Notes on the book: Supercapitalism
Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, by Robert Reich, is the most interesting book on the American government and how it relates to our lives that I’ve read in a long time.
In a nutshell, the thesis is: “Capitalism has become more responsive to what we want as individual purchasers of goods [and investors], but democracy has grown less responsive to what we want together as citizens.” “Democracy means more than a process of free and fair elections. Democracy, in my view, is a system for accomplishing what can only be achieved by citizens joining together with other citizens–to determine the rules of the game whose outcomes express the common good.”
He makes what I consider an extremely cogent, well-written, and persuasive argument to support this. He explains why it happened, focusing on the history of the American economic and governmental structure starting in the post-War era (the fifties), and showing how major changes started in the Seventies and continued to the present.
He offers explanations for:
- Why CEO pay has soared into the stratosphere and what prevented it from soaring before
- Why inflation has become less of a threat than it was three or four decades ago
- Why antitrust laws are less important today as a means of restraining economic power than they were previously.
- Why there are so many more corporate lobbyists and lawyers in Washington, D.C.
- Why politicians demand that companies be “patriotic” and put America before other nations
- Why a bigger fuss is being made over corporate philanthropy when corporations were never set up to be charitable institutions
- How someone can fret about the decline in hourly wages and simultaneously hunt for the best deal from China or India, which is often at the expense of an American’s wages or even job.
- How someone can lament the decline of independent retailers on Main Street while at the same time do most of their shopping at big-box retailers and online.
- Why a person who is deeply concerned about global warming might nonetheless buy an SUV
- Why politicians like to publically excoriate CEOs but then enact no laws making what they did illegal
- Why the move toward improved corporate governance makes companies less likely to be socially responsible
- Why the promise of “corporate democracy” is illusory
- Why the corporate income tax should be abolished
- Why companies should not be held criminally liable
- Why shareholders should be protected from having their money used by corporations for political purposes without their consent
- Why large companies have less economic power now than they had three decades ago
- Why the immense increase in corporate lobbying is due to a decrease in the market power of the corporations
You may be thinking about some of these points: “Oh, it’s obvious why.” But Reich’s explanations are often not what you’d expect.
None of this happened because of Ronald Reagan or Margaret Thatcher; the trends were clearly under way before they came to power, and the same trends can be seen in other countries to some extent. Neither were they caused by heroic or villainous CEOs; the changes are structural, not personal.
“The executives of Wal-Mart or any other large company are not brutally insensitive or ruthlessly greedy. They are doing what they’re supposed to do, according to the current rules of the game–giving their customers good deals and thereby maximizing the returns to their investors. Just like players in any game, they are doing whatever is necessary to win. But just as all games require rules to define fair play, the economy relies on government to set the economic ground rules. If government wanted to do something about the means Wal-Mart employs, it could change the current rules. In theory, it could enact laws to make it easier for all employees to unionize, require all large companies to provide their employees with health insurance and pensions, enact zoning regulations to protect Main Street retailers from the predations of big-box retailers, and raise the minimum wage high enough to give all working people a true living wage. All such measures would have the likely effect of causing Wal-Mart and other large corporations across the board to raise their prices and reduce returns to investors.”
Reich is not especially advocating that government should do these things. His point is to show what could happen, and why things are happening the way they are. He would like there to be more public conversation about whether or not to make these kinds of tradeoffs. The last sentence is “The first step, which is often the hardest, is to get our thinking straight.”
The writing style of the book is simple and direct, and fun to read. He has a lot of supporting facts and figures as well as good illustrative stories.
I believe that his overall point is extremely valid, and provides a useful framework for thinking about the vital issues of our economy and our government.
January 15th, 2008 at 2:37 pm
Without having read the book, I will nonetheless comment on the quote, risking the context failure.. My main beef is with this statement – “But just as all games require rules to define fair play, the economy relies on government to set the economic ground rules.”
