The Questions That Will Shape the Future of Capitalism
Advocates of free markets must engage in the public debate about them.The Questions That Will Shape the Future of Capitalism
The Project Twins
Businesses can be famous for many things at once. Chick-fil-A is famous for savory waffle fries, splendid customer service, and financing homophobia.
This final achievement has brought the company a fair amount of unwanted attention. For instance, in October 2019, barely a week after Chick-fil-A opened its first location in England, the owners of the Oracle shopping center in Reading announced that they would not extend the restaurant’s lease beyond a “six-month pilot period.” The abortive effort left the Georgia-based company with egg on its face, but it was a smashing success for gay allies. “It’s a business based on anti-LGBT beliefs,” Martin Cooper, the head of Reading Pride, told a local newspaper. “If it was just beliefs, we probably wouldn’t be here protesting. It’s about the active engagement and where their profits are going.”
Where Chick-fil-A’s profits are going has been a thorny subject for the privately held company for some time now. At least as far back as 2010, the WinShape Foundation, a nonprofit established by S. Truett Cathy, Chick-fil-A’s founder, had made a conspicuous habit of donating to groups committed to preventing the cultural acceptance of homosexuality and, more urgently, to halting the move toward legalizing same-sex marriage. LGBTQ advocacy groups had been trying to draw attention to these disbursements when, in the summer of 2012, Dan T. Cathy, the company’s CEO and Truett’s son, decided to do them a favor. Setting aside his spreadsheets and executive summaries, Cathy shared his thoughts on gay marriage in a radio interview. “I think we are inviting God’s judgment on our nation when we shake our fist at Him and say, ‘We know better than you as to what constitutes a marriage,’” Cathy told Ken Coleman, a nationally syndicated talk-show host. “I pray God’s mercy on our generation that has such a prideful, arrogant attitude to think that we have the audacity to define what marriage is about.”
God’s mercy might also have been requested for Chick-fil-A’s social media team, which quickly found itself on the receiving end of a bombardment of incensed tweets and furious Facebook comments. The shelling was so intense—“Hate to think what they do to the gay chickens!” one critic tweeted—that shortly after Cathy’s interview, the company issued a statement reading in part: “Going forward, our intent is to leave the policy debate over same-sex marriage to the government and political arena.”
This hardly ended the affair, especially as Cathy’s comments effectively put a spotlight on the family’s philanthropic practices. The day after the company’s statement, the late Boston mayor Tom Menino wrote in a public letter that there was “no place for discrimination on Boston’s Freedom Trail” and vowed to block Chick-fil-A’s efforts to colonize Beantown, while the Jim Henson Company, home to the Muppets franchise, announced that it was suspending its collaboration with the company on children’s meals. Chick-fil-A, it seemed, had lost the support of Kermit the Frog.
We live in an age of protest, and not only because of a seemingly global wave of sociopolitical discontent.
Nearly eight years later, Chick-fil-A is still struggling to shed the impression that it is unwelcoming to the LGBTQ community, a very public battle it has had to fight every time the company has tried to expand north of the Mason-Dixon or establish beachheads overseas. That’s why the swift rebuke at Reading was so stinging. For all of Chick-fil-A’s efforts to burnish its image as a restaurant chain that is friendly to families of all sorts, many consumers have consistently demanded more evidence precisely because they remain unconvinced.
Perhaps that’s why last November, just a month after its stillborn expansion to England, the company announced “a more focused giving approach,” one that would support organizations “working exclusively in the areas of education, homelessness, and hunger.” And just in case there was any confusion about the use of the word “exclusively,” Chick-fil-A’s president and COO, Tim Tassopoulos, made the company’s intentions clear in an attendant interview. “There’s no question that, as we go into new markets, we need to be clear about who we are.”
Who we are—Tassopoulos seemed to imply to LGBTQ-friendly communities—is not a fox in the proverbial henhouse.
As the head honchos at Chick-fil-A have learned the hard way, we live in an age of protest, and not only because of a seemingly global wave of sociopolitical discontent. Human beings have a disputatious instinct. We love to haggle and bicker and barter—a trait that is essential to how economists have always understood the first law of motion in a market economy. Markets work because we will never be eternally satisfied with the options before us. We simply want more and better of everything.
Markets provide us one way of obtaining whatever it is we want at any given moment. They are not the only way, of course—I can purchase an iPhone from the Apple store, or I can punch your lights out and appropriate yours—but with respect to material goods, at least, markets provide a more expedient method of obtaining the heart’s desire than mendicancy, as well as a more ethical means than violence.
