The Other Dangerous Supremacy: Wealth Supremacy

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Summary

• The book “Wealth Supremacy” by Marjorie Kelly examines how the economy is driven by a bias towards wealth and capital, rather than serving the public good. The author argues that this “wealth supremacy” is a form of bias that underlies many of today’s crises.
• The book diagnoses the problem of wealth supremacy, debunks the myths that underpin it, and outlines a vision for democratizing the economy through initiatives like worker ownership, impact investing, and reclaiming the purpose of institutions like the Federal Reserve.
• The author argues that this transformation is necessary to address the growing inequality, distrust in institutions, and threat of authoritarianism that result from the current economic system’s prioritization of profit maximization for the wealthy.
• The key is to shift away from an economy designed to primarily benefit the wealthy, and towards one that serves the broader public good and is more aligned with democratic values and environmental sustainability.

Transcript

Rob Johnson (00:00:00):

I’m here today with an extraordinary author, Marjorie Kelly, whose new book Wealth Supremacy, how the Extractive Economy and the Bias Rules of Capitalism Drive Today’s Crises, as they say unmasking the myth of capitalism. I became familiar with Marjorie’s purpose and career when she was running something called business ethics. And my dear friend who the audience of this podcast have heard about over and over, William Greider told me he was writing a preface for her previous book on the Divine Right of Capital.

Rob Johnson (00:01:17):

And to quote Bill from that preface, her book is intended as a free spirited provocation, gloriously incautious. It’s an intelligent plea to think a new and to act. It reads not like another gloomy recital of familiar economic complaints, but more like an enthusiastic tour of the far horizon, a time when Americans find the will and the way to correct the systemic failures of their economic institutions. He then goes on and says something about it’s been the interest of making the rich richer and living taxes on the rest of us. Financial powers have become the A economic aristocracy says Greider.

Rob Johnson (00:02:12):

He then goes on to say her publication is both hopeful, cheerful, and she’s a tough critic. And then finally he comes around up stretch and says, I from employees to environment to social equity, their exclusion. It was a discouragement that led her to search for deeper answers. But his summation, her flood of ideas are so numerous and profound. No one would expect to agree with all of them, and certainly I didn’t. But I believe this book is an important step toward generating a new politics. And I share Marjorie Kelly’s optimism that it is possible. What she essentially is after is a lively time of argument and inquiry in which the oldest deepest questions, what it really means to live in a democracy are back in play again. And people are once again in motion toward achieving there are democratic ideals. Now everybody who is affiliated with INET knows my reverence and love for that man, William Greider. And to experience his vivacious joy and a preface, he did a lot of different books and he didn’t talk that enthusiastically very often. So I’m very, very excited in honor of Bill Greider’s tremendous life writing about the Federal Reserve and globalization, the military industrial complex, how David Stockman got punished for trying to be a good office of management budget leader, director.

Rob Johnson (00:04:05):

I saw Bill had a compass for what mattered. And when he finds a friend like you and he writes like that, it made me curious, and I’m not going to talk much further now, but I’m going to tell this audience, when I read your newest book, I started calling my whole inner circle and having conversations. So I’m not the writer that Bill is, but my enthusiasm for your latest book is comparable to his enthusiasm for the divine right of capital. So Marjorie, thank you for joining me. Thanks for listening to my intro diatribe and I look forward to hearing what you think. But I want to start with a simple question. What inspired you to write this book?

Marjorie Kelly (00:05:00):

Well Rob, thank you so much for that wonderful introduction. It was fun to revisit that writing by Greider. He’s a wonderful guy. Yeah, I am really circling back to the territory of divine right of capital with this book. That book was really a deconstruction of the corporation and comparing it really to the monarchy, to the, it’s run by an aristocracy, it’s capital, the controls the corporation. And it’s been 23 years since that book came out and things are worse and not better. And in this book I attempt looking at the economy, not just the corporation, but the economy and how it’s really, it’s a capital driven economy. It’s driven by wealth supremacy. So why did I write this?

Marjorie Kelly (00:05:57):

I started out being publisher and co-founder of Business Ethics magazine back in the late eighties. I just wanted to talk about good business, good investing. I didn’t want to be a business basher. And I became discouraged over time. I saw, I published that magazine 20 years. I saw corporate behavior getting worse rather than better. And I came to see that this drive to maximize gains to shareholders requires greater ruthlessness over time. Because the more profits you deliver one year, the more you have to deliver the next. And it really is ending. And really it comes down to this drive of capital. So I wrote that divine right of Capital 2001. I’ve been at a couple of different think tanks and now I’m at the democracy collaborative and I’ve tracked the rise of a democratic economy. There are so many visionaries who figured this out. How do you run companies differently?

