Robert Reich’s latest book, Saving Capitalism For the Many, Not the Few, graphically details how current U.S. capitalism operates in stark contrast to the post-World War II period of the 50s, 60s and 70s. For Reich, the earlier period represented almost an ideal state: “the rules of the game were basically fair.” The rules defined a system in which “widely shared prosperity generates more inclusive political institutions, which in turn organize the market in ways that further broaden the gains from growth and expand opportunity.”
In other words, inequality remained restricted, an expansive middle class thrived, the economy purported to function in the interests of the majority, and democracy seemed to operate more or less adequately.
Now, however, wealth is concentrated at the top, the middle class is shrinking, the poor are getting poorer, and the very wealthy unduly control the outcome of elections. His book aims at outlining policy changes that would allow us to return to the earlier, more virtuous state “once again.”
The philosophical premise of the book is significant. Like Marx and Hegel before him, Reich insists that capitalism’s structure is not the result of uncontrollable laws of nature like an earthquake or a volcano eruption but is the result of human decision-making. Humans create the rules that govern the economy, and these rules are consequently amenable to change.
In this way Reich demonstrates the incoherence and obfuscating role of the current debate between those who want big government and those who want a minimal government where the economy functions with little interference. In fact, he rightly emphasizes that there is no such thing as an economy outside and independent of government. Every economy exists according to a set of rules that has been enshrined into laws by government. Accordingly, the real debate should be framed according to which rules to adopt, not the size of government.
Reich supplies a wealth of information about how, during the past three decades, corporations, Wall Street, and rich individuals have changed the rules to enrich themselves, creating a vicious circle. Each change enhances their wealth and power, which allows them to change even more rules to their benefit, and the cycle keeps repeating. It is not surprising, he notes, that most people think the economy is rigged. It is.
Examples of policy changes that would take us back to a more democratic and egalitarian society include getting big money out of politics, eliminating corporate welfare, breaking up monopolies, providing everyone with a guaranteed minimal income, raising the minimum wage, shortening the lengths of patents and copyrights, restricting the size of banks, ensuring that the government spends equal amounts of money on students in rich and poor communities, legislating more progressive taxes, restricting CEO salaries, encouraging employee stock ownership and profit sharing, and the list goes on.
Surely, Reich is on a campaign to turn back the clock to the more preferable capitalist society of his youth. But is this a plausible undertaking?
In the first place, there is the question whether capitalism generally operates in the interests of the majority so that the current period would represent an aberration. In his Wealth of Nations, (1776) Adam Smith argued that it does. Convinced that people were basically self-interested, he observed that people are more productive when they “employ their capital” for their self-interest rather than for society as a whole. But even though “he intends only his own gain, he is in this, as in many other cases, led by an invisible hand to promote an end [the interest of society as a whole] which was no part of his intention” (Book IV, Chapter 2).