Marjorie Kelly On “Wealth Supremacy” & The Blueprint For A New Economy

“The problem lies within the system,” says Marjorie Kelly when discussing the polycrisis now upon us – inequalities, climate change, biodiversity loss, and rising authoritarianism. Drawing insights from her book, Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises, I recently interviewed Marjorie about what went wrong with the very foundations of our economy and society, and what possible necessary changes could be.

Marjorie is a Distinguished Senior Fellow at The Democracy Collaborative, a non-profit working to catalyze the creation of a democratic economy. This new book is a culmination of Marjorie’s 30 years of work as a journalist, theorist and consultant focused on next generation enterprise, place-based impact investing, and a next system of capital and other proven models that are creating a more democratic economy.

The title Wealth Supremacy cuts to the heart of Marjorie’s critique of today’s economic and societal systems, where wealth itself is valorized and people often don’t ask how it was accumulated. She likens this to a bias – capital bias – because it’s a way of thinking that tells us who matters and what matters, and who doesn’t matter and what doesn’t matter. And like gender bias or racial bias that are now socially unacceptable (but once were), we need to understand that capital bias is also unacceptable; we need to see its destructive and unethical nature in order to grasp that the solution is to change the system.

Marjorie illustrated her points with vivid examples from oil companies, private equity, universities, and also how businesses school are culpable for today’s problems. She highlights that our current system is both biased toward wealth owners and blind to the needs of common people. Consequently, the pressing question becomes how to define and move toward a new economic paradigm. Marjorie offered two major sets of solutions and concluded our discussion with words of encouragement for the next generation, expressing hope that they would be able to make a real difference.

Read below for an edited transcript of our discussion.

Christopher Marquis: One of the things that I really appreciated about your book is it provides a solid critique of the core assumptions of the shareholder-dominated, neoliberal system. People are so bought in that many of the typical solutions follow a “win-win” logic without recognizing that such a logic shows we are trapped in the system’s mindset. You see this a lot in the discussion on ESG. But like you, I think this is a fundamentally wrong approach.

Marjorie Kelly: Right! I think that is a result, Chris, of a refusal to let go of the current paradigm. Businesspeople in particular who are holders of the ideology are loath to admit that the paradigm is wrong. So what people are saying, as you know, is, we’ll fit ecological benefit and social benefit inside the paradigm. We can have these along with maximum financial gains. We can have win-win. And that is denial. Plain and simple.

The most dramatic example of this denial, and of the clashing paradigms, is Exxon Mobil, or any fossil fuel producers. Can we have shareholder primacy and maximum profits for shareholders at the same time that we preserve a livable earth? The answer is, No, we can’t. This confronts us starkly with the choice of which matters more – life on earth or profits for shareholders? It shows us the absurdity of the question itself.

Christopher Marquis: I love how you put that, and it really resonates with my new book The Profiteers. Furthermore, I think the part of the issue with these fossil fuel companies, now becoming recognized in a widespread way, is how for decades they promoted climate denial. At the same time, during the Ukraine crisis and gas crisis, they just jacked up their profits. In this paradigm, it’s just about protecting their profits and power, truth or the public be damned!

Marjorie Kelly: The other dramatic example of this is private equity. There has been a movement to get the big oil companies to divest their dirtiest assets and to say, “we’re on a path to net zero.” So they have been divesting their dirtiest assets. And who’s buying them? Private equity. And what private equity is doing in many cases is ramping up production, sometimes tripling production of these dirty assets.

I point to this in the book for two reasons. One, it shows that the problem is in the system. The system – the mind that says I’m going to maximize profits for capital, at any cost, in any way that we can – that mind simply flows around any barriers we put in the way. Until we challenge that mind, until we admit it’s an archaic and illegitimate bias toward the few, our change efforts will fail. We can no longer operate a global economy to benefit a wealthy few. So that’s the first error – that we can’t solve this at the level of the individual company or individual portfolio. The problem is in the paradigm, the mind out of which the system arises.

