Even when it sides with the right, big government suppresses both freedom and economic growth.
by Jeb Hensarling, The Wall Street Journal, September 1, 2024
Many big-name companies this summer have scrapped their diversity, equity and inclusion policies. The manufacturer of Jack Daniel’s whiskey announced it will end its DEI initiatives, saying, “the world has evolved.” Harley-Davidson similarly dropped its DEI policies, saying it will focus on “retaining our loyal riding community.” Tractor Supply said it’s eliminating its DEI roles. “We have heard from customers that we have disappointed them,” the company said.
Companies are also getting pushback from shareholders on their environmental, social and governance policies. A report from shareholder consulting firm Georgeson found that investors submitted more anti-ESG proposals at annual shareholder meetings between July 2023 and May 2024 than in any previous year.
Pensioners are pushing back, too. Employees of American Airlines have filed a class-action lawsuit against the airline, alleging it mismanaged employees’ 401(k)s by loading their accounts up with ESG investments.
Conservatives were slow to recognize how deeply the left had burrowed into corporate human-resources departments and C-suites, but they’re clearly making up for lost time. Consumers and shareholders are showing that they’re willing and able to defend their values with cash, credit cards and investments.
Many conservatives know they have this power in their own pockets without the government’s help. For years, conservatives were appalled at how the left used government to coerce private businesses into taking their side in the culture wars. Recall how the Obama administration pressured banks into choking off credit to politically disfavored customers such as firearms businesses. Or how the Biden administration pressured social-media companies into suppressing what it considered to be Covid misinformation. Today, however, a growing populist conservative movement has seemingly decided that government decrees to private businesses may not be such a bad idea as long as those dictates are conservative.
Red states including Oklahoma and Arkansas have empowered regulators to deny state businesses to asset managers that they determine have boycotted or discriminated against favored industries such as oil and gas. No doubt many investment firms are guilty of discriminating against certain industries, but it’s foolish to have political professionals rather than investment professionals construct portfolios and expect better returns. Isn’t this exactly what Republicans accuse Democrats of doing?
The better approach is to focus on corporate finance rather than corporate ideology. Florida last year enacted a law that did that. If you want to be a fiduciary of Florida state funds, you actually have to be a fiduciary; investment decisions must be driven solely by returns. Fortunately, asset managers across the U.S. are now speaking more about fiduciary duty than ESG. BlackRock, the nation’s largest asset manager, is even helping finance a new Texas Stock Exchange promising to be, of all things, apolitical.
The culture war isn’t only on the investment side; it’s permeating other aspects of business, too. In the tech sector, it’s no secret that social-media companies censor conservative voices. This has prompted some red states to pass laws attempting to regulate how social-media companies handle users’ content. Serious problem, bad solution. Populist conservatives should know they’re better off fighting with leftist tech CEOs than a government ministry of speech control. There’s room for debate over Section 230 liability protections, but in a free society companies shouldn’t lose First Amendment rights simply because they’re big or biased.
Populist conservatives have also proffered bad ideas on restricting private companies’ discussions about diversity and forcing publishers to rate their books for sexual content according to undefined “current community standards of decency.” Such policies would likely require an even more muscular bureaucracy to enforce them. Do conservatives genuinely want to “drain the swamp,” or do some simply believe they can train the alligators to bite the right people?
When trying to increase bureaucratic power over private businesses, conservatives would be wise to be careful what they wish for. During the Reagan administration, many conservatives celebrated the Supreme Court’s decision in Chevron v. Natural Resources Defense Council (1984), which they viewed as a curb on liberal judges. After seeing how effectively the left used the Chevron doctrine for its purposes, conservatives then spent decades trying to get rid of it—and celebrated when the court overturned it in June.
Conservatives would do well to remember that a light regulatory touch encourages economic growth. The annual Economic Freedom of the World Report, co-published by the Cato Institute (with which I am affiliated), consistently shows an inverse correlation between a nation’s economic regulatory burden and the height of its per capita income.
The tide continues to turn against wokeism in corporate America, and that’s good. But private citizens are largely responsible. They’re successfully using their voices and economic leverage in civil society. But as populist conservative elected officials begin to legislate business practices, they must be careful not to sacrifice free speech, free enterprise and limited government. These freedoms remain foundational to our culture, and we must protect them. To adapt an infamous Vietnam War quote, conservatives must be careful not to destroy freedom in an effort to save it.
Mr. Hensarling, a former chairman of the House Financial Services Committee (2013-19), is an advisory council member to Americans for Prosperity and an economics fellow at the Cato Institute.