Rebuilding American Capitalism: A Handbook for Conservative Policymakers, foreword by Oren Cass, American Compass, 104 pages.

Announcing his bid for the presidency in 2015, Donald Trump said, “Sadly, the American Dream is dead.” He might also have said—and throughout his campaign did, though perhaps not in these terms—that America’s political system is bankrupt, the national parties are bankrupt, the country’s political class is bankrupt. Many Americans agreed with him and they swept him into the White House. Many Americans still agree with the diagnosis today: Morally, financially, legitimately, America’s ruling regime is in bankruptcy. 

Ours is still a capitalist regime, and, as Trump’s fellow populist in that early campaign, Sen. Bernie Sanders, might put it, American capitalism is bankrupt, too. American Compass agrees. Last week, the small think tank—the vanguard of the GOP’s much-discussed “realignment”—released its “Handbook for Conservative Policymakers,” a plan for Rebuilding American Capitalism. Today, in a show of force, Compass hosts four Republican senators—Tom Cotton, Marco Rubio, J.D. Vance, and Todd Young—on Capitol Hill. Readers of The American Conservative may have long nurtured fears from the right about libertarian economics and the consequent wage stagnation, inequality, and two-income trap, but now we are not alone. You cannot white paper your way to recreating 2015, but concrete policy proposals do matter, and Compass has distilled eight years of “New Right” conversations into a porch from which to step. 

There is too much detail in American Compass’s dense little handbook to review its proposals here, from plans for student debt to decoupling from China, each ably defended by members of the Compass Advisory Board. The broad theme of a worker’s republicanism is by now a familiar one. But in reading Rebuilding American Capitalism from stem to stern a new and unexpected motif emerges: bankruptcy. 

While American bankruptcy law has been instrumental to American growth and dynamism, so too has it been abused, and demands reform. In the same way, if American economic and political life is a kind of corporation in bankruptcy—an assertion I can only defend here with a gesture to look around you—then we have been in one of those private equity-driven wind-downs where vultures make their money off short-term stock inflation and long-term company failure. In its handbook, American Compass suggests a different bankruptcy plan, a humane political economy that makes sure the old regime’s shuttering pays out its workers, its citizens, its families, first and then sets out to build the future. 

As Henry Olsen lays out in his contribution to the collection, “The Meaning of Liberty,” liberalized debt laws are an essential underpinning to American capitalism at its best. The common law, “consistently enforcing the doctrine of personal responsibility,” demanded stagnating caution, as “an individual was liable to repay all of his debts regardless of his capacity to do so.” But, Olsen argues, America’s Founding Fathers “believed that individuals deserved second chances in life and ought not to be condemned to misery and servitude because of a risk gone wrong. They thus created the law of bankruptcy, which overrode common law to allow a person unable to repay his debts to have some of them discharged by law.” This new liberty encouraged the economic growth we no longer take for granted, as “more people were willing to take risks knowing they could preserve their freedom.” 

Like Chekhov’s gun promising something in the next act, however, Olsen concedes, “This surely created what is today called ‘moral hazard’ as the dishonest took advantage of this escape to take greater risks than perhaps they ought to, with borrowed money.” And, sure enough, in the handbook’s introduction to financialization—a section featuring Caleb Orr and Julius Krein—we read about financial engineering that shifts investment risks onto third parties while keeping the returns. “The leveraged-buyout model employed by many ‘private equity’ (PE) firms represents an extreme case, incurring high levels of debt that enable much larger profits when a transaction is successful, while accepting that some bankruptcies will occur along the way.” The political issue at play here: “The workers and communities devastated by the bankruptcies do not get to ‘hedge.’” 

Compass offers a response:

The United States should create a new, primary obligation to workers that is paid first in the event of a bankruptcy. This could equal, say, six month’s salary for all workers laid off in advance of or during a Chapter 11 reorganization, or for all workers in the event of a Chapter 7 liquidation. A similar claim should be created for local communities, equal to one year’s tax liability in each domestic locality where a business operates. These changes in bankruptcy rules would decrease the value that creditors can recover from a business in bankruptcy while increasing the value available to other affected parties. This would make much riskier the aggressive leverage strategies that accept the chance to bankruptcy as a cost of business and a means to higher returns. It would also give workers and local communities a seat at the table in reorganizations.

And perhaps that last line summarizes the political significance of Rebuilding American Capitalism. American Compass and its advisors, members, and allies in the U.S. Senate all want to give workers and local communities a seat at the table in a period of national reorganization. What else would you call this moment? All around us, amid gerontocratic leadership and collapsing bridges and falling fertility, are signs of decline, indications of bankruptcy. The vultures have been feeding. But this need not be cause for despair. There is much work to do, and in America, at least, we think people deserve second chances and ought not to be condemned to misery and servitude because of risks gone wrong—and bankruptcy can be a new beginning.