Pro-Business Should Mean Pro-Democracy

Mobilizing the Business World to Stand Up for Democratic Capitalism

In case you missed it, check out Malcolm Salter’s collected series for The Renovator: Why Business Leaders Must Step Up for Democracy and the Market Economy, adapted from The Fading Light of Democratic Capitalism (Cambridge University Press 2024). Across the series, Salter:

• defines what “democratic capitalism” actually is and why it has been so successful when it works;

• shows how pervasive cronyism and restricted suffrage now threaten both democracy and markets;

• and makes the case that business leaders must become evangelists for renovating our political economy if they want it — and their enterprises — to endure.

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When the wealth-creating engine of democratic capitalism comes under threat, you’d expect to see business leaders racing toward the breach. So where are the corporate defenders when we need them?

photo by Phil Desforges from Unsplash

U.S. history since World War II has shown that when our system of political and economic governance is working well, democracy and capitalism prosper together. Despite economic crises and some notable corruptions, American democratic capitalism has proved capable of delivering a level of growth, standard of living and social security that is the envy of the world, all while simultaneously protecting individual liberties, expanding civil rights, reining in the excesses of free markets and preserving rule of law.

This is an enormous accomplishment, disproving Marx’s famous conclusion that if one wants capitalism, forget democracy; and if one wants democracy, forget capitalism.

Today, however, this achievement is at mortal risk by institutional corruptions like cronyism and restricted suffrage on the one hand, and the speed with which the Trump administration is obliterating the cultural and legal underpinnings of democratic capitalism on the other. The degradation of democratic capitalism that we are now experiencing began long before the second Trump administration took office. But since taking office, Mr. Trump has greatly expanded the corruption in our political and economic life.

Yet despite the stakes, business leaders have been reluctant to speak out.

For sure, a few CEO voices have been heard on specific administration policies related to tariffs, Fed independence and the federal government’s extraction of “golden shares” from private companies. But overall the soundtrack remains extremely hushed.

Correcting the underlying causes of democratic capitalism’s “decline” can only succeed if business leaders support efforts to curb pervasive cronyism, strengthen universal suffrage and citizen voice, and restore cultural values supportive of democracy and democratic capitalism. Business leaders are, incontestably, central actors in our nation’s political and economic governance system, and little will get done about saving — and, where necessary, renovating — democratic capitalism without them.

There are several reasons for the failure of business leaders to push back publicly against the Trump administration’s attacks on democratic capitalism. The most obvious, frankly, is that many high-profile businesspeople and corporations support President Trump for his tax policies, advocacy for specific industries, regulatory rollbacks, downsizing of government, America First orientation, campaign against woke universities and museums, peace negotiations, and “move fast and break things” operating style.

A second reason is the fear of some business leaders that a strong democracy may increase the chances of a redistribution of wealth away from people like them and constrain their ability to extract special favors from Congress and the White House through their campaign finance and lobbying activities.

CEOs who generally approve of the Trump regime and its assault on democratic values clearly have nothing to gain by criticizing the administration. In addition, in normal times all business leaders typically want, and should want, to “get along” with any administration.

However, these are not normal times.

According to a recent survey by Jeffrey Sonnenfeld and Stephen Henriques of CEOs attending their CEO Forum at The Yale Chief Executive Leadership Institute, many top CEOs are beginning to say behind closed doors that they “worry that Trump is undermining an economic system that took decades to build and has long benefited the U.S. more than any other country, under both Republican and Democratic administrations, all for short-term gains.”

That’s important and good, but what will it take for our business leaders to take a public stance?

Two things: (1) overcoming the fears of retribution from the Trump administration and of missing out on profit opportunities available to the president’s supporters, and (2) committing to the idea that business leaders should think of themselves not only as agents of company shareholders but also as guardians of the institutions and ethical culture of democratic capitalism.

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photo by Miguel Henriques from Unsplash

We know that good CEOs are quick to act on threats to themselves and their organizations when they see them, and they are surely facing such a threat today. One simply needs to reflect on Trump’s recent use of the levers of the federal government to disrupt and extort some of the nation’s leading law firms, media companies, universities and businesses. In such an environment, we should not be surprised by the aversion of CEOs to sounding the alarm. Meanwhile, the catalogue of CEOs offering presidential support to protect profit streams is a long one, as seen in their contributions to Trump’s inauguration ceremonies and the construction of Trump’s White House ballroom. However, in fending off this threat, they are exposing their own companies and indeed our entire economic system to an even greater danger.

