Saving Capitalism: For the Many, Not the Few

by Robert B. Reich

The new discipline sought to identify abstract variables applicable to all systems of production and exchange and paid little or no attention to the distribution of those resources or to a specific society’s legal and political institutions. The study both of economics and of many other aspects of society thereafter began shifting from historically specific political, moral, and institutional relationships to more universal and scientific “laws.” John Maynard Keynes’s General Theory of Employment, Interest, and Money (1936) dominated American economic policy from the end of World War II until the late 1970s. · PART I · The

majority ruled that collective bargaining was “an intolerable and unconstitutional interference with personal liberty and private property a denial of rights safeguarded by the due process clause of the Fifth Amendment.” Yet without collective bargaining, workers weren’t free to negotiate their terms of employment; if they wanted a job, they had to accept whatever terms were dictated by the big businesses that dominated

that favor them; additional lawyers and experts to push their agendas in agency rule-making proceedings; the prospect of (or outright offers of) lucrative private-sector jobs for public officials who define or enforce the rules in ways that benefit them; public relations campaigns

workers who have no alternatives but to agree to terms mandating arbitration of all grievances before an arbiter chosen by the company, thereby forcing employees to give up their constitutional right to a trial. A corporation that monitors its employees’ every motion from the minute they check in to the minute they check out, even limiting bathroom breaks to six minutes

said patents could be obtained for “any useful art, manufacture, engine, machine, or device, or any improvement thereon not before known or used,” and its duration would be fourteen years. Since then, Congress has extended patent protection to twenty years (for applications filed after 1995), but the real battles have been over what is “new and useful.” The Patent and Trademark Office makes these determinations on a case-by-case basis; another office handles copyrights on literary works. Those who disagree with Patent Office decisions can appeal them to a special court set up for the purpose and take their cases all the way to the Supreme Court if the court is willing to hear them. As inventions have become ever more complex, patent litigation—typically legal fights between those who are granted patents and competitors who believe the patents unjustifiably infringe on patents they already own, or who believe no patent should have been awarded—has increased in volume and duration. By the second decade of the

good prices for their contributions. Since it costs almost nothing to sell more units, these new monopolists can keep out (or buy out) potential competitors and gain almost complete control—along with the profits and the legal

debt obligations may sink further into the hole, plunging their entire societies into deeper economic and social crisis (many historians argue that German reparations after World War I facilitated the rise of Nazism). In the late nineteenth century, when America’s giant railroad companies had gotten so deep in hock that they couldn’t repay their debts,

Electric marketed the Mark 1 boiling water reactor used in the plant (as well as in sixteen American nuclear plants), a cheaper alternative to competing reactors because it used a smaller and less expensive containment structure. Yet the dangers associated with the Mark 1 reactor were well known. In the mid-1980s, Harold Den an official with the Nuclear Regulatory Commission, warned that Mark

nine months as CEO of Viacom before being fired, and departed with a severance payment of $101 million; Michael

of the incipient American Railway Union. The union movement was thought by many business leaders to pose a fundamental threat to the nation, and its objectives to run counter to the principles of economics. The president of the National Association of Manufacturers warned in 1903 that “organized labor knows but one law and that is the law of physical force—the law of the Huns and the Vandals, the law of the savage….Composed as it is of the men of muscle rather than the men of intelligence, and commanded by leaders who are at heart disciples of revolution, it is not strange that organized labor stands for principles that are in direct conflict with the natural laws of economics.” But as average working Americans gained political power, they were able to legitimize unions and

of which specific companies they own, or for how long, because their ownership is through pension funds or mutual funds that tend to move quickly into and out of shares of stock, seeking quick speculative gains. If nothing else, high-frequency trading illustrates the irrelevance of stock ownership to effective corporate governance. Shareholder “ownership” is therefore a legal fiction. So is

form of stakeholder capitalism locked up resources in unproductive ways and allowed CEOs to be too complacent—employing workers the company didn’t need, paying them too much, and becoming too tied to their communities. Yet when you take a hard look at the consequences of the shareholder capitalism that took root in the 1980s—a legacy that includes flat or declining wages for most Americans, along with growing economic insecurity, outsourced jobs, abandoned communities, CEO pay that has soared into the stratosphere, a myopic focus on quarterly earnings, and a financial sector akin to a casino whose near failure in 2008 imposed collateral damage on most Americans—you might have some doubts about how well shareholder capitalism has worked in practice. Only some of us are corporate shareholders, and a tiny minority of wealthy Americans own most of the shares traded on America’s stock exchanges. But we are all stakeholders in the American economy, and most stakeholders have not done particularly well. Perhaps more

