Robert Reich’s new book “Saving Capitalism: for the Many, Not the Few” is in many ways a path breaking work. It essentially argues that we have taken our eye of the ball. We have been preoccupied with a false dichotomy – arguing the merits of free markets v. government – when in fact government is what enables the functioning of free markets in a capitalist system.
Failing to adequately account for the the inter-connection of markets and government, Reich argues, has created something of a blind spot in our political system. Operating outside the public eye, often with the tacit acquiesce of elected officials, those with outsized financial resources are able to write rules and regulations in such a way as to benefit themselves at the expense of everyone else. For their part, politicians tend to turn a blind eye because they benefit from political contributions and, increasingly, lucrative consulting work after leaving office.
The net result is that the benefits of economic growth and productivity in this country are primarily going to a very small group at the top of the income scale. Most others, meanwhile, are seeing their wages stagnate or decline relative to inflation. As Reich (and many others including TDV) have argued, this trend towards wage stagnation and inequality poses a serious threat to the future of our democracy.
The trend has been exacerbated, in Reich’s analysis, by the decline of “countervailing power”, or institutions such as labor unions that, in the past, have acted as a check on the power of big money interests. That, combined with the flood of money into politics courtesy of the Supreme Court’s “Citizens United” decision, has effectively created an entrenched oligarchy that writes the rules of our economy in the shadows with little or no public accountability.
The strength of “Saving Capitalism“ is the book is extremely well researched and written. There are many detailed and well documented examples of how laws and regulations, or lack of adequate oversight and enforcement, has been skewed to benefit a privileged few. Reich cites examples in the areas of contract, labor, patent, and anti-trust law; international trade, education, corporate governance, tax policy, Congressional gerrymandering, and regulation of the banking and stock and bond trading, among others. In many cases he proposes detailed reforms to make the system fairer and more equitable.
A former Labor Secretary in the Clinton Administration, and currently Professor of Public Policy at the University of California, Berkley, Reich is a bit of a rock star in liberal circles. He has some 14 books, many path breaking studies including bestsellers “Aftershock”, “The Work of Nations,” and “Beyond Outrage.”
But, ultimately, Reich’s latest book seems to fall a bit flat. Economist and New York Time columnist Paul Krugman makes similar point in a review for the The New York Review of Books, entitled “Challenging the Oligarchy”, and TDV agrees. Despite an engaging thesis and great research, the book concludes by professing optimism that the America will right itself, much as it did during previous eras in American history, including the Progressive movement the early 1900’s or the New Deal in the 1930’s and 1940’s. Yet, Reich offers little in the way of specifics as to how those reforms will be enacted into law and enforced when the wealthy interests about which he writes are as firmly entrenched as they are today.
At a minimum, it will probably take a popular uprising reminiscent of the Progressive era combined with formidable leadership recalling FDR and the New Deal. It remains to be seen whether we’ll get there anytime soon but, if and when we do, Reich’s book will be a valuable resource to help guide much need and long overdue reforms.