Woke Capitalism’s Tragedy of the Commons

The Mouse is in trouble. In April, Republican Governor of Florida Ron DeSantis signed a bill revoking Disney’s special self-governing status in the area around its Orlando theme parks. This prompted the Washington Post’s Henry Olsen to announce “the sundering of the over-150-year alliance between big business and the Republican Party.” His observation received further support in May, when Republican Senator Josh Hawley introduced a bill targeting Disney’s older copyright protections.

As Olsen noted, policies that target big business have recently become more palatable to the GOP’s traditionally pro-business supporters. The Pew Research Center has reported that, between August 2019 and July 2021, the proportion of polled Republicans who say large corporations have a positive impact plummeted from over half to less than a third. It is not a coincidence that this time period overlaps with an acceleration of what has become known as “the great awokening.” As white Democrats have lurched leftwards on issues related to race, sex, gender, and sexuality, leading corporations have taken increasingly progressive public stances on these sensitive topics.

In a 2018 article for the New York Times, conservative columnist Ross Douthat christened this trend “woke capitalism,” and this is what lies at the heart of Disney’s feud with DeSantis. The spat began when Disney’s CEO attacked Florida’s new Parental Rights in Education Act for allegedly targeting LGBTQ+ communities. The new law forbids classroom discussion about sexual orientation and gender identity at primary grade levels. DeSantis, in turn, accused Disney of trying to import “California values” and of folding to pressure from a “woke mob.” Hawley likewise referenced Disney’s social stances in the press release for his copyright bill. “Thanks to special copyright protections from Congress,” he complained, “woke corporations like Disney have earned billions while increasingly pandering to woke activists.”

At first glance, corporate America’s decision to poison its relationship with its core supporters is puzzling. But woke capitalism actually makes sense as an example of Garrett Hardin’s “Tragedy of the Commons,” a theory he introduced in the journal Science over 50 years ago. Considered from that perspective, woke capitalism is both rational and unsustainable.

Hardin was an ecologist, and he used his theory to explain why rational agents overuse environmental resources despite the high costs this behavior eventually brings. He illustrated the concept by telling a story about medieval peasants who share a field of grass on which they graze their animals. If the animals graze moderately, the commons are able to regenerate and the peasants will have grass for their animals indefinitely. If they overgraze, the commons eventually die and the animals and their owners are forced to go hungry.

The peasants overgraze their animals even so, killing the commons and bringing catastrophe. The individual peasant overgrazes for two reasons: first, because he is tempted by the prospect of fattening up his animals; second, because he fears that other overgrazing peasants will take advantage of his moderation if he practices it alone, fattening their animals while his stock remains thin. It is rational for the peasants as a group to use the commons sustainably, but it is also rational for them to overgraze as individuals. This is because the benefits of overgrazing go directly to those individuals who do so while the costs are shared among all, including those who exercise restraint. Hardin’s story has been used to explain the depletion of other types of commons, such as fish stocks, which collapse if used unsustainably.

Woke capitalism can be understood as another Tragedy of the Commons, in which the commons are represented by public goodwill towards big business. Like the peasants whose herds use and benefit from fresh grass, all large businesses use and benefit from public goodwill. Goodwill helps to shield them from unfavorable government policies and legislation and even provides some perks. For decades, it allowed Disney to benefit from copyright laws and its special legal status in Florida. Like grazing animals, corporate America consumes the public’s goodwill over the course of its normal operations via price rises, layoffs, CEO bonuses, offshoring, and other controversial but routine business decisions.

Like grass, the goodwill can grow back, since memories fade and big business also provides tangible benefits to its host societies. However, this requires restraint and, like the peasants, corporations face both temptations and pressures to take liberties. There have been more of these in recent years as a result of the great awokening and the lure of the lucrative but increasingly controversial Chinese market. Since the vast majority of goodwill towards big business has traditionally been found on the political Right and centre, the rise of woke capitalism has been especially devastating to these commons.

