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).
In other words, people are more motivated to work when they are working for themselves. When they do, everyone produces more, and everyone benefits from one another through the process of trade.
But Adam Smith’s argument is based on the premise that everyone is operating from a position of equality and can “employ his capital” as he chooses. Marx took up the argument about capitalism from a different angle and arrived at the opposite conclusion about the benefits for society as a whole.
Capitalism, of course, does not comprise business owners alone. Some have no capital and must sell their labor and work for others who are owners. But this relation produces an irreconcilable conflict, according to Marx. Because capitalists must compete with one another for customers, those who can sell their products cheaper without sacrificing quality will prevail. Consequently, there is an unremitting pressure on owners to reduce their expenses – particularly labor expenses – to remain competitive. Time and again in the past three decades, as international competition intensified, business owners went to their workforce and demanded (not asked for) concessions. Walmart, by paying workers rock-bottom wages, has succeeded in eliminating much of its competition.
For Marx, capitalism does not operate in the interests of the majority because with competition workers must continually sacrifice in order to keep businesses competitive. But working people constitute the vast majority.
At least Marx raised serious doubts about the universal benefits of capitalism. In looking back to the post-World War II period, perhaps that was the exception, not the rule, in part made possible by the widespread destruction during the war of some nations and their subsequent diminished ability to compete in the international market. And, of course, admiring the post World War II period here in the U.S would require overlooking the little economic opportunity available for African Americans, women, Latinos, the disabled, etc.
But a second argument could be raised in opposition to Reich’s project of turning back the clock. Reich has painted a bleak picture of our current predicament. We seem caught in an ever-worsening situation. The rich use their money to influence political decisions that allow them to accumulate ever-more money.
How can such a vicious cycle be reversed? Unfortunately, Reich’s book only contains vague references to possible approaches. At one point, for example, he cites Patagonia, “a company whose articles of incorporation require it to take into account the interests of workers, the community, and the environment, as well as shareholders” as a step in the right direction. But are there any grounds for believing many companies will follow Patagonia’s example? The evidence would suggest not.
Capitalism is not simply an economic system. It spawns a culture: a way of life, a world-view, and a specific type of human nature. It encourages people to compete against one another, seek one’s own self-interest, not the common good, and measure self-worth by material possessions. Workers must compete against one another for jobs, promotions, etc. Capitalists must compete for customers, raw materials, labor, etc. Capitalism does not exist because people are inherently selfish, competitive and materialistic. People are this way in large part because capitalism breeds it.
Recent studies show that those with the most wealth are the least likely to conduct themselves ethically and consider the common good. Paul Piff at U.C. Berkeley has conducted studies comparing the behavior of wealthy people with those with far less:
“Again and again, he’s found a common thread: Rich people are more likely to behave unethically even if they get very little benefit. They’re more likely to take candy from a jar labeled as just for kids, cheat at games and cut off pedestrians in crosswalks. They’re also more likely to say they’d do the same thing when told about somebody who accepts bribes, lies to customers, cheats on an exam or pockets the money when a clerk gives too much change.”
All of the above supports the conclusion that examples like Patagonia will remain relatively rare.
While his book does not adequately address the question of how to implement his ideal, one of Reich’s blog entries, “It Takes a Movement,” raises an important point. In the article he argues that presidents alone are not in a position to implement dramatic change. They are forced to compromise with powerful interests so that changes end up basically reinforcing the status quo. However, when a president is backed by a mobilized public, if a mass movement demands certain progressive changes, then the prospects are promising. Reich believed that such a movement was “at the heart of the Sanders’ campaign,” and for this reason he endorsed Sanders.
But powerful movements can only be sustained when controlled by the rank and file. Such control is the best insurance that the movement will reflect the interests of the members. The “movement” around Sanders is top-down. Sanders defined the platform, and his supporters were forced to take it or leave it. For this reason, as Sanders’ campaign winds down, the “movement” will evaporate.
In the U.K., however, a movement within the Labor Party has in fact grown up around Jeremy Corbyn, who has encouraged the expansion of democratic procedures to ensure that the members control the Party. Such formations unleash a new dynamic. Members come into constant contact, they discuss and debate polices, they benefit from one another’s opinion and educate each other, and they begin to think in terms of the good of the whole rather than their narrow self-interest.
Marx captured the essence of the transformation of human nature in such contexts when observing French socialist workers:
“When communist workmen associate with one another, theory, propaganda, etc., is their first end. But at the same time, as a result of this association, they acquire a new need – the need for society – and what appears as a means becomes an end. In this practical process the most splendid results are to be observed whenever French socialist workers are seen together. Such things as smoking, drinking, eating, etc., are no longer means of contact or means that bring them together. Association, society and conversation, which again has association as its end, are enough for them; the brotherhood of man is no mere phrase with them, but a fact of life, and the nobility of man shines upon us from their work-hardened bodies” (Economic and Philosophic Manuscripts of 1844).
In other words, democratic movements give birth to a new culture. Competition becomes subordinate to cooperation, members are mutually supportive, and the good of all is the common aim. Socialism, when entirely democratic, embodies these dynamics and represents a higher moral and social stage in human history. What would be the point of abandoning such a positive step forward that a movement creates for a capitalist system that encourages exploiting one’s fellow human beings, treating them as mere means to make a profit, not as ends in themselves, and consequently always harboring the potential of unleashing the worst in human nature?
Fortunately, more and more youth under the age of 30 are beginning to agree. In a recent poll 43 percent of respondents said they preferred socialism while only 32 percent preferred capitalism.
Capitalism has devastated humanity by ignoring entrenched poverty; it has spread economic insecurity and stress throughout the working population; and it has dragged us all to the edge of a catastrophic environmental disaster. Enough of saving capitalism. It is time to join with youth and insist a better world is possible with socialism.
