Tuesday, July 20, 2010

SuperCapitalism as a Teachable Subject

Robert Reich's book Supercapitalism: The Transformation of Business, Democracy and Everyday Life came out in 2007 before the recent economic collapse and it is prescient not only about the economic volatility that led up to the events circa 2008 but also the kinds of fundamental changes in US democracy that now need to be in place if we are to survive further horrors. Robert Reich is of course best remembered as US Labor Secretary in the Clinton administration's first term--who pushed for a rise in the minimum wage and far more modest economic stimulus. His progressive ideas led him to lock horns with the great nemesis Alan Greenspan who as Fed Chairman opposed as much as possible a proactive government role in the operation of the marketplace whose golden bubbles began to ferment during his tenure. He was also as he writes in his memoir of those years also (to use his title) "Locked in the Cabinet" as the Clinton White House sailed full steam ahead to fast track trade agreements such as NAFTA without labor agreements in place that could have protected American jobs or funding that could help them retrain for new ones. But this is an important book because it understands the present moment far more completely than most I have read. Reich's insights as an economist and his experience as a policy maker allow him to connect together the key elements of our era--and suggest why there are no easy solutions for a new species of capitalism that threatens to destroy the planet unless we have stronger democratic institutions in place than we have at present.

It all started around the 1970s when the federal government flush still wanting to figure out how to battle the former Soviet Union to the death invested in some very sophisticated new ideas in technology that led to the development of the Internet.
Prior to this period roughly 1945-1970 the US was the unquestioned economic leader in what amounted to the post-war economic boom in which real incomes tripled around the world and world trade quadrupled. In 1953 as a result of a CIA plot to topple a legitimately elected democratic government, the US was guaranteed access to Iranian oil when the US friendly Shah was installed as leader. The US corporations could control prices and wages and stability and security was assured for America's growing middle class even as battles to win rights for minorities and clean air and clean water as the cold war cooled down after the Cuba debacle and the LBJ administration tried to prove that it was not soft on communism by fighting a futile war in Viet-Nam.

As Reich writes "Starting in the mid 1970s the large oligopolies that anchored the American system started to teeter. Their sales, profits and employment became far more volatile...Between 1970 and 1990, the rate at which companies disappeared from the Fortune 500 quadrupled." In a word barriers to enter the market place started to collapse as deregulation of huge industries became the norm--cable television changed the prior reality of three great TV networks controlling the airwaves--now 100s of channels were available. The AT&T phone monopoly was being broken up as cell phone companies and cable companies wanted a piece of the telecommunications networks that AT&T had previously regarded as their own. Airline companies that had owned major routes were challenged by smaller regional carriers to give them some room to compete.

Then the digital revolution and Microsoft challenges IBM and then Google challenges Microsoft for world dominance. In this period no company could feel safe as costs to compete with the big boys was finally lowered so anyone with a great new idea and a good business plan could get investors to buy in. Think Fed-Ex, AOL,Yahoo and of course Apple. It meant that because these companies could literally sell to the world and had few of the old labor and transportation costs returns could be sky high for modest investments as cargo containers (perfected by the military in the cold war period) could ship goods for far less cost and manufacturing could span the globe as supply chains became extended. This as Reich persuasively argues created enormous challenges for politicians--on the one hand consumers enjoyed far more choice in the marketplace--and with the advent of global giants like Walmart and other huge buyers of merchandise far lower prices. Did anyone worry too much where these goods were being manufactured? Was anyone concerned with the fate of unionized labor in the US or anywhere in the world? Did people really care about the environmental damage or the consumer culture that was being engendered with its appetite for credit card spending?

Or whether companies like Walmart, Nike or a hundred other brands exploited workers while making huge returns for investors and obscene salaries for their executives?
Not when they were taking campaign contributions right, left and center from the lobbyists these new companies employed to ensure that their products were favorably treated by regulators and prevent any new labor or consumer credit laws from having any teeth. But for Reich this issue of how the corporations make money is not really important. He simply does not care as long as they obey the typically very weak US laws. It is the business of government to try to set boundaries and define legal and illegal practices. He is not in favor of either consumers banding together to pressure companies which he sees as random and often based on single interest politics--or companies setting their own voluntary and thereby unenforceable codes of practice. Under the unwritten supercapitalism rules companies simply have to fiercely compete with each other so they can continue to keep making higher and higher returns for their investors or vanish. They cannot count on the great advantages of stable markets that companies in the pre supercapitalism phase were allowed.

