For 250 years, the American Dream has centered on the promise of economic mobility and agency. When that promise is repeatedly broken, the collective will and ability to defend democracy itself dissipates.
The experts know American democracy is at risk. The health of the democracy scores lower than it has in years, according to leading lawyers and scholars.
More importantly, people feel it. Across political divides, 68% of Americans no longer trust in U.S. democracy as an example for other countries, according to Pew Research Center. This disillusionment is acute among younger generations. Only 15% of young Americans report that they trust the federal government to do the right thing.
Strengthening the core pillars of democracy – free and fair elections, a free press, and an independent civil society – is essential but insufficient. Democracy extends beyond the voting booth and into our daily lives. It is tangibly connected to where we work, live, and how we participate in the economy. America’s architects, from the revolutionaries and founders to the freedom riders and civil rights heroes, have fought for shared prosperity right alongside a government by and for the people.
Shared prosperity
In the field of public health, outcomes are shaped by social determinants; factors like income, housing, and education are predictors of life expectancy, chronic illness, and mental health. In the same way, we must consider the economic determinants of democracy.
For workers, democratic empowerment looks like quality jobs and a real voice in the workplace. But due to monopolistic corporate practices and wage stagnation, workers do not receive a substantial portion of the value they create.
For small business owners, it means a level playing field and access to capital. Yet, banking deserts, biased underwriting, and the dismantling of federal programs intended to bridge these gaps persist.
For families, they need safe and affordable housing and opportunities to grow wealth for themselves and the next generation. Unfortunately, for many Americans, owning a home or saving for retirement is out of reach.
With these key ingredients of financial empowerment missing, the U.S. economy is increasingly K-shaped. While the rich get richer, the middle and lower classes stagnate. Federal Reserve data reveal that the top 1% of American households hold nearly the same amount of wealth as the bottom 90% of the population combined. Considering roughly 70% of U.S. GDP is driven by consumer spending, this casts a dark shadow over the future of our economy.
Avenues for addressing these harms are increasingly limited. Foundational federal regulations are being rolled back. The Consumer Financial Protection Bureau, the agency created after the 2008 financial crisis to protect people from predatory financial practices, has been all but dissolved.
Investors’ ability to hold corporate managers accountable for their impacts on people and the planet is diminishing by the day. The Securities and Exchange Commission recently gave corporations complete leeway to bar shareholder proposals they dislike from appearing on their proxy ballots.
Broad coalition
All told, the financial system is not aligned with the real economy. Policymakers are not stepping in to fill the gaps or create inclusive pathways for wealth creation.
Somewhere along the way, we started to take our democracy for granted. We assumed it was self-sustaining without asking whether people have the means or the will to defend it. Stemming the backsliding requires that we address the economic determinants of democracy for real people and the real economy. Investors, business leaders, funders, and advocates have an important role to play.
Financial inclusion. We need to allocate long-term capital to the economic bulwarks of democracy, including community development financial institutions, or CDFIs, that serve the most underbanked communities. These institutions bring both a deep historical track record and the ability to meet the current moment.
We can look to leaders like Pacific Community Ventures, a CDFI in California that recently acquired an AI startup to scale its impact underwriting and measurement and supercharge its efforts to support quality job creation and climate resilience.
Wealth-building. Investors can also help build what many are calling the “ownership economy,” in which people have greater opportunities to build wealth where they live and work. Investment managers like Apis & Heritage and advocacy groups like Lafayette Square Institute are establishing a new model for worker empowerment through employee ownership.
Accountability. We need to use our voices and our assets to mitigate the economic detractors of democracy and the causes of the K-shaped economy. Investors and business leaders have direct access to the capital markets and can advocate for better practices at the corporate level.
Grantmakers can support accountability organizations, like the Interfaith Center on Corporate Responsibility, a coalition of over 300 global institutional investors that seeks to improve corporate practices for workers, communities, and the environment. In the private markets, the Private Equity Stakeholder Project measures the risks private equity poses to workers and quality jobs. And together we can help catalyze the funds, products, and solutions that take the high road to invest in shared prosperity.
https://impactalpha.com/agents-of-impact-are-assembling-a-playbook-for-shared-prosperity/
This will all require a broad coalition, bringing together investors who have the ability to address system-level risks and opportunities with advocates and funders who have deep knowledge of supporting communities and fortifying democracy.
Bold movements like the GroundBreak in Minnesota, a coalition of businesses, investors, residents, and workers toward a common goal of inclusive wealth creation, prove that this kind of organizing is possible.
Democratic and economic empowerment are deeply intertwined. We cannot fight to save and secure our democracy without investing in an economy that works for all.
Fran Seegull is president of the US Impact Investing Alliance, which works to increase awareness of impact investing in the U.S., foster deployment of impact capital across asset classes globally, and partner with stakeholders, including government, to build the impact investing ecosystem.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
