With the current arguments over Brexit a proxy for Britain’s future economic model and social contract, a recent book by leading American economist Robert Reich offers some timely and thoughtful ways to tackle the problems of economic inequality; which many believe was a key driver of the vote to leave. Localise West Midlands Chair Jon Morris reviews the book below.
‘Saving capitalism for the many not the few’ is not the latest Labour slogan or manifesto but a book by American economist Robert Reich. His belief is that the massive concentrations of wealth and political power in the hands of the few is putting the future of capitalism at risk. He does not see this inequality as an inevitability of capitalism but as a result of the way the economy is currently regulated. He argues that it is regulated in the interests of the rich and powerful and that in turn makes them even richer and more powerful; giving them control over the political process and disproportionate influence over the way economies are regulated. Drawing on historical evidence and his own insights from his time as an economic advisor to Clinton, Reich argues that this concentration of power has happened on a number of occasions in America’s past, but that this has previously led to increased government intervention and a reversal of the growing inequality, resulting in economic recoveries.
It is refreshing to see an economist state that there can never be any such thing as a free market. At its most basic there is always some regulation even if it is just the courts enforcing property rights and contracts (or perhaps in the case of black-markets criminal gangs). So for him, the argument about state v free market has hidden the real issue which is in whose interests is the market regulated. He gives numerous examples of the way that regulations have been changed over the last 50 years to increasingly favour multinationals and finance at the expense of smaller companies, consumers and workers. This has happened not only through governments in America (including Clinton and Obama) and Britain but also through trade treaties and the World Trade Organisation (WTO).
Robert Reich sees the growing anger and frustration of the electorate leading to the rise of populist politicians (like Trump, the book was written before he became president), that will lead to even more division and political instability. He also sees technological change leading to fewer jobs and more growing inequality unless regulated in different interests. He sees the falling spending power of consumers leading to a lack of demand and massive recessions if we continue as we are.
His big solution is intellectual property rights and patents. Over the last few decades, these have been made more and more expensive to acquire and have had their protection and the time they last massively extended. He argues that if tax them or we restrict the length they last and give the income streams after they expire to government, that this would be sufficient to provide a basic income for all. He dismisses the argument that this would halt innovation and inventions on the basis that very few of the real innovations come from the large companies rather they buy out the smaller innovative companies who under present regulation cannot afford to patent and develop their ideas.
Relevance to Britain
While his book is based on the US his experiences and views certainly chime with my experience and those of others I have talked to that have been on UK government advisory bodies. The Treasury officials in particular always argue that whatever advice they are given that what we need is a more free-market – and that results in regulations that only suits the largest companies. If we are to get the sorts of local economies that benefit local people, then clearly regulation matters. Much of this is determined at the national and international level, but we should start a debate about what can be done locally.
It should also be seen as a warning about the sort of Brexit we might get. It is clear that the right-wing of the Tory party wants a “free market” that will be even more regulated in the interests of the rich and powerful at the expense of the rest of the population.
Jon Morris Chair LWM
Saving Capitalism for the Many not the Few is published in the UK by Icon Books in 2017.
You can find the book here for under £10 at Hive.co.uk https://www.hive.co.uk/Product/Robert-Reich/Saving-Capitalism–For-The-Many-Not-The-Few/20373890 or a book seller of your choice…