Notes on the book: Supercapitalism
January 6, 2008Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, by Robert Reich, is the most interesting book on the American government and how it relates to our lives that I’ve read in a long time.
In a nutshell, the thesis is: “Capitalism has become more responsive to what we want as individual purchasers of goods [and investors], but democracy has grown less responsive to what we want together as citizens.” “Democracy means more than a process of free and fair elections. Democracy, in my view, is a system for accomplishing what can only be achieved by citizens joining together with other citizens–to determine the rules of the game whose outcomes express the common good.”
He makes what I consider an extremely cogent, well-written, and persuasive argument to support this. He explains why it happened, focusing on the history of the American economic and governmental structure starting in the post-War era (the fifties), and showing how major changes started in the Seventies and continued to the present.
He offers explanations for:
- Why CEO pay has soared into the stratosphere and what prevented it from soaring before
- Why inflation has become less of a threat than it was three or four decades ago
- Why antitrust laws are less important today as a means of restraining economic power than they were previously.
- Why there are so many more corporate lobbyists and lawyers in Washington, D.C.
- Why politicians demand that companies be “patriotic” and put America before other nations
- Why a bigger fuss is being made over corporate philanthropy when corporations were never set up to be charitable institutions
- How someone can fret about the decline in hourly wages and simultaneously hunt for the best deal from China or India, which is often at the expense of an American’s wages or even job.
- How someone can lament the decline of independent retailers on Main Street while at the same time do most of their shopping at big-box retailers and online.
- Why a person who is deeply concerned about global warming might nonetheless buy an SUV
- Why politicians like to publically excoriate CEOs but then enact no laws making what they did illegal
- Why the move toward improved corporate governance makes companies less likely to be socially responsible
- Why the promise of “corporate democracy” is illusory
- Why the corporate income tax should be abolished
- Why companies should not be held criminally liable
- Why shareholders should be protected from having their money used by corporations for political purposes without their consent
- Why large companies have less economic power now than they had three decades ago
- Why the immense increase in corporate lobbying is due to a decrease in the market power of the corporations
You may be thinking about some of these points: “Oh, it’s obvious why.” But Reich’s explanations are often not what you’d expect.
None of this happened because of Ronald Reagan or Margaret Thatcher; the trends were clearly under way before they came to power, and the same trends can be seen in other countries to some extent. Neither were they caused by heroic or villainous CEOs; the changes are structural, not personal.
“The executives of Wal-Mart or any other large company are not brutally insensitive or ruthlessly greedy. They are doing what they’re supposed to do, according to the current rules of the game–giving their customers good deals and thereby maximizing the returns to their investors. Just like players in any game, they are doing whatever is necessary to win. But just as all games require rules to define fair play, the economy relies on government to set the economic ground rules. If government wanted to do something about the means Wal-Mart employs, it could change the current rules. In theory, it could enact laws to make it easier for all employees to unionize, require all large companies to provide their employees with health insurance and pensions, enact zoning regulations to protect Main Street retailers from the predations of big-box retailers, and raise the minimum wage high enough to give all working people a true living wage. All such measures would have the likely effect of causing Wal-Mart and other large corporations across the board to raise their prices and reduce returns to investors.”
Reich is not especially advocating that government should do these things. His point is to show what could happen, and why things are happening the way they are. He would like there to be more public conversation about whether or not to make these kinds of tradeoffs. The last sentence is “The first step, which is often the hardest, is to get our thinking straight.”
The writing style of the book is simple and direct, and fun to read. He has a lot of supporting facts and figures as well as good illustrative stories.
I believe that his overall point is extremely valid, and provides a useful framework for thinking about the vital issues of our economy and our government.
