Kamala Harris’s economic plan helps, but it doesn’t get to the root of middle-class discontent

Despite recent economic indicators, the quality of life for much of America has been declining for decades. Since 1970, the share of income held by the middle class has fallen by a third, while the share of income held by the wealthy has nearly doubled. During the same period, the minimum wage, unchanged since 2007, lost about half of its purchasing power. More than 39 million workers, or 23 percent of the working population, earn less than $17 an hour. More than 50% of American households earn less than $75,000, which, according to one study, is what the average US family of three needs to earn to cover the cost of basic necessities. Simply put, America is hurting.

The crux of the matter is that over the past half-century, American society has been reorganized, both legally and culturally, to put the interests of investors above all else—a state of affairs we call the “investor monoculture.” .

Today, about 80% of the public company’s shares are owned by institutional investors – such as Berkshire Hathaway, Blackrock, State Street, Fidelity, JP Morgan Chase, KKR and Blackstone. In 1980, that number was just 29%. Such investors tend to operate with a single objective: to seek maximum profits, regardless of the harm they may cause to society. Such harm usually comes at the expense of workers, customers, and communities—and explains much of the nascent malaise and anger plaguing America.

Today’s extreme profits are generated in two ways. The first is by cutting costs, which usually means cutting workers, outsourcing jobs, and lowering wages. In the future, technological progress and the revolution of artificial intelligence promise to make this worse. The second is a relentless drive to increase incomes, regardless of its effects on society or the planet. For example, food companies have over-sized and over-processed their products for decades, making a poor diet the leading cause of death. Youth suicide rates have risen more than 60 percent since 2007, but investor pressure is pushing tech companies to keep users glued to their screens as long as possible. But none of this is the investor’s concern.

The investor monoculture serves the wealthiest 10% of households, who own over 90% of corporate stock and whose income exceeds $250,000. It has been the dominant political influence in the legislative and executive branches of the US government since the Reagan administration—lowering taxes on corporations and the wealthy, shrinking the social safety net, frustrating the efforts of organized labor, and pushing back market regulation. And in recent years, it has put hundreds of pro-investor judges on the federal bench and a six-judge conservative supermajority on the Supreme Court.

The Biden-Harris administration’s attempts to correct this situation have been sincere, but they do not get to the root of the problem. The Biden CHIPS and Science Act provides tens of billions in funding and incentives for US semiconductor manufacturers. But chipmakers aren’t big employers, and the biggest beneficiary of those funds will be, yes, the investors in those corporations. Harris just announced a plan for $100 billion in tax credits for companies in strategic industries like biotech, aerospace, blockchain and artificial intelligence. Once again, venture capitalists and other large investors in these companies will reap the most benefits.

To materially change the trajectory of our country, a new paradigm is needed. Corporations need to be redesigned so that ordinary people (the bottom 90%) have a fairer stake and say in corporations. In other words, we need to shift ownership and governance of corporations away from current investors and to stakeholders such as employees, customers, suppliers, communities and the planet. Here is a set of ideas that can be implemented without any new legislation or funding.

Government spending

This year, the US government will spend $6.5 trillion, or 23% of GDP. Much of this is transfer payments, but trillions of dollars are overhead. This represents formidable spending power that can be harnessed to compel corporations to more equitably share government-generated wealth with communities and stakeholders.

What if corporations receiving government funds through CHIPS and the Science Act were required to share property rights or profits with the communities in which they build factories? What if the government gave preference to employee-owned businesses, or stipulated profit-sharing with stakeholders, for its purchases of goods and services? What if instead of being owned by private equity players looking to return multiples on their investments, all hospice services that receive Medicare funds were required to be substantially owned by nonprofits or the individuals providing the care hospice? What would this do for caregivers? What would they do for care? Or imagine the pride and dedication of construction workers who share in the ownership and profits of firms that build government projects.

Government loan

Each year, the US government lends hundreds of billions of dollars to corporations through agencies such as the Small Business Administration, the USDA, and the Department of Energy. Under the Inflation Reduction Act, the Department of Energy alone will lend more than $400 billion to climate technology companies. The biggest gains from these loans will go to only a few investors.

The US government should provide for higher levels of ownership, profit sharing, voting and board rights for workers, communities or other stakeholders in companies participating in these programs. Such requirements would spread the benefits of these loans more widely and give stakeholders a greater sense of economic agency and civic participation. Similarly, when publicly funded universities or the National Institutes of Health grant new drug or technology discoveries to corporations, they should require that the profits be distributed not only to investors but also to other stakeholders, such as patients and the caretakers. Imagine if patients shared the profits from skyrocketing drug prices.

Redesigning corporations for the benefit of stakeholders and communities using existing market-based approaches presents endless possibilities. The force of government spending and investment applied in this way would stimulate hope among the 90% who are marginalized by the investor monoculture and begin a process of political healing.

America is hurting. Democrats need to recognize and address this pain. Investor monoculture is at the root of the problem – and government-encouraged corporate redesign is a viable path to recovery. We already have the tools to do this. The question is whether we have the political will.

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