Supercapitalism--thoughts by Robert Reich and Tony Judt

The current issue of The NY Review of Books features a thought-provoking review of Robert Reich's new book "Supercapitalism: The Transformation of Business, Democracy and Everyday Life."

Judt convincingly takes issue with Reich on several counts, terming Reich a technological determinist, a capitalist version of Marx. Here are a few passages from Judt's critique of Reich's book.

Reich: "...the Clinton administration of which I am proud to have been a part was one of the most pro-business administrations in American history."

Reich's theme goes as follows. during what he calls the "Not Quite Golden Age" of American capitalism, from the end of WWII through the 1970s, American economic life was stable and in comfortable equilibrium. A limited number of giant firms--like General Motors--dominated their predictable and secure markets; skilled workers had steady jobs....the American economy depended heavily on protection from foreigh competition..."While Europeans set up cartels and fussed with democratic socialism, America went right to the heart of the matter--creating democratic capitalism as a planned economy, run by business."

But since the mid-70s, and with increasing ferocity in recent years, the winds of change--"supercapitalism"--have blown all that away....competition and innovation generated new opportunities for some and vast pools of wealth for a few; meanwhile they destroyed jobs, bankrupted firms, and impoverished communities.

Reflecting the priorities of the new economy, politics are dominated by firms and financiers (Wal-Mart and Wall Street in Reich's summary)

In 1968, the CEO of General Motors took home, in pay and benefits, about 66 times the amount paid to a typical GM worker; in 2006 the CEO of Wal-Mart earned 900 times the pay of his average employee. Indeed the wealth of the Wal-Mart founders' family that year was estimated at about the same ($90 billion) as THAT OF THE BOTTOM 40 PERCENT OF THE US POPULATION; 120 MILLION PEOPLE. If the overall economy has grown "exuberantly" but "median household income has gone nowhere over the last three decades...where has all the money gone? Mostly to the very top. As for the intrepid boldness of the latest generation of "wealth creators," : Reich lists the tax breaks, pension guarantees, safety nets, "superfunds"and bailouts provided in recent years to savings and loans, hedge funds, banks and other "risk takers," before dryly concluding that arrangements "that CONFER ALL UPSIDE BENEFIT ON PRIVATE INVESTORS AND ALL DOWNSIDE RISK ON THE PUBLIC ARE BOUND TO STIMULATE GREAT FEATS OF ENTREPRENEURIAL DARING."

...Congressional bills are written to private advantage; influential contributors determine the policies of presidential candidates; indivisual citizens and voters have been steadily edged out of the public sphere. In Reich's many examples, it is the modern international corporation, its overpaid executives and its "value-obsessed" shareholders who seem to incarnate the breakdown of of civic values. These firms' narrowly construed attention to growth, profit and the short term, the reader might conclude, hyas obscured and displaced the broader collective goals and common interests that once bound us together.

But this is not at all the conclusion Reich would have us reach. In his present version of the dilemma, no one is to blame. "As citizens, wer may feel that inequality on this scale cannot possibly be good for a democracy...but the super-rich are not at faule." "Have top executives become greedier?" No. "Have corporate boards grown less responsible?" No. "Are investors more docile?" "There's no evidence to support any of these theories." Corporations aren't behaving very socially responsibly, as Reich documents. But that isn't their job. We shouldn't expect investors or consumers or companies to serve the common good. They are just seeking the best deal. Economics isn't about ethics. As the British Prime minister Harold MacMilllan once observed, "If people want morality, let them get it from their archbishops."

The changes recorded in Reich's book apparently just "happened," in a subjectless illustration of the creative destruction inherent in the capitalisy system...Reich is a technological determinist. "New technologies have empowered consumers and investors to get better and better deals." theas deals have "sucked...social values...out of the system..The story of what happened has no heroes or villains."...Corporations just do what they do.

..."As citizens we are sincerely concerned about global warming; as consumers and investors we are actively turning up the heat."

Not only are there no "heroes" no "villains," and noone to blame." There are no politics either....We live in an economic age.

"In the long run," three respected economists wirte, "only one economic statistic really matters: THE GROWTH OF PRODUCTIVITY."

Nothing is more ideological, after all, than the proposition that all affairs and policies, private and public must turn upon the globalizing economy and its insatiable demands. Together with the promise of revolution and its dream of social transformation, this worship of economic necessity was also the core premise of Marxism.

whether contemporary wealth creation and efficiency-induced productivity growth actually deliver the benefits they proclaim--opportunity, upward mobility, happiness, well-being, affluence, security--is perhaps more of an open question than we are disposed to acknowledge. What if growth increased social resentments rather than alleviating them? We should consider the noneconomic implications of public policy choices.

With the advent of the modern state transport, hospitals, schools, mails, armies, prisons, police forces, and affordable access to culture--all of them essential services not obviously well served by the workings of the profit motive--were taken under public regulation or control. They are now being hanced back to private entrepreneurs.

The real impact of privatization, like welfare reform, has been to reduce the role of the state in the affairs of its citizens.; to get the state "off our backs" and "out of our lives,"--a common objective economic "reformers" everywhere--and make public policy "business friendly."

If modern democracies are to survive the shock of Reich's "supercapitalism" they need to be bound by something more than the pursuit of private economic advantage, particularyly when the latter accrues to ever fewer beneficiaries; the idea of a society held together by pecuniary interests alone is in Mill's words "essentially repulsive."

The danger today is that, having devalued public action, we are no longer clear just what does bind us together.

There are two overriding reasons to worry...the first is that this story is not very appealing. It leaves a lot of people out, both at home and abroad; it wreaks havoc with the natural environment; and its consequences are unattractive and uninspiring....AS SHARED SOCIAL OBJECTIVES GO, SHOPPING REMAINS SOMETHING OF AN UNDERACHIEVEMENT.

The second source of anxiety is that the never-ending story may not last. Even economies have histories. the last time the capitalist world passed through a period of unprecedented expansion and great wealth creation there was a widespread assumption that this was the threshold of and unprecedented age of indefinite peace and prosperity when we were actually on the edge of catastrophe.

Populations experiencing increased economic and physical insecurity will retreat to the political symbols, legal resources, and physical barriers that only a territorial state can provide. This is already happening in many countries: note the rising attraction of protectionism in American politics, the appeal of "anti-immigrant" parties across Western Europe, the call for "walls," "barriers," and "tests" everywhere. "Flat worlders" may be in for a surprise.

If we are indeed going to experience a return of the state, an enhanced need for the security and resources that only a state can provide, then we should be paying more attention to the things a state can do. Today we speak contemptuously of the state; not as the natural benefactor of first resort but as a source of economic inefficiency and social intrusion best excluded form citizens' affairs whenever possible.