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Elizabeth Warren’s “Accountable Capitalism Act” promises the most radical shift in economic power since the New Deal. It contains four essential components, including campaign finance regulations, an attempt to limit corporate “short-termism” that has supposedly accompanied the rise of finance, and a requirement that corporations serve the “public benefit” rather than just shareholders. Most substantial, however, is the proposal that employees play an enlarged role in electing corporate boards of directors. As Seth Ackerman argued in calling for the left to “take Elizabeth Warren literally, but not seriously,” the Act would in some respects be a step toward greater democratic control of the economy. Yet even aside from Warren’s proud declaration that “I am a capitalist,” there are many reasons to regard the bill with skepticism. Indeed, given that it is modeled partly on the German social democratic model, the experience of workers in that country — who have increasingly been forced to accept wage restraint in one of the harshest neoliberal regimes in the world — should itself serve as a warning. Developing a clear understanding of the limits of Warren’s proposal can be helpful in forming the vision of economic and political democracy that should be at the center of the current “democratic socialist” upsurge in the United States. Even if unachievable today, is Warren’s vision what democratic socialists should struggle for? Congress could never enact Warren’s bill absent a massive working-class mobilization and a major shift in the balance of forces. Even aside from this, the most substantial proposals, those around corporate governance, are aimed not at empowering workers but rather non-financial corporate executives. Indeed, the bill appears rooted in the familiar false dichotomy between “finance” and the “real economy.” The rise of finance is not a cancerous growth on the otherwise healthy body of capitalism, but rather a component of the capitalist globalization of recent decades. Moreover, while the restructuring of capitalism makes it impossible to simply turn back the clock to the 1950s, postwar managerialism was in any case no less ruthlessly committed to profit maximization than contemporary neoliberalism — though workers were able to maintain rising standards of living through unionization. Similarly, the proposition that corporations act in the “public benefit” sounds good, but in reality this “stakeholder capitalism” leads to the same single-minded focus on profit that it claims to challenge. In the end, were it to be enacted, the Accountable Capitalism Act could actually be a barrier to working-class consciousness, embedding workers even more deeply within the logic of capitalism and identifying their interests more closely with corporate profitability.

Managerialism and Neoliberalism Even if they have always been geared toward maximizing profit and outcompeting rivals, corporations have not always looked the same. The corporation was born when investment bankers like J.P. Morgan in the nineteenth century merged small businesses into larger and more efficient firms. These bankers exercised power by acquiring seats on the boards of directors of the firms they controlled, creating networks of interlocking directorates. The decline of these investment banks meant that corporations were increasingly autonomous, and under the control of professional managers. Investors in this era of “managerialism” had little ability to challenge the power of internal managers, who were able to subordinate boards of directors. Of course, these new corporate organizations were just as dedicated to profit maximization as their forbearers had been — and indeed were perhaps even more effective in pursuing this goal. Yet in the neoliberal period, stockholdings have again been concentrated in the financial sector, increasing the power of outside investors to discipline management. Warren’s prescriptions are predicated on the idea that investors have used this power to impose a “short-term” perspective on the managers of non-financial firms, who are now forced to look for a quick buck at the expense of long-term prosperity. Unlike in the earlier managerial period, Warren writes, “the obsession with maximizing shareholder returns effectively means America’s biggest companies have dedicated themselves to making the rich even richer.” This, she argues has been primarily responsible for the increasing social inequality, economic stagnation, and declining wages of the neoliberal period. Warren claims that financial pressure has led managers to effectively loot their companies by diverting capital from useful investment to “buying back” shares of their company’s stock to manipulate the price. As a result, “good jobs” are disappearing and corporate investment has become a simple matter of handing out money to the super rich. This underinvestment means companies are “setting themselves up to fail.” And given that managers are often compensated with stock, they have every incentive to perpetuate the irrational cycle. To remedy this, Warren proposes preventing managers and directors from selling shares within five years of receiving them, or within three years of executing a buyback. She also suggests issuing federal corporate charters requiring firms to act as “benefit corporations,” serving a range of stakeholders — including workers, consumers, and communities — rather than just shareholders. By increasing the autonomy of managers from investor discipline, corporations will supposedly again engage in the kind of investment that generated the “good jobs” and rising standards of living that characterized the managerial period. She also proposes granting employees the right to elect 40 percent of corporate boards of directors in order to “give workers a stronger voice in corporate decision-making at large companies.” To be sure, the rise of finance in the neoliberal period was accompanied by greater pressure to cut costs and increase margins by offshoring production, subcontracting out work, and laying off workers. But these trends were not simply the result of financial parasitism. Rather, this restructuring was rooted in the increasing global mobility of capital, which intensified competitive pressures between firms as well as countries and the workers living within them for