Book Reviews

Fred Fleron, Editor

Supercapitalism: The Transformation of Business, Democracy, and Everyday Life

 by Robert Reich  (Alfred Knopf, 2007. $25.00) 

 Reviewed by Frederic J. Fleron, Jr.

(With suggestions by Erik P. Hoffmann and Kimberly A. Kerns)

In his important recent book, Robert Reich argues that global capitalism is an economic game whose players have responsibility only to protect the bottom line of their multinational corporations (MNCs). In what might appear to be a shocking statement, Reich claims that "the companies themselves and their squadrons of lobbyists"  "have no responsibility to address inequality or to protect the environment on their own."  This is exactly the point made by Michael Moore in his recent film Sicko: health insurance companies--like all companies--are required by law to attempt to make a profit, to watch the bottom line.  Democracy, on the other hand, is about how the rules of the game are set.  "What is desperately needed," he argues, "is a clear delineation of the boundary between global capitalism and democracy . . . If the purpose of capitalism is to allow corporations to play the market as aggressively as possible, the challenge for citizens is to stop these economic entities from being the authors of the rules by which we live." To which Michael Moore would say: so change the laws, change the rules.

This is much easier said than done, however, as Reich himself describes the many ways in which "the corporations themselves and their squadrons of lobbyists" are able to control policymaking and policy implementation--or, in the nearly half-century-old political science jargon of Gabriel Almond and Sidney Verba, the systems of rule-making, rule-application and rule-adjudication.  In other words, they have an institutionalized and, thus, unfair advantage in all aspects of the policy processes in a democracy.

Reich contends that the problems of contemporary capitalist democracies cannot be solved without delineating a clear boundary between global capitalism and democracy.  Each one does what it does best--capitalists watch the bottom line and citizens in a democracy set the rules of the game demonstrating that capitalism and democracy are ultimately incompatible.  And that is what accounts for "capitalism's negative side effects." Growing inequalities of income and wealth amidst plenty (10% of the U.S. population owns 90% of the wealth), increasing numbers of citizens without adequate health care and health insurance, rape and pillage of the environment and the resulting tragedy of the commons, increasing privatization of functions traditionally performed by governments (especially the military and intelligence-gathering) are not merely "negative side effects" of capitalism, they are the very essence of advanced capitalism in the contemporary age.

Even if we accept Reich's main argument, what is the nature of these boundaries between global capitalism and democracy?  Are they moral and ethical in nature?  Political?  Economic?  Legal?  Territorial?  Or some combination of these dimensions?  (In this regard, it is instructive that the word 'boundaries' does not appear in the index to Reich's book.)  And once we figure out and agree upon what kind(s) of boundaries these should be, who gets to decide exactly where those boundaries are located?  Where are the lines drawn?  By popular referendum?  By individual governments for each country?  By the United Nations or some other international body?  By Plato's philosopher-kings?  It turns out, in Reich's analysis, that we should make the rules (13; italics in original).  But that begs the question.  Exactly who are we?  And what if we can't agree?

There is yet another aspect of the boundaries between politics and economics that requires consideration here.  As a student of Russian politics in the post-Soviet era, it has struck me as curious that Russians tend to equate democracy with capitalism and a variety of economic benefits.  When those economic benefits have not materialized for them, they have become disillusioned with democracy.  It seems that they want to enjoy the advantages of capitalism (the chance to become rich), but they also want the protection of socialism's safety nets in case they fail as capitalists.  In other words, they want it both ways.  But that takes all the fun out of capitalism, doesn't it.  The victories of success are all the sweeter because others have failed.  Many observers have opined (this writer included) that democracy in Russia cannot possibly succeed so long as a sizable portion of the population holds to such views.

But hold on.  Isn't that exactly how we operate in the United States?  American capitalists are all in favor of free enterprise until they begin to fail and hit hard times, as in the current financial maelstrom.  Then all of a sudden they are in favor of government (read: public) bailouts of their losses.  In other words, they want less government interference and regulation when they are winning, but more government interference (with as little regulation as possible) when they are losing.  So even in America big business is sometimes strongly in favor of socialism!  Witness the current efforts to bail out Fannie Mae and Freddie Mac.  Who will be next?  GM? Ford?  Chrysler (again)?

Reich makes the contentious claim that it is not  "a failing of capitalism" that "no democratic nation is effectively coping with capitalism's negative side effects."  How could they?  It is the very nature of capitalism to prevent democratic governments from doing so.  Hellooooo!  Capitalism is an economic system; democracy is a political system.  The problem arises, as it inevitably does, when the economic system begins to manipulate the political system to its own advantage and to the disadvantage of others, i.e., private citizens.  And these manipulations are done primarily through lobbyists and the game of musical chairs whereby individuals from large corporations are appointed to government positions that are supposed to regulate the corporations from which their personnel are recruited.  It is a "no win" situation for the vast majority of the citizenry, as they do not have that kind of access to the corridors of power.

What is the solution?  There are several possibilities.  First, do not allow former employees of corporations to hold positions in government regulatory commissions where they can "regulate" the companies from whence they came.  Second, sharply increase and strengthen the laws (and their enforcement) governing lobbyists and their legal activities.  Third (with regard to mandated profits), pass and enforce laws that place a cap on profits.  If companies exceed the gross profits cap, they would be severely penalized in the form of some sort of greed tax.  [This is written the week after Exxon announced the largest quarterly profit in the history of world capitalism: $11.68 billion, or nearly $90,000 per minute during the quarter, up 14% from the previous year's 2nd quarter.  But speaking of greed, this was not enough to satisfy investors as Exxon shares fell 4.6% on the foregoing news!] Fourth, no bailouts.  If corporations want to operate in a capitalist system, then they have to take their medicine when they fail.  Our form of government is like inconsistent, pushover parents who allow their children's tantrums to make them give in, effectively indulging the child's every whim.  Our government is a dysfunctional family, and its 'children' (the corporations) run the house.  And there may be other possibilities. But these are merely tinkering with "the system"; enterprising capitalists will find ways around the new rules (no pun [comedic and/or trademark theft] intended, Bill Mahrer) because that is part of their job.  And in the past they have done that job very well indeed.

