How To Save Capitalism From Itself
Robert Reich’s Saving Capitalism: For the Many, Not the Few is a readable rant that — should you disagree with Reich’s central premise — will elicit eye-rolls and summary dismissal. But while his well-known political ideology (he served as Secretary of Labor under Clinton) is on constant display, I found Reich’s book both timely and important.
I am drawn to any work that posits a better way forward, and as you might expect, I agree with Reich far more often than not. You have to be willfully ignorant to pretend our current economic system is equitable (Reich argues we’re in the “second Gilded Age”) or capable of creating long-term increasing returns. And while many in our industry cling to libertarian fantasies in which technologic silver bullets solve our every social need, back here on earth we need to do better than pine for the singularity. Fixing income inequality and the loss of the middle class requires hard policy choices and a re-framing of the problems at hand.
Reich’s compact book lays out a strong prescription for what he feels is ailing our capitalist system. Anyone in tech should pay attention: Reich lumps the tech elite right alongside bankers, big pharma, and agribusiness as the new monopolists, and argues that if our capitalist society is to truly prosper, some pretty fundamental changes have to occur in both our economic policy as well as the structure, practices, and purpose of the companies we build.
Most of Reich’s argument turns on this simple premise: The debate between “free markets” and “government intrusion” is a false choice. “The central choice is not between the “free market” and government;” Reich argues, “it is between a market organized for broadly based prosperity and one designed to deliver almost all the gains to a few at the top.”
Reich goes on to deliver example after example of how the rules governing our current capitalist system are rigged to deliver “pre-distributions” of wealth to those in power. From banking to broadband, pharma to agriculture, Reich details subtle market mechanisms that concentrate power and capital into the hands of the “new oligarchs.” Government doesn’t intrude on markets,Reich argues, in fact government creates markets. Citing regulatory and enforcement frameworks for property, monopoly, contract, and bankruptcy law, Reich argues that opposition to government regulation “hides a larger reality: the necessary role of government in designing, organizing, and enforcing the market to begin with.”
The proper role of government, Reich argues, is to insure fairness to all — and today’s capitalist system is anything but fair. Reich traces the role of money in politics, for example, and the disastrous roll back of regulations limiting corporate giving to political campaigns. He shows how corporate lobbying has effectively hamstrung food safety legislation and stifled innovation in our nation’s infrastructure. He details how corporations have successfully lobbied for tax loopholes that allow for massive increases in executive pay.
Reich takes on several sacred American myths along the way. One is the idea that corporations must be run to maximize profit — the almighty “shareholder return.” “The idea that shareholders are a corporation’s only owners, and therefore that the sole purpose of the corporation is to maximize the value of their investments, appears nowhere in the law,” Reich writes. Instead, Reich argues, corporations should balance many constituents — employees, customers, communities impacted by their operations and their products. And in fact, this idea was once quite commonplace in American capitalism, Reich reminds us. Back in the 1950s, Fortune magazine exhorted its readers to act like “industrials statesman” who “regard business management as a stewardship, and … operate the economy as a public trust for the benefit of all the people.”
Reich also skewers the American myth of meritocracy — that we are paid what we are worth. “The notion that you’re paid what you’re “worth” is by now so deeply ingrained in the public consciousness that many who earn very little assume it’s their own fault,” Reich writes. “They feel ashamed of what they see as a personal failure — a lack of brains or a deficiency of character. [But] those who are rich and becoming ever more so are neither smarter nor morally superior to anyone else.”
I have a feeling there are more than a few folks in the Valley who’d disagree with that last statement.
Here are a few more of Reich’s tidbits:
- The $26.7 billion distributed to (recently bailed out) Wall Street bankers in 2013 bonuses would have been enough to more than double the pay of every one of America’s 1,007,000 full-time minimum-wage workers.
- In 2001, the top ten websites accounted for 31 percent of all page views in America, by 2010 the top ten accounted for 75 percent.
- Google and Apple have been spending more money acquiring and litigating over patents than on doing research and development.
- The richest four hundred Americans have more wealth than the bottom 50 percent of Americans put together.
- Fast food and low-wage service jobs are subsidized by public benefits, driving significant profits for large corporations.
Capitalism must be “saved from its own excess,” Reich concludes. “There is simply no way the American economy can be sustained if the richest 10 percent continue to reap all the economic gains while the poorest 90 percent grow poorer; there is no way American democracy can be maintained if the voices of the vast majority continue to be ignored.”
Reich’s prescription includes overturning Citizens United, considering a basic universal income, rethinking our intellectual property, patent, and copyright laws to insure wealth created by innovation ultimately returns to the public domain, and nothing less than the “reinvention of the corporation.”
It’s that last thought that was the true “aha!” for me — it echoed my own thinking about what I’ve come to call the “NewCo narrative” — the story of a new kind of corporation, one driven as much by purpose as profit. I didn’t read “Saving Capitalism” expecting to find affirmation for our nascent movement, but I’ll admit it was satisfying to hear Reich calling for a new approach to corporate philosophy.
“We’re likely to see a reversion to a time when many jobs were considered “callings,” expressing a deeply personal commitment rather than simply a means of acquiring money,” Reich writes, arguing that in the end, workers and consumers will be the most effective agents of change in our economy, be it through the ballot box (Reich does raise the specter of a populist third party separate from either Democrats or Republicans), or, more likely, through the formation of new kinds of companies which see themselves as responsible citizens of the world. Hear Hear!