The second error is, the example shows us who’s participating. This isn’t just the oil companies. There are big institutional investors who are flocking into private equity. There used to be $1 trillion in assets in private equity and now there’s $10 trillion. Harvard’s $53 billion endowment in 2021 was two-thirds invested in private equity and hedge funds. The University of Michigan was 42 percent in private equity. Ford Foundation in 2020 had nearly $1 billion in private equity. Institutional investors seem to be sleepwalking, saying, we just want the highest returns. And they apparently aren’t looking too hard at what’s done on their behalf to accomplish those returns.

In the book I liken this to what happened during colonization in the US. The settling of the West involved what was called “Indian removal.” But that language masked the violence and the atrocities that were part of it. Something similar is happening with institutional investments when we just look at the numbers that come in, and those numbers mask the damage being done on behalf of capital.

Christopher Marquis: One of the things that I think is important about your book, and which is also resonant with The Profiteers, is about the system and how these practices pervade our culture, our mindsets; they’ve become taken for granted. They are not questioned.

Can you say more about how in the last 50 years plus, have we have come to internalize these ideas, so people don’t question these assumptions?

Marjorie Kelly: That’s why I call it a bias, because it’s a way of thinking that’s largely unconscious, very much like gender bias or racial bias. It tells us who matters, what matters. And, by the way, who doesn’t matter and what doesn’t matter. What the system says is that capital matters, anything that benefits capital is good. Everything else is essentially irrelevant.

In the book, I unpack a series of seven myths, which really form the operating system of the mind of capital extraction. The first is the myth of maximizing, that no amount of wealth is ever enough. Bill Gates at one point had 10 billion dollars, then invested it with a money manager and today has more than 300 billion dollars. Now, that is absurd. In any rational world that is laughable. But we don’t laugh. He and his money manager are doing what the system is supposed to do, because no amount of money is ever enough.

Then there’s the myth of materiality. Material means something that’s corporeal, physical. But in the upside down, Alice in Wonderland world of corporate and financial accounting, something is material if it impacts capital, if it shows up in these ethereal numbers, balance sheets and investment portfolios. If you’re going to do something that’s will harm capital – like the founder of Theranos lying to her investors —well, that’s material. She’s going to prison for that.

But is it going to harm the planet? Is it going to harm workers? Is it going to damage society? None of that is considered material in and of itself. Now, you and I might say, well, what’s more material than people and planet? But no. Those are material only to the extent that what happens to them impacts capital. That’s just topsy turvy. That’s inside out.

Christopher Marquis: The amazing thing to me about materiality is that what you describe is the standard that governments use, when the government should be the protector of the public good and employees and the planet. But they apply this logic of materiality as being solely determined by financial markets, which like you say is topsy turvy, like Alice in Wonderland.

Marjorie Kelly: Another myth is about fiduciary duty, which says that investment and corporate managers have a sacred obligation to take care of other people’s money. Now, there is some validity to this. If I invest my money with a money manager, I expect them to act on my behalf, not to give the money to some crazy uncle or run off to the Bahamas. That’s valid, and that’s necessary.

But there’s this other piece hiding inside fiduciary duty, and what it says is that what happens to capital is all that matters, nothing else matters. But if I leave my money with someone else, that doesn’t give them a right to trash the world on my behalf.

There’s also the myth of the income statement, which tells us that income to capital (delightfully called “profit”) must always be increased, and income to labor (called the horrid name “expense”) must always be decreased.

There’s bias threaded all through our system. There are so many of us, Chris, who are working to disrupt this system. I’ve been writing about it for decades, tracking the brilliant people trying and trying to disrupt the system, and mostly failing because the system is so entrenched.

All the positive things we’re doing will never add up until we challenge the core of the system itself. Look at Community Development Financial Institutions (CDFIs), for example. The president of The Democracy Collaborative, Stephanie McHenry, used to be president of ShoreBank, Cleveland. ShoreBank was the very first CDFI, which showed you can do lending that serves the disadvantaged. It’s a workable model, right? She was out there doing good, lending in her disadvantaged neighborhood in Cleveland.

Then big capital came along. The big banks moved in with predatory mortgages and virtually blew up the global economy, and in the process ShoreBank was destroyed. The system will devour whatever we build.

