As I was briskly running through Jamie Dimon’s latest annual letter, it occurred to me that the financial media (especially conservative financial media) will likely give short shrift to the “public policy” section.
To be as clear as absolutely possible, I don’t generally care what business luminaries have to say about politics and, I’d gently suggest, you probably shouldn’t either.
Corporate America lobbies relentlessly for its own interests. The money spent in the process distorts policymaking and is often synonymous in voters’ minds with Beltway corruption. In the past, this dynamic led directly to bad policy and, in some cases, extraordinarily deleterious outcomes for everyday people.
With those (obvious and obligatory) caveats committed to digital page, I’d caution against writing off the musings of someone like Dimon as mere “virtue signaling.” I hinted at why earlier this week while discussing Mitch McConnell’s newfound disdain for corporate free speech.
Why do corporations “virtue signal”? Is it because they think they can dupe shareholders and the public into believing that top management is comprised entirely of Mother Teresas and Dalai Lamas? Of course not. The aim is to pay homage (more aptly: lip service) to societal trends because not doing so can be detrimental to the bottom line. Here’s how I put it Monday:
When it comes to the C-suite, I’ll take the cynical view in order to strip partisan politics out of the discussion. Corporations are beholden to shareholders every quarter and, in many respects, every day. In the past, that obligation led corporates to be among the world’s worst offenders when it came to things like harming the environment and trampling on human rights. The bottom line always comes first. Workers, communities, public health and the planet itself are secondary, at best. Often, they don’t matter at all.
Now, however, it’s fashionable to be “woke.” And being fashionable is often synonymous with being profitable. Companies are rewarded for adopting plans to help address climate change, for example. Conversely, failing to be sufficiently proactive when it comes to hot-button issues like gun violence and equality can cost corporations dearly, whether it’s something as ephemeral as a short-lived advertising ban or something more serious like missing out on the opportunity to be included in indices and ETFs that shun shares of companies seen as insufficiently attentive to the needs of the modern world.
None of that is to say that someone like Dimon doesn’t actually care (at least a little bit) about building a better society and reimagining capitalism so that it works for more people, if perhaps not for everyone. But even when the concern is genuine, it’s still rooted, to a certain extent anyway, in self-interest.
Why are so many of America’s most successful capitalists suddenly so intent on paying higher taxes and reforming the very system which allowed them to accumulate wealth on an unfathomable scale? Why did Jeff Bezos say, on Tuesday, that Amazon is “supportive of a rise in the corporate tax rate” in order to pay for Joe Biden’s infrastructure proposal?
Well, in part because there are many more poor and middle-income people in America than there are rich people, and there’s only so far you can push the “huddled masses” before they take their sundry “yearnings” to the streets.
The cynical view, then, is that corporate “virtue signaling” isn’t some laughably transparent attempt to make you believe that executives and the wealthy are truly “woke” or otherwise “reformed.” Rather, it’s aimed first at ensuring management can’t be accused, in hindsight, of not reading the proverbial writing on the wall, and second at self-preservation in the face of an irritated society that’s “had enough” on multiple fronts.
You could also argue there’s a bit of benign paternalism in play. The Republican party in America is increasingly ostracizing itself from the business community to which it’s historically been wed, in favor of championing narratives that resonate with Donald Trump’s base. Corporate America doesn’t want anything to do with those narratives for two reasons. First, they’re based on lies and misinformation. Second, while the grievances of the struggling middle-class are real (and in fact inextricably intertwined with the socioeconomic trends alluded to above), semi-autocratic rule by populist demagogue can be a recipe for disaster in the long-run. It’s not so much that I’m trying to cast aspersions at Trump, as much as it is to say that recent history (i.e., over the past 150 years) shows that kind of government can lead nations to near total ruin. Obviously, some manifestations of autocratic rule can “work” depending on your definition of “work.” Putin’s Russia is a lot of things, many of them bad, but it’s not an abject failure, for example. But bellicose populist pandering, frenzied nationalism and rudderless government is an inherently perilous proposition. Indeed, 2020 found America dissolving into something like a failed state on multiple levels. (That isn’t hyperbole.)
Folks like Jamie Dimon aren’t particularly keen on societal breakdown or on the notion that America could succumb to a kind of soft, one-man rule, backed by a political party that now functions more like a personality cult than a collection of lawmakers dedicated to a set of principles about free markets and budget rigor. Oligarchs can thrive in autocratic regimes, but that’s a dangerous path to go down, especially when you’re already a pseudo-oligarch who’s already thriving.
That, in brief, is my framework for assessing ostensible “virtue signaling” from corporate executives in 2021. There’s more to it than that, but I’m penning this from the back deck, in the glaring sun and I’ve now burned my espresso on the stove, something I need to remedy post haste.
So, please consider the above the short version of what I hope is useful context for the excerpts below from Dimon. I didn’t include the following passages in my initial coverage of his letter, but I think they’re poignant, irrespective of how you conceptualize of his motivations and regardless of how you score his sincerity.
