“Wealth Supremacy – An Interview with Marjorie Kelly

Marjorie Kelly is Distinguished Senior Fellow at The Democracy Collaborative (TDC), a nonprofit working to catalyze the creation of a democratic economy, where people reclaim control from extractive capital, and where all economic institutions are designed for justice. She is a leading theorist in democratic economy design, including next generation enterprise, place-based impact investing, and a next system of capital. Here latest book is Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises. Kelly has for years been a thought leader in next generation enterprise design, employee ownership, impact investing, and the building of a community-rooted democratic economy. Previously she was a Fellow at the Tellus Institute and cofounder/president of Business Ethics magazine.

What is wealth supremacy, and how did your previous work bring you to this book? 

Wealth supremacy is a term I devised to point to the central problem of our economic system – that it’s designed to extract infinitely expanding wealth for the wealthy few, and to disregard the harm this causes to the rest of us, to society, and to the planet.

I’ve felt compelled to write about wealth supremacy because of the hydra-headed emergency we’re in – the “polycrisis,” encompassing wealth inequality, biodiversity loss, climate change, and rising authoritarianism. Wealth supremacy is a root cause of much of this, yet it’s not widely recognized. 

I’ve had the privilege to work with and write about thousands of visionaries redesigning the economy. But I’ve become discouraged. We’re losing ground faster than we’re gaining it. Even when we build the positive, big capital devours it. It’s no longer enough to just build the positive. We have to turn and challenge the profit-maximizing, extractive financial system that is devouring the wealth of our society. We cannot leave this destructive force to run free in the world. 

Why is moral capitalism impossible?  

We don’t talk about “moral racism” or “ethical sexism,” because we know that bias cannot be made moral. Capital-ism is a system of bias. 

After decades watching change efforts fail, it’s become clear to me that we cannot reform or adequately regulate the system of extractive capitalism. We have to replace it.

The system flows around whatever regulations or barriers we create. Superfund liability for pollution? No problem. Chemical plants simply moved to China and other low-regulation regions. Wage and hour laws? No biggie. Corporations disaggregated the employment relation itself, turning full time jobs into part-time, contract, self-employment, and gig work – now 40 percent of jobs.  Black families enjoying rising home equity? Hey, great. Big capital moved in and used predatory mortgages to suction up that wealth and send it to Wall Street. Big oil companies pressured by investors to sell off their dirtiest assets? Wonderful. Private equity moved in and bought those assets, sometimes tripling production. 

Where the soul of the regime lives is in the idea of the regime. As systems theorist Donella Meadows emphasized, the most effective place to intervene in a system is at the level of the paradigm – the mind out of which the system arises. The mind of capitalism is about maximizing returns to capital holders, the wealthy. Until we call out wealth supremacy as illegitimate, our change efforts are doomed to fail. 

What is financialization, and how does it hurt society? 

Financialization means, quite simply, that there is too much financial wealth in our society, in too few hands. Instead of having an economy designed to produce more value in the real world, for regular people, the economy’s machinery has been rejiggered to produce higher asset valuations for the few – a giant sucking action squeezing consumer pocketbooks, shifting income from labor to capital, pushing housing prices to unreachable heights, loading families with onerous debt, creating monopolies that hobble family businesses, blocking our ability to tackle climate change, and enabling billionaires to capture democracy. The result is economic injustice, society-wide fragility, and planetary-scale crisis.

You warn of the final risk of financialization. What is that risk?

The destruction of democracy. The party of wealth cannot attract voters with its plutocratic agenda; thus it’s race-baiting the struggling white working class to win their allegiance. It supports Trump because he cut taxes and gutted regulation and put conservatives in the courts. As Senator Sheldon Whitehouse has said, the broad conservative movement has evolved to become a coordinated assault on democracy. “It’s a massive covert operation run by a small group of billionaire elites,” he said. 

If the role of race in antidemocracy work has been widely discussed, often overlooked is the role of plutocrats. What remade American politics was runaway inequality – that offspring of financialization, which created the pool of disaffected, struggling workers, and put too much power in the hands of billionaires.

Your work with Ted Howard is a main inspiration to us. What is the shift from “extractive capitalism” to a “democratic economy”? 

The democratic economy is one where financial extraction is reined in, where wealth and ownership are broadly shared, and where economic institutions and processes are designed to serve the public good; it’s about creating a democratic social order where all of us can prosper, on a thriving planet. 

The path to change is about moving beyond our system of extractive capitalism and building the next system, the democratic economy. A shift in core values is where it begins. Capitalism values financial wealth above all; yet people today clearly value sustainability, racial equity, fairness, broad well-being, and democracy. These values need to be embodied in economic institutions: ownership, corporations, and capital markets. We need a great ownership transition, so the 1 percent no longer owns everything, and so that capital is no longer in control of corporations – so that corporate governance is democratized.  We need wealth held in broad hands, so all of us have financial security and control over our lives.

We need worker ownership of enterprise, community ownership of water and electricity, public banks, public ownership of the health system, and more. We need new models of land ownership like the 15 percent of forests worldwide now controlled by Indigenous peoples and communities, said by the UN to be vital to preserving ecological diversity.

