Radical Liberals

Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, by Robert B. Reich (2007, Knoph, New York) and The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity, by Robert Kuttner (2007, Knoph, New York.) By Brad Lander

In its May 10 issue, The Economist magazine’s editors whined that “we have been appalled by some of the anti-capitalist rhetoric” that Barack Obama and Hillary Clinton have “spouted on the campaign trail.” While it is laughable to characterize either as anti-capitalist, there have been a few moments in the primary campaign when the Democratic candidates have offered much-needed warnings about the dangers that widening inequality and corporate lobbyists pose for democracy.

At these moments, they might be channeling “the Bobs”—Robert Reich and Robert Kuttner, authors, professors, and editors of The American Prospect. Reich, who was a friend of Hillary and Bill Clinton in law school and served as labor secretary in the first Clinton administration before falling out with them over their lack of more progressive action on the economy, accused Sen. Clinton’s campaign of “lacking conviction about anything” and in the spring endorsed Sen. Obama. Kuttner, also a fellow at Demos and one of the co-founders of the left-leaning Economic Policy Institute, was critical of Obama’s position on health insurance early in the campaign, arguing that it was insufficiently progressive. But he later came to Obama’s defense (in response to criticism of the candidate by New York Times columnist Paul Krugman), arguing that Obama’s speech on the financial crisis was courageous, and “showed real understanding and subtlety.”

Whatever their opinions of the presidential candidates, Reich and Kuttner have a broader project. In two recent books, Supercapitalism and The Squandering of America, Reich and Kuttner, respectively, lay out a radical critique of present-day corporate domination of our politics that even liberals can love. They broadly agree, although their differences are instructive. They also raise some interesting questions (partly by critique, mostly by conspicuous absence) for community-development practitioners and community organizers eager to change the political landscape.

Where They Agree: A Dangerous Shift

Both writers look back to the post-World War II era as a “not quite Golden Age” of “democratic capitalism” (Reich), or “managed capitalism” (Kuttner), when the balance between big business, big labor, and (relatively) big government produced broadly shared prosperity, at least for families headed by white male workers. While they are clear that this period was marked by race and gender inequality, Reich argues that from roughly 1945 to 1975,

America struck a remarkable accommodation between capitalism and democracy. It combined a hugely productive economic system with a broadly responsive and widely admired political system … achieved its highest degree of income equality generated a larger proportion of good-paying jobs than before or since, and more economic security than ever for more of its people (Supercapitalism, page 15).

This accommodation was based in the relationship between mass production by a small number of very large corporations (think General Motors, Johnson & Johnson, Sears Roebuck), industry-wide labor unions, and government planning and regulatory bodies that set rules and patterns that governed the economy.

Over the past 30 years, however, this period of more broadly shared prosperity has been almost entirely undermined:

The central institutions of democratic capitalism in the Not Quite Golden Age—big oligopolistic companies, big labor unions organized by industry, and government representing communities and local interests through regulatory agencies—came undone … Power shifted to consumers and investors. Supercapitalism replaced democratic capitalism (Supercapitalism, page 87).

The consequences of this shift from “managed/democratic capitalism” to “supercapitalism,” from employers like General Motors to employers like WalMart, have been stagnant wages, rising inequality, millions without health care, main streets abandoned.

For most Americans, the years since 1973 have been trying times economically, with stagnating real incomes and increased personal financial risks. But they have been terrific for the top 10 percent, even better for the top 1 percent, and best of all for the superrich (The Squandering of America, page 7).

Kuttner and Reich agree that there are not only economic consequences, but profound political ones as well. Corporations have become increasingly dominant in government, drowning out the voice of citizens, converting politics into one more space of supercapitalist corporate competition, and increasing cynicism about democracy.

In a market economy, where concentrated wealth has disproportionate political power, the only thing that keeps elites from wreaking self-interested havoc is robust democracy; but democracy is also in disrepair. (Squandering, page 267).

This is not simply the work of the Bush administration, Republicans, or conservative think tanks, according to Kuttner, though all have done their part. Democrats too have abandoned a progressive economic philosophy, with business interests and market ideology trumping the interests of working Americans.

Reich is particularly devastating when discussing the ways in which corporate lobbyists prevail on present-day K Street in Washington, D.C. It is not, he argues, so much that corporate lobbyists have a secret cabal to screw regular people. Instead, each company is locked in an everyday-life-or-death battle for the most profitability. As a result, they pour money into contributions and lobbying for minute changes in legislation that advantage this or that particular pharmaceutical product, or section of the airwaves.

