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People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

The Myth of Capitalism: Monopolies and the Death of Competition by  Jonathan Tepper and Denise Hearn

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The C Word

Yes, we’re hosting a series exploring how capitalism can lessen inequality and create opportunity. Fire away, Twitterverse!

The C Word

Yes, we’re hosting a series exploring how capitalism can lessen inequality and create opportunity. Fire away, Twitterverse!

Get those pitchforks ready, folks. We’re talking capitalism, the mere mention of which has fast become a triggering event.

This week, The Citizen announced a series of public discussions under the rubric “Business…For Good” that will delve into the ways that capitalism can spur inclusive growth, lessen inequality, and extend opportunity. (Join us for our first get-together, April 18, featuring Brandywine Realty CEO Jerry Sweeney, Urban Affairs Coalition CEO Sharmain Matlock-Turner and Hilco Redevelopment Partners Senior VP Jasmine Sessoms).

We do this fully aware that “capitalism” has become an increasingly controversial buzzword. Our city has very real wealth and income inequality challenges; a new report from The Economy League finds that Philly has the sixth highest rate of income inequality among the nation’s top 15 cities, outpacing the national average. Thirty percent of our households earn between $10,000 and $40,000 per year, and only 5.4 percent of households make $200,000 or more.

It’s a chasm some 50 years in the making; Philadelphia has never recovered from the loss of its manufacturing base in the late 20th Century. That said, other cities—like Pittsburgh—have made the transition to knowledge economies that build vigorous middle classes. Here, we’ve had a succession of mayors ably performing economic development triage.

There’s a harrowing scene in Buzz Bissinger’s A Prayer For The City, which chronicles then-Mayor Ed Rendell’s indefatigable efforts to save the city from ruin in the early ‘90s, in which Rendell pleads with a Clinton administration official for more help: “‘Forget all the good things I’ve done,” he says, practically begging. “Philadelphia is dying. It’s happened a lot more slowly since I took office, but we’re dying.’’’

It’s still an open question as to whether Philadelphia can regrow a vibrant middle class. Yet there has been a dearth of policy solutions aimed at that goal. Whether you agree or not with the idea of a wealth tax pushed by Council progressives Kendra Brooks, Helen Gym and Jamie Gauthier, what’s undeniable is that where they would spend their newfound revenue—libraries, homeless services and rec centers—will not spur growth or otherwise move the needle on inequality.

So this is where we’re at. Rather than holding solutions up to the light of inspection, the public debate in our 140-character era has given us the C word, a stand-in for a whole host of meanings—most of them ideological in nature.

To wit, the populist resentments mouthed by Gym and Brooks—urging Philly’s almost mythical one percent to “pay their fair share”—differs not at all from the us versus them rhetoric of Alexandria Ocasio-Cortez, who said last week at SXSW: “To me, capitalism is irredeemable.” Or take lefty filmmaker Michael Moore: “Capitalism is against the things that we say we believe in—democracy, freedom of choice, fairness. It’s not about any of those things now. It’s about protecting the wealthy and legalizing greed.”

“If you believe in competitive free markets, you should be very concerned,” Hearn and Tepper write. “If you believe in fair play and hate cronyism, you should be worried.”

This is not to say that, when it comes to the excesses of capitalism, they don’t have a legitimate complaint. According to the website Capital & Main, one in four African-American families have a net worth of zero; the median White family has 41 times more wealth than the median Black family; CEO compensation has grown 940 percent in the last 40 years, against a 12 percent increase in worker compensation during the same time span; and, since Ronald Reagan took office, the earnings of the top 0.1 percent have grown 15 times faster than the bottom 90 percent.

Those stunning statistics would seem to suggest we are in a crisis of capitalism, but it’s really a crisis of crony capitalism. Properly regulated, capitalism, after all, has lifted 1 billion people out of poverty worldwide over the last decade, according to the International Monetary Fund. In the second half of the American 20th Century, it created the most dynamic economy in the history of the world, with significantly less inequality than now, as Nobel laureate economist Joseph Stiglitz makes clear in his clarion call for reform, People, Power, and Profits: Progressive Capitalism for an Age of Discontent.

Like Stiglitz, Denise Hearn and Jonathan Tepper argue in The Myth of Capitalism: Monopolies and the Death of Competition that the real problem is that too many so-called capitalists essentially believe in capitalism for me, but not for thee.

