The WSJ has a great book advertisement/review, disguised as an op-ed with Robert Reich, former secretary of labor under President Bill Clinton, but interestingly enough it strikes to the core of the problem with today’s capitalism.
It is plain that while developing economies have made huge progress in terms of prosperity, rising living standards including health and education, most developed economies have seen a stagnation in employment, wages and/or working conditions, with rising inequality the rule, not the exception.
The usual platitudes of “oh its just globalization, a new world, a new economy – just work harder!” aren’t sitting well in the US, where the middle-class has been effectively wiped out with wealth distribution undergoing a reverse Robin Hood. This has seen the rise of Bernie Sanders taking on the presumptive Democrat presidential candidate, Hillary Clinton, who stands for the few, while on the Republican side, the main contender, serial liar Donald Trump, is the embodiment of the problem.
Power. Concentrated financial and corporate power that has consolidated into a few, an “elite” as Robert Reich puts it, with some excerpts from the interview:
Q. How did you come to see political power as a key force driving inequality in addition to technology and globalization?
The power of the business community to get the kinds of regulatory and legal results they wanted has continued to escalate at a remarkable rate, and it seemed to me there was some relationship between that political power to get the rules and the laws they wanted, and widening inequality.
For years, I had looked at the individual industries, I had looked at individual studies, and I was aware of pieces of the puzzle. But actually seeing the entire reality, pulling the puzzle pieces together, connecting the dots—I was surprised at the enormity of it.
Q: What are some of the ways we see this market power in our own lives?
A: Americans pay more for Internet service than citizens of any other advanced country, and we get the slowest service. Because the Internet service providers have a lot of political clout, both locally and nationally, and the cable companies know how to keep their monopolies.
Another example would be the pharmaceutical industry. Americans pay more for pharmaceuticals than do the citizens of any other advanced country. Rather, it’s because the rules and laws governing pharmaceuticals here allow companies to do things they’re not allowed to do in most other countries, like pay the manufacturers of generics to delay the introduction of generic equivalents beyond the point where the patents have run out.
Even food: Crop prices are down at least 6% from what they were 10 years ago, and yet food prices have been increasing much faster than inflation. That’s largely because of the market power of some very big food processors.
Ring any bells here? While any use of a government monopoly is derided and needs to be “privatized” as soon as possible, when corporations takeover, they are applauded and supported, sometimes by government itself (witness Andrew Robb in recent years campaigning for it) even if the outcomes are worst. Its hypocrisy and rent seeking of the worst kind and is nowhere near a “free market”.
Reich goes on to explain that this political power concentration is nothing new, and that the internet age while providing enormous education and organisation for the “many”, is being gamed by the “few” just like the old yellow sheets and use of scapegoats in the past. A concentrated media is part of this of course.
Capitalism needs to be saved from itself, because as an organising economic force, there has been no demonstrable better solutions to raising prosperity from the feudal and/or agragian like state the majority of the planet was once in beforehand. But it cannot continue to do that if there is no trust in the system:
Capitalism is based on trust. It’s impossible to have a system that works well and is based on billions of transactions if people don’t trust that others are going to fulfill their obligations, or they fear someone will take advantage of them or exploit them. That’s when a system moves from production to protection, and we spend more on everything from lawyers to security guards.
That begins to spell the end of a system that generates widespread prosperity and growth, and that’s the real threat to our democratic capitalist system.