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Readable, Compelling and Very Socialist
on 20 February 2011
I loved Robert Reich's previous book "Supercapitalism" and this book, written in our more troubled times, continues the same trail of thought, and pushes on further with some quite radical proposals.
The main theme of this book is that in the US, growing income inequality and the relatively lower purchasing power of the middle classes is the major factor contributing to America's economic problems. It is quite a strongly Keynesian viewpoint, which stresses the difference between middle class consumers who spend and therefore re-circulate a high proportion of their income, and the very wealthy who do not have consumption habits so widely beneficial to their fellow countrymen, and who instead speculate, and invest / spend abroad.
The quality of Reich's writing and the historical and anecdotal insights are as satisfying to read as ever, but to me some of the final analysis and proposals are too brutally socialist to be widely accepted or effective. For example, the case for making the tax system in the US much more progressive in response to widening inequality is a good one, but going beyond that and topping up middle class wages by substantial transfer payments is very radical.
Middle class Americans nostalgic for a time when their country's technological lead meant that their low and medium skilled workers could command high wages may love this book, and find Reich a champion of their interests. However trying to reverse or replace this lost comparative advantage of the US worker with large transfer payments from the rich is a very blunt instrument indeed, which may have many side effects. Also there is an implicit assertion running through this book that the standard of living of the American middle class should be maintained and perpetually rise. For me this sits uncomfortably with the future of our world environmental issues.
It could be argued that it is international trade, and the catching up of countries like China in their technological ability which has caused both the growing inequality and economic problems in the West. Therefore it could be argued that the solution to the problems of the US and others needs to confront more directly these fundamental international trade issues at the root, rather than using the state to treat the symptoms of the problem. In this book Reich warns against "killing the cow", meaning a reactionary response born out of envy of the rich, which could endanger the wider prosperity of our free market and free trade system. This kind of caution is characteristically wise, but perhaps others may have less worries about the free-trade/free-market cow, and perhaps be happy to see it, if not killed, then penned in and put on a diet.