Saving Capitalism: For The Many, Not The Few Paperback – 2 Feb 2017
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'A riveting guide to how our economic and political system has become so badly flawed.' -- Joseph Stiglitz 'Reich makes a very good case that widening inequality largely reflects political decisions that could have gone in very different directions... Saving Capitalism is a very good guide to the state we're in.' * Paul Krugman, The New York Review of Books * 'One of Reich's finest works, and is required reading for anyone who has hope that a capitalist system can indeed work the many, and not just the few.' * Salon * 'Arresting, thought-provoking... Readily understandable language... Powerful.' * Publishers Weekly * 'Like any good teacher, Robert Reich knows that making a simple yet crucial idea stick often takes much time and many presentations of the concept... In Saving Capitalism, Reich drives home a basic fact that, if widely understood, could lift America from today's destructive political standoff.' * Chicago Tribune * 'Reich has both the stature and eloquence to make a compelling case... Highly recommended to all readers... Insightful.' * Library Journal, starred review *
About the Author
Robert Reich is Chancellor’s Professor of Public Policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley, and senior fellow at the Blum Center for Developing Economies. He has served in three national administrations and has written fourteen books, including the bestsellers Supercapitalism and Locked in the Cabinet. His articles have appeared in the New Yorker, Atlantic, New York Times, Washington Post, and Wall Street Journal. He is co-creator of the award-winning 2013 film Inequality for All.
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What’s more worrying is that that there is next to no debate on the relevant issues.
I disagree with, dunno, four out of five conclusions Robert Reich draws in “Saving Capitalism,” but it is regardless the best book I’ve read in years because it defines the terms of the debate.
You read that right. I consider this left-wing book by a former Clinton (wash my mouth) Labor Secretary one of the best I can remember reading. I’m buying copies for my whole family.
The first major issue he tackles is the false debate that pits “free markets” versus “the government,” and this he does straight from the Mancur Olson playbook: spontaneous free markets exist everywhere. A visitor to the former Soviet Union would be confronted with tons of black markets that of necessity sprung up in the absence of official ones, same way a visitor to Marrakesh can walk into the suk where he can find practically anything. (My favorite such market is the former Soviet market for dead lightbulbs you could then bring to work to screw into the fixture left open by the functioning light bulb you’d pilfer from work to bring back to your apartment)
But here’s the deal:
A bunch of rules must be in place for orderly markets that go beyond the flea market. If you want free markets to thrive, then you need an institution that comes up with and enforces the rules for:
1. What am I allowed to own? Can I own other people? Can I own my beachfront? (In Greece, for example, you don’t, the beach is everybody’s). How about ideas? If I can’t own them, will I bother having them? If I own a life-saving idea is it OK for me to own it? Who is allowed to buy me out of a house that’s blocking a new highway and what must he pay?
2. If I own something, can I sell it? Where does the statute trump the contract? Californian women can sell their womb, but they can’t sell their blood. Dutch people can own cannabis, but, to quote from Pulp Fiction, to sell it they need a license. And here in the west you can’t sell your children (or yourself) to strangers, period.
3. When is it fine to run a monopoly? In pretty much all countries the military is up to the government. The police, not entirely. It is illegal to sell protection, of course, but it is becoming legal to hire security. Most governments are busy giving up the monopoly on mail. Nobody cares that one company in America sells pretty much all chewing gum. Overall, the decision on market power is not trivial.
4. What if I can’t pay for something I bought? What recourse should my seller have? Can he seize my property? My family’s property? What am I allowed to contract into offering as security?
The institution that (i) decides and (ii) enforces these rules has a name. We call it our government.
No government, no market. Just flea markets.
The discussion that pits “free markets” versus “government” is dust in our eyes, Robert Reich says and he says so in a non-patronizing, wonderful narrative a kid can follow.
He does not stop there. This beautifully penned call to arms breaks the taboos of the unsophisticated, parochial American Left and spares nobody. On page 183, Robert Reich takes aim at the preoccupation of Americans on his “progressive” side of the argument with “noneconomic issues such as same-sex marriage, abortion, guns, race and religion,” and urges them to find common economic cause, because that’s the arena where the politics of the government have true influence first and foremost. Chapeau!