And we need a next system of capital; Wealth Supremacy has a chapter on seven pathways to a next system of capital, based on a convening The Democracy Collaborative did with a group of experts. Among those pathways is a new ecosystem of banking in the public interest. We need to rein in private equity, as Elizabeth Warren’s proposed policy shows. We need more local investing, support for CDFIs, a debt jubilee, baby bonds for disadvantaged families, and a reclaimed Federal Reserve – a “people’s fed,” as Cornell Law professor Robert Hockett proposes. Put it together, and it begins to add up to a full next system of capital. You begin to see what an entire economic system looks like when the public good is in its DNA.

What are the some of the common myths of wealth supremacy? 

  1. The Myth of Maximizing—No amount of wealth is ever enough, which is the basic principle of investing, and the core principle around which the system is organized.
  2. The Myth of Fiduciary Duty—Corporate and investment managers’ most sacred duty is to expand capital.
  3. The Myth of Corporate Governance—Corporate membership must be reserved for capital alone, while workers are disenfranchised and dispossessed.
  4. The Myth of the Income Statement—Income to capital (delightfully called “profit”) must always be increased, while income to labor (called the horrid name “expense”) must always be decreased.
  5. The Myth of Materiality—Gains to capital alone are real, “material,” while social and environmental damages are not real, not material, except when they affect capital. This is a principle of financial and corporate accounting.
  6. The Myth of Takings—The first duty of government is the protection of private property, which today we call wealth. While government taking of property is prohibited without compensation, wealth holders may take from others at will. 
  7. The Myth of the Free Market—There should be no limits on the sphere of influence of corporations and capital.

What do you mean when you talk about how corporations are aiming to get rid of employees altogether? 

There are a series of processes by which companies are eliminating labor expense, and in fact trying to eliminate employees altogether. The Wall Street Journal ran a story in 2017 with the chilling title, “The End of Employees.” It was tracking what’s called “subcontracting,” and what I call the rise of throwaway workers. As I wrote: “People unloading shipping containers at Walmart no longer worked for Walmart, but for a trucking company, which in turn subcontracted with temporary staffing agencies. Half the workers at Google didn’t work for Google but were subcontractors.” 

Contracting is seen as a stopgap, the Journal continued, “until more jobs are automated, freeing firms to dispense with some workers altogether.” 

Subcontracting, automation, gig work, outsourcing factory work abroad – all of these are aspects of the ongoing effort to get rid of employees. Since labor costs are often the largest expense for companies, driving down income for labor is critical to maximizing income to capital.   

You say it’s not wise to wait for investors to see that profits are too high. How do we pose this question, and to whom? 

In the investment management industry, only financial players and investors have a seat at the table. It’s a closed circle, with no incentive to question its own norms. But the question needs to be posed: can profits be too high? Posting this question is a subversive act. 

Business schools teach that the aim of management is maximizing income to shareholders. Business students could pose the question in class – can company profits be too high? Impact investors can challenge this by posing the question with one another, with advisers, and at conferences – can’t investment income be too high? 

I tell the story of Neva Rockefeller Goodwin, who announced at an institutional investment conference that she was capping her portfolio gains. The attendees “looked horrified,” she told me, as though she’d suggested “something completely outside of their experience.”

Pundits can pose the question in articles, aren’t pharmaceutical profits (EBITDA) of 30 percent too high? Isn’t the aim improved health, not maximum gain for the wealthy? Artists and activists can expose and mock abusively high profits – much as the #MeToo movement mocked Harvey Weinstein and other sexist men for their abusive behavior.

How important is community wealth building? 

We can begin to build the democratic economy right where we live. The Democracy Collaborative nearly 20 years ago articulated the concept of Community Wealth Building (CWB), an approach to local economic which is about transforming local economies through communities having ownership and control of their assets. I’m heartened by how many communities around the US and the world are embracing CWB. The entire nation of Scotland is taking up this model of development, and our colleague Neil McInroy advised them on that approach. Neil, Ted Howard, and our director of CWB programs, Sarah McKinley, have helped to seed CWB work in places like Amsterdam, Chicago, Los Angeles, Meadville, Pennsylvania, and many other places. Community Wealth Building is where the democratic economy is already rising all around us. There’s more happening than people realize. “This isn’t about pushing a boulder up a hill,” our friend Mary in Amarillo, Texas told me. “We’re at the top of the hill. We need to push the boulder down.”

What is the real problem – the one we’re not talking about?

That problem is financialization – the fact there’s too much financial wealth in our world, with its insidious processes of wealth extraction, which are the invisible forces driving so many crises. This is the inevitable result of wealth supremacy, the notion that more wealth for the wealthy is the aim of our economy, the notion that wealthy people matter more than others.  As I wrote:

“We’re not connecting the dots yet. We don’t hear about the rising number of billionaires and think: opioid crisis, precarious workers barely getting by. As college endowment returns soared not long ago, trustees weren’t thinking: local firms shut out by chains, private equity bankrupting companies, Black families losing equity in their homes. When big tech firms’ share prices were lofty, we didn’t’ think: post-truth society, corruption of democracy.” 

These outcomes are symptoms of the root cause of financialization, which is fed and upheld by wealth supremacy. We need to start talking much more about this.

Thanks so much.

SEE ALSO: Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises [Book Review]

INTERVIEW by Christian Sarkar