The remoralization of the stock market
Suddenly economic populism is all the rage. In his now famous monologue on Fox News, Tucker Carlson argued that American elites are using ruthless market forces to enrich themselves and immiserate everyone else. On the campaign trail, Bernie Sanders and Elizabeth Warren are telling left-wing versions of the same story.
In an era of tribal emotionalism, you’re always going to be able to make a splash reducing a complex problem to a simple narrative that separates the world into the virtuous us, and the evil them (the bankers). But I’d tell a third story about our current plight, which is neither economic populism nor free-market fundamentalism.
My story begins in the 1970s. The economy was sick. Corporations were bloated. Unions got greedy. Tax rates were too high and regulations were too tight. We needed to restore economic dynamism.
So in 1978, Jimmy Carter signed a tax bill that reduced individual and corporate tax rates. Sen. Ted Kennedy led the effort to deregulate the airline and trucking industries. When he came into office, Ronald Reagan took it up another notch.
It basically worked. We’ve had four long economic booms since then. But there was an interesting cultural shift that happened along the way. In a healthy society, people try to balance a whole bunch of different priorities: economic, social, moral, familial. Somehow over the past 40 years economic priorities took the top spot and obliterated everything else. As a matter of policy, we privileged economics and then eventually no longer could even see that there could be other priorities.
For example, there’s been a striking shift in how corporations see themselves. In normal times, corporations serve a lot of stakeholders — customers, employees, the towns in which they are located. But these days corporations see themselves as serving one purpose and one stakeholder — maximizing shareholder value. Activist investors demand that every company ruthlessly cut the cost of its employees and ruthlessly screw its hometown if it will raise the shortterm stock price.
We turned off the moral lens. You probably know the example of the Israeli day care centers. Parents kept showing up late to pick up their kids. To address the problem, the centers experimented with fining the late parents. But the number of late pickups doubled. Before, coming to pick up your kid on time was a moral obligation — to be fair to the day care workers. After, it was seen as an economic transaction. Parents were happy to pay to be late. We more or less did this as an entire society — we switched to a purely economic lens.
A deadly combination of right-wing freemarket fundamentalism and left-wing moral relativism led to a withering away of moral norms and shared codes of decent conduct. We ripped the market out of its moral and social context and let it operate purely by its own rules. We made the market its own priest and confessor.
Society came to be seen as an atomized collection of individual economic units pursuing self-interest. Selfishness was normalized. As Steven Pearlstein puts it in his outstanding book, “Can American Capitalism Survive?” “Old-fashioned norms around loyalty, cooperation, honesty, equality, fairness and compassion no longer seem to apply in the economic sphere.”
Anything you could legally do to make money was deemed OK. A billion-dollar salary for a hedge fund manager? Perfectly acceptable. The Apple corporation exists because of American institutions. But, as Pearlstein notes, Apple parked its intellectual property in an Irish subsidiary so it could avoid paying taxes in America and support those institutions. It saved $9 billion in 2012 alone. This is clearly sleazy behavior. Apple employees should be humiliated and ashamed.
But today the amoralism of the trading floor governs corporate decision-making. Pearlstein quotes Carl Icahn: “I don’t believe in the word ‘fair.’” So Apple paid no reputational price when it stiffed its own country.
Social trust arises from a covenant: I give to my company, my town and my government, and they give back to me. But that covenant was ripped. Now the general perception is: When I give, they take. As we disembedded individuals from traditional moral norms we disembedded companies from social ones. Human beings are moral animals, and suddenly American moral animals found themselves in an amoral economic system, which felt increasingly alienating and gross.
We wound up with the secession of the successful, and in many parts of the country we wound up decimating the social trust that is actually a prerequisite for economic prosperity.
Capitalism is a wonderful system. The populists are perpetually living in 2008, when the financial crisis vindicated all their prejudices. They ignore everything since — the 19 million jobs that have been created, the way wages are now rising at 3.2 percent.
But capitalism needs to be embedded in moral norms, and it needs to serve a larger social good. Remoralizing and resocializing the market is the great project of the moment. The crucial question is not: How can we have a good economy? It’s: How can we have a good society? How can we have a society in which it’s easier to be a good person?