American Compass – their conservative economics get it right, mostly

American Compass is a self-described think tank for conservative economics. From its Mission Statement page:

“We are developing the conservative economic agenda to supplant blind faith in free markets with a focus on workers, their families and communities, and the national interest.”

There is much to admire about the analysis of our situation here. Globalization is accurately described as a failure to develop broader economic growth around the world, with its true face as the policy of low-wage jobs with no worker protections accompanied by the loss of high-paid jobs here in the US. All the while lining the pockets of corporations with larger profits. American Compass accurately notes what we describe here at AmericanDelusions as the shift from the production of goods and services to the extraction of money as the primary objective of corporations, aka Financialization. This comes in the form of a bloated, gambling enterprise that is our financial sector and the transformation of the real economy into enterprises whose only metric is next quarter’s profits, stock buybacks, and super bonuses for the managers.

American Compass also takes significant note of the wage gap that has nearly flatlined wages for most Americans over the past 40+ years. Their Cost of Thriving Index report for 2023 provides this very concrete example of the effects of flatlined wages:

In 1985, COTI was 39.7. Costs totaled $17,586, while median weekly income for a man aged 25 or older working full-time was $443 ($23,036 per year).

In 2022, COTI was 62.1. Costs totaled $75,732, while median weekly income for a man aged 25 or older working full-time was $1,219 ($63,388 per year).

In 1985, a single male worker worked 39.7 weeks to pay for the basics of middle-class life for a family of four. In 2022, the same worker had to work 62 weeks just to pay for the same basics.That is 22 more weeks of work to pay for an equivalent basket of basic family goods. But, of course, there are still only 52 weeks in a year. So, he ended up $12,344 short for the basics over a calendar year. This reflects the fact that, as measured by some, average wages in the US only grew by 17% between 1979 and 2020.

American Compass goes on to call for a return to investment in productive enterprises.

“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.”¹

American Compass sees the market system embedded in society and our politics. So, they call for support of families and communities.

“At American Compass, we work to identify the values and priorities that Americans hold dear but markets ignore, and to ensure that the nation’s politics and policymakers do not ignore them as well.”²

There is much to admire about American Compass’s perspective. However, two significant areas of analysis are completely missing: the control of government by the rich and corporations and the lack of competition in capitalism’s markets—monopolization. Effectively, there is no real competition in virtually any sector of the economy.

The Rich and Corporations Own the Government and Political Discourse

There are 435 members of Congress and 100 Senators. In 2021, there were 12,136 registered lobbyists in Washington, supported by over $3.73 billion to influence legislation and regulations. That amounts to $6,972,000 and 23 lobbyists per legislator. The bulk of these funds come from the rich and corporations. The situation in state and local governments is not dissimilar.

The national political discourse is dominated by the narrowing of the paths of conversation and information to a handful of reosurces owned by the rich and corporations. They have invested huge sums over many decades to establish think tanks, fund university departments, and otherwise set the language and framework of our national discourse.

The impact of all this money has been empirically demonstrated in research by Martin Gilens and others, which clearly shows the significant bias in law and regulation towards government actions to further the interests of the rich and corporations. From the summary of this research, “the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.…economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy.”³

For an introduction to how our political leaders experience money raising, listen to this podcast from This American Life, Take the Money and Run for Office. Though it is now 12 years old, I believe the story is still accurate.

The upshot of the control of our government by the rich and corporations is that they have mobilized our system of laws and regulations to arrange the economy to benefit themselves above everyone else. The proof is in the surge in income and wealth inequalities that have only grown more severe in the post-COVID years.

Competitive Capitalism Is Dead

A market in which three or four companies control more than 50% of a market⁴ is a fact throughout the US economy. These are highly concentrated markets – monopolized markets.⁵ Competitive capitalism is dead in America. This can be quickly illustrated by a trip to the grocery store. One of my favorite images of an apparently competitive market is the toothpaste aisle. All those different brands! Proctor & Gamble, Colgate Palmolive, and Glaxo Smith Kline, three companies, command 89% of this $3.19 billion market.

But the scale of market concentration is best revealed by a study by researchers from the U. of Chicago, Harvard, and Leibniz Institute, “100 Years of Rising Corporate Concentration,”⁶found that as of 2018, 97% of all business assets (plant, equipment, etc.) in the US are owned by just 1% of corporations. Further, the top 0.1% of corporations owned 88% of these assets. With this in mind, we can posit that the planning for developing our economy is in no way the sum of some idealized competitive struggle. This is centralized planning by monopolists.

So, what’s wrong with a monopolized economy? First, monopolists can charge their customers higher prices because their customers have no or few choices in who they buy from. Second, monopolists can pay workers much less in wages and benefits because they have no effective competitors. Third, monopolists can pay their suppliers of goods and services less for the same reason. Fourth, monopolists slow down or eliminate competition and innovation in their market sectors.

I am going to send a link along to American Compass to see if I can get some feedback.

1. https://americancompass.org/productive-markets/
2. https://americancompass.org/responsive-politics/
3. Gilens, Martin. Affluence and Influence: Economic Inequality and Political Power in America. Princeton, N.J; New York: Princeton University Press ; Russell Sage Foundation, 2012.; and Gilens, Martin, and Benjamin I. Page. “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.” Perspectives on Politics 12, no. 3 (September 2014): 564–81. https://doi.org/10.1017/S1537592714001595. This article has been cited over 3,250 times by other scholars.
4. is the definition by econometricians of a “highly concentrated market”
5. Though the word “monopoly” suggests that only one company can constitute a concentrated market, while econometricians stick with their three or four company rule, we will use the terms interchangeably.
6. Spencer Kwon, Yueran Ma, and Kaspar Zimmerman, “100 Years of Rising Corporate Concentration” (BusinessConcentration.com), accessed June 6, 2024, https://businessconcentration.com/.