# Capital strike
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{{Short description|Businesses withholding investments as leverage for getting favorable policy}}
'''Capital strike''' is the practice of businesses withholding any form of new [investment](/source/investment) in an [economy](/source/Economic_system), in order to attain some form of favorable policy.[{{Cite journal|last1=Young|first1=Kevin A.|last2=Banerjee|first2=Tarun|last3=Schwartz|first3=Michael|date=2018|title=Capital Strikes as a Corporate Political Strategy: The Structural Power of Business in the Obama Era|journal=Politics & Society|language=en|volume=46|issue=1|pages=3–28|doi=10.1177/0032329218755751|issn=0032-3292|via=[SAGE Publishing](/source/SAGE_Publishing)|doi-access=free}}] Capital strikes may arise from the determination that [return on investment](/source/return_on_investment) may be low or nonexistent or from the belief that by withholding investment certain political or economic changes may be achieved—or from a combination of the two. Capital strikes can be economy-wide, or take place in a specific industry.[{{Cite web|date=2019|title=Capital Strike|url=https://www.shmoop.com/finance-glossary/capital-strike.html|url-status=live|archive-url=https://web.archive.org/web/20210311163315/https://www.shmoop.com/finance-glossary/capital-strike.html|archive-date=March 11, 2021|access-date=March 11, 2021|website=Shmoop}}]
Capital strikes may sometimes result when [governments](/source/governments) pursue policies that investors consider "unfriendly" or "inflexible", such as [rent control](/source/rent_control) or [nationalization](/source/nationalization). Capital strikes are often aimed at undermining proposed [left-wing](/source/Left-wing_politics) or [socialist](/source/Socialism) policies. The term can refer to a capital strike by a single investor[{{Cite web|last=Dane|date=February 20, 2011|title=Foreign Investor Explains Capital Strike Against Chile|url=http://brophyworld.com/foreign-investor-explains-capital-strike-against-chile/|url-status=usurped|archive-url=https://web.archive.org/web/20200719180111/http://brophyworld.com/foreign-investor-explains-capital-strike-against-chile/|archive-date=July 19, 2020|access-date=March 11, 2021|website=Brophy World}}] or a large group. Capital strikes are commonly invoked as the business-owner/shareholder equivalent of a [labor strike](/source/Strike_action), and are often tied to the concept of [capital flight](/source/capital_flight)''.[{{Cite book|last=Epstein|first=Gerald A.|title=Capital Flight and Capital Controls in Developing Countries|publisher=[Edward Elgar Publishing](/source/Edward_Elgar_Publishing)|year=2005|isbn=9781781008058|location=Cheltenham, United Kingdom|pages=6}}]'' Capital strike was originally a derogatory term,[{{Cite web|last=Frank|first=Thomas|author-link=Thomas Frank (political commentator)|date=April 2013|title=To Galt's Gulch They Go|url=https://thebaffler.com/salvos/to-galts-gulch-they-go|url-status=live|archive-url=https://web.archive.org/web/20200921120333/https://thebaffler.com/salvos/to-galts-gulch-they-go|archive-date=September 21, 2020|access-date=March 11, 2021|website=[The Baffler](/source/The_Baffler)}}] but has been used more neutrally in modern politics.[{{Cite web|last=Karlgaard|first=Rich|author-link=Rich Karlgaard|date=December 22, 2008|title=Capital Is On Strike|url=https://www.forbes.com/sites/digitalrules/2008/12/22/capital-is-on-strike/#3ee5dded6075|url-status=dead|archive-url=https://web.archive.org/web/20200925142931/https://www.forbes.com/sites/digitalrules/2008/12/22/capital-is-on-strike/#3ee5dded6075|archive-date=September 25, 2020|access-date=March 11, 2021|website=[Forbes](/source/Forbes)}}][{{Cite web|last=James|first=Frank|date=September 15, 2011|title=Boehner Lobs Supply Side Shell In Fiscal Trench War With Obama|url=https://www.npr.org/sections/itsallpolitics/2011/09/15/140512590/boehner-lobs-supply-side-shell-in-fiscal-trench-war-with-obama|url-status=live|archive-url=https://web.archive.org/web/20200925172506/https://www.npr.org/sections/itsallpolitics/2011/09/15/140512590/boehner-lobs-supply-side-shell-in-fiscal-trench-war-with-obama|archive-date=September 25, 2020|access-date=March 11, 2021|website=[NPR](/source/NPR)}}]
==Examples==
It is difficult to determine with any certainty when a decline in business investment is the result of a "capital strike" against certain policies or a response to other economic factors. Most often, the phrase "capital strike" is used to describe resistance to labor-friendly or left wing reforms which are perceived or intended to be against the interests of business owners and investors.