Marjorie Kelly (00:06:51):

How do you do investing differently? It’s been figured out and yet we’re lacking momentum. We’re lacking coherence of really a movement. So I wanted to go back to really delegitimizing the core aim of our economy, which is a form of bias. It basically says wealthy people matter more than everybody else. No amount of wealth is ever enough. Wealth deserves control and power and maximum income. That’s wealth supremacy, that’s the name of the book. And that is driving so many crises today. So I wanted to be a truth teller, Rob, I’m closer to the end of my career than the beginning. And I just thought pull out the stops, say it like it is. And that’s what I did.

Rob Johnson (00:07:39):

Well, and what I can see, my father was a doctor diagnosis and prescribed remedies. Part one, naming the unnamed part two, the myths of wealth supremacy and part three where we begin. So you’re diagnosing and then through what you see and your insights that you share with us, you’re taking us in a new direction towards a new north star. And I love just what you might call the meta thematic guidance that your book took me on. And I really think there’s a lot to explore. And just like Greider said, he sometimes disagrees with this, this and that.

Rob Johnson (00:08:28):

I think you identify a lot of things. And the question is, my questions come more is can we resolve them with say, a Supreme Court that seems to be plutocratic driven. I’ve just listened to David Sirota, the Master Plan podcast, which is an extraordinary 10 or 11 episodes from the beginning of the Powell Memo, citizens United to how the Wichu might call the umpire doesn’t get in the way of the batter being hit by the pitch from big money and using the baseball playoffs as an analogy right now. So let’s talk about, what is it that’s unnamed that you name in the first part of the book?

Marjorie Kelly (00:09:24):

Yeah, the first thing I call it is wealth supremacy. This idea that wealthy people matter more than others. Someone we know about white supremacy, we know about male supremacy. Well, there’s this other form of bias that we don’t recognize enough. And you can say it’s class bias, but I mean class, of course it is, right? But class is many things, tastes going to the right schools and so forth, but it all rests on a foundation of wealth. That’s the economy that’s designed to deliver that. So the second thing I call it Rob, is capital bias. So how do you keep the wealthy on top and secure and happy? Well, you have a system that has a bias driven through it in very technical ways. It’s bias toward capital. And capital is the operational form of wealth. Wealth doesn’t just sit there, wealth is invested. It becomes capital either in corporations or bonds or land real estate. So you invest in it becomes capital and then the bias of the system says maximum gains to capital is always to be preferred. Power to capital is always to be preferred. And I unpack that in a variety of technical ways

Rob Johnson (00:10:43):

And you sense, one of the things that I found very refreshing because of reading this book right now is it didn’t feel like you were aligning with the Democrats or the Republicans. There’s a sense in which when the system’s broken, it’s like Gary Gerstel talked about in his rise in decline of the neoliberal order. It’s not one set of bad guys, they got ugly hearts and one set of good guys, men or women. And it’s about the structure of the incentives and survival, et cetera, drives people in the direction of servitude of wealth as would you mind calling turbocharges its supremacy?

Marjorie Kelly (00:11:34):

Yeah, that’s right, Rob. I mean, I think we’ve lived for a long time with the idea that Republicans are over here and they’re running the economy and they know how to do that. Democrats are over here and we’ve got government and we want government to serve the public good. Well, I think if you step back and look at it, we need to turn our attention. There’s only so much you can do from the seat of government. Certainly it’s needed, but we need to actually change the structures and norm and culture of business and investing itself. I like to say we long ago democratized government. We have yet to democratize the economy and that’s the task that we face. And it’s different than regulating business. So when you have business that’s owned by workers and that maybe it’s a B Corp, which means it has a public benefit as it’s purpose.

Marjorie Kelly (00:12:29):

You have workers on the board, maybe you have public interest directors, then you have a company that is designed to serve the public good. It needs to make a profit stay alive. That’s a kind of a law nature, but it doesn’t have to maximize profits. That’s a demand of capital. So you can design companies, you can design investments so that by their nature they are delivering better outcomes ecologically and socially. And that’s a different approach. So it’s an institutional and norms kind of approach, which I think is precisely what we need right now. And believe me, so many visionaries have worked this out.

Rob Johnson (00:13:12):

Well, I guess I can imagine some of the audience in this era of climate concern being a bit confused because what you talk about in government and ownership or B Corporations has to do with taking better care of the people who really do make things within the corporation. And then there’s the externalities, the side effects related to water, related to temperature. I just came back from helping my family with Hurricane Milton, and it’s really profound that we aren’t seeing how to handle the environment more. And I think right, that inside the tent people can say, we’re doing this, we’re building this. We don’t want to have these negative side effects. But I also think we need governance, creating boundaries because the temptation to make more money for your own team when you’re despairing might make you cross those boundaries and

Marjorie Kelly (00:14:22):

Yeah, that’s absolutely right, Rob. I don’t mean to suggest that employee ownership and B Corp will solve all our problems. I mean it’s an all hands on deck solution situation. We need government fully active limiting carbon emissions and so much, I am a Democrat by the way, but imagine if we were trying to deal with climate change and oil companies were with us in that, imagine if oil companies had environmental people on their board saying, we need to responsibly wind down. Maybe we can ramp up some other lines of business, maybe wind or whatever, but we’ve got to wind down on carbon emissions. Who better to figure it out than oil companies? So why do we accept a norm that tells Exxon maximizing gains for shareholders is your purpose. It is your guiding purpose. It is your only purpose. Nothing else matters. Why do we allow that to exist? I mean, that kind of company should no longer exist. It really, it’s past its prime. It’s created by government. Corporations should be serving a public good and we just can’t allow profit maximization for the few to remain a norm with these behemoth institutions that are basically running the world.