What we have here is the bare bones of a ten-star book as far as I’m concerned.
I find tons of stars to take off from there, of course, because I disagree with a lot that he has to say.
So, for example, I think shareholder capitalism is self-correcting and I genuinely think the stock market is about to punish self-dealing corporates that issued debt to buy their own stock with a massive correction that will bring the practice into disrepute for at least a generation. The government would be hopeless in terms of attempting to adjudicate on who can and who can’t buy his own stock (though I totally agree with Reich that it should not tax-favor such behavior, of course) New competitors, unburdened by silly amounts of debt will spring up and devour the dinosaurs, bet your house on it. (Well you can’t, in this zero rates forever world, they are all privately owned, it drives me crazy)
Along the same vein, I think there’s nothing to do about globalization or the progress of science. You just need to give “palliative care” to the victims and assure they can afford to give the necessary education to their children. I don’t think a futures floor trader will ever earn as much money again shouting and gesticulating and I don’t think a petroleum engineer will ever earn as much money again drilling holes and I have zero problem if they join the girl who used to look at me funny from behind the screen and book my airline tickets at STA travel in whatever endeavors she has chosen to pursue. As for the guy who lost his job reading legal documents to some guy in India, he hasn’t really lost all that much: the outsourced job is about to move somewhere to the cloud. Same as all those Chinese manufacturing jobs. At this point, China fires more people from manufacturing jobs every year than we do.
Let us not forget that in 1910 some 25% of Americans used to work in Agriculture. That number is now 2% and the US remains the world’s biggest exporter of grain. And fewer than half of those who officially work in Agriculture actually get dirt under their fingers, they mostly work for companies like the Monsantos Robert Reich seems to dislike for monopolizing what is now a tiny (though obviously vital) part of the American economy. My point is that the children of the 23% did not disappear into an abyss, the Great Depression was their parents’ problem and society made sure it wasn’t theirs (chiefly through the GI bill that followed WWII). Our job is not to restore the jobs of the parents. It’s to make sure the kids fit in the new economy. Yes, it’s a massive job, but let’s talk about that, please, let’s not cry about what’s lost and never coming back.
And I think he’s barking up the wrong tree with all the campaign finance stuff. The billion dollar charitable foundations set up by the Clintons and Blairs and so on mainly sell exemption from tax. Suppose corporate tax was set to some extremely low number (dunno, 5%) you would not collect a penny less from Amazon, you would help the law-abiding small corporates Reich loves and you would deliver a very targeted punch in the stomach of the gatekeepers of tax exemptions in Congress, the lobbyists, the 10^3 tax accountants GE employs etc. It would not be without its challenges of, course. You’d have to then be draconian about taxing the people who would rush to dress themselves up as companies. All I’m saying is Reich is not at all imaginative when it comes to looking for the right place to strike at the status quo, he’s repeating some of the old solutions and just shouting louder.
So when he says we must give power to the unions, he’s ignoring that in the new economy we keep changing jobs all the time. The companies themselves come and go. And he’s ignoring progress. GM had to shut down because it makes cars 8 times more efficiently than it used to. It makes twice as many cars as before, but that means it needs a quarter as many people to make them. Them guys can’t carry four retired people on his back each, all of whom are living longer than it was anticipated they would, incidentally. We cannot “magic” a solution to this problem. The union actually exists, it’s called the UAW and it’s rather powerful, but it cannot work miracles.
More generally, unions can either be all-encompassing, like in France, where they cover millions of people across the entire industry, or they can be more industry-specific (example: teachers, autos etc.) or they can even be firm-specific. The all-encompassing union is what we chiefly have in Europe and the results are out: it redistributes to its members from other poor people. Germany’s super successful Hatz reform was all about allowing more specialized unions, in order to reward industries that were performing better AND THUS INCENTIVISE PEOPLE OUT OF INEFFICIENT INDUSTRIES AND INTO MORE EFFICIENT INDUSTRIES whose workers command more power at the negotiating table.
In summary, unions of course have a role to play, but they are already playing it and (much as the managers at Walmart are not exactly angels with wings and halos) this role is being diminished by the realities on the ground.
