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Review :: Labor
Robert Reich's "Super-Capitalism: How the Economy Undermines Democracy"
07 May 2008
When everyone talks about stocks and consumption, what happens to social responsibility and public welfare? We suffer in a schizophrenia. The consumer in us opposes the worker in us. In the age of super-capitalism, businesses cannot act socially responsibly because they serve profit.

In his book “Super-Capitalism,” former Secretary of Labor Robert Reich urges the primacy of politics over the economy

By Beat Mazenauer

[This book review published in: Freitag 11, 3/14/2008 is translated from the German on the World Wide Web,]

Everyone talks about the economy today. Dow Jones, efficiency and profit are familiar terms. We are economically on the lookout to scrutinize the best offers. Today the freedom of the person is the freedom of the consumer. The subprime crisis ensures uncertainty. Whoever invests in stocks must accept losses. Joy in the stock market game may be a thing of the past for some.

When everyone talks about stocks and consumption, what happens to social responsibility and public welfare? asks the economist and former US Secretary of Labor Robert Reich in his book “Super-Capitalism." This question should be asked again and again. We tenants of the capitalist world of goods suffer under schizophrenia that we gladly in the daily routine. We are employees and citizens and also consumers and shareholders. This double role is awkward. The consumer in us opposes the worker and the investor exposes us as citizens under lobby pressure. Every investment in a pension fund takes away the ground under our feet a little more since high profits and cheap prices are in contradiction to fair wages and democratic participation. This sounds like a short-circuit between the macro- and the individual economy. However contradiction is inescapable in present economic developments.

The dilemma is real. Robert Reich sees a dangerous tendency that is very advanced in the US but has long been an offshoot all over the world. The economy has developed at breakneck speed in the last twenty years and launched processes that cause “a shift in us.” In the course of this change, the model of the “social market economy” or “democratic capitalism” threatens to fall by the wayside. This “Golden Age,” as Reich calls it, was marked by state regulations and social partnerships, agreements with the goal of maintaining purchasing power, social balance and economic planning. The price for that was national “oligopolies” that divided up the market and only competed tepidly. Every product existed in its own column and with its own hierarchy. Employees and shareholders were in a pecking order.

With the fall of the wall and the dismantling of tariff barriers, a new competitive situation resulted that neutralized the model of the democratic planned economy. In the past, the firm that launched new products and prevailed against rivals survived in the competition. The number of offers increased at a breakneck speed. An increasingly price-conscious demand on the side of consumers rejoiced in this abundance. More and more and cheaper and cheaper was the template. Parallel to this, the capital markets gained dynamism through amassed pension funds that had to be invested with profit. On November 14, 1972, the Dow Jones stood at 1,000 points. On April 17, 1991, it reached the mark of 3,000 and today is around 12,500 points.

These developments produced consequences that Reich describes in detail. “We made a Faustian pact. Today’s economy can offer us marvelous possibilities because it takes our fare at another place. Middle-class society is squeezed between Wall Street and Wal-Mart and gets a hearing less and less for its interests.

Reich’s book offers political and economic theory and shakes and awakens us on a central point. Managers are not marked by their special greed. They only sit at posts where they can live out this greed unrestrainedly. Joe Six-Pack must be satisfied with schnapps and the cheap hope for a lotto windfall. The casino mentality is planted in all of us. Who would not want to be a casino winner if he or she had the means?

This question is awkward and touches a sore point. We are all accomplices in a system that fulfills our consumer desires, puts job security in question and empties public spirit. The latter has grave consequences, Reich emphasizes referring to the US. “Our democracy no longer seems able to carry on this debate although we need it more than ever. The real scandal lies here, in leftist concepts that at best can meddle in the “balance of competition.” Consumer unions replace unions. The instruments that were once developed for the “social market economy” are not viable any more. “As long as the rules of the game of super-capitalism altogether are not changed, the business that refuses social responsibility has the competitive advantage.

Reich gives examples how businesses hinder and accelerate political processes with money and how politicians become accomplices with businesses out of selfishness. Battles over interests between politics and the economy are mostly pure theater today from which no dangers threaten for consumers and shareholders.

Against culturally conservative laments, Reich points to the two sides of the coin. Industry produces what consumers consume – regardless of morality. The economist refuses all illusion. “In the age of super-capitalism, businesses can not act socially-responsibly” because they serve only one goal – the maximization of profit in favor of shareholders. This is true without restriction. Do not trust any self-commitment of a business listed on the stock exchange. It will only fulfill commitments when political discussion and media interest fade. Ethical goals are pure theater or marketing. This attitude is generally accepted by consumers because no one wants to pay more for a product than necessary.

While Reich argues cogently, the remedy against super-capitalism is fundamental. There is no other possibility for fixing the social commitments of private enterprise than through the process of political power and universally binding legislation. Only legal rules of the game in force for everyone that do not discriminate against individual businesses can be accepted by competitors. Thus it is incumbent on politics and us as citizens to guide disorderly drives in desirable paths. At this point, Robert Reich agrees with Joseph Stiglitz who sees “de-politization of the decision-making process” as central. Politics lags behind the economy instead of regulating the economy.

“Super-Capitalism” is not an easy book because it obligates us as citizens. Reich concentrates on conditions in the US because the effects of super-capitalism are very advanced in the US. Still Europe is not an island. Seeing what is happening in the US and drawing lessons is important. Reich categorically criticizes that businesses are treated as “natural persons” with rights of protest and moral duties. This is entirely impossible. Only citizens who participate in democratic processes are entitled to rights and duties.

Whether Reich’s prescriptions are enough or deserve criticism is basically unimportant. His book arouses democratic imagination and political initiatives and strengthens the citizen in us over against the consumer in us. Robert Reich provides clarity about this. “The first and often hardest step,” he writes, is “thinking clearly.” The stock market crisis has shown us that a system error is planted in the high profit policy. Perhaps this will help change the relative strength or hierarchy between the economy and politics.

Robert Reich: Super-Capitalism. How the Economy Undermines Democracy, New York 2008
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