Robert Reich has been banging on about the risks to advanced economies of increasing levels of inequality for longer than most. The Work of Nations (published in 1991 and the book that got him headhunted by Bill Clinton’s campaign and, eventually, appointed as US Secretary of Labor) set out pretty accurately how the “global” economy would allow the elite to accumulate vast wealth while the rest were left behind, the steady squeezing of the middle class and the end of public investment. If things have turned out somewhat worse than Reich believed – the new class of “symbolic analysts” that he predicted emerging as an independent and powerful social force have (except for a few superstars) found their wages and status just as squeezed as those who worked in the “old” economy – he can, at least, always claim that he saw the shape of things more clearly than most.
Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it (Alfred A Knopf, 2012 – eBook only[i]) is a snappily-titled extended essay that first tries to cut through the chaff about the causes of the problems facing America’s political and economic system and then makes a powerful case that collective action can still make a difference – that it is still possible to reverse the trends that threaten the democratic state.
Reich’s book is entirely focused on America – and particularly on trying to mobilise progressives to press for a more radical agenda for the forthcoming Presidential poll and beyond. However, there are obvious parallels in many of his arguments that apply beyond the borders of the US.
First, the title. Anger is not enough –
Your outrage is understandable. Moral outrage is the prerequisite of social change. But you also need to move beyond outrage and take action. The regressive forces seeking to move our nation backward must not be allowed to triumph. (Loc. 47-50)
One thread that Reich returns to throughout Beyond Outrage is his belief that we must not lose sight of the idea that politics is a social activity. This can sound obvious – to the point that it seems to go without saying – but the regressive forces that he identifies have absorbed the Thatcherite claim that “there is no such thing as society” and their goal is the wiping away of any institution that might limit:
the corrupting effects of big money in our politics, the stridency and demagoguery of the regressive right, and the accumulation of wealth and power at the very top. We are perilously close to losing an economy and a democracy that are meant to work for everyone and to replacing them with an economy and a government that will exist mainly for a few wealthy and powerful people. (Loc. 51-53)
The only way to resist the wealth and power of the regressives is collective action. Elections are important – and putting pressure on elected representatives to enact legislation that tips the balance in society back towards public investment is vital – but elections and election campaigns can’t be the limit of organisation. Pressure has to be built and maintained over the long term if fundamental change is to be delivered. Reich is optimistic – identifying the “Occupy” movement and even elements of the “Tea Party” insurrection as evidence the growing discontent in America with the way society has developed. He notes that, for the first time since the 1930s, recent polls have found a majority of Americans in favour of a more equal distribution of wealth and of the rich paying more taxes. “I used to be called a class warrior for even raising the subject of widening inequality. Now it seems most Americans have become class warriors. . Instead, the game seems rigged in favor of people who are already rich and powerful—as well as their children. Instead of lionizing the rich, we’re beginning to suspect they gained their wealth by ripping us off.” (Loc. 160-66)
CONNECTING THE DOTS
But, Reich argues, there is a systemic failure in the American polity that needs to be addressed before the trend of ever greater inequality can be reversed. The fundamentals of the American economy have been distorted and that has warped the nation’s democracy, which, in turn, has further reinforced the economic imbalances. Reich urges his readers to “join the dots”.
- The first dot: For three decades almost all the gains from economic growth have gone to the top. (Loc. 71-73)…
- The second dot: Because so much income and wealth have gone to the top, America’s vast middle class no longer has the purchasing power to keep the economy going—not, at least, without going deeper and deeper into debt. (Loc. 78-80)
- The third dot: Political power flows to the top. As income and wealth have risen to the top, so has political clout. Obviously, not everyone who’s rich is intentionally corrupting our democracy. For those so inclined, however, the process is subtle, if lethal. (Loc. 85-87)
- The fourth dot: Money paid to politicians doesn’t enrich them directly; that would be illegal. Rather, it makes politicians dependent on their patrons in order to be re-elected. (Loc. 88-90)… What these patrons want most are lower taxes for themselves and their businesses; subsidies, bailouts, government contracts, loan guarantees, and other forms of corporate welfare; and fewer regulations. (Loc. 93-94)
- The fifth dot: Government budgets are squeezed. With so much of the nation’s income and wealth at the top, tax rates on top earners and corporations dropping, and most workers’ wages stalling or declining, tax revenues at all levels of government have fallen precipitously. (Loc. 98-100)
- The sixth dot: Average Americans are competing with one another for slices of a shrinking pie. There is now more intense competition for a dwindling number of jobs, a smaller share of total income, and ever more limited public services. (Loc. 101-6)
- The seventh dot: A meaner and more cynical politics prevails. Because of all of these occurrences, our politics has become nastier, more polarized, and increasingly paralyzed. Compromise is more difficult. Elections are more venomous, political advertising increasingly negative. Angry voters are more willing to support candidates who vilify their opponents and find easy scapegoats. (Loc. 108-9)
The result is a vicious cycle. Ordinary people are increasingly disengaging from politics. What’s the point of taking part, they rightly ask, if the game is rigged? But this disengagement and fatalism serves to make it easier for the elite few, who are already guaranteed winners, to further increase the bias of the game in their favour.
