Elizabeth Warren and the Economics of Magical Thinking

Elizabeth Warren and the Economics of Magical Thinking, by Max Gulker.

It is now clear that the Democratic Party in the US is shaping up to offer Elizabeth Warren as its candidate for leader of the Free World.

At his core Sanders is a redistributor, fighting along the same big-market/big-government axis on which American politics has focused my entire lifetime. To be sure, Sanders is less shy about pushing things much further toward the big-government end of the spectrum than any mainstream Democratic candidate in decades.

Warren presents herself as a tireless, technocratic savior of capitalism, but her plans give the U.S. government far more control over individual firms, households, and markets than anything proposed in recent memory. Warren, a legal scholar by trade, has moved into the complex realm of a modern economy, where a lawyer’s penchant for sweating the details is usually counterproductive and causes considerably more damage along the way. …

Economic fascism threatens to return. That’s the system in 1940s Germany and Italy, where private individuals could “own” businesses but the Government could tell the businesses exactly what to do.

[One of Warren’s proposals] stands above the rest in its potential to overhaul our commercial landscape. Warren calls the reforms she envisions to corporate mandates and governance “accountable capitalism.” … accountable capitalism does nothing short of rethinking what it means to be a business in the United States and opens the door to negative consequences so severe that ignoring them involves a sort of magical thinking that would make even Warren’s starry-eyed socialist opponent shake his head in disbelief. …

Warren’s plan starts from the premise that corporations that claim the legal rights of personhood should be legally required to accept the moral obligations of personhood. …

It’s clear from Warren’s campaign materials that it will involve a new and large bureaucracy, but the rules to be enforced are less clear. In short, accountable capitalism means government mandating that corporations do what Elizabeth Warren wants them to do.

Warren’s plan requires corporations valued at over $1 billion to obtain a special federal charter. This charter exposes corporations to regulation from a new Office of United States Corporations that “tells company directors to consider the interests of all relevant stakeholders — shareholders, but also employees, customers, and the community within which the company operates — when making decisions.”

There are a few specific rules — misguided one-size-fits-all requirements about the number of workers on company boards, how executives can sell stock, and how companies can make political contributions. But it mostly appears to be a means for our elected political leaders to micromanage America’s largest corporations at their own discretion. …

The socialist delusion is that they know better than you how to manage your affairs. Nope, experience and theory both clearly show that local information and decentralized decision making win every time against centralized top-down control. Just ask the Soviet Union.

We don’t need to keep our corporations safe from the meddling of Elizabeth Warren out of some starry-eyed hero capitalism that reveres big business. We need to do so because these corporations are the arteries through which information pumps in our economy. Some workers may have extra time to serve on company boards, as Warren mandates, after they lose their jobs from the overall economic damage wrought by the government’s attempt to legally impose its notion of good citizenship. …

Big government breeds corruption and economic inefficiency:

If most rent-seeking were a matter of nefarious corporate executives buying off weak or greedy officials, we could just elect better people. The fact that this problem persists over decades is indicative of a more subtle process. Rent-seeking is an inevitable systemic feature in a network with thousands of contact points between business and government.

Unless one ascribes mystical power to Warren’s moral presence, her plan represents a fertile breeding ground for mismanagement and corruption. And then comes the day when the people’s champion leaves the White House.

Candidates with big ideas that increase government power often seem to adopt an implicit fantasy that their election will usher in a golden age where “the people” will no longer make mistakes and elect candidates from the other party. What will happen when the unprecedented power Warren wants to assume over corporations falls into the hands of the next Donald Trump? This alone should give the Left serious pause before supporting game-changing deeply misguided reforms to our system.

Pocahontas versus communism:

Elizabeth Warren is smart, tenacious, caring, and catastrophically wrong on a host of issues. She’s running on a left-nationalist platform, where corporations turn away from their natural role serving shareholders and instead serve whatever interest the aspiring president believes is important. …

I’d take whatever Sanders calls socialism over accountable capitalism any day, because rather than starve the dynamic private sector of resources, Warren’s vision stifles the dynamism itself.