One of the more worrying features of this new era is that there is no debate about these kinds of issues. As Reich writes,
"A change in labor laws making it easier for employees to organize and negotiate better terms might increase slightly the price of products ans services I buy" (but) he argues. "my inner consumer won't like that very much, but the citizen in me thinks it is a fair price to pay." Reich sensibly believes everyone would strike some sort of balance between the two hats we wear-the problem is that the discussion is not available to us. "Instead, our debates about economic change tend to occur between two warring camps representing the extreme positions: those who want the best consumer and investor deals, and those who want to preserve jobs and communities much as they are. Instead of finding ways to soften the blows, compensate the losers, or slow the pace of change..we go into battle. Consumers and investors almost always win, but sometimes citizens get so riled up they temporarily put a stop to things--blacking a new trade agreement or blocking a Wal-Mart."

One of the reasons (Reich does not discuss) that the consumers/investors win is that the media has been largely, if not bought off by corporate interests, so afraid of offending them that they are incapable of framing the issues in ways the public can understand. Most of the time they don't even bother --moving on from one sensationalized issue to the next--never remembering or caring to return to any one of them so we are capable of putting them into any real human, historical or global perspective.

Reich repeats again and again the arguments as to why supercapitalism is incapable of having a conscience about the kind of destruction it is wrecking on the globe. Over and over we read they are just there to be in business to make as large a return as possible for their investors. But after banging that particular drum for so long the arguments start to sound hollow. Reich takes the example of China and how both Yahoo and Google have made every effort to appease the Chinese government even when they have used their technologies to push their clamp down on human rights. Reich argues that they are blameless because under Supercapitalism there are no rules except to make money --if they were to retreat from China they would lose out to Microsoft etc. But Reich does not acknowledge sufficiently that these companies risk damaging their image as a smart but humane companies (Googles' motto "do no evil" comes to mind) and they could lose customers and investors if groups decide to boycott. But the problem is that they so rarely do. The other way that companies could be harmed is if the Congress gets so incensed with some morally outrageous behavior that they pass a law to stop that conduct. But Reich is savvy about the reasons why --particularly with respect to China's human rights abuses Congress tends not to act. Instead they hold hearings where they haul up CEOs in front of them and try to shame them in front of the media but seldom go the next step and take legislative action--preferring instead to collect nice campaign handouts from those very same companies who show their gratitude for the policitians restraint in not really addressing the core issues. Then to counter any remaining negative effect from morally dubious policies and acts, companies typically invest in media campaigns to reconfigure their image. Reich is particularly good concerning the way BP in a whole series of incidents reminiscent of the Gulf spill invested millions in making people believe it was environmentally friendly and "beyond petroleum" when the facts show that the company was investing a fraction of its huge profits in things like alternative energy to keep the bad publicity at bay.

The answer to all this? Nothing new here -take the money out of politics by having publically funded campaigns. Reich would also abolish corporate income tax--because corporations should not be treated as individuals and should be denied "any right or responsibilities or a legislative role in State matters." Too bad that the Supreme Court in an inexplicable move just gave corporations a bucket load of more rights as they can freely express their political views in elections even those based off shore.

My own sense from reading this book is that while opinion poll after opinion poll suggest that only a tiny fraction of consumers would prefer to buy from companies that favor socially responsible practices over those that have no concern for them, that dynamic can change. We as teachers should help our students better understand the central trade off that Reich focuses on between choice,low prices and high stock returns versus lowere wages, obscene profits for a few and growing inequality.
It is our duty as educators to help our students to understand the world they now live in, the kinds of choices we have in this world and to help them to look beyond that shiny new gadget that they want to sell you to how that buying decision effects you, your families and your communities. In particular we should enabling students to spot the double games that corporations and politicians sometimes play with the media around these issues. I don't agree with Reich that being a business in a supercapitalist era gives companies the right to run roughshod over human rights. While our politicians and media have turned a deaf ear to the issues--we as citizens can remind them that they exist because of our vote and our airwaves. It may well be a long time before we get the third party politics that might rid money from politics or at least significantly reduce its impact, until then we might want to continue to understand how the many consumer campaigns that have been successful --from Greenpeace to the ones that took place with regard to the South African apartheid regime and Nike, worked and could be replicated. In the last analysis democracies have to be educated to care--as Thomas Jefferson said so well "If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be."

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