‘Stakeholder Capitalism,’ the Climate Wars, and Democracy

(kieferpix/Getty Images)

The week of June 14: stakeholder capitalism and fascism, tax leaks, antitrust, and much, much, more.

The leftist objectives of “woke capitalism,” a phenomenon which is intertwined with “socially responsible” investment (SRI) and has at its base, stakeholder capitalism, have obscured the way in which this combination works owes far more to fascism than to socialism. Nearly 90 years ago, Roger Shaw, a progressive writer, described the New Deal as “employing Fascist means to gain liberal ends.” Overwrought, perhaps, but not without some truth to it. He would recognize what is going on now for what it is.

Underlying the notion of “stakeholder capitalism,” a concept that has taken the C-suites of some of America’s largest companies by storm, is the idea that a company should be run for the benefit of all its “stakeholders,” a conveniently hazy term that can be defined to include (among others) workers, customers, and “the community,” as well as the shareholders, who, you know, own the business. It’s a form of expropriation that is frequently sold on the basis of the myth that a company that puts its shareholders first must necessarily put everyone else last. In reality, a business that, to a greater or lesser extent, fails to consider the needs of various — to use the term — stakeholders in mind, customers, most obviously (but certainly not only) is unlikely to flourish, and nor, therefore, will its shareholders.

But stakeholder capitalism is not only a threat to private property, but also, by not much of a stretch of the imagination, to individual freedom. To understand why, take a step back.

As I wrote last July:

The wider vision underlying stakeholder capitalism is one in which different interest groups such as employers, employees, and consumers collaborate in pursuit of mutually (if sometimes mysteriously) agreed objectives under the supervision of the state. It would never be quite post-democratic, not quite, in any likely American form, but what it would be is a variety of corporatism.

Corporatism takes many, many forms. It can range from the relatively (relatively) benign — it runs through European Christian Democracy, and it can be detected in early-20th-century American Progressivism — to the infinitely more heavy-handed. It has been an important element in the theory, if not the practice, of some variants of fascism, most notably in Mussolini’s Italy, but not only there.

As choices go, that’s quite a range, but in The Rise of Corporate-State Tyranny, a fascinating, lengthy (and must-read) article for the Claremont Institute, Joel Kotkin makes the case that the route down which much of the country’s elite is embarked will take us rather closer to pre-war Benito than to post-war Bonn. He writes of “a new alliance between large corporate powers, Wall Street, and the progressive clerisy in government and media”:

Its agenda consists of several goals. On the corporate front we have the emergence of “stakeholder” capitalism, which embraces the state’s priorities implicitly and those of the progressives generally, as a way to please regulators, the woke among their employers, and, to some extent, their own consciences. In this they resemble companies in authoritarian states—like Mussolini’s Italy, Hitler’s Germany, and today’s China—where private capital accumulation is permitted but dissent from the agreed norms of the media-government-academy, once the privilege of individuals and corporations, is now largely verboten.

Kotkin goes on to explain how

fascist corporatism, by rejecting the autonomy of private interests, parallels today’s fashionable theories like “stakeholder capitalism” and the environmental “Great Reset.” As in the fascist state, corporations [perhaps it’s worth adding that the word corporatism does not refer to business corporations, but it derived from the notion of society as a single ‘body’—corpus in Latin] now take it on themselves to be conscious change agents for particular political and moral agendas. Two doctrines guide these actions. First, “stakeholder capitalism,” which holds that corporations must push onto society doctrines concerning gender, “systemic racism,” and other elements of the woke agenda. Second, the “Great Reset,” which seeks to have companies essentially “save” the planet by slowing material growth for the working and middle classes while maintaining rich profit opportunities through “disruption” of energy and other industries. Both doctrines currently guide the majority of America’s major corporations.

The “Great Reset” is being put forward by the World Economic Forum (“Davos” to you and me).


