Customer Reviews: Aftershock: The Next Economy and America's Future
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on September 21, 2010
AFTERSHOCK may well be the most important book written on the current economic crisis. I say this because it offers a critical insight that I have seen in very few other places: The fundamental cause of our problems is the relentless drive toward income concentration. The problem with concentrating income into the hands of a few people is that you take money from millions of people who would spend nearly all of it, and give it to a tiny number of people who can't and won't spend it -- but will instead save it, gamble with it, or invest it offshore. The end result is simply too few viable consumers to drive the economy.

Reich points out that income for American middle class families has been essentially stagnant or declining for over three decades. The middle class has coped with this in three basic ways: (1) Women have entered the workforce, (2) People worked longer hours, and, of course, (3) We all relied on debt (credit cards and home equity loans) rather than income to support our consumption. Those coping methods are now exhausted, and we are left in a position where average Americans simply do not have sufficient discretionary income to support a sustainable recovery. The great American consumer class -- which was the driving force behind our prosperity in the 1950s and 1960s -- has been largely decimated.

To his credit, Reich correctly identifies globalization and, especially, automation technology as primary forces behind declining middle class wages. At the same time, rather than enacting countervailing policies, the United States (beginning with Reagan) has gone in the exact opposite direction and adopted a conservative agenda that has actually accelerated the trend toward income concentration.

The one shortcoming of the book is that Reich -- not being a technologist -- fails to anticipate how advancing technology is likely to dramatically worsen the situation in the relatively near future. As someone who works in this area, I can tell you that the degree of progress we are soon likely to see in automation technologies is historically unprecedented.

To get a sense of what we may face in the future, I would strongly recommend that this book be read in conjunction with Aftershock: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. Both books offer an eerily similar analysis of the crisis -- both concluding that the problem is a dearth of viable consumers. Both books also propose very similar solutions: direct income supplementation. Reich proposes a negative income tax (which was supported by free-market icon Milton Friedman).

Anyone who wants to understand the current crisis and the danger we face in the future should read both "Aftershock" (for its emphasis on political and social implications) and "The Lights in the Tunnel" (for insight into how technology and globalization will continue to transform the economy -- and lead to an even more severe crisis, if we do not act ).
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on September 23, 2010
Every middle class American should read this book. Many observations about income disparities have been written up lately but Reich pulls the important points together in a powerful and accessible way.

Reich's main thesis is that the current transition the US economy is under is misunderstood. Many of the policy elite (Geithner, Volcker) have repeated the familiar claim that Americans are living beyond their means. Personally I don't discount that completely but Reich's insight goes much deeper and rings truer: "The problem was not that American spent beyond their means but that their means had not kept up with what the larger economy could and should have been able to provide them."

"We cannot have a sustained recovery until we address it. ... Until this transformation is made, our economy will continue to experience phantom recoveries and speculative bubbles, each more distressing than the one before."

Anyone looking at the unemployment data since WWII has to wonder why the unemployment component of the last three recessions is so prolonged. Instead of a sharp trend up, there are long slopes of delayed returns to peak employment. (Google "calculated risk blog" and look at Dec. 2010 articles.) I believe Reich has demonstrated the main culprit this. To be clear, he is not describing the detailed mechanics of what triggered the Great Recession. (Nouriel Roubini has a good book that I would recommend for more on the financial fraud, leverage and credit risks involved - Crisis Economics: A Crash Course in the Future of Finance. ) But Reich is taking a long term view and exposes a dysfunctional trait of the US economy that no one can afford to ignore. It is this weakness that will delay the current recovery and continue to create greater risks in the future.

Reich draws the parallels between the Great Depression and the Great Recession, particularly the imbalance of wealth concentrated in fewer hands and middle class workers with less income to convert into consumer demand. One of the fascinating devices he found to do this was the writings of Marriner Eccles (Fed chair between '34 to '48):

"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth - not of existing wealth, but of wealth as it is currently produced - to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped."

Reich also shares a couple of powerful and disturbing graphs that show how the middle class has been squeezed and also how since the late 70s, hourly wages have not only not kept up with the rise in productivity but have remained essentially flat.

