Robert Reich courtesy headshot and Saving Capitalism orange book cover

Saving Capitalism: For the Many, Not the Few

Pitting the free market against government intervention is a false premise. Free markets can’t last without government intervention. The debate is how much, which is not just an economic but a political challenge to overcome.

That’s a big theme from Saving Capitalism: For the Many, Not the Few, a 2015 book from progressive academic Robert Reich, who was President Clinton’s labor secretary. Today he’s a prolific writer, speaker and social content producer. Though I don’t align entirely with his politics, he’s a thoughtful and effective writer. I still recommend the book after all these years.

Below I share my own notes for future reference.

My notes are below:

  • Free markets don’t exist naturally in nature. Governments always set market conditions
  • “There can be no free market without government.”
  • Thomas Hobbes wrote in his legendary 1651 treatise Leviathan that in nature “there is no place for industry because the fruit thereof is uncertain… The life of man, solitary, poor, nasty, brutish and short.”
  • Austro-Hungarian anthropologist Karl Polanyi (1886-1964) argued that “less government” really means different government and regulation; not deregulation but “re-regulation”
  • Five building blocks of capitalism: property rights; monopoly; contracts; bankruptcy and enforcement
  • Baltimore-born legal theorist John Rawls (1921-2002): Society’s rules should be decided by the average citizen who doesn’t know how that choice would impact them (as opposed to informed and biased interests)
  • Ecologist Garrett Hardin (1951-2003) famously popularized in 1968 the “tragedy of the commons,” which is often used as a critique of socialism
  • Author and journalist Adam Hochschild has argued that in the late 18th century, three-quarters of all humans were in one form of bondage or another
  • Henry George’s 1879 Progress and Poverty: increasing land prices were “an immense wedge” cutting through society, lifting up owners and squishing others
  • Copyright law (like the 1998 Copyright Term Extension Act that was derisively nicknamed the Mickey Mouse Protection Act) doesn’t spur more innovation because it’s over just such a long time period; it just protects companies with lobbyists
  • The U.S. was less entrepreneurial at the time of the book (this shifted)
  • American internet high speed access is expensive and unlike Stockholm not competitive
  • Plants grown with Monsanto seeds cannot be used to harvest seeds for new plants
  • In Wealth against Commonwealth in 1894, Henry Demarest wrote: “Liberty produces wealth and wealth destroys liberty”
  • Author argues capital influences all building blocks and the rule. Thomas Piketty’s famous equation (r > g) demonstrates that capitalism will move toward more income inequality when return to capital is greater than economic growth. But why don’t returns to capital decline as those numbers get bigger? This author argues that it’s because of regulatory capture (not outright bribery but cushy relationships); big enough businesses bend the rules to benefit themselves
  • “This vicious cycle is neither inevitable nor irreversible“
  • Herbert Simon: “ if we are very generous with ourselves “… I suppose we might claim that we ‘earned’ as much as 1/5 of [our income]. The rest is the patrimony associated with being a member of an enormously productive social system.”
  • What we earn is set by government and social decisions (how much antitrust regulations; unions; etc)
  • Paid what you’re worth is a tautology: CEO pay soared because of stock options and share buybacks: more financial engineering than actual performance
  • In the 1970s, a virtuous cycle of productivity gains and growing worker wages ended (how this compares to Robert Gordon). The standard explanation is globalization and technology made American labor less competitive. But why did German median income continue to rise? And why did even American college graduate incomes stay stuck? (NYT calls them Generation Limbo)
  • The Modern Corporation and Private Property is a book written by Adolf Berle and Gardiner Means published in 1932
  • In 1950s busyness leaders had stakeholder perspectives
  • 1974 ERISA brought way more capital into investing and 1982 savings and loans could invest too
  • In 1950s JD Zellerbach told TIME that Americans “regard business management as a stewardship, and they expect it to operate the economy as a public trust for the benefit of all the people. In 1980s Coca Cola CEO: “We have one job: to generate a fair return for our owners.”