Rob Johnson (00:15:51):

Yeah, I remember years ago there was a gentleman, there was a lot of very, how it called broad imagination type people around Berkeley, California and so forth. A man I met named Peter Schwartz wrote a book called The Art of the Longview, and then he started working with some of the European oil companies on anticipation of which you might call the management of externalities. And this was before we were so acutely alarmed, but I could see what you might call a constructive curiosity. But in the end, I don’t think it’s taken hold nearly to the depth and degree that it needs to.

Marjorie Kelly (00:16:35):

No, I think that’s right. I think voluntary change only takes us so far. And what I’m trying to do with wealth supremacy, Rob, is to undermine the cultural legitimacy that wealth bias stands on. We would not allow corporations to exist. That said their purpose is to benefit white people or that their purpose is to benefit men and they’re going to systematically dehumanize and disempower women and blacks. We would not permit that to exist. And yet we do permit it to exist. The companies say that their purpose is to make the we wealthier, that’s their sole purpose and they’re going to pull out all the stops to do it, even if destroying the planet happens along the way. That’s insane. And so when we start to see that wealth bias is really what’s driving the system, and we recognize that that is not legitimate, that my hope is that it makes the foundation that the system is standing on into sand. You cannot stand on a foundation of bias in a democratic society once we recognize that bias. I don’t know if I’m right about that, Rob, but that’s my hope that if we see that bias is driving this, then we will say, well for heaven’s sake, no, we can’t have that. Of course corporations are going to fight. It’s not a slam dunk once you see what needs to happen. But as you said, it’s a north star.

Rob Johnson (00:18:09):

But I thought the analogy that she drew from what I will call the colonization of the world during the British Empire, and particularly as it pertained to Africa, now we have this tension which is Africa’s population is getting very large. Africa is an equatorial region in many parts. Subsistence farming won’t persist. Global large scale, hundreds of millions of people migrating doesn’t work. And how would I say we’re struggling particularly in light of US China tension with who is the leader who makes the rules, what’s the common good for the global south look like? And to be fair, let’s say you are, you’re a United States senator or whatever, and the World Bank wants to take care of that. All the people in the town where I grew up, Detroit, Michigan, will get awfully angry because why you take care of them? You never took care of us. My children are afraid, tuitions are high, et cetera. So which might call the reallocation of money that has a moral purpose is also in the tension. There are a whole lot of channels of moral purpose that aren’t being taken care of. How do you create the order of the rank of those for priorities for all of us? Right.

Marjorie Kelly (00:19:39):

Well, I think I would start Rob by saying that we have enough money to deal with the situation that we’re in. One of the things I talk about in wealth supremacy is financialization and economists, as you know, have well established this phenomenon over decades at Democracy Collaborative. We hired three international economists to do some research for us on this and they showed that in the US for example, if you take all financial assets and that’s stocks, bonds, various kinds of financial assets, they are now five times GDP. When I was a kid in the 1950s, financial assets were roughly equal to GDP. And over the course of my lifetime it’s been, they’re now five times GDP. And yet this is what the system is designed to grow a maximum amount and that becomes an extractive force. The economists we hired, they showed that out of all GDP gross domestic product, it’s income spending, it’s all the things, the activities of the real economy.

Marjorie Kelly (00:20:59):

GDP is now when it grows, one third of it is going to finance and that’s executives and investors both. So no wonder people are feeling squeezed, the flow of money is being siphoned off from ordinary people and who can’t barely pay their bills drowning in debt because it’s going to finance. So I think if we say, okay, so does Bill Gates who has last I heard 23 billion no $230 billion, does he need to maximize his returns? That’s the priority that we have. Now, Rob, you said how do we set priorities? Well, we have a priority. It said the wealthier you are, the more wealth will be created for you. We know that billionaires doubled their wealth during the pandemic.

Rob Johnson (00:21:56):

You had that wonderful report from Oxfam. I did a podcast with them about that exact question, which was what the 10 wealthiest people in the world paid no taxes on the increment of their wealth during the pandemic and the coping scale of that money, had it been taxed at 30% would’ve provided vaccinations and medical services for the entire planet.

