Wikipedia offers an excellent synopsis of Regulatory Capture. In her book, Media Capture, Anya Schiffrin does so for Media Capture. In 1971, soon-to-be Associate Justice Lewis Powell Jr., then a corporate lawyer, wrote a memorandum to his friend Eugene B. Sydnor, Jr., Chair of the Education Committee of the U.S. Chamber of Commerce titled Attack On American Free Enterprise System.
To his mind, the status quo, which he called The American Free Enterprise System, was under threat of destruction by a revolution at the ballot; destruction by democracy. Whether he knew it or not, Powell’s plaint was really about Economic Capture. Powell, though he had majored in commerce at Washington and Lee University, may yet have never realized that such a thing even existed, though it had for centuries. Many American politicians and economists don’t admit to its existence today.
Since before Adam Smith, western economies have been a captive of capital, or more precisely, of wealth. Over the years, much had been learned, many books have been written, about the principles of economics. In the west, these principles were to be applied only if it was in the interest of wealth. It was the threat to the interest of those who held the economy captive that had Powell so exercised. To be fair, in the world into which Powell was born and lived, economics according to capital was gospel. So, the importance of the status quo. In the memo, Powell spoke to the threat to the nation; this, perhaps, was an attempt on his part to look ahead. But, his concern was for that part of the world in which he lived. In that world, any other perspective was heresy.
From his vantage in Virginia, Powell could have looked not so far back in time and made the connection of capitalism to an economy based on slavery; a classic example of an Economy Captured by wealthy interest. From where he stood in history, he could have given the America of 1971 a more objective look; one that might have seen a few of the problems with The American Free Enterprise. 1971 saw the beginnings of some of the greatest changes of all times.
The U.S. Chamber of Commerce, some Americans of great wealth, and the Republican Party took Powell’s memo and ran with it. Still are. In doing so, they shifted more wealth to the wealthiest while lowering the standard of living for the working class Americans. In doing so, they captured the Supreme Court by stuffing it with unqualified right-wing ideologues. To quote Barack Obama, in doing so, they ran the nation into a ditch.
Chamber members loved the mantra, believed that the memo would be good for business. The Chamber, as an ally to the wealthy, was a facilitator of Economic Capture. The wealthy well understood that they did not want to relinquish control of the economy. The Republican Party, bereft of anything good to offer the nation, had collectively decided to do anything in order to give the wealthy their due and be rewarded for doing so. All of them agreed that democracy was OK only as long as it was under their collective control.
From the vantage of the rest of us, our Captured Economy has a checkered past; is particularly ill-suited for the future. Obvious for some time now; the greatest threat to The American Free Enterprise System is The American Free Enterprise System, aka, Capitalism, itself. By either nom, they are responsible for many of the problems we, the world, face(s) today. Most significantly, the Economic Capture of western economies has exacerbated the effects of Climate Change (the greatest challenge heretofore known to man), has, especially since 1971, broadened economic disparity in America, and stifled progress at every turn.
Powell’s 1971 memorandum played an outsized role in the near total corruption of the Republican Party, the growth of the most undemocratic Federalist Society, and the subsequent Court Capture – the disaster that is now the Supreme Court, and much more. The memorandum spawned the Paul Weyrich founded, Joseph Coors funded, Heritage Foundation; a group that led the charge to shrink government. The memorandum spawned the American legislative Exchange Council (ALEC); a group that co-opted state legislatures and help them gerrymander voting districts. Gerrymandering has become a Republican Party favorite for Electoral Capture; another is voter suppression. Voter suppression and gerrymandering are both forms of Electoral Capture; are both abetted by the Captured Court.
From today’s vantage, The American Free Enterprise System, aka, Capitalism, is so yesterday. Today, the Financialists represent wealth as capitalists once did. It isn’t the board rooms of giant corporations that rule the world (PS, it never was their CEOs), it is the billionaire Oligarchs. Oligarchs who made theirs, not in producing goods, but in finance. For some time now it has been the financialists holding the Economy Captive. They do so because it is in their, the wealthiest, interest to do so.