* U.S. President [Franklin Roosevelt](/source/Franklin_Roosevelt) argued that the [Recession of 1937](/source/Recession_of_1937) was caused by a capital strike organized to undermine the [New Deal](/source/New_Deal) and his new taxes on high incomes.[{{Cite book|last=Markham|first=Jerry|title=A Financial History of the United States|publisher=[M. E. Sharpe](/source/M._E._Sharpe)|year=2002|isbn=9780765607300|volume=II|pages=234|author-link=Jerry Markham}}]
* In December 1978, banks financing the debt of the city of [Cleveland, Ohio](/source/Cleveland) engaged in a capital strike by refusing to roll over the city's municipal debt when the Mayor, [Dennis Kucinich](/source/Dennis_Kucinich), refused to sell the publicly owned electric company, the [Cleveland Municipal Light Plant](/source/Cleveland_Public_Power).[{{Cite web|title=History|url=https://www.cpp.org/history|url-status=live|archive-url=https://web.archive.org/web/20200930152032/https://www.cpp.org/history|archive-date=September 30, 2020|access-date=August 23, 2020|website=[Cleveland Public Power](/source/Cleveland_Public_Power)}}] Cleveland would later enter [default](/source/Default_(finance)).
* French President [François Mitterrand](/source/Fran%C3%A7ois_Mitterrand) is said to have faced a capital strike[{{Cite journal|last=Devine|first=James|date=Fall 1989|title=Paradigms as Ideologies: Liberal vs. Marxian Economics|journal=Review of Social Economy|volume=47-3|issue=3|pages=305|jstor=29769465}}] when capital fled France following the 1982 nationalization of a large number of private firms and other labor market reforms.[{{Cite news|last=Eaton|first=George|author-link=George Eaton (journalist)|date=October 7, 2017|title=French lessons: what Corbyn can learn from Mitterrand's mistakes|work=[New Statesman](/source/New_Statesman)|url=https://www.newstatesman.com/politics/uk/2017/10/french-lessons-what-corbyn-can-learn-mitterrands-mistakes|url-status=live|access-date=February 19, 2019|archive-url=https://web.archive.org/web/20201112021442/https://www.newstatesman.com/politics/uk/2017/10/french-lessons-what-corbyn-can-learn-mitterrands-mistakes|archive-date=November 12, 2020}}]
* Chilean President [Salvador Allende](/source/Salvador_Allende) is said to have faced a capital strike[{{Cite web|date=January 29, 2021|title=Salvador Allende|url=https://www.britannica.com/biography/Salvador-Allende|url-status=live|archive-url=https://web.archive.org/web/20210211200858/https://www.britannica.com/biography/Salvador-Allende|archive-date=February 11, 2021|access-date=March 14, 2019|website=[Encyclopædia Britannica](/source/Encyclop%C3%A6dia_Britannica)|language=en}}]
* U.S. President [Barack Obama](/source/Barack_Obama) was sometimes said to have faced a capital strike during the [Great Recession](/source/Great_Recession), including then [Speaker of the House](/source/Speaker_of_the_United_States_House_of_Representatives) [John Boehner](/source/John_Boehner) saying that "job creators in America are on strike" in response to uncertainty over the Obama administration's economic policies.[{{Cite news|last=Chiang|first=Lulu|date=September 15, 2011|title=Boehner: Job Creators in America are 'On Strike'|work=[CNBC](/source/CNBC)|url=https://www.cnbc.com/2011/09/15/boehner-job-creators-in-america-are-on-strike.html|url-status=live|access-date=February 19, 2019|archive-url=https://web.archive.org/web/20200920185450/https://www.cnbc.com/id/44536913|archive-date=September 20, 2020}}]
*A February 2021 article in the magazine ''[Jacobin](/source/Jacobin_(magazine))'' argued that companies such as [Amazon](/source/Amazon_(company)), [Kroger](/source/Kroger), [Lyft](/source/Lyft), and [Uber](/source/Uber) were threatening to use capital strikes during the [COVID-19 pandemic](/source/COVID-19_pandemic).[{{Cite magazine|last=Shure|first=Natalie|date=2020-08-20|title=Uber and Lyft Are Threatening a Capital Strike|url=https://www.jacobinmag.com/2020/08/uber-lyft-capital-strike-california-reclassify|url-status=live|archive-url=https://web.archive.org/web/20200820234847/https://jacobinmag.com/2020/08/uber-lyft-capital-strike-california-reclassify |archive-date=2020-08-20 |magazine=Jacobin }}] As examples, they pointed out Uber and Lyft threatening to cease operations in [California](/source/California) if [California Assembly Bill 5](/source/California_Assembly_Bill_5_(2019)) were enforced and Kroger announcing they would close two stores in [Long Beach, California](/source/Long_Beach%2C_California) after the [city council](/source/city_council) passed an ordinance requiring grocery stores to increase pay for their workers during the pandemic.[{{Cite web|last=Press|first=Alex N.|date=February 15, 2021|title=At Kroger and Amazon, Capital Is Going on the Offensive|url=https://jacobinmag.com/2021/02/capital-strike-kroger-amazon-long-beach-dch1|url-status=live|archive-url=https://web.archive.org/web/20210218112347/https://jacobinmag.com/2021/02/capital-strike-kroger-amazon-long-beach-dch1|archive-date=February 18, 2021|access-date=March 11, 2021|website=[Jacobin](/source/Jacobin_(magazine))|language=en-US}}]
== Impacts ==
Capital strikes have historically impacted economies and governments in a variety of ways and provoked a variety of responses.