Marjorie Kelly (00:22:21):

Yeah, that’s exactly right. We have the money to meet the needs. We’re spending it wrong, we’re investing it wrong and we’re making the wealthy wealthier. That’s the priority right now. And we need to change that.

Rob Johnson (00:22:36):

It’s an interesting, because how would I say the historic parable is if you get in the way of the wealthy, then you sometimes stop the rising tide that can raise all boats. What it seems like you’re saying is now that the rising tide is allowing one person to swim and the rest have drowned, are struggling.

Marjorie Kelly (00:23:01):

So here’s another way to put it. I mean we’re told we’re in a trickle down economy, right? Let the wealthy get their wealth and some will trickle down to us. The economists that we hired showed that reverse. The reverse is the true. Where does their wealth come from? It comes from extracting from the rest of us. So it’s not trickling down, it’s being siphoned upward. It’s being siphoned through debt, through debt payments. Debt is a huge amount of financial assets today. You look at corporations, they are spending money on stock buybacks. They’re not raising wages. In fact, they’re laying people off in droves or turning full-time jobs into part-time jobs, all those are forms of extraction. We’re going to extract the money formerly paid to full-time workers and give it to stockholders who are primarily the wealthy and let people struggle along with their Google, I mean, sorry, with their driving Uber and those kinds of things. So when you recognize that wealth is actually a form of extraction, then you start to understand what’s going on in our system.

Rob Johnson (00:24:12):

Yeah, I mean wealth can be the result of creation, but then when it’s reoriented, it becomes a human. I call predatory extraction.

Marjorie Kelly (00:24:23):

Yeah, that’s right.

Rob Johnson (00:24:25):

A different way.

Marjorie Kelly (00:24:27):

Yeah, financial, I want to buy a house, it’s helpful to get a mortgage that way I don’t have to save up all the money and I pay interest on that mortgage. That’s a reasonable kind of thing. When you start to bundle mortgages together and turn them into financial assets and you’re trading them, then you have a financialized system and something else begins to occur. It’s very much like climate change, Rob. I mean, back in the fifties, back in the fifties, you could set your thermostat where you wanted or drive a little bit. People weren’t flying all over the world the way they are now, but when you have so many people traveling, so much living in such big houses, then our activities in the aggregate become dangerous. And it’s the same with finance. At a reasonable real world level, it’s fine. But today five times GDP, it’s become a dangerous force.

Rob Johnson (00:25:27):

So as you’ve gone through, you kind of like we’d said, you named the problems, but then you do a lot of exploration of like I mentioned, your Oxfam study that you cite and you talk about people like Michael Hudson and others who the INET community is familiar with his work. And so then the question I guess is at some level the vision of what to change. And you talk about changing who runs and controls corporation or who’s on the board and what kind of, I’ll call channels meet their objectives after the objectives are redesigned. But then I think there’s the echo you always used to get back, this is when I was a PhD student, all you got to do is go study Lenin and Stalin and Mao. And you can understand that government centralized social systems don’t work either. That in other words, the same what you might call human spirit flaws, our operative in that world just as they are in what I’ll call the plutocratic sphere that you’re describing.

Rob Johnson (00:26:51):

So the question I guess that I struggle with is where do you find the balance and where do you find what you might call agreement on what the common good looks like? The reason I’m putting this question before you, I want to just cite a man who I cite frequently. Martin Wolf who writes for the Financial Times. It’s just written a book in the last couple years called The Crisis of Capitalist Democracy. And as a person whose family was devastated by the rise of the Nazis, Martin felt after the 2016 elections and so forth, but he was writing this book in 2020, 2021, that the, what you might call the stresses that the people who are left behind are feeling sometimes make them susceptible to charismatic autocrats who can be very dangerous ultimately. And he was writing a book. I guess what I would say it felt to me, I read all the chapters before and gave him comments and he was saying, we are on the on-ramp to the rise of authoritarianism again. And unless we do the kind of adjustments and changes and recognition that are in your book, we can go to that ugly place. And so this isn’t just a nice little wandering out in the imaginative garden. This is at the core of what my children’s world and my grandchildren’s world is going to look like.

Marjorie Kelly (00:28:40):

Yeah, I think that’s right. That in order to survive, the plutocracy needs to capture government. It’s no longer the little bits of profit that it used to live on aren’t enough anymore. It needs to cut down taxes, it needs to destroy the regulatory state which the Supreme Court is taking steps toward. It needs to capture democracy and invalidate the vote. It’s a few billionaires who are really behind the hard right, even though they’re very good at stirring up racism and fear of immigrants. But really it’s the interests of the plutocracy that are being protected. Yeah, so there’s a wonderful book called Globalists who talks about that neoliberalism, which is the regime we’ve lived under for so long. Hands off the economy, you don’t want government control. He said that neoliberalism was really born in the death of empire. That at one point you had Europe controlling 85% of the planet’s surface captured Africa and about a decade and controlled it and extracted the wealth, sending it back to an elite in Europe.

