Productive Markets

Channeling the pursuit of profit toward the nation’s liberty and prosperity

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A great benefit of the free market is the latitude it affords individuals to pursue their own self-interest however they may wish to define it. When that pursuit advances the common good as well, capitalism generates unparalleled prosperity. But the free market alone does not guarantee that individual and public interest will in fact align. Market fundamentalism’s basic error is to misunderstand this point.

Conservative economics distinguishes amongst free markets and recognizes that only some have the alignment between self- and public interest necessary to harness capitalism’s power for the benefit of American workers, their families and communities, and the nation. Adam Smith shows how the system can work, not that it always will. Recent decades confirm that sometimes it does not. It is the productive market, not any free market regardless of conditions and outcomes, that public policy must have as its goal.

At American Compass, we work to understand the forces rendering modern markets unproductive and develop public policies that would create conditions in which capitalism can once again flourish.

We focus in particular on the parallel trends of globalization and financialization, which have pulled capital toward activities that generate profit while undermining the nation’s prosperity. Globalization severed the bond between capital and labor, so that growth and profit no longer depended on investment in a domestic workforce. Shareholders in multinational corporations saw their wealth skyrocket while workers saw their wages stagnate. Entire industries shifted overseas, decimating communities, reducing productive capacity, and slowing innovation. Financialization severed the bond between capital and the real economy altogether, offering huge paydays for producing nothing of value. Capital and talent surged toward Wall Street, the financial sector metastasized, and real investment declined. 

For more of our work on globalization, start with the Regaining Our Balance collection. The Where’s the Growth? Atlas provides an overview of the data on globalization’s costs and, conversely, the failure to generate promised benefits. Searching for Capitalism in the Wreckage of Globalization provides an explanation for why globalization has gone wrong. And The Balancing Act offers a comprehensive set of responses for policymakers. 

On financialization, start with We’re Just Speculating Here…, which shows how U.S. corporations have shifted their behavior from consistent investment in their capacity to provide goods and services to active disinvestment for the sake of disgorging cash back to shareholders. Our Coin-Flip Capitalism Primer highlights the corrosive role played by private equity and hedge funds, which collect hundreds of billions of dollars in fees while performing no better than the stock market. Confronting Coin-Flip Capitalism makes the case that American financial markets are misallocating capital, talent, and risk in ways that directly weaken the economy and suggests a range of reforms. And our Corporate Actual Responsibility collection considers the private sector’s obligations to the nation and the constraints necessary to ensure they are fulfilled.

Our work also emphasizes the unique role of manufacturing in an advanced economy, which investors may not consider when pursuing their own profit—thus the need for public policy to bring their self-interest and the public interest into closer alignment. Our work on semiconductors, including the Guide to the Semiconductor Industry and advocacy for the CHIPS Act, provides a case study of the broader phenomenon. Our Moving the Chains symposium brought together a wide range of policy experts to explore the many levers that policymakers have at their disposal.

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3/9/2022
Searching for Capitalism in the Wreckage of Globalization

Mutual dependence between capital and labor, not mere “economic freedom,” is what Adam Smith so ably described. Globalization destroys it.

Featured Content

Collections

Regaining Our Balance

3/9/2022

How to Right the Wrongs of Globalization

Coin-Flip Capitalism

7/12/2021

Coin-Flip Capitalism aims to help policymakers and the public better understand how the hedge fund, private equity, and venture capital industries function, what social and economic value they create or destroy, and how policy should respond.

Corporate Actual Responsibility

7/27/2020

Holding corporations accountable for their obligations to workers, their families and communities, and the nation.

Moving the Chains

6/8/2020

9 Strategies for Retaking Global Leadership in Industry and Innovation

Essays

Constraining the Corporation

8/5/2020 Oren Cass

Business leaders have lost contact with the communities and institutions that might hold them accountable, escaped from the oversight and regulation that would channel their activities, and proven themselves shameless in the face of whatever weak standards of decency the culture still attempts to muster.

Searching for Capitalism in the Wreckage of Globalization

3/9/2022 Oren Cass

Mutual dependence between capital and labor, not mere “economic freedom,” is what Adam Smith so ably described. Globalization destroys it.

Bad Trade

10/7/2022 Michael Pettis

“Bad competitiveness” results in weakening demand, which either reduces global production or requires surging debt to maintain demand and production at its existing level. Perhaps that rings a bell, because it is the world we live in.

Confronting Coin-Flip Capitalism

7/14/2021 Oren Cass

This paper presents the case for policymakers who favor free markets and appreciate the value of a well-functioning financial system to reform the rules governing that system.

The Rise of Wall Street and the Fall of American Investment

3/25/2021 Oren Cass

Confusion over the nature of investment is pervasive among economic policymakers and commentators, has bled into the popular culture, and threatens the nation’s future prosperity.

Conversations

Is Common Good Capitalism the Answer?

4/28/2022

American Compass executive director Oren Cass joins Luigi Zingales and Bethany McLean to discuss common good capitalism, China’s relationship with the U.S., Big Labor, and more.

Has the Right Gotten It All Wrong?

3/3/2022

Oren Cass joins David Bahnsen to discuss globalization, market orthodoxy, and much more.

Critics Corner with Stephanie Slade

4/1/2021

On the first episode of Critics Corner, Oren is joined by Stephanie Slade, managing editor of Reason magazine. They discuss the importance of liberty to the common good, whether government should fund research or infrastructure, the meaning of free trade in the context of China, and quite a bit more.

Commentary

The Market’s Border Crisis

4/21/2022 Oren Cass

American Compass executive director Oren Cass makes the case that revitalizing the American industrial base requires moving beyond globalization.

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