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American Moral Economy

U.S. Senator Elizabeth Warren speaking with attendees at the 2019 National Forum on Wages and Working People in Las Vegas, Nevada (Gage Skidmore / Wikimedia Commons)

E.J. Dionne Jr.’s recent piece on the Moral Economy caught my eye. “How might we organize our economy so that it enhances rather than disrupts our families and communities?” Dionne wrote. “Yes, productivity and growth matter. Our everyday lives matter, too.”

He’s right. Whether a Moral Economy comes by way of Democratic Socialism (Sanders), Progressive Capitalism (Stiglitz), or some other related means, what matters most is evolving the system that exists currently.

Two news reports this week show why. The first revealed the impacts of misguided Federal policy. The second involves a troubling trend regarding public pension funds investing.

A TAXING MATTER. On Tuesday, The Wall Street Journalreported that individual charitable giving was down 3.4% last year (inflation-adjusted dollars), breaking a streak of four consecutive years of growth.

The findings came as no surprise. The new tax law made it so. Deductions for charitable giving come if taxpayers itemize, and the doubling of standard deduction levels meant that most filers didn’t: nearly 90% of filers took the standard deduction last year (Bloomberg). Those choices gave charitable giving benefits to the other 10%. Those at the top of the wealth scale—the 1%’ers—raked in 57% of total benefits, up from 38% in 2017 (Tax Policy Center).

Supporters of the new tax laws blamed the philanthropic dip on December’s stock market decline (down 10% as measured by the S&P 500 Index), which came at the time when many taxpayers make charitable giving decisions. That said, The Journal reported that the tax law—not market fluctuations—will likely have a consistently negative impact on smaller nonprofits. Smaller nonprofits have fewer mega-donors and more moderate-to-lower income contributors, many of whom don’t itemize. Kristen Merrifield, CEO of the Alliance of Arizona Nonprofits, told The Journal that some organizations in her state are already shrinking programs or considering reductions.

Does our tax policy support a Moral Economy? Not a chance.

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FINANCIAL RETURNS TRUMP SOCIAL RESPONSIBILITY? The second report—also featured in The Journal this week—pertains to investment strategies for public pension funds. According to The Journal, socially responsible investing (SRI)—an approach that is especially relevant for public funds investment—is in jeopardy. SRI is a both/and investment form, seeking stable financial returns while also advancing the public good (e.g., investing in a well-managed, profitable company that has an exceptional diversity record).

Does it make sense, for example, to support public policies that address climate change but then invest public funds in industries that contribute to climate change?

But with high/stable returns a goal in a sector where pension systems nationally face a shortfall of $4.2 trillion, there’s concern about restricting the scope of investments to achieve social outcomes. As one chief investment officer told The Journal, “We need access to all potential investments across all asset classes.” That explains why, in New York State, officials with the public service employees union are opposing an effort by the state to put the fossil fuel industry on the public funds ‘no invest list.”

Are concerns based on dollars and sense? Nationally, a study conducted by Boston College found that states with socially responsible selective criteria for pension investments performed about a half-percent below states that made pension investments without that screen. And data compiled by Wilshire Associates regarding the pension performance by The California Public Employees Retirement System (CalPERS) suggest a two-sided story. CalPERS benefitted financially from divesting/avoiding companies that didn’t satisfy its social responsibility screen. The fund was hurt financially by not investing in companies that were screened out.

Why is it important to filter investment options through the lens of social responsibility? Does it make sense, for example, to support public policies that address climate change but then invest public funds in industries that contribute to climate change? Of course not. But it’s entirely possible given the current conversation. That shows just how far we have to go.

The counterweight demands strong declarations followed by corresponding actions. No, we will not have a tax policy that privileges the affluent and hurts the sector that ministers to the public good. No, we will not invest public funds in socially irresponsible ways. Those are but two declarations on a long “to do” list.

Each of us has a role to play in changing the narrative. We can all speak out, vote accordingly, and act responsibly at the household level. Lead for the public good in your organizations and community.


Make a Moral Economy possible.

Frank Fear