Saving Capitalism For The Many, Not The Few


I have just finished reading Robert Reich’s new book Saving Capitalism For The Many, Not The Few.

I have come to a set of expectations for books of this type. The really good ones do a great job of identifying a problem, providing new ways to analyze the problem, and new ways to explain the problem clearly for the rest of us to understand. This book does all that, so I rate it really good.

These books always have a small part at the end that tell us what to do about the problem. These are universally the weakest part of the books. Most of the books do tell you what needs to be changed, which of course is pretty obvious from the excellent description of the problem. No book that I have read so far tells you any practical way to bring about the change.

Robert Reich’s book goes farther than many books because he doesn’t just tell us that people have to act differently from the way they have ever acted before. He does go through some specific rules of the market that need to change, and he does describe some ways of reorganizing the meaning of basic economic entities such as corporations. What he cannot do, and therefore does not do, is to explain how we wrest power from those who now wield it in such a way that we can never seriously contemplate how to make the changes that he says we need.

The robots of the future, along with other breakthrough technologies, will not exactly take away “common property” for which citizens deserve to be indemnified. But they will take away good good jobs that are already dwindling in number and replace opportunities already growing scarce. They will, in short, supplant the middle class that has been the centerpiece of our economy and society that is already shrinking. New market rules that cause wealth eventually to revert to the public domain rather than compound for future generations that had nothing to do with creating it, and be used instead to finance a minimum guaranteed income for all citizens, is one way to go.

This and some other ideas he discusses are starting to be tried in some places around the world, so it is not as if they are completely outside of the realm of possibility. I should give Reich more credit for bringing these ideas to the fore in a book that may be more widely read than other sources that discuss these ideas.

What strikes me is that there is a transition step that I think is more easily made, and I do not see even mentioned. The idea has been described and thoroughly researched by Franco Modigliani and Arun Muralidhar as described in several posts on this blog, but even they shied away from the deeper implications of their proposals. Possibly they downplayed these implications for fear that it would be too upsetting to the 0.01% if they were to understand what the implicatons were.

I am talking about changing the Social Security Trust Fund investment rules so that the trust fund could actually buy shares of corporations. The premise is that the trust found would have far better returns than the Treasury bonds they must buy now. With better returns, the trust fund could both do with less money being taken in from taxes, and it could safely pay higher benefits. This is the surface meaning of this idea.

The deeper implication is that an arm of our government, The Social Security Trust Fund, would own a very large part of the private corporations, given the size of the trust fund. Rather than be passive investors, the trust fund could be active in demanding that corporations pay more attention to the needs of the whole society. The trust fund as a major shareholder would do that because the trust fund has that basic responsibility to society as a whole. This is unlike private investors who have only their own best interests at heart.

Moreover, the fact that the Social Security Trust Fund was growing because of the growth of corporations would in itself be a sharing of the benefits of increasing productivity which sharing is not going on now.

This idea of starting to invest the trust fund in corporate shares is something that could start small, and grow over time. The transition could be so gradual, that people would hardly notice the impact until it had grown substantially. It would also have the benefit of changing its course if unforeseen side-effects started to appear.

As the size of the investment grew, the incentives for corporations would change. The income inequality between top executives and average workers would start to get controlled in a way that no group of small investors can cause. The funding by corporations of buying elections and elected officials to rig the system for their benefit could be brought under control. This change in wealth and income distribution, and diminishing of political power and influence would make it easier to make Reich’s more far reaching changes possible.

If the public understood these changes this way, they might be far more apt to strongly support them. Of course the people with the power now would also understand, and they would fight these ideas more fiercely. It is then a question of whether or not the power of an idea could overcome the power of the money. I think history shows that sometimes this can happen.

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