Many observers of corporate America over the last several years have been surprised, confused, and chagrined to discover that CEOs and senior managers these days seem to be paying more attention to social activism than profit and loss. Big players in the business world are apparently determined to discard the longtime stereotype of corporate managers as greedy, boring bean-counters in suits and ties. They want to be perceived as cool, forward-looking, and generous. The only problem, author Vivek Ramaswamy argues, is that they want to do it with your money.

Ramaswamy is not new to the debate over the role of corporate governance in American society—one of his previous books, Woke, Inc.: Inside Corporate America’s Social Justice Scam, was on a similar topic. He also left a successful start-up business in the biotech industry to found his own anti-woke finance firm, Strive Asset Management, to take on the problems he had diagnosed with finance and investing in the twenty-first century. His latest book, Capitalist Punishment, is an updated and expanded version of the argument he’s been making against politicized investing for the last few years.

Ramaswamy begins by describing what he sees as the biggest current threat to the market economy: the theory most often referred to as environmental, social, and governance (ESG) investing. This is the idea that corporations should not operate solely to make money for their shareholders, but also to advance the interests of multiple stakeholder groups, some of them internal to the firm (like employees), or with a direct relationship to the firm (like suppliers and customers), but also others with far more vague connections and definitions like “the global environment” or “society at large.”

The fact that ESG definers and defenders often mention society in general as a group to benefit is key to Ramaswamy’s invocation of the World Economic Forum (WEF) and its chairman, longtime conservative boogeyman Klaus Schwab. The WEF and its annual convention in Davos, Switzerland have been the object of much previous criticism, some of it sober and reasonable and some conspiratorial nonsense. Fortunately, Ramaswamy skips the lizard people and Illuminati claims and focuses on the real problem with Schwabian economics: its corporatist emphasis on social control of business.

As a post-World War II German economist, it should not be surprising that Schwab (and eventually, his many acolytes in the Davos network) followed the German model of social organization and “economic democracy” that West Germany became famous for after the war. From this perspective, free-market capitalism is to be shunned in favor of a complex set of interlocking institutions, directed by the state, which governs production, distribution, labor supply, and provision of social welfare. In this view, all businesses need to coordinate their operations to be in harmony with some larger plan for social cohesion and flourishing. If every major institution needs to contribute to such a plan, there can be no room for the individualistic cowboy capitalism championed by, say, libertarian radicals like Milton Friedman. Corporate managers need to manage their firms with broader societal goals in mind. The only question is: who decides what those goals are going to be?   

So, while the debate over ESG can often get bogged down into fights over sub-topics like climate change, diversity hiring mandates, or corporate activism on transgender bathroom accommodations, Ramaswamy correctly defines it as an effort to sublimate our natural speech, property, and association rights to the rule of a political elite, whether they are elected members of our own government, appointed delegates to international bodies like the United Nations, or CEOs who have committed to work with government planners in advancing supposedly enlightened social policies. As Stand Together’s Russ Greene has pointed out, unlike some previous efforts aimed at promoting business ethics, ESG was born in the cradle of international elite policymaking: a 2004 conference co-hosted by the UN, the Swiss government, and a conference room full of major bank representatives. This is why an ESG framework is a threat to freedom—not just because it’s currently pushing public policy in the wrong direction, but because a corporatist model of governance is antithetical to our rights and the constitutional order.

Fortune 500 CEOs, of course, are not known for their meek, mild, and deferential natures. What do they get out of the deal? Ramaswamy does a good job pointing out that there are plenty of upsides for the average titan of Wall Street in the world of ESG. Improved status with their elite friends for one, along with approval from the world of pundits and policymakers—the same people who normally spend their time castigating prominent figures in corporate life for being greed-obsessed sociopaths. An ESG focus is also great for anyone whose firm isn’t doing so great financially. What you lose in quarterly profits you can often make up for in public opinion by announcing a new socially enlightened corporate initiative. Competing in a free market is hard—virtue signaling is easy.

And that’s just considering a single CEO in isolation. Now that the ESG trend has reached saturation level in corporate America, managers have to exist in a dynamic equilibrium. Like Alice in Wonderland’s Red Queen, many feel they have to run just to stay in place, adopting policies and public positions they don’t really believe in just so that they don’t start to look like the worst performers in their industry. Lastly, there are the subsidies, incentives, and tax breaks to be had from government for acting in woke-adjacent ways. Why waste your time producing reliable baseload energy at a low margin like a sucker when there are hundreds of billions of dollars in taxpayer pork waiting to be gobbled up by anyone ready to produce green “cleantech” products?

So, the corporate decision-makers—who were once the most feared bad guys of left-wing discourse—have either sold out or been bought off by the ESG revolution. That empowers progressive policymakers, who have already decided for us that fossil fuels are too dirty, that merit-based colorblind hiring is secretly racist, and that there is an endless list of externalities and previously hidden social costs that have to be “corrected for” by their professional-managerial brethren. The impact of those verdicts on say, Dutch farmers who stand to be regulated out of existence for conflicting with this vision, are judged to be acceptable casualties. This is what Ramaswamy means when he talks about ESG and the WEF’s much-vaunted “Great Reset” agenda being a threat. At one point, he simply says, “People in democratic nations don’t like it.” Indeed, it’s becoming increasingly clear that they do not. 

So, what is to be done? The first step, of course, is simply realizing what is happening. Despite being first coined in 2004 and circulating in elite circles since then, most people still only have a hazy idea if anything, of what ESG stands for. In a May 2023 survey, Gallup reported that even after hearing a pollster read a brief description, over 60% of Americans said they were “not too familiar” or “not familiar at all” with the term, with only 11% responding that they were “very familiar.” When asked their opinion of ESG, 59% said they were unsure, with the rest almost even split between positive and negative impressions.

Even that is, however, an increase from a few years before. Politically, the saliency of ESG investing and the international efforts to resist it have risen dramatically. There is now a growing list of states that have passed anti-ESG laws, such as requiring state pension fund managers to focus only on maximizing returns rather than attempting to influence non-financial social and environmental factors. The House Financial Services Committee has created its own ESG Working Group to address the trend, and the Securities and Exchange Commission received a huge volume of critical comments on its major ESG initiative of the last two years, its proposed climate disclosure rule for public companies.

Ramaswamy, of course, also advises people to patronize financial institutions like his own company, Strive, to incentivize asset managers away from an ESG focus. It remains to be seen how excited individual retail investors will be to move their retirement nest eggs away from longtime ESG promoter BlackRock, for example. It seems unlikely that ESG can be defeated by a grassroots revolution among small savers—since it was created and sustained up until now almost entirely without their knowledge—much less support. In terms of there being safety in numbers, however, he does advise all of the state-level pension fund and finance managers in Republican-majority states to band together and make their demands as a bloc, in hopes of countering the political influence of the big pro-ESG blue state pensions funds in places like California and New York.  

Overall, Ramaswamy presents a lucid and reasonable argument for why we should be doing everything we can to disentangle market institutions from the tentacles of corporatist social planning. He is also much more restrained when it comes to recommending new government action against his adversaries than he was in his previous book, which suggested expanding civil rights law and litigation in novel ways against “woke” employers. If Ramaswamy is correct, we may just be able to pull corporate America back to neutral.