November 25, 2016

Saving Capitalism For the Many, Not the Few, by Robert Reich, is a succinct and scary look at the forces driving increasing economic inequality in the United States. Filled with clear, accessible examples and frequent pauses to recap and clarify key points, it is explanatory social science writing at its most effective.

Its basic premises are these:

  1. “The market is a human creation. It is based on rules that human beings devise.”
  2. “Over the last three decades, the rules have been shaped by…corporations, Wall Street, and…wealthy individuals to channel a large portion of the nations’ total income and wealth to themselves.”
  3. Because of the increasingly potent influence of money on politics, concentrations of wealth lead to concentrations of power in the hands of a few.
  4. “[U]nder such conditions an economy and a society cannot endure….[This] is a challenge to democracy.”
  5. Those in the lower and middle classes who have been losing ground since the 1970’s must come together to reassert mechanisms of countervailing power to level the playing field, both in terms of income/wealth and the power to write the rules.
  6. Changes in the economy will necessitate a basic minimum income (or a bequest to all citizens of either a share in intellectual property or of future stock gains); otherwise there will be no one to consume the products and services provided by the few.

These points obviously convey a distinct perspective on the American system, as well as a set of policy recommendations. The book, however, also offers illuminating basic lessons in economics (as in Chapter 2: “The Five Building Blocks of Capitalism”), government (Chapter 8: “The Enforcement Mechanism”), and history (Chapters 14 and 15: “The Rise of the Working Poor” and “The Rise of the Non-working Rich”).

Reich is clearly also on a mission in this book to dispel myths and expose the worst offenders. The Koch brothers are often mentioned, and this fact is repeated several times to drive home the reality of immense wealth concentrations at the top: “The six Walmart heirs together had more wealth than the bottom 42 percent of Americans combined…” This means that these six individuals, none of whom actually founded Walmart, possess more wealth than the pooled resources of about 135 million people.

The single most enlightening point—to me, at least—raised in the book, is this: “Shareholder ‘ownership is…a legal fiction. So is the idea that CEO’s and other corporate executives have a fiduciary duty to maximize the value of corporations’ shares of stock. Corporate charters, issued by states, require no such thing….[T]he idea that the sole purpose of a corporation is to maximize shareholder value is relatively new, dating back only to the 1980s.”

Apparently, for many decades before I was born, leaders of corporations regularly sought to share the benefits generated by their companies among all of the stakeholders, which included employees and customers, as well as shareholders. Now they mostly make it their business to enrich founders and executives (often the largest shareholders) by buying back shares, pumping up stock values, and cashing out. Reich does cite some laudable exceptions, like Patagonia and Market Basket, but these are few and far between.

Despite the dire picture his book paints of an American political and economic system rigged and distorted apparently beyond repair, Reich ends Saving Capitalism with a hopeful message that solutions are indeed possible: “The vast majority of the nation’s citizens do have the power to alter the rules of the market to meet their needs….We have done so before,” he says, and “we will do so again.”

Saving Capitalism For the Many, Not the Few gives readers a map to what has gone wrong with the rules and how the rules get made. It also provides a blueprint for how to start redrawing that map. The book packs a powerful message into its 219 pages, and it is absolutely worth a few hours of your time.