Column

Supercapitalism is good for consumer, bad for the citizen

By ROBYN BLUMNER
Published September 23, 2007

Robert Reich, former labor secretary under Bill Clinton, is a very smart man with a very good heart - my favorite combination. He's one of those people to whom I pay special attention, on a par with thinkers like Jared Bernstein at the Economic Policy Institute, David Cole, a law professor at Georgetown, and psychology professor Steven Pinker at Harvard.

So I pounced on Reich's new book Supercapitalism, an unblinking look at the economic realities of the global marketplace and what can be done to temper its worst elements. It turns out, Reich has news for every person (like me) who believes that corporations have a responsibility to act morally as well as legally: Fughetaboutit.

According to Reich, the era of corporate statesmanship, during which business leaders would consider the best interests of society and their workforce in making corporate decisions, has passed. Due to intense and increasing global competition, no corporation can any longer indulge in behaviors that don't enhance profitability without risking eventual oblivion.

It's enough to make a girl cry into her fair trade coffee (purchased at www.peacecoffee.com in case you're interested).

Reich says that a structural change has occurred in our economy. Since the 1970s, we have been moving away from democratic capitalism toward "supercapitalism." He describes this metamorphosis as a natural consequence of the rise of competition along with the decline of institutions such as labor unions, regulatory agencies, industry oligopolies, and legislatures responsive to Main Streets - entities that had acted in formal and informal ways to spread the wealth and establish equitable rules of business conduct.

According to Reich, consumers and investors are the big winners in the new economy, and it is largely due to technology, which has revved up productivity and given consumers and investors ready access to information about better deals.

Consumers have enjoyed a remarkable range of new product options at dirt cheap prices. Wal-Mart has proven that buyers will shop wherever they find the cheapest prices, regardless of the consequent harm to Main Street and Mom and Pop retailers.

Investors have also reaped wild rewards. A peek at the performance of the Dow Jones Industrial Average over recent decades tells the story of how top executives have been responsive to their investors. The Dow reached 1,000 in November 1972 and 2,000 in January 1987. It now hovers above 13,000.

Corporate executives have learned that they are mightily enriched when their company's stock price rises but are not correspondingly punished if meeting heady projections means slashing payroll or moving operations overseas.

The big loser, Reich notes, is the citizen: "Capitalism has become more responsive to what we want as individual purchasers of goods, but democracy has grown less responsive to what we want together as citizens."

Survey evidence demonstrates a growing disconnect between Americans and their government. In 1964 only 29 percent of Americans thought that government was run by a few big interests looking out for themselves. By 2000, more than 60 percent of Americans agreed with that statement.

Reich says that democracy is more than just majority-rule elections. It is a system for the promotion of the common good by citizens joining together to assert their societal priorities. The job of capitalism is simply to increase the economic pie, Reich asserts, then democracy has a role in divvying it up - assigning much of it to personal gain to be sure, but diverting a chunk to things like ensuring clean air, good public schools, a social safety net for displaced workers, and protecting unionization so employees can demand better wages and working conditions.

It is up to our government and its regulatory power to set the rules of capitalism so that it maintains a balance with broad societal goals. And as long as those rules are applied across industries (including on goods imported from overseas), the playing field is leveled, putting no one company at a competitive disadvantage.

I'm not quite as willing as Reich to give corporate titans a pass on morality. Blaming competition for forcing factory girls in Bangladesh to work seven days a week for a pittance, or for contracting with manufacturers in China who fail to protect workers from toxic fumes, is a little too convenient. Rules shouldn't be necessary to tell executives they need to value human life.

The late Anita Roddick, who founded the successful The Body Shop chain, was famous for promoting business principles that included social justice and environmental responsibility. It's not impossible.

But I do agree that government has abdicated its role in ensuring that capitalism's rewards inure to society's betterment. Which is why so much of the electorate is disenchanted and disengaged.

America needs more citizens and fewer consumers. But that will only happen when our leaders start doing their jobs. Reich is right, once again.

[Last modified September 22, 2007, 21:54:26]