http://www.nybooks.com/articles/20853
The Wrecking Ball of Innovation
By Tony Judt
Supercapitalism: The Transformation of Business, Democracy, and Everyday Life
by Robert B. Reich
Knopf, 272 pp., $25.00
Supercapitalism is Robert Reich's account of the way we live now. Its story is familiar, its diagnosis superficial. But there are two reasons for paying attention to it. The author was President Clinton's first secretary of labor. Reich emphasizes this connection, adding that "the Clinton administration—of which I am proud to have been a part —was one of the most pro-business administrations in American history." Indeed, this is a decidedly "Clintonesque" book, its shortcomings perhaps a foretaste of what to expect (and not expect) from another Clinton presidency. And Reich's subject—economic life in today's advanced capitalist economy and the price we are paying for it in the political and civic health of democracies—is important and even urgent, though the "fixes" that he proposes are unconvincing.
Reich's theme goes as follows. During what he calls the "Not Quite Golden Age" of American capitalism, from the end of World War II through the 1970s, American economic life was stable and in comfortable equilibrium. A limited number of giant firms—like General Motors—dominated their predictable and secure markets; skilled workers had steady and (relatively) safe jobs. For all the lip service paid to competition and free markets, the American economy (in this respect comparable to the economies of Western Europe) depended heavily upon protection from foreign competition, as well as standardization, regulation, subsidies, price supports, and government guarantees. The natural inequities of capitalism were softened by the assurance of present well-being and future prosperity and a widespread sentiment, however illusory, of common interest. "While Europeans set up cartels and fussed with democratic socialism, America went right to the heart of the matter—creating democratic capitalism as a planned economy, run by business."<1>
But since the mid-Seventies, and with increasing ferocity in recent years, the winds of change—"supercapitalism"— have blown all that away. Thanks to technologies initially supported by or spun off from cold-war research proj-ects—such as computers, fiber optics, satellites, and the Internet—commodities, communications, and information now travel at a vastly accelerated pace. Regulatory structures set in place over the course of a century or more were superseded or dismantled within a few years. In their place came increased competition both for global markets and for the cataract of international funds chasing lucrative investments. Wages and prices were driven down, profits up. Competition and innovation generated new opportunities for some and vast pools of wealth for a few; meanwhile they destroyed jobs, bankrupted firms, and impoverished communities.
Reflecting the priorities of the new economy, politics are dominated by firms and financiers ("Wal-Mart and Wall Street" in Reich's summary) lobbying for sectional advantage: "Supercapitalism has spilled over into politics, and engulfed democracy." As investors —and above all as consumers—Americans in particular have benefited in ways their parents could not have imagined. But no one is looking after the broader public interest. Investment values have gone through the roof, but "the institutions that used to aggregate citizen values have declined." Public policy debates in the contemporary US, as Robert Reich observes, "are, on closer inspection, matters of mundane competitive advantage in pursuit of corporate profit." The notion of the "common good" has disappeared. Americans have lost control of their democracy.
Reich has a nice eye for the instructive example. The wealth gap in the US is now at its widest since 1929: in 2005, 21.2 percent of US national income accrued to just 1 percent of earners. In 1968 the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker; in 2005 the CEO of Wal-Mart earned nine hundred times the pay of his average employee. Indeed, the wealth of the Wal-Mart founders' family that year was estimated at about the same ($90 billion) as that of the bottom 40 percent of the US population: 120 million people. If the overall economy has grown "exuberantly" but "median household income has gone nowhere over the last three decades,...where has all the wealth gone? Mostly to the very top." As for the intrepid boldness of the latest generation of "wealth creators": Reich lists the tax breaks, pension guarantees, safety nets, "superfunds," and bail-outs provided in recent years to savings and loans, hedge funds, banks, and other "risk-takers" before dryly concluding that arrangements "that confer all upside benefit on private investors and all downside risk on the public are bound to stimulate great feats of entrepreneurial daring."
