The progressive of yesterday is the centrist of today. Progressive ideals like human rights, equal opportunity, and anti-corruption have begun to manifest themselves in the policy recommendations of nearly every Democratic primary candidate. Whether looking at the many policy plans from self-described progressives like Elizabeth Warren who argues for “big, structural change” or position shifts from long-time centrists like Joe Biden, their platforms prove that the progressive movement has won the hearts of the Democratic Party.

As a result, the 2020 election will be a face-off between Donald Trump and a progressive, and according to polls, a progressive in the White House is more likely than ever. With high White House hopes, it is more important than ever to look past this election and create an effective strategy that extends beyond Donald Trump. Progressive strategy must rely heavily on creating the optimal environment through which progressive policy can operate. That environment is progressive capitalism. 

This article will be the first of a series of installments about the case for progressive capitalism. The first installment will cover the problems with the American economy and why a new form of progressive capitalism is more pressing than ever. Rather than looking at specific solutions, this article will diagnose the weaknesses of the current system and suggest a broad new solution . Future installments will include arguments for specific policies that work to achieve progressive capitalism and how they will affect non-economic progressive values like international peace and human rights. In the end, this series of articles should serve as a comprehensive policy recommendation for the future of the progressive movement as it looks to create a winning strategy for both the movement itself and the American economy.

The Problem with American Capitalism

Capitalism is often ridiculed by the left and commonly used as a scapegoat for the plight of the American worker. Common solutions include calls to redistribute wealth and permanently shift to a system more akin to socialist economies in Europe. Democratic socialists, led by Bernie Sanders, rail on corporate greed, powerful vested interests, and income inequality as proof that capitalism does not work, but they are missing something. By condemning the economy as corrupt, unequal, and non-competitive, they reveal the system they are critiquing was never capitalist in the first place. Competition, innovation, private business, and choice are integral to a vibrant economy and the central tenets of capitalism, but these things do not exist when capitalism is allowed to run freely and without regulation. The progressive movement, rather, can target these three distinct problems of corporate consolidation, corruption, and the lack of equal opportunity to create a form of capitalism that actually draws on the ideas of competition and innovation that define capitalist theory. 

Politicians often call for fixes and legislation to tackle unemployment and stagnant growth, but to truly fix our economy, progressives must first understand in far greater detail the three major defects that plague the modern American economy:  corporate consolidation, lack of equal opportunity, and corruption.

Corporate Consolidation

Excessive corporate consolidation is one of the largest defects in American capitalism. It has not only served as a pseudo-regressive tax, targeting the poorest of citizens, but it has deformed the economy from a true, free-market capitalist system. Conservative lawmakers’ arguments for competition, innovation, and choice that they readily pull from Smith and Locke fall to the wayside in the face of corporate lobbyists and campaign contributions that influence legislation that hinders the free market that they claim to be trying to protect. For example, the T-Mobile and Sprint merger, which was recently settled by the Department of Justice Antitrust Unit, will likely culminate in three companies, Verizon, AT&T, T-Mobile, each holding about one-third of the mobile phone market, culminating in about 98% of the phone market between them. This conglomeration of market share will then create significant concerns regarding the quality and affordability of cell coverage.

T-Mobile and Sprint are the predominant carriers for low-income households in the United States, offering an affordable smartphone option to the lower class. A merger would consolidate market share in the low-income sector and create three distinct sub-markets within the cell phone provider industry; upper, middle, and lower class. As each company settles into their respective pricing demographic, competition will decrease drastically as all three corporations become unafraid of either of the other “competitors” infringing on their customers.

The point here is that capitalism, allowed to run freely, destroys itself. Companies can use competition to corner a market and create barriers to entry that are too high for anyone to hope to compete. Here competition dies, and with it, innovation and choice. Cell phone companies have no incentive to innovate, and consumers have no choice regarding which product they buy. Conservatives, instead of protecting the ideals of Adam Smith’s free market, would allow the market to strangle itself.

Equal Opportunity

Right now, the economy is a race to the top of a mountain; the rich live in a gated community at the peak, the middle class starts at the trailhead, and the poor broke their leg when they were pushed into a 15-foot ditch. Studies show that about one in five poor, high school graduates do not go to college, while rich students have continued to dominate college demographics. Even larger numbers do not complete college, and it is not because of inequality in skills, but in opportunity. The cost of college has increased eight times faster than wages and has left the poor reeling in wake of decreased opportunity. In past decades, it was more possible for lower class citizens to escape poverty by attending college, but with tuition rates averaging $34,000, that path no longer exists without extensive and burdensome debt.

