Saving Capitalism: For the Many, Not the Few

"Saving Capitalism" is the best explanation of the current economic situation in America that I have ever read. Reich proposes somewhat progressive solutions to the massive problems, not necessarily by expanding government, but by changing the way government sets the rules of the marketplace. Robert Reich points out that there is no such thing as a free market in nature. Every market in the history of civilization has been regulated by some authority, usually government. Whether governed by pharaohs or kings or democratically-elected congresses, some authority must set the basic rules by answering the following questions about the five building blocks of capitalism: 1. Property: What can be owned? 2. Monopolies: What degree of market power is allowed? 3. Contracts: What can be bought and sold? On what terms? 4. Bankruptcy: What happens when purchasers can't pay? 5. Enforcement: How do we assure that no one cheats on these rules? According to Reich, current arguments about the conflict between the free market and government are specious. They are designed to deflect public attention away from the real question, namely "Who is writing the rules of the marketplace?" Ever since the 1980s, when government virtually halted anti-trust enforcement, corporations have merged to become so large that one or a few corporations control each segment of the economy. With their wealth, and the wealth of a few powerful individuals, they have purchased armies of lawyers and lobbyists who incessantly walk the halls of Congress making their wishes known, suing over any government regulation that they dislike and even writing self-benefiting laws at the state and federal level which obliging legislatures enact, sometimes verbatim. During the 30-year period after WWII, corporate CEOs understood that they have many constituents in addition to shareholders. There are employees, customers, the public, and local governments which provide the infrastructure in which the corporation operates. Beginning in the 1980s, attitudes changed to regard shareholders as the only CEO constituent and share price as the only measure of CEO success. CEOs who focused on share price benefited by changes in regulations allowing them to accumulate more shares and sell them based on inside information. Any other constituencies, from employees to customers, came to be disregarded. The end result has been the massing of income and assets by a tiny minority and the fall of real wages and opportunity in the middle class and below. The economic elite has taken control; they write the rules of the marketplace for their own benefit. The solution, according to Reich, is to restore the influence of countervailing power such as labor unions, small investors, small farmers, small business people, small banks, various interest groups, and anyone else whose influence over the rules of the market has been virtually eliminated. How to achieve this? • Campaign finance reform to get big money out of politics. • Eliminate the revolving door between government and the industries it regulates. • Full disclosure of campaign contributions, funding of think tanks and studies about public policy. • Full enforcement of anti-trust laws. • Restore Glass-Steagall to separate ordinary banking from investment banking. • Set the minimum wage at half the median wage and adjust it regularly for inflation. • Reform the way we fund public education. He points out many more possible corrective measures not requiring an increase in government, but rather a change in the way government regulates the relative power of the moneyed elite and the American public. Reich presents hundreds of persuasive, detailed and nuanced arguments to make his case. Everyone should read this book.

Reich makes many interesting observations, including: 1. Although the free market is very efficient at rewarding people for their behavior, it's the underlying rules of the market that determine what those rewards are going to be; therefore, one should not confuse the statement "the market greatly rewarded so-and-so" with the view "so-and-so deserves their reward because the market rewarded them". For example, in the 1960s CEO pay was 20 times average worker in that CEO's Co. This ratio has steadily risen and today CEO pay is 300 times average Co. worker wages. Reich asks if CEOs are over 15 times (15,000.%) better than past CEOs. A study of 1,500 large cos. from 1994 to 2013 by economists shows that, the higher the CEO compensation, in general the worse their companies did. 2. Over the last 35 years there have been many changes to the rules of the free market, involving: property rights, monopoly rights, contracts, bankruptcy, and how the rules are enforced. These changes have resulted in wealth being transferred from the middle class to the upper class. For example, new rules regarding banking has given enormous bonuses to executives at large banks. There were 1,007,000 full-time minimum wage workers in the USA in 2013. Reich states that if those bonuses to bankers had been given, instead, to minimum wage earners, they would have doubled their minimum wages. 