Seizing on the opportunity presented by the COVID-19 pandemic, the “Great Reset,” introduced by the World Economic Forum’s Klaus Schwab, proposes that large corporations reject their traditional goals and market capitalism in favor of serving racial and gender “equity” or saving the planet. The “Great Reset” advocates the reevaluation of the principles of democracy, particularly if they are perceived as not meeting the values embraced in the “reset.” Eric Heymann, a senior executive at Deutsche Bank, suggests that to reach the climate goals of Davos, corporations will have to embrace “a certain degree of eco-dictatorship. Corporations must explicitly embrace top-down authoritarianism.

Ah yes, climate. Much of the agenda of the emerging corporatist state both revolves around an apocalyptic vision of climate change and is empowered by it — a process made even easier by the ubiquity of the role that CO2 and other greenhouse gases play in our current way of life. Restricting greenhouse-gas emissions, can be used as an argument to restrict how we travel, where we travel, how we heat our houses, what we eat, and so on — the list is seemingly endless.

If climate change (full disclosure: I am a “lukewarmer” myself) can be depicted as a threat to our future on the planet, then it can be used to justify, in Heymann’s formulation, “a certain degree of eco-dictatorship,” in, he explains, “the form of regulatory law” — a qualification which may obfuscate more than it clarifies. The worse the potential damage attributed, accurately or otherwise, to a changing climate, the more drastic, logically, the measures that must be taken to deal with it, measures that would leave little of our current behavior untouched.


We take key consumption decisions, for example whether we travel at all, how much we travel and which means of transport we use, whether we live in a large house or a small apartment and how we heat our homes, how many electronic devices we have and how intensely we use them or how much meat and exotic fruit we eat. These decisions tend to be made on the basis of our income, not on climate considerations.

If we really want to achieve climate neutrality, we need to change our behaviour in all these areas of life.

Quite a lot will depend on who “we” are — or are allowed to be.

It is no coincidence that more and more in the media, in government, and other parts of the flourishing climate ecosystem now refer to a climate “crisis” or climate “emergency.”

Nor is it a coincidence that the climate warriors’ preferred solutions are focused on coercion rather than pragmatic adaptation, measured technological transformation, and uninterrupted wealth creation, three approaches that between them offer the best prospects (and would generate the necessary resources) for enabling us to deal with whatever the climate may (or may not) throw at us. Coercion, by contrast — banning this and rationing that — is a device to transfer power, and the perquisites that flow from it, to a relatively small elite, and, in smaller portions, to a nomenklatura below it, and then to enforcers below them. That such measures, most of which would be probably likely to applied mainly in the West, are likely to have little or no effect on the climate is irrelevant. Indeed, that may be a feature, not a bug: A permanent “emergency” would come in very handy indeed for those looking to control society.

Reviewing Mark Carney’s Value(s): Building a Better World for All for Canada’s National Post, Peter Foster sees it as a manifesto for a technocracy, justified, naturally, by the battle against climate change, which comes with the advantage that it relieves the author from any tiresome commitments to improving living standards, at least anytime soon:

Carney’s Brave New World will be one of severely constrained choice, less flying, less meat, more inconvenience and more poverty: “Assets will be stranded, used gasoline powered cars will be unsaleable, inefficient properties will be unrentable,” he promises.

In case you were wondering why Carney’s opinions should matter, well, he is a former governor both the Bank of England and the Bank of Canada and

UN Special Envoy on Climate Action and Finance. He is also an adviser both to British Prime Minister Boris Johnson on the next big climate conference in Glasgow, and to Canadian Prime Minister Justin Trudeau.

He is also vice chair of Brookfield Asset Management, an investment group with over $600 billion under management, where he is Head of ESG and Impact Fund Investing. “In this role,” maintains Brookfield, Carney “is focused on the development of products for investors that will combine positive social and environmental outcomes with strong risk-adjusted returns.”

And Carney believes in a “partnership” with the private sector (or, at least, those who run it — by far from the same thing) to achieve aims that extend a long way beyond his own career. If you think this is beginning to sound rather familiar you would be right.


The agenda’s objectives are in fact already being enforced, not primarily by legislation but by the application of non-governmental — that is, non-democratic — pressure on the corporate sector via the ever-expanding dictates of ESG (environmental, social and corporate governance) and by “sustainable finance,” which is designed to starve non-compliant companies of funds, thus rendering them, as Carney puts it, “climate roadkill.” What ESG [an increasingly dominant variant of SRI] actually represents is corporate ideological compulsion. It is a key instrument of “stakeholder capitalism.”


