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4 of 5 people found the following review helpful:
4.0 out of 5 stars
Provocative thesis, but comes up short at the end (3.5 stars), 10 Nov 2007
Robert Reich (RR) has an interesting take on the development of capitalism in the last 40 years, particularly, though not exclusively, in the US. It's also one that might confound the expectations of critics who recall him as Secretary of Labor under Bill Clinton. Some passages of the book might warm Milton Friedman's heart, were it now warmable. But the book is very weak on proposed solutions.
A rough outline of RR's themes, slightly rearranged from their presentation in the book, is as follows:
@@ We (not just Americans, but most of the developed world) are caught in a paradox today of doing very well as consumers and investors, while feeling increasingly powerless as citizens. "As consumers and investors we want the great deals" that the current form of capitalism brings, while "[a]s citizens we don't like many of the social consequences that flow from them," @ 89. Moreover, we don't know how to act effectively on our feelings as citizens - and we often direct our frustration at the wrong targets (such as at individual companies).
@@ The situation was quite different prior to, roughly, the 1970s (Chapter 1). American industry was dominated by oligopolies, consumers had less choice, the Dow was a fraction of what it is now. Government intervened to control wages and prices, which made established players in industry more secure. (RR points out that as recently as 1994, over half of the Fortune 500 had been founded before 1930, @19.). Citizens belonged to a wider variety of local, regional and national unions and voluntary groups that were "countervailing forces" (in JK Galbraith's phrase) to industry. Government spent more of its time mediating between these countervailing interests.
@@ Today, much of the regulatory framework that was erected to balance these forces has been dismantled, and with it many of the "cross-subsidies" that protected small subgroups of workers and others (@68). While many people are doing better, some people are doing much worse, and inequality has grown since the 1970s (Chapter 3). Government now spends its time mainly mediating between the interests of different segments of industry and different industries. Fewer citizens belong to voluntary groups, and those can't really compete with industry for government's ear anyway. (Chapter 4)
@@ The cause of this shift isn't greed, ideology, or politics but technology. "The real explanation involves the way technologies have empowered consumers and investors to get better and better deals - and how these deals, in turn, have sucked relative equality and stability, as well as other social values, out of the system," @ 51. Container ships, overseas cables, satellites and the Internet all played a part. This also explains why similar shifts are occurring in Europe, Japan and elsewhere. (Chapter 2)
@@ We shouldn't blame companies for this shift, or for bloated CEO pay, or for their intense lobbying of government. They need to do what they're doing to stay competitive. For the same reasons, we shouldn't expect voluntary "corporate social responsibility" (CSR). Corporate responsibility is to shareholders, and while some companies' actions have good effects on others, they should be taking those actions only if they lead to increased corporate profits. If we as a society want to make companies act more responsibly to a larger range of "stakeholders," the way to do so is through government regulation. (Chapter 5)
Up to this point, I felt that RR had a provocative thesis, albeit that many of its parts had been put forward by others previously. (E.g., as to CSR, David Vogel's excellent "The Market for Virtue" (2006), which RR mentions often.) Some may argue about historical points, such as whether regulation in the past 30 years has diminished (RR) or exploded (see other reviews on this page). However, even academic research showing a growing number of pages in the US Code of Federal Regulations (e.g., Dawson, KYKLOS 2007 Feb. @15-36) isn't sufficient to negative RR's point about the shift in *who* is battling over what's printed on those pages today, compared to who did so during most of the 20th Century. RR also has some interesting observations on how antitrust laws are no longer discussed in the context of protecting small competitors, but rather of protecting consumer choice and investor return(e.g., @55n and 163.) Certainly the citizen side of me could identify with the feelings and trends RR describes.
But the last chapter, "A Citizen's Guide to Supercapitalism," was a let-down. Most of it is a list of reasons not to trust politicians or executives who make certain types of claims. E.g., instead of believing executives who say their companies are doing something to advance the "public good," we should remember that "Companies are not interested in the common good. It is not their responsibility to be good," @ 214. Fine, but this is a missed opportunity for some constructive action. Surely there's some benefit if activists and others help or encourage companies to find good stuff to do that also happens to be profitable - this is like low-hanging fruit. RR never makes such a suggestion.
The last section of the chapter is a surprising rant about corporate personhood. RR blasts the "legal fiction," as lawyers call it, that companies are persons. Instead, he claims they are aggregations of contracts between and among individuals. (This theory isn't original, having been described by, e.g., Frank Easterbrook in the 1990s, though RR doesn't cite any predecessors. Nor does he mention any of the less plausible idealizations implicit in this model, e.g. about rationality, utility maximization etc.)