Another driving theme Reich presents is the "basic bargain" and he evokes Henry Ford, the man that took mass production to new heights and paid his workers well:

"[Henry] Ford understood the basic enconomic bargain that lay at the heart of a modern, highly productive economy. Workers are also consumers. Their earnings are continuously recycled to buy the goods and services other workers produce. But if earnings are inadequate and this basic bargain is broken, an economy produces more goods and services than its people are capable of purchasing."

I was concerned early in the book that Reich would leave out some of the important complexities of the topic but he covered related finances, politics and even consumer/voter psychology in a succinct yet informative way. His summary of changes to the labor market in the last 30+ years was very good.

His ideas for correcting this were interesting if perhaps difficult to implement politically. My take away however was that this is a strong indicator of how bad he thinks the situation really is. Many Americans may be yearning to return to "normal". Reich is the first to thoroughly convince me that it is not going to happen.

This is a very quick read of 144 pages and is well worth the time.
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on April 10, 2010
Who hasn't thought of walking away from their life at one point or another? In Richard Paul Evan's new book, Alan, the main character does just that after he looses everything, including his beloved wife. This is the first of 5 installments as he journeys on foot across the country while coming to terms with all he has lost. It is a very capitvating story and moves quickly. Although the book has it's own satisfying ending, you definitely remain very attached to Alan and are left looking forward to hearing about the rest of his journey!
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on October 7, 2013
Despite what um ... some reviewers say, Dr. Reich is not delusional. He comes loaded with statistics to back up every assertion he makes. I have not read the book as yet, but just saw the movie over the weekend. Fantastic and highly recommended!

*I have since read the book too. Excellent read!
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on September 23, 2010
In this concise and well reasoned book, Robert Reich shows that the origin of the "Great Recession" lay in the widening gap between the very rich and the middle class. In brief, middle class incomes, adjusted for inflation, have stagnated or even declined, while the very rich have accumulated a larger and larger share of the nation's wealth. The nation's wealth has indeed been redistributed: upward.

This created a structural problem in the economy, since middle class workers no longer can afford to buy the products and services they produce, and the very rich cannot possibly spend the vast amounts of money they accumulate. Businesses remain "profitable" by outsourcing jobs or replacing workers with technology; this compounds the middle class dilemma because many of the jobs they did are gone forever.

With a shrinking consumer base for the products they offer, businesses cannot justify expansion, and do not create jobs. The rich, looking for places to put the huge amounts of money they control, are attracted to speculation; new bubbles are inevitable. At the same time, great wealth translates into political power, making any useful change extremely difficult.

Since the problems are structural, they must be solved with structural changes, and Reich ends with a list of suggestions for the kinds of changes that could help direct more money and success to middle class Americans. Many readers will think his suggestions are politically unfeasible, and while he makes a valiant stab at optimism, it is clear that Reich is very much aware of the obstacles in the way.

Before things get better, it seems, they will have to get worse. Much worse.
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on October 11, 2013
After reading this book you will understand why the middle class needs to coalesce and take back some of the power from the rich, corporate elite, the Koch brothers, and similar greedy entities. He explains the problem clearly and in very simple, easy to understand English; although, some tea party people may read this, understand it but still think that 2 + 2 doesn't equal 4. I love this book and would recommend it to any middle class American trying to take our country back from the 1 percent!
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on January 7, 2014
I know I will never be an economist. Understanding the financial system of Wall Street, Government and all is really difficult to comprehend. But Robert B Reich has produced a clear and concise description of what has happened to the money system and the people's financial security in this country today. Everybody should read this book. Why? because you get a perspective on what happened in 2007 - 2008 that ruined your retirement, your financial position, your job and you standard of living, plus an inkling as to why.
It is a pretty sad picture of the politics and mishandling of responsibility in the USA today. How to fix it. Not so simple. When the people in charge are used to eating cake it is difficult for them to stop or eat less.
Read it and make up your own mind and THINK for a change, is a message you can take from this very interesting book.
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on September 23, 2010
The "aftershock(s)" in the title refer to the waves of damage caused by the supposedly finished Great Recession -- shocks that Reich warns will be shaking us up for years to come, and are bound to become regular occurrences unless we fix this fundamentally imbalanced economy of ours.