Marjorie Kelly (00:30:01):

And then when that fell apart in World War I in particular and continued to fall apart in World War ii, then there was this scramble. You no longer had a United world market. It was united by empire. Now how were you going to replace that? And it was done through this theory of neoliberalism, which basically said, well, you can democratize government, but keep your hands off the economy. So the economy continues to be aristocratic and plutocratic and Africa. You talked about the problems in Africa. I mean basically colonialism destroyed what had been a workable civilization in Africa. And so colonialism now, empires now are portfolios of assets. That’s where empire has moved and yet its mind is essentially the same. So yes, we have to preserve democracy and we have to do, I think the analogy to climate change is very helpful because there’s two levels at which we deal with climate change.

Marjorie Kelly (00:31:09):

Number one, we have to get people off rooftops. When there’s flooding, you have to get them to safety, you have to stop the forest fires. So there’s immediate action that needs to be taken. But if that’s all that we do, we are condemning people to worse flooding to further forest fires. And so there’s this other action that you need to do at the aggregate and you need to have international summits and gatherings to track the level of climate change and to come up with agreements, international agreements, you need both kinds of action. Either one or the other is not enough. I would say the same is true with our economy. We have to preserve democracy. Now my wife is helping to help people correct their ballots in Pennsylvania, calling people one by one did there was a flaw in your envelope. You need to redo it.

Marjorie Kelly (00:32:02):

I mean, the detailed work that needs to happen and needs to happen now that is real. But if that’s all we do, the plutocrats who are getting wealthier by the hour are going to continue to find new ways to destroy democracy. So we have to turn and look at the plutocrats themselves. How are we creating a plutocracy? And we’re creating it through very deliberately, through very simple means. The fact that only capital has a vote. Inside corporations workers are disenfranchised and disempowered. They have no voice, they have no claim on the wealth that they help to create. The income statement itself, which is the lens to which every company views its activity, says by its structure, profit is good, that’s income to capital, pay capital as much as possible. Income to workers is called expense. Expense is bad. Pay workers as little as possible. And so that bias against workers is built into the very structure of the income statement and drives company behavior.

Marjorie Kelly (00:33:01):

You look at fiduciary duty, which says, oh, you have a duty as an investment manager to maximize returns to capital. Well, no, you don’t. Don’t have a duty to maximize. You have a duty to be prudent to pay attention and to have reasonable returns, but there’s no duty to maximize. So we live by all these myths which we think of as technical and benign and just normal and just like we live by turning our thermostats a certain way, driving our cars a certain way. So we need to look at these norms and these practices and these institutions and change ‘em at the same time that we’re dealing with the very immediate problems.

Rob Johnson (00:33:43):

Yeah, I remember watching a film that included a gentleman named Tristan Harris who I had been involved in. He’d been at some of our events that we held out in San Francisco about technology, and in this movie called The Social Dilemma. He and some of his colleagues painted the picture of how many of these big companies, the Googles and Microsofts and so forth, know that they can raise their rate that they charge advertisers if they get longer duration and more people signing on longer duration of the person who signs on. And so what they seem to have done was studied the person and fed them what they wanted to hear. And essentially what was being created was two different channels, let’s call it, or three different channels, all of which reinforced people. But it was, as they said, creating a civil war.

Marjorie Kelly (00:34:53):

Yeah, that’s right. Yeah, that’s right. It’s profit maximization that’s driving that. And I think it’s really important for us to recognize that I was trained initially as a journalist and I’ve seen newspapers systematically destroyed basically by the internet and by these large tech companies. So we used to have journalists committed to at least trying to tell the truth and be accurate and factual. And now we have people serving as clickbait, whatever’s the best clickbait. That’s what they’ll give us because that’s where they can get the most ad clicks. And so we’ve, given our news function is essential to democracy, we’ve given it over to clickbait chasing and profit maximization. So again and again, you see this profit maximization as really lying behind so many of the issues that we’re facing

Rob Johnson (00:35:58):

At some level, what you might call the information systems oversee or how would I say are woven into our society. And when they play those profit games inside, it can be divisive for society rather than persuasive and healing. And I think it kind of stunned me to see that film and see how these kinds of pressures related to profit maximization are now in a national and a global level of greater concern. Just as for instance, the fear of nuclear war has actually increased defense budgets. I mean people, whether it’s the late Daniel Ellsberg or President General Eisenhower warning us or whatever. There are these kind of feedback and incentives, which I would say are examples of what you write in your book. And being overly simplistic can do in neglecting many of these incentives and side effects can be very, very damaging cumulatively to society. And I’ve just given a talk. I just gave a talk in London to a large Asian audience about a month or two months ago now it is. And I went through the gala polls of they do, it’s roughly every April confidence in the various different institutions, whether it’s the media or manufacturing industry or the Supreme Court or the Federal Reserve or the Center for Disease Control. Almost everything is down more than 20% with the exception of confidence in small business and organized labor.

