Some plutocrats accept the evidence that capitalism is no longer working for the middle class, and are trying to figure out what to do about it. It’s not just George Soros, the hedge-fund billionaire, who cheerfully describes himself as a class traitor and has been worrying about the shortcomings of what he calls free-market fundamentalism for decades. Among the plutocrats, this once-radical perspective is going mainstream. Ordinary people’s perceptions of the economic situation is troubling.
According to the Harvard Institute of Politics, a recent poll shows that a mere 19% of Americans between 18 and 29 years old thought of themselves as “capitalists”, and among older people the number only rises to 26%. Furthermore, only 42% of the younger group said they “supported capitalism”, while just over half of the older group said so. Observers draw the obvious conclusion, namely, that the majority of citizens in America no longer trust the system. Many view this as a wake-up call—and not just to Americans.
One of these critics is David Smick, a financial advisor, author and CEO of the Wall Street advisory firm Johnson & Smick, who argues in his latest book, “The Great Equalizer, How Main Street Capitalism Can Create an Economy for Everyone,” that corporate capitalism of top-down mismanagement and backroom deal making has smothered America’s innovative spirit. The big, the corporate and the status quo dominate at the expense of the small, the entrepreneurial and inventive. The result is that the middle class has seen their incomes flatline and prosperity slip away. He calls for the Great Equalizer, a reimagined Main Street Capitalism of small business startups and bottom-up innovation, all unfolding on a level playing field.
“It’s easy to see why America’s middle and lower-middle classes are so angry,” he writes. “The exponential nature of growth matters. Average folk can feel in their bones that they are losing out. For generations, inequality was tolerated because people at all income levels were becoming better off. Now the working and middle classes have realized that their wages have been stagnating or falling for decades.”
Smick advances a 14-point plan to create a climate more welcoming of greater business startups, propelled by greater innovative daring. Some of these include ideas already swirling around Washington such as reforming the tax system, shifting it away from stock “coupon clippers” in favor of jobs-producing enterprises. Among the more innovative is his proposal to make every American child at birth a stockholding capitalist with an investment account and modest low-interest loan. (imagine every baby born in 1980 if he or she were given at least one share of Apple!)
Another Smick idea kicked around by others is clever inducement to bring capital home from overseas. In exchange for enticing corporations to repatriate the estimated $2.6 trillion sitting offshore, give a one-time tax holiday, but insist that every company doing so purchase specific amounts of special infrastructure bonds paying 1%, thus enabling a down payment on much needed infrastructure spending.
Other ideas worth further discussion:
- Make part of the Federal Reserve’s mandate to encourage large financial institutions to specify an increment of new credit to young enterprises.
- Adopt the Kauffman Foundation’s proposal to allow shareholders in firms going public to opt out of the onerously expensive Sarbanes-Oxley rules and regulations.
- Increase worker mobility by providing vouchers for disadvantaged families to move from states with modest employment opportunities to states in need of new employees.
Fund adult tech education by fixing the country’s community college system, which has forgotten its original mission. Provide federal grants for community college adult education to update IT and Internet-related skills.
Many companies are already receptive to reforms particularly of corporate taxation, and comprehensive immigration policy. Some company leaders such as John Watson of Chevron are very much open to any scheme that would permit the repatriation of funds sheltered outside the U.S. without a punishing tax penalty. No one expects tax reform to be easy, given entrenched interest groups and the government’s enormous appetite for tax revenue, but startup advocates feel reform would pay off through more business and job creation.