And what should be understood is that this is part of a process that is not so much designed to replace democracy, as to bypass it, whether by corporate fiat, or by largely unaccountable regulators, both private and public sector — from accountancy standard-setters to the SEC to central banks — taking their mandates to places where they should never go, all in the interests of an agenda largely designed by and for an unsavory coterie of unelected corporate managements, unelected activists, unelected investment groups, unelected foundations, unelected judges, unelected media, unelected bureaucrats, unelected academics, and elements within the state. Voters, however, are unlikely to be given too much of a say. Kotkin observes that

a recent poll questioning respondents’ policy preferences for the first one hundred days of the Biden administration showed that only 13 percent prioritized about climate change, that only 11 percent desired social justice reform . . .

For now, that hasn’t seemed to matter overmuch, but sooner or later, much of the electorate will start to notice that their interests are not only being ignored or reviled by the emerging corporatist state, but, in the name of fighting climate change, being materially damaged by it. The increasing unreliability (and expense) of power supplies in California is only an early sign of what is likely to be a major assault on the standard of living of large sections of the population in the interests of heading off an apocalypse that, like all the supposed supposedly imminent apocalypses in the centuries that have preceded our own, owes more to fevered imaginations than anything anchored in reason.

History shows us that it would be foolish to underestimate the appeal of the irrational, not least to elites who may benefit from the opportunities that it may offer them. Sooner or later, however, some of those paying the bill may start to object.


The attempts to curb companies in the fossil fuel, real estate, aviation, and automobile sectors for climate reasons may not appeal much to oil riggers, factory employees, or construction workers who drive old trucks. These workers also will find out that most Green jobs turn out to be mainly ephemeral, essentially positions that are already present and, where they actually exist, pay far lower salaries, are usually shorter-term, and are far less likely to be unionized, particularly as compared to the roughly 750,000 high-paying jobs in the fossil fuel sector . . .

Other parts of the elite agenda—for example, the notion of forcibly densifying suburbs and restricting single-family zoning—are also not likely to play well with the general public. Homeownership, the primary way middle- and working-class people achieve wealth, is often decried by progressives, while many on Wall Street look forward to a fully “rentership” society. Oligarchs, living in unimaginable splendor, may want the plebs to live in rented, small apartments in their “degrowth” universe, but this is not likely to be a popular stance.

The corporatist state will push back hard against opposition. Kotkin notes the way that Big Tech and the media can be used to distort the debate. Some of its advocates, indeed, are more open about it than others.


The need to redirect people’s minds from above has been gaining adherents among the political cognoscenti. Jerry Brown, the former governor of California, openly favors applying “the coercive power of the state” to achieve environmental goals while promoting the “brainwashing” of the uncomprehending masses . . .

That said, there are occasional signs that even the Biden administration — however many climate fundamentalists are working within it — is aware of the domestic political problems that this may bring in its wake. Perhaps that may ultimately force a reconsideration of the course in which corporatism is taking us before it is too late. Perhaps.

I would not agree with everything that Kotkin has to say in this thought-provoking article, even if, on occasion, this is merely a matter of emphasis. Thus, I’m much more troubled by the transformation in the way that corporate power is used (a concern Kotkin clearly shares) than by the simple fact of its concentration. The latter, however, is a major preoccupation for Kotkin, but may be less of a problem and more fluid than he believes. Then again, it would be difficult not to be worried by the influence now being wielded by giant investment groups that appear to have lost sight of the fact that, except where their products specifically marketed as socially responsible are concerned, their only job is to concentrate on the return to their clients. Should, to single out one obvious group, BlackRock’s managers be using other people’s money to steer society in the direction that those managers thinks it should take? Spoiler: No.