And yet, for everything that might commend it, this process of providing us “stuff” is not without moral consequence. How we create things, how we distribute them, and who benefits from that process are all matters that have significant implications for the communities we live in. If a woolen-sock factory upriver from a small town dumps toxic dye in the water, refuses sales to single mothers, and profits a misanthropic old man who spends every penny he makes publishing pornographic pamphlets, one suspects the townspeople might have something to say about it.
And yet, however much they might holler, would their voices be heard? It may come as a surprise, but this was not an overwhelming concern for the earliest proponents of laissez-faire, and not for reasons of cold indifference. Taking for granted a mostly rural world of routine engagements, they assumed that social suasion would inevitably shape the self-interest of individual actors, whose familiarity with their fellow market participants meant they couldn’t pursue their professional aims without implications for personal matters.
The advent of the industrial revolution changed things. (For more on this shift, see “Yelp Has Revived Intimate Capitalism.”) It not only depersonalized business pursuits—buyers and sellers, employers and employees no longer enacted the daily ritual of looking each other in the face—but it also dissolved the nucleus of commercial authority. With the rise of the modern corporation, the titanic figures of 19th-century commerce—Vanderbilt, Carnegie, Rockefeller, Morgan—were swept aside for byzantine hierarchies of featureless bureaucrats who were empowered by an even more remote and mysterious authority: the shareholder. The problem, in turn, for those who longed to address some defect in commercial behavior was less determining which individual to appeal to than coming to terms with the fact that there was no such person at all.
For the isolated individual, changing some complex institution’s objectionable state of affairs is no simple matter.
For an angry public, this left two conundrums in the face of corporate misadventure: How do we make ourselves heard? And to whom should we direct the message?
The first of these problems, in particular, provided a starting point for Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, a slender treatise authored by the late economist A. O. Hirschman in 1972. Hirschman was an idiosyncratic figure whose lissome prose and polymathic pursuits—agrarian reform in Columbia, economic integration in Europe, the semantic conversion of “passions” to “interests”—make him a throwback to a time when economics was understood to be a subset of political science which, itself, was merely adjunct to the ultimate study of what it meant to be human.
The subtitle of Hirschman’s book explains the possibilities intended by Exit, Voice, and Loyalty. Institutions of every sort stumble from time to time, Hirschman observed, and “each society learns to live with a certain amount of such dysfunctional or mis-behavior.” And yet, “lest the mis-behavior feed on itself and lead to general decay, society must be able to marshal from within itself forces which will make as many of the faltering actors as possible revert to the behavior required for its proper functioning.”
The forces we marshal to combat institutional misbehavior involve “two contrasting, though not mutually exclusive, categories” of affirmative action: exit and voice. We can simply stop participating in an institution—leave it, in the case of a club or association we belong to, or discontinue our patronage, in the case of a company—or otherwise we can raise a ruckus in the hopes that the institution will change its practices.
Significantly, Hirschman noted, voice and exit additionally reflect a “more fundamental schism” between “economics and politics,” by which he meant between how professional economists and political scientists view the world around them. When a loyal customer removes his business from one company and takes it to another (the path of exit) he “uses the market to defend his welfare or improve his position; and he also sets in motion market forces which may induce recovery on the part of the firm that has declined in comparative performance.” This, Hirschman remarked, “is the sort of mechanism economics thrives on.”
Voice is a different matter. As opposed to the neatness of exit, in which “success and failure of the organization are communicated to it by a set of statistics”—if more people buy my goods, I’m doing something right; if they stop, I’m doing something wrong—voice is “messy.” It involves the airing of grievances “rather than a private, ‘secret’ voice in the anonymity of a supermarket,” and it can be “graduated, all the way from faint grumbling to violent protest.” It is “political action par excellence,” Hirschman said, for it attempts “to change, rather than escape from an objectionable state of affairs.”
For the isolated individual, changing some complex institution’s objectionable state of affairs is no simple matter. If I am disappointed by GM’s paltry selection of electric automobiles, I can always head across the street to Tesla, a choice that may signal to the bean counters in Detroit, in some modest, mute, and entirely indirect way, that the company should offer more of them. But if I want GM to make that change as soon as possible in a public acknowledgment that car companies must do their part to stem CO2 emissions and combat global climate change, my power seems quite limited. Yes, I can raise my voice—I can march outside my local dealership screaming my guts out, waving a handmade sign depicting our beloved planet looking like a burnt kernel of popcorn—but we all know that the only immediate result of such activity will be shredded vocal cords. It will not include a change in company policy.