Long before the present depression, incomes for middle and lower class workers were dropping while the richest accumulated more. “Trickle down” economics has been thoroughly discredited. The rich put their money where it will reap the highest return – wherever in the world might be – and the economy “is in trouble because so much income and wealth have been going to the top that the rest of us no longer have the purchasing power to keep the economy going.” (Loc. 181-84) The rich are bailed out and protected from the impact of their excesses while the risks are transferred to the poorest in society. The middle and lower classes face growing job insecurity, falling wages, reduced benefits and pensions and longer working hours with increased pressure to remove the health and safety legislation that protects them at work.
The regressives in America believe they can profit from the cynicism that the buying of democracy has created – they believe it reflects disenchantment with government in general. Reich believes they are wrong and that there are opportunities for progressives:
Americans have never much liked government. After all, the nation was conceived in a revolution against government. But the surge of cynicism now engulfing the country isn’t about government’s size. The cynicism comes from a growing perception that government isn’t working for average people. It’s seen as working for big business, Wall Street, and the very rich—who, in effect, have bought it. (Loc. 241-44)
The regressives talk about cutting budgets but they back the businesses who bankroll them and who receive huge hand-outs from government. Financial companies who were bailed out without condition while homeowners struggle with “underwater” mortgages on properties devalued by the bursting of the property bubble created by the lenders. Health insurers and big pharmaceutical companies who make huge profits while blocking reforms that cold deliver cheaper, more efficient social healthcare provision. And military contractors who drive hugely expensive weapons systems that no longer reflect the real nature of modern security needs.
Smaller government isn’t the answer to these problems:
A smaller government that’s still dominated by money would continue to do the bidding of Wall Street, the pharmaceutical industry, oil companies, big agribusiness, big insurance, military contractors, and rich individuals. It just wouldn’t do anything else. Millionaires and billionaires aren’t making huge donations to politicians out of generosity. Corporations aren’t spending hundreds of millions of dollars on lobbyists and political campaigns because they love America. These expenditures are considered investments, and the individuals and corporations that make them expect a good return. (Loc. 318-19)
And the situation in America has been made worse by the decision by the Supreme Court (Citizens United vs Federal Election Commission) to rule that money is speech (and so can’t be limited) and that corporations are people under the First Amendment. All restraints are off.
Never before in the history of our republic have so few spent so much to influence the votes of so many. Yet when real people without money assemble to express their dissatisfaction with all this, they’re told the First Amendment doesn’t apply. Instead, they’re clubbed, pepper sprayed, thrown out of public parks, and evicted from public spaces. (Loc. 334-38)
The threat to America is not from too large a government or from protestors occupying public spaces, it is from the money that is flooding into the political arena from big corporations and the super-rich and drowning expression of the public will. The rich have bought themselves lower taxes and fewer restraints and they’ve abandoned the public sphere, leaving it impoverished and weaker than ever.
A society is embodied most visibly in public institutions—public schools, public libraries, public transportation, public hospitals, public parks, public museums, public recreation, public universities, and so on… Much of the rest of what’s considered “public” has become so shoddy that those who can afford to do so find private alternatives. (Loc. 402-11)
This is another vicious cycle – as the rich have got richer they’ve shifted support and money away from public institutions making them less appealing and more difficult to support and thus spurring faster flight from public services. The regressives talk about replacing an “entitlement economy” with an “opportunity economy” but what sort of opportunities are available in a society without good public education, affordable higher education, decent jobs, working infrastructure and adequate healthcare provision?
America no longer possesses the advantages of a uniquely highly-educated, highly-skilled workforce, American industries no longer invest only or even primarily within national boundaries, the wealthy middle class that once drove their economy has been impoverished and the rich have accumulated vast fortunes shun public services even while the corporations they own are taking more and more out of the public purse in bail-outs, subsidies, tax cuts and big contracts. “There is something dreadfully wrong with this picture.” (Loc. 515-18)
THE BASIC BARGAIN
Widespread industrialisation in 20the Century America was accompanied by a basic bargain:
…that employers paid their workers enough to buy what American employers were selling. That basic bargain created a virtuous cycle of higher living standards, more jobs, and better wages. But for the last thirty years that basic bargain has been coming apart. (Loc. 522-23)
The archetypal example was Henry Ford’s decision to pay his workers higher wages and encourage them to buy the products they worked to produce. But today, “Ford Motor Company is paying its new hires about half what it paid its new employees a decade ago.” (Loc. 528-29). Across America employee pay now accounts for the smallest share of the economy (and corporate profits the highest) since figures were first collected in 1929.
