Capital Ideas

From The Practice September/October 2020
Systemic problems come to the fore amid the pandemic

The year 2020 has been marked with no less than three acute crises: a public health crisis in the form of the global COVID-19 pandemic; a financial crisis linked to the economic fallout from the public health crisis; and a racial justice crisis, which, while far from a new phenomenon, was sparked by instances of recent police violence against Black Americans such as Breonna Taylor, George Floyd, and Jacob Blake. As we see in “The Year So Far,” all three of these crises are demanding their own forms of immediate action. However, they are also revealing deeper, more structural issues, including some economic principles long taken for granted.

This is the basic premise of Rebecca M. Henderson’s recent article in Harvard Business Review, “Reimagining Capitalism in the Shadow of the Pandemic,” based in part on her new book, Reimagining Capitalism in a World on Fire (PublicAffairs, April 2020). In the article, Henderson, who is a university professor at Harvard, argues that the convergence of all these crises can be viewed as an inflection point for lasting change to the economic systems that help preserve, and even perpetuate, many of the interrelated ills now cast in sharp relief by today’s challenges—among them, racial disparities in key indicators of wealth and health, deteriorating climate conditions, and a lack of trust and accountability in governing institutions. Moreover, these problems predated the pandemic, the resulting economic fallout, and the recent calls for racial justice. As Henderson argues, they can just as easily remain problems well after the acute crises of 2020 have retreated from the headlines if nothing is done to account for them.

“I’m not suggesting that firms neglect their duty to their shareholders,” writes Henderson. “Focusing on profitability is essential if a company is to thrive in today’s brutally competitive market. But profit maximization has always been a means to an end, justified by the idea that when markets are genuinely free and fair, there’s good reason to believe they lead to both prosperity and freedom.” As she explains, a reimagined capitalism might do better to anchor its mechanics in a broader vision for the public good. Henderson continues:

We cannot decarbonize the world’s energy supply without government regulating fossil fuel emissions and providing positive incentives to embrace low carbon solutions. Yes, individual firms can provide better jobs—paying employees a decent wage and providing ongoing training, among other necessary steps—but we’ll only successfully address inequality and racism at scale through structural reform, if we can do things like: provide quality education and health care to everyone, no matter their parents’ income; raise the minimum wage; and find ways to give employees more power as they negotiate with increasingly powerful firms. Most fundamentally, we’ll only rebuild trust in the political system, and with it a government that is genuinely responsive to ordinary people, if we can get money out of politics and stop tolerating business’s attacks on government. These attacks are often framed in terms of defending the free market, but too often are simply attempts to block the action we need to build a more equitable society.

Henderson highlights how these issues are interdependent, while also serving as windows into much deeper problems with the way our economic systems function. The potential long-term effects of these issues cut across industries and cannot be solved by lawyers alone, though, as we see in “Playing Through the Pandemic” and “Rallying Around Racial Justice,” lawyers will undoubtedly have critical roles to play. As Henderson writes, “We can learn from the horrors of the pandemic. We must. We don’t need to go back to ‘normal’—we need to reimagine capitalism instead.”


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