“The decision whether to exit will often be taken in light of the prospects for the effective use of voice,” Hirschman emphasized, which is why, as he would later acknowledge of his book, relative to the exit alternative, voice gets something of a short shrift.
Advocates of free markets must engage in the public debate about them.The Questions That Will Shape the Future of Capitalism
When protesters took to Cairo’s Tahrir Square in 2011 to oppose a decades-old Egyptian regime, it wasn’t just a powerful political statement—it also upended the cozy relationship between the government and favored companies.How Hashtags Can Push Down Stock Prices
But a lot has changed since Exit, Voice, and Loyalty was first published, for, as the senior leadership at Chick-fil-A may well appreciate, “the effective use of voice” has been democratized thanks to the advent of social media. Platforms such as Twitter and Facebook not only provide a means by which messages may be communicated the world over for free, but they have radically lowered the cost of staging a protest. No longer need one labor over poster board or pound the pavement in the rain. Shame may be brought on some company from a BarcaLounger or even the comforts of one’s bed.
Now, taking note of the experience of companies such as Chick-fil-A, some in the United States have concluded that, if social media magnifies any voice, it is that of individuals on the activist Left. And yet, the resort to social media as a corrective tool of corporate malfeasance has bipartisan appeal. Just a few months before Chick-fil-A was deported, Nike found itself on the receiving end of a social media outcry from the Right for its decision to pull a special edition Betsy Ross Flag sneaker.
The decision came after the company’s most famous spokesman, Colin Kaepernick, the former National Football League quarterback who gained notoriety for kneeling during the national anthem in protest of systemic racism, asked Nike to withdraw the shoe, which was released in the US to celebrate Independence Day.
The uproar on social media was immediate. “Nike thinks American flag is [a] symbol of oppression?” Republican Senator Josh Hawley of Missouri tweeted. “What planet are you on?” The remark kicked off a tweetstorm by Hawley that received nearly 16,000 likes and was retweeted more than 6,000 times, but what stands out about his criticism is that it goes well beyond a single decision by the company. “Nike is a symbol of everything wrong with the corporate economy,” he wrote. “They take advantage of our laws but send jobs overseas for sweatshop wages, partner [with] repressive regimes, aggressively avoid paying any US taxes, and then tell Americans to shut up and buy their stuff.”
Set aside policy specifics, there’s a broader point Hawley was trying to make that’s similar in spirit to that of the Chick-fil-A protesters: If a company wants to do business in a community, it must meet certain standards of behavior that go well beyond moneymaking.
This is the belief that is at the heart of what I am inclined to call activist capitalism, a commercial phenomenon made possible by the advent of social media. Emboldened by technologies that can amplify the voices of everyday people and quickly organize large assemblies in protest, consumers are increasingly calling on companies to ensure their activities are not merely consistent with the common good, but productive of it.
Naturally this phenomenon doesn’t assume, much less promise, unanimity about what constitutes the common good. If anything, insofar as corporate power and largesse may be called upon to support a particular vision, activist capitalism will probably enflame the tendency to dispute its terms. The point is not that corporations, and capitalism more broadly, will necessarily support a uniform set of values, rather that it will no longer be tenable for companies to maintain that they should be guided by none at all—none, at least, beyond the profit motive. They will have to be active participants in the larger drama of how we build and maintain a just society, and they will be held accountable, immediately and in public, for the decisions they make.
Is this development good for capitalism? That remains to be seen, but for my own part, at a time when the system seems most dubious to those entering adulthood, I see any forces that tend to socialize capitalism as making it far more likely that the strengths of the system will be conserved for years to come, and far less likely that the struts will give out entirely.
John Paul Rollert is adjunct associate professor of behavioral science at Chicago Booth.
The ‘amenity value’ of working from home may moderate demands for higher pay.Could Remote Work Help Curb Inflation?
Economists evaluate a policy proposal to fight higher prices.Should the US Outlaw Price Gouging?
Chicago Booth’s Raghuram G. Rajan visits the Capitalisn’t podcast to discuss some of the big questions about inflation in the US.Capitalisn’t: The Causes and Effects of Today’s Inflation
We want to demonstrate our commitment to your privacy. Please review Chicago Booth's privacy notice, which provides information explaining how and why we collect particular information when you visit our website.