count on it that you will perceive an association in the United States.⁸

Some question whether this culture of collaboration and association has declined in recent decades. In 2000, political scientist Robert Putnam published his influential bestseller Bowling Alone: The Collapse and Revival of American Community,⁹ in which he argued based on evidence of declines in voter turnout, political activism, and membership in community clubs and organizations that Americans were becoming disengaged and detached, threatening a decline in our “social capital.” Others have questioned Putnam’s conclusions, arguing that civic engagement has merely shifted forms and can now be found in volunteering and online forums.¹⁰

There is one area of American life, however, in which disengagement, disassociation, and apathy has become the norm: in corporate governance. Chapter 2 showed how shareholder apathy, when combined with other elements of the way shares are currently owned, traded, and voted, produces a bizarre system in which power over many large corporations has been concentrated into the hands of a small group of hedge and mutual fund managers, and mysterious entities called proxy advisors—many of which have little or no long-term economic interest in the shares themselves but stand to profit from pushing companies to pursue short-term strategies that often harm employees, customers, the environment, and long-term investors.

In terms of both intended outcome and design, Citizen Capitalism offers a tool for creating more equal opportunity in economic participation and corporate governance. In terms of outcome, the Universal Fund allows more citizens to participate in the corporate sector. By giving average Americans more equal influence over the corporations that drive the economy, it gives them more equal influence over the political system as well. In terms of design, the Universal Fund is structured to support the ideal that citizens should be treated equally. This is why, for example, it bars citizen-shareholders from buying, selling, or bequeathing citizen-shares. Just as no voter gets more than one vote, no citizen-shareholder can hold more than one citizen-share. This is also why, in contrast to many recent proposals for a guaranteed basic income, we do not recommend “means testing” and distributing citizen-shares only to those who fall below certain income or wealth thresholds. Every US citizen age eighteen or older can register and receive a share. Of course, especially just after the Fund is created, when the income from shares may be modest, some might prefer not to take the time and trouble to register. That’s fine; it increases the benefits to other citizen-shareholders. But by being available to all American adults, Citizen Capitalism embraces the ideal of equality.

By creating a new, powerful, and fundamentally long-term shareholder—the Universal Fund—and empowering its citizen-shareholders to decide how shares in the Fund should be voted, Citizen Capitalism would counter the forces that currently drive companies to destructively chase short-term profits. By distributing shares to all American adults, it allows a far wider range of interests to be represented in corporate boardrooms. And by allowing citizen-shareholders to select a proxy service to vote their shares, it facilitates their task to participate in the corporate sector.

This approach not only promotes civic engagement in corporate governance, it fosters civic engagement more broadly.