Kotkin’s comparison between the evolution of a corporatist China (itself a state now more accurately labeled as fascist rather than communist) and an emerging corporatist America is, to say the least, provocative, if, in my view, taken a bit too far (“We have not yet reached Huxley’s Brave New World or even China’s high-tech police state, though we are headed in that direction”). It ought, but probably won’t, make some of the more well-intentioned supporters of stakeholder capitalism (there are a few) think again about the direction in which they are taking this country, not only if they are concerned about the fate of our democracy, but also if they can bring themselves to put working for the prosperity of the bulk of the American people above the rehashed millenarianism into which so much of the climate movement has sunk. To revert, briefly, to FDR, Kotkin observes that

FDR’s New Deal was about expanding ownership and productivity while the current version is more about constricting the population and depressing their standard of living.

However repulsive the regime in Beijing may be, China’s elites, for varied reasons, have no interest in depressing the standard of living of most of its population. The same, ironically and unfortunately, cannot be said about their counterparts in America.

As should be evident by now, there are passages in Kotkin’s piece that are more tangentially related to stakeholder, or even woke, capitalism than others. They are worth discussing on another occasion, but to conclude for now, events may already be taking a turn that Kotkin has noticed:

Ultimately, the woke oligarchs may find that they have virtue signaled their way to a confiscatory form of socialism. Among grassroots Democrats in the plutocrat-funded Democratic Party there is now more support for socialism than capitalism.

The pace of that turn may be even faster than those oligarchs anticipate.

Kotkin’s article was published in late May, and includes this comment:

The Biden-led Democratic Party promises a fresh springtime for oligarchs. The prominence of corporate lobbyists in the new administration all but assures that Biden, like Barack Obama, will wink and nod as Microsoft, Amazon, Apple, Facebook, and Google acquire or crush competitors . . .

A more aggressive approach to antitrust is, by no means, the same as socialism, even if, to me, it can under certain circumstances, come far too close to central planning for comfort. Nevertheless, the recent appointment of Lina Khan as Chair of the FTC could be read as an interesting straw in the wind.

Writing for the Financial Times, James Politi and Dave Lee put it this way:

Biden’s decision to appoint Khan to chair the FTC — making her one of the youngest-ever heads of a federal agency — sends a signal of his administration’s intent to take a more aggressive stance towards Big Tech.

“This is the equivalent of an activist outsider suddenly becoming chairman of the board. And none of them saw it coming. None of them,” Kovacic added. “Their life just got much more difficult, and much more precarious.”

Ahead of the game, China is already in the process of reining in Big Tech (check out the travails of Jack Ma). And that should be no surprise. In a corporatist regime, the state ultimately has the last word.

The Capital Record

We released the latest of a series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and NRI trustee David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.

In the 22nd episode David was joined by supply-side economic historian and best-selling author, Brian Domitrovic, to talk about the real history of supply-side economics. He drops some bombs for us on what tax cuts may have actually done in the 1980s and what the Fed may actually not have done! This is a fascinating conversation about the role supply-side economics can play in driving future economic growth.

And the Capital Matters week that was . . .

Miserable Iran

Steve Hanke:

The first [economic] misery index was constructed by economist Arthur Okun in the 1960s to provide President Lyndon Johnson with an easily digestible snapshot of the U.S. economy That original misery index was a simple sum of a nation’s annual inflation rate and its unemployment rate. The index itself has been modified several times, and its coverage has been greatly expanded, first by Robert Barro of Harvard, and then by me.

My modified misery index is the sum of the unemployment, inflation, and bank‐lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These “bad” measurements are offset by a “good” (real GDP per capita growth), which is subtracted from the sum of the bads. A higher HAMI score reflects a higher level of misery.

Where, then, does Iran rank? Of the world’s 156 countries that I cover in the HAMI, Iran ranks as the eighth-most miserable country in the world, behind Venezuela, Zimbabwe, Sudan, Lebanon, Suriname, Libya, and Argentina.

The symptoms of Iran’s misery are as clear as the nose on your face. Since January 2020, the Iranian rial has lost 45 percent of its value against the U.S. dollar. As shown in the table below, there are only seven countries whose currencies have lost more than Iran’s . . .

Minimum Wage

Robert VerBruggen:

As I discussed in a piece earlier this year, hiking the minimum wage can cause a number of unintended consequences. The most obvious, and most studied, is that employers might buy less labor when labor is more expensive. Yet employers can respond in other ways too — such as cutting benefits or making jobs more demanding.

