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The Dangers of Woke Capitalism | Discourse

Summary:
Corporations have gone political. They proudly announce support for various social movements, embrace climate consciousness, fire employees for harboring real or perceived offensive opinions, try to institute their own form of gun control and even pull the baseball All-Star Game from Atlanta to protest a new voting law (leading to some awkwardness when the Braves won the World Series). Corporations now aggressively seek, or at least profess to seek, change in the world. This quest for change almost always involves embracing the progressive (or in some cases “woke”) side of an issue. Unsurprisingly, such moves are controversial. But the exact nature of the problem is unclear, as is what, if anything, the response should be. Enter

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Corporations have gone political. They proudly announce support for various social movements, embrace climate consciousness, fire employees for harboring real or perceived offensive opinions, try to institute their own form of gun control and even pull the baseball All-Star Game from Atlanta to protest a new voting law (leading to some awkwardness when the Braves won the World Series). Corporations now aggressively seek, or at least profess to seek, change in the world. This quest for change almost always involves embracing the progressive (or in some cases “woke”) side of an issue. Unsurprisingly, such moves are controversial. But the exact nature of the problem is unclear, as is what, if anything, the response should be.

Enter Vivek Ramaswamy and his book “Woke, Inc.: Inside Corporate America’s Social Justice Scam.” Ramaswamy, a Harvard and Yale Law grad and former biotech CEO, sets out to define the nature of “woke capitalism” and why it is harmful. He discusses its root causes and provides some, maybe not cures, but treatments. Ramaswamy is completely clear that this book is not a journalistic or scholarly exercise (though there are some good citations), but rather an experiential polemic against what he sees as a threat to American democracy.

On these terms the book succeeds, but it also suffers from the limitations of the genre. Ramaswamy’s treatment tends to conflate materially different phenomena. It is hard to hold this against Ramaswamy, however, because this confusion is endemic to the discussion of corporate sociopolitical activism. While Ramaswamy makes some small attempt at categorization, a more complete taxonomy is desperately needed. Another problem is that, while Ramaswamy’s solutions are creative, they are subject to constraints that, while understandable, also likely limit their usefulness. Still, they are thought provoking and may spur productive conversation.

Ramaswamy’s primary audience is conservatives, classical liberals and others skeptical of government intervention in private ordering. As such, it is critical that Ramaswamy show why woke capitalism is a threat and why, at least in some cases, the reticence to using law to control the actions of a private firm should be overcome. In this Ramaswamy does a mixed job. He moves so quickly, covers so much disparate ground and offers so many different arguments that he isn’t able to develop any very thoroughly. You can see that the pieces are there, but they aren’t fully fleshed out and driven home.

Ultimately, “Woke, Inc.” serves as an entertaining opening shot in the discussion of how to address the politicization of commerce for those with a generally free market perspective, but it fails to deliver fully on either detailed analysis or pragmatic solutions. It works as a polemic, but polemics aren’t enough for such a fraught topic. This is the greatest weakness of the book. Whether woke capitalism presents a sufficient threat to democratic legitimacy and political equality that regulation is necessary is a legitimate and important question, but it is one that must be worked out with fear and trembling, based on deep and specific analysis. Ramaswamy clearly has the mental chops to make the deeper case; hopefully he does soon.

The What and Why of Woke Capitalism

For Ramaswamy, woke capitalism reflects the invasion of capitalism into the sphere of life properly reserved for the democratic process. He worries that corporate actions ranging from persuasion (e.g., tweeting support for a social movement) to coercion (e.g., firing an employee for expressing a politically incorrect thought) are eroding the ability of Americans to govern themselves democratically, instead concentrating power in the hands of a few rich executives and the advocates (and dictators) who have their ear. To Ramaswamy, this reflects an abuse of corporate power and a betrayal of the purpose for which corporations were established in the first place: to seek profit by providing goods and services.

