Paul Krugman’s “Challenging the Oligarchy” in the New York Review of Books provides a perceptive review of former Secretary of Labor Robert Reich’s Saving Capitalism: For the Many, Not the Few. Of current progressive economists, Krugman and Reich are the most skilled at framing “the dismal science” for time-challenged readers who want a better understanding of economic policy options in the context of today’s political realities. In the concluding section of his favorable review, Krugman explains:
…Like a number of other commentators, Reich argues that there’s a feedback loop between political and market power. Rising wealth at the top buys growing political influence, via campaign contributions, lobbying, and the rewards of the revolving door. Political influence in turn is used to rewrite the rules of the game–antitrust laws, deregulation, changes in contract law, union-busting–in a way that reinforces income concentration. The result is a sort of spiral, a vicious circle of oligarchy. That, Reich suggests, is the story of America over the past generation. And I’m afraid that he’s right. So what can turn it around?
Anyone hoping for a reversal of the spiral of inequality has to answer two questions. First, what policies do you think would do the trick? Second, how would you get the political power to make those policies happen? I don’t think it’s unfair to Robert Reich to say that Saving Capitalism offers only a sketch of an answer to either question.
Krugman adds that Reich “calls for a sort of broad portfolio, or maybe a market basket, of changes aimed mainly at “predistribution”–changing the allocation of market income–rather than redistribution. (In Reich’s view, this is seen as altering the predistribution that takes place under current rules.)” Specific reforms would include “fairly standard liberal ideas like raising the minimum wage, reversing the anti-union bias of labor law and its enforcement, and changing contract law to empower workers to take action against employers and debtors to assert their interests against creditors.”
But Reich also urges reforms to “move corporations back toward what they were a half-century ago: organizations that saw themselves as answering not just to stockholders but to a broader set of “stakeholders,” including workers and customers.” Noting that the New Deal was “remarkably successful at creating a middle-class nation,” Krugman asks,
But how is this supposed to happen politically? Reich professes optimism, citing the growing tendency of politicians in both parties to adopt populist rhetoric. For example, Ted Cruz has criticized the “rich and powerful, those who walk the corridors of power.” But Reich concedes that “the sincerity behind these statements might be questioned.” Indeed. Cruz has proposed large tax cuts that would force large cuts in social spending–and those tax cuts would deliver around 60 percent of their gains to the top one percent of the income distribution. He is definitely not putting his money–or, rather, your money–where his mouth is.
As Krugman concludes, “Still, Reich argues that the insincerity doesn’t matter, because the very fact that people like Cruz feel the need to say such things indicates a sea change in public opinion. And this change in public opinion, he suggests, will eventually lead to the kind of political change that he, justifiably, seeks. We can only hope he’s right. In the meantime, Saving Capitalism is a very good guide to the state we’re in.”
All three Democratic presidential candidates will find much to agree with in Reich’s book and Krugman’s analysis. None of them favor wholesale nationalization of the economy, as the Republicans suggest they do. And though Senator Sanders has awakened broad interest in the ideas of democratic socialism, he too envisions a robust role for the private sector, especially small business entrepreneurs.
As the Republicans double down on government-bashing, increasing tax breaks for the rich and their war to obliterate the labor movement, Democrats have a unique opportunity and a clear field ahead as the party of reason and moderation. Indeed it is increasingly clear that the Democrats are the only American political party capable of negotiating and navigating the way to reduce economic inequality. That’s a pretty good brand for 2016.