The industrial revolution brought us our current model for capitalism, and it has served us relatively well for over a century. Yes, the system has had its flaws, yet somehow we have always managed to recover.
But the parameters have changed for the 21st century. From Reagonomics through to the Bush era we’ve received a near lethal dose of the worst aspects of capitalism. The current level of corporate power would make even robber barons jealous. And finally America has woken up to this. Between the Occupy movement and the recent elections, the rumblings towards fixing a broken model have grown louder and gone more mainstream.
The problem with capitalism as it now stands is that large multinationals have a disproportionate influence on politics, media, the economy, the environment, and the middle class. These corporations have slanted the tax, anti-trust, and environmental laws further in their favor with lobbyists. Corporate profits are through the roof, yet CEO’s salaries have gone even more stratospheric because taxpayers have had to shoulder the external costs of these behemoths. We pay the healthcare costs for those stricken by their pollution, or in the case of oil companies, the cost of our military’s protection of American tankers in the Middle East.
Add to this picture the fact that many board members receive most of their compensation as stock options, which under current law are only taxed at 15% as capital gains rather than 39.6% as regular earnings. The end result is that we’ve created a class of super-rich where the top 1% in America hold 65% of all wealth.
Throughout time, massive income disparity between the haves and have-nots has been at the core of how civilizations collapse. Our current corporatist tendencies push us towards that brink; it’s a downward spiral that is hard to break.
This is how runaway capitalism can be our downfall, and it’s a hard rut to crawl out of. Since a corporation’s key goal is to maximize profits, CEOs and board members have a fiduciary responsibility to game the system via these aforementioned lobbyists. Wolves in multiple henhouses are part of the multinational business model.
But what if we find a way to use the forces of each CEO’s own greed to help benefit society rather than leech from it? What if tax rates vary dramatically dependent on how well a corporation treats its employees, its physical neighbors, the environment, and society as a whole through the quality of its products or services?
Sounds good, you may be thinking. But how do we get there?
Let’s look at my idea of socio-capitalism and see if perhaps this might be a viable path. The first part is to remake the tax code so that companies that have the most benevolent "social footprint" can get their tax rates down to 14%, while those that retain business as usual have their taxes max out at 38%. What determines which end of the spectrum they fall on is the SPI, the Society Partner Index, which attempts to quantify and balance out the factors that lead to a corporation being a force for good not a force for greed. No businesses with an annual gross of less than $400 million are subject to these rules, so for mid-sized businesses nothing changes. They might, however, see the benefits of doing so anyway.
The parameters that lead to a high SPI score are:
fair wages for workers, middle management
good working conditions in the US and in overseas manufacturing plants
worker retention, percentage of employees with benefits
declining percentage of manufacturing jobs overseas
business practices in regards to fair competition
ecological footprint
footprint of their physical home office on their community
track record of the quality of their product or services
integrity and honesty in advertising
These parameters will be weighted in importance as well as over time.
Bonus points are given for:
high quality day care
job sharing without reductions in benefits for either party
moving manufacturing jobs back to the US
long tenure for middle management
charitable aid in their home office community
paying some or all taxes that were avoided through offshore tax havens
Points are taken away for:
lobbying history if they have achieved a tax or monopoly advantage through corruption
superPAC contribution history with greater weight given the more deceptive the messaging used
dodging taxes through offshore tax havens
records of discrimination and/or sexual abuse
buying off and burying competing technologies
Bear in mind that all these parameters are not only judged in current time for a corporation, but also in their business practices throughout the decades. But a corporation’s dark past has a half-life. If the CEO and all board members get the boot, part of a company’s legacy can be excluded from the SPI right away. Over time less and less of its malevolent past will drag down the numbers as new evidence of change is realized. In this format the slate can be wiped clean in a linear fashion over four years -- but no sooner. The ticking clock will provide additional incentive.
Still, a CEO may just decide that it’s not worth the effort to make America a better place. His company will make less money, but he’ll keep on doing just fine. This is where his greed comes into play, though: corporate charters will be rewritten so the company’s SPI and the maximum CEO pay are directly proportional. This is the second aspect of the socio-capitalism plan, conceived to provide more teeth. A low SPI will cost a CEO greatly.
Here is the tax and compensation index. If a corporation has an SPI among the bottom 40% within their industry, the corporation pays a 38% tax rate and the CEO's salary is capped at $8 million. From that level to the top 30%, a corporation’s tax rate is 32% and CEO salary is capped at $14 million. From the top 30 to the top 10%, the tax rate is 27% and the CEO maxes out at $20 million. If their SPI is within that top ten percent, their tax rate is 22% and CEO pay can reach a max of $28 million. And if they have the best SPI within their industry, their tax rate is 14%, and the CEO salary can max out at $40 million. It's harnessing greed for good.
These are the tools to create a world that will aggressively take on global climate change, bolster the middle class, and make US products the best in the world. It all comes from using greed to push America’s corporations towards a race to the top instead of a race to the bottom. And being that their competitive practices will be under scrutiny with financial ramifications, small and mid-range businesses will be able to thrive, eroding inherent monopolies. Families will see a more secure future, and overseas America will again embody a society to be admired.
Now there is a lot that will need to be fleshed out, and opposition to overcome, in realizing this vision. It will take a Democratically controlled House to start the wheels in motion, and that can only happen if elections are fair and transparent. To achieve that, corporate money, now considered a protected form of free speech by the Supreme Court with their Citizens United decision, must no longer be allowed to circumvent the democratic process. In last year’s elections, some Democratic candidates were outspent eight-to-one or worse, due to superPAC corporate soft money. In the presidential election, the total that the billionaire Koch brothers spent in support of Mitt Romney exceeded the total spent on the entire John McCain campaign four years earlier.
The overturning of the Citizens United can be done through a Constitutional amendment, and Move to Amend has already proposed one that is part of the House record. And support for that cause can and will grow quickly, perhaps exponentially. Libertarians and most independents may find themselves aligning with progressives in ending the stain on democracy that unbridled corporate spending brings.
And perhaps that spigot may soon be turned off anyway for the GOP if it becomes clear that they are destined for obscurity. As it stands now, the Republican party will eventually run out of corners to paint themselves into thanks to their absurd policies on women’s issues, immigration, climate change, tax loopholes, marriage equality, education, oil subsidies, privatization, and social programs.
There will be many hoops to jump over before the option of socio-capitalism is even possible. But let’s start the dialog and the planning now, because this end game might be what today’s college kids eventually see as the path to maximizing the implementation of their dreams.