3. Most interesting is Reich's example of changes to the SEC that have enabled the most egregious form of insider trading to occur legally. SEC rules have changed over time to enable heads of companies to not reveal when their Company does buyback of shares, nor to reveal when they cash out their stock options in their companies. The person who would have the most insider info. about a company would be the CEO and top executives of that co. If their main source of income is stock options, then a CEO can make many millions by doing the following: a. CEO directs his co. to borrow $ in order to buy back shares (leveraged buyback). Large buybacks will cause the value of the his Co. shares to increase in value in the market (and shareholders will not know that buybacks are what is causing this rise in stock price). b. He then uses his insider info. to determine when to privately cash out his stock options. What the CEO/executives have essentially done is legally-sanctioned insider trading. Reich documents the changes in SEC rules regarding stock buybacks and execution of stock options that have resulted in enormous changes in the amount of buybacks going on in the market and the enormous amount of non-salary (i.e. stock option) compensation going to executives. Due to these changes in the rules of the game, the amount of buybacks has gone from very little to $3.6 trillion for S&P500 during 2001-2013, according to Reich. 4. Reich argues that gov. subsidies to students at private, elite universities are around $54K per student per year while only around $7K to public university students (although public universities educate many more students). The main point he makes is that the debate is usually framed as: conservatives want less regulation and more free market while liberals want more regulation and less free market; instead, the debate should be reframed as: Revealing how the wealthy have been getting enormous subsidies (involving wealth transfer to themselves from the middle and poor classes), in a manner that is largely invisible (because it happens automatically as the rules of the game have become tilted in their favor, due to their increasing political & lobbying influence). However, of all the points he made, the buyback/insider-trading scheme was most disturbing to me.

As I have reaffirmed many times in this column, I hold the opinion that no economic system has grown companies and countries faster and more effectively than Capitalism. However, it hasn’t raised the quality of life for all beneficiaries equally - to say the least. It is this regrettable failing that is addressed by Robert Reich, Chancellor’s Professor at the University of California, Berkeley. He served in the administrations of Presidents Gerald Ford and Jimmy Carter, and was Secretary of Labour under President Bill Clinton. Fundamental to Capitalism is the notion of a free market, where people pay for goods or services according to how they value them. What follows logically from this is that what one is paid, reflects one’s worth in the market. If you are paid too little to live on, it is because that is all you are worth, and if you are paid tens of millions you must be worth it. One of many studies found that good teachers increase the average present value of their students’ lifetime earnings by $250,000. Perhaps, if teachers were paid better the profession would attract many more such teachers. “The worth to society of many CEOs, hedge-fund managers, investment bankers, high-frequency traders, lobbyists, and high-end corporate lawyers, may be less than they command in the market. Much of what they do entails taking money out of one set of pockets and putting it into another, in escalating zero-sum activity,” Reich asserts. If Capitalism is so ‘good’, why is it so bad? That is the subject of this profound book, as well as what can reasonably be done about it. To achieve any change to the economy of a society, to make it more equitable, reasonable and humane, requires first a sound understanding of what actually makes it work. To have a ‘free market’, decisions must be made about five critical issues: property, monopoly, contract, bankruptcy, and enforcement. What can be understood as property, and therefore can be owned? Cars? Land? Slaves? A bomb? Intellectual property such as the human genome? Some have been approved and others not. What degree of market power is permissible? How big a control over the market is acceptable? Is a monopoly permissible? What can be bought and sold, and on what terms? Votes? Unsafe food? Babies? Most civilized societies do not allow or enforce contracts that are fraudulent, or that are based on coercion. But how do you understand coercion? Is insisting you buy insurance from me in order to buy something else you want, coercion? What happens when purchasers can’t pay their debts? Do they go to debtor’s prison or declare bankruptcy, and pay all debtors a only portion of what is owed equally? Are employees who have lost their bonus or the rest of their employment contract, seen as debtors? Can homeowners declare bankruptcy and so reduce their obligation on their home loan? Can students declare bankruptcy and be relieved of some of their student loan? How can we make sure no one cheats on any of these rules? We have to rely on decisions about how all these rules are enforced or they will be valueless. What are the priorities of police, inspectors, and prosecutors? Who is entitled to sue whom? Markets, whether a ‘free market’ or a ‘planned’ economy (one that is heavily regulated or controlled by the government, as in socialist or communist countries,) are made by human beings. This is no different to nations, governments, laws, corporations, and sports which are all the products of human beings. These products reflect moral values and judgments, and are not static; they change over time. The rules are made by those with the most power over rule-making, and by changing the rules, the balance can be shifted for or against certain groups. As such, the rules can be skewed to the benefit of a few, rather than the many. Whether in the USA or South Africa, decisions are too often made behind closed doors, in negotiations influenced disproportionately