Cody Englander
Staff Writer
At 10:45 a.m. Monday in the Amphitheater, Erin McLaughlin and David K. Young, two of The Conference Board’s leading experts on the economy and economic development, discussed U.S. capitalism, how it’s evolved and how to continue innovation.
This lecture opened Week Five of Chautauqua Lecture Series “Innovation in Capitalism: How to Meet 21st-Century Challenges?”
Young previously worked as chief executive officer of Oxford Analytica with a focus on global strategy and business operations. He is currently president of the Committee for Economic Development, the public policy center for The Conference Board.
McLaughlin was the vice president of Private Market Resources at the American Council of Engineering Companies, where she led initiatives analyzing economic and market activities before she joined The Conference Board in 2022. Currently, McLaughlin works as a senior economist at The Conference Board’s Economy, Strategy and Finance Center.
Larry D. Thompson, former U.S. Deputy Attorney General and current trustee for Chautauqua Institution, moderated the conversation.
The lecture began with background information on the United States’ capitalist environment.
“We are not a totally free market because we have regulations,” McLaughlin said. “It’s called a mixed market by economists. What it means to be capitalist is that property and businesses are owned by individuals and individual entities who pursue profit. Classically, that is really the goal of businesses, to pursue profit.”
This is the difference between a capitalist system and a communist system, McLaughlin said. The ability to have choice and prosperity is because of the advantages American capitalism brings, despite its pitfalls.
“It’s not static — it’s evolving and we’re trying to make it better,” said Young. “… If you look at the 2008 financial crisis, certainly you could say that is somewhat of a failure to capitalism. And you could even challenge this and say climate change, to what extent is that challenging market capitalism? Is that, to an extent, a failure of this capitalistic system?”
Capitalism is an evolving economy, according to Young. Despite detractors, the market’s rules and regulations allow for the evolving system to bring innovation with the regulations. Largely, this is due to competition.
“Our regulatory environment, maybe it can’t perceive risks and perceive new technologies, but at least it sort of creates an atmosphere where competition is enabled, where we don’t have monopolies,” said McLaughlin.
Not allowing for monopolies gives America the chance to innovate through competition. With monopolies, creatives have a more difficult time looking for innovations toward new technologies, according to McLaughlin, especially with the introduction of constantly evolving AI.
“Not only are technologists grappling with this, but on the other end of the spectrum, the politicians are grappling with this,” said Young. “As they look at trying to form regulation, especially guardrails, it has to be adaptable to change and flexible. If we put regulation in and it’s static and it can’t react, then we will be stifling innovation in the U.S.”
AI has developed at an incredibly quick rate; the technology doesn’t “feel human or human-centric,” said McLaughlin. It’s come to a point where some AI programs are able to generate music.
“There is a scary aspect, looking forward, where it seems that somehow technology or AI or robots are going to somehow replace us or somehow change or control or take over for us,” she said. “And there is a lot of fear in that. But then you have to remember AI and the robotic world is created by humans.”
Willingness for companies to innovate and create change is going to continue, a fact that Young is “100% certain” about. The inability to sustain and innovate would be a misstep in the story of American capitalism.
One way to innovate, especially with limited assets, is resource optimization, McLaughlin said.
“We are studying the transition away from fossil fuels into renewable energy,” she said. “… Initially, it took some research and development by both public entities and private entities to get a lot of that off the ground.”
Thompson then posed a question about the sustainability of innovation through cuts to recent federal government funding that have halted incentives for green technology projects. McLaughlin, from Massachusetts, a state “likely” not canceling energy credit tax for solar panels or EVs, believes that these decisions will come down to a state level.
“I do think that one of the trends, just in the next decade or so, we will see is a more localization of policies,” she said. “I, again, am an infrastructure and built environment economist at heart. One of the challenges that we have seen, which is also a benefit, is that a lot of states and localities were really early in the green building movement.”
This helps continue economic innovation while working around the current red tape of the Trump administration. Although there are some ways in which the current American capitalist state can improve capitalistic opportunity, according to Young, capitalism always comes with a degree of inequality. But, some issues are solvable.
“Financial education, financial literacy with regards to helping people look at opportunities about how they can add more wealth and creativity to their lives — I wouldn’t say it’s one of the failures of capitalism — it’s just part of capitalism and something that we just have to recognize. There is a goal for the government to play,” Young said.
Maintaining a balance in the system comes with keeping a large and formidable middle-class. McLaughlin notes this as one of the reasons the United States has maintained the strongest economy in the world.
“We are in a consumer-based economy, about 70% of our GDP is made up of consumer spending,” she said. “When you look at who spends money, it’s everyone. And the larger middle class we have, the more spending, the more choice, the stronger economy we will have.”
McLaughlin noted that a characteristic of capitalism is the lack of a “safety net.” This was seen coming out of the COVID-19 pandemic, she said, where some argue the United States is in a “K-shaped economy.”
“A K-shaped economy is where those that are sort of at the top do better faster coming out of a recession or a slow down, “ McLaughlin said. “Those folks that are maybe in the bottom quarter income do worse. I think that there is a lot of evidence that we are in a little bit of a K-shaped economy. That’s something I think that we have to be aware of because that weakens both our economy and potentially can weaken our civil society.”
However, without a safety net, Thompson posed a question about the government’s role in a capitalistic society.
Government organizations like the Environmental Protection Agency, created in 1970, play the exact role the government should have, according to McLaughlin.
“We began to have some regulations,” she said. “That’s safety. We have regulations around worker safety, air quality, and child labor laws. So paramount as a civic society is for the government to make sure that we live in a safe environment.”
Young said that oftentimes there is a lack of transparency surrounding government agencies. He challenged politicians to lead by example in society.
“Someone said to me recently, 53 versus 47 is not bipartisanship,” Young said. “That is the pure definition of partisanship. We will force things through regardless of what the opinions and views are on the opposite side of the aisle. What bipartisanship is, is having civil conversations with people on the other side of the aisle and trying to get bills passed.”
He believes this openness allows for greater safety, regulation and innovation.
“Diversity of opinion and mindset is critical and a central pillar to progress and innovation,” Young said. “But disagreeing, using inappropriate words and inappropriate tones isn’t helpful. It’s not civil. There should be a better way within public and private enterprise to disagree and to come together on the things that matter — disagreement is healthy and needed. As a result of disagreement, you get better solutions.”
Overcoming disagreements in exchange for greater innovations makes America special. Young believes politics shouldn’t divide the United States, but our conversations should unite us.
“There are challenges in the U.S., and we need to address them,” Young said. “But magic happens more in the United States than it does anywhere else in the world. I think we have to appreciate that and value that and reinvest in that.”
McLaughlin closed the lecture with encouraging words about America’s growing economy and one of its historically unique strengths.
“We can look to productivity as economists do, or look to technology and innovation to create that kind of growth,” McLaughlin said. “But ultimately in the U.S., what has made us such an awesome country are immigrants — growth of population that doesn’t just come from folks having kids, but also from the people that come to the U.S. that truly do make us such a great society.”
