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Every day, we hear the mantra that where capitalism flourishes, democracy is sure to follow. But that is not necessarily the case, says former labor secretary Robert Reich, pointing to nondemocratic nations such as China and Singapore, which are moving full throttle toward capitalistic economies.
Rather, today’s highly competitive “supercapitalism” is endangering democracy by taking power out of the hands of ordinary citizens.
Reich says that over the past 30 years, global capitalism has developed into a turbocharged, Web-based system in which consumers and producers can access almost anything just about anywhere. But, he says, this intense competition generates negative social consequences:
There are social consequences that supercapitalism creates—whether it’s global warming, lower wages, unstable jobs or greater inequality—and we have to examine carefully who pays what cost. These results of supercapitalism require a response. We cannot depend on companies’ morality to change their ways.
Reich, a professor at the Goldman School of Public Policy at the University of California-Berkeley and labor secretary during the Clinton administration, spoke to some 150 activists and scholars at the Economic Policy Institute (EPI) last week as part of theAgenda for Shared Prosperity. The initiative includes a network of more than 50 progressive U.S. economists, policy analysts and academics sponsored by EPI to address the growing gap between America’s promise and its problems. (See video.)
In his new book, “Supercapitalism: The Transformation of Business, Democracy and Everyday Life”, Reich says the hypercompetitive environment of the global economy has shifted power in the marketplace away from corporations and citizens to consumers and investors. To keep up in this economy, companies must work harder to consistently maintain low prices to satisfy consumers while increasing profits to satisfy investors.
Many achieve these competing goals by paying lower wages and barring unions in the workplace, he says.
So we should not be surprised about the growing gap between the rich and everybody else, Reich says. While the top 5 percent of the population has gained tremendous wealth in the past decade, the median household income is less now than it was in 2000, which means the other 95 percent of us are losing ground.
Meanwhile, the tools traditionally used to balance corporate power—fair taxation, well-funded public education, unions—have been weakened as supercapitalism has grown.
As a result, ordinary citizens are less protected than ever, and a balance no longer exists between profits and low prices and what’s good for the country.
To restore that balance, Reich says, we need to “do the hard work of writing regulations that make capitalism work and save capitalism from itself,” such as:
· Raising the top tax rate for the richest Americans and lowering it for the poor and middle class. The top rate today is only about one-sixth of what is was in the 1950s.
· Decreasing corporate power over politics by reforming campaign finance laws to create blind trusts for candidates, which would allow people to contribute money, but without the candidates knowing who gave or how much was given.
· Allowing taxpayers to check off part of their taxes to support interest groups of their choice.
EPI launched the Agenda for Shared Prosperity network this year, with the goal to compile issue papers on topics such as trade, retirement security and job creation to foster discussion and propose solutions in advance of the 2008 congressional and presidential elections.
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