by those with enough resources to be heard. This creates and perpetuates a vicious cycle: economic dominance feeds political power, and political power further enlarges economic dominance. This is most evident in the USA, partly because of the country’s economic sophistication, level of transparency and freedom of expression and democracy. These decisions have real consequences for an economy and for the individual people whose livelihoods are affected by them. In 2000 in the US, for example, labour’s share of nonfarm business income was 63%. In 2013, it was 57%, representing a shift of about $750 billion annually, from those who labour to produce the capital, to those who own the capital. The reality is that government has a pivotal role in designing, organizing, and enforcing the market to begin with. The free market vs. planned market debate clouds the thousands of choices made by legislators, administrators, and judges. It clouds the ongoing task of deciding that can have huge consequences, and that will never cease, so long as there are changes in market conditions, innovations and technological advances. This is the key takeaway from this book. Changing the economic system will not help the many: vigilantly monitoring, influencing, and counterbalancing power, will. This book is a profound account of a very thoughtful and very well informed intellectual. It will shed light on some very troubling issues. Readability Light ----+ Serious Insights High +---- Low Practical High ----+ Low *Ian Mann of Gateways consults internationally on leadership and strategy, and is the author of the recently released ‘Executive Update.

This is an inspiring book. The copyright date is 2016, and it was clearly written before the emergence of Donald Trump as President. In fact, Trump is only mentioned in the book once, and this is because of his infamous bankruptcy issues over his Atlantic City properties. The author actually talks about some prominent Republicans voting for Hillary Clinton, in anticipation of her becoming President in 2017. So much for that prediction or insight. But as this is review is written, and the Presidential era of Joe Biden has begun, it is as if this book may be even more relevant in the current events of American history. The thesis of this book is that there is nothing inherent in capitalism that should lead to “mounting insecurity and economic inequality.” He says that this has been the case in American history, in varying degrees over time, but that it can be changed. When this increasing inequality is unchecked by government intervention, it feeds upon itself and has to be “saved from its own excesses.” If this is not done, we get to a point where the rich and powerful have most of the money and political power. Per Reich, this is not good for anyone, including the rich and powerful. He questions whether the “free market” has every really been free. He says that there can be a government that is there to “make and enforce the rules of the game.” He does not think the size of government is a major issue. What is more important is that government be there to stabilize things, especially when they get out of whack. He says that there are five building blocks of capitalism: property, monopoly, contract, bankruptcy and enforcement. He sees the accumulation of money and power as linked to the core. He talks about how real and intellectual property have been the basis for wealth for centuries. And he shows how some giant corporations, such as Pfizer and Monsanto have been able to monopolize products to produce huge financial gains. He cites Amazon as an entity that sucks all the air out of the room, when it comes to eliminating competition. And he talks about the dangers of insider trading on the stock market. Reich believes in capitalism, but he wants controls. For example, he says that “In America, people with lots of money can easily avoid the consequences of bad bets.” He is good with bankruptcy, but wants it available to common folks, as well. And he points out that many of the super rich are such because of inheritance, not from earning their own money from scratch. He says that things get bad when the majority in the country feel that the system is rigged against them and that they have little chance to make that better. He rails against the argument that American workers are paid what they are worth. He spends a whole chapter talking about the rising payouts to corporate CEOs, especially in comparison to the average income of employees of their companies. He says that it would be far healthier for corporations to pay their CEO and top executives less, then use those saving to reinvest in the company, itself, and/or to pay their employees more. He hates the idea of corporations using money to buy back their own stock to raise the unit stock price. As for the tax system, he says that it is “biased toward the owners of wealth and against people whose incomes are from wages.” He also says that trends in the 1970s led directly to the stagnation of middle-class wages. He cites GE CEO Jack Welch as leading that charge. The guy was hell bent on increasing shareholder returns at the expense of the workers. Another factor that affected the stagnation of wages was the deterioration of unions. Yet another was the emergence of sending manufacturing jobs and industries overseas, mainly to China. Such factors encouraged workers to accept the pay and benefits offered. He cites the rise of the “working poor,” who may be working two jobs, not one, but still cannot pay all the bills. He, I assume, would be encouraging the current Biden efforts to raise the national minimum wage to a level of a “living wage.” He