Today, Mark Perry points us to an interesting study of an anonymous “chain of fashion retail stores” with locations in Texas and California. The data run from 2015 through early 2018; the minimum wage was $7.25 for this entire period in Texas, but started at $9 and rose every year in California.

Interestingly, as the minimum wage crept up in California relative to Texas, stores in the Golden State did not measurably reduce the number of employee hours they paid for. What they did, instead, was to spread those hours around: hire more workers, but have each employee work fewer hours.

What’s the advantage of doing this? Well, as the authors note, “workers have to work at least 20 hours per week on average to be eligible for retirement benefits and work at least 30 hours per week for employer-sponsored health insurance based on the [Affordable Care Act].” They estimate that stores can save roughly a quarter of the cost of the higher wages simply by getting out of contributing to these benefits . . .


Robert VerBruggen:

As I’ve pointed out before, Joe Biden’s promise not to raise taxes on “anyone” making less than $400,000 doesn’t square with his actual plans. For example, his big hike to corporate taxes would, in part, be borne by workers, as well as by investors whose earnings put them below the cutoff . . .

Sean-Michael Pigeon:

The ProPublica tax leaks have shaken up the business world and led to a flurry of cries to overhaul the tax system. Many have increased their calls for a wealth tax, arguing that billionaires can flaunt the rules ordinary Americans have to abide by. But people across the political spectrum should all be concerned by the rhetoric coming from the left. Recent events show some on the left won’t be satisfied until the entire billionaire class is eliminated.

Liberals have waged war on businessmen for decades, so the recent attacks on the wealthy are hardly surprising. In the past, liberals would point to individual instances of corporate greed running amok, or of corporations knowingly putting profits above all else. Inconveniently for those on the left, the leaked documents show that the billionaires in question followed the letter of the law. Unable to claim that their actions were illegal, left-wing rhetoric has changed. Thus, the system itself is now attacked as illegitimate, and abiding by the law is no defense for the crime of being too wealthy.

Two articles from the New York Times in the last week show just how profound this change is. First, a guest article published yesterday by Anand Giridharadas explicitly argues that there is no such thing as a “Good Billionaire.” Giridharadas specifically targets Warren Buffett, a generous philanthropist who plans to give away his fortune upon his death. Some might say that is noble and generous, an example of how social pressure and a desire for a legacy incentivize good behavior. For the Left, though, it’s just another example of privileged power . . .

Andrew Stuttaford:

However much some on the left might like to deny it, there is a legitimate distinction between capital appreciation and income. And however much some of them might understand it, ignoring the validity of that distinction is too good a propaganda opportunity to be passed up.

And so when ProPublica, “an independent, nonprofit newsroom that produces investigative journalism with moral force” “obtained” and then, in an article by Jesse Eisinger, Jeff Ernsthausen, and Paul Kiel, publicized some of the details of “a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing,” much of the secondhand reporting of their story, not to speak of the ProPublica article itself, followed an all too predictable script.

First, some background. Eisinger, Ernsthausen, and Kiel explain that the data, which consisted of “the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years” was handed over to ProPublica “in raw form, with no conditions or conclusions.” The information offers “an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.” Presumably it does (or could do) the same with respect to all the “thousands” who had their data pilfered . . .

Supply Chains

Dominic Pino:

The global shipping industry is still behind from the pandemic and likely will be for quite some time. Premack writes that when the pandemic started, shipping companies started canceling sailings. The massive cargo ships are only profitable when they’re pretty much completely full, so it’s better for the shipping companies to have fewer full ships than have more partially full ships.

