Saving Capitalism For the Many, Not the Few
By Robert B. Reich
279 pages, $26.95
By Peter Simon
In the 30 years after World War II, the United States created the largest and most prosperous middle class the world has known. The American economy doubled, and so did the earnings of the typical worker.
Over the next 30 years, the bottom fell out. The economy again doubled, but earnings for the typical worker remained flat.
Today, two-thirds of Americans live from paycheck to paycheck, and about 25 percent of the employed have incomes below the federal poverty level for a family of four.
Meanwhile, the rich get richer. In 1965, chief executive officers made 20 times more than their firm’s average worker. Today, CEO compensation is 300 times greater than the workers’ average pay.
The richest 400 Americans have more wealth than the bottom 50 percent of the nation’s workforce.
Income inequality has reached the boiling point, writes Robert Reich, a professor of public policy at the University of California-Berkeley, secretary of labor during President Clinton’s administration and the author of 14 books.
“The threat to capitalism is no longer communism or fascism but a steady undermining of trust modern societies need for growth and stability,” he says. “When most people stop believing they and their children have a fair chance to make it, the tacit social contracts societies rely on for voluntary cooperation begin to unravel. In its place comes subversion, small and large – petty theft, cheating, fraud, kickbacks, corruption.”
Many of the causes of income inequality are evident. American employees are displaced by lower-paid workers abroad and by technology that cuts the need for employees. Labor unions have seen huge declines in both members and clout.
Then there are the hidden factors, driven by corporate spending for attorneys, lobbyists, publicists and experts willing to endorse a product in return for hefty fees. Through political power and know-how, business interests outwardly support legislation that appears favorable to the consumer, then, away from the public eye, use their influence to make sure the bills are neutralized by favorable details, or that enforcement is assigned to agencies too short-staffed to be effective, Reich said.
Two years ago, for example, pharmaceutical interests spent $225 million to, among other things, secure patents prohibiting rivals from marketing less expensive generic drugs for as long as 20 years. In many cases, patents are then extended on the basis of small and insignificant changes to the original drugs. As an alternative, Reich said, drug firms simply pay their rivals lucrative sums to keep the generics off the market. Meanwhile, the high cost of drugs was a major factor that kept an estimated 50 million people from filling their prescriptions in 2013.
In Texas, 14 people were killed and more than 200 injured by a 2013 explosion at a fertilizer plant that had not been fully inspected by a short-staffed federal agency in nearly 30 years.
“Defanging laws by hollowing out the agencies charged with administering them works because the public doesn’t know it’s happening” Reich said. “The playing field is tilted toward those who have had the resources and power to tilt it in their direction. And as they gain steadily more resources and power, it tilts further.”
Critics of Reich say he favors excessive government tinkering with the free market, which in turn creates higher business taxes, red tape and exacting regulations that discourage innovation, growth and hiring.
Reich disputes those assertions repeatedly in the book. “There can be no ‘free market’ without government,” he writes. “The ‘free market’ does not exist in the wilds beyond the reach of civilization. A market – any market – requires that government make and enforce the rules of the game.”
While much of the debate centers around semantics, he asserts, income inequality threatens the very fabric of American life. Without major reform, “the middle class will disappear, and capitalism as we know it will not survive.”
For starters, Reich urges that patent protection be shortened; antitrust laws be more strictly enforced; bankruptcy laws provide more leverage for those with unmanageable student debt or crippling mortgages on their first homes, and that the minimum wage be raised to half the national median wage.
More dramatically, Reich proposes that all Americans, beginning at age 18, receive “a basic minimum monthly income that enables them to be economically independent and self-sufficient.” He also floats the idea of giving every child at birth “a basic minimum endowment of stocks and bonds that could grow into a nest egg capable of producing a minimum basic income.” Those measures would be funded by savings from market reforms or “a tiny share of intellectual property awarded by the patent office.”
“Saving Capitalism” offers a timely, articulate and informed argument for a strong and activist approach to income inequality. It suffers, however, from Reich’s sketchy explanation of a monthly income for all Americans, the stocks proposal for newborns, and how they would be financed.
Peter Simon is a former longtime Buffalo News reporter.