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Elizabeth Warren, European Corporatist

August 20, 2018 in Economics

By Ryan Bourne

Ryan Bourne

It’s easy to be grateful for small mercies. Senator Bernie
Sanders is pushing radical, expensive government intrusions into
health care and labor markets, in the form of Medicare for all and a federal jobs guarantee. So when Democrat
Elizabeth Warren recently bucked socialist trends—declared
“I love what markets do” and said
“I am a capitalist to my bones”—it seemed a
refreshing tonic to those of us who want an open, dynamic, free

Alas, the senator from Massachusetts has unsurprisingly
confirmed that she is no free marketeer. While she might want
businesses to notionally be private entities, the “Accountable Capitalism Act” she
unveiled last week represents pure, unadulterated European
corporatism: a supposed partnership between business, labor, and
government interests.

The Act would force all businesses with more than $1 billion in
revenue to adopt a federal charter of corporate citizenship.
Companies would have to consider “the interests of all major
corporate stakeholders—not only shareholders—in company
decisions,” Warren wrote in the Wall Street
—as if they do not broadly do this already. A
successful business must weigh up satisfying its employees to keep
them happy and productive, respond to its competitors and consumer
demands, pre-empt or react to ever-changing government policies,
and consider long-term perceptions of their brand.

Warren’s proposal would establish in the Commerce Department an
Office of United States Corporations to review and grant charters
for large entities, as well as refer entities the office finds in
violation of the law to appropriate federal agencies for
punishment. This office is an almighty and arbitrary Damocles
sword, with the politicians that control it able to hold companies
in breach of charter for anything and everything they are thought
not to have considered.

As my colleague Jeff Miron has noted, honest
companies will find themselves tied up in extensive regulation and
never-ending stakeholder engagement, while those genuinely looking
to make a fast buck will take their chances. To say the Act would
muddy the waters and create perverse incentives is an

As if this were not bad enough, the legislation requires workers
to make up 40 percent of the membership of boards of directors, in
an arrangement known as co-determination. Supporters of the bill
suggest this will lead to better outcomes for workers and higher
productivity. Yet the limited evidence available suggests quite the

Research from the year 2000 undertaken by then-University of
Pennsylvania economist Gary Gorton and Federal Reserve Bank of St.
Louis economist Frank Schmid found that German firms were 27 percent less
to their shareholders because of these laws. This does
not represent some pure redistribution from shareholders to
workers. At …read more

Source: OP-EDS

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