The Transformation Of Business, Democracy, And Everyday Life
By various | 28 January 2008
Supercapitalism: The Transformation of Business, Democracy, and Everyday Life"by Robert B. Reich
Introduction
Whether or not you agree with him, Robert Reich, former Secretary of Labor in the Clinton administration, opens up a dialogue on the joint problems of economics and social responsibility.
Reich makes a compelling argument that supercapitalism has robbed democracy of much of its power. supercapitalism by the definition presented in the book is simple— the consumer is king and prices always go down. What Reich looks at is the cost of such a narrow focus to companies, society, the individual, and its impact on the workings of democracy. Reich also points out the hidden costs and 'contributions' of the rise of well heeled, single-purposed, different lobbying groups (e.g., PACs) to politics and the political process, and to the process of globalization. This is hardly new. But it has become markedly more pronounced in recent years.
So how is democracy compromised? The 'great compromise' is not driven by some overarching conspiracy or hidden agenda— it is driven largely by the simple mechanics of Adam Smith's 'marketplace'— by simple consumption. Ultimately Reich argues that it robs the common citizen (the 'hoi polloi') of legitimate, effective, democratic control over his society. It's not surprising that this is a highly charged issue because the economics of what benefits society (or "the common good" as Reich calls it) often gets tangled up in the web of politics, history, and ethics. Reich also points out that the cost of supercompetitiveness and constantly falling prices is a loss to the economic and social health of America. Reich points out that everyone, of course, is driven to get the lowest price for a good or service as possible, but he suggests that we must balance that with our desire also to have decent wages and benefits— that the two are not necessarily complementary— and often at odds. He also points out that the move towards regulation was initiated by government and that companies/corporations went along because it tends to raise the bar for new competitors and guarantee a top and bottom for prices— i.e., stable prices. Regulation promised companies a profit without fear of prices so low that they might be put out of business— e.g., as the result of some new breakthrough technology or marketplace innovation— hence, most regulation does stifle novelty; every consumer 'protection' restricts the 'new'). And that companies/corporations fight tooth and nail against any regulations that would tend to 'open up' competition (especially to new companies or innovations promoted by 'new' companies) and for any regulations that would tend to 'close down' competition from new companies. And, of course, this should be considered the 'natural and necessary order' of things!
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I should point out that this is a great oversimplification of Reich's points but it does capture some of the principal concepts. He also makes suggestions that should promote the free market without unduly undermining democracy and still allowing consumers to benefit from competitive pricing. Since this is economics we are discussing, politics is inextricably mixed in and will probably color whether or not you agree with his points or not— but try to give him a fair, unbiased reading before you make up your mind.
Reich's style is breezy for a book that looks at economics, democracy and the erosion of wages, benefits. Reich comes across as fair balanced and thoughtful even as he sells his take on what is undermining American society. Ultimately it's a worthwhile book to read simply because it opens up dialogue on the social cost of constantly lowering prices without regard to end effects, and how it impacts those who live next door to us.
According to Robert Reich, there was a time when capitalism and democracy where almost perfectly balanced. This was the period of 1945 to 1975, which he calls the "Not Quite Golden Age." During this period there was a three-way social contract among big business, big labor, and big government. Each made sure that they as well as the other two received a fair share of the pie. Unions recieved their wages and benefits, business' and investors their profits, and regulatory agencies regulated to 'protect' consumers (e.g., from unsanatory and otherwise harmful products) and make sure everyone could compete fairly. It was also a time when the gap between the rich and the poor was the narrowest in our history. It was not quite the golden age because women and minorities were still second class citizens, but at least there was hope.
Fast forward to 2007, capitalism is thriving and democracy is sputtering. Why has capitlism become supercapitalism and democracy become enfeebled? Reich explains that it was a combination of things: unthinking deregulation, globe spanning computer networks, better transportation, etc. The changes were mainly a result of technological and social breakthroughs; unlike many left-leaning authors, he sees no 'great conspiracy,' only a transformational change and contest. The winner of this great transformation was the consumer/investor and the loser was the citizen/wage earner. Throughout the world, the consumer has more choices than ever before him and at reasonable prices. The investor has unprecedented opportunities to make profits, if only he is patient and wise. The citizens and the wage earners, however, are less well off. The average citizen does not have much voice— other than occasional (and sometimes 'fixed') voting— in the body politic. And the wage earner income has been stagnating for many years. The most salient illustration of this trend is Walmart. Walmart delivers the goods at low prices, but the trade-off is low wages and poor benefits for their employees [[in their defense, it must be argued that they give preference to ex-military and retirees of all stripes, who usually come with their own benefits: normxxx]]. We justify this dilemma, as Reich nicely puts it, because "The awkward truth is that most of us are of two minds."
Reich makes some startling pronouncements. For starters, stop treating corporations as 'human beings'. They are neither moral or immoral, they are merely "bundles of contracts." I couldn't agree more. Stop expecting corporations to be socially responsible, see them for what they are: profit-seeking institutions. Any socially responsible action they are likely to take (and remain in business) as a result of coercion is probably defensive (and half-hearted) anyway. Don't even encourage them to be socially responsible, because it may only hurt them and wrongly lead us to believe that they are solving problems when they are not. Corporations play by the rules of the 'market place' and the laws of the states that they operate under: these are their givens, and it is up to wage earners and other citizens, and their elected representatives, to change the rules of the playing field so that it is possible for all to play a fair game and benefit— 'win-win' NOT 'win-lose'.