In other words, the real reason the American economy tanked in 2008, and why we’re still struggling to recover, is that the basic bargain has been broken. The big news isn’t the slow return of jobs. It’s the drop in pay. Most of the jobs we’ve gained over the last two years pay less than the jobs we’ve lost. (Loc. 555-59)
And as pay in the private sector drops, regressives attack public sector workers driving down their wages and benefits too while repeatedly demanding that we must not “price ourselves out of jobs”.
Conservative economists have it wrong. The underlying problem isn’t that most Americans have priced themselves out of the global/high-tech labor market. It’s that most Americans are receiving a smaller share of the American pie. This not only is bad for the majority but also hobbles the economy. Lower incomes mean less overall demand for goods and services, which translates into lower wages in the future. The basic bargain once recognized that average workers are also consumers and that their paychecks keep the economy going. We can’t have a full fledged recovery and we can’t sustain a healthy economy until that bargain is restored. (Loc. 573-575)
The rich can’t spend enough, the middle class can’t borrow any more money and wages don’t provide enough purchasing power to jump start the economy.
It doesn’t have to be like this. Some European countries, like Germany, have been more successful at maintaining workers’ wages and limiting the accumulation of wealth (the top 1 percent of German households account for 11 percent of the economy – about the same as 1970). And with its focus on education and the continued strength of its unions, it is a nation that retains a counterbalance against corporate and individual manipulation.
WHY BIG CORPORATION WON’T LEAD THE WAY
The success of American big business is disconnected from the prosperity of the rest of American society. It is no longer the case that what is good for General Electric, or any other large corporation, is good for America. They no longer have a significant stake in the success of America. The focus on global profits and, in particular the attractions of China – with a vast potential market and an economic policy designed to boost growth – means that American companies no longer particularly care about creating American jobs or the level of American demand.
That’s because China has a national economic strategy designed to make it the economic powerhouse of the future. China wants to create the technologies and the jobs of the future, and it has been pouring money into world-class research centers designed to lure American corporations along with their engineers and scientists. The Chinese are intent on learning as much as they can from American corporations and then going beyond them— as they already have in solar and electric-battery technologies. They’re also pouring money into education at all levels. In the last dozen years they’ve built twenty universities, each intended to become the equivalent of MIT. American corporations are happy to play along because China has the biggest consumer market in the world, to which every American company wants access. (Loc. 651-657)
The irony is that China is pursuing many of the policies that American corporations are actively blocking in their “home” nation. This is another vicious circle. American corporations cut wages and jobs at home, reducing demand in the economy, reducing that economy’s importance to their global strategies. America can’t compete on the price of production and, because the impoverishment of the public sphere means its education and skills base is shrinking, it’s advantages in quality have been eroded away.
China has a national economic strategy designed to create more and better jobs. We have global corporations designed to make money for their shareholders. No contest. (Loc. 699-700)
THE CLOUT OF THE STREET
While American corporations abandon American workers, Wall Street continues to exercise vast influence over the American economy and government policy and refuses to learn from its recent mistakes – lobbying aggressively against regulation and pursuing profit at any cost. But, as Reich notes: “The problem isn’t excessive greed. If you took the greed out of Wall Street, all you’d have left is pavement. The problem is the Street’s excessive power.” (Loc. 745-746)
Wall Street’s cynicism has spawned both the Occupiers and the Tea Party and a wider anger about the way the finance industry works. “All of this raises the basic question of whom the economy is for.” (Loc. 778) When wealth is so concentrated measures like GDP growth or the Dow Jones don’t reflect economic success. The unemployment rate can’t measure success when more jobs are part-time, insecure and paying less than ever. The average income, skewed by vast wealth on one side, can’t measure success. And even if wages rise:
“our lives will not improve if our schools, parks, roads, air and water, and other public goods continue to deteriorate. We won’t feel better off if our workplaces are unsafe, if we can’t safely walk on the streets of our communities, if we have no regular access to medical care, or if the cost of a major illness can wipe out our savings. And our lives will not be better if our democracy is dying, replaced by a system mostly responsive to big corporations and wealthy individuals. It is impossible to live happily in a society that seems fundamentally unfair or to live well in a nation rife with anger and cynicism. (Loc. 778-793)
The solution offered by the right is a crude social Darwinism whose goal is not “conservative” – it doesn’t seek to conserve what we have – but “regressive” in that it seeks to wipe away the advances made in the last century.
