Rubio's Soft Corporatism Won't Help Workers

“Fascist.” “Market fundamentalist.” Those are just two of the epithets exchanged in the debate that exploded on the right following Senator Marco Rubio’s November 5 speech at the Catholic University of America’s Busch School of Business.

Based on my reading of his text, I don’t think that Senator Rubio’s “common good capitalism” amounts to peddling fascist economics à la Mussolini’s Italy. In fact, he spoke some important truths. His naming of China as a country bent on challenging the United States and seeking to reshape the global order in its own image was spot-on. While I’m very much a free trader, I’ve never had much patience with the argument that free trade necessarily brings about peace and harmony between nations. Nor, incidentally, did Adam Smith. I’m inclined to think that America should treat China like the crony-Communist, authoritarian, neo-mercantilist and, as Adam J. Macleod recently illustrated, lawless state which it is.

That said, I have considerable reservations about Rubio’s diagnosis of America’s economic problems. Many of the proposed solutions he advances under the rubric of common good capitalism also have significant flaws that need highlighting.

The economy doesn’t explain everything

It’s remarkable just how much Rubio attributes America’s social problems to the economy. At times, he sounds positively economistic. Rubio draws a straight line, for instance, between economic globalization’s disruptive effects and the breakdown of family life and community throughout much of America. “[W]hen an economy stops providing dignified work for millions of people,” he argues, “families and communities begin to erode.”

The cause and effect logic utilized here is very questionable. Economic transitions—whether from agricultural to industrial economies, or industrial to service economics—always upset existing social patterns and expectations. While everyone generally “wins” over time from these transitions in terms of higher living standards, some people “lose” in the short-term insofar as there is less availability of particular types of jobs. The adjustments are not always easy.

But are we to conclude that such transitions and their effects on America’s labor market are responsible for a “decline in marriage, child-birth, and life expectancy” and an “increase in drug dependency, suicides, and other deaths of despair,” to cite Rubio. High unemployment certainly has negative effects on families and communities. Yet high unemployment levels aren’t the norm in postwar America. Unemployment in America has averaged 5.74 percent from 1948 until today. That suggests other factors have been at work for a long time.

Could it be that some of the social problems identified by Rubio owe far more to, for instance, the Sexual Revolution of the 1960s that downgraded marriage and family in favor of relentless self-expression? Isn’t some of the social dysfunctionality characterizing parts of America’s population partly attributable to grand political experiments like Lyndon Johnson’s Not-So-Great Society, the socially disastrous effects of which have recently been well chronicled by the historian Amity Shlaes?

And what about the impact of weakening religious affiliation upon communities? Once upon a time, religious organizations were core to America’s particular experience of solidarity. That is less true today. I doubt this has much to do with changes to the employment mix. It surely owes more to 1) a dearth of serious apologetics, 2) the endless sexual and financial scandals which have stripped America’s religious leaders of any claim to moral authority, and 3) the decision of many clergy formed in the 1960s and 1970s to immerse themselves in political activism instead of the much-harder, less-glamorous work of encouraging individuals to embrace the virtues central to the good life but which also help prevent free societies from collapsing into mere license.

A touch of soft corporatism

Religion features significantly in Rubio’s address, not least because he draws explicitly on Catholic social teaching. This has always underscored work as a medium for understanding relationships between entrepreneurs, investors, owners, managers, and employees. You find similar emphases in various schools of Protestant social thought. Judaism’s unique stress upon the importance of work hardly needs restating.

That focus on work, however, has been cashed out in a variety of economic proposals by religiously-informed citizens. Much of the content of Rubio’s speech reminded me of what’s called “corporatism:” specifically, the soft version which helped shape postwar Western European Christian Democracy.

Corporatism draws upon sources ranging from Hegel to the French sociologist Emile Durkheim. Corporatist thinkers have included socialists, Christians, nationalists, modern liberals, progressives, and fascists. Though the details vary, corporatist economic programs are broadly underpinned by the following claims:

  1. Private enterprise and the market economy are essential for economic growth. They promote, however, excessive wealth-disparities, undermine community, and facilitate social instability. In short, they weaken solidarity.
  2. Private property and free exchange must be imbedded in legal and political frameworks that foster mutual assistance throughout society.
  3. Each industry should have organizations that embrace all the businesses and employees who work in that economic sector. These should help decide wages and conditions, and help give employees a voice in management.
  4. The investment choices of businesses should be subject to a high degree of coordination by state agencies, directly (such as through subsidies) and indirectly (like preferential tax treatment).

