Saving capitalism

Robert Reich's new title calls for counter-class war.

Rolling Stone interviews Robert Reich.

Economic inequality is shaping up to be one of the central debates of the 2016 election: Those on the left – most notably Bernie Sanders – decry the increasing wealth and power of those at the very top of the economy, while others are left behind. Those on the right respond that this upswing in inequality, however regrettable it might be, is the natural result of free markets.

Few have looked at this issue as closely as political economist and former Labor Secretary Robert Reich. In his new book, Saving Capitalism: For the Many, Not the Few, he tackles this obsession with free markets. He argues that there is no such thing as a free market, and that the basic rules of capitalism – laws surrounding property, monopoly, contract, bankruptcy and enforcement – are really driving inequality.

Rolling Stone recently spoke with Reich about his book, the rise of populists like Bernie Sanders and Donald Trump in the presidential race and the legacies of the Obama and Clinton years. 

You called your book Saving Capitalism. Why does capitalism need saving, and why is it worth saving?

Those are the two questions I've been getting on the book tour. One group of people says, ‘Why do you suppose it needs saving? It's perfect.’ And another group says, ‘Why do you want to save it? It's so rotten.’

This reveals a fundamental misunderstanding of the global economy and also the American economy. Even democratic socialist countries like Denmark and Sweden are fundamentally capitalist in terms of how they're organized. Even communist China is moving toward capitalism. Capitalism is going to become the universal system of economic organization. The real issue isn't capitalism versus some other ‘ism.’ The real issue is whether capitalism is organized for the benefit of the society as a whole or for the benefit of a small group at the top. That's really what we ought to be debating.

In the United States, we've fallen into a trap of thinking that on the one side there's a free market, and on the other side there's government, and that's the choice we have to make. But in fact you can't have a free market without government setting the rules.

Your book is focused on the idea that the term ‘free market’ is a false distraction, and a harmful one at that. Why is that?

This idea forces us to make a choice that is not the central choice at all. Our system is a market with rules that are set by administrations, agencies, legislators and judges and then continuously set and reset almost every day in thousands of ways. The real issue we need to keep our eye on is who benefits from these rules, and who is having the most influence in making them. The classical, interminable debate we've got ourselves into between government and the so-called free market is a distraction from this more fundamental question that we ought to be raising and that I'm trying to raise in this book.

You write about the building blocks of capitalism, with a focus on contracts, bankruptcy and property law. Why should people understand our current economic plight in terms of those rules?

Because every one of these building blocks has been altered over the last 30 years by very powerful money interests who have succeeded in changing these building blocks so that they improve the finances and enhance the profits of big companies – Wall Street and the very wealthy – but make most other people worse off.

If you look at bankruptcy, for example, someone like Donald Trump can declare bankruptcy four times and insulate himself from the downside risks of his investments. But some average working person who gets caught in a downdraft of the Great Recession and finds that her home is worth a fraction of what it was before can't use bankruptcy to reorganize mortgage debt. You can't use bankruptcy to reorganize your student debts. You could be 70 years old and still have student debts, and those creditors could garnish your social security check in order to pay. Bankruptcy law has been changed and modified over the years to the benefit of big creditors, banks, credit card companies and corporations, to the detriment of average working people.

Read the rest of this interview at Rolling Stone.

Challenging the oligarchy

By Paul Krugman


'Following his schema, Reich argues that unions aren’t so much a source of market power as an example of “countervailing power” (a term he borrows from John Kenneth Galbraith) that limits the depredations of monopolists and others. If unions are not subject to restrictions, they may do so by collective bargaining not only for wages but for working conditions. In any case, the causes and consequences of union decline, like the causes and consequences of rising monopoly power, are a very good illustration of the role of politics in increasing inequality.'


Back in 1991, in what now seems like a far more innocent time, Robert Reich published an influential book titled The Work of Nations, which among other things helped land him a cabinet post in the Clinton administration. It was a good book for its time—but time has moved on. And the gap between that relatively sunny take and Reich’s latest, Saving Capitalism, is itself an indicator of the unpleasant ways America has changed.

The Work of Nations was in some ways a groundbreaking work, because it focused squarely on the issue of rising inequality—an issue some economists, myself included, were already taking seriously, but that was not yet central to political discourse. Reich’s book saw inequality largely as a technical problem, with a technocratic, win-win solution. That was then. These days, Reich offers a much darker vision, and what is in effect a call for class war—or if you like, for an uprising of workers against the quiet class war that America’s oligarchy has been waging for decades.

Read the rest of this review at The New York Review of Books.

Image: Partial reproduction of Robert B. Reich by James Ferguson