There is a way to nudge the nation back to public trust, self-confidence and optimism. It is to restore the “rising tide raises all boats” and democracy-friendly form of capitalism that dominated our economy in the decades following WWII.

If Main Street as well as Wall Street were once again to benefit from corporate profitability, Americans would have faith that the nation’s traditional social mobility (the American Dream) had been restored.

I am convinced that this is an achievable goal, especially if the public is fully engaged in making it happen.

It would constitute a huge win for everyone: it would raise public morale; business would regain the public trust it craves; our institutions of governance could once again be counted on to “do the right thing,” just as they had in earlier decades; our consumer-driven economy would achieve the higher levels of growth we need to sustain productivity and prosperity.

There is nothing mysterious about the strategy needed to make this happen. But it does require building a new national consensus about how to manage our form of capitalism.

Capitalism and democracy do not coexist automatically and effortlessly. We have learned from China and others how flexible capitalism can be. It can take many forms and flourish under both democratic and non-democratic governments.

It takes considerable effort to achieve and maintain democracy-friendly capitalism. We know from our own national history that, left to its own devises, capitalism drifts toward monopoly. It took our nation years of strife to channel capitalism toward competition rather than monopolistic trusts, greatly strengthening our free enterprise system.

We have, I believe, reached a comparable tipping point in the current tendency of our great corporations to put the interests of shareholders ahead of other stakeholders: customers, employees and the broader society. If you stand back and reflect on the fact that the interests of short-term traders take precedence over consumers, employees, citizens and the larger society, you see a travesty of democracy. And yet it is today the dominant doctrine of the vast majority of America’s corporations.

This is a relatively new development. I clearly remember that my firm’s corporate clients in the 1970s and 1980s believed that the main task of the company CEO was to balance the competing claims of all stakeholders, and not give priority to any one, certainly not shareholders.

This prioritizing of shareholders is wreaking havoc on our society. In an earlier blog, I wrote:

This means that a casual day trader with no stake in the company other than some shares he bought yesterday and may sell tomorrow is given precedence over all of the company’s employees, however committed and effective they may be. The company’s obligations to the larger community are likewise shoved to the side in favor of shareholders. The long-term interests of the company are subordinated to the trading manipulations of hedge fund managers who don’t give a damn about the company and want only to add to their unimaginably huge, tax-advantaged profits.

It is hard to conceive of a more irrational, shortsighted and frankly self-defeating doctrine for a nation that prides itself on maintaining a democracy-friendly form of capitalism.

This Wall-Street-first doctrine is largely responsible for the economic stagnation that has paralyzed middle-class worker incomes over the past 15 years. It is at least partly responsible for the persistently slow growth of the economy. It was a major cause of the Great Recession of 2008-9.

Our economy, unlike that of China and other countries, is mainly consumer driven. More than 70 percent of our GDP reflects consumer buying. That is why growth in company profits and consumer income marched hand in hand for so many years.

In recent decades, however, companies began to learn how to be profitable without relying on steady increases in consumer incomes. Through exporting jobs and reducing labor costs through technology, they were able to maintain their profitability without passing on these gains either to employees or consumers.

Of course, these practices began to stir up public resentment. Ordinarily, such resentment would have motivated business to restore the older balance. Instead, American business became obsessed with the doctrine known as “shareholder value.” This doctrine came to justify business practices that would otherwise have been plainly seen as unethical, irresponsible and in the long run unsustainable.

The gist of this doctrine is that the interests of shareholders always come first. They are to be given priority over the interests of employees, consumers, the larger society and any other stakeholder. The inference is that companies can’t be profitable unless they privilege shareholders.

But this is clearly nonsensical. Companies were quite profitable in the post WWII era when profitability depended on the rising incomes of average Americans.

These applications of shareholder value are utterly contrary to the intentions of the two economists – Michael Jenson and William Meckling – who first promulgated the doctrine. They were scrupulous in insisting that they were speaking about long-term shareholder value, not short term. And from a long-term perspective, their theory may have some merit. But short-term traders dominate Wall Street, not long-term investors.

It is my conviction that if the doctrine of shareholder value were to lose its credibility, business would be free to return to the sensible view that the role of the CEO is to find the right balance among the claims of all stakeholders, including shareholders. This would break the stranglehold that our financial institutions have over the majority of America’s great companies.

Indeed, I believe many thoughtful CEOs would put traders and shareholders after the company’s employees or customers. I was recently reminded of this more traditional point of view while listening to an interview with Bill George, the former CEO of Medtronics. George said flat out: Customers come first, employees second, shareholders third.

A new national consensus that all stakeholders are important to our economy and society is politically inevitable. Once average citizens understand that overprioritizing the interests of some traders and bankers are undermining the nation’s growth, productivity and social mobility, a new consensus will quickly form. Indeed, if we wait too long for it to happen, it will be difficult to prevent it from becoming extreme and punitive, rebalancing too far in the other direction.

If it can happen sooner rather than later, the nation’s economy would be free to return to the form in which it mightily thrived.

Public trust would be restored.

Oct. 16 at Tufts University, the White House, working with the Department of Education, the Corporation for National and Community Service, and Tuft's Tisch College of Citizenship, organized a gathering on higher education's civic purposes. It was called "The White House Civic Learning and National Service Summit."