The Wrecking Ball of Innovation
By Tony Judt
Supercapitalism: The Transformation of Business, Democracy, and Everyday Life
by Robert B. Reich
Knopf, 272 pp., $25.00
Supercapitalism is Robert Reich's account of the way we live now. Its story is familiar, its diagnosis superficial. But there are two reasons for paying attention to it. The author was President Clinton's first secretary of labor. Reich emphasizes this connection, adding that "the Clinton administration—of which I am proud to have been a part —was one of the most pro-business administrations in American history." Indeed, this is a decidedly "Clintonesque" book, its shortcomings perhaps a foretaste of what to expect (and not expect) from another Clinton presidency. And Reich's subject—economic life in today's advanced capitalist economy and the price we are paying for it in the political and civic health of democracies—is important and even urgent, though the "fixes" that he proposes are unconvincing.
Reich's theme goes as follows. During what he calls the "Not Quite Golden Age" of American capitalism, from the end of World War II through the 1970s, American economic life was stable and in comfortable equilibrium. A limited number of giant firms—like General Motors—dominated their predictable and secure markets; skilled workers had steady and (relatively) safe jobs. For all the lip service paid to competition and free markets, the American economy (in this respect comparable to the economies of Western Europe) depended heavily upon protection from foreign competition, as well as standardization, regulation, subsidies, price supports, and government guarantees. The natural inequities of capitalism were softened by the assurance of present well-being and future prosperity and a widespread sentiment, however illusory, of common interest. "While Europeans set up cartels and fussed with democratic socialism, America went right to the heart of the matter—creating democratic capitalism as a planned economy, run by business."<1>
But since the mid-Seventies, and with increasing ferocity in recent years, the winds of change—"supercapitalism"— have blown all that away. Thanks to technologies initially supported by or spun off from cold-war research proj-ects—such as computers, fiber optics, satellites, and the Internet—commodities, communications, and information now travel at a vastly accelerated pace. Regulatory structures set in place over the course of a century or more were superseded or dismantled within a few years. In their place came increased competition both for global markets and for the cataract of international funds chasing lucrative investments. Wages and prices were driven down, profits up. Competition and innovation generated new opportunities for some and vast pools of wealth for a few; meanwhile they destroyed jobs, bankrupted firms, and impoverished communities.
Reflecting the priorities of the new economy, politics are dominated by firms and financiers ("Wal-Mart and Wall Street" in Reich's summary) lobbying for sectional advantage: "Supercapitalism has spilled over into politics, and engulfed democracy." As investors —and above all as consumers—Americans in particular have benefited in ways their parents could not have imagined. But no one is looking after the broader public interest. Investment values have gone through the roof, but "the institutions that used to aggregate citizen values have declined." Public policy debates in the contemporary US, as Robert Reich observes, "are, on closer inspection, matters of mundane competitive advantage in pursuit of corporate profit." The notion of the "common good" has disappeared. Americans have lost control of their democracy.
Reich has a nice eye for the instructive example. The wealth gap in the US is now at its widest since 1929: in 2005, 21.2 percent of US national income accrued to just 1 percent of earners. In 1968 the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker; in 2005 the CEO of Wal-Mart earned nine hundred times the pay of his average employee. Indeed, the wealth of the Wal-Mart founders' family that year was estimated at about the same ($90 billion) as that of the bottom 40 percent of the US population: 120 million people. If the overall economy has grown "exuberantly" but "median household income has gone nowhere over the last three decades,...where has all the wealth gone? Mostly to the very top." As for the intrepid boldness of the latest generation of "wealth creators": Reich lists the tax breaks, pension guarantees, safety nets, "superfunds," and bail-outs provided in recent years to savings and loans, hedge funds, banks, and other "risk-takers" before dryly concluding that arrangements "that confer all upside benefit on private investors and all downside risk on the public are bound to stimulate great feats of entrepreneurial daring."
posted by Dan at 7:03 PM
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