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“A Modern Financial Tool-kit”: Lessons from Adolf A. Berle for a More Democratic Financial System

At the close of the 1930s, Adolf Berle – brain truster and co-author of The Modern Corporation and Private Property – developed a plan for a “modern financial tool-kit.” This paper recovers Berle’s program for financial reform. The discussion opens with an overview of Berle’s personal and intellectual history, the historical moment in which he developed these proposals, and a summary of alternative proposals circulating at the time. Berle’s own proposals are then presented. Notably, we find that Berle stresses the need for (quasi-)public banks, improved infrastructure finance, and loan guarantees for small business. Based on these proposals, we draw three lessons for efforts to democratize finance today. The first concerns the importance of critiquing misguided alternatives. Here we assert that proponents of democratized finance should push back against private equity’s encroachment on public infrastructure. The second lesson takes inspiration from Berle’ invocation of precedents for government action as justifications for further reform. Here we argue for a closer focus on the trillions in loans currently owned or guaranteed via federal credit programs. The third lesson takes inspiration from Berle’s articulation of core principles to guide reform. In that tradition, we offer a distillation of the overarching principles of Berle that might guide democratic financial reform today: fair allocation, local and global sustainability, and political accountability.