THE RISE OF THE REGRESSIVES AND THE REBIRTH OF SOCIAL DARWINISM
The modern Republic party is using the same rhetoric of survival of the fittest that justified the “brazen inequalities of the Gilded Age” (Loc. 824) and that advocates punishing the poor for their obvious fecklessness while piling ever greater rewards on the rich. William Graham Sumner imported social Darwinism into American in the late 1800s, promoting the abandonment of attempts to alleviate poverty and the end of government interference in “natural selection.”
Listen to today’s Republicans and you hear a continuous regurgitation of Sumner. “Civilization has a simple choice,” Sumner wrote in the 1880s. It’s either “liberty, inequality, survival of the fittest” or “not-liberty, equality, survival of the unfittest. The former carries society forward and favors all its best members; the latter carries society downwards and favors all its worst members.” Sound familiar? (Loc. 835-840)
This thread runs through attacks by politicians like Ron Paul’s on socialised health-care and in the work of sociologist Charles Murray, who rails against the decline in moral fibre of the white American working class.
Murray and other neo-social Darwinists seem not to have noticed that for the past thirty years the wages of the old working class have declined, steady union jobs once available to them have disappeared, the economic base of their communities has deteriorated, and their share of the nation’s income and wealth has dramatically shrunk. It seems more likely that these are the underlying sources of the social problems and pathologies Murray chronicles, but this logic is inconvenient because it suggests that any solution requires reversing the widening inequities that have hit the old working class especially hard. (Loc. 867-871)
In the 1930s and after, America rejected social Darwinism – as did the rest of the civilised world – creating a society that had safety nets and a fairer distribution of wealth and that invested in public goods – schools, universities, public transport, public parks, healthcare.
Today, however, the regressive agenda is gaining ground in the atmosphere of cynicism that they have created as they increasingly gain control of the levers of economic and political power is furthering their cause.
One of the things that distinguishes the new regressives from older forms of right wing conservative is that they are not interested in compromise or negotiation – if they don’t get what they want, they will do everything they can to destroy the institutions that stand in their path. This is reflected in the way American politics has become more polarised and the way the Tea Party and other regressive politicians pursue apocalyptic tactics (shutting down government, risking a default on the national debt) to get their way.
They are driven by a fundamental hatred of government and a determination to destroy those structures that might oppose the free action of the very wealthy. Reich identifies a three parts to their strategy:
…a federal budget battle to shrink government focused on programs the vast middle class depends on; state efforts to undermine public employees whom the middle class depends on; and a Supreme Court dedicated to bending the Constitution to enlarge and entrench the political power of the wealthy— [which] fit perfectly and diabolically together. They pit average working Americans against one another, distract attention from the almost unprecedented concentration of wealth and power at the top, and conceal regressive plans to further enlarge and entrench that wealth and power. (Loc. 1023-1027)
THE TEN BIGGEST ECONOMIC LIES
To get their way, the regressives and their allies in the media seek to convince us of ten big lies, which they repeat often and expect us to swallow despite the evidence against them:
- Tax cuts for the rich trickle down to everyone else, while higher taxes on the rich hurt the economy and slow job growth.
- American corporations would create more jobs and spur the economy forward if their taxes were lower.
- We’d have more jobs and a better economy if we shrank the size of government.
- We’d have a stronger economy if we had fewer regulations.
- The economy would improve if we cut the budget deficit right now.
- Medicare and Medicaid have to be scaled back.
- Our safety nets are overly generous.
- Social Security is a Ponzi scheme.
- It’s unfair that middle- and lower-income Americans have been paying a smaller share of federal income taxes and some pay no income tax at all.
- A flat tax would be fairer. (Loc.1034-1166).
These claims don’t stand up to scrutiny and closer inspection reveals that they reflect the regressives’ prime concern – which is to further benefit the wealthy.
BEYOND OUTRAGE: WHAT YOU NEED TO DO
There is, amongst ordinary people, a desire for change. The question is how to “harness that energy and turn it into a sustainable and powerful progressive movement to take back our economy and our democracy from the regressive forces that have been gaining ground.” (Loc. 1192-1194) Surrendering to the cynical belief that politics can’t change anything is to surrender to the regressive agenda and to give them what they want most – a free hand.
To succeed, we need to organise.