I am not a libertarian, but I still think that the efficacy of democracy is inversely proportionate to the level of involvement of the government in the economy.. The moment that it becomes cheaper for a corporation to get their governor/senator/president elected, who will then veto all green regulations, than it is for them to change all their plants to comply with said regulations, well, that’s just what they’ll do… As Reich said, the corporation just aims to maximize its profits, and if it involves changing the game rules, so be it..
And of course, we can’t blame corporations for what they do – they are (b?)organisms designed for a purpose, and they do it – trying to prop a government to beat them into behaving differently is rather inefficient and self-defeating. What needs to change is the environment in which corporations operate – namely, the individual people.
It is here that I am beginning to agree with the later part of the quote – there needs to be more public conversation on these issues. We need better means of educating people on the direct and indirect consequences of their actions.. Eventually, we need a mechanism of resource redistribution that doesn’t involve everyone tugging in different directions (note though, I am not a communist either)..
January 16th, 2008 at 1:07 pm
Ivan, I largely agree with you and so would Reich.
Do you really disagree with that quotation? Don’t you think there are rules? Who do you think sets them?
I’m not sure what change in the individual people you mean. I think everybody tugging in different directions is inevitable; that’s one of the main things politics and democracy are (or should be!) about, to let us all live together peacefully despite our differences, our various motivations, and the conflicts between them.
As long as election results are so heavily biased by large campaign contributions, the political-donor class will have unfair power in this country, and will continue to set the rules in a way that gives much power to our role as customers and shareholders, and much too little power to our role as citizens, in my opinion. Reich refrains from expressing much of an opinion, stressing that we just have to understand the phenomenon and all talk and think about it.
January 16th, 2008 at 4:39 pm
Dan, I am definitely not in vehement disagreement with any of the above
– I am not trying to strongly refute any of your or Reich’s statements. I am mostly just trying to engage in one of those public discussions that we all agree are beneficial to society…
My point is that centralized government interventions with laws and regulations are rarely successful, if they are not supported, or even caused, by general citizens’ sentiment. Wal-Mart can screw over their employees in more ways and faster than Congress can pass laws to prevent them from doing it.
A simple and honest educational campaign can change the fundamental environment in which a company operates – if your customers demand not ‘deals’, but ‘maybe smaller deals, but also fair treatment of employees’, then you change your company’s behaviour to provide that, and you are still maximizing profits, but on a different product.
Unfortunately, in the US it seems the preferred way to be a good citizen is to mostly just buy a lot of stuff around Christmas.
As for the tugging in different directions, that was a completely separate tangent for me; also, I meant it as an analogy for the current market economy, rather than politics. I can probably write for hours about the inefficiencies of the economy – way too many layers of feedback/redistributors, extreme vulnerability to monopolists/speculators/frauds etc.. I feel we can do much better – but that’s probably my idealistic streak, and in any case is a topic for another discussion..
January 17th, 2008 at 3:58 pm
“I can probably write for hours about the inefficiencies of the economy – way too many layers of feedback/redistributors, extreme vulnerability to monopolists/speculators/frauds etc..”
Come to France, and you will witness extreme vulnerability to Government monopolies/speculators/frauds and incompetent bureaucrats which have managed to bankrupt the country in a couple of decades. Supercapitalism may have its failings, but those of Undercapitalism combined with HyperGoverment are much worse.
January 17th, 2008 at 10:14 pm
“He would like there to be more public conversation about whether or not to make these kinds of tradeoffs.”
This is why I like Obama. He occasionally talks about trade offs. Stop and think about times you have actually heard a politician say “I think we should do this, but here are the costs…” or “…no, I don’t think we can afford that”.
I have heard Obama say such things, and it is quite jarring to hear it coming out of a politician’s mouth.