Rob Johnson (00:38:06):

The disparaging despondency of the American people regarding its structure is feeding that danger that Martin Wolf talked about and what you might say, a proper diagnosis, which I think your book is a wonderful on-ramp too, is very, very important medicine right now.

Marjorie Kelly (00:38:30):

Yeah, thank you for that. I think that’s right. We’re seeing a breakdown of a lot of, I think trust with good reason, what you described seeing with the information ecosystem. You can see it in health as well. I mean, we’ve turned over the development of medicine to big pharmaceutical companies that are out to maximize their profits. They’re not out to create the drugs that people actually need. So sometimes the drugs that we need that might be inexpensive are not being developed or sold correctly because of this profit maximization. I’ve studied Buddhism, Rob, one of the tenets of Buddhist psychology is that we all have various seeds in our store consciousness. We have love, we have hate, we have greed, we have altruism, we have all of these. We all had these seeds in us. And the question is, which ones are we watering? Which parts of yourself are you growing?

Marjorie Kelly (00:39:33):

So what our economic system does is it grows and in fact mandates greed and puts it on autopilot. So CEOs are paid by share price. When their share price goes up, that’s when they become fabulously wealthy. When their share price doesn’t go up or doesn’t go up enough, they get fired. So they are basically required to focus solely on profit maximization. That’s just one example. And so one of the things I’m trying to point to is that point profit maximization is a dangerous force in society, in aggregate, in the same way that the sex drive can be a dangerous force when it’s taken into extremes. And so we as a culture try to have norms around that. But the norms that we have around wealth, we basically say, well, no amount of wealth is ever enough and making wealth for the wealthy comes first. So we’ve put all of the incentives toward maximization, and that is, it’s become such a destructive force.

Rob Johnson (00:40:47):

Well, it’s quite enjoyable for me to learn about your thinking and how it’s inspired by Buddhist training because I just finished reading a book about the famous Canadian artist, Leonard Cohen, and he has a song that has become very famous about concern about the health of democracy. It’s called everybody knows. Everybody knows that the dice are loaded, everybody rolls with their fingers crossed. Everybody knows the war’s over. Everybody knows the good guy’s lost. Everybody knows the fight was fixed. The poor stay poor and the rich get rich. That’s how it goes. Everybody knows there are other verses and they come on with leaky boats and all kinds of other things. But I have always enjoyed his music. And to hear you talk about Buddhism when I’ve just read about his Buddhism and feel his lyrics resonate with the message that you’ve given us in wealth supremacy. People always tell me that, how would I say the arts often carry the message that we have to bring forward. But how would I say there’s a certain art to the kind of book that you wrote too, that I’m very impressed by. And so how would you like to set up or organize or whatever to bring the mission structure you’ve defined to implementation? How do we do that?

Marjorie Kelly (00:42:27):

Yeah, so we start with clear seeing. We see that the nature of the problem is that there’s a bias toward wealth built into many technical aspects of how our economy is run and built into institutions, both corporations and investments. And once you see that bias is the nature of the problem, then I think the solution becomes obvious. We need to democratize the economy. Now, what would that mean? I see. And when I say, I mean also the democracy collaborative, this is work that we have been working on for a couple of decades. What we see is needed is two great processes. One is we need a great ownership transition. You can’t have the wealthy owning everything. You can’t have private equity owning everything. So you need ordinary people to have a stake in where they work. You need broad home ownership. You need land perhaps in commons ownership. So you need public ownership, possibly of pharmaceuticals, for example. Or some banks. There’s a movement for state owned and city owned banks. So you need a great ownership transition. And a lot of people are working on that. There are various pieces of what that means.

Marjorie Kelly (00:43:57):

But then second, what you need is what I call a next system of capital. Capital is not going to go away. You don’t want government to own everything. You do want some public ownership, particularly in inappropriate sectors. But we needed a next system of capital. And we did a convening at Boston University, worked with Neeva Goodwin on that. She’s an economist.

Rob Johnson (00:44:27):

She’s on the board of Inet,

Marjorie Kelly (00:44:29):

Wonderful Neeva, very good friend and a wonderful person. And she and I did this gathering at Boston University and we had 15 experts in the room. We looked for existing practices or existing, well-developed ideas. How would you have a next system of capital? We came up with basically seven wedges, similar to the seven wedges of climate mitigation. You need different ways to sort of wedge your way into the problem. You need debt forgiveness, for example. There’s some wonderful work being done with debt for nature swaps. There’s also work being done with churches, buying medical debt and then forgiving it, buying it for pennies on the dollar and then just forgiving it. So we need debt forgiveness, we need impact investing. You need investing to be for positive impact and not just maximum returns. So you need to reclaim the Federal Reserve. This is Robert Hackett’s idea. He’s a Cornell.

