The ‘Stakeholder’ War on the Enlightenment

No one appreciates the power of capitalism more than its greatest rival, Karl Marx. According to Marx, born of the Enlightenment, embodied in the Industrial Revolution, capitalism “has achieved feats far beyond the Egyptian pyramids, Roman bridges, and Gothic cathedrals. . . achieved more massive and colossal productive forces than all previous generations together “in the “hundred years of scarcity”.

Based on the erroneous view that all value comes from labor, Marx argued that financiers, entrepreneurs, and managers are claimants of non-distributive property rights based on the fruits of workers’ labor. and that government can replace them and then “swallow” as growth occurs spontaneously. Most later collectivists claim the same thing. In this utopian condition, workers will then receive all the values ​​created in society.

Government can never replicate the efficiency and innovation of private finance, entrepreneurs and regulators, and free and prosperous government, not government, always withers. But because of the misery that Marxism has imposed, the world has a vivid memory and therefore some natural immunity to a system in which government holds the commanding heights of the economy. economic.

No such immunity existed for the older and therefore more dangerous socialism of the pre-Enlightenment world. In the common world of the Dark Ages, workers gained allegiance to crowns, churches, guilds, and villages. Those “stakeholders” have extracted a part of the product from the worker’s sweat and tears and his savings. Growth stagnated as rewards for effort and savings were eliminated.

The 18th century Enlightenment liberated minds, souls, and possessions, empowered people to think on their own, and finally have a say in their government, worshiping as they were. choose and own the fruits of their own labor and savings. As the Enlightenment economist Adam Smith said, “property which every man acquires by his own labor, for it is the foundation of all property, and is therefore the most sacred and impregnable.”

The British Parliament abolished the royal charter, allowed businesses to be established simply by meeting set capital requirements, and established the rules of law governing private competition. Most importantly, legislation is introduced through a process of public discussion with a vote of the public. This democratic process replaced the threat of medieval stakeholders who followed the public concept of labor and inherently took part of what others produced.

These Enlightenment ideas gave birth to the Industrial Revolution and gave birth to the modern world, as Marx describes it. When people seek their own advancement under a system of private property and the rule of law, as if guided by Adam Smith’s “invisible hand,” they advance the public good without intent. or don’t know about it. Freedom and self-interest unleashed the world’s greatest productive endeavor and continue to drive progress to this day.

The pre-Enlightenment world was dominated by powerful people who determined the public good to benefit themselves and imposed their will on productive members of society. When labor and capital are forced to share what they produce with stakeholders, the rewards for working and saving are robbed.

In the post-Enlightenment world, people were empowered to pursue their own interests. Private interest and the free market have accomplished what no benevolent king redistributes, without the charity of a loving bishop, without mercantile protectionism, and without opportunity. no power group ever did – bring about vast, unceasing prosperity.

Notably, between the documented successes of capitalism and the failures of socialism rooted in Marxism, pre-enlightenment socialism is reemerged in the name of capitalism. by stakeholders. These stakeholders argue that “you didn’t build your business” and that your labor and savings should serve their definition of the public good.

The original target of this extortion was the American company. Stakeholders argue that the wealthy capitalists who own large businesses have gotten more than they deserved. But since about 70% of a company’s revenue comes from labor, the biggest losers in stakeholder capitalism are workers, who will suffer wage erosion. And of course, the idea that wealthy capitalists own corporate America is largely a progressive myth. About 72% of the value of publicly traded companies in the US is owned by pensions, 401(k)s, individual retirement accounts, charities, and insurance companies that fund the life insurance policies and annuities. The majority of involuntary shareholders in stakeholder capitalism will be workers and retirees.

The mantra that private wealth must serve the public good was fueled by one of capitalism’s great innovations, the index fund. What investors gained from the efficiency of the index fund’s low fees, they are losing now as index funds use the extraordinary voting rights they own to vote on other people’s shares. Whether their motives are to promote the marketing of their index funds, to do “good” with other people’s money, or, as Warren Buffett’s longtime partner Charlie Munger has stated, to play the role of “king” emperor”, they have empowered the environmental, social and governance (ESG) agenda. Other stakeholders will certainly participate, as evidenced by Sens. Bernie Sanders and Elizabeth Warren have worked to get BlackRock to use their equity voting rights to pressure a private company into giving in to union demands.

Stakeholder capitalism not only demands prosperity, it also affects democracy. Self-proclaimed stakeholders require workers and investors to serve their interests even though no legislation has been enacted applying the ESG agenda.

Trust law requires trustees of an investor’s money to use it “only for the benefit of the . . . for the sole purpose of providing benefits to “investors. Index funds that allow stakeholders to intimidate the public assembly are in violation of federal fiduciary requirements, and stakeholder capitalism enforcement government agencies are engaging in a criminal act. unconstitutional under the Fifth Amendment to the Constitution.

In our post-Enlightenment world, public interest beyond the combination of private interests is determined by the public actions of a constitutionally bound government. By overturning the Enlightenment, stakeholder capitalism not only jeopardizes capitalism and prosperity, but also jeopardizes democracy and freedom.

Mr. Gramm is a former chairman of the Senate Banking Committee and a nonresident senior fellow at the American Enterprise Institute. Mr. Solon is a partner at US Policy Metrics.

The Editorial Review: Best and Worst of the Week from Kim Strassel, Mary O’Grady and Dan Henninger. Image: Getty Images Synthesis: Mark Kelly

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