Canceling a sailing has huge ramifications because, basically, boats are really slow. It takes about three weeks for a cargo ship to go from Los Angeles to Shanghai. If you have a cargo ship sitting in Los Angeles that’s scheduled for Shanghai and the shipping line decides to cancel the sailing, that stinks for people trying to ship things out of Los Angeles and for people trying to receive things in Shanghai. But it also stinks for people trying to ship things out of Shanghai because the people running the Shanghai port were planning on that boat being in Shanghai in three weeks. Now that it won’t be there, three weeks’ worth of containers are going to pile up on the docks at Shanghai. It’s fine, they can wait for the next one, you might think. It’s not that easy, though, because every boat is scheduled to be full, and there already are containers waiting on the dock scheduled for the next boat. The people running the port in Shanghai can try to find another boat to put it on, but the closest available boat might be a week away, and then that boat won’t be somewhere else it was expected to be, creating a new problem for the people expecting that boat three weeks in the future, on and on and on. At the start of the pandemic, shipping lines were canceling about 20 percent of their scheduled sailings, and we’re still feeling the reverberations from that . . .


Michael Lucci:

President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) into law on March 11, capping a year of unprecedented federal aid to families, firms, and state and local governments. Yet emerging evidence reveals the self-defeating nature of this costly federal overreach. Since ARPA was signed, jobs reports have fallen a combined 900,000 jobs short of economists’ expectations. Inflation is hitting levels not seen in a decade, eating away at Americans’ savings. And state and local governments are flush with excessive federal cash — even as the federal government piles up debt. States do not have to accept congressional overreach; they can take the lead in putting Americans back to work.

Employment trends vary widely across states, revealing the profound impact of state policies. For example, Idaho and Utah have already recovered the payrolls lost during the pandemic, and South Dakota is not far behind. States such as Texas, Tennessee, and Arizona imposed fewer economic restrictions during the pandemic, and they are just months away from a full jobs recovery. On the other hand, states such as Michigan, California, and New York imposed draconian economic measures, and they remain more than a year from recovering their pre-pandemic jobs counts.

Although economic lockdowns are largely in the rearview mirror, states have plenty of tools to improve local labor markets . . .

Sean-Michael Pigeon:

Last month’s jobs report missed expectations, even though the May projection had been lowered because of slow growth. Three million people have been unemployed for a year, and it’s unclear if the U.S. will meet the ambitious GDP projections estimated last year. Luckily, the media are here to tell us that everything is okay; in fact, high unemployment may be a good thing.

A CBS report covering the economic recovery is fascinatingly soft on the administration. It does virtually nothing to push back against the government’s own view of the numbers . . .


Jordan McGillis:

As representatives of the United States and Taiwan engage to reaffirm trade and investment ties this summer, liquefied natural gas (LNG) ought to be at the forefront of the conversation.

The U.S. has been the world’s largest producer of natural gas for a decade. In 2019 it accounted for 23 percent of global production, and in recent years it has become a major exporter of LNG for the first time. Taiwan, meanwhile, has a growing appetite for this resource and a goal to increase its use as a way to replace higher-emitting coal power.

To date, President Joe Biden has been reluctant to endorse new American fossil-energy enterprises, angling instead to soothe the concerns of the Democratic Party’s climate wing by stopping projects such as the Keystone XL oil-import pipeline and suspending oil and natural-gas leases on Alaska’s Arctic Coast.

But in the case of natural-gas exports to Taiwan, the administration would have the ability to tout potential emissions reductions. That’s because Taiwan, like the People’s Republic across the strait, is heavily reliant on coal-fired electricity generation . . .


Robert VerBruggen:

Politico has an update on the dealmaking process. There is an interesting dynamic at play.

Some Republicans hope that if they sign on to a deal, they can keep the price tag down. The deal would fund normal “hard” infrastructure such as highways, and would avoid raising taxes. This would leave only the trickier topics — things like clean energy and child care, funded by big tax hikes — for later. Democrats might have trouble cobbling together a unanimous vote in their caucus to pass what’s left of Biden’s plan.

Many Democrats, however, are expecting to pass a bipartisan bill and then pass a partisan one later (through the reconciliation process, which avoids a filibuster). For example, Bob Casey claims “we’re going to have to have an agreement among us that we do both.”

Obviously, Republican cooperation will be pointless if the Democrats proceed to enact through reconciliation everything the GOP rejected in the bipartisan deal. This will give the Democrats points for bipartisanship without forcing any actual compromise . . .