January 18th, 2008 at 12:12 pm
jimbokun: Yes, I feel the same way. I also have heard John McCain saying things that are realistic, such as telling people in Detroit that their jobs (with the same benefits and so on) are not going to come back, as opposed to one of his opponents who said the exact opposite. The temptation for a politician to pander must be very strong, and I can’t help but be impressed by those who resist it.
April 18th, 2008 at 5:41 am
““The executives of Wal-Mart or any other large company are not brutally insensitive or ruthlessly greedy. They are doing what they’re supposed to do, according to the current rules of the game–giving their customers good deals and thereby maximizing the returns to their investors. Just like players in any game, they are doing whatever is necessary to win.”
My initial reaction to this paragraph is that it’s outright terrible. First, it only recognizes the rules of the _game_ as having any authority. Moral rules are supposed to go above and beyond all others — you abide by them even if the incentive is to do the opposite. If the executives of Wal-Mart do something clearly immoral that’s in their competitive interest, it’s still clearly immoral. Just because they’re good at the game doesn’t mean they don’t suck at life.
Second, this outlook is overly simplistic. He maybe right — perhaps the Wal-Mart executives are not the most evil individuals on Earth, and perhaps some of their actions really are for the best.
April 18th, 2008 at 5:46 am
(cont. — accidentally hit submit)
And perhaps even, they’re in situations where they would like to do the right thing but can’t and remain competitive, because other companies won’t do the right thing (they’ll do the cheap thing). We should absolutely be looking out for those conditions and trying to fix them, but strictly speaking it doesn’t change the immorality of their actions. Anti-corporate sentiment stems from clear examples of companies killing people, not just stopping them from unionizing. Look at any number of scandals settled for millions of dollars over companies deliberately withholding information about how their products or the manufacturing of their products affects people’s health.
April 18th, 2008 at 1:00 pm
dataangel: The point of the paragraph is that if you want to change what’s happening, it won’t do much good to boycott Wal-Mart. Rather, you have to attack the underlying root cause, or the problem will just keep happening again and again. It most certainly does not say that the rules of the game have moral authority; quite the opposite. The point is that it is the rules that give rise to the undesirable outcome, rather than the personal characters of the Wal-Mart executives. Neither he nor I is saying that what they’re doing (referring to the context of the book at that point) is for the best; it’s not. The book’s point is what’s really causing the problem, in hopes of making it more clear how to try to solve the problem.
April 18th, 2008 at 1:05 pm
Anything that involved killing people I would look at differently! But the fact that Wal-Mart tries to get local subsidies, or tries to suppress unionization, is (at least as they see it) what they need to do in order to compete. As you say, if other companies didn’t, or, more to the point, couldn’t do the same thing, then Wal-Mart wouldn’t have to do it either.
Analogously, I have heard cattle ranchers say that they hate having to give their cows various hormones, but if they didn’t do so, they’d be out of business in a short time, because of the competition. To solve that kind of problem, you have to change the rules of the game. Otherwise you end up with this kind of classic prisoner’s-dilemma non-zero-sum game, where everybody wants to “cooperate”, but someone will always “defect”, particularly if there are many “players”.
If there were only, say, three cattle ranches, maybe they could all agree to forgo the hormones. Reich in fact points out that having free competition and easy entry into markets tends to exacerbate these problems, because with more players, it’s harder to do cartel-like things even if they are beneficial from a public policy point of view. I really do recommend this book; my own summary cannot do it justice.
July 16th, 2008 at 8:01 am
Cognitive dissonance is a problem. To advocate one point of view, while acting in a way that is contrary to it, contributes to the problem.
An effective boycott of any large retailer would impact their bottom line, especially since there are other retailers out there. A boycott is the closest thing to a “death penalty” that can be imposed on a corporation.
I no longer purchase Sony products because of the rootkit scandal. Audio CDs were created with a data track that secretly installed software on the PC that took over certain operating system functions. As long as there are other providers, I can still live my life, and the only thing I really give up are movies from Columbia Pictures.
- Ralph (rhyre.wordpress.com)