Why 'Woke Capitalism’ and Crony Capitalism Stem From the Same Root - America's Future

May 7, 2021

Markets & Free Enterprise

Why ‘Woke Capitalism’ and Crony Capitalism Stem From the Same Root

By: Matt Hampton

The Chamber of Progress, a new group funded by Google, Amazon, and other tech companies, represents a confluence of two related trends: businesses trying to influence public policy and companies supporting left-of-center social causes.  

After its founding in March of 2021, the group’s first action was opposing Georgia’s voting reform.  But, they also support President Joe Biden’s infrastructure plan and other issues, including climate action and “a progressive society, economy, workforce, and consumer climate.”

Companies building facades of virtuosity has caused much political outrage recently, but whether you call it “woke capitalism,” corporate social responsibility, or stakeholder capitalism, businesses attaching themselves to causes other than profit is not a new phenomenon.

In 1929, the father of public relations, Edward Bernays, sought to increase tobacco sales among women by making the cigarette a symbol of female empowerment. Social norms considered it improper for women to smoke, so he fought the taboo by having women walk down Fifth Avenue during the Easter Sunday parade “in the interests of equality of the sexes.” This “Torches of Freedom” protest was a success for the American Tobacco Company and the first step in a tradition of marketing cigarettes as a feminist symbol.  

Capitalism vastly improves our lives, but as Jonah Goldberg wrote in Suicide of the West, it also leaves individuals seeking romantic meaning, which foments many political impulses that seek to demolish the modern order of capitalism and individualism: “When confronted with the seeming chaos of capitalism and democracy, the human mind retreats to its tribal programming.”

And companies exploit this anxiety by positioning themselves as a source of higher meaning. Much of modern branding aims to position brands as avatars of identity, status, and belonging.  And woke capitalism is that strategy’s next logical step. Buying athletic shoes may feel hollow, cold, and insignificant; but when brands insert themselves into political struggles, they can earn part of the tribal loyalty those conflicts create.  

Fifty years ago, economist Milton Friedman railed against a related trend: businesses arguing that they stand for higher ends than “mere” profit. To the extent that it was not a “cloak” to give profit-seeking a warmer glow, corporate social responsibility was contrary to the value of capitalism, he concluded. Businesses could do the most good by maximizing profit, which requires them to produce better, cheaper products, and neglecting this role was essentially stealing from both customers and shareholders to appear altruistic. 

Virtue capitalism shares fundamental similarities with businesses attempting to gain government favors, which is perhaps just as universal. Both are attempts to profit by means other than providing rational value to consumers.  When businesses choose to compete on grounds other than merit, we lose out on the value that competition would require them to provide.

Both erode the free market: cronyism erodes its political foundations by advocating for big government, and corporate social responsibility erodes its philosophical foundations because, Friedman wrote;

It helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of Government bureaucrats.

Like virtue capitalists, crony capitalists cloak their self-interest in the greater good.  

“While no company leader would eagerly increase their company’s tax bill,” Chamber of Progress founder Adam Kovacevich wrote in a blog about Biden’s infrastructure plan, “there’s a growing recognition in the tech industry that the United States needs sizable investments in both tangible and human infrastructure.”

But supporting higher taxes will raise the barriers to entry for potential competitors to existing tech giants.  

The Chamber of Progress also lobbies for repealing “discriminatory” foreign taxes on U.S. tech companies and other tax reforms that would benefit its members.  

Some of these reforms may be legitimate, but that’s the very source of the problem. When the government creates policies that favor some businesses over others, this requires businesses to compete to be the dog that eats, rather than the one who gets eaten. Silicon Valley may have created the Chamber of Progress as a defense mechanism as they face criticism from both sides of the aisle.

The creation of the Chamber of Progress should serve as a lesson to oppose crony capitalism on principle and therefore reduce government influence in the economy. But it’s more likely it will instead push the Republican Party towards more anti-capitalist sentiment, seeking to punish “bad” companies and reward “good” ones. Instead of passing laws against anti-conservative companies, Republicans should decouple the rent-seeking relationship between business and government across the board. But unfortunately, the first trend seems more common.