Rethinking the future of American capitalism
25/12/2020 12:11
Capitalism has contributed to significant gains in economic growth and prosperity throughout its history. But at a time of growing public discontent about rising inequality, heightened competition from economies with different models, and existential threats including from climate change, capitalism in its current form—and American capitalism in particular—may face its most serious test.
Talk of change had already begun prior to the COVID-19 pandemic. At a time when many are feeling left behind by globalization, the impact of technology, and other trends, and inequality has risen, critiques of capitalism in its current form have grown louder. The calls for reform—which range from tweaks to wholesale change—have come not only from economists but also from business leaders; for example, the US Business Roundtable, representing the CEOs of America’s largest corporations, in 2019 redefined the purpose of corporations as going beyond serving shareholders to commitments to all stakeholders, promoting “an economy that serves all Americans.” The pandemic has shone a harsh spotlight on challenges both old and new facing the American model of capitalism. Policy makers from across the political spectrum and business leaders, as well as leaders of multilateral institutions, have called for moves toward greater inclusiveness, resilience, and fairness.
Evolution of American capitalism would not be new. Indeed, capitalism has evolved in keeping with the changing nature of the economy itself, including the role of capital and labor, trade and monetary policy, and changing ideas about the political economy. The neoliberal model of capitalism present in the United States today and to varying degrees in other Western economies was shaped in the 1960s and 1970s. Commonly cited as a defining moment for this shift was Milton Friedman’s 1970 article for the New York Times, in which he argued that “the social responsibility of business is to increase its profits.” This itself was a move away from Keynesian economics, which emerged as the standard model in advanced economies after the Great Depression of the 1930s.
Today, we may be poised for another such shift. American capitalism faces the question of the nature and degree of change necessary to ensure growth and prosperity for all in the 21st century.