This model’s influence upon Western Europe’s economies cannot be underestimated. It also closely parallels what Senator Elizabeth Warren is proposing for much of America’s economy. Senator Rubio doesn’t go all the way down that path. Yet his common good capitalism does track claims 1, 2, and 4. He refers, for instance, to businesses being required to “reinvest enough of those profits to create dignified work for Americans.” Rubio also argues that “tax preference should be for the use of corporate profits that further the common good by creating new jobs or higher wages.”

Unfortunately, the type of soft corporatist policies which Rubio is advocating have very negative side-effects. They undermine, for instance, the ability of businesses to redeploy capital in ways which allow them to maintain and increase their effectiveness and efficiency in competitive markets. Failure to do so in often rapidly changing circumstances can mean the difference between life and death for a business.

A company may wish to reinvest most of its profits in new technologies in order to stay competitive. Over time, this may mean that it provides fewer but also different and less-physically strenuous types of jobs. If, however, the business is constrained from making such investment decisions by mandated requirements to devote, say, 30 per cent of profits to providing new jobs and higher wages, that will undermine its flexibility and diminish its technological prowess, thereby increasing the odds of the company—and the jobs it provides—disappearing altogether.

Beware the experts

One of soft corporatism’s underlying assumptions is that government officials and technical experts should play a major role in shaping the economy. Senator Rubio is no socialist. He does believe, however, that circumstances require the federal government to assume more directive roles in America’s economy. Rubio wants, for instance, “to reform the Small Business Administration, so that it channels finance into small business manufacturers instead of lifeless corporate conglomerates.” “A revamped SBA,” he says, “will drive the success of innovative, high-growth small businesses in advanced manufacturing.”

America’s already doing quite well in the realm of advanced manufacturing. But that has relatively little to do with federal funding and everything to do with the fact that America enjoys a competitive advantage in this area. What drives the success of sophisticated manufacturing in America isn’t taxpayer dollars. Rather it is the fact that (1) advanced technological capabilities plus (2) entrepreneurs, private investors, managers, and employees who take risks, work hard, and adapt in the face of competitive pressures, enable American businesses to provide advanced manufacturing goods to consumers in America and elsewhere in more comparatively efficient ways than anyone else.

More generally, Rubio is putting a lot of faith in the ability of government officials and specialists to determine correctly which small businesses receive state funding and which don’t. The track record of governments at picking winners is, at best, very mixed. That’s not to say that private investors always make the right choices. But unlike government officials, they’re taking risks with their own resources and credit and consequently pay a price if the investment goes south. Experts at the SBA just move onto another project.

Indeed, there’s good reason to believe that the specialists who staff ostensibly business-friendly government departments not only get things more wrong than right, but also suffer from a significant degree of hubris. Those inclined to imagine that experts working in a substantially-reformed SBA could achieve much good should take the time to read a recent article by the lawyer Helen Dale. She systematically lays out the case, backed up by copious evidence, for why we should be extremely wary of ceding much control of government policy, economic or otherwise, to such individuals.

The common good matters

Much of Senator Rubio’s speech was surely crafted with an eye to the 2024 presidential election. I don’t begrudge the Senator that. It’s part of political life in a constitutional republic with a significant democratic element. Nor, to my mind, is Rubio’s invoking of the language of common good problematic. It’s a term with deep roots in the Greek, Roman, Jewish, and Christian thought which helped create the Western civilization of which America is part.

Classically-defined, a country’s common good embraces all those conditions that help its citizens make free choices for the good and pursue happiness. Some of those conditions fall within government’s direct remit (rule of law, national security, the police function, etc.), but most don’t. Politicians like Senator Rubio do nevertheless have a particular responsibility to think and speak about America’s common good. At some level, Rubio’s speech sought to encourage debate about the economic component of that common good. In that regard, he certainly succeeded.

Though I regard his analysis and policy proposals to be mistaken in important ways, I hope that Senator Rubio continues giving public addresses about America’s economic challenges. For we need prominent public figures to address some of the genuine economic problems facing America: the rampant cronyism that’s disfiguring our economy and corrupting our politics; the woke capitalism which is poisoning corporate America; our shamefully high levels of public debt; and the related problem of unsustainable entitlement-spending—to name just a few.

Naturally, any legislator who chooses to speak regularly and candidly about these issues can expect to pay a political price. The cronies who live at the crossroads of politics, lobbying, and business in places like Washington D.C., for example, don’t like being reminded that they live at everyone else’s expense. Woke capitalists will resent being told that they’re long on political correctness and short on basic philosophical coherence. But drawing attention to these problems is surely worthy of any politician who purports to take America’s common good seriously.