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.
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Excelent bookEasy to read ,sounds recommendations based on sound data and Reich knowledge and experience
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