argues that when workers have to seek government programs to help pay their bills, it is the employers who win out here, and the average taxpayer who is really paying the bills. He suggests having the federal government be more involved in paying for the schools and universities. He encourages increased taxation on inherited wealth. He says “no one should confuse income for virtue, (or) net worth for worthiness. The underlying reality is that capitalism is not working as it should or as it can….The playing field is clearly tilted toward those who have the resources and power to tilt it in their direction.” So, what can be done? He says that redistribution of wealth has, for the most part, actually been going in the wrong direction, to the rich and powerful from the working class, not the other way. He questions how the richest four Americans could have as much money as the lower 50% of American households. He says that “The economy cannot function without the purchasing power of a large and growing middle-class.” He feels that these trends toward more and more wealth at the top are not sustainable, economically or politically. “The only way back to a democracy and economy that work for the majority,” he suggests, “ is for the majority to become politically active once again.” What needs to be done is to establish a “new countervailing power.” Reich suggests that we “lift the curtain” on how the economy and so-called free market work. “The explicit aim of this new (effort) would be to save capitalism, by enabling most Americans to benefit from its success.” He also says that “with effective countervailing power, the American corporation could be reimagined and reinvented.” He says that today’s employment opportunities involved about 20% of the jobs being in “routine productions work,” while about 50% are now in “personal services.” Another 20% of jobs are in problem-solving or analysis. But he says that the allocation of work and jobs is not the primary challenge. It is the distribution of income and wealth. And, clearly, for what it is worth, there are about 10% of American households today who do not need to “work.” As far as income and wealth redistribution, he talks about ways to “share future wealth.” He also talks about a basic minimum income. And, he encourages us to find ways to “design the rules of the market so that the economy generates what most people would consider a fair distribution on its own, without necessitating large distributions after the fact.” As I said above, it seems like this book and its ideas are very much in sync with what is emerging from the Biden administration in its first 100 days in office. May some of the ideas in this book be useful in that effort and beyond.

The middle class is shrinking and has become poorer. The median American household was earning less in 2013 than it did in 1989, while the proportion of income going to the top one percent has skyrocketed. Economist Robert B. Reich explains why in his latest book, and does so in a way non-economists can understand. Conservatives tend to explain rapidly growing inequality as merely the result of “market forces” and globalization. They say unions are an anachronism that actually reduce jobs. Yet, not all modern economies have experienced a declining standard of living for the middle class and rapidly widening inequality. In Canada, for example, unions still represent 27 percent of the workforce, compared to 11 percent in the USA, and the Canadian middle class is doing better than the American. In Germany, unions also remain an important institution in the private sector. Real hourly pay in Germany has risen by almost 30 percent since 1985, while it has stagnated or declined in the USA. The percent of total income going to the top 1 percent in the US grew from 10 percent in the 1960s to well over 20 percent by 2013, while in Germany, the richest 1 percent continue to receive about 11 percent of total income there, a percentage that has remained steady for four decades. The share of national income going to the middle class has remained relatively stable in Germany, while it has declined sharply in the US. The consequence is the German middle class remains healthy, while their American counterparts are struggling. Germany is subject to the same market forces as the USA. What differs are the rules. Reich argues that the concept of the free market is widely misunderstood. Rules create markets, and government generates the rules. Consequently, “government doesn’t ‘intrude’ on the ‘free market’ when it creates the market.” On the contrary, government plays an indispensable role in organizing and reorganizing the market, in setting the rules about copyrights, patents, bankruptcy, and much more. Thus it is a false dichotomy whether the “free market” is superior to government; that debate, however, serves to obscure the rule changes and whom they serve. Political power influences the rules, and the corporate and financial elite, due to its increasing concentration of political power, “has been able to influence the rules by which the economy runs…The consequence has been a market organized by those with great wealth for the purpose of further enhancing their wealth.” By contrast, the political influence of the middle-class and working poor has declined, and their share of the national income has declined accordingly. This book critically examines the rules that serve the financial elite, and proposes a remedy, namely for the vast majority to regain influence over how the market is organized. As has happened before, writes Reich, capitalism needs to be saved from its own excesses. Readers of this book face a basic question: Do you prefer