Robert Reich is familiar to many Democrats as the Secretary of Labor during the administration of President Bill Clinton. But Reich's work didn't begin or end with the Clinton administration. He's served three different presidents, written ten books and hundreds of articles, appears as a regular commentator on public radio's "Marketplace," and is currently a professor at the Goldman School of Public Policy at the University of California at Berkeley.
His book Reason: Why Liberals Will Win the Battle for America spelled out the bankruptcy of neoconservative ideology and pointed up the hunger in America for a Democratic Party willing to stand up and strongly defend progressive ideas. Robert Reich's latest book, Supercapitalism, isn't as directly confrontational as Reason, but its calm, ordered words and well-documented numbers are, in their own way, as frightening as anything by Stephen King.
International corporations unrestricted by any government have long been a staple of science fiction dystopias, but you don't have to wait for the world of Blade Runner to encounter these monsters. You have only to trip down to your nearest "big box" discounter. We've reached a position where the demand for lower prices absolutely trumps any other factor in the marketplace. Pass a law restricting pollution? That's okay. Corporations will find a place where no such law exists, or where local officials can be bribed to ignore it, and manufacture their goods there. The same thing applies to labor laws, safety regulations, and any other factor that stands between corporations and delivering a product that undercuts the completion. Modern technology for communication and transportation allows corporations to play nations against each other and leave regulators in the dust. To get out of this trap is going to require a significant shift in the relationship between politics and corporations.
Professor Reich has agreed to spend some time on Daily Kos today, answering your questions. So jump in and participate.
Devilstower: For many people, democracy and capitalism are seen as so closely bound, they're inseparable. We even view a "free market" as a prerequisite to "freedom." But does one really promote the other?
: Capitalism may be necessary for democracy, but its' not sufficient. Look at modern China -- a capitalist hothouse. Or Singapore. Forty years ago, Americans assumed that capitalism and democracy went hand in glove. Indeed, we called the American system "democratic capitalism," and told the world it was the best alternative to Soviet communism. Forty years ago, there was some truth to that. Mass production begat mass consumption.
Almost everyone's income grew. Between 1945 and 1975, inequality in America shrank to the lowest it had been up to that time, or at any time since. Most Americans expressed high confidence in government. We were far from perfect -- we still had lots of rural and elderly poverty, still relegated blacks to second-class citizens, still had few opportunities for women, had a communist witch-hunt in the fifties, went to battle in Vietnam, faced more and more pollution, etcetera. But the democratic process was at least strong enough to allow us to begin tackling these problems -- a Civil Rights Act and Voting Rights Act, new opportunities for women, Medicare, the Environmental Protection Act. We got out of Vietnam, we sought to strengthen civil liberties. Now, fast-forward forty years. Our economy is far larger. Consumers and investors have done far better. But democracy is in worse shape. Inequality is wider than it's been since the 1920s, jobs less stable, Main Streets declining, global warming threatening, poverty increasing, more de facto segregation than before, and so on. And a majority of Americans express low confidence in government. In short, our free market doesn't seem to have promoted democracy. It seems, rather, to have submerged it.
DT: Are corporations as we have them today, an integral and necessary part of a capitalist system?
: Corporations are simply contractual arrangements to protect investors from liability. To that extent, they're a necessary part of capitalism as it's been organized. But today's large corporation is far different from what it was a quarter century ago. Then, it directly employed vast numbers of people, organized by rank. Today, large corporations are typically global supply chains. They directly employ fewer and fewer people, and contract out most of what they do.
DT: But we often treat corporations as "super citizens," with a great deal of power and very few responsibilities.
: It's very important that we understand that corporations are not people. They're just pieces of paper. The "anthropomorphic fallacy" that corporations have human traits leads us to all sorts of absurd positions -- that they have legal rights, for example; that they should be represented in our political process; that they deserve legal standing to sue the government; that they can be criminally prosecuted; that American-based corporations are more "patriotic" than foreign ones; that they should act morally; that they are capable of being charitable; that they pay taxes; and so on. None of these positions has any logic behind it.
DT: Any attempt to restrict corporations is often cast as "protectionism." Is there a way to push corporations to more responsible behavior without being subject to the shadow of 1929?
: Again, corporations are not people. They cannot be pushed to more responsible behavior. They are legal contracts among lots of people, often in different places around the world. But as legal contracts, there's much that the United States government could do to enact and enforce certain standards on their executives and officers -- even if those executives were operating in another country. Remember, the US is the largest and richest market in the world. Every global corporations wants to do business in America. If we say, for example, that every corporation must provide its workers with a salary that's at least half the nation's median wage, then that could have far-reaching consequence. We could also build such a requirement into every trade treaty. That's not protectionism. It's simply an attempt to make sure that the benefits of trade and growth are spread widely, not only in the US but also abroad.
