Here’s a letter to the Wall Street Journal:
Elizabeth Warren’s “Companies Shouldn’t Be Accountable Only to Shareholders” (August 15) is one of the most frightening displays of economic ignorance and intellectual arrogance that I’ve ever read from a high U.S. government official. Never mind that Sen. Warren mistakenly asserts that worker pay in the U.S. hasn’t kept pace with worker productivity. (Four years ago in these pages Liya Palagashivili and I offered evidence that directly contradicts Sen. Warren’s assertion.) And also forget that this former law professor, in her designs to radically remake the way in which corporations are governed, gives no evidence of familiarity with even the rudiments of corporate finance.
In effect, Sen. Warren’s aim is to confiscate a large chunk of the property of equity owners (those whose economic welfare is most directly tied to the quality of corporate decision-making) and transfer it to a largely nebulous set of “stakeholders” (those who, having directly risked nothing of their own on the performance of corporations, will nevertheless get a say in how corporations are run simply because politicians, bureaucrats, and judges declare them – according to what criteria we do not know – to be “stakeholders”).
Or maybe not. I above describe stakeholders as largely nebulous because, in fact, one group of them is quite clear – namely, existing employees. Perhaps the practical effect of Sen. Warren’s proposal would not be the widespread stakeholder management of her dreams but, instead, worker management. Corporations would be run overwhelmingly for the benefit of existing workers. Pay would outstrip worker productivity – which itself would fall. Payrolls would bloat. Efficiency-enhancing innovation would disappear. And economic competition would become anemic as companies are run less and less to produce goods and services that appeal to consumers and more and more to produce security and sinecures that appeal to workers.
Either way – whether corporations would be run for a broad set of “stakeholders” or only for workers – Sen. Warren’s planned confiscation of owners’ equity would turn what is now a Niagara of job-creating and prosperity-enhancing investment funds into a mere puddle, as stagnant as it is puny. We would then bid adieu to American prosperity.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
I don’t encounter many reasons for me to wish that Trump will win re-election in 2020. But this essay by Warren comes close.