* The Roosevelt administration took an aggressive stance in response to the recession and alleged capital strike. Roosevelt railed publicly against monopoly business interests,[{{Cite book|last=Freyer|first=Tom|title=Antitrust and Global Capitalism|publisher=[Cambridge University Press](/source/Cambridge_University_Press)|year=2016|isbn=978-1139455589|location=Cambridge|pages=59}}] and signed into law a total of $3.75 billion worth of new congressionally allocated government spending to be divided among government recovery agencies, which helped spur economic rehabilitation.[{{Cite web|date=August 19, 2010|title=Roosevelt Recession|url=http://rooseveltinstitute.org/roosevelt-recession/|url-status=dead|archive-url=https://web.archive.org/web/20190620003413/http://rooseveltinstitute.org/roosevelt-recession/|archive-date=June 20, 2019|access-date=March 11, 2021|website=[Roosevelt Institute](/source/Roosevelt_Institute)}}]
* Disinvestment and international market pressures forced the Mitterrand government to reverse course on economic policy, making significant cuts to public spending, raising individual taxes, and setting a hard ceiling on deficit spending.[{{Cite journal|last=Brown|first=Kendall W.|date=2019|title=Chilean Military Overthrows Allende|url=http://search.ebscohost.com/login.aspx?direct=true&AuthType=ip&db=ers&AN=89314121&site=eds-live&scope=site|journal=Salem Press Encyclopedia}}] it maintained significant popular support among working class Chileans[{{Cite journal|last1=Navia|first1=Patricio|last2=Osorio|first2=Rodrigo|date=2017|title='Make the Economy Scream'? Economic, Ideological and Social Determinants of Support for Salvador Allende in Chile|url=https://www.cambridge.org/core/product/identifier/S0022216X17000037/type/journal_article|journal=[Journal of Latin American Studies](/source/Journal_of_Latin_American_Studies)|publisher=[Cambridge University Press](/source/Cambridge_University_Press)|volume=49|issue=4|pages=771–797|doi=10.1017/S0022216X17000037|s2cid=151818039 |url-access=subscription}}] until it was overthrown in a [1973 U.S. supported coup](/source/1973_Chilean_coup_d'%C3%A9tat) that put in place a more business-friendly military junta led by General [Augusto Pinochet](/source/Augusto_Pinochet).
* Under pressure from large firms withholding investment, the Obama administration pursued several pro-business reconciliation initiatives such as cutting corporate tax rates, pursuing free trade deals, and limiting government regulation''''',[{{Cite web|last=Williamson|first=Elizabeth|date=December 11, 2010|title=Obama Woos CEOs as Frictions Ease|url=https://www.wsj.com/articles/SB10001424052748703518604576013194238316636|url-status=live|archive-url=https://web.archive.org/web/20150325205908/https://www.wsj.com/articles/SB10001424052748703518604576013194238316636|archive-date=March 25, 2015|access-date=March 11, 2021|website=[The Wall Street Journal](/source/The_Wall_Street_Journal)}}][{{Cite web|last1=Young|first1=Kevin|last2=Schwartz|first2=Michael|last3=Banerjee|first3=Tarun|date=February 3, 2017|title=When Capitalists Go on Strike|url=https://www.jacobinmag.com/2017/02/capital-strike-regulations-lending-productivity-economy-banks-bailout|url-status=live|archive-url=https://web.archive.org/web/20201129174221/https://www.jacobinmag.com/2017/02/capital-strike-regulations-lending-productivity-economy-banks-bailout|archive-date=November 29, 2020|access-date=March 11, 2021|website=[Jacobin](/source/Jacobin_(magazine))}}]''''' but still signed into law [mild financial regulations](/source/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act), the [Affordable Care Act](/source/Patient_Protection_and_Affordable_Care_Act), and the [2009 American Recovery and Reinvestment Act](/source/American_Recovery_and_Reinvestment_Act_of_2009).
== Conditions under which capital strikes are effective ==
Given that capital strikes have succeeded or failed in a variety of situations, predicting what conditions favor them is particularly difficult. Some have put forward that [capital control](/source/capital_control)s are one key method by which governments can mitigate the effectiveness of disinvestment and capital flight,[{{Cite web|last=Panitch|first=Leo|author-link=Leo Panitch|date=January 21, 2014|title=Syriza Succeeds in Greece by Challenging European Social Democrats' Approach to Reform|url=https://therealnews.com/stories/lpanitch0121capitalism|url-status=live|archive-url=https://web.archive.org/web/20210120134054/https://therealnews.com/lpanitch0121capitalism|archive-date=January 20, 2021|access-date=March 11, 2021|website=[The Real News](/source/The_Real_News)}}] but their usefulness has been disputed.[{{Cite journal|last=Hartwell|first=Christopher|date=July 3, 2015|title=Capital Controls Hinder Needed Reform|url=https://www.academia.edu/13587427|journal=[Handelsblatt](/source/Handelsblatt)|issue=211}}] The effectiveness of modern purported capital strikes in Greece and Venezuela have been attributed to the sheer size and reach of the financial firms involved.