By Chet Yarbrough
Written by: Robert B. Reich
Narrated by: Robert B. Reich
Every economic theory is burdened by a temptation of pundits to pick and choose what they wish to believe. Keynes, von Mises, and Piketty are cases in point. Each has an economic view that resonates with some but appalls others. Robert Reich, though not an economist, is undoubtedly appalled by von Mises, and less so by Keynes and Piketty. This review is no less subject to the temptation of “pick and choose”.
In broad outline, von Mises objects to any interference in free trade. Von Mises decries nationalist tariffs, industry subsidization, planned economies, and political interference with business failures. Keynes endorses government intervention in economic crises. Piketty argues that the widening gap between rich and poor foment revolution. Each economic belief is supported and faulted by chosen historical events.
Von Mises theory may be proven based on the false economies of communism that led to the collapse of the U.S.S.R. Equally, von Mises theory can be attacked with the evidence of America’s subsidization of the oil, transportation, and technology industries that led to huge economic benefits for the United States.
Keynes’ interventionist theory may be proven true by George Bush’s and Barrack Obama’s recovery actions after the 2008 financial crises. On the other hand, government intervention allowed many millionaire and billionaire fat-cats escape prosecution for being the human cause of the 2008 crises. Though fines were levied, no corporate CEOs were jailed.
Piketty points to the French Revolution as credible historical evidence for consequence of an increased gap between rich and poor. On the other hand, improvements in energy, transportation, finance, and manufacture can be traced to business moguls like Carnegie, Rockefeller, Vanderbilt, and Ford. They may be history’s robber-barons but their drive and determination raised the standard of living for millions of Americans.
A common thread in an American capitalist economy is pragmatism. American capitalism has changed in every generation since 1776. Today, America is enduring the biggest economic and social change since the industrial revolution. It is change wrought by technology.
Like yesterday’s invention of the cotton gin, the steam engine, and farm machinery, jobs were lost. Today, it is robotics, and artificial intelligence that are changing the economy and the availability of jobs. Jobs disappear with each new labor-saving invention.
The consequence of unemployment is frightening and unsettling. However, the shape of the American economy will adapt just as it did with the industrial revolution.
There are modern Luddites fighting that change but as pragmatism takes hold, jobs will be created to fill the gap. Reich implies job loss can be overcome with government intervention. He suggests job creation can come from personal services like health care, elder care, child care; etc. Reich calls for government support of education to retrain labor, increase productivity through technology, and regulate private industry to correlate pay with accountable economic contribution.
Reich tentatively suggests government provide a minimum wage for all citizens based on a subsistence level of income. He argues that incentive to work will not diminish human motivation. He suggests Americans will continue to be motivated to do better than just get by in life. To many Americans, the idea of an unearned wage would be a fundamental mistake.
On the other hand, what if minimum wages are raised to a subsistence level. Not unlike the principle of Habitat for Humanity where family participation in building of a pre-qualified buyer’s house is required. A pre-qualified family (one that has employment and no bankruptcies) receives a below market price and mortgage on the house being built. However, the family must participate in the construction of the house. The mortgage payments are tailored to the income of the family. If they miss payments, they lose their house. On the same Habitat principle, a minimum wage worker who fails to do a good job, loses it; with no safety net (except in cases of mental or physical disability).
No one is likely to totally agree with any solution for the widening gap between rich and poor in the world but American capitalism has shown a willingness to pragmatically attack whatever creates conflict in the world. Sometimes the proposed solution is wrong. Some solutions do not work but America adjusts to eventually fit the circumstance. It is not a process without pain, but capitalist pragmatism is the most successful governmental system of modern times.
The biggest criticism one may have of Reich’s book is that he spends too much time explaining what is wrong with American capitalism. Yes, it is unconscionable that some CEOs are making 300 times what their employees make.
Yes, stock value is often unrelated to a CEO’s exemplary performance. Stock prices often increase because of stock price manipulation or other factors beyond the control of its executive officers.
Yes, labor is denied a seat at the table when corporate decisions are made. Yes, unions are disadvantaged by corporations that can be treated as individuals when unions are systematically sidelined and/or ignored.
Yes, corporate board members (often former members of Congress) are being paid hundreds of thousands of dollars for 4 meetings a year. How can they not be prejudiced to support corporate executives they are supposed to be overseeing?
Reich’s book would have been more interesting if he had spent more time on pragmatic solutions. The gap between rich and poor does foment revolution. One supposes Reich describes the problem in such detail because he presumes few understand what is happening in America. “Occupy Wall Street”, the national press, and the internet would beg to differ.
American capitalist pragmatism remains the best hope for equality of opportunity and qualified human freedom.