Rob Johnson (00:45:29):

Yeah, yeah, I know problem.

Marjorie Kelly (00:45:32):

Yeah, he’s a brilliant guy, law professor. And he says the Federal Reserve was supposed to be about serving communities. And he said, let’s reclaim the old purpose of the Federal Reserve and make it a tool for local economic development.

Rob Johnson (00:45:46):

As Bill Greer used to say, the Federal Reserve is independent. Independent from whom?

Marjorie Kelly (00:45:54):

Good point. Right? Independent from the government, but not from the banks. So there’s a series of approaches that we need in order to have a next system of capital, a series of ownership transitions that we need. But to our mind at the Democracy Collaborative, those are the two great processes that we need. And I think underlying both of those, Bob, is really a shift in awareness, right? A shift that we need sort of new approaches, not just the old approaches of regulation and unions, although we certainly need both of those. And I think unions have a huge role to play, but we need, workers should also be in boardrooms. They shouldn’t have to organize shop by shop by shop in order to have a voice. They should have a seat at the board level, several seats. So I think we need this awareness of the nature of the transformation that we need. And then there’s a variety of ways to go about it.

Rob Johnson (00:46:55):

It’s almost like a navigator when you realize you got a bad map, you know are at risk of hitting the rocks and sinking your ship. So you got to change, finding the next map is a different thing. Or finding the north star as we use as a parable is important. And it’s interesting to me that kind of tension that existed between the keynesians kind of the, I’ll call Cambridge England, Keynesians and University of Chicago, Joan Robinson and Milton Friedman with, how would I say, with MIT and Harvard standing in between. But that doesn’t feel to me like the full scope or the spectrum of the exploration that we need to undertake at this point. And a lot of economists in recent years have sought to demonstrate virtue by using more evidence-based work as software and data and things became more available. But it’s the underlying hypotheses, it’s the maintained hypotheses that is what you’re reaching toward to ask whether those questions make sense.

Rob Johnson (00:48:12):

I’ll give you a good example. A young man named Robert Ker, the son of George Ker and Janet Yellen, treasury secretary, Nobel Laureate or her parents, or his parents, excuse me. And Robbie Erol said, everybody acts like you got preferences, and then the preferences become your utility, and then they become your demand function, and then the market serves, you said, but market outcomes affect whether you are afraid and market outcomes affect your preferences. So there’s a feedback loop in there where preferences are endogenous in relation to market outcomes. I thought this guy’s brilliant young man. He really sees what is going on. And his father and Rachel Cran at Duke, who used to be at Berkeley with George Aof, they wrote a book called Identity Economics that resonates with these same themes. So a lot of the building blocks that were very nice for clean model building have ramifications within them that we were not conscious of. And you are bringing us to this point of consciousness, I think is a very, very useful and powerful contribution.

Marjorie Kelly (00:49:40):

Yeah, thank you. Yeah, I think what we’re talking about is a new paradigm for the economy. And economists have been working for a long time about a new paradigm of economics. There’s ecological economics, feminist economics, and there’s all kinds of pieces of that heterodox economics. We also need a new paradigm of enterprise. I’ve been doing some work with Kate Raworth, the economist who wrote Donut Economics about what is the next generation of enterprise design that’s designed to live within planetary boundaries and social boundaries as its purpose and as its governance. And I’ve convened some of these companies and I’ve been writing about them. And we need a new paradigm of investing. And I think impact investing is the closest that we have so far. But a new paradigm is threatening to the old paradigm right here with

Rob Johnson (00:50:39):

Economists. I want to ask you a question because a lot of people talk to me. I used to work on the private sector and investing currencies were my specialty, but a lot of people are saying to me now that are in the climate world that the so-called impact investing and the ESG groups and so forth are a mask for avoiding doing what they need to do. They want to create legitimacy so their investors won’t depart thinking they’re partners in a destructive pathway for allocation of capital, but they aren’t really doing anything that is climate based. And I’ve actually talked to some people at some of the private sector firms who said to me, if we make our traders all do the ESG stuff, then we won’t make as much profit and they’ll quit and go to another firm and we’ll lose our talent.

Marjorie Kelly (00:51:34):

So it’s very important to make a distinction between ESG and impact investing. I mean, I’ve been around this field for more than 30 years, and it used to all be called socially responsible investing, and the idea was to invest to have positive impact. Well, that got turned inside out when it started to be called ESG, which refers to environmental, social, and governance factors. And what ESG is about is using ESG factors in order to protect and enhance your returns. If Coca-Cola is going to run out of water in its plant in Mexico, well then it needs to be concerned about having enough water. That’s not what socially responsible investing was supposed to be about. It was supposed to be about let’s protect the water, but no, now it’s become about protect the returns and we’ll just pay attention to the water to the extent that it impacts our portfolio.