We need to challenge this relentless extractive process. We will never get there just by building the positives. The ultimate tool that we have is legitimacy. What brought down apartheid? It was that that regime of apartheid lost legitimacy because it was perceived as white supremacist, illegitimately favoring white people over people of color. When we recognize that the capital extraction system is wealth supremacist, I think that loss of legitimacy could bring the system down, and should.

Christopher Marquis: You’re right. My PhD is in sociology, and I see that economists have convinced us that there’s this profit-loss logic that can be applied to everything, that focusing on shareholders should be the only concern. People don’t understand the power of shaping mindsets, legitimacy, culture. What economists have convinced us of is not natural, even though this is how they present markets.

In my book I talk about Jack Welch a bit and the book that David Gelles published recently, The Man Who Broke Capitalism. For a long time, Welch was seen as the greatest CEO of the twentieth century. While some still defend him, I think people understand now that actually the model that he established of massive layoffs was hugely destructive. In my book, I make the comparison with Jeff Bezos. He is lauded now as a great CEO, but perhaps with some historical hindsight, and shift in norms and standards of legitimacy, he will be the next discredited Jack Welch.

Marjorie Kelly: Yes, people also saw Cecil Rhodes as a great leader; he created the DeBeers diamond company, and he was the architect of apartheid. He captured the diamond wealth of Africa. And DeBeers is still a multi-billion-dollar company today, still extracting the wealth of Africa. There’s an underside to what we call wealth creation that we don’t like to look at. Imperialism used to be viewed as this benign process. The West civilizing the world. We see now that there was violence and harm to others, mostly nations of color. But that was invisible at the time, because there was this focus on benefit to Europe and the civilizing mission.

Now we focus on our portfolio gains, and we focus on corporate profit. Whatever drives those up we think of as positive, and we don’t look at who’s harmed. Jack Welch pioneered mass layoffs that he made a new norm; these became routine. Tens of thousands of lives were destroyed potentially for generations, because we know that unemployment disrupts family life, creates depression and ill effects that extend into the next generation. There are very real damages done to very real people by layoffs. But all of that was invisible, because what people saw was the share price rising.

I have a chart in the book where I show how wages for workers start plummeting in the 1980s, as the Dow Jones industrial average is rising. One fed the other. The trend Welch kicked off – throwing tens of thousands out of work – along with companies sending jobs overseas and moving to part-time and gig work, all of this was about shifting income from labor to capital, systematically and economy wide. While the rising Dow Jones industrial average benefited wealthy investors, millions of working people suffered.

Christopher Marquis: Okay, so let’s turn to changing the system. You talk about undermining the legitimacy of this system, having us question and think about what’s really happening. I think naming it as Wealth Supremacy is powerful, because having a name helps people better identify this as something we should think about.

You devote five chapters to system change in Part III. Talk about how we can reform. How can we define and come up with a new paradigm?

Marjorie Kelly: This is what I’ve been working on for 30 years, as a journalist and a theorist and a consultant. I’ve been working for a more democratic economy. That’s the phrase that we use at the Democracy Collaborative. You can call it a well-being economy. You can call it inclusive economy. There’s the phrase solidarity economy. We use democratic economy because it speaks to the issue of power.

The models that we need are here: They work. Proof of concept has been demonstrated. For instance, employee-owned firms, they are far less likely to go out of business, and they create more than double the household wealth for workers. It’s a proven model. There’s more than 6,000 of these. We could ramp this model up.

There are models for ownership of land and housing, like cooperative housing, and community land trusts, where the community owns the land, and you lease the house for 99 years. That way you remove houses from the speculative market. This is a proven model. In the 2008 downtown, community land trusts had one-tenth the rate of foreclosures as traditional home ownership. 85 percent of Americans already get their water from municipally owned water systems. LA Power and Light is the largest, serving millions of businesses and homes. These are not tiny models. There’s evidence that you get better service at lower price when you have public ownership of water.

But we’ve been taught to fear public ownership. That’s a kind of a red baiting approach. California right now is moving toward public ownership and control of insulin, because there’s been too much profit extraction. Medicine is not for profit. It’s for the people. That’s something that the founder of Merck said. This idea that everything exists to maximize profits — that’s really a bastardization of what a healthy economy is.

