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Reich writes: "I'm hearing the same refrain from a growing number of business leaders. They see an economic recovery that's bypassing most Americans."

Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)
Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)


Real Business Leaders Want to Save Capitalism

By Robert Reich, Robert Reich's Blog

19 June 14

 

few weeks ago I was visited in my office by the chairman of one of the country’s biggest high-tech firms who wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it.

I asked him why he was concerned. “Because the American middle class is the core of our customer base,” he said. “If they can’t afford our products in the years ahead, we’re in deep trouble.”

I’m hearing the same refrain from a growing number of business leaders.

They see an economic recovery that’s bypassing most Americans. Median hourly and weekly pay dropped over the past year, adjusted for inflation.

Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research.

These business leaders know the U.S. economy can’t get out of first gear as long as wages are declining. And their own businesses can’t succeed over the long term without a buoyant and growing middle class.

They also recognize a second danger.

Job frustrations are fueling a backlash against trade and immigration. Any hope for immigration reform is now dead in Congress, and further trade-opening agreements are similarly moribund. Yet the economy would be even worse if America secedes into isolationism.

Lloyd Blankfein, CEO of Goldman Sachs, warned recently on “CBS This Morning” that income inequality is “destablilizing” the nation and is “responsible for the divisions in the country.” He went on to say that “too much of the GDP over the last generation has gone to too few of the people.”

Blankfein should know. He pulled in $23 million last year in salary and bonus, a 9.5 percent raise over the year before and his best payday since the Wall Street meltdown. This doesn’t make his point any less valid.

Several of business leaders are suggesting raising the minimum wage and increasing taxes on the wealthy.

Bill Gross, Chairman of Pimco, the largest bond-trading firm in the world, said this week that America needs policies that bring labor and capital back into balance, including a higher minimum wage and higher taxes on the rich.

Gross has noted that developed economies function best when income inequality is minimal.

Several months ago Gross urged his wealthy investors, who benefit the most from a capital-gains tax rate substantially lower than the tax on ordinary income, to support higher taxes on capital gains. “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end,” he stated.

Similar proposals have come from billionaires Warren Buffett and Stanley Druckenmiller, founder of Duquesne Capital Management and one of the top performing hedge fund managers of the past three decades. Buffett has suggested the wealthy pay a minimum tax of 30 percent of their incomes.

The response from the denizens of the right has been predictable: If these gentlemen want to pay more taxes, there’s nothing stopping them.

Which misses the point. These business leaders are arguing for changes in the rules of the game that would make the game fairer for everyone. They acknowledge it’s now dangerously rigged in the favor of people like them.

They know the only way to save capitalism is to make it work for the majority rather than a smaller and smaller minority at the top.

In this respect they resemble the handful of business leaders in the Gilded Age who spearheaded the progressive reforms enacted in the first decade of the twentieth century, or those who joined with Franklin D. Roosevelt to create Social Security, a minimum wage, and the forty-hour workweek during the Depression.

Unfortunately, the voices of these forward-thinking business leaders are being drowned out by backward-lobbying groups like the U.S. Chamber of Commerce that are organized to reflect the views of their lowest common denominator.

And by billionaires like Charles and David Koch, who harbor such deep-seated hatred for government they’re blind to the real dangers capitalism now faces.

Those dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the current system will deliver for them and their kids.

America’s real business leaders understand unless or until the middle class regains its footing and its faith, capitalism remains vulnerable.

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+22 # Yakpsyche 2014-06-19 10:09
On the one hand, a few plutocrats thrive in their bubble while all the world becomes a slum. On the other hand we work together and do what we can to make the planetary society work for all.

The question is, what can the majority of the world do to help the mentally adolescent who have virtually unlimited financially based power, develop into mature caring people?
 
 
+19 # reiverpacific 2014-06-19 10:43
I'm an economic ignoramus but have always thought that Capitalism was basically the exploitation of the many by the few and the resources of the planet regardless of the consequences to further generations, for excessive profits and distribution to shareholders who finance further expansion and exploitation.
I mean, my wife and I are small business owners and don't consider ourselves Capitalists. We are just happy to keep on doing what we both love at a reasonable profit and if we ever get back to being able to hire anybody in a rather rarified, creative field they'd be paid a living wage.
But I guess that's "Un American" in these mean-spirited times.
I'm always willing to be educated on these things but still consider myself a "Small Business Socialist", as I simply wish my taxes to be used for the common good, especially Universal Healthcare, Public Education, Infrastructure and Public Transport modernization and not for the military-indust rial-prison behemoth, continuing bail-out of criminal banks and abuses by the credit bureaus which seems to suck so much of the resources of the wealthiest nation in the world and keep the majority of the wealth in fewer and fewer hands.
And they CERTAINLY won't start to loosen their grip on this power of the purse without a fight as history has shown.
"The White Man can make everything but has never learned to distribute it" Tatanka Leyoté (Sitting Bull), Hunkpapa Lakota. spiritual leader.
 