  • All the productivity gains have gone to the top, author argues
  • Union declines in 1960s and 1970s
  • Un-American: Inherited wealth that allows people to live only off that income
  • America’s rise of working poor is recent, author argues. Previously real poverty was those who didn’t work (elderly and widows etc)
  • “Slavery after all was a full employment system”
  • Dube, Lester and Reich research on minimum wage. Does it kill employment? Authors research showed 52% of fast food workers get some public assistance, almost $7b in aid which is a kind of subsidy of fast food industry
  • The Walton family wealth equals bottom 40%
  • (Thomas Sewall has argued that the standard of living has grown for the ‘so-called working poor, but progressives always move the yard-stick)
  • Greg Mankiw’s research has led him to say: “how do we help people at the bottom, rather than thwart people at the top.” Author argues they are inseparable
  • Wives and mothers surged into paid work in the 1970s and 1980s, everyone put in longer hours in the 1990s and households fell into deeper debt before 2008 collapse: all tactics for middle class to maintain purchasing power
  • The US only with Turkey and Israel that has such big spending gaps between poor and rich
  • Like working poor, also rise of non-working rich (dynastic wealth)
  • The George W Bush tax cuts, reduced estate taxes (impact)
  • “We can have a democracy or we can have a great wealth in the hands of a few“, said Louis Brandeis “but we cannot have both.”
  • Gilens and Page reviewed policy and determined little of it directly relevant to average Americans
  • This isn’t necessarily new. In 1922 Walter Lipman wrote in his book Public Opinion that the public’s consent was manufactured. “It is no longer possible… to believe in the original dogma of democracy.”
  • But author says mid 20th century had “interest group pluralism”
  • Economist John Kenneth Galbraith “countervailing power”
  • Robert Putnam (who wrote Bowling Alone in 2000): Americans stopped being “joiners,” loss of unions and clubs like the American Legion
  • In 1964 just 29% of voters believe the government was “run by a few big interest looking up themselves “. By 2013 that opinion predominated, with the 79% of Americans agreeing
  • In 2011 65% of Americans felt the government corruption was widespread; by 2013, 79% of Americans felt that way
  • Shift between republicans vs democrats to establish vs anti establishment
  • Reduce length of copyright, and pay-to-delay pharma, limit patent extensions, antitrust return to including a combat to political influence, return of Glass–Steagall legislation; inflation adjusted minimum wage, opposed local property tax funding schools; Tie corporate tax rates to ratio of CEO pay
  • William Gaston wants tax breaks if you give pay raises at productivity rates
  • Arthur T Demoulas
  • John Maynard Keynes’s famous 1928 essay Economic Possibilities for Our Grandchildren predicted far less work (like 15 hours a week) but richer Americans keep working more (did the pandemic shift?)
  • In his 1991 book The Work of Nations, the author separated workers into three groups
    • routine production services
    • in person services
    • symbolic analytics services.
    • He predicted the first group would shrink and make less, the second group would grow and make less and the third group would grow on both accounts
  • The 2004 book The New Division of Work (remote and on-site, or tradable vs. non-tradable)
  • In 1964 the four most valuable American companies had a market cap of $180 billion and employed 30,000 people; in 2011, they were worth twice that and were accomplishing it with 1/4 the number of employees
  • Instead of redistributing, how do we ensure more people are in the prosperity together from the start?
  • In 2014, six of the 10 wealthiest Americans were heirs to prominent fortunes
  • TS Elliot, Walt Whitman and Albert Einstein all did incredible work while having day jobs but are peoples day jobs today more intrusive not allowing this to happen?
  • Thomas Paine wrote in 1797 an essay called Agrarian Justice that argued for a universal basic income, and Chicago economist Frederik Hayek made a similar argument in 1979
  • He also argues for baby bonds or the idea that all Americans own a percentage of a collective share of the patent and electoral property that the government otherwise protects

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