Alan Solomont, former ambassador to Spain and now dean of Tisch College, gave an impassioned opening address on how democracy is endangered. Peter Levine, Associate Dean of Research and director of the CIRCLE research center, played a central role in organizing the meeting.

The meeting on Oct. 16 brought together about 50 White House aides, agency officials and staff, higher education leaders and community activists and civic leaders. Jonathan Greenblatt, director of citizen participation in the White House, and Robert Rodriguez, Obama education policy adviser, gave opening remarks.

The title of the gathering may have revealed a shrinking of the sense of possibility in the administration. The name of the event, "Civic Learning and National Service," is smaller than the earlier meeting on which it built, "For Democracy's Future," at the White House in 2012.

But the discussions were lively. Jamienne Studley, Deputy Under Secretary for Higher Education, made a strong pitch for the continuing bully pulpit role of administration officials in promoting change.

Studley chaired a panel which including Carol Schneider, president of the Association of American Colleges and Universities, and Richard Freedland, Commission of Higher Education in Massachusetts. Both discussed what has happened since the earlier White House meeting, January 12, 2012, when AAC&U unveiled the report, A Crucible Moment, commissioned by the Department of Education, calling for civic learning to become "pervasive" in colleges and universities. Perhaps the most significant development in the intervening time was the strategic plan developed among public universities in Massachusetts, which calls for pervasive civic learning and will evaluate presidents' performance based on progress toward that goal.

"For Democracy's Future" also launched the American Commonwealth Partnership (ACP), a one year alliance to commemorate the 150th anniversary of land grant colleges.

ACP developed strategies to revitalize the democracy story, purposes, and practices of higher education. In the breakout session I participated in, chaired by Andrew Seligsohn, new president of Campus Compact, I described these democracy initiatives. These include the initiative on civic science detailed in a recent blog, Citizen Alum, an effort to broaden alumni's roles coordinated by Julie Ellison of the University of Michigan, and the forthcoming book collection from Vanderbilt University Press, Democracy's Education: Public Work, Citizenship, and the Future of Colleges and Universities.

They also included a conversation in communities across the country on the purposes of higher education, "Shaping Our Future," undertaken with the National Issues Forums, the Kettering Foundation, and Martha Kanter, Under Secretary for Post Secondary Education. We launched "Shaping Our Future" on September 4, 2012.

My take-away from the October 16th meeting was that the civic engagement movement in higher education has a more urgent sense of the importance of higher education's contribution to revitalizing and deepening the democratic story, purposes, and practices of colleges and universities than two years ago. My group strongly supported the proposal of Barbara Vacarr, past president of Goddard College, that presidents need to articulate a bold vision of their colleges' democracy role. Participants also agreed strongly with the remarks of Carolyne Abdullah of Everyday Democracy that faculty need to learn skills of collaborative partnership with communities, becoming democratic role models for students.

Today the democracy identity of colleges is largely counter-cultural. While many pundits express alarm these days about higher education and its purposes, few mention any relation to democracy.

In contrast, the Commission on Higher Education created by President Truman declared in its 1947 report, Higher Education for American Democracy, "the first and most essential charge upon higher education is that at all levels and in all its fields of specialization, it shall be the carrier of democratic values, ideals, and process." This reflected a broad national discussion growing out of land grant colleges, the City College of New York, community colleges and elsewhere that highlighted higher education's multiple public roles.

For all the service-learning projects, community research and other worthy efforts over the last two decades connecting higher education to communities and the society, the democracy history and purposes of higher education are now largely forgotten. Most institutions advertise themselves as tickets to individual success.

At the Summit I described "The Changing World of Work: What's Higher Education's Role?" the forthcoming dialogue on how colleges can be resources for communities in dealing with radical changes in work and workplaces. "The Changing World of Work" will be launched by the Kettering Foundation, Augsburg College, and the National Issues Forums on January 21 at the National Press Club.

Our earlier dialogue, "Shaping Our Future," and the listening process for "The Changing World of Work" have involved thousands of citizens. We found widespread sentiment that the current policy debate is too short term. It narrows the focus to immediate issues like student debt, distance learning, and vocational education and neglects ways in which higher education can prepare students for a rapidly changing world.

We discovered that public knowledge of the once vibrant democracy story of higher education has largely disappeared, but there is hunger for this narrative.

Participants in the White House civic summit on October 16 believed that it is imperative for higher education to reaffirm its democracy purposes and educate about the democracy-building story of higher education. Our discussions with citizens outside higher education suggest that people may respond.

This means that leaders and others associated with higher education will need to communicate a much deeper and richer understanding of democracy itself, in which citizens are the central agents.

As Solomont intimated, democracy's advance can no longer be taken for granted, in the United States or around the world.

Higher education needs to step up to the plate to help revitalize both the meaning and the practice of democracy.

Harry Boyte coordinated the American Commonwealth Partnership in 2011 and 2012.

The meeting on October 16 brought together about 50 White House aides, agency officials and staff, higher education leaders and community activists and civic leaders.

The meeting on October 16 brought together about 50 White House aides, agency officials and staff, higher education leaders and community activists and civic leaders.