However, Ramaswamy also worries that much of woke capitalism is a scam meant to help companies seek profit. In this case the wokeness is a cynical cover by executives to attract customers and employees by signaling that the corporation shares their values and is part of their tribe. In some especially nefarious cases, such as the Volkswagen emissions scandal and the NBA’s embrace of social justice everywhere but China, Ramaswamy argues that wokeness is used as a cover to distract people from corporations’ unsavory, but presumably profitable, dealings.

Rather than building a case in linear order, Ramaswamy takes us on something of a whirlwind tour of the origins of woke capitalism. In his view, woke capitalism is largely a substitute for class-based reform that allows the professional and managerial class to increase its power, prestige and wealth by doling out token favors to (mostly) well-meaning people who see the world through the lens of identity politics.

The book then discusses multiple iterations of woke capitalism. Some are fairly benign, or at least only raise the question of whether corporate management is misspending corporate resources, such as when companies issue statements of support for various causes. Others are alarming, as when foreign governments, leveraging their role as either investor or market gatekeeper, play a part in suppressing speech and extracting data. Finally, there is, in my opinion, the most serious example: companies using the threat of economic sanctions and termination against employees or localities that do not follow progressive norms.

Some of Ramaswamy’s stories seem out of place. For example, the chapter on Silicon Valley platforms such as Facebook paints them to be almost victims of the government, which holds the threat of punitive regulation over them to extract woke concessions. While this kind of government influence is certainly at play, focusing too much on the role of government may also let the companies off the hook too easily. These platforms also seem to be influenced by many groups outside the government, such as their employees, the media and customers, bowing to pressure to de-platform some individuals and boost others.

Ramaswamy then proposes some arguments for how to think of woke capitalism legally and philosophically. He subsequently relies on those definitions to justify several significant proposed reforms. These arguments are novel and rely on sophisticated legal analysis but tend to suffer from some challenges.

For example, Ramaswamy is not always clear whether it matters if woke capital is in earnest or a fraud. He clearly believes that both forms exist, but analytically he sometimes fails to distinguish what it means if an example falls into one bucket or the other.

This matters because some of his solutions rely on wokeness being ideologically driven, but sometimes politics is good business. Increasingly, consumers are shopping and employees are choosing jobs based on their values and identity. This incentivizes politicization, even if corporate management doesn’t actually believe in the cause. If putting out a supportive tweet will help cement and expand your customer base, why not do it? Conversely, if an employee has become controversial such that they no longer pass the cost-benefit test, even if the controversy is unfair or unwarranted, the rational, profit-maximizing thing to do may well be to fire them. Does Ramaswamy object to the intent of the corporation in these cases, or its effect on democracy? Does he think his solutions’ viability should hinge on the question of intent? It sometimes isn’t clear.

Curing the Disease Without Killing the Patient

To his credit, Ramaswamy doesn’t just complain. He also proposes courses of action to help address the risks posed by woke capitalism. While he avers that the ultimate solution needs to be cultural, he also embraces (in my opinion, correctly) the belief that law can shape institutions and culture just as much as the other way around. Ever the realist, Ramaswamy recognizes that new legislation—at least at the federal level—is unlikely at best. Therefore, many of his proposals are based on clever (perhaps too clever) interpretations of current law. Among his proposals are the following:

  • When owners or powerful shareholders (e.g., asset managers such as BlackRock) use companies to pursue “social responsibility” policies rather than profitability, restrict the usual limited liability protections for those individuals; that is, their own assets should be at risk if the companies’ policies lead to lower profits.
  • Subject platforms like Facebook to First Amendment restrictions on the ground that, between the government-granted privilege provided by Section 230 of the Communications Decency Act and the threats against platforms by government officials if they don’t suppress certain speech, the actions of the platforms have effectively become state action.
  • Have wokeness classified as a religion because woke beliefs are sincerely held and make claims about “ultimate ideas,” the current standard under federal law for whether something is a religious belief. This would in turn make woke companies religious employers and therefore grant employees protection since an employer generally cannot compel an employee to adopt its religion.
  • Make political views a protected class similar to religion. If you can fire a person for saying something even if it was based on their religious beliefs (e.g., “Marriage is between a man and a woman”), you can’t fire someone for making an equivalent statement based on secular beliefs, on the grounds that doing so is religious discrimination.