This is no easy task in the age of supercapitalism. There are currently 38,000 registered lobbyists in Washington DC in a virtual arms race of spending with each other to buy favors from our so-called representatives. The only way citizens can compete with this is not by hiring more lobbyists but advocating through new media outlets such as the internet and cable tv. This, according to Reich, is currently the most effective way to make government more responsive.
As noted, during the "Not Quite Golden Age," the government was charged with ensuring a 'level playing field' for all and also as being the referee. He refers to this political-economic balancing act as "democratic-capitalism." But that accommodation rapidly unraveled starting in the mid-70s as advances in transportation, communications, and various other technologies permitted the globalization of production and the rise of more efficient, generally international firms that challenged the monoliths and that also undermined and decimated labor unions and the 'mom and pop' companies, who could not compete. An ideology of free-market, 'laissez-faire' capitalism was legitimized that discredited any regulation [[so the 'market place,' including that for labor, is today becoming one mad scramble, subject to the laws of no nation : normxxx]]. He suggests that Americans as consumers and investors have benefited greatly from this transformation of the economy, but as wage earner-citizens we no longer have the political will or power (as non-union or weakly unionized wage earner-citizens) to counter the social impacts of largely unchecked international corporations. In other words, democratic-capitalism has morphed into supercapitalism.
For an author accused of being left-leaning, this book is remarkably neutral, even benign, in its assessment of dynamic capitalism in its current form of globe-spanning corporations, massive layoffs and job shifting, extravagant CEO pay, and vast political influence by corporations in both local and national elections and even day-to-day affairs. In fact, in his view, corporations are doing no more than reacting positively to consumers/investors in their demands for advancing shareholder prices and their insistence on lowest possible pricing. He points to the stock market run-up over the last thirty years and the ability to produce consumer items relatively more cheaply. However, little notice is made of the considerable market manipulation and price setting in many areas of the economy, such as in energy and telecommunications [[as government regulation, abetted by those large, international hegemons, stifle legitimate competition. : normxxx]]
Any perceived social harmony in the post-WWII generation is more of an aberration than indicative of democracy in action. A combination of devastated economies across the globe and the containment of workers in no-strike, inflation adjustable contracts permitted the setting of stable, high prices by now dominant US corporations. Dissidents were painted with as Comm-simps (communist sympathizers) and purged from unions. The fact that corporations nevertheless had the power to quickly destroy any so-called accord demonstrates clearly that democratic effectiveness even in democratic-capitalism was minimal at best.
In the present, Reich insists that the very existence of Wal-mart is indicative of consumer empowerment, setting aside the fact that consumers are also workers who have had their wages squeezed by the likes of Wal-mart. Lumping consumers and investors is highly convenient. The mega-profits of global corporations have highly enriched the most knowledgeable and deeply invested— generally, the upper (managerial and owner) classes. It is somewhat cynical to hold that the lower prices and the holding of a few shares of stock have enriched or empowered the working classes nearly as much.
But the author takes issue with those who perceive a conspiracy of big business and politicians or the existence of class warfare to explain the takeover of government functions by the most affluent (including corporations). His argument that businesses (and business combines/lobbies) compete for favorable legislation in no way discredits those who recognize the exclusion of average Americans and their concerns from government. The commonality of corporate interests is readily seen in their united opposition to populist initiatives. The author does accept that the corporate "social responsibility" movement- codes of conduct, etc. is little more than a cynical defensive ploy to deflect concerns about the ramifications of corporate dominance undercutting the possibility of democratic actions.
The author assures us that we can have both a vibrant democracy and a vibrant capitalism. The spheres of consumption and citizenship are likewise to be kept distinct. His essential contention is that powerful corporations need to be severely limited or kept out of the political process. Beyond that, we must elevate our actions as citizens above our actions as consumers [[to which I append a completely cynical, "good luck!" : normxxx]]. One cannot simply ignore the consequences to one's community in making buying decisions; for example, by frequenting Wal-mart[!?!] Most of all, we need to reinvigorate the political process. Democracy requires citizen interaction and debate to set an agenda and carry it out. The town square is long gone; perhaps online communities can act as meeting places [[like the viewers/listeners of PBS? Fat chance! : normxxx]]. By contrast, markets need only aggregate individual, self-interested behavior [[and democracy must do the same— or perish in its present form: normxxx]]. The greater difficulty in conducting [[unrewarded: normxxx]] democratic action is certainly a factor in the ascendance of the marketplace in supercapitalism.
The book is best at describing the evolution of so-called supercapitalism. It is a stretch to maintain that the post-WWII period can be termed 'democratic-capitalism'. It is, perhaps, disingenuous to suggest that American consumers have become 'empowered' with globalization and the advent of Wal-mart. A vibrant democracy cannot be distinct from consumer/investor actions— the latter must be involved in the economy to ensure a positive impact on all communities and the greater society.
The question that remains, after reading this book, is to what degree will 'consumers' be willing to sacrifice their low prices to achieve their goals as 'citizens'. If the answer is that we currently ARE imbalanced in the direction of 'the marketplace' we must rebalance the choices between capitalism and democracy. If not, we are left to the increasingly autocratic and not so tender mercies of supercapitalism.
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Normxxx
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