Capitalism no longer functions under these circumstances. The economy misses out on potential labor competition and innovation because the system never granted the poor the opportunity to succeed. How can you claim to have an economy that operates upon worker incentives when about 12 percent of the population lives in such abject poverty that they do not have the time, money, or opportunity to contribute to the economic mobility necessary in a capitalist system? Poverty has existed in the past, but with the advent of furthered wealth inequality and conglomerations of power, the way out is no longer a tangible possibility. Capitalism rests on the theory of an inequality in skills that propels people to success, but many of these citizens are no longer competing in the labor market. Poverty erases potential contributions to the economy , as there is no time to focus on school or innovation when you are worrying about feeding your kids after you clock out of your third shift in a poor, midwestern town. Essentially, by not allowing potential for growth, America locks a huge portion of its workforce in place, which hinders innovation, competition, and growth.

Corruption

Corruption serves as the third of yet another defect in American capitalism. At the same time that the poor struggle to escape the ditch, corruption allows the rich to lock themselves into the upper echelons of the economy. They do this by guaranteeing their children access to education, quality homelife, and business opportunities like the ability to take unpaid internships or capitalize on their parents business connections. Political power, revolving door politics, and obtuse barriers to entry into product markets again restrict economic mobility and the effectiveness of the “capitalist” economy. Incentives to innovate and specialize are mitigated by convincing politicians to pass tax breaks, allow mergers, or introduce certification programs that lock the elite into a market with no competition. 

A good example is the use of patents in the prescription drug industry to create towering barriers to entry that not only hurt the economy, but also the most vulnerable citizens. The drug industry uses patents to limit supply and protect intellectual property, which they argue incentivizes them to spend large sums of money researching and manufacturing cures and new drugs that help the average American. Of course, this is a fair and legitimate argument. Using government created barriers to entry to increase profits is a time-tested strategy and is an important part of incentivizing research and development because it offers businesses protections against intellectual theft and corporate espionage. Unfortunately, drug companies use these patents to artificially raise prices on the most inelastic of products and withhold cures from sick friends, parents, and children who need them most. By raising prices on consumers these corrupt business practices target the lower class and continue to push upon problems in the lack of equal opportunity available.

Beyond morality, the detrimental impacts of abusing patents on the economy is huge. Currently, they are not used to incentivize research and development, rather they are abused by securing non-innovative products, withholding innovations, and artificially removing competitors from the market for long periods. Drug lobbyists have effectively created an economy that locks the company into a non-competitive market, with no chance of being challenged, thus removing the incentive to innovate further.

Of course, corruption extends beyond just patents. It can be found in favorable international trade deals for corporations, small tax-loopholes written into extremely complex bills by lobbyists, and favoritism in government contracts. All of these problems serve as examples of the power of American capitalism to consolidate power in individuals who can subsequently use that power to further build upon that power and wealth. Without regulation on unfair corporate behavior or reform in the patent industry, the system continues to perpetuate a system that favors businesses, artificially hinders competition, and feeds upon itself until there is no more room to grow.

The Importance of Fostering Progressive Capitalism

So, corporate consolidation, inequity in opportunity, and corruption create a system that lacks competition, innovation, choice, and economic mobility. This is not capitalism. For years conservatives have leveled attacks against progressives for being socialist or communist, yet their own policies trample on the foundational principles of capitalism. As the progressive movement finally sees the White House on the horizon, it is more important than ever to fix capitalism. Progressive ideals like equal rights, equity in opportunity, international peace, and basic human rights rest in their ability to operate within a system that does not inherently push these ideals down. 

The economy is broken and the answer is progressive capitalism. Careful government regulation, targeted social programs like free college education or universal pre-k, and the removal of money and powerful interests from politics serve as the foundation of progressive capitalism. The system will create a base camp on the mountain of opportunity, rather than forcing some to dig their way out of a ditch as others start at the peak. So, instead of working three jobs, they might have the opportunity to attend college or respecialize in a different industry. The result is a fully participating labor market that contains every person in the competition for skilled labor, while maintaining the incentive-based economy that drives innovation and economic growth. Of course, this article does not offer specific solutions, but because it is only an identification and prognosis of the problem. Part two will try to present a pathway to progressive capitalism in light of these variety of problems that are impeding the strengths of capitalism.