What about the idea of business leaders as guardians of the institutions and values of democratic capitalism? Unfortunately, this is not widely shared in today’s business community, even though there are good reasons it should be.

It is clear that a well-functioning democracy is essential for securing the legitimacy of capitalism and its longevity as a system of economic and political governance. In the absence of democracy serving as “a moral engine of prosperity” (in the words of social philosopher Michael Novak), the social contract between the state and the people will inevitably be perceived as rigged against those without wealth and influence. And public trust in business will inevitably evaporate, too. Social instability often leads to authoritarian backsliding or tyranny, populism, or other undesirable forms of governance.

In addition, a healthy democracy contributes to the survivability of market capitalism by providing citizen-sanctioned laws that protect property rights and contracts, regulations that are both predictable and crucial for systematic planning and investment, procedures for resolving conflicts and grievances, and a sense of citizen inclusion in matters that affect their personal interests and welfare. Without a healthy democracy, citizens are left more exposed to harms and personal catastrophes.

Side by side, it’s no contest – democratic capitalism, and a robust defense of it, is where the weight of the argument falls for the welfare of the country and the business community. So, what will it take for individual business leaders to set aside their fears and join the public effort to halt the debasement of both capitalism and democracy?

Two things:

First, more collective action by CEOs in forums like Sonnenfeld’s at Yale; the Business Roundtable, comprised of the nation’s most powerful CEOs; and The Conference Board’s Committee for Economic Development, which includes “Sustaining Democratic Institutions” as one of its central policy areas. It is unrealistic to expect many business leaders -- caught in a conflict between their fiduciary duties to their shareholders and their practical duty to assume some responsibility for the maintenance of democratic institutions and values -- to launch a defense of democratic capitalism on their own, but there is a great deal they can do as a group. If you’re not in such a group already, join one.

Second, charismatic spokespersons not directly benefiting from this administration’s industrial policies and priorities who possess the wit and courage to stand publicly against breakdown in the ethical culture or “moral ecology” surrounding our political and economic governance system.

Their message needs to address the essential requirements for reestablishing the perceived legitimacy and promise of U.S.-style democratic capitalism discussed in my prior columns:

• Curbing cronyism through reforms in campaign finance laws, greater transparency in corporate reporting of campaign and lobbying spending, and the nullification of the Supreme Court’s democracy-destroying Citizens United decision;

• Strengthening citizen voice and influence as a countervailing power to wealthy and influential elites (corporate and otherwise) by improving ballot access for a more diverse population of candidates and reducing restrictions on citizens’ right to vote on all candidates;

• Promoting the kind of ethical culture required for democratic capitalism to flourish, which includes a commitment to honesty, respect for the law, disciplined work, self-restraint, sacrifice for mutual gains, and the foundational democratic principles of political equality and power sharing; plus

• Acknowledging that free markets expertly regulated in the public interest can be good for business and capitalism’s perceived legitimacy over the long run.

Here’s the good news as we launch this renovation: Never before have budding evangelists for a truer form of democratic capitalism had more knowledge and more grassroots and national-level democracy support groups — organizations like Danielle Allen’s Partners in Democracy and Lawrence Lessig’s Equal Citizens — available to them. With this intellectual and political infrastructure moving into place, the time to start socializing the principles and values necessary to maintain and strengthen the institutions of democratic capitalism is at hand. Action principles, too, have never been clearer. These include the essential democratic principles of political equality and power sharing.

Paul Hoffman, the president and then chairman of Studebaker Motors from the mid-1930s to the mid-1950s, can be a model for today’s evangelist CEOs. Hoffman led the Committee for Economic Development and the Marshall Plan, recruiting some of the biggest names in American business to the cause of addressing his era’s crisis in democratic capitalism. Hoffman’s goal was no less than reforming the culture of American business. According to journalist David Leonhardt, “Hoffman became an evangelist for a corporate America that was less self-interested and more concerned with the national interest.”

Time is short. The longer we wait for the restoration to actuate, the more the decline of democratic capitalism as a national ideal will become irreversible. And without the restoration of our national ideal and a renewal of Americans’ faith that democratic capitalism is working for them, social unrest and political dysfunction will inevitably accelerate.

Hopefully, Ralph Waldo Emerson’s assertion – that “America is the country of tomorrow” – will be proven correct once again, with that “tomorrow” including the restoration of democratic capitalism as a credible aspiration for our country. But we cannot succeed unless our business leaders choose to help lead this work.