Instaread - Saving Capitalism: For the Many, Not the Few by Robert B. Reich Key Takeaways, Analysis & Review

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Robert B. Reichs

Saving Capitalism

For the Many, Not the Few

by

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Table of Contents

Saving Capitalism: For the Many, Not the Few by Robert B. Reich examines the intersection of economics and politics in order to make sense of income inequality and wealth disparity in the 21st century United States of America.

The free market has been used to mask the reality of how big money, such as Wall Street, large corporations, and wealthy individuals, manipulate the market to their benefit, distributing wealth upwards at the expense of US working and middle classes. The real choice is not between a mythical free market and a demonized big government, but between a market designed to enhance the wealth of a minority at the top and a market designed to benefit the majority of US citizens.

The current economic and political system is creating a growing divide in US society between moneyed interests who fix the rules and everyone else who suffers the consequences. This state of affairs is not only economically unsustainable, but also politically dangerous, a threat to the functioning of US democracy. The only way to alter the status quo is for the majority to become informed, organized, and motivated to act. The majority must regain influence over the rules of the market in order to counteract the power of moneyed interests and reestablish an economy of widespread prosperity. It is not a matter of having more or less government, but of deciding who the government is really for and organizing the market accordingly.

Robert Reich: Robert Reich is a political and economic theorist and professor at the University of California, Berkeley. He served in the administrations of Presidents Ford, Carter, and Clinton.

John Maynard Keynes: An English economist born in 1883, Keynes is considered one of the most influential economists of the 20th century and the founder of modern macroeconomics. His school of thought, which challenged the tenets of neoclassical economics, is known as Keynesian economics.

Thomas Paine: One of Americas founding fathers, Paine was an activist, political philosopher, and revolutionary. He authored influential pamphlets, including Common Sense and Agrarian Justice.

1. There is no such thing as the free market.
2. It is no coincidence that those who praise the free market are the moneyed interests who benefit most from this system.
3. Economic and political power are deeply connected. As moneyed interests gain dominance over the economy, they increase their influence over government, which in turn allows them to continue growing their wealth and entrenching their economic power.
4. The influence of the wealthy on the economy and politics undermines the trust on which capitalism depends. Lack of trust further damages the political and economic system as people become cynical, avoid reasonable financial risks, and start cheating in order to get by.
5. The notion that people earn what they are worth is a fallacy as it disregards the political institutions that define the market and determine worth. It also encourages people to think there is nothing they can do to improve their situation.
6. The increasing power and influence of Americas upper class has come at the expense of the declining power of the working and middle classes. The main problem is not economic, but political.
7. The growing divide in US society is not between Republicans and Democrats, but between the establishment and everyone else, the wealthy and the struggling majority. Ordinary people must establish a countervailing power that enables this majority to reconfigure the market.
8. A countervailing power should not only reorganize the market to distribute income more evenly, but it must also develop market rules to counteract the trends of globalization and technological innovation that tend to benefit the one percenters and cost the lower classes their jobs.

There is no such thing as the free market.

Analysis

The free market is a myth that masks the reality of how the rules of the economic game are fixed and distracts attention away from the possibility of reorganizing the economy in a way that works for the majority of people. The major economic debate between Republicans and Democrats tends to be about how much the government should interfere in the workings of the market. Framed this way, the debate is already deeply deceiving. It positions the government as an unnatural, problematic entity distorting a system of naturally operating forces. But the free market does not exist without a government that creates and enforces the rules by which it operates. In fact, there is no economic system, no economy period, without these rules.

The idea of a free market has also been historically described as laissez-faire economics, a French term meaning letting go. The idea originated in the Enlightenment thinking of the 18th century. Philosophers were preoccupied with the idea of nature and natural rights, which they saw as harmonious, just, and self-regulating. For this reason, they sought to create systems that did away with artificial constraints and returned to the spontaneity of the natural order [1]. This thinking has a distinctly moral bent to it. Nature is by definition virtuous and right. Anything that alters it is damaging. Laissez-faire imagines a kind of perfect world, an Eden of economic activity in which the market imitates the harmonious, self-regulating order of the natural world. Adam Smith, an English philosopher and economist, was one of the major thinkers in this tradition [2]. For him, a laissez-faire system freed the market from constraining laws, restored order, and activated the potential for growth.

It is no coincidence that those who praise the free market are the moneyed interests who benefit most from this system.

Analysis

Since there is no such thing as an economy without rules, the free market really allows certain interests to establish a certain set of rules by which they profit. It is not a deregulated economy so much as a re-regulated one, with laws that allow Wall Street to speculate, for instance, on risky and lucrative bets, or that allow banks to push mortgages on people who cannot afford them. These rules obviously enhance the income and wealth of a tiny fraction of the US population, the so-called one percenters. Naturally, they have no inclination to introduce a different set of rules that would rein in the activity that makes their economic power possible.

There is enormous rhetorical deception at play in the way the term free market is thrown around. It plays to deeply held beliefs in the US about freedom itself. Those who continue to praise the free market and demonize big government are effectively interested in keeping the majority of the people in the dark about what these terms really mean. The ignorance of the majority works in favor of the wealthy minority who are able to hide their real intentions behind this simplistic insistence on freedom.