the economic status quo of the past 30 years, where much of the middle class has suffered a declining living standard, upward economic mobility has become more difficult, corporate profits in 2014 were at an 85-year high, while labor’s share of the economy continued shrinking, and the CEOs of large corporations enjoy incomes more than 200 times that of their typical worker? It was not always that way. During the three decades after WWII, the income of the typical worker doubled, while the average CEO earned just 20 times more than his typical employee, and the top 1 percent received just 9-10 percent of total income. The economy doubled during both 30-year periods, so the much broader sharing of prosperity during the earlier period apparently did not retard growth. But the three decades after WWII were consistent with the American Dream, where hard work meant upward mobility, and where children would enjoy better lives than their parents. Reich rejects the Marxian view that capitalism inexorably leads to economic insecurity for the masses and widening inequality. It all depends upon the rules. Reich advocates changing the rules to make capitalism work for most Americans by more widely shared prosperity and opportunity, as happened during most of American history. The main obstacle to such reforms is the corporate and financial elite that benefits the most from the status quo. Those who benefit defend the status quo using the either/or fallacy – we either have a “free market” or we have Big Government. The real underlying issue is not whether government should play a rule-making role, since there would be no patents or copyrights without government. The real issue is HOW government defines property rights and who benefits. The bankruptcy rules, for instance, allow business moguls like The Donald to declare bankruptcy four times to protect their fortunes, while homeowners who go underwater with their mortgages can’t use bankruptcy. Neither can young adults burdened with college debt. The rules don’t allow it. It appears those rules protect the people who need it least and exclude those who need it most. The solution is the reemergence of a countervailing power to end the political and economic dominance by the super-rich. Reich calls this inevitable, because neither the economy nor democracy can be sustained when 70 percent of the population continues getting poorer, and their views are ignored. One reason for Reich’s optimism is that the 2015 has been the year of the anti-establishment presidential candidates in the GOP, while establishment candidates such as Jeb Bush have been rejected. Among the specific reforms that could only be enacted by a different power structure would be boosting the minimum wage to half the median wage and adjusting it to inflation thereafter, restoring limits on campaign contributions, slowing the revolving door between government service and jobs on Wall Street, regulated corporations, or lobbying firms. By 2014, six of the ten wealthiest Americans were heirs to prominent fortunes, and that trend of great inherited wealth is accelerating. New rules could “cause wealth eventually to revert to the public domain rather than compound for future generations that had nothing to do with creating it.” The critical debate, writes Reich, is not about the size of government, but about whom government is for; it is not about the free market vs. government, but between a market organized for broadly based prosperity and one designed to deliver almost all the gains to a few at the top. ###

The book is extremely rich on both the details of inequality in the USA and the legislative enactments that have made it possible. When it comes to what to do about it, Reich speaks of countervailing power (within a capitalist framework, as the title makes clear). He believes that different enactments could indeed reduce inequality without the need to get into left-right arguments about the appropriate size of government or even any debate about a possible shift towards socialism. For example, he says in Chapter 17 ('The Threat to Capitalism') that 'Americans have always tended to choose pragmatism over ideology'... {that} whenever capitalism has before reached points of crisis, we have not opted for communism or fascism or any other grand scheme. Again and again we have saved capitalism from its own excesses by making necessary corrections'. For a book published in 2015, Chapter 19 ('Restoring Countervailing Power') is very percipient, reading ahead of time the populism that propelled Trump to the Presidency in 2016. He is clear that the countervailing power will not come from the Democratic Party until it re-invents itself, reminding us that during the election campaign big business very much favoured Clinton over the anti-establishment stance of most Republican front-runners (including Trump of course). Whether the protests that started the day after Trump's inauguration signal the new beginnings of an effective countervailing power remain to be seen. Quite appropriately, those protests were triggered by Trump's misogynist views. But will these and future broader-based protests be enough to push capitalism back into (???) a progressive populist direction? Or will the clash lead to a bigger government role and an adoption of socialist practice that Reich seems to believe could not be democratic (for reasons that he does not discuss in this book despite his strong support for Bernie Sanders)? Reich provides us a wealth of invaluable information but doesn't help us to identify the (within capitalism) that will change the thirty-year drift towards ever greater inequality and now with Trump, the rush towards fascism.

