“Saving Capitalism,” by Robert Reich

February 1, 2016


In this excellent book, Dr. Robert Reich addresses a major issue in the politics of our time: that Conservatives have created a powerful illusion of government as the enemy of freedom. In fact, he shows with clear logic and many examples, that without government, there is no freedom. There is only lawlessness, a dangerous place where none of us would feel safe.

Across the 30 years since Reagan, there has been a steady advancement of Conservative economic policies, favoring the free market over government, involving a steady erosion of worker rights vs. employer rights, and shifting corporate values from serving employees, customers and shareholders, to serving shareholders only. Exacerbating this are two other major factors: technology advancing rapidly through digitization, resulting in reduced need for workers in manufacturing and also moving into service businesses, such as legal and accounting; the third wave of globalization also advancing, supported by Conservatives–this is key to “free trade.” But, as jobs are lost to technology and to foreign countries with cheaper labor, there is no willingness of Conservatives to allow government to provide a safety net to 50 year old workers who need to be retrained or to enable them to move to cities where jobs are available.

Reich explains that the right issue for debate is not whether we need government, but what do we want government to do, how government is to deal with a wide range of options.  Most specifically, he illustrates how the role of government has been shaped by the wealthy, with squadrons of lawyers and lobbyists, so that government primarily serves the interests of capitalism and big money–“who has the power to set the rules of the game.”

Reich,reich2 currently at Berkeley and formerly Secretary of Labor under President Clinton, has been an ardent advocate for the middle class and the poor. He’s been consistent in calling for adjustment to the “rules of the game,” such that we can return to the kind of shared prosperity that we enjoyed for many years after WWII.

Reich’s argument is that where we’re going is not only tragic for the middle class and poor, but also for the wealthy. Start with the realization that supply side economics is not working–the idea that wealthy investors will drive growth by investing in production which hires people who spend the money. The investors simply have not been doing much  job creating investment. Instead, Reich reminds us that the middle class needs to have income in order to spend it to drive growth in the economy. That’s how the wealthy win from allowing a fairer distribution of wealth and income.


The siren song of “Conservatives” is small government. Usually there is little in the way of specifics as to what parts of government should be cut, just reduce government! Given that real wages have been stagnant across the last 30 years, while the 1% has seen astronomical increases in both income and wealth, the political dilemma Reich addresses in this book is easy to understand. Politicians offer to reduce taxes and struggling voters seize on the prospect for a little more money to spend.

Unfortunately, as this happens, with the limitation of politically unchangeable entitlements and Conservative support for military, the cuts end up in services that are critically reduce taxesneeded to enable the middle class and the poor to advance and participate in our prosperity. Eduction is cut, social services are cut, and help for unemployed is cut. Those who are voting for a little more discretionary income lose out–they lose protection from job loss, they lose social services, they lose education support for their children, and they even lose in infrastructure, and transportation is critical to our workers.

Everyone agrees, both sides of the aisle, that government is terribly inefficient, that many of our compounding regulations are obstacles to business and consumers, that many of our agencies (e.g., Veterans Affairs) are poorly run. We all agree government needs a thorough makeover. When businesses discover that they are too inefficient, a scalpel is taken to focus in on the divisions needing to be terminated and those needing to be re-organized, and selective improvement is undertaken, swiftly. No one on either side of the aisle has come up with a proposal to re-organize government. All the talk from the right is simply to reduce government. Reich explains in detail why that won’t help.

So, consider that the wealthiest 400 in the US have more wealth than the entire bottom 50% of our population. Consider that CEO pay rose 978% from 1978 to 2013. If you want to understand how such dramatic and dangerous changes developed in what was once a relatively egalitarian country, please do read this book.

“Liberty produces wealth, and wealth destroys liberty,” wrote Henry Demarest Lloyd in 1894. Reich argues the only way to prevent this natural transition is for government to do its job, the right job, free of excessive influence from monied interests. Capitalism cannot function effectively without government functioning effectively.

More later on his prescriptions for how to reverse the dangerous trend.


A reviews you may want to read: Paul Krugman