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The following is an excerpt from Robert Reich's new book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life.
Of Two Minds
In recent years, the cheerleaders of American capitalism -- denizens of Wall Street, lobbyists on Washington's K Street, the inhabitants of top executive suites and New York penthouses, most Republicans, many economists, editorial writers for the Wall Street Journal, free-marketeers around the world -- have had difficulty containing their enthusiasm about the economy. America's gross national product has virtually tripled since the 1970s! The Dow Jones Industrial Average has risen from 1,000 to over 13,000 today! Behold the wondrous innovations and inventions, and the plethora of new products and services! The cheerleaders disdain what they consider to be constraints on further capitalist exuberance -- taxes and regulations, labor unions, "Old Europe's" inefficiencies, anything that retards consumer well-being and investor gain.
But other trends have worried labor leaders, community activists, most Democrats, some economists, many sociologists, editorial writers for the New York Times, trade protectionists, and left-wing populists. Look at all the workers falling behind! The widening inequalities of income and wealth! The instability of jobs! The loss of communities! The destruction of the environment! The trampling of human rights abroad! Conservatives will sometimes join this chorus, especially with regard to the so-called coarsening of American culture and the entertainment industry's seeming obsession with lurid and titillating sex and violence. For these critics, the villains are often greedy CEOs, immoral corporations, and a cabal of wealthy global elites.
The two stories -- Oh the wonder of it! Oh the shame of it! -- both describe aspects of 21st-century supercapitalism. But considered separately, each is seriously misleading. Each leaves out the other, which is actually its flip side. Each disdains or blames imaginary forces in opposition, when the qualms are actually inside almost every one of us.
The awkward truth is that most of us are two minds: As consumers and investors we want the great deals. As citizens we don't like many of the social consequences that flow from them. The system of democratic capitalism in the Not Quite Golden Age struck a very different balance. Then, as consumers and investors we didn't do nearly as well; as citizens we fared better.
What's the right balance? Are our gains as consumers and investors worth the price we're now paying for them? We have no real way to tell. The old institutions of democratic capitalism, and the negotiations that took place within them, are gone. But no new institutions have emerged to replace them. We have no means of balancing. Our desires as consumers and investors usually win out because our values as citizens have virtually no effective means of expression -- other than in heated rhetoric directed against the wrong targets. This is the real crisis of democracy in the age of supercapitalism.
***
It has become fashionable in progressive circles to bash Wal-Mart. "My problem with Wal-Mart is that I don't see any indication that they care about the fate of middle-class people," shouted Sen. Joe Biden from the rooftop of the State Historical Society of Iowa building in Des Moines. It was a little more than two years before the 2008 presidential election, and Biden was among a number of Democratic hopefuls who wanted to burnish his credentials as someone who cared about what was happening to American jobs and wages. "They talk about paying them $10 an hour ... How can you live a middle-class life on that?"
Wal-Mart has become the poster child for all that's wrong with American capitalism, because it replaced General Motors as the avatar of the economy. Recall that in the 1950s and the 1960s, GM earned more than any company on earth and was America's largest employer. It paid its workers solidly middle-class wages with generous benefits, totaling around $60,000 a year in today's dollars. Today Wal-Mart, America's largest company by revenue and the nation's largest employer, pays it employees about $17,500 a year on average, or just under $10 an hour, and its fringe benefits are skimpy -- no guaranteed pension and few if any health benefits. And Wal-Mart does everything in its power to keep wages and benefits low. Internal memos in 2005 suggested hiring more part-time workers to lower the firm's health care enrollment and imposing wage caps on longer-term employees so they wouldn't be eligible for raises. Also, as I said earlier, Wal-Mart is aggressively anti-union.
Wal-Mart's CEO in 2007 was H. Lee Scott, Jr. Scott was no "Engine Charlie" Wilson, who as GM's top executive in the 1950s saw no difference between the fate of the nation and the fate of his company. Scott has a far less grandiose view of Wal-Mart's role. "Some well-meaning critics believe that Wal-Mart stores today, because of our size, should, in fact, play the role that is believed that General Motors played after World War II. And that is to establish this post-World War middle class that the country is proud of," he opined. "The facts are that retail does not perform that role in this economy." Scott was right. The real problem -- not of his making -- is that almost nothing performs that role any longer.
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Robert Reich is professor of public policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. He was secretary of labor in the Clinton administration.
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