 
+7 # bmiluski 2014-06-19 12:09
Socialism is a political and economic theory of social organization that advocates that the means of production,and distribution regulated by the community as a whole.

Capitalism is an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

So unless there is a community that is controlling the production and distribution of your products you are a capitalist.

There is nothing wrong with capitalism as long as it is not taken to the extreme. It is the greedy that give capitalism a bad name.
 
 
+2 # reiverpacific 2014-06-19 13:14
Quoting bmiluski:
Socialism is a political and economic theory of social organization that advocates that the means of production,and distribution regulated by the community as a whole.

Capitalism is an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

So unless there is a community that is controlling the production and distribution of your products you are a capitalist.

There is nothing wrong with capitalism as long as it is not taken to the extreme. It is the greedy that give capitalism a bad name.


I appreciate the input.
Read the bit after my self-definition as a "Small Business Socialist", as the distribution of taxes -or should I say "My Wish" for same, are surely those of a Socialist.
And I do try to make one component of my business serve the benefit of a wider community than my immediate one, including an adjunct healing of veterans.
Anyhoo, I love what I do and have always done what I love and feel grateful just for that: the title is neither here nor there but I still hold to my primary definition of Capitalism, especially as practiced in these mean-spirited times, where winner-take-all and screw everybody else seems to be the goal of those in power, most of whom got it the old-fashioned way -they inherited it!
BTW, I believe that both government and private business should handle different services, the former starting with Universal Healthcare.
 
 
+3 # tabonsell 2014-06-19 15:21
Socialism has gotten a bad name in this nation in which people don't know what socialism is.

Bmiluski, above, is on the right track in that socialism is the people controlling society, especially the economy. It excludes state ownership or control and would be the closet thing we have to libertarianism.

Capitalism is capital used to make products that create more capital; i.e. profit. It is not evil in its basic form, but many capitalists are. Socialism is capital used to make products for use by people in the society.

When FDR "cured" the Great Depression he used some forms of socialism (although by the state rather than by the people) which resulted in the paradox that socialism was needed to save capitalism, and against the efforts of capitalists who fought hard against the rescue, just as many are now fighting against a new rescue of capitalism.
 
 
+14 # Buddha 2014-06-19 10:46
"...and further trade-opening agreements are similarly moribund. Yet the economy would be even worse if America secedes into isolationism."

Robert, please square that circle for us. Please do a column or blog, telling us exactly how "Free-trade" agreements benefit our nation economically when they are putting our higher-wage workers in direct competition for jobs with overseas low-wage workers in countries with no labor protection or OSHA or environmental laws? Hasn't the huge transfer of our multinationals' manufacturing off-shore over the last 4 decades, as these "Free Trade" bills opened up low-wage labor sources, shown that what is good for the bottom line of a large 1%'er shareholder controlled multinational is not necessarily good for the nation as a whole? It seems to me trotting our "isolationism" or the more commonly used pejorative of "protectionism" is a bit of a strawman. What I want, and perhaps others on the Progressive Left feel the same way, are trade bills that aren't written specifically to spread ass-cheeks of American Labor. There has to be a middle-ground between isolationism/pr otectionism of no trade bills, versus the kind of pro-corporate pro-global-olig archy trade bills that we continually go into. Look who's writing the TPP, and who the provisions in it which have been leaked benefits. It isn't the working class of America.
 
 
+7 # jsluka 2014-06-19 13:41
Excellent point Buddha - So-called "free trade agreements" have been disastrous for everyone except the corporations and the 1%, and being opposed to them is not at all "isolationism."
 
 
+8 # wwway 2014-06-19 10:59
In the late 1990's Unions were realizing the effects of NAFTA. I suggested to one Union leader that Unions should be pro active and go global too. He nearly bit my head off!
With new business deals with governments across the globe business was and is proactive. Those agreements require government efforts be committed to putting down union efforts.
Workers have done it to themselves. As a student of history and economic philosophies I see a clear picture of how the 1% pits the 98% against each other. That 1% is pro-active and unified. That Union boss who nearly bit my head off is one dumb idiot.
 
 
-2 # Yakpsyche 2014-06-19 20:12
Of course. That's why he's a union boss, not a plutocrat!
 
 
+9 # fredboy 2014-06-19 12:05
Hope the lesson from the whiner Cantor was the current GOP is anti-business. The lesson is profound here in Florida, where the alleged pro-biz governor ignores any and all protections for the environment here--our top business draw.

Are they mean or just plain stupid?
 
 
+11 # pbbrodie 2014-06-19 12:14
Both, mean and stupid.
 
 
+9 # David Starr 2014-06-19 12:38
Quoting Reich: "America needs policies that bring labor and capital back into balance."

Since when has capital and labor been balanced? Capital has been dominating labor throughout the relationship between the two. It should be the other way around. If it wasn't for labor, capital wouldn't exist.
 
