Something quite bizarre and remarkable is happening to American capitalism. Our economic system has long been predicated on the laissez faire sacrament of tethering commerce only to what Adam Smith called the “invisible hand” of the market. Roughly translated, that means those who own the means of production should be allowed to suck up all the profits they can, unencumbered by any duty to their workers, customers or communities.
However, as a dystopic sign of chronic congressional constipation, together with the companion malady of massive Trumpian deregulation, some corporate titans are taking unheard of steps to self-regulate for a broader public good, even if it means loss of revenue. Milton Friedman must be spinning in his grave.
To be sure, as incredible as this shift appears, so far its scope is relatively small and limited. It is not likely to win Hosannas from Democratic Socialists anytime soon. Yet, Its significance lies in the profundity of its message, namely that the federal government has grown so dysfunctional that some major corporate entities are taking a stab at public policy governance.
What makes the role reversal even more bizarre is that the Trump administration and Republican lawmakers have responded to this corporate usurpation of policy making by acting like lobbyists in an effort to influence the outcome of corporate legislating. It’s as if the regulators and the regulated simply switched places but carried on the old dance.
Take the issue of guns for example. As of the first of this month, there have been 283 mass shootings in the U.S. this year. Yet, Congress has not passed any substantive gun control legislation in more than a generation. Many business leaders are attempting to fill that regulatory void. Walmart, on the heels of the murder of 22 customers in its El Paso store, banned the sale of assault weapons, hand guns and most ammunition in all of its locations. Dick’s Sporting Goods took similar action a year earlier. Responding to the school massacre in Parkland, Florida, Dick’s pulled all assault-style rifles and high capacity magazines from its stores at an annual revenue loss of $150 million.
The giant e-commerce software company, Salesforce.com, stopped doing business with clients that sell military-style weapons. A number of banks, including Citigroup and Bank of America, adopted prohibitions against lending money to gun dealers who sell assault rifles, and required them to submit background checks on all other gun buyers. BlackRock, the world’s largest asset manager, set up a new line of investment funds that exclude gun manufacturers and retailers.
Amazingly, these sensible gun regulations – stuff that Congress has been unable to legislate – have managed to push Republican officials into action mode. Unfortunately, the action is aimed at maintaining the sacred status of gun sales. Yes, the party of free enterprise has suddenly turned to its former arch enemy of regulation as a cudgel to protect the free flow of assault weapons. Republican senators, led by Louisiana’s John Kennedy, are pushing legislation that would prohibit banks from “discriminating” against gun buyers. Kennedy has also asked federal agencies to stop lending institutions from effectively restricting gun sales by adopting their own regulations.
Some of the Republican lobbying techniques against this new self-regulation by businesses trying to reduce gun violence have been even more Draconian. The country’s biggest credit card issuers, led by Citigroup, decided to take steps that would either restrict or monitor gun sales purchased with a credit card. This was not without precedent. Smaller companies like PayPal, Stripe, Square and Apple Pay already had explicit policies against transacting online sales of guns and related merchandise. If big banks took a similar move, it could inflict a substantial dent in gun trafficking.
As reported on a recent episode of the New York Times’ The Daily podcast, senior bank executives went into a meeting with officials from the Security Exchange Commission, ostensibly about some unrelated and arcane financial reporting regulations. During that session, however, an SEC commissioner made it very clear that the agency would not take kindly to any bank that came out against guns. That shut down the gun sales credit card gambit, at least temporarily.
This new corporate resolve to look for ways to push back on a combination of paralysis in some areas, and excessive deregulation in others, has surfaced in a number of other ways. For example, the Trump administration’s move to roll back rules on methane-emissions was initially seen as a boon for big oil companies. Quite the contrary, most of those corporations – including Exxon Mobil, BP and Shell – were critical of Trump’s move and have said they will stick with the stricter Obama limits out of a desire to be seen as supportive of climate change remedies.
Meanwhile, automakers are balking at Trump’s plan to give them relief from Obama-era rules on fuel efficiency standards. Here again, the president thought he was doing the companies a favor by rolling back environmental regulations. But Ford, BMW, Volkswagen and Honda have said they will adopt standards slightly reduced from the Obama rules but much stricter than those Trump is trying to enact. Other car manufacturers appear headed in the same direction, away from the president’s huge reduction in fuel efficiency rules.
Mostly, this has to do with California and other states whose fuel standards exceed those pushed by Trump. But they are also sensitive about being seen as ignoring environmental concerns, a stigma that has never kept the Donald from getting a good night’s sleep. As a result, Trump is now threatening to hit car companies with anti-trust charges on the basis that they have conspired against him to make cars that don’t pollute enough. He is also talking about prohibiting states from having stricter environmental standards.
Clearly, the GOP, once the party of big business and states’ rights, has morphed into a demented and unrecognizable entity. It is taking rights away from states, and it is beating up on God-fearing capitalists for trying to do what the government has failed miserably at: making this country a better place. If this is what MAGA means, someone with a red hat needs to file a consumer fraud complaint.
Thanks, Bruce for an enlightening post. Slowly people are waking-up and standing-up, some in large ways and others briefly and/or in other ways.
Climate change will push this kind of transformation farther and faster.
Thanks for the education and insights.