SAVING CAPITALISM
Columnist Jennifer Wells takes on Robert Reich in an economic debate,
“I have no standing to say this,” says Robert Reich. “I probably shouldn’t.”
Reich’s blue eyes seem impish beneath a furrowed brow, so you know he’s going to say it, whatever it is.
He’s leaning forward in conversation at Le Germain on Mercer St., talking wealth and politics and power. The United States principally, but Canada and parts of western Europe too.
Slight pause. “I am surprised that the NDP seems to be moving to the right on macroeconomic policy. The last thing you want to do right now when you still have underutilized resources and capacity is to make a fetish over deficit reduction. Our countries have to invest in education and infrastructure and our people. That’s the future.”
Reich, secretary of labour in the Bill Clinton administration, has read this script before, when the parties on the left “became worried that they had to establish their credentials as fiscally responsible. I saw it in the Democratic Party in the 1990s. Fiscal responsibility is often translated into balancing the budget. It’s completely absurd.
“The idea of balancing the budget as a goal is utterly silly.”
What role government must play is central to Reich’s just-published Saving Capitalism: For the Many, Not the Few. The title beguiles because, as we all know, we’re in a mess. “The issue of widening inequality, the decline of equal opportunity, the stagnation of median wages, (these) have become central issues,” he says. This is well-established fact. But the political activist, public policy professor (University of California, Berkeley) and prolific author argues now that a “huge misunderstanding” underlies what he describes as a false political dichotomy. That is, between the so-called “free mar- ket” and government intervention.
“There is no choice to be made between the free market and government. Government determines the rules of the market. The real question is what those rules are going to be and who is influencing those rules and whether the market is going to be working for the vast majority as a result, or whether it’s going to be rigged in favour of a small minority.”
You don’t have to be a fan of the clears peaking, untethered Sen. Bernie Sanders, whose run for the Democratic Party nomination is far more compelling than any antics Donald Trump throws down on the Republican side, to assess the existing system as “rigged” or gamed. When chief contender Hillary Clinton asserted last spring that even in economic recovery “the deck is still stacked in favour of those already at the top,” she went on to lament chief executive officers making 300 times the wages of typical workers, and how handsome productivity gains have been achieved without commensurate pay increases and on and on.
“There’s something wrong,” Clinton said, with all of that.
“It is gamed,” Reich says of the system, warning of an unravelling of the social fabric “unless the economy starts working for most rather than a small group at the top, and unless democracy begins to be responsive to the vast majority rather than a small group at the top. What we have in store is an ever more polarized politics, a more angry populace, potentially vulnerable to demagogues, sotto voce like Donald Trump, and also mounting distrust.”
Saving Capitalism is rich in examples of economic disequilibrium. One not often cited is this: “The share of corporate income devoted to compensating the five highest paid executives of large public firms went from an average of 5 per cent in 1993 to more than 15 per cent in 2013.” Reich adds: “Not incidentally, this was money corporations could have invested in research and development, additional jobs, or higher wages for average workers.”
Instead, pay packages for top executives are pushed ever upward in a “faux competition,” benchmarked against other CEOs.
The book runs much deeper than executive winnings. Bankruptcy rules that favour the big over the small, diminished union power, the agglomeration of market power into near monopolies — they’re all explored. Reich packages it all together in what he describes as one big myth and two mythical offshoots.
“The big myth is that there’s a free market separate from government. The second myth is that we have a meritocracy — that people are paid according to what they’re worth . . . And the third myth is that somehow redistribution (how much you tax the rich) is the central political question when in fact people are overlooking pre-distributions that are really quite central to why the top has got more and more of the wealth and more and more of the income.” Pre-distributions that are hidden, or baked into, the market.
I tell him that in Saving Capitalism I think he lets his old boss Bill Clinton off rather lightly in repealing the Glass-Steagall Act in 1999. “Do you?” he laughs. “Some people think I was too critical.”
It’s a newsworthy topic, given the current long-shot gambit to reinstate the Depression-era legislation that separated commercial banking from investment banking. Glass-Steagall was aimed at protecting the little guy. Wall Street won that fight. “This was a Democratic administration that was essentially saying to Wall Street: Do whatever you want to do. This was the culmination of two decades of deregulation on Wall Street.”
There hardly seems an inch of hope. Yet Reich says he remains optimistic that capitalism can be corrected and made to work for most people. It’s happened before.
He hopes his latest book will reframe the debate: “We can’t get anywhere without an educated electorate.”