Nevertheless, woke capitalism is tempting because it promises higher returns in the short-term. Nike, for example, reported “$163 million in earned media, a $6 billion brand value increase, and a 31% boost in sale” after its controversial 2018 ad campaign featuring athlete-activist Colin Kaepernick. “It doesn’t matter how many people hate your brand as long as enough people love it,” said Nike founder Phil Knight. This thinking makes a narrow kind of sense, as Nike is targeting the youthful and ethnically diverse sections of the public. Many of them liked the ad and did indeed go out and buy the company’s products.

But on election days, these progressive voters wear their Nikes to the polls and vote for progressive politicians who want to raise corporate taxes. As for the older and paler Americans whom the ad offended, they happen to be the voting core of the traditionally pro-business Republican Party. For them, the Kaepernick ad was one more nudge towards populist economic nationalism and away from the pro-market consensus of the Reagan era. In politics, pace Knight, it matters a great deal if these people hate his brand.

On the other hand, corporations that take a conservative position on cultural disputes, or that try to remain neutral, risk being publicly called out and shamed by activists and media outlets. Initially, Disney resisted getting drawn into Florida’s culture war, and its CEO only relented after a media-publicized pressure campaign was mounted by activists inside and outside the company. Even this, combined with Disney’s pledge to donate millions to activist groups, proved barely adequate. “Businesses have had and continue to have a major impact in the fight for LGBTQ+ rights, from marriage equality to the defeat of House Bill 2 in North Carolina and beyond,” declared the head of one activist group. “While Disney took a regrettable stance by choosing to stay silent amid political attacks against LGBTQ+ families in Florida—including hardworking families employed by Disney—today they took a step in the right direction. But it was merely the first step.” The more businesses go woke, the greater the pressure on those that don’t.

The result is an overburdened, depleting commons of public goodwill, as previously pro-business conservatives are turned off by attacks on their values. This loss of goodwill from the Right is insufficiently balanced by new goodwill from the Left, where it has always been meager. The Pew Research Center found that the collapse in Republican support for corporations between August 2019 and July 2021 was accompanied by only modest gains among Democrats. In economic policy, the Democratic Party has continued its drift towards progressivism, apparently indifferent to corporate America’s public embrace of its social views and values.

Consider, for example, the Biden Administration’s attempts to pass the multi-trillion-dollar Build Back Better bill, or its scapegoating of big business for the inflation crisis, and its push to raise corporate tax rates. If these trends continue, corporate America will find itself without friends, squeezed from the Left by progressives like Senator Elizabeth Warren and from the Right by economic nationalists like Senator Hawley. Big business will then have to tighten its belt like Hardin’s peasants, as its bottom line is eroded by ruinous new taxes and regulations.

This might still be avoided, however. One means of preserving a commons is to privatize it. The peasants would be less likely to overgraze if the commons were divided up among them as private property. However, goodwill cannot be entirely privatized because the actions of individual corporations affect how the public sees other corporations. Another means of saving the commons is to charge those who use it. Peasants won’t overgraze if doing so results in a hefty bill. This method has proven effective in protecting fish stocks in countries like New Zealand, where fishermen buy and sell limited fishing quotas.

Something like a de facto “woke quota” or “woke tax” may be taking shape in the United States. Disney was and remains free to erode Republican goodwill towards corporate America by wading into highly sensitive social issues. However, like a New Zealand fisherman, it is now paying a price for depleting the commons. Other corporations seem to be getting the message. So far, big business has tried to avoid getting drawn into the brewing controversy over abortion and Roe v. Wade. A pair of journalists who asked nearly 200 firms about their stances on abortion received replies from only 15. The head of a PR company told the Financial Times that “[i]f you think business people want to get involved with abortion, you need your head examined.”

If this becomes a trend, corporate America could adopt a more cautious approach to social issues, allowing the commons of public support and tolerance for business to grow back. The alternative is a continuing collapse in goodwill, leading to a bipartisan array of anti-corporate government measures. In either scenario, woke capitalism is unsustainable.