DT: One of your fellow Marketplace commentators, David Frum, this week gave a commentary on how dangerous it was to not bail out corporations who had made bad decisions. Why are government funds for corporations that are about to fail seen as acceptable, but regulations to keep those same corporations out of trouble attacked?
: We have a double standard in America, but it's not about corporations per se. It's about the typically wealthy people who stand behind them as executives and large investors. They get bailed out, because the institutions they run or own are "too big to fail." Look at the 1998 bailout of the hedge fund Long Term Capital Management. Or the Chrysler bailout. Or the airline bailouts after 9/11. Look at the Fed's decision just yesterday to cut short-term interest rates. Look at how easily CEOs can put their companies into bankruptcy and wipe the slate clean (including labor contracts). On the other hand, if you're an average working person, conservatives immediately condemn any move to bail you out -- using the old argument of "moral hazard" (someone who's bailed out from bad decisions will make them again). Even when GW Bush announced his tiny plan to help a small portion of the millions of home owners who may lose their homes over the next year or two because of abusive lending practices, he warned that people should not be bailed out from the consequences of their bad mistakes in buying homes they should have known they can't afford. Shouldn't have known? The people who had the most knowledge and experience about the riskiness of these loans were the mortgage lenders, bankers, credit-rating agency personnel, and hedge fund executives. But the Fed is actively bailing all of them out. And if you're an average working person who's fallen on bad luck, the new bankruptcy law makes personal bankruptcy far harder to come by. Again, double standard.
Why the double standard? Because large corporations wield extraordinary power in Washington. They, their PACs, their lobbyists, their lawyers, and their PR firms essentially run Washington.
DT: Many studies have indicated that, despite apparently falling prices, Americans spend much more time working for the things they buy than previous generations. Why are we so willing to jump on the "consumer treadmill?"
: The typical American is working harder and longer because the median wage for the typical male worker has dropped over the past thirty years (adjusted for inflation). That means he and his spouse or partner have to work harder and longer to make up for that decline. Meanwhile, the costs of energy, health care, higher education for the kids, and housing have all risen faster than inflation -- adding to the burden. Yes, of course, there's lots of advertising and marketing -- telling people they should buy more stuff. And credit cards are being pushed on everyone. But I think the basic reason has to do with the decline of male hourly wages.
DT: The philosophy of Adam Smith has been taken as a given for so long, that it's become a gospel. Is it time to revisit the basic principles?
<R>RR</R>: It's important to revisit basic principles, over and over again. The economy should work for us, rather than the other way around. And the economy doesn't exist independent of the laws and regulations that define private property, fair contracts, responsibility for accidents or injuries or bad luck, and so on. In other words, we as citizens should have it in our power to define the rules of capitalism, so that it serves our needs. That's hard to do in a small country, unless its citizens want to live like the former Albanians lived, isolated from the rest of the world, and paying the high price for autarchy. But America is the biggest market in the world. We as American citizens -- and Europeans, who live in the other biggest market in the world -- have it in our power to set new rules that better reflect our social values.
DT: Is the "supercapitalism" made possible by globalism and modern technology really the problem, or has it only exposed a basic flaw? In other words, should we be working to fix capitalism, or to replace it with something else?
: Other systems have been tried -- communism, socialism, fascism. The twentieth century was littered with their failures. "Democratic capitalism" emerged from the ashes of World War II, and it seemed to work. Now, we have a new system emerging in China. Call it "authoritarian capitalism." Does it work better than democratic capitalism? Is the "democratic" in democratic capitalism still realistic? Perhaps the best way to approach the question in this century is to step outside the ideological debates that have shaped the way we used to think about your question, and ask ourselves how our current system needs to be changed in order to reflect our social values. What should the rules of the game be, in order to, for example, reduce inequality and poverty, reduce global warming, rescue our Main Streets from big-box retailers, raise wages and ensure more stable jobs, and so forth? Some of the answers may require that we sacrifice as consumers and investors. That's okay, as long as we address the tradeoffs. Democracy is supposed to provide us a means for doing this.
DT: Do you think it's possible to address these issues in our political system?
Not in our present political system. It represents the consumer and investor sides of our brains, rather than the citizen side. The first step is to rescue democracy. Nothing else is as important. And in order to do that, each of us needs to learn to practice citizenship. We need a democracy movement -- a movement as strong and as committed as the Civil Rights movement, the feminist movement, the gay rights movement, and the environmental movement. Because if we don't get our democracy back, we can't accomplish anything at all.