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Books /24 Feb 2019
02.24.19

How a Universal Fund Works. Interview with Author Sergio Gramitto

Sergio Gramitto is a Visiting Assistant Professor of Law at Cornell Law School, where he also serves as the assistant director of the Clarke Program on Corporations & Society. He studied law at the University of Milan and received a Ph.D. from Bocconi University. Sergio Gramitto is consistently invited to speak at universities around the world. His research focuses on corporate law, corporate governance, and legal personhood. His new book is Citizen Capitalism: How a Universal Fund Can Provide Influence and Income to All.

Care to briefly explain how your Universal Fund differs from Universal Basic Income?

It differs in three ways. First, the Universal Fund provides more than just income; it provides influence. The Universal Fund is a device which allows all American adults to participate in the corporate sector. It gives voice to those who have not been heard so far. Second, the Universal Fund would solely be funded by private donations of humans—especially the ultra-wealthy—and corporations; thus it does not require transfer payments or coercion. Third, because it would be a private ordering initiative, the Universal Fund would be insulated from changes in the compositions of governments, political elections, and government budgetary needs.

You write that a sovereign wealth fund bill could never pass in Congress. However, such legislation was able to pass in ultraconservative Alaska. Polling shows an increasing majority of the US electorate favoring ambitious government programs like Medicare for All. Why can’t the US enact its own sovereign wealth fund?

The Alaska Fund could be created with the profits coming from a quite specific source of earnings: Alaskan oil. That would not be replicable on a national scale. Moreover, the Alaska Fund supplements does not replace other government programs. In addition, the Alaska Fund does not provide influence over the corporate sector—a characterizing trait of the Universal Fund. Lastly, a government program could pose risks that private ordering does not entail—think about the instability that a government program could be subjected to upon changes in the composition of government or Congress. Insulation from politics is a great feature of the Universal Fund.

In 2018, companies didn’t raise compensation for employees, even in the face of record profits. Why do you think they’re going to start donating to your Universal Fund? If tax deductions are the main reason, wouldn’t it make more sense for the government to directly support the Fund, instead of hiding behind tax incentives and hoping for the best in terms of corporate generosity?

Corporations would have a number of reasons for donating. Marketing reasons: donating corporations would appeal to all American adults, who would benefit from such donations. Corporate governance reasons. By design, the Universal Fund would not trade the shares in its portfolio (with exceptions of specific circumstances), so corporations and their boards of directors would secure a long-term, patient shareholder on which they can rely. Practical reasons. Lately corporations have repurchased larger and larger amounts of their shares; they could donate these shares to the Universal Fund instead of turning them into treasury shares. Now imagine if the legislator made these donations tax-deductible, corporations and humans would benefit of a fiscal incentive, too. But enough reasons exist even without this legislative intervention.

People are increasingly skeptical of the philanthropist-centered model of social welfare spending. Jeff Bezos alone could write a check to end homelessness and still have billions leftover. Instead, the billionaire class donates crumbs and stashes most of its tens of trillions of dollars in tax havens. Why should we continue to wait in vain for the unaccountable Davos crowd to save us, instead of demanding change from our elected officials, whom we actually control?

A large part of the ultra-wealthy have already committed to donating a majority of the wealth. As I respond to your questions, 189 pledgers have signed the Giving Pledge. But there is a collective action problem. Without an idea that would allow donors and corporations to coordinate, their donations might only have a superficial impact. The Universal Fund is a device that would allow to coordinate charitable actions and donations and to produce real social change in the present and in the future.

Why do you think the billionaire class vocally supports UBI? Could it be that they’re simply trying to placate people asking for more fundamental changes to our unequal system?

I believe that the billionaire class is aware of the widening inequality and of potential issues that automation and robotization of labor could cause.

UBI is touted as a possible solution to the emerging Era of Automation. However, countless social scientists and philosophers argue that work is a fundamental part of being human. What are your thoughts on the looming unemployment pandemic?

UBI would only support people financially—perhaps also in the effort to start a new enterprise. Conversely, the Universal Fund, by allowing all to engage with the governance of the corporate sector, could mitigate the sense of lack of purpose that citizens might experience in the emerging Era of Automation.

In terms of instituting “citizen capitalism,” what do you think of the German law of corporate co-determination, in which workers make up about half of a company’s board of directors?

I like German co-determination. I find it consistent with an interest of corporations that goes beyond the mere interest of shareholders and that better recognizes the nature of corporations as legal entities distinct from its shareholders. But German co-determination would require a structural change in American corporate governance because the German model is structured around two boards, the monitoring board, and the managing board. It might be too big a change for American corporate law.

To further riff on your concept of “citizen capitalism,” do you think financial literacy and economics should be made required courses during high school? If so, what concepts would you include in the standard curricula?

I would start with basic macroeconomics.

On Pg. 92, while glowingly extolling the benefits of capitalism, you write, “Companies like the Dutch East India Company and the Hudson’s Bay Company opened whole continents for trade.” I laughed out loud reading that naïveté. These are among the companies that first engaged in the centuries-long colonization, swindling, enslavement and genocide of native peoples in America and the Global South. I daresay people in places like Sierra Leone and the DRC still aren’t benefiting from “continental trade-opening,” either. Would you care to clarify your statement?

In a recent paper, “The Technology and Archeology of Corporate Law,” I trace back the origins of corporations to Ancient Rome. The Roman State first conceived the corporate form for cities and towns. When the state expanded and could not provide services and infrastructure, it outsourced activities, including tax farming and infrastructure building to private entrepreneurs. To facilitate the performance of these activities, the Roman State granted the corporate form to private business ultimately carried out in the interest of the state itself. Today, almost everybody uses products and services that business corporations provide. The challenge is making the corporate sector inclusive, instead of exclusive. That was the ultimate goal Lynn Stout and I had in mind when we conceived the idea of the Universal Fund while writing the article “Corporate Governance as Privately-Ordered Public Policy: A Proposal.” I hope that our idea could help business corporations re-merry their original purpose to serve civil society.

Do you want to take a minute to write about your co-author Lynn Stout, who passed away last year?

Lynn and I used to box in the same gym and our trainer used to call her “The Indomitable Lynn Stout.” In remembering Lynn during the launch of this book, Marty Lipton listed the names of Nobel Laureates whose theories and positions she challenged. Her intellectual courage was second to none. She was indomitable in academia, even more than at the gym.

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