Customer Review

Reviewed in the United States on March 20, 2008
This gets my vote for the best book in the category of "What's Wrong with our Country and How to Fix It." Other books spend the first 300 or so pages describing all that is wrong and then come on like the cavalry with their own formula solution. Not so with Kuttner's book. He makes it clear throughout that the problem is laissez-faire capitalism, manipulated by financial elites, and that the answer is managed capitalism, responsive to a democracy.

The book is a great read for those of us who get all worked up about political economy, populism vs. elitism and the personalities of domestic politics and finance during the last half century. Kuttner has many specific suggestions for improving economic security for those of us who are not wealthy. However, he focuses primarily on increasing wages, benefits and employment security, not on building income from owning capital.

There would be a limit, however, to what the government can do to make managers accountable to shareowners. As shown in the book's chapter, "Wall Street Rules," even the regulatory reforms of the 1930s did not fix the disengagement between individuals and corporate management. There needs to be a different, direct relationship between the ultimate providers of capital and the stewards of that capital.

What government could do is encourage direct ownership of business, through changes in the tax laws and securities laws. Individuals could receive a tax credit for the amount invested, up to an annual limit. (The credit directly reduces taxes by the same amount, in contrast to a deduction, which only reduces taxable income.) Businesses would have to meet corporate governance standards of shareowner rights, director independence and limits on executive power and compensation. Investors would need to meet some basic educational or experience requirements. People who aren't already qualified could take a course through local community colleges or high schools. Interest, dividends and capital gains would be taxed at the going rates, recovering taxes to offset the investment credit.

This would empower individuals to bring the discipline to corporate management that has not come from government regulation. If we had active, informed individual ownership of corporations, the opportunities would be reduced for private equity firms to join with management in buying and reselling a corporation. It may seem like a complex, politically difficult proposal, full of potential objections. But more government rules just mean that lobbyists and lawyers earn big fees finding new ways to do the same old thing.
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