A few recent news stories have a commonality that may not be immediately apparent. What thread connects Obama’s fiduciary rule, workplace safety, and Donald Trump’s friend Thomas Barrack? They’re all examples of how the moral justification of capitalism has failed to live up to its promise.
Despite challenges from House Republicans, a rule crafted by the Obama administration went into partial effect earlier this month. The fiduciary rule legally obligates your financial advisers (such as brokers or insurance agents) to put your best interest first in many (but not all) cases. Previously, advisers were held to a lower standard, requiring them only to offer “suitable” advice to their clients. For example, if you are faced with multiple choices and some of them would benefit your adviser more than others, now he or she must focus on the choices that are best for you, the customer, rather than the choice that might yield a higher fee or bigger commission for the business.
One could be forgiven for expecting a fiduciary to already provide the best possible advice for their customers, but the necessity to make this a law instead of just a good idea reveals the regularity with which this did not naturally happen. After all, the moral justification of capitalism and the free market involves the belief that businesses can only prosper by properly serving their clientele and coming up with quality products, lest the paying customers choose some other provider to fill their needs. In reality, not everybody is willing or able to do the level of research this requires in order to make the best choices from multiple competing offers, especially when businesses are less than forthcoming about the weaknesses or hidden costs in their products. Perhaps ironically, this is why many people employ advisers in the first place.
The next story involves government action to shore up worker protections. Bills sponsored by Senators Al Franken (D-MN) and Patty Murray (D-WA) take aim at Republican-led rollbacks. Under Franken’s bill, federal, state, and municipal workers would be covered by federal safety protections, and companies that are repeatedly cited for “high gravity violations” would face criminal charges instead of simply misdemeanors. Murray’s bill would require employers to record injuries, illnesses and deaths in a timely fashion, a rule that Trump overturned in April.
Amazingly, part of the moral justification of capitalism is the idea that free market, capitalistic competition makes workers safer. Supposedly, businesses have a lot to lose if they are dangerous workplaces or produce unsafe products. In a perfect world, the profit motive would encourage companies to invest in worker safety in order to reap a greater reward later. Unfortunately, we don’t live in a perfect world, which is why the “government nanny” has to step in and force better conditions when cost-cutting businesses can’t be trusted to do so. Indeed, the profit motive often incentivises externalities and the cutting of corners.
Capitalists can’t even be trusted to prefer an economy that serves working class interests. Remember the Great Recession, when a foreclosure crisis threw people out of their homes? The lingering effects of the worst economic downturn since the Depression arguably spawned the populist movement that put Trump in office. It also made life very comfortable for Trump’s friend and supporter Thomas Barrack. As families were being tossed onto the street, Barrack was busy buying up foreclosed homes at fire sale prices. He then turned around and rented them out for thousands without doing much maintenance at all on the houses themselves, and evicting tenants over tiny debts.
Apologists offer up yet another moral justification of capitalism, saying that it creates the rising tide that lifts all boats. Releasing the self-interested to pursue their goals supposedly prospers society as a whole, as the pursuit of wealth requires somehow convincing others to part with their money in exchange for whatever better prize the capitalist offers. However, public and private interests are not necessarily aligned; in fact, they are often at odds. Capitalists may well find it suits their wealth-accumulation agenda to encourage indebtedness in the lower classes and favor policies that trigger a recession. Desperate people with debts to pay will sell their assets at low prices. When the economy recovers, the wealthy are richer and the rest have lost so much.
Sadly, one more common thread weaves through these stories. Republicans fight to allow financial dealings that are not in the best interest of consumers. Republicans fight to roll back worker safety protections for employees. Slumlords with enough tainted money from the last recession invest in the political party likeliest to torpedo the economy again. Why is it that those who most loudly shout about the moral justification of capitalism seem to be the ones giving capitalism its bad name?