Actually, this book isn't so much about the calamity of 2008 as much as an exploration of the slow, steady march that got us there. Expanding somewhat on his "Supercapitalism" book, Reich points out (and backs up with data) that nearly ALL of the benefits from economic expansion since the late 70s have gone straight to the top, especially the top 1% -- a group that went from earning 9% of total income to 23% (not to mention 36% of total current wealth) -- while earnings for everyone else hasn't budged one bit, which translates to a decline in relative terms. Thank Reagan for that one, who hacked the top-tier tax rate in half, and then the Bushes, who trimmed it further while introducing tax loopholes (i.e. letting people classify income as capital gains), which collectively dropped the effective rate for top dogs from about 92% in mid-century to 35% today (25% after the loopholes).

It's fun to watch Reich vividly show us the absurdity of the results, i.e. pointing out how in order for the CEO of Bank of America to successfully spend the $96,000,000 he made in 2006, he'd have to find $23,000 worth of crap to buy every waking hour -- a level that's not only past the point of boosting happiness, but beyond an amount that's even possible to spend. Basically, there are more than a few extra billions of dollars just sitting stagnant in the bank accounts of schmucks that didn't deserve it, wouldn't miss it, and couldn't even use it if they tried -- a colossal waste from society's perspective. Logically, Mr. Reich believes this waste will be our undoing, because those of us in the bottom three-quarters are becoming so piss poor that we losing the ability to even buy the stuff the economy produces anymore, which makes EVERYONE worse off (even the bourgeoisie, since they'll have fewer masses to buy their wares). And no, the millionaires & billionaires don't compensate with their own spending, because they pretty much already have everything they need.

After touching upon a number of related issues, he ends on an optimistic note as usual, pointing out that we've been wavering between massive inequality and shared prosperity every few decades for a while now, and he believes we have enough "common sense" to return to the latter state without too much unrest. I'd say the jury's still out on that one.

I guess my only reservation is that if you're a Reich regular, you've probably heard much of this before. For me, quite a bit of the content evoked memories from his past books or blog. But it's still a worthy read in any case, and the guy still writes a better book than Krugman or Dowd or Moore.

And familiarity notwithstanding, I walked away with one pretty cool blinding insight I hadn't known before: his point about the "three coping mechanisms" that the average household has been using over the past 30 years to compensate for dwindling wages:
1. pushing women into the workforce
2. making men work overtime
3. borrowing money from home values
Reich says we've exhausted all three and are now out of options, doomed to lower standards of living unless our employers start actually sharing the wealth a little. He's right.
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on April 28, 2010
I read the walk about 2 weeks ago, I really enjoyed the story and the characters, however, there were a few things that I found irritating. First there is so much blank space in the book. You read 2, 3, 4 pages and then there are 2 blank pages, which if you cut that out, the book would be about half the size. It was simply for page fillers and a little misleading. I also think he left out a lot and focused too much on what the main character had to eat. I feel like this book is somewhat of a cash cow, and that greed may be the reason for the 5 part series. In all honesty he SHOULD have just put all 5 books in 1. I am really curious for the next one...but am I going to remember it a YEAR from now? Possibly not. It is definately not worth $22 as it's a very short simple story. I also feel it may be a slight rip off of Paulo Coelho's "The Alchemist" which is amazing.
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on April 30, 2010
I feel I've been had! If I'd know that Alan's trek across America was nothing more than a serial story to be spread across many volumes, I would not have started the journey!

The story is simple, the people Alan encounters traveling across Washington state (Not across America to Key West) are forgettable. It turns out to be a journal of his meals and B&B's. It's not even a good 'feel good' book if that's your cup of tea.

I found it offensive that I'd get to the end of the (Kindle) book to see a "join Alan in April 2011 as he continues his walk". Come on. This is not much more than a Saturday afternoon serial at the movies that never ends.

Nowhere in the promotional material does it indicate this is the beginning of a multi-part story. Bad on the publisher.

Believe me, there was nothing I read here that could possible keep me interested for a year from now.
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