As a country, we focus obsessively on the conflict between the political left and right, but what good is this doing us when politicians from both sides embrace the same oligarchic ideology? This is the question explored by Robert B. Reich in his latest book, The System: Who Rigged It, How We Fix It.
Reich shows how the current political-economic system in the United States is infused with incentives for bad behavior. This starts with large corporations, whose executives are forced to maximize short-term profits for shareholders at all costs (to prevent hostile takeovers and to secure their own jobs and salaries). This is typically accomplished by shifting costs from shareholders onto other stakeholders, for example by laying off workers, moving operations overseas, or polluting the environment—all behaviors we should fully expect based on current incentives.
In essence, here’s what we’ve done: we’ve created massive legal entities (corporations) with a single-minded objective to maximize profits and then released them out into the world with few regulations and little oversight. Should we then be surprised to find that this has left a trail of devastation in its wake (layoffs, worker disillusionment, climate change, growing inequality, public health issues, financial crises, etc.)?
But we’ve done even more than this: we’ve also given those same amoral profit-maximizing monstrosities the power to infuse massive amounts of funds into the political process to buy candidates and engage in self-interested political lobbying, with the goal of further reducing regulations and taxes and further increasing their own power. Since the only goal of corporate management is the enhancement of profit, we can surmise that corporations are making these political contributions as investments, and not as political expressions of their genuine interest to promote the common good. As Reich wrote:
“When JPMorgan and other big corporations donated to the Republican Party in the 2016 elections in anticipation of a giant tax cut if Republicans won, their donations were also investments, and they paid off big…GE contributed $20 million and will get back $16 billion in tax savings. Chevron donated $13 million and received $9 billion. Not even a sizzling economy can deliver anything close to the returns on political investments.”
Politicians are likewise incentivized to bend to the will of corporations for campaign contributions and also for lucrative positions in those very firms once they leave Washington. And so big business has, in this way, infiltrated Washington and initiated a vicious cycle of concentrated wealth and power. This has resulted in America’s own unique brand of socialism: upward redistribution from the poor and middle class to the rich.
How else to explain the fact that the government bailed out the largest banks from reckless and idiodic decisions but did not likewise provide relief for homeowners and students struggling with mortgages and college debt? (Students still cannot eliminate student debt even through bankruptcy proceedings.) And how to explain the fact that, over the last four decades, corporate taxes have been slashed and yet middle-class wages have remained stagnant while top incomes have soared? As Reich wrote:
“Between 1999 and 2018, the United States economy grew 48 percent, but the typical household’s income did not grow at all, and the bottom half of America ended up with less wealth than it had before the financial crisis. The richest 1 percent, however, ended up twice as much wealth as it had before the financial crisis, and the richest 0.1 percent, with three times as much.”
So much for trickle-down economics.
Here’s what any rational reading of the numbers tells us has happened: the money corporations have saved from reduced taxes has gone to the wealthy at the expense of tax revenue that could have funded public goods that everyone would have benefited from (healthcare, education, infrastructure, basic research). This is a simple case of upward redistribution and socialism for the rich—and harsh capitalism for everyone else.
The reader might object that it is corporations that provide our products, services, and standards of living, but, as Reich points out, innovation is not stifled by progressive taxation. Reich correctly points out that Jeff Bezos, for example, would be equally motivated to innovate for 50 million dollars rather than 100 billion. Wealth taxes would ensure that the funds that would otherwise accumulate at the top make their way down for the benefit of everyone else.
Of course, it doesn’t help that the public is easily conned into believing that policies which benefit the wealthy will actually benefit themselves. An entire ideology of market fundamentalism (the modern equivalent of the divine right of kings) and “trickle-down” economics has been fabricated and widely disseminated just for that purpose. It runs so deep that even apparently liberally-minded democrats—like the CEO of JPMorgan, Jamie Dimon—believe it. But, as in Dimon’s case, this is probably just an instance of self-delusion. As Reich demonstrates throughout the book, what Dimon says and how he behaves are two entirely different things. For example, Dimon claims that he’s a “Patriot before a CEO” and identifies as a Democrat concerned for the common good, but then publicly supports Trump’s corporate tax cuts (i.e., gifts to the wealthy).
In regard to Trump’s tax cuts, these did not stop large corporations from continuing to maximize the bottom line at the expense of employees, by the way. For example, Walmart, in 2019, despite saving $2 billion courtesy of Trump’s tax cuts, laid off 570 workers while spending $20 billion buying back stock to enrich wealthy investors and boost executive pay.
The bottom line is that income inequality is growing, the middle class is shrinking, and executive pay is skyrocketing, and claiming that this can all be blamed on immigrants is beyond stupid. So how do we really solve the problem and restore democracy from corporate capture? As Reich points out, the solutions already exist: universal healthcare and education, more funding for basic research and infrastructure, and steeper progressive income and wealth taxes to pay for it all—not to mention overturning Citizens United and broader campaign finance reform.
The question is, if the solutions exist—and have had success in other countries—why do we consistently fail to implement them? The reason is, simply put, that the American oligarchy spends endless sums of money convincing us that the outcomes of the market—which it has rigged in its favor—are natural and inevitable, just as European monarchs used to tell its subjects that their vast amounts of wealth were decreed by God.
The only path forward is through the solidarity of the working class and its ability to resist the divide-and-conquer rhetoric of the oligarchy (currently led by Trump), who wants us fighting each other instead of them. As Reich wrote:
“Ultimately, these trends in America, as elsewhere, can be reversed only if the vast majority, whose incomes have stagnated and whose wealth has failed to increase, join together to demand fundamental change. The most important political competition over the next decades will not be between the right and left or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground and an economic elite that refuses to recognize or respond to the majority’s growing distress.”
Check out these additional works by Robert Reich.
Also check out the following great reads in liberal/progressive politics:
- People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph Stiglitz
- The Price of Inequality: How Today’s Divided Society Endangers Our Future by Joseph Stiglitz
- Good Economics for Hard Times by Abhijit V. Banerjee & Esther Duflo
- The Conscience of a Liberal by Paul Krugman