I think most entrepreneurs know that. It’s when companies are captured by big capital with publicly traded companies or private equity that they turn to maximization. That’s the problem, not profit itself. I make the distinction between profit making and profit maximizing.

Other models that we need are here: Community Development Financial Institutions, publicly owned banks. In the 2008 crisis the state-owned Bank of North Dakota kept lending and kept that state thriving when the other big banks froze up, stopped lending. These models work. They are superior, if the measure of success is something other than share price.

We know how to build a democratic economy. We need to build the pathways there. And I talk about that in the book. Briefly, I’ll say there are two large processes needed. One is that we need a great ownership transition. We can’t accept the 1 percent owning everything. People should own their homes, own a piece of where they work. Communities need to own and control land and water. 15 percent of forests worldwide are already controlled by Indigenous and community groups. And that’s a model the UN says is vital to preserving endangered species. So that’s one great change process that we need – a great ownership transition.

The second large change is, we need a next system of capital. You need a modern, sophisticated system of finance that’s designed to serve the public good. And we can do that, using processes and models that are already here. For example, you need a different kind of Federal Reserve, a “people’s fed” as Cornell law professor Robert Hockett proposes. We need a debt jubilee. In Germany after World War II, there was a huge, successful process of debt forgiveness through currency reform, and that’s what created the powerhouse of Germany today. So debt forgiveness is a proven model we need. We also need local and impact investing. These are among the seven pathways to a next system capital that I lay out in the book. I liken it to the seven wedges of carbon reduction. Put them together, it starts to look like a whole system of capital in the public interest.

What I’ve been thinking about lately, Chris, is how business schools are culpable in ecological devastation because they’re teaching shareholder primacy. They’re basically teaching wealth apartheid. That’s not going to go down well in history.

Christopher Marquis: That’s very interesting to me as I am sitting in a business school as we speak, and on the whole I agree with you. But also, I do think it is a bit more nuanced; there are different departments in a business school, finance and operations and marketing and management and so on. The area I’ve been in is organizations and management, and I would say at least half of my colleagues, certainly in the UK, and even in the US, are also pretty critical of the shareholder-focused system and the huge problems it creates; they’re very thoughtful around sustainability and responsibility and focusing on that in their teaching. But also many of the finance and accounting and economics folks have been through really deep socialization on shareholder primacy, and I agree, I can’t see those people changing their minds. They’ve been trained very deeply in that paradigm. And that paradigm also has the power in business schools as institutions.

Marjorie Kelly: What we’re seeing in business schools is the process by which paradigm change happens. At first the new paradigm just blows your mind. Everything that we believe can’t be wrong. This happened in physics, and it’s a very threatening and frightening moment when a paradigm is challenged, and so many people cannot accept that challenge, they simply cannot change their mind. Max Planck said that paradigms change one death at a time. That’s very true. A new generation coming up will be the one to carry the new paradigm. If there’s one thing that I hope my book can do, it’s to empower those people and give them a unifying language and an understanding that helps them find their place in this great work of transformation. There are already many visionaries articulating the new ways, and I highlight many in the book; I write mostly as a synthesizer and a popularizer.

The paradigm that we’re in may seem invincible. It may seem rational and normal, but it also at one time seemed rational and normal that every single legislator and judge was a man. It used to seem rational and normal even to the founders of America that you would own slaves, right? What seems rational and normal at one point becomes discredited over time.

Recognizing and rejecting bias is the name of that change. We begin to recognize that the world is constructed to benefit some people and inadvertently to harm others. It’s not deliberate. And I’m very careful about this in the book. I don’t point fingers at individuals. Billionaires and CEOs and hedge fund managers are the ones who are carrying things out and benefiting. But it’s the mind of the system that needs to be challenged. Where the soul of the regime lives is in the mind of the regime. Donella Meadows, the systems theorist, emphasized that the most effective place to intervene in a system is at the level of the paradigm, the mind out of which the system arises. It’s an idea that needs to change. There are so many brilliant people who are discussing this new paradigm. It’s pretty well thought out. All the pieces are there.