RR draws many conclusions from the non-personhood of corporations, such as they shouldn't have to pay tax (which is shareholder money anyway) (@216ff) and should not have standing to sue (@222). This last notion seemed particularly half-baked. RR doesn't say that only individuals should be subject of regulation. So if corporations are regulated, why shouldn't they have standing to sue about those regulations at least? (Moreover, RR's literal assertion, "Noncitizens should have no right to [seek to overturn American laws and regulations] unless the law or regulations breach some international treaty," (id.) seems to imply that individual non-citizens also should not have standing to sue, e.g., to contest the Constitutionality of any law or regulation affecting their freedom or human rights.) It also seems rather quixotic to think that so many jurisdictions might purge this legal fiction from their laws and jurisprudence in one swoop (and BTW the personhood notion is even stronger in Europe than in the US). The more important issue, it seems to me, is not about personhood, but about balancing the rights of the entity (or of its aggregate of contracting shareholders, if we take RR's view) against the rights of individuals in other roles (as community, consumers, workers, etc.).
Corporate personhood is an old controversy in any event, whose history in the US is nicely summarized in a 2001 article by David Millon freely available on the Social Science Research Network. Millon's conclusion is that the underlying arguments are political ones about what should be the responsibilities of corporations, and that both pro- and anti-"person" points of view can be found on both sides of the political issue. Consequently, there's no need to drag this concept into policy arguments, even when RR's ideas are good ones (e.g., about making Americans more competitive, rather than American companies more competitive, @ 222). That someone of RR's accomplishments and intelligence can't do better than to conclude on such a wobbly and arcane point suggests, sad to say, just how difficult it may be to resolve the paradox he so thoughtfully describes.
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2 of 3 people found the following review helpful:
3.0 out of 5 stars
Of Profits and Global Competition, 13 Nov 2007
Robert Reich provides little new information in this superficial look at how global competition emerged in the last 60 years and makes questionable recommendations for how to improve matters. Unless you feel compelled to read every book that Professor Reich writes, you can skip this one.
Unlike many commentators who praise or criticize business while ignoring society, Professor Reich attempts to reconcile the two. He is tougher on consumers than on business: Business is supposed to focus on making profits, and consumers who complain about business should realize that serving more interests could raise prices and cut customer benefits.
Where Professor Reich gets worried is when competition for government favor becomes part of beating your business rival, when success in business causes a widening of income and net worth within the society, and citizen's interests are ignored by the political process. He feels that all of those factors are a problem now and are likely to get worse in the future.
Professor Reich proposes very few solutions . . . and ones that aren't likely to be implemented. For income distribution, he wants to make the top rates in income higher (like in the 1950s), directly tax corporate shareholders on their share of corporate profits (to further boost the bite on the rich), and provide more of a social safety net for those who lose their jobs or have temporary problems. The political likelihood of those things happening is certainly quite low.
In the field of corporate governance, he wants corporations to lose the right to sue and lobby government. Instead of suing companies, you'll sue individuals . . . something he feels would improve behavior quite a lot. Now, can you imagine business wanting to do those things?
Wealth creation has probably never been more democratic in the United States. By studying the Forbes 400, we see that the great wealth is mostly new wealth, generated by entrepreneurs who mostly played by the rules. Education and access to capital to start up one's own business have never been more available.
It's inevitable that income and wealth distribution will widen in a global economy. Why? The best will get paid on a global rather than a national scale while the least effective will have to compete with more people who are already paid a lot less. When the Berlin Wall fell, this effect was inevitable.
I believe that having a non-responsive federal government is a problem, but that problem will probably have to be solved by the creation of a new political party (or conversion of an existing one) with a focus on representing the broad interests of citizens that corporations don't care about.
I also think Professor Reich doesn't appreciate the extent to which the federal government's power will continue to wane versus the power of the largest and most effective companies. Government is going the way of agriculture in terms of becoming less important, except where corruption makes it hard to do business.
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1 of 2 people found the following review helpful:
5.0 out of 5 stars
Provocative, insightful reflections on capitalism, 18 Feb 2008
Robert Reich, President Bill Clinton's secretary of labor and one of the most provocative public intellectuals in the U.S., unflinchingly explores the transformation of American democratic capitalism into a system of "supercapitalism," in which corporations and the market exercise apparently unbridled power. Reich considers and then discards most, if not all, of the standard leftist explanations for this development. Instead, in a logically coherent analysis, he arrives at some startling but convincing conclusions. For example, arguing that the government should never treat corporations like people, Reich advocates eliminating the corporate income tax. getAbstract recommends this book to anyone who wants to understand today's economics, politics or fiscal events. Although recent legislation attempts to address some of the issues Reich raises, such as the flow of corporate money into political campaigns, his analysis is still relevant.
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