Let me suggest here an entirely different approach from that of Reich.  Another issue that must be kept in mind when attempting to sort out the priorities between democracy and capitalism is a basic principal of the logic of ethics that we cannot give priority to two intrinsic values in our value system.  Value systems contain both intrinsic values (things that are good in and of themselves) and instrumental values (things that are not intrinsically good, but good only to the extent that they contribute to the realization of some higher value).   For example, we could not hold both freedom and equality to be intrinsically good within our value system because ultimately one will come into conflict with the other and there would exist no criteria for resolving the conflict.  However, if one holds freedom to be the higher value and equality is instrumentally good only to the extent that it contributes to freedom, then whenever there is a conflict between freedom and equality freedom will always win out. 

And so it is with the conflict between democracy and capitalism.  If capitalism is higher in the collective value system of a particular society, then whenever there is a conflict between capitalism and democracy capitalism will win out.  On the other hand, if democracy is placed higher than capitalism in the collective value system, then democracy will always win out.  That is the dilemma every democratic capitalist country faces--which one is higher in the collective system of values.  This is in direct contrast to the one proposed by Reich of properly delineating a clear boundary between global capitalism and democracy with each one doing what it does best.  For even under Reich's proposed solution conflicts can still occur conflicts between democracy and capitalism.  Reich's formula in no way assists us in deciding which system--the political system known as democracy or the economic system known as capitalism--ranks higher in our collective value system.  Explicitly placing democracy and capitalism in our collective value system and then deciding which one takes priority in case of conflict--that is the prior question to be resolved. 

My vote goes to democracy.  Hence, whenever there is a conflict between democracy and capitalism, democracy will win.  And we could have a constitutional amendment to the effect.  One of the basic problems with our Constitution is that it speaks only to politics and not to economics.  It gives enumerated powers to the national government (Article 3), places prohibitions on the national government (Amendments 1-9) and the state governments (Amendment 14), and reserves all other powers to the states and to the people (10th Amendment).  But nowhere does it place any limitations on the economic system, on capitalism.  Why not?  Probably because capitalism did not exist (or really was just coming into being) when the Framers framed.  And ever since then, the capitalists have been powerful enough to prevent any such "economic" amendments from being added, or at least they were powerful enough to block them if any were attempted (and I cannot recall any).

I am under no illusion concerning the ease with which conflicts between democracy and capitalism can be solved.  At first glance, it might appear that all politics is economics, and that would militate in favor of political solutions to the conflict.  Unfortunately life in the contemporary age is not that simple.  With so many Americans invested in mutual funds (either directly through ING, Vanguard, or some other broker, or indirectly through their retirement and pension systems), we are in effect participating in our own exploitation whether we know it or not.  And so we are caught on the horns of a great dilemma.

The significance of Reich's book is that is brings to light the conflict between capitalism and democracy in the 21st century.  And that forces us to grapple with issues of priorities and our hierarchy of values.  Reich's solution is deeply flawed.  Let's try mine on for a change.  It gets us away from the sticky question of boundaries between capitalism and democracy boundaries that cannot be clearly delineated.  My approach forces us to make a choice about priorities in our collective system of values.  To what do we assign the greater value?  Democracy or capitalism? If it's capitalism, we are sunk.  If it's democracy, then we can begin to formulate an action program to enforce that priority of democracy over capitalism whenever there is a conflict between the two.

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Blackwater:The Rise of the World's Most Powerful Mercenary Army
by Jeremy Scahill

Paperback
US $16.95
CAN $18.50
ISBN: 9781568583945
ISBN-10: 156858394X
Published by Nation Books 
 
reviewed by Fred Fleron

Publisher's Description
·  Winner of the George Polk Book Award
·  Alternet Best Book of the Year
·  Barnes & Noble one of the Best Nonfiction Books of 2007
·  Amazon one of the Best Nonfiction Books of 2007 Meet Blackwater USA, the world’s most secretive and powerful mercenary firm. Based in the wilderness of North Carolina, it is the fastest-growing private army on the planet, with forces capable of carrying out regime change throughout the world. Blackwater protects the top U.S. officials in Iraq and yet the world knows almost nothing about the firm’s quasi-military operations in Iraq, Afghanistan, and inside the United States. This is the dark story of the rise of a powerful mercenary army, ranging from the blood-soaked streets of Fallujah to rooftop firefights in Najaf to the hurricane-ravaged U.S. Gulf Coast to Washington D.C., where Blackwater executives are hailed as new heroes in the war on terror.


Things you should know about this book and its subject [Fred Fleron, 5/30/08]:
 
This is an important book that describes just one aspect of the more general problem of the privatization of government functions that has been taking place in this country in the post-Eisenhower era.  Indeed, it is as if Ike had never made his famous speech warning Americans of the dangers of the burgeoning military-industrial complex.  The privatization of the military escalated dramatically under the successive administrations of Bush I and Clinton, and has reached dangerous levels under Bush II.  Scahill has done a great public service by revealing to us the dangers of this process.

 Jeff Kinney, Diary of a Wimpy Kid: Greg Heffley’s Journal.  Amulets Books, New York, NY, 2007