This is an excellent overview of how the market is defined and managed by the government, and how the rules managing the market have been subtly altered over the years to benefit the top 1 percent (crony capitalism). The book then goes over potential solutions to the problem, some fixing/reverting the rules and others addressing the symptoms (minimum wage, unions). Interestingly, the last 2 chapters of the book discusses a completely unrelated problem that presents an even bigger danger to income inequality. The rise of automation has been pushing manufacturing jobs to service and making "problem solving" jobs more and more of a premium. In fact, the real danger is that eventually all of the manufacturing and much of the service jobs will be completely crowded out by automation. The only solution proposed for this eventuality is to provide a minimum standard living allowance to all Americans. Personally, I find it a little ironic that some of the solutions proposed for crony capitalism (minimum wage, unions) will tend to increase the cost of labor and exacerbate the presumably more dangerous automation issue. I also do not share the authors belief that it would be in any way a good thing to provide all Americans unconditionally a minimum standard of living with limited incentive to generate more income. In general, I think humans need some kind of purpose and structure in there lives. There are exceptions, like the authors suggested "starving artist", but for the majority I think such an environment would have a very negative social impact. Personally, I think if it really came to this a better solution would be to tie that income to some form of government employment, not necessarily because I think it will generate additional productivity (I'm not sure that it will) but because I think it will ultimately provide benefits to both the individual and society. Regardless, even though I disagree with some of the authors solutions, the book had me thinking for days on the topic after I finished reading making it more than worth my time.

Dr. Reich expresses his concern over the growing gap in the maldistribution of income in the US economy. Over the last 30 years, the size of US economy has doubled yet middle income earnings have been flat. However, the richest 1% of the US population receives about 20% of the total national income and their earnings continue to grow. Because the way the market has been dominated by special interests with disproportionate influence on federal regulations, the income gap continues to grow in favor the wealthy. Reich foresees a collapse in the middle class which could lead to major social disruption in the next decade. The loss of the middle class which is the consumer component of the economy can also actually threaten the wealthy class which needs a consumer market for their goods and services. He foresees a compounding deterioration of the national economy because of a breakdown in the interdependency of the classes. Because of their short-term opportunistic profit mentality, the wealthy class is not likely to pursue altruistic policies to benefit the lower classes. The income gap is likely to grow even larger in the near-term unless federal government economic reforms lead to redistributing the national income to the middle class. Reich proposes that a popular national movement could pressure the US Congress to reform laws and regulations that have been favoring compounding the wealth for the already monumentally wealthy. The short-lived movement of protests against the "two-percenters" has clearly demonstrated that the middle class does not have the organization or collaborative infrastructure that could begin to challenge the wealthiest people in the nation. It would take a gigantic economic meltdown like the Great Depression to force serious national economic reform. Even then, those who are too big to fail economically will not likely suffer at all from any future economic crisis. Most of us will be helplessly watching our economic train wreck in slow motion while the wealthy will be on another track. Reich further explains that an underlying vehicle for accelerating the income flow to the wealthy is the growing intrusion of automation and robots into the mainstream workforce. Robots can replace almost any redundant and repetitive function at very low operating costs. And although this appears to be a threat primarily to the "blue-collar" class, Reich makes a strong argument that the middle-class will also be threatened by robots for "white-collar" jobs. Robots could very well change the entire labor structure in the next decade to the increasing benefit of the very wealthy and to the