Marjorie Kelly (00:52:31):

ESG is largely a crock, and I will say that outright, and I know a lot of people in that field. There are a lot of good people, but it’s been hijacked. I would say impact investing is something else. Impact investing is a subset, and these are people who want to use their investments for positive ecological impact, for positive social impact. And it tends to be maybe 5% of people’s portfolios, something like that. But there’s a lot. Now, there might be some greenwashing going on in impact investing as well, but for the most part it it’s more authentic and it’s more aimed at real beneficial impact.

Rob Johnson (00:53:17):

Well, I guess equality, whether it’s race or gender or just these people and those people, all who work at the same place, all who are necessary to create the output that sells. You’ve covered many, many different pathways and channels and inequities. And I’m curious, have you had chance to present to people who are leaders in government?

Marjorie Kelly (00:53:53):

Well, when I launched the book, I did it at the Aspen Institute in dc and I know there were policy makers there, so I was delighted to see that.

Rob Johnson (00:54:05):

I actually joined that on Zoom. I was in your audience that day. Wonderful. Yeah.

Marjorie Kelly (00:54:11):

Oh, that’s wonderful. Yeah, so I think there were policymakers there. We have worked with policymakers on issues of employee ownership. So there are some more specific things that we’ve worked on, but I think only sort of on the edges have I reached policymakers

Rob Johnson (00:54:34):

And who has argued with you the most vehemently? I’m curious. Has anybody given you pause or

Marjorie Kelly (00:54:48):

You’d be surprised how little of that that I’ve gotten? And it may be because I speak where I’m invited, right? And people invite me because they are interested in what I have to say. I’ve gotten very little pushback. I think if people understood what I was really up to, there would be more pushback. I will say, I mentioned that I’ve been working on next generation of enterprise design, and we submitted an article to the Harvard Business Review about that, and it’s very grounded talking about some companies that put nature on the board, Recology, which is a big billion dollar firm, this worker owned. We talked about real models that presented different kind of business, but we used the term wealth supremacy is guiding the current paradigm. Well, the editor at Harvard Business Review was initially interested in our article, and then when he read our draft, he said, well, this comes across as a rant. So he wouldn’t publish it. So he thought that it was a rant.

Rob Johnson (00:55:57):

Well, I guess you might say it would’ve been difficult for his audience to digest. And so he’s protecting his project from adverse reaction. But that doesn’t mean you are a rant. That means you might be talking through his organization and his documents to exactly the people that need to hear your message. It’s hard to get that. Well, that was my hope,

Marjorie Kelly (00:56:27):

But we didn’t get in there. There is one group that speaks to institutional investors, and she’s talked about bringing me in. I mean, you have to speak in terms that you can be understood, and I haven’t accepted that engagement one yet. We do have, there’s one foundation, which I won’t name, but it’s a 10 billion foundation that is looking at healthcare outcomes, and particularly for people of color. And they’re starting to ask themselves, well, how might our own portfolio investments be contributing to the very problem we’re trying to solve? And I’ve said that I would love to work with your board on that. I have worked with foundations before on social impact. I don’t know if they’ll take me up on that, but that would be a very delicate conversation. But I think the fact that people are starting to think about it is really quite significant.

Rob Johnson (00:57:27):

Yeah. Well, as I mentioned to you in our preparation for this, have this Young Scholars Initiative and hopefully changing the consciousness of the leaders of the future and also being mindful of the context in which they have to operate. So you want to teach ‘em what gets you tenure, what gets you published in the peer review journals, what gets you grants, what gets you a job at the World Bank? If you want to work in a multilateral institution or like the IMF for the World Bank, understanding those contexts and understanding their resistances is part, but understanding what you want to be when you got to go to the equivalent of St. Peter’s gate and ask for admission in the next life. What are you doing? What did you do in this chapter? And I think I’d love to get you together with our young scholars, because I think exploring with them we’ll cultivate invigorate conversation, teach them levels of curiosity that the Institute for New Economic Thinking using our title was meant to do. So in the next chapter, I’d like to line you up with them and we’ll kick off with this particular episode. And I know you’ve got other demands on you today, so I want to let you go, but with a great deal of thanks for what you wrote, for how you’ve moved me, for how you reminded me of William Greer and for what you’re doing for people on earth.

Marjorie Kelly (00:59:18):

Rob, thank you so much. This has been great fun.

Rob Johnson (00:59:21):

Excellent. We’ll see you again soon in hopefully many different contexts, but this is outstanding work. Thank you.

Marjorie Kelly (00:59:33):

Thank

Rob Johnson (00:59:33):

You. And check out more from the Institute for New Economic [email protected].

Speaker 3 (00:59:41):

And I’ll tell it and speak it and think it and breathe it and reflect from the mountain so all souls can see it. And I’ll stand on the ocean until I start sinking. I start singing.

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Marjorie Kelly (Completed 10/21/24)

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