First, the government, as it provides aid, could avoid subsidizing merger waves or mass firings. Companies would not be allowed to use public money to prepare a company for sale or to fund acquisitions or takeovers. The money lent by the Treasury Department and the Federal Reserve for recovery could be used only to keep viable firms alive until the economy returned to some semblance of normalcy.
Second, the investors who have put more than $12 trillion into “socially responsible” investments — usually focused on problems like climate change — might find ways to turn their efforts toward the rescue of sick companies. Imagine the socially responsible equivalent of a “vulture fund” whose goal was to return companies to health while preserving employment — and then to disappear into the sunset, like the Lone Ranger.
Third, both government and the private sector could encourage and finance a wave of “worker buyouts,” in which employees take control of otherwise sound but currently distressed firms. The problem with typical buyouts is that they too often hurt employees. But a worker buyout can use the techniques of private equity to give employees their share of the company’s proceeds. (The Phoenix Project and Project Equity are two examples of private-sector efforts to promote employee ownership.)
While worker buyouts have been rare and are overly complex, Congress could encourage them by allocating some of the recovery funds to equity investments by employees looking to acquire their company. Congress could also create a “right of first refusal” for employees of businesses about to be sold — similar to that enjoyed by tenants in some parts of the country — so workers would have the first opportunity to bid.
Finally, the government could impose stronger oversight over mergers and buyouts, either by rigorously enforcing existing antitrust rules or by creating new restrictions on private equity. The idea is not to prevent all rescue operations, only the most blatantly anticompetitive ones. Is the buyer a direct competitor? Does the buyer already control the other competitors in the same industry?
At the moment, the economy is still in a state of shock, and uncertainty has paralyzed buyers. There is, in other words, still plenty of time to act. The possibility of even greater inequality of wealth and income in the United States is, unfortunately, not a danger to which the Trump administration seems particularly attuned. But make no mistake: If we repeat the mistakes of the 2010s, the rich will get richer, the poor will get poorer and the middle class will be further gutted. And the resulting backlash could make the current level of discontent in this country seem like the good old days.
Tim Wu (@superwuster) is a law professor at Columbia University, a contributing Opinion writer and the author, most recently, of “The Curse of Bigness: Antitrust in the New Gilded Age.”
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