impoverishment of the middle class. He defines three categories of labor and how their income has deteriorated over the past 25 years. He further expects these trends of increased unemployment through automation to become more aggravated for all labor classes. Only the wealthiest 2% capitalists will be immune to the threat of robot replacement. In looking for the possible roles for the future middle-class in the future robot dominated labor market, he proposes that the super wealthy will have to offer some accommodation to the middle-class. Somehow, a welfare state will emerge and the federal government will offer a guaranteed base income to all citizens. In his example, every adult would receive a check for up to $10,000 annually as a basic guaranteed income. Individuals might be allowed to earn a ceiling of about $50,000 before some of the guaranteed income would be reduced. But because of the wide use of robots in place of human labor, only a small fraction of the population would really generate any independent income. This basic guaranteed income would provide a fundamental means for survival by most of the middle class and could keep the consumer economy on life-support. Reich’s future American welfare state reads like science-fiction utopia. The large, highly belligerent politically conservative faction in US would all have to self-deport to Mars for any such welfare state to emerge in the US. At the same time, how will the public adapt to an economy that is operated primarily by robots and automation and with diminishing need for human labor? No rational solution is apparent. Either a great social crisis erupts on the scale of the Civil War or the upper class will just continue to monopolize on the wealth of the nation. But then, soothsayers are often wrong. By some unexpected turn of technology and education, the middle-class may find a role in the robotic society that creates whole new labor opportunities. Maybe somehow, middle-class income will exhibit a new growth spurt in the future robotic society. Then Reich will be will be reviled as some academic kook who was on hallucinatory drugs back in the early 21st-century. Only time will tell.

Saving Capitalism: For The Many, Not The Few is a timely and provocative book by Robert B. Reich, a former US Secretary of Labor and a professor of public policy at the University of California, Berkeley. In this book, Reich challenges the conventional wisdom that the free market is the best guarantor of freedom, prosperity and democracy. He argues that the market is not a natural or neutral force, but a human creation that reflects and reinforces the power of those who shape its rules and institutions. He exposes how the wealthy and influential have rigged the system to their advantage, creating a new oligarchy that undermines the common good and threatens the future of the American experiment. Reich does not advocate for abandoning capitalism, but for saving it from its own excesses and distortions. He calls for restoring the countervailing power of the many - the workers, consumers, small businesses, citizens and public servants - who can balance and check the power of the few. He proposes a series of reforms to make the market more responsive to the needs and preferences of the majority, such as raising the minimum wage, expanding the earned income tax credit, strengthening antitrust laws, reforming campaign finance, regulating Wall Street, investing in education and infrastructure, and expanding social security and health care. Reich writes with clarity, passion and conviction, drawing on his extensive knowledge and experience as an economist, a policymaker and a public intellectual. He combines empirical evidence, historical analysis, moral arguments and personal anecdotes to make his case compelling and accessible. He also anticipates and addresses some of the common objections and criticisms that his proposals might face from different ideological perspectives. He does not claim to have all the answers or to offer a silver bullet solution, but he invites readers to join him in a constructive dialogue about how to make capitalism work for the many, not the few. Saving Capitalism: For The Many, Not The Few is a must-read for anyone who cares about the state of American democracy and economy in the 21st century. It is a book that challenges us to rethink our assumptions, to question our complacency, and to act on our responsibility as citizens. It is a book that offers hope and inspiration for a more fair and sustainable future.

Capitalism most definitely is at a crossroads. To claim otherwise is, at best, denial. 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.