His many excellent examples range from WalMart’s efforts to be allowed to get into the banking business, to the rules that prohibit online gambling companies in the United States. (not for any meaningful values reasons, since consumers can still have their pick of vices, but to advantage corporate gambling interests that had already invested in the expensive real estate of casinos), to what standards are required for food to be labeled as “organic” (if you guessed that these were the lowest standards, pushed by agribusiness, you are right). The net result is that politics are simply swamped with corporate money and lobbying, putting the time and energy of Congress and the administration into the things that matter to various businesses, leaving little bandwidth for the interests of you and me.

Where They Disagree (a Little): Cause and Risk

While Kuttner and Reich agree in the beginning and end of their argument (and share a publisher and a magazine), they play out their disagreements across the pages of The American Prospect Web site. While Freud would almost certainly call this “the narcissism of minor differences,” there are two interesting points of contention: over what caused the shift, and over how big the risk of economic catastrophe is as a result.

Essentially, Reich believes that Americans are all to blame, while Kuttner lays the blame more squarely at the feet of a corporate elite. Reich argues that most Americans are, whether we know it or not, of two minds. As consumers (who want and can now get much lower prices and better choices for food, electronics, household items, etc), and as investors (since a slight majority of Americans now hold some stock—some directly, and more through their 401ks, 403bs, pensions, college-savings funds, mutual funds, etc), Reich says, we have done significantly better under supercapitalism. As citizens seeking the common good, we have lost ground, to our common detriment. What made this possible, he suggests, is shifts in technology and transport that have given consumers and investors a far wider range of choices (and information) than they ever had before, allowing them to demand cheaper products and higher returns. Kuttner argues instead that corporate elites have systematically sought to undermine the public sector and regulatory institutions, with more corrupt insider dealings (think Enron).

On this disagreement, Reich has the more thorough and certainly more provocative argument, since it implicates all of us. We do need to confront his challenge that the choices that a majority of Americans are making as consumers and (wittingly or unwittingly) as investors, while helping a very small elite do so well, have widened inequality and undermined public goals.

The intervening months since both books were written (in 2007) have shown Kuttner as more prescient on the ways that the economy is increasingly speculative and vulnerable as a result of the weakening of regulatory functions. Reich does not focus on this trend, suggesting that he believes “supercapitalism,” while deeply problematic, is not inherently unstable. Kuttner argues instead that the increasing economic insecurity for ordinary Americans and the increasing financial risks to the entire economic system are two sides of the same coin. In his chapter on “Financial Engineering and Systemic Risks,” he describes how

The excessive speculation that dominates the real economy widens inequality, reduces economic efficiency, and increases systems risk … Most [of the systemic threats] are the consequences of the increasingly speculative financial markets permitted by cumulative deregulation and supercharged by globalization (Squandering, page 107).

Put another way, corporations have been able to change the rules so that the public sector (i.e. taxpayers) will bail out most of the corporations who take risks and fail, so they can be more speculative. The profits are private, the risks are public.

Kuttner—writing before the subprime mortgage meltdown accelerated—cited the two biggest sources of financial risk as hedge funds and the increased dependence of the U.S. economy on borrowing from abroad, so he slightly missed the mark on where the next crisis would come from. But he does have a prescient section on subprime mortgages and the risk they posed. What has happened in the intervening months is a good argument for his broader point about both increasing risks. On the one hand, millions of Americans who got loans that they probably could not afford—the result of lax rules and increased speculative activity by lenders—face foreclosure and financial ruin. On the other, the ensuing crisis spread through the financial industry as a result of broad-scale speculative investment by the financial institutions (who, it turns out, could not afford this debt either) in a way that almost no one precisely foresaw, and that is threatening to be a leading cause of dragging the world into a global recession.

What It Means for Communities

Both books are about the national economy and body politic, with relatively little to say about community-development or affordable-housing issues. Kuttner was executive director of the National Commission on Neighborhoods and has written about neighborhood issues elsewhere, but there is little in The Squandering of America. Reich does include in Supercapitalism a discussion of WalMart’s destructive effects on neighborhood main streets as one of the ways in which our gains as consumers are our loss as citizens. We choose the low prices, even if we dislike both the low wages and benefits, and the loss of locally owned stores and community character.

I would have liked to hear more about how housing fits into this picture, since it does not fall neatly into Reich’s category of products for which the shift to supercapitalism has created more and cheaper options for consumers. Instead, Americans pay a much higher share of their income for housing than they used to (what they are saving on consumer goods they are mostly pouring into housing payments).

On this front, I’d suggest yet one more Robert: Robert Frank’s Falling Behind: How Rising Inequality Harms the Middle Class (2007, University of California Press). In this much shorter but no less insightful book, Frank outlines how the wealthiest Americans, who have reaped most of the income gains for reasons outlined by Reich and Kuttner, have led a “consumption cascade”: paying more for housing, health care, and other goods in a way that has raised the cost of what is generally perceived to be an adequate middle-class life. As a result, middle-class and working-class families are falling behind, even if their incomes have risen modestly, since their costs have risen much more.