All of these proposals are interesting, but many are convoluted and might have serious unintended consequences. Ironically, the proposals are less likely to work when “wokeness” is a scam. For example, if the corporation adopts a woke policy not out of true belief but because it believes doing so is profit maximizing, isn’t it entitled to full limited liability protection under Ramaswamy’s logic? Likewise, if corporate leadership doesn’t really believe in the tenets of wokeness, does it fail to meet the standards of being a religion under Ramaswamy’s argument because the beliefs aren’t sincerely held?

Further, who needs to believe for a corporation to be part of the church of woke? In the Hobby Lobby case the Supreme Court looked at ownership of the corporation, not management (though they were effectively one and the same), finding it significant that the business was privately held by a small group of owners, unlike the Googles and Facebooks of the world. Would a majority of Google stockholders have to announce conversion to wokeness for the idea to work? Even if wokeness is a religion, recent Supreme Court precedent has expanded the ability of religious employers to avoid being bound by civil rights law. Whether Google or the Gap could claim that their employees qualified for the ministerial exemption is debatable, but no less debatable than whether the courts would accept wokeness as a religion. And if they did, do we really want the merger of Google and God?

Missed Opportunities

It is also interesting what Ramaswamy doesn’t propose. He makes a challenging argument that Facebook should be subject to the First Amendment, which would result in Facebook having to accept not only heterodox political views but also hardcore pornography and crush videos. He does not, however, make the narrower argument that the platform could be made a common carrier. This would allow platforms like Facebook to exercise some discretion as to what content they carried, while forcing them not to discriminate among providers of that type of content. Whether such a move would be wise is certainly debatable, but there is a reasonable argument that it is constitutional under current jurisprudence.

The Dangers of Woke Capitalism | DiscourseLikewise, Ramaswamy wants to restrict the limited liability of asset managers such as BlackRock, who use their privileged position of getting to vote trillions of dollars of shares that other people pay for—the thing that makes them powerful. Why not instead limit the funds’ discretion when voting by forcing them to vote based on the preferences of the underlying investors? This would return power to where it belongs without forcing a change in established corporate law.

Finally, Ramaswamy tries to get employees protection for freedom of thought through a clever but probably futile religious argument and overlooks the possibility of state-level civil rights or employee protection laws. Some states, including California, treat political affiliation as a protected class. More states provide at least some protection for employees to engage in political activity outside work.

I understand that Ramaswamy is generally restricting himself to what he thinks a court could realistically decide in light of existing law and precedent. And I share his skepticism about new legislation at the federal level, at least in the near term. But in not fleshing out more moderate or plausible ideas, I worry he is being too pessimistic, and that forces him into suboptimal proposals. It might be more productive to develop less fraught solutions, acknowledging that they may require a legislative moment at the federal or state level, than to shoot the moon with solutions that have to fit into a narrow and oddly shaped box.

Should Political Beliefs Be a Protected Class?

Having critiqued some of Ramaswamy’s suggestions, I want to make clear that his idea of making political belief a protected class is worth consideration, provided there is an individual right to sue for discrimination on that basis. First, this idea gets to one of the most malignant and dangerous parts of the woke capitalism phenomenon: the threat of depriving people of their livelihoods for having a thought that is objectionable to sufficiently important constituencies. As Ramaswamy notes, the legitimacy of the U.S. system is premised on political equality and the ability of the people to speak, hear, organize and vote to peacefully set policy. Using the commercial system as a tool of suppressing speech and political activity implicates core freedoms in a way that woke tweets and posters in windows, or even asset managers voting others’ shares, does not. If there is an aspect of woke capitalism that justifies government intervention, this is likely it.