○Reich がStiglitzと同じことを言っている。トップ1％への富の集中とミドルクラスの没落は大きな問題だという。アメリカで起きていることは他の先進国でも起きているはずだ。そして、その際によく言われる「市場か政府介入か」という問題設定が最も問題隠ぺいに寄与している。なぜなら、と著者はいう、マーケットとは自然に存在するものではなく、構成されるものだから。所有権、行為規範、争訟解決、その強制等のルールがあって初めてマーケットは存在する。そしてそのルールは様々な選択の幅がある。実は、そのルールが富める者に都合が良いように少しずつ変えられてきているのだ。それが最も問題なのだ、と言う。まさに目から鱗。深く共感する。 ○以下では、私なりに本書のポイントを整理する。関心があるかたはご覧ください。 ○何ら不正が行われているわけではないが、金持ちがカネを使ってロビーイングや訴訟を通じて、自らに有利になるように制度を変え、税制も変え、制度の運用にも影響をあたえている。その結果、社会全体の利益配分がトップ（大企業幹部）に厚く、ミドルクラスと貧困層に薄くなっている。富者も貧者も、自分の所得は自分の価値に応じてもらっていると思い込んでいるが、そうではない。現在の制度が現在の富の配分を生んでいるのだ。Wall Streetがやっていることは、社会価値の創造でもなく、富の創出でもない。ゼロサムゲームでいち早く利益を手に入れているだけのことだ。真に社会に貢献している人々（福祉労働者、教員など）には、その貢献に見合った収入を与えるべきだ。さもないと若い才能が、本当に創造的な仕事に向かわず、Wall StreetやLawyerなど非生産的な仕事に向かってしまう、と言う。根底には、経営者が一般社員の300倍の収入を得るのはおかしいという感覚がある。 ○1970年代に敵対的企業買収が行われるようになって状況が大きく変わる。それまでは企業経営者は、多様なステークホルダーの間のバランスをとる調整役であり、アメリカ社会において公的責任を帯びた存在と考えられていた。自身もそう自負していた。優良企業は高い賃金を払い生涯雇用を実現していた。ところが買収が行われるようになると、企業は株主のものという新思想が広まり、経営者は買収に備えるようになる。そうなるとコスト削減も必要になり、人員削減・賃金削減に動く。GEのジャックウェルチなどがその手の経営者の代表である。株式市場はこのような企業の株価を上げて歓迎したため、産業界に一気に広まった。 ○さて、これに対する著者の処方箋である。当面は次のふたつだ。①富裕層以外の人々が（男も女も、人種を問わず、会社員も農民も商店主も、民主も共和も）自分たちの立場は同じだと認識すること、②個別の問題からでよいからこれらの人々が連携すること、そうして制度改正によって市場の仕組みを1970年代以前の状態に戻すよう努めることだ。著者によれば、すでにそのような動きが各地で認められる。将来は、政治的対立が、民主党対共和党でなく、establishment対反establishmentとなる可能性がある。大統領選で第３党設立の動きも出て来よう。実際には、かかる動きを察知したら既存政党のいずれかが、これを取り込む方向に動くのだろう（過去もそうであった）。 ○かくして、力を握ったとすれば、やることは金権政治改革だ。つまり、①選挙からbig moneyを締め出す、②政治資金の公開または公費選挙の実施、③天下りの制限、④専門家（経済学者等）の資金源の開示だ。こうして1970年代より前に戻す。 ○もうひとつ注意すべきは、The winner takes allの経済になっていることだ（デジタル化、ロボット化など）。この解決には、パテント制度・著作権制度等の改正が必要だ。留意すべきは、①富の一極集中を防ぐ、②イノベーションへのインセンティブを損なわないようにすること。つまりは、上手にバランスを取る必要がある。一つの方法として、知財のように一定の期間が立ったところで、失効させてpublic domainに移すことが考えられる ○これについては、国際競争を忘れていないか？という疑問が湧く。その答えは、①貿易協定によって、世界の知財制度をうえのように変える（できるかな？）、②貿易協定によって、世界の最低賃金を一定の水準（国民平均の半額など）とすることが提案されている（大変そう）。 ○さらに遺産対策が必要だ。アメリカのincomeの3分の１は遺産相続等の不労所得だと言う。Basic minimum income制度も真剣に考えるべきだ。 ○いずれにせよ、われわれはこれまでも問題が生じるたびに市場の制度を改めてきた。今度もきっとできるはずだ、という著者の楽観主義で締めくくられている。

Robert Reich authors a well-written and researched book on the future of our economy, sharing his concerns if we continue down our current path of distribution to the few - but also offering a hopeful vision of a society in which the many can prosper.

Full of insight and useful information. Really gives the reader the facts of how our society is structured. What I like about the book the most is that it informs the reader in simplified terms the game of capitalism and the role that governments should play and how they should gear the rules. Well done book! 👏 One of my favorite books as of late.