Saturday, August 1, 2009


Supercapitalism: The Transformation of Business, Democracy, and Everyday Life Supercapitalism: The Transformation of Business, Democracy, and Everyday Life by Robert B. Reich

Robert Reich is sometimes categorized as a standard liberal idealogue. This book should put that characture to rest. Reich sees himself as pro-capitalism. The market is needed, Reich argues (echoing Milton Friedman) because dissent is undermined if one cannot dissent and also buy bread without government funds. There is, however, a difference between democratic capitalism and supercaptilism. And we have gone from one to the other, with terrible results.

Simply put, Reich's thesis is that following the great depression and the second world war a set of regulations and the existence of strong unions kept capitalism democratic. Wages were good, the economy prospered, and the gap between rich and poor was small. What happened, as everyone knows, is that all this was undone. Since the 1970s unions have been crippled, corporate lobbyists have bought off most of washington, and the gap between rich and poor has grown beyond anyone's wildest imagination. why this has happened, however, is something Reich thinks has not been fully understood.

The Standard liberal critique is that Ronald Reagan and the Neo-cons reversed and destroyed the new deal, corporations sacrificied social responsibility to seek profit alone, and cogressmen were bought off by their corporate masters. There is truth in these claims, but they are not, Reich argues the root of the problem.

Democratic capitalism was transformed to supercapitalism because the consumer and investor in us has won out over the citizen. This is Reich's cetral claim. We pay lower prices for our goods. This satisfies the consumer and reaps profits for the investor. But how can companies charge such lower prices? By pushng the costs onto employees, who recieve fewer and fewer benefits and lower and lower wages.

We attempt to fix this problem, Reich argues, in a very poor way. We appeal to personal responbility alone. We think it's all a matter of individuals "behaving decently" We wag our fingers at corrupt CEOs and demand corporations "act responsibly." But this is not what corporations do. They exist to make profits. We should not simply protest and scold, we must change the system.

Reich argues that the only way to fix our system is to regulate it. Corporations will not serve the public good; they are not desinged to. Nor should they be. A corporation exists to make money. Money is often made by harming the environment, hurting employees, and deceiving the consumer. It's only simple pragmatism to realize this. Therefore, Reich concludes, the time has come to subject the system to a radical revision. We must regulate our corporations, and find ways to keep corporate money out of washington pockets (perhaps by insisting on public campaign financing).

This is really an original an intersting book. Filled with pertinent sources ad arguments, this book forces us to consider what we must do to make capitalist serve democracy, rather than - as is our present system - make the people serve capitalism.

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  1. I'm suspicious of this notion that there is strong correlation between unions and economic regulation, on the one hand, and economic growth and quality of life, on the other. There's another way to explain the rapid economic growth of the US post WWII. Since the Great Depression, we have lived in a mixed economy where regulations have steadily dwindled and government subsidization of industry has increased significantly. This has lead to reduced production and distribution costs for companies, allowing them to make available larger quantities of products at lower prices for the consumer, while still making greater profits.

    To be sure, regulations have allowed businesses to turn virtually any available raw resource into capital and exploit increasingly cheaper labor. This is one of the reasons we ended up where we are now. But the other reason that Reich seems to ignore (at least this is the impression I get from your review) is that the government allows industry leaders to control their markets through subsidization, since it reduces their costs and ensures that their capital continues growing, thereby restraining competition from other smaller businesses. This obviously perpetuates the displacement of the vast majority of those without capital from making their own livelihood; rather, they become wage "earners" *ahem* slaves *ahem*, dependent on the employment of those with capital to sustain themselves and their families.

    In other words, deregulation is just one side of the story of how we got to the injustice of "supercapitalism," if that's what you want to call our current system (Though I find this something of a misnomer, since "supercapitalism" brings to mind scenarios in which every facet of life is dominated by free market principles and all economic outcomes are the result of the "impersonal forces" of the market. However, our current system relies on subsidies, and the subsidization of industries obviously involves massive government intervention). Government subsidization is another (perhaps, larger) part of the story.

    Not regulation alone, but both sensible regulation and general elimination of subsidization must equally be parts of the solution to our current mess. Just calling for more regulation, as Reich seems to suggest we do, doesn't guarantee that we'll have a radical revision that will deliver the substantial economic growth that we've become accustomed to (as if such growth were an end in itself). Indeed, regulations might be instituted once again, but as long as multi-national corporations keep receiving subsidies from Big Government, we'll still essentially have the same system we have now. And if Reich thinks that these proposed regulations won't be gradually dissolved over time like the ones put in place during the Great Depression, he's sadly mistaken. To achieve a sustainable, steady-state economy, we'll have to address not only industry regulation, but also a) the issue of subsidies and b) what level of social organization (i.e. individual, familial, communal, national, international, and global) ought to meet the multifarious demands of our curious creatureliness.

  2. Nathan Wrote:

    "I'm suspicious of this notion that there is strong correlation between unions and economic regulation, on the one hand, and economic growth and quality of life, on the other."

    This depends on who is benefiting from this growth. Reich's point is that Unions and regulatons are better for us as employees and citizens. It helps out the poor and working classes by bringing to them a standard of living that they can't have otherwise.

    But ... as Reich makes clear ... the consumer and investor is better treated by deregulations and a lack of unions. For under this "Supercapitalism" products sell for cheaper and investors make profits like nothing else.

    The problem of course is that the costs are pushed unto employees and citizens (who are, of course the same people who are consumers - so we benefit in one way at the expense of losing badly another way). The gap between rich and poor grows, workers rights are diminished ... etc.

    So, Supercapitalism is compatible - nay strongly creates - huge economic growth. But this growth is only for the very - increasingly - tiny few and to the detriment to most of everyone else.

    I recall Reich discussing the very isse of subsidies that you raise. But he treated it very briefly and I can't recall precisely what he said.

    Indeed in regulations put into effect could again be undone. That's a real problem, and a scary one.

    Reich's position is not simply that we should just have better regulations. There is more to his view than that. I think, however, you find a true weak spot: for he is pretty unclear on what else is needed to fix the mess we are in.

    Although, if you read Reich's blog ... he's more clear on this matter lately.


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