National Review Online, January 22, 2022

It’s the time of year when Larry Fink, the chairman and CEO of BlackRock, comes out with his annual letter to CEOs, a letter in which he tells CEOs what he expects of them. As BlackRock marked the end of 2021 by passing the benchmark of $10 trillion under management, an impressive figure however you look at it, many CEOs will treat Fink’s thoughts with rather more respect than their shareholders or our democracy deserve — $10 trillion will do that.

It will be worth going through the letter in more detail at a later date. There are some newer topics to discuss, not least with regard to the beginnings of a worthwhile initiative to give clients an increased say on proxy votes. Suffice to say for now that the letter also includes some familiar themes. And so, by the second half of the third paragraph, there, with dreary predictability, is this:

Over the past three decades, I’ve had the opportunity to talk with countless CEOs and to learn what distinguishes truly great companies. Time and again, what they all share is that they have a clear sense of purpose; consistent values; and, crucially, they recognize the importance of engaging with and delivering for their key stakeholders. This is the foundation of stakeholder capitalism.

CEOs clearly know how to talk the talk to an important investor. There’s nothing wrong with that. What is worrying is that more and more of them have actually come to believe in its more malign aspects. Why? They, and many of their colleagues in the C-suite, have realized that, in a regime where stakeholder, rather than shareholder, capitalism is the dominant ethos in the “private” sector, their rewards will be less dependent on delivering value to shareholders (who can be a demanding bunch) than in the past. Rather, they will be expected to pay increased attention to the somewhat nebulously defined aspirations of their almost as nebulously defined stakeholders. In practice, that means putting “their” companies’ capital, and the power that comes with it, behind a social, political, and economic agenda set by the state, various interest groups (unions, say, or NGOs, to take two examples), and, yes, business, a set-up that may not only offer them a pathway to (in many cases, even more) wealth but also to a degree of political power. And the latter comes with the advantage that it is largely free of conventional democratic control. That’s how corporatism works — and stakeholder capitalism is, as I have argued many (!) times before, a form of corporatism.

Somewhat defensively (it seems to me), Fink goes on to argue that

stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.

To say that those words need qualification is an understatement. To start with, stakeholder capitalism, at its core, has a great deal to do with politics. More precisely, it is about (as mentioned above) using corporate power to pursue, contrary to Fink’s claim, a social and ideological agenda, underpinned by a dream of society as some sort of unified whole (corporatism’s foundations are premodern). However, while stakeholder capitalism is ideological, the form of that ideology will vary with the vision of what that “whole” should look like. Fink argues that stakeholder capitalism is not “woke” and he’s right in the sense that it does not have to be. Unfortunately, in the U.S., the vision of society toward which corporatists are working contains a strong woke strain. Not only that, but those working toward that vision are well aware of the ways in which wokeness can be used for coercive means, if not always woke ends.

But that’s just the U.S. and, to different degrees, the modern European take. Corporatism (and by extension stakeholder capitalism) looked very different in, say, post-war West Germany or pre-war Italy. And it is being given a fresh twist with the fascism with Chinese characteristics that is emerging as the dominant ideology in a still nominally Communist state about which, incidentally, segments of Wall Street are either naïve or unhealthily admiring. For those looking to understand the nature of China’s latest transformation, the emphasis, at least in theory, that Beijing is putting on “common prosperity” is an intriguing indicator of the way that thinking is developing over there — and of how that thinking will be sold.

In June 2020, I wrote this:

Corporatism takes as its starting point the idea that society is best run through its leading interest groups, either alongside the ballot box, or, under fascism, in place of it. To fascist ideologues, it was a pathway to a harmonious national community, a “third way” that made redundant the class divisions that could tear a nation apart. Conveniently, this national community could be directed by a single party under, more conveniently still, a single leader.

A key part of the pathway to social harmony was, Mussolini claimed, “social justice” (a phrase, it seems, we are doomed to live with for eternity) and something to which the “selfish individual” will always be an obstacle. Mussolini’s claim is a reminder of the conflicting attitudes toward the individual percolating through corporatism. Corporatism rests on the assumption that most individuals are unable to protect or assert themselves on their own and so need the support that only the group (and/or the state) can bring if they are to flourish. But (to the extent that it is needed), the proof, however camouflaged, that this is a fundamentally collectivist ideology can be seen in the treatment of the individual who does feel able to strike out on his own yet finds himself criticized (“selfish”) — or worse — for his effrontery.

The other day Xi Jinping addressed a virtual Davos (where else?) and turned his attention to “common prosperity.”

The Financial Times reported some of what he said:

China’s “common prosperity” drive is not a pursuit of egalitarianism, President Xi Jinping said in a rare international defence of the policy that rattled markets from Hong Kong to New York last year . . .

“The common prosperity we desire is not egalitarianism,” Xi said. “We will first make the pie bigger and then divide it properly through reasonable institutional arrangements. As a rising tide lifts all boats, everyone will get a fair share from development, and development gains will benefit all our people in a more substantial and equitable way.”

Under the policy, spearheaded by Xi, the Chinese Communist party has sought to reshape the country’s business and cultural landscape via a months-long series of crackdowns. This has targeted industries including fintech, education and entertainment as well as perceived societal ills such as celebrity culture, gaming and effeminate fashion trends.

Xi understands the prosperity that capitalism can bring. Nevertheless, if insisting that some of its energy is directed (or reined in) to satisfy broader societal or political purposes means that China will see less growth than could otherwise have been the case, Xi can live with that.

Fink argues that stakeholder capitalism “is capitalism.” And so it is. But, as was or is the case with the other corporatist regimes described above, it is a harnessed capitalism. And harnessed capitalism should never be confused with the free-market variety.

Published as part of National Review’s Capital Letter on January 22, 2022.