Robert VerBruggen:

Congress is currently working through an infrastructure debate. Some Republicans are trying to compromise to keep costs down — Biden initially wanted to blow more than $2 trillion, while the latest bipartisan plan would include only about $600 billion in new spending (plus more by repurposing COVID relief that hasn’t been spent yet). But Democrats are also preparing to go it alone, so they can enact a partisan bill through the filibuster-proof “reconciliation” process if the negotiations fail. Some Democrats hope they can ram through more spending this way even if the negotiations succeed.

The partisan plan they’re working on could cost . . . my God . . . $6 trillion, folks, as has now been confirmed by several media outlets. And Bernie Sanders wants to include an expansion of Medicare down to age 60! Oh no, Republicans had better give in or the spending is going to be enormous! . . .

The taxes would be big too. From Politico:

“According to a tentative plan, half of the proposed Democrats-only alternative would be paid for. About $2.5 trillion would go through the Finance Committee, $185 billion through the Energy Committee and almost $500 billion through the Environment and Public Works Committee, one source said, while emphasizing that the discussions are fluid. The dollar amount, however, is likely to shrink as moderates weigh in. At the moment, it appears impossible that all 50 Democrats would get on board with such a large figure. . . .

Sen. Mark Warner (D-Va.) laughed when asked if the $6 trillion number is too high. He said he was “open” to reconciliation but wants increases to the corporate income tax and capital gains to be more modest than as presented by Biden.”

Ahhhh, that’s right. Democrats have 50 votes in the Senate, not 70, and thus can’t actually pass off-the-charts insane spending measures that alienate every Democrat with even the slightest sense of fiscal restraint. I forgot.

Big Tech Regulation & Antitrust

Jessica Melugin:

A decade ago, when Google search was first accused of self-preferencing its own results, a colleague of mine created a meme with text over a photo of the Google homepage that read: “All Search Results Must Appear First.” Ten years later, it remains an absurd idea to stop the search giant from prioritizing its results. That, however, did not stop the State of Ohio from asking for just that in a suit filed earlier this week, seeking to regulate the company as if it were a common carrier. The civil complaint comes on the heels of prominent conservatives calling for common-carrier regulations for social-media platforms. Both proposals suffer from similar problems: private-property-rights violations, First Amendment constraints, and a real-world outcome that would leave consumers worse off.

In his filing, Ohio attorney general David Yost fretted about Google’s ability to favor search results that link to its other platforms, such as YouTube, Google Maps, or Google News. Yost writes that Google “has a duty not to artificially prioritize Google services and links higher than they would be displayed as a result of Google’s internet searches algorithms in which the algorithm is not programmed to prioritize Google’s own products and services.”

Contra Yost, Google has no such obligation. As the Ninth Circuit Court of Appeals has ruled, Google is not a public forum — it is a private company. As such, it has First Amendment rights to speak as it chooses — and search results, in addition to how they are displayed, qualify as protected speech . . .

Sean-Michael Pigeon:

President Biden’s newly confirmed commissioner of the Federal Trade Commission (FTC), Lina Khan, was promoted to chairwoman of the FTC today. This was somewhat surprising, and not just because Khan will be the youngest chair of the FTC ever. She is also a notable critic of tech monopolies. Her ascendancy signals a growing feeling on the left and the right that Big Tech corporations need to be restrained by the government. But before we herald a new era of trustbusting, we should be careful that the proposed solution isn’t worse than the actual problem.

Khan is well-regarded as a rising academic mind, already an associate professor of law at Columbia University, at just 32 years old. Her influential paper, “Amazon’s Antitrust Paradox,” argued that consumer prices alone were inadequate in assessing monopolistic practices. Josh Hawley, a Yale Law graduate like Khan, has made similar arguments, too. But there are two questions that Hawley and other antitrust conservatives should ask before celebrating Khan’s appointment.

The first is whether breaking up tech companies will actually help consumers. Khan and Hawley both seem to agree that Amazon, Facebook, and Microsoft are not overcharging customers. Google has yet to charge for search. While allegations of stifling innovation have sprung up, these charges continue to ring hollow. Every year, new phones roll out with more features, such as curved screens, HD video, 5G, etc.