And so on. The rant against Steve Cohen, for example, should also have been included in his list of red herrings, along with same-sex marriage, abortion, guns, race and religion. There’s plenty wrong with finance, but the (tens of billions of) profits from insider trading are not on my top-ten list, much as they are distasteful. There are trillions at stake here and if you get the trillions right, the billions will follow. And I get to watch the same movies and same football games as Steve Cohen, it turns out. They don't make different ones for him. I still have (marginally) more hair than him too. I avoid jail by not breaking the law, on the other hand, but I don't find that enormously burdensome and I have bigger cares than cutting him down to size.
I also thought the sundry solutions involving a minimum endowment for every citizen were rather off the wall. We need to look at what it is we’re already doing and we need to fix it. There cannot be a deus ex macchina, that’s the wrong place to look.
I can go on taking stars off and discussing points where I disagree rather vehemently with Reich.
But I can’t get below five stars, because this is a tremendous call to arms for the American Left to come to the table to discuss the real, material issues we all face. I’m not aware of an equivalent book for the Right.
The author is concerned and he believes that the same economic system which charged America and made it a great economic powerhouse in the past century is failing, leading to greater problems if it is not brought back under control. Can the genie be put back in the bottle? The author believes so and has a plan.
This does not appear to be one of those typical hysteric “oh God, the world is ending, it is all the fault of the elite”-type books but a sensitive, considered look at a problem. The so-called elite do come in for some criticism, as their increasing power and influence is part of the problem, yet it just a component of a complex situation. Not so long ago a typical income in the U.S. could have been enough to sustain an entire family and provide often a fairly comfortable life. Today, you would be struggling and even if two people have the luxury of a job the money just doesn’t seem to stretch. Consumer debt is spiralling and yet the rich are getting richer and the poor, as well as the “pampered middle class” are not.
There is a distinct falsehood, the author claims, that people are paid what they are “worth” and that increased wages leads to reduced employment and thus a vicious circle is formed. A race to the bottom is quite unedifying. Society is becoming ever polarised. It is becoming a “them” and “us” arrangement. Of course there has always been rich and poor, yet the differences were mostly relative: now the difference between the average worker and the rich or super rich can be quite obscene, even when viewed through the eyes of someone who has been fairly successful in life so far.
Many have stopped believing in a future and that may lead to a dangerous snowball effect. As the author notes: “Confidence in the economic system has declined sharply. The apparent arbitrariness and unfairness of the economy have undermined the public’s faith in its basic tenets. Cynicism abounds. To many, the economic and political systems seem rigged. The threat to capitalism is no longer communism or fascism but a steady undermining of the trust modern societies need for growth and stability. When most people stop believing they and their children have a fair chance to make it, the tacit social contract societies rely on for voluntary cooperation begins to unravel. In its place comes subversion, small and large – petty theft, cheating, fraud, kickbacks, corruption. Economic resources gradually shift from production to protection.”
The solution may be bloody, at least figuratively. Turkeys don’t vote for Christmas or Thanksgiving after all. Yet the American public will be engaged with the never-ending “fight” between Republican and Democrats or other distractions as to whether government is doing too much or too little. This distraction may be contrived or encouraged because it suits those in power to divert attention away. The author’s recipe for success is for the wider population to be unified and united in a desire for change for the entire country’s best. The author also notes that whilst focussing on America’s problems, the self-same issues and solutions are relevant for many other countries too, adding: “I believe that if we dispense with mythologies that have distracted us from the reality we find ourselves in, we can make capitalism work for most of us rather than for only a relative handful. History provides some direction as well as some comfort, especially in America, which has periodically readapted the rules of the political economy to create a more inclusive society while restraining the political power of wealthy minorities at the top.”
Whether the author has the right recipe to get things back on track remains to be seen, but more and more people do believe that something has to be done. It is not a dream or desire to take America into a socialist or communist-style paradise; inequalities exist in every system but the inequalities now seem to be getting into extreme territory: that is the concerning “danger zone”.
If nothing else, the author has provided an interesting take on a challenging, divisive, engaging subject and treated it with sensitivity and maturity. Some may describe it as revolutionary, some as evolutionary and others just won’t really know for sure how to react, yet the book’s observations and analysis will resonate with them nonetheless.
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It gives a a realistic assessment of capitalism in the U.S.
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