Finance capitalism is bad for business

The department store chain Sears once represented the vitality of American capitalism. People of all income levels shopped at Sears. Households everywhere welcomed the Sears catalog, which offered everything from clothes to toys to model homes at reasonable prices. The Sears catalog was especially notable for the way that it allowed people of all races to shop freely for the same products. The writer Edward McClellan has argued that “there has been no more ubiquitous, unifying experience” in the United States than shopping at Sears.

So when Sears declared bankruptcy in October, it marked the end of an era. Sears had been in decline for years, its middle-class brand losing value in a fragmented marketplace and its business model punctured by the rise of e-commerce. Sears’s demise reflects a changed marketplace and a series of unwise business decisions.

Yet the fall of Sears is also emblematic of a broader shift in capitalism. It’s telling that the CEO managing the crisis, Edward S. Lampert, is not an expert in the retail business but rather the founder and manager of a hedge fund. His efforts have not focused on the company’s value to its customers, communities, or employees. Instead, his concern has been shareholder value, which he has tried to salvage by selling off parts of the company—in his words, “unlocking the value of our assets.”