investment and jobs. Managers of non-financial corporations relied on international finance to integrate the global economy and circulate capital all over the planet, helping to resolve the 1970s profitability crisis by opening vast low-wage workforces of the peripheral states to exploitation. They also counted on finance to facilitate globalization by managing the risks associated with world trade, especially through derivatives trading after the final abandonment of the gold standard in 1971. So, too, do these non-financial corporate managers depend upon financial firms to finance mergers and acquisitions, and to maintain consumption in the context of the stagnant wages that have been a primary feature of neoliberalism. All this shows just how deeply entwined the financial sector is with the “productive” economy — and how essential it is to global capitalism. There is good reason to doubt the idea that the rise of finance has been associated with increasing economic “short-termism.” Rather than executives looting their companies, stock buybacks are more likely the result of historically high profits and low interest rates than supposed corporate irrationality. With corporations sitting piles of cash, and borrowing extremely cheap, why not distribute wealth to shareholders? This also means buybacks have not necessarily come at the expense of investment, which remains at historically normal levels relative to GDP. The problems with this argument are particularly clear in the case of the tech companies, which forego short-term profits to develop the technologies to secure market dominance well into the future. The same long-term perspective is evident when General Motors invests in China and Mexico, building fixed capital infrastructure, brand recognition, and political relationships to control markets and reduce input costs. In fact, management tenures are actually up. Neither is there any clear reason to associate finance with a fundamental short-term perspective. An estimated 75 per cent of the value of Amazon, for example, is “justified by profits that are expected to be made a decade or more from now,” which makes for “the biggest bet in history on a company’s long-term prospects.” Indeed, since the crisis there has been a historic shift to passively managed investment funds — which hold shares “indefinitely.” Either way, Warren’s act aims not at empowering workers but restoring managerial predominance. As an editorial by Jesse Fried in the Financial Times pointed out, “when 40 per cent of a company’s board consists of managers or their indirect reports” as required by Warren’s proposal, “investors would need to win almost every other seat to wrest control from incumbent management.” Workers notoriously almost always side with management in conflicts with outsiders. Indeed this was precisely why some of the largest firms encouraged employee stock ownership during the managerial era, alongside strategies to split stocks whenever the share price rose above a certain level: such measures were intended to prevent the emergence of an oppositional bloc of investors that could challenge management. Especially in the wake of the extreme financial concentration of the post-crisis period, boards have again become key battlegrounds. Activist investors like Nelson Peltz have taken stakes companies like Johnson & Johnson and GE, demanding Board seats to push reforms on often-reluctant management — even forcing the retirement of General Electric CEO Jeff Immelt. But throughout the neoliberal period, managers have engaged in futile efforts to defend themselves from financial pressure by setting up anti-takeover defenses in the form of golden parachutes, poison pills, and state regulations. Warren’s plan (were it implemented) might actually succeed in giving them the protection they have sought. Contrary to those emphasizing the supposed corrupting influence of financial “short-termism,” the rising living standards and robust economic growth of the “Golden Age” of capitalism rested on more than merely a specific model of corporate governance. It also depended upon relatively high union density. Without this, competitive pressure to allocate capital as efficiently as possible within firms as well as across the economy as a whole would mean that downward pressure on wages would continue to produce economic inequality and precarity. Firms seeking to raise capital need to be able to promise a return. This, in the end, is the primary objective of all corporate management strategies. Though individual managers may have different visions for how to achieve it, that it is the ultimate goal is beyond question. This of course would be true no matter which specific individuals might be on a given firm’s board of directors. The logic of the firm would continue to be maximizing profits; those empowered within the corporation who fail to achieve this will undoubtedly be seen as ineffective. Indeed one of the dangers of Warren’s proposal is that it leads workers to identify their interests with those of the firm —thereby strengthening the logic of profitability, rather than undermining it. Finally, the Accountable Capitalism Act attempts to achieve this “back to the future” strategy without challenging global financial integration or imposing controls on the global movement of capital. The question therefore becomes one of why investors would choose higher costs and lower returns. With corporate investment free to circulate anywhere on earth and establish corporations in whatever context in most attractive, why would capitalists willingly take on unnecessary costs? Barring controls that could limit the movement of capital, the only alternative would be increased subsidies and tax breaks for investing at home — which would only further increase pressure for public sector austerity and cutbacks to what’s left of the social safety net. And in any case, the state cannot engage in such strategies continuously. As others follow suit, generating a race to the bottom, pressure from capital for an “improved investment climate” will return. This has been the fate of even the most robust of European social democratic states. As new technologies are adapted for the relatively low-skill and low-cost workforces of the global periphery, there is less and less reason for capital to produce even high value-added exports in high-tax and high-wage contexts.