In his article “What Happened to Capitalism? A Conservative Perspective,” Oren Cass, the director of American Compass, provides a thought-provoking analysis of the state of capitalism in America. Cass argues that while businesses continue to pursue profit, they often fail to advance the public interest. He highlights several concerning trends over the past 50 years, including the disproportionate rise in corporate profits compared to wages, the loss of America’s technological edge, declining investment, and negative productivity growth in the manufacturing sector.
Cass challenges the notion that the free market capitalist system is inherently self-regulating and beneficial for society. He argues that if capitalism prioritizes short-term gains and fails to invest in domestic value creation or support American workers, it undermines the very foundations of the system. He points out that offshoring production, bringing in foreign labor for jobs Americans won’t do, and prioritizing financial trading over productive investments contribute to national decay and inequality.
Over the past 50 years, corporate profits rose by 185%. Wages rose by 1%. American industry lost its technological edge, from semiconductors to commercial aerospace to robotics. Investment stalled, so much so that the entire corporate sector became a net lender, handing money back to financial markets faster than it tapped those markets for capital to invest. As American Affairs editor Julius Krein has observed, if $1 trillion in annual stock buybacks are to be taken at face value and “there are in fact no better investments to be made, … it calls into question the viability of the free market capitalist system itself.”
Managers are supposed to be accountable to owners, but the latter’s identity is no longer discernible. Most shares are held by passive funds, often on behalf of pension plans on behalf of retirees and taxpayers, or else overseas, often in sovereign wealth funds. Comparative advantage is supposed to allow a developed economy like America’s to focus on the most advanced technologies, but the U.S. trade balance in advanced technology products has swung from a $60 billion surplus in 1992 to a $190 billion deficit in 2020. Innovation is supposed to drive productivity but, in the manufacturing sector, productivity growth has turned negative, with factories producing less per worker in the early 2020s than the early 2010s.
The author criticizes the market fundamentalism that has dominated the American right-of-center for the past four decades, reducing capitalism to “just another word for economic freedom.” He highlights the adverse effects of this ideology, such as rising inequality, slowing innovation, limited opportunity, and the erosion of middle-class security. Cass emphasizes the need for a positive vision of capitalism that combines economic freedom with obligations and responsibilities.
Cass argues that conservatives are uniquely positioned to rebuild American capitalism by recognizing the importance of institutions, shaping market actors, and imposing constraints to channel ambition productively. He highlights the historical success of a robust national economic policy that involved public investment, financial involvement, regulations, public education, and labor support. The author stresses the importance of balancing economic rights with economic responsibilities and the need for markets to serve not only individuals but also families, communities, and the nation.
In the latter part of the article, Cass presents a comprehensive agenda for restoring conservative economics and rebuilding American capitalism. He outlines the importance of responsive politics, productive markets, and supportive communities. The policy proposals put forward in each section aim to align investment and profit pursuit with the public interest and strengthen key institutions.
Overall, Cass’s article offers a compelling critique of the current state of capitalism in America and advocates for a conservative approach that recognizes the importance of family, community, and industry. The analysis is well-supported with data and is supplemented by policy proposals from leading experts in the field. By presenting a nuanced perspective on capitalism, Cass encourages policymakers and readers to consider the broader implications of economic systems and the necessity of balancing individual liberty with the common good.