“If you believe in competitive free markets, you should be very concerned,” they write. “If you believe in fair play and hate cronyism, you should be worried. Fake capitalism CEOs cozy up to regulators to get the kind of rules they want and donate to get the laws they desire. Larger companies get larger, while the small disappear, and the consumer and worker are left with no choice…”

Hearn and Tepper give us the damage, and it’s devastating:

At 40 of the 100 largest U.S. airports, a single airline controls a majority of the market…Two corporations control 90 percent of the beer Americans drink. Five banks control about half of the nation’s banking assets. Many states have health insurance markets where the top two insurers have an 80 percent to 90 percent market share…When it comes to high-speed Internet access, almost all markets are local monopolies; over 75 percent of households have no choice with only one provider. Four players control the entire U.S. beef market and have carved up the country. After two mergers this year, three companies will control 70 percent of the world’s pesticide market and 80 percent of the U.S. corn-seed market. Google completely dominates internet searches with an almost 90 percent market share. Facebook has an almost 80 percent share of social networks. Both have a duopoly in advertising with no credible competition or regulation. Amazon is crushing retailers and faces conflicts of interest as both the dominant e-commerce seller and the leading online platform for third-party sellers. It can determine what products can and cannot sell on its platform…

So, yes, there is a real need for reform. But, here in Philadelphia, efforts to make capitalism work for the rest of us have given rise to performative progressives like Gym and Brooks, who smartly prey on class resentments. They single out the exploitative “one percent” when there is actually a distinct absence of wealth within city limits. Rather than come in good faith to the problem-table solving with the leaders of the business community who are willing to sit down at it, they message. Rather than seek to be held accountable, they point the finger of blame—and walk away. Not My Fault ought to be their campaign slogans.

The stridency we hear from the Democratic Socialists—who appear to want jobs, but not employers—ignores the facts on the ground. In recent years—particularly since the murder of George Floyd—many business leaders have rushed to reform capitalism by mitigating against its deleterious excesses.

Here in Philly, after all, we’re the birthplace of the international B Corp movement—thanks to the vision of Jay Coen Gilbert and his team—a movement to extend corporate fiduciary responsibility to stakeholders like workers, the environment and the community instead of just shareholders; we’re home to a growing impact investing community; and, in recent months, we’re the birthplace of a slew of funds rushing to aid the flow of early stage capital into entrepreneurial ventures in Black and Brown communities.

Of all our shameful statistics, perhaps the worst is that, in a city that is 45 percent African-American, only 2.5 percent of businesses with payrolls are owned by Blacks. For the first time in my memory, there seems to be enough disgust over that sad state of affairs to create a consensus for change amongst a business class that has long outsourced public leadership to elected leaders.

It’s time to focus on growing a middle class, with good jobs and benefits, while moderating against the vicissitudes of markets run amok.

In the past, I’ve been critical of the Greater Philadelphia Chamber of Commerce— in an Inquirer column a decade ago, I took it to task for paying mere lip service to inclusive growth strategies. But, under Chairperson Sue Jacobson, the Chamber has at least gotten in the game.

Its Recharge and Recovery program helped the Philly economy adjust during the heart of the pandemic and it was influential in the forming of the $100 million GRIT fund—the Philadelphia Growth, Resiliency, Independence, Tenacity fund—which represents the stepping up and coming together of about 30 banks to provide loans through smaller, on the ground Community Development Financial Institutions (CDFIs) to Black and Brown businesses. Rather than demonize banks, why not work with the ones that are coming forward and committing to flood economically distressed neighborhoods with much-needed capital for aspiring entrepreneurs?

As urban thinker and Citizen contributor Bruce Katz, director of Drexel University’s Nowak Metro Finance Lab, often reminds us, cities aren’t just governments—they’re networks. The ones that flourish have elected officials who step away from the megaphone and do the hard work of engaging stakeholders from the private and nonprofit sectors to find the common good in common ground.

This whole capitalism versus socialism debate? The Bard of Great Britain put it to rest in the last century. “The inherent vice of capitalism is the unequal sharing of blessings,” said Winston Churchill. “The inherent virtue of socialism is the equal sharing of miseries.”

I’m with Winston, and not just because he was a party animal. It’s time to focus on growing a middle class, with good jobs and benefits, while moderating against the vicissitudes of markets run amok. We’re going to look at ideas that do just that, while hoping our elected leaders join us in problem-solving.

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