 
+3 # scoff 2014-06-19 17:45
"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

Abraham Lincoln
 
 
+1 # ganymede 2014-06-19 19:09
Having spent time living in various European Social Democracies, I got a taste of what Social Democracies are, which is a mixture of mostly Capitalism with a fair amount of Socialism. Europeans are more advanced than we are because they've had a turbulent, violent history for hundreds of years.

Robert Reich is an optimist, and so am I. I think the best we can hope for is to continue moving leftwards. It's obvious that the 'state' should take care of all of the people of that state in an fair, equitable manner, i.e., health care, social security, banks,post office, infrastructure, as well as sensibly regulate how private business is done.

FDR fought hard to save capitalism, and WWII also helped to revive the economy. Of course, the rightwingers of that time fought tooth and nail to destroy him. What we need to do now is get rid of the rightwingers in Congress. If the Democrats can gain control we will create a social democracy in this country in just a few years. Despite the total opposition to everything Obama, there has been some positive movement forward, and he's not finished yet and, Hillary (groan) will be easily pressured to start seriously regulating businesses and raising taxes on the uber-wealthy - just like they do in many social democracies.
 
 
+1 # Rockster 2014-06-20 01:43
There is absolutely no reason why business and labor cannot be in mutually profitable balance . There is just a kind of mesmerism at work in the greed factor and so many poor dreamers who fanatasize becoming the next Donald. Of course it's ridiculous to even Want to be that, but dreaming wet dreams of money and power is so addictive. I'm beginning to see real similarities with other addictions drugs , porn etc. Always need more and more and oblivious to harm done to others.
 
 
+1 # RMDC 2014-06-20 18:36
/rockstar. I don't agree about business and labor. Capitalists hate workers. They'd like to see them all dead or replaced by robots or by workers in some other nations so that the owners of the corps never have to see them. Phil Knight the owner of Nike has never visited his factories in Vietnam, China, and other places he may not even know about. He does not even consider the people who make his fucked up shoes as human beings.

Marx well understood that the same mentality that drives the slave owner drives the capitalist. Wages turn out to be cheaper than owning slaves because if there is no work to do you don't have to feed your workers. And there's no up front investment in wage slaves.

Capitalists only respect workers when they are organized and employ brute force.
 
 
0 # RMDC 2014-06-20 07:44
So sometimes reason dawns on a capitalist. but very soon competition will come back to the foreground and greed will take over and business leaders will again be screwing as many people as they can.

Capitalism in institutionaliz e and legalized greed. They don't see that this is a short term regime and will explode someday. Marx tried to explain why this was the inherent flaw in capitalism.

Capitalism is long past its expansionary phase. Now it is making the world poorer. This applies specifically to the people of the US, who still worship capitalism like a god because it once made them wealthier. Capitalism now should be called cannibalism, as it eats up the middle class which it once helped create (though not consciously or willingly).

The world will be better off without capitalism. We are heading toward a world of co-ops (worker owned businesses), non-profits, and social democracy. The US is holding the world back. The US is the great satan of world economies. But it is falling worse than any other nations. Its economy and its capitalist are only surviving because of "quantitative easing" -- i.,e pumping of several trillions of dollars into the system each year.

The EU central bank has just announced "negative interest rates." Banks and businesses get paid for borrowing money. This is is the death knell for capitalism.
 
 
0 # wrknight 2014-06-20 11:16
Quote "Yet the economy would be even worse if America secedes into isolationism".

I keep hearing that, but I don't see any evidence or hear any logical argument for it. There would in fact be some businesses that would be hurt. Imports would become more expensive, but that would encourage more domestic production. Exports would be hurt, but we would have to produce more for our own domestic consumption. Some things would become more expensive but maybe we would put more value on those things, repair them and become less of a throw away society. (Wall Street would probably be hurt the most, but I really don't care much about them. They're the ones that are ripping us off the most.)

Our huge balance of trade deficit tells us that we are importing much more than we are exporting (we are consuming much more than we are producing). The free trade agreements have only made matters worse. As a result, we produce less, lose more jobs, increase unemployment and lose bargaining power for higher wages. In essence, we're giving away the farm. It seems to me that we need to stop that.

I would feel different if we enacted "fair trade" laws that guaranteed that foreign workers got a fair share of the wealth. But that's not what's happening. It's all going to the top 1% in foreign countries as well as our own.

For the most part, Bob, I fully agree. But not on the disastrous effects of isolationism. Not until you show me proof.
 
 
0 # Vegan_Girl 2014-06-30 04:26
The current system is very dangerous. I think that the majority of the rich and corporate elite must be mentally ill, because the current policies are destructive and self-destructiv e. They are destroying this planet.

Besides addressing the obvious economic injustice, I think we really need democracy. You know, the kind of modern democracy where individuals and organizations respect the rule of law and human rights, and the kind where public opinion influences policy. We must have that and soon. Sanity in economic decisions is just a small part of that.

I love Mr. Reich and follow his work but I disagree with him about hope. I hope he is right and we are about to turn a corner. But I think that a mentally ill elite that is isolated behind gated communities and militarized police will go on in their bubble and not give up anything without a fight.
 

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