Second, there is reason to believe it might actually work, at least to a degree. Critics of Ramaswamy, such as Richard Hanania, argue that trying to use civil rights law will empower woke bureaucracies such as the Equal Employment Opportunity Commission and HR departments. In Hanania’s telling, civil rights law and subsequent court rulings forced corporations to hire compliance bureaucracies in the form of HR departments. These bureaucracies evolved into enforcers of wokeness, and any effort to use civil rights law will simply empower them (as well as trial lawyers) further. While Hanania acknowledges that there may be some benefit to making political belief a protected class (it did allow James Damore to sue Google and get a settlement) and could be “tolerable” if there were a plan to get more conservatives into civil rights enforcement, he doubts that will happen. Instead of trying to cast out demons by Beelzebub, Hanania argues the non-woke should focus on rolling back civil rights law.

This critique is ironic because it acknowledges that civil rights law (or an equivalent) could itself be used to counter the most pernicious problems of woke capitalism. In Hanania’s own theory, the law forced changes to companies that in turn changed culture, causing a feedback loop. Why couldn’t that continue to work? If what corporations (or their shareholders) want most is to be profitable and not get sued, they have an incentive to comply with a new law. Yes, compliance will be imperfect, especially initially, but with an enforcement mechanism in place, HR departments will have an incentive to evolve to protect the company (and their own jobs).

Furthermore, the courts are, as Hanania recognizes, a relatively less woke venue. Juries are drawn from the general public, and judges are one of the few government positions that are still held in high esteem by conservatives, libertarians and classical liberals. There is also a lot of non-woke litigation in support of civil rights and liberties, including in areas such as religious liberty, the Second Amendment and education. The lesson is that if you want more conservatives (or classical liberals, or whomever) to get into civil rights enforcement—or HR for that matter—you need to give them civil rights that they care about and that provide them with status.

Further, we should acknowledge that laws that carry the possibility of (sometimes significant) damages can create their own market for enforcement. Hanania worries that making politics a protected class will empower trial lawyers, but if you want the law to be enforced, you want trial lawyers on the prowl. They may not be motivated by a commitment to free speech or resisting private political coercion, but their motives do not need to be pure. To paraphrase Adam Smith, “It is not from the benevolence of the trial lawyer that we expect our rights to be vindicated, but from their regard for their own ability to buy a mansion and not have to fly commercial.”

An argument can certainly be made that using litigation to protect heterodox views from workplace coercion would be inappropriate or excessive. It might have undesirable unintended consequences. It might be a permanent solution to a temporary problem. It might also just be the cost of doing business if we want to protect the political equality that our system requires in an increasingly polarized and hostile social environment. This is a debate that needs to be had in a serious way, and Ramaswamy’s general idea cannot be dismissed out of hand, even if his specific idea for getting there is flawed.

“Woke, Inc.” is a quick, interesting, at times infuriating read. It raises an argument that needs to be engaged with in an accessible way and that should absolutely be considered. However, it is not, nor do I think it was intended to be, the final word on the subject. The role of corporate power as a tool of coercion is getting more attention from non-woke academics, policy professionals and politicians. The issue often places critical values in tension, with property and associational rights on one side and speech and core political activity on the other. This is a dangerous time, with high stakes for freedom, the economy and the trajectory of political and philosophical development. Ramaswamy’s contribution should be appreciated, but it is hopefully just a prelude to a deeper conversation in which he and others play an earnest part.

Brian Knight
Brian Knight is a Senior Research Fellow for the Financial Markets Working Group at the Mercatus Center at George Mason University. Brian most recently worked for the Milken Institute, where he headed up the FinTech and Capital Access programs. He has experience working for a broker-dealer with a focus on the emerging online private-placement market and was the co-founder of CrowdCheck, a company providing due-diligence and disclosure services to companies and intermediaries engaged in online private offerings.

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