While tech companies do purchase other fledgling companies, the successful ones integrate these new companies into a preexisting platform. This model works, and it is one the reasons the United States is a worldwide leader in technological innovation. It seems unlikely that getting the government will spur more growth . . .


Ryan Young:

Last week’s G-7 meetings provided an opportunity to resolve the growing international tensions over tariffs. Simply removing the tariffs enacted by and against the U.S. over the past five years would create thousands of jobs while lowering prices on hundreds of billions of dollars of goods. It would also go a long way toward easing other diplomatic tensions. Sadly, there is no guarantee that leaders will do the right thing.

Take, for example, the prospect of digital taxes that several European governments have advocated in recent months. The rationale, of course, is that they would be a favorable way to tax wealthy U.S.-based tech companies. The U.S. government is not happy about this and at the beginning of the month, threatened to raise tariffs against six countries if they do enact them. The Biden administration would be wise to drop this idea and, instead, remove existing tariffs that are already hurting Americans . . .

SBA — Same As it Ever Was

Veronique de Rugy:

Sadly, Ms. Harvey’s experience with the SBA’s disaster program is neither unique nor limited to this disaster. In fact, I think this is the flaw in this WSJ story, as it leaves readers with the impression that most of the problems with the agency’s response this time around were due to the remarkably high demand for help. Of course, the demand was enormous. But the truth is that SBA’s responses to disasters are always awful and terribly painful for those business owners who are trying to get help from the agency.

I wrote about how catastrophic previous SBA disaster responses were here and here, and so have others. I even warned last March that using the SBA to help small businesses during this pandemic would inevitably inflict a lot of headaches on these poor business owners. I also wrote about this for Reason last year, here, and highlighted examples of horror stories from the past that are eerily identical to the ones reported in the WSJ story.

This explains why I thought it was a mistake to give the agency this responsibility during the pandemic. It demonstrates either legislators’ inability to learn from the past or an incredible naïveté in thinking that it would be any better this time around. Either way, it is unacceptable.

The Fed

Alexander Salter and others wrote an open letter expressing concern about the direction that the Fed is taking:

The Fed’s behavior renders it increasingly sensitive to political interference. Partisan agendas have no place in determining the Fed’s policies. Yet this is precisely what the Fed’s current operations invite. We are beginning to see the signs of a politicized Fed, as it delves into areas such as environmental and social policy. These diversions weaken the Fed’s credibility and undermine its independence.

This is not a partisan issue. Our objections would be equally strong if the Fed involved itself in industrial policy or national security. All Americans benefit from a central bank devoted to effective monetary and regulatory policy. The Fed should refocus on its core missions.

Cryptocurrencies and Inflation

Christos Makridis and Raghav Warrier:

Another reason investors might flock to crypto is its finite supply. Unlike fiat currencies that are often influenced by central banks that can expand the money supply, a fixed supply can create more discipline in the market. Admittedly, there is a lot of debate in the popular press, but fundamentally many of these debates are philosophical, coming down to whether someone believes that a central bank that effectively prints more money actually brings more value into the economy.

As concern about inflation and “mission creep” begin to mount, investors will increasingly flock to cryptocurrencies. Time will tell how much of the surge in cryptocurrency activity is genuine versus just buzz and sentiment-driven, but already it is proving to be an oasis that is free from government intervention and manipulation by centralized authorities.

Finally, we produced the Capital Note, our “daily” (well, Tuesday–Friday, anyway). Topics covered included:  a corporate debt binge, a potential taper tantrum, the growth of collateralized-loan obligations, the rise of zombie corporations,  carbon taxes and democracy, Big Tech and Biden, lending as a (Chinese) strategic weapon, the “socially responsible” ecosystem and its parasites, corporatism, Western self-harm, the Fed’s surprising hawkishness, the FTC’s new trustbuster, the anti-Amazon industry, an evaluation of Congress’s recent antitrust proposals, weaponizing tax leaks, Olympic sponsorship (and its problems), the advertising that dreams are made of, Babe Ruth slices, capitalism, rope, and China.

To sign up for the Capital Letter, follow this link.