Via Jamie Dimon
Our nation is clearly under a lot of stress and strain from various events: the COVID-19 pandemic, of course, which has taken more American lives than the total lost in World War II, the Korean War and the Vietnam War combined, resulting in acute economic distress for millions more; the brutal murder of George Floyd and the racial unrest that followed; the divisive 2020 presidential election, culminating in the storming of the Capitol and the attempt to disrupt our democracy; and the seemingly inevitable, but nonetheless alarming and unnerving, rise of China, threatening America’s global preeminence.
America has faced tough times before – the Civil War, World War I, the U.S. stock market crash of 1929 and the Great Depression that followed, and World War II, among others. As recently as the late 1960s and 1970s, we struggled with the loss of the Vietnam War, political and racial injustice, recessions, inflation and the emergence of Japan as an economic power. But in each case, America’s might and resiliency strengthened our position in the world, particularly in relation to our major international competitors. This time may be different.
China’s leaders believe that America is in decline. They believe this not only because their country’s sheer size will make them the largest economy on the planet by 2030 but also because they believe their long-term thinking and competent, consistent leadership have outshone America’s in so many ways. The Chinese see an America that is losing ground in technology, infrastructure and education – a nation torn and crippled by politics, as well as racial and income inequality – and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals. Unfortunately, recently, there is a lot of truth to this.
Perhaps we were lulled into a false sense of security and complacency in the last two decades of the 20th century as we enjoyed relative peace in the world and a position of global dominance, validated by the fall of the Soviet Union. During those two decades, we experienced relatively uninterrupted and strong growth, resulting in broad improvement in income for almost all Americans. That stability was shattered by the September 11, 2001, terrorist attacks, which were followed by nearly 20 years of overseas combat for American soldiers. Economic growth over the last two decades (including the Great Recession of 2008) has been painfully slow, with increasing income inequality and virtually no growth in income at the lower rungs of the economic ladder. The COVID-19 pandemic, for which our nation was totally unprepared, capped by the horrific murder of George Floyd, shoved into the spotlight our country’s profound inequities and their devastating effects – inequities that had been there for a long time. Once more, our country suffered, and its least well-off individuals suffered the most. Unfortunately, the tragedies of this past year are only the tip of the iceberg – they merely expose enormous failures that have existed for decades and have been deeply damaging to America.
Today, the United States and other countries around the world are grappling with many other critical issues. To name just a few: capitalism versus other economic systems; access to healthcare; immigration policy; the role of business in our society; and how, or even whether, the United States intends to exercise global leadership. Many Americans have lost faith in their government’s ability to solve these and other problems – in fact, most people would describe government as ineffective, bureaucratic and often biased. Almost all institutions – governments, schools, media and businesses – have lost credibility in the eyes of the public. And perhaps for good reason: Many of our problems have been around for a long time and are not aging well. Politics is increasingly divisive, and government is increasingly dysfunctional, leading to a number of policies that simply don’t work.
Americans know that something has gone terribly wrong, and they blame this country’s leadership: the elite, the powerful, the decision makers – in government, in business and in civic society. This is completely appropriate, for who else should take the blame? And people are right to be angry and feel let down. Our failures fuel the populism on both the political left and right. But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country’s situation worse.
To explain how and why this all happened, we tend to look for convenient reasons – some blame greed and “short-termism,” some blame immigration and others blame the uncontrolled effects of new technologies, trade or China. Many of our citizens are unsettled, and the fault line for all this discord is a fraying American dream – the enormous wealth of our country is accruing to the very few. In other words, the fault line is inequality. And its cause is staring us in the face: our own failure to move beyond our differences and self-interest and act for the greater good. The good news is that this is fixable.
Some Americans think that the country’s can-do attitude, innovative entrepreneurism and great resiliency, which served us so well in prior crises, still exist and will re-emerge to help us self-correct. At the other end of the spectrum, there are those who think we are simply a great empire whose glory days have passed and we should cede global leadership to China. These advocates would add that democracy itself does not work – our failures being prime evidence of democracy’s ineffectiveness. Both views fall short.
The problems that are tearing at the fabric of American society require all of us – government, business and civic society – to work together with a common purpose. And that common purpose should be our ongoing quest to be a more perfect union and to maintain America’s preeminent role in the world. To do this, we need to demand more of both ourselves and of our leaders. And we can’t fix our problems if we don’t acknowledge them and the damage they have caused. Hoping that things will self-correct is not a strategy – working on solutions is.
One last thing: The raw power of America is often represented by our incredible military might. In reality, however, our raw power emanates from our economic vitality and strength, which have always been predicated upon freedom, free enterprise, and the promise of increasing equality and opportunity for all. If income inequality is the fault line, returning to the basic morality at the core of America’s founding principles can lead us to a common purpose and help bind us together again.