You can’t accomplish much on your own. You have to join with others and pull in many more. Legislators don’t pay attention to complaints or demands from individual constituents, but they pay lots of attention when those complaints or demands come from hundreds of constituents. (Loc. 1202-1207)
Our strength is in our collective numbers, but we have to get out and convince people. And that means stepping outside of our “ideological bubble” and engaging with people who might disagree or who simply aren’t engaged with politics. “It’s too easy in modern America to preach to the converted because it’s increasingly easy to surround ourselves only with people who share our views.” (Loc. 1219-1220) The internet is not the solution, “the convenience of online political activism reduces its political significance. Elected representatives who receive virtual petitions know how little they may mean, relative to the exhausting work of getting out the vote or pushing a legislative agenda through to completion.” (Loc. 1226) Virtual organisations lack the cohesion of real world groups.
We also have to be willing to step outside our “issue cocoon”:
…don’t be so mesmerized by any single issue that you fail to join with others on the bigger stuff that’s making it harder for the voices of average Americans to be heard on all of these issues and others: the growing concentration of income, wealth, and political power at the top; the increasing clout of global corporations and Wall Street; and the corruption of our democracy. (Loc. 1233-1238)
Change does not always come quickly and those who expect immediate results are often quickly disillusioned. The struggles that have delivered advances on civil and voting rights and reduced discrimination are struggles required decades to secure significant advance and that require continuing commitment to maintain.
Be patient… Those who benefit from the prevailing allocation of power and wealth don’t give up their privileged positions without a fight, and they usually have more resources at their disposal than the insurgents. Take satisfaction from small victories, but don’t be discouraged or fall into cynicism. And don’t allow yourself to burn out. (Loc. 1243-1249)
Finally, don’t wait for others set the agenda for you, tell candidates and incumbents what the price is for your support and the support of those you are organising with. Campaign for your agenda during the election and don’t let up afterwards – keep reminding them what they owe you and that your continued support is contingent on them continuing to deliver.
THE PRICE OF OUR SUPPORT
To that end, Reich sets out an agenda for change that could start to readjust the inequalities in American society that he offers to politicians as the price of our support.
- Raise the tax rate on the rich to the level before 1981
- Put a 2 percent surtax on the wealth of the richest 0.5 percent
- Put a 1.5 percent tax on all financial transactions (A Tobin Tax)
- Cut the military budget more than others
- Use Medicare’s bargaining position to cut soaring healthcare costs
- Extend Medicare to all
- Use the money from new taxes and budget savings to invest in public goods – especially education and infrastructure
- Regulate the banks. Reintroduce limits on the risks banks can take with people’s deposits that are insured by the federal government (the Glass-Steagall Act).
- Cap the size of Wall Street’s biggest banks
- Force the big banks to bail-out those with “underwater” mortgages and allow debt relief by changing the bankruptcy laws
- Get big money out of politics – block corporations and super-wealthy individuals from buying influence
A CORPORATE PLEDGE OF ALLEGIANCE
In addition, since the Supreme Court and regressives, believe that corporations have the right to be treated as American citizens, receive tax breaks and demand special advantages, Reich suggests that the public ask big corporations to take a voluntary “pledge of allegiance” to America that would allow them to judge whether they are doing their part and to decide how to spend their money appropriately.[ii]
Our corporation pledges allegiance to the United States of America. To that end:
We pledge to create more jobs in the United States than we create outside the United States, either directly or in our foreign subsidiaries and subcontractors.
We further pledge that no more than 20 percent of our total labor costs will be outsourced abroad. If we have to lay off American workers at a time when we’re profitable, we will give those workers severance payments equal to their weekly wage times the number of months they’ve worked for us.
We pledge to keep a lid on executive pay so no executive is paid more than fifty times the median pay of American workers. We define “pay” to include salary, bonuses, health benefits, pension benefits, deferred salary, stock options, and every other form of compensation.
We pledge to pay at least 30 percent of money earned in the United States in taxes to the United States. We won’t shift our money to offshore tax havens, and we won’t use accounting gimmicks to fake how much we earn.
We pledge not to use our money to influence elections.
So Reich’s goals are straightforward: fairer politics, a decent economy and a system that promotes the interests of the many, not just the accumulation of wealth by the few. “This isn’t too much to ask, is it?” (Loc. 1457-1478)
[i] References are to the locations in the Amazon Kindle edition.
[ii] Some of the content of this pledge make me nervous. It teeters on the edge of encouraging isolationism and that didn’t much help anyone the last time we were struggling against a worldwide economic depression. Other parts – the demands for corporations to act as decent citizens as a price of their freedoms – such as the limits on executive pay, the paying of a fair share of tax and limits on corporate manipulation of politics seem a fair settlement for a lasting social contract.