How Capitalism Is Coping in an Era of Populism

Recent years have seen a marked rise of populism, as leaders like President Trump tapped into fury over growing chasms in society to assume power and reshape American institutions. Even President-elect Joseph R. Biden Jr., an embodiment of the Washington establishment for decades, has embraced populist elements in his platform. (Core to his “Build Back Better” plan is “Buy American,” after all.)

As Heidi Heitkamp, the former Democratic senator from North Dakota, put it, people increasingly ask of government and business leaders, “What the heck are those guys doing for me?” The answer, as they see it: “It seems like they are really focused on themselves.” That attitude, and the ire it stokes, has put ever more pressure on fundamental systems like capitalism and democracy, with the potential to reshape society in countless ways.

As part of the DealBook D.C. Policy Project, in early December The New York Times gathered a virtual panel of executives, academics and policymakers like Ms. Heitkamp — “people who to much of the outside world can be defined as belonging to the elite of American society,” said the moderator, The Times Opinion columnist Bret Stephens — to discuss what leaders could do to answer and counter that outrage, or risk it burning even hotter.

The participants:

The loss of faith in traditional institutions is growing.

Richard Edelman, whose firm’s “trust barometer” has measured the reputations of institutions for two decades, noted that trust in top-level institutions has waned significantly in recent years. No longer do people rely on pronouncements “conveyed in a Moses-like manner” from on high, he said.

Both government and business have fallen short in building trust, the panelists agreed. When the topic came to corporate America’s embrace of “stakeholder capitalism,” which powerful business groups like the Business Roundtable have welcomed, Kevin Sharer — a former member of the group when he ran Amgen — expressed skepticism. “I don’t make much of the manifesto,” he told the panel. “It was a nice press release. Will anything change? I don’t think so.” Linking executives’ pay packages to elements associated with stakeholder pledges would be more effective, he said.

We’ve seen this before: Panelists put the forces fueling populism in perspective.

Mr. Stephens noted that there had been tectonic shifts in industry before, including the 19th century rise of the industrial and financial economies, which resulted in the populist backlash led by William Jennings Bryan.

We are capable of managing this transition, Veronique de Rugy of George Mason said, but the problem is that we are in the middle of that shift, with little visibility into the endpoint:

“It’s going to be very disruptive, especially because we are in a period that is not unique, that we’ve seen before. Old institutions are being swept away, and we have not yet replaced them with new institutions. This is traumatic.”

Amid the inequality exacerbated by the pandemic, Ms. Heitkamp noted that Congress had yet to agree on a new round of economic stimulus, further eroding the trust and support that the public had in existing institutions:

“By not delivering a package right now when people are literally lined up for food, can you disagree with that attitude? Can you disagree that it’s not an incredibly valid point when you look at Wall Street thriving and the richest people in America doing very well during the pandemic, and the rest of America is struggling?”

She added, “This rightfully is judged by many people as a failed system.” (Since the panel was convened, Congress has been negotiating a new aid package, but a breakthrough remains elusive.)

The panel proposed a number of areas worth focusing on. Common points of agreement were on allocating capital more broadly, making education more affordable and investing in job-retraining programs.

Steve Case, the former head of AOL whose investment firm focuses on investing in start-ups between the coasts, said that the flood of money pouring into Silicon Valley and New York — with little left for firms based elsewhere — had upset Americans across the country:

“The only way to change the landscape is to level the playing field, so capital spreads more broadly, start-ups are created more broadly, jobs are created more broadly and you really kind of level the playing field. Otherwise this divide, this mistrust and anger is going to just grow.”

To Danielle Allen of Harvard, the gap between the financial aid possibilities at money-starved public universities and top private universities has been particularly hard on the middle class:

“It’s been very good for the folks at the bottom of the socioeconomic spectrum and tolerable for people at the top end, and people in the middle have been impossibly squeezed. So in that regard, I think there’s an important need to rebuild the strength of public universities, the state flagship universities, to take some of the pressure off an expectation that the elites are carrying the load.”

Another problem is the disappearance of many traditional middle-class jobs. Mr. Edelman singled out the financial services and retail sectors. “Twenty-five thousand stores are going to close this year in the United States, and it’s going to be worse next year,” he said. “And similarly, in financial services, branch banks are going to be toast. We don’t need so many.”

That makes programs to give workers new skills all the more necessary, Mr. Edelman added: “If we don’t handle this retraining thing right, we’re having another populism revolution.”

But James Tisch, whose family’s hotel company employs more than 18,000, warned of a potential problem: overtraining and onerous job-licensing requirements: “In order to get a job to cut hair in New York State, you have to do either a thousand or 1,500 hours of class, class work, and it’s just absolutely, absolutely crazy,” he said. “Give people adequate training, but don’t make them take six months or nine months off to learn what we all would agree to be generally simple professions to learn.”

Government has a big role to play, for better or worse.

Mr. Tisch’s warning about onerous government requirements echoed an idea that ran throughout the debate: the role that policymakers play in addressing the roots of populist anger. Mr. Sharer warned that government needed to play a specific — but limited — part in the economy: It should not, for instance, tell Pfizer which technology to use to develop a coronavirus vaccine, but it should provide money to aid its manufacture and ensure that patent laws work. “There is a role for government, but the closer government gets to very specific industry-based solutions, the worse off we are, and I happen to think the American innovation ecosystem is our greatest strength,” he said.

Ms. de Rugy followed up with one particular policy area where an overhaul might help, which she admitted was an “unsexy answer”: zoning laws. One issue, she said, was that areas with higher wages tended to have more expensive housing, in part because of more restrictive permitting, which makes it daunting for low-wage or unemployed workers to move seeking more lucrative jobs. By simplifying and relaxing some zoning practices, “I think we’d see more flow of capital.”

Ms. Allen took a different angle, calling for expanding public credit via the Federal Reserve and other levers in Washington:

“Think about a postal banking system with public credit that supports innovation in places that don’t have access to credit in the same ways as the coastal urban centers. That would be the thing I focus on.”

And perhaps a bigger philosophical shift on attitudes toward is needed.

To Ms. Heitkamp, the dignity of work needs to be redefined, because much of today’s populism is rooted in how much people feel they are contributing to society. Too many believe that if their work lacks the marker of a belonging to the elite, their societal worth is diminished — even if they’re in a blue-collar trade, like construction, making “tons of money” because of a work force shortage.

“We’ve got to figure out how we redefine success as individuals in doing what you need to do that makes you feel fulfilled and actually provides a contribution to society,” she said.