Reich has a compelling critique of “corporate social responsibility”—the efforts of business schools and corporations and NGOs to achieve a “double (or even triple) bottom line” (profitability, as well as socially and environmentally positive outcomes)—as a panacea for what ails us. While he is open to the possibility that much of this is sincere (as opposed to a cynical marketing ploy, which certainly some of it is), he believes it is fundamentally misguided. He argues that it diverts political energy from the “more difficult but more important job of establishing new rules that protect and advance the common good, and keep supercapitalism from overwhelming politics.” Instead of the coordinated campaign that unions, environmentalists, and community groups have mounted against WalMart, he thinks that organizing energy should go into a political effort for national health insurance, or an increase in the minimum wage.

This makes sense from a pure policy perspective, and does help to clarify some issues. If we want workers to make enough to take care of their families, and everyone to have health care, and our communities to have walkable or locally owned retail, then we would collectively need to accept that we’d have to pay a little more for what people buy there, and that we have the power as citizens to set new rules that could achieve this.

While this does help to clarify the conversation, it is a bit naive (or maybe dismissive) about how to build the power necessary to make this possible. The groups fighting WalMart know that they would be better off with local, state, and federal laws requiring hiring wages, fairer rules for workers seeking to organize a union, and national health insurance. But they don’t usually have the power to win those campaigns. Locally targeted campaigns against WalMart have been successful in many places and have at least raised these issues. And groups like ACORN have built on local campaigns to fight for statewide minimum-wage increases and progressive national legislation. In Los Angeles, groups pushing for community benefits agreements on development deals have coalesced into a citywide movement for higher standards on all projects.

Reich may be correct that these efforts enable corporations to make flashy but small commitments that distract from the bigger picture, and Kuttner correct that business interests within the Democratic Party have prevented it from mounting a robust defense the role of government in managing capitalism to make it work for most Americans. But neither lay out any alternative political, or organizing, path by which we might build enough power to confront the ills of supercapitalism.

Neither of these books, unfortunately, has much to say about how to build a politics to win the kinds of changes they propose. Kuttner and Reich both suggest that progressive politicians would be better off making the arguments that they do (even if they are called “anti-capitalist” by The Economist). And Kuttner calls for Democrats to adopt a “politics of transformation” that would go beyond the “merely palliative,” small-bore steps that characterized the Clinton administration, and beyond bipartisanship in hopes of a sustained period of one-party rule in which they could rewrite the playbook.

They don’t lay out even the slightest hints of a path for doing this—especially given the overwhelming power of corporate lobbying, with Democrats as well as Republicans, that they portray so well, or how unlikely it seems that Democrats could build a 60-seat majority in the Senate on a much more radical platform. As a result, while they are in many ways optimistic in tone, both books have an essential pessimism about possibilities for change.

And neither pays attention to what could take place at a local level that might provide a base for broader change. Because they believe that the negative impacts of the changes at the national level overwhelm communities, they don’t spend time examining grass-roots efforts beyond Reich’s critique of the WalMart campaign.

But maybe there are some bright spots out there, or at least some building blocks. Early in the presidential campaign, the Center for Community Change and community-based allies from around the country convened the Heartland Presidential Forum in Iowa, at which nearly 4,000 people from all around the country heard community leaders talk to the Democratic candidates for president about the harms of supercapitalism (although they didn’t use these words, they talked about foreclosures and plant closures tearing up their neighborhoods), and the community values they want candidates to support.

John Edwards’ campaign was largely organized around the themes of that forum, and of these two books. He connected the dots between corporate influence over our democracy, the insecurity of the middle and working classes, and the scourge of poverty (and was widely attacked in the mainstream media for doing so). After Edwards dropped out, and the campaign veered into the “silly season” of attacks between Clinton and Obama, the media—and, at their low points, the campaigns themselves—tended to focus on the differences between segments of the Democratic base, nominally pitting “hard-working white Americans” against people of color and immigrants, and against upper-middle-class progressives.

But for Democrats around the country preparing for the November elections, the analyses of the Bobs and the work of community organizers have a lot to contribute. The real challenge is to combine the day-to-day work of local organizing (which demands tangible results along the way) with the long-term work of bringing people together around a vision that restores the values of democracy and fairness to the center of our political life. In that effort, it’s worth taking a little time off from knocking doors (though not too much time before November) to read the Bobs.

Brad Lander is the director of the Pratt Center for Community Development in New York City (www.prattcenter.net).

Published by the National Housing Institute