I have made my share of predictions as well. In 1991, in my book The Work of Nations, I separated almost all modern work into three categories and then predicted what would happen to each of them. The first category I called “routine production services,” which entailed the kind of repetitive tasks performed by the old foot soldiers of American capitalism through most of the twentieth century—done over and over, on an assembly line or in an office. Although often thought of as traditional blue-collar jobs, they also include routine supervisory jobs involving repetitive checks on subordinates’ work, enforcement of standard

operating procedures, and routine data entry and retrieval. I estimated that such work then constituted about one-quarter of all jobs in the United States but would decline steadily as it was replaced by new labor-saving technologies and by workers in developing nations eager to do it for far lower wages. I also assumed that the pay of remaining routine production workers in America would drop, for similar reasons. I was not wrong. Using the same methodology I used then, I found that by 2014 routine

bus drivers, truck drivers, and sanitation workers. The third job category I named “symbolic-analytic services.” Here I included all the problem solving, problem identifying, and strategic thinking that go into the manipulation of symbols—data, words, oral and visual representations. This category encompasses engineers, investment bankers, lawyers, management consultants, systems analysts, advertising and marketing specialists, professionals

or fascinate the human mind. I estimated in 1990 that symbolic analysts accounted for 20 percent of all American employees, and expected their share to continue to grow, as would their incomes, because the demand for people

take. I would never have expected, for example, that the life expectancy of an American white woman without a high school degree would decrease by five years between 1990 and 2008. I also failed to anticipate how quickly the combination of digital technologies with huge network effects would push the ratio of employees to customers to extraordinary lows. When Instagram, a popular photo-sharing site, was sold to Facebook for about $1 billion in 2012, it had thirteen employees and thirty million customers. Contrast this with Kodak, which had filed for bankruptcy a few months before. In its

Policy Studies website, April 22, 2014, p. 5 (http://​www.ips-dc.org/​wp-content/​uploads/​2014/​04/​IPS-Restaurant-Industry-Pay-Report-2014.pdf). “It was well-intentioned”: Senator Chuck Grassley, “Executive Compensation: Backdating to the Future/Oversight of Current Issues Regarding Executive Compensation Including Backdating of Stock Options; and Tax Treatment of Executive Compensation, Retirement and Benefits,” closing statement, Finance Committee hearing, September 6, 2006 (http://​www.finance.senate.gov/​newsroom/​chairman/​release/​?id=fa3baac7-174f-4e3e-b16d-2eda0b6cec87

Values for Systemically Important Financial Institutions,” IMF Working Paper no. 12/28, International Monetary Fund website, May 2012, p. 4 (http://​www.imf.org/​external/​pubs/​ft/​wp/​2012/​wp12128.pdf). This may not sound like much: “Why Should Taxpayers Give Big Banks $83 Billion a Year?” editorial, Bloomberg View, February 20, 2013 (http://​www.bloombergview.com/​articles/​2013-02-20/​why-should-taxpayers-give-big-banks-83-billion-a-year). This estimate, by the way, is consistent: See International Monetary Fund, “Global Financial Stability Report: Moving

epi.org/​blog/​inequality-exhibit-wal-mart-wealth-american). According to political economist Peter Barnes: Peter Barnes, “Why You Have the Right to a $5K Dividend from Uncle Sam,” PBS NewsHour website, August 27, 2014 (http://​www.pbs.org/​newshour/​making-sense/​right-5k-dividend-uncle-sam/​). the expected transfer by wealthy Americans: For discussion of the expected transfer of wealth, see John J. Havens and Paul G. Schervish, A Golden Age of Philanthropy Still Beckons: National Wealth Transfer and Potential for Philanthropy Technical