In “Saving Capitalism,” Robert Reich, former Secretary of Labor and currently a professor at U.C. Berkeley, affirms his commitment to the free enterprise system—yet more than three quarters of his book explores the ways the basic tenets of capitalism have been subverted in the United States.
Reich’s underlying assumption is that a free market economy requires government regulation. He dismisses conservatives’ protests, noting that many who complain vigorously about government interference actually profit from unfair tax loopholes and other laws that rig the market in their favor.
He explains that there are five necessary “building blocks” of the free market, which each require government regulations to protect the system: property, monopolies, contracts, bankruptcy and enforcement measures.
He explains how each component contributes to the free market but can be warped to enrich a select few. Patents, for instance, protect intellectual property in order to encourage investors to support new products. But patent laws have been exploited; the duration of patents has more than tripled from an initial limit of 28 years to the current maximum of 95 years, long after inventors have died and initial investors have recouped reasonable rewards. The latest amendment to the patent laws, passed in 1998, has been dubbed the Mickey Mouse Protection Act since it assures that Walt Disney’s characters won’t move into the public domain until 2023. These laws stymie those who might create new versions of those products or make them less expensive. Patent laws are often blamed for preventing the widespread, inexpensive distribution of lifesaving pharmaceuticals, which cost very little to manufacture.
This is only one example of how the building blocks of the free enterprise system have been undermined. Some bankruptcy protection laws, for instance, let corporations cancel labor force agreements, often while top executives profit enormously from insider knowledge of upcoming bankruptcies. Enforcement of regulations has been another target for manipulation. Sometimes government agencies are stripped of the manpower to prosecute violations or are staffed with political appointees who frequently come from the industries they regulate and are hired by them again when they leave office.
What is to be done? To answer this question, he digs into the history of the country’s capitalist system, noting successes in reeling in excess and injustice. The mass enslavement of black people ended after the Civil War. At the end of the 19th century, when robber barons built great monopolies, Congress passed the Wagner Antitrust Act. Curiously the legislation was first used to prosecute unions, but subsequently it limited monopolies in big industries like oil and steel. Americans also came together in the Depression to pass legislation that protected workers, funded public programs that increased employment and provided for those who were unable to work.
Other national efforts bolstered the middle and working class, too. After World War II, the G.I. Bill, which financed post-secondary education for veterans, helped lay the groundwork for many to move into the middle class as lawyers, doctors and other kinds of professionals.
According to Reich, the tide turned after 1980, and there has been a dramatic shift of wealth and resources to the richest 10 percent in the country. One remarkable example is that by 2014, “The six Walmart heirs together had more wealth than the bottom 42 percent of Americans combined.” At the other end of the economic spectrum, Reich reports a significant growth in the number of people who work full-time but need government assistance to meet daily needs.
Another problem faced by embattled working class and middle class professionals is the emergence of ever more powerful robots that can perform many tasks faster and cheaper than humans, leading to even greater unemployment.
Reich concludes that in order to challenge the super-rich and save the free enterprise system, “shareholder capitalism” should be replaced by “stakeholder capitalism.” He emphasizes the importance of reviving union membership and power, as well as increasing consumer participation in the governance of corporations, to end the “upward redistribution” of wealth.
Reich claims that such efforts have borne fruit elsewhere. In Germany, new rules on corporate governance illustrate this approach; he singles out Volkswagen as a company that has been “far more receptive to worker’s rights than their compatriots in America.” Reich’s book was published before the exposé of Volkswagen’s fraudulent behavior that has led the German government to order a mandatory recall of 8.5 million diesel automobiles. When asked about these revelations, he acknowledges that he was “surprised and disturbed. Every global company—even those that treat their workers well—is now under enormous pressure to maximize profits.”
In 1946 Saul Alinsky published Reveille for Radicals, which aroused the middle class, the poor and minority groups to take action that led to greater power and prosperity for average Americans. “Saving Capitalism” offers a 21st century wake-up call for the middle class and the poor to stop the predatory practices of the very wealthy and strengthen the American economy.
Robert Reich will discuss his book, Saving Capitalism, on Nov. 7 at the West Marin Gym at 7 p.m. For more information, visit ptreyesbooks.com/events.
Herb Kutchins is a professor emeritus at California State University, Sacramento, and had a varied career organizing social welfare and criminal justice reform. He lives in Inverness Park.