Robert Reich is a prominent American political economist who served as the Secretary of Labor under President Bill Clinton’s Administration and has authored many books about his political economic ideology, among them is Saving Capitalism: For the Many Not the Few. In Saving Capitalism, Robert Reich makes several claims about why income inequality is growing; why the rich are getting richer and why the poor are getting poorer. He makes arguments citing a few studies that show CEO salaries rising while employee wages remain stagnant while also addressing what he thinks are common misconceptions about the market and the economy as a whole. He comes to the conclusion that the government can and should put restrictions on the power of corporate interests in politics and give “countervailing power” to the working class. In reading his book, however, I noticed that he attempted to paint his political rivals in an unfair light while also making assumptions about the economy that his evidence didn’t support.
Although, he presents compelling evidence to back up some of his claims, I think his arguments have several flaws that I hope to point out in this paper. Reich addresses many of what he perceives to be common “myths” about the free market namely that people in a free market are payed what they are worth and that CEOs must act in the best interest of company shareholders instead of that of employees and consumers. Reich claims that it is pointless to argue over the size of government, what the free market’s role in the economy should be, and what action by the government is an intrusion and that these arguments and these “myths” only distract from the issues of growing inequality in wealth and power in America and that the game is being rigged to the benefit of actors such as Wall Street and big corporations.
In this, he lays out what is the main claim of his book: “I believe that if we dispense with mythologies that have distracted us from the reality we find ourselves in, we can make capitalism work for most of us rather than for only a relative handful” (Reich, 2015). He elaborates how, in his view these “myths” can stract us from those are subtly grabbing political and economic power for themselves at the expense of the working class: “The idea of a “free market” separate and distinct from government has functioned as a useful cover for those who do not want the market mechanism fully exposed. They have had the most influence over it and would rather keep it that way. The mythology is useful precisely because it hides their power” (Reich, 2015). He argues that the free market isn’t something that exists in nature, separate from human civilization, and so it cannot exist without government.
The government doesn’t intrude on the free market, according to Reich, the government creates the free market, and therefore, the govermment can regulate the free market. Also, not only does the government have this ability, but it must make decisions concerning the regulation of the free market for the free market to survive, and it is morally obligated to, in his view, to take the power from Wall Street and big corporations and give “countervailing power” as he calls it, back to employees, labor unions, and working class America.Reich points out the shady practices of some corporations, such as Lehman Brothers” Repo 105 program, the $64 billion subsidy that went to America’s largest banks, and the millions that companies like Facebook, Google, Amazon, Microsoft and Apple spend on lobbying, while citing sources showing the struggle of America’s working class, for example, the study committed by the Journal of Post Keynesian Economics that showed “the bottom 90 percent’s share began to drop dramatically between 1982 and 1990” (Reich, 2015). As he argues, “the underlying issue has nothing to do with a hypothetical choice between the “free market” and government. Decisions must be made about whether a particular company or group of companies has “excessive” market power” (Reich, 2015).
Reich makes a number of errors in his argument that I will address. Firstly, he views his opposition as people that either benefit from the system and don’t want to change it (i.e. the top 1%, wealthiest Americans) or those with blind faith in a mythical Zion that they call the “free market” when that is not the case. The former seems like a knee jerk reaction towards opposition that resembles that of the McCarthy era to me, (though I don’t think he’s going to be putting capitalists to death anytime soon) but I would expect better from such an esteemed political economy theorist. Nevertheless, he creates this strawman argument to represent that of those opposed to his political opinion and attacks it repeatedly throughout the book without addressing any truly frequent myths or arguments conceming free market capitalism. A free market enables individuals to make choices based on what is best for them economically.
The “market forces” he mentions are not economic winds that blow this way or that ona whim and no one thinks they are. They are supply and demand, which is effected by people; their willingness to buy and efficiency in producing the things that people are willing to buy. His attempt to paint his opposition as hopelessly, blindly dependent on an outside force that doesn’t exist fails when we take this more realistic definition of the free market into account. How blind we are having faith in our own rational ability to make decisions for ourselves instead of just letting the government do it for us!
How dare we trust in our ability to freely trade with one another when we should rely on the government instead? But, this highlights another flaw in his argument: his assumption that the free market cannot exist without government. Because a free market, really only depends upon a peoples’ ability to trade goods and services for other goods and services or currency, government is not wholly needed if only to prevent thievery and enforce property rights, and, to his credit, Reich does mention that property rights are necessary. He reasons that because the free market is not found in nature and does not exist outside of civilization, that it is government that creates it and therefore regulates it. He confuses civilization and social politics for government. I would argue that social interaction, and therefore civilization, and therefore politics could and would exist even without government.
Ordinary individuals, as I have mentioned are capable of interacting and trading with one another, and thus are capable of living together in a society and agreeing on some set of rules even if they are not decided upon by a representative or an authority of some sort; that is to say, even if they are decided upon at an individual level. In addition, Reich even claims that: The rules [of the market) are neither neutral nor universal, and they are not permanent. Different societies at different times have adopted different versions. The rules partly mirror a society’s evolving norms and values but also reflect who in society has the most power to make or influence them” (Reich, 2015). However, isn’t this subjectivity yet another reason that the financial decisions of individuals within a society with ever changing norms and values be left up to the individual? Why does Reich see blanketing government-mandated rules as the best way to dictate the market?
In conclusion, while Robert Reich makes a strong case that growing income inequality and unfair economic practices of corporate interests interfering with governmental affairs as a serious problem, he doesn’t seem to make a strong case for what we or the government should do about it. His book reads more like a manifesto or a call to action intended to ignite an emotional response in the reader (who is likely a working/middle class American) rather than a well- thought out political theory. Even though, I disagree with Robert Reich, I still expected better arguments from someone who had as much experience in government affairs, but instead I feel that he made broad assumptions and tried merely to paint his political opponents as greedy or naive…or perhaps both.
Works Cited
- Reich, Robert B. “Saving Capitalism For The Many Not The F Robert B Reich PDE” DropPDF.
Alfred A. Knopf, 2015. Web. 26 Feb. 2016.
