Supercapitalism: The Transformation of Business, Democracy, and Everyday Life – Book Review

Bound by a simple cover that features a dollar sign from which protrudes the forked tongue of a snake, Supercapitalism is a New York Times Best Seller that warns not of the dangers of traditional capitalism, but rather of the new supercapitalism — through which the corporation, as a global supply chain competing in an extremely competitive consumer/investor-centred world, is eroding the fabric of the political and social system in which those consumers and investors live.

The work of Robert Reich — Professor of Public Policy at the University of California at Berkeley; former Secretary of Labor under the Clinton Administration and winner of the Vaclav Havel Foundation prize for pioneering work in economic and social thought — Supercapitalism is no populist rant, but rather a considered argument in which complex ideas are conveyed in an interesting and accessible way.

The Argument

Reich sets out his work as a structured argument.  He begins with the words of Milton Friedman:

“The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.”

Immediately thereafter, in his first chapter called “The Paradox,” Reich then summarises his issue — that with increasing disparity between rich and poor; job insecurity; cuts in conditions; and the break down of the traditional Main Street, community-style of life, there seems to be a social malaise. Supercapitalism is not enabling democracy but perhaps disenfranchising its people. Reich cites his research, which includes, for example, a University of Michigan study in which 60% of Americans were said to believe government was run by a few big business interests.

In his following chapter, “The Not Quite Golden Age”, Reich acknowledges that the 1950-60s were not perfect — there was still blatant discrimination which people were trying to fight; and people lived pretty predictable lives — but there was a strength in the era in the sense that there was “community spirit” and there was strong representation of the interests of most workers and citizens in the political process. To this end, Reich notes the efforts of organised labor and the fact that many CEOs of corporations in that era were “corporate statesmen” — their profits were assured, they had little competition, they were oligopolies prepared to make deals and set ingrained standards of operation that saw “countervailing forces” between the need to make money and the need to serve a greater, intangible social good (“Democratic Capitalism”).

Subsequent chapters — “The Road to Supercapitalism; Of Two Minds”; “Democracy Overwhelmed”; and “Politics Diverted” — provide an insightful discussion of how that ‘not so golden age’ began to unravel. What separates this work from many others and what makes it so refreshing is that Reich actually acknowledges how complex this process has been. There is no one “bad guy” who took away that proverbial “white picket fence”. Rather, many factors come in to play. With the emergence of cheap labor in, for example, Asia, corporations could dramatically slash their main expense — labor — by manufacturing offshore. With the emergence of big pension funds and a culture of investment, increasing pressure was exerted on CEOs to make the so-called ‘tough decisions’ to increase profits. Technology not only decreased the need for labor in some industries. It also meant that there was increased competition — new players could enter the market easily and cheaply, so loyalty to old corporate giants was challenged — they, too, had to conform to the new competitive set of rules. CEOs steering all of these companies became like “stars” who commanded large salaries, and a corporate culture of largesse, that separated the extremely rich from the extremely poor, was accelerated.

Throughout the above discussion and in his final words in his chapter “A Citizen’s Guide to Supercapitalism”, Reich, in my view, makes his real contribution to scholarship:

•    The role of us as consumers and investors — instead of sheeting home blame for society’s woes to external forces, Reich asks how much we ourselves have contributed to it. We enjoy the deals we get from cheap labor and many of us still actually keep the TV switched on when the Nine news reports (as it did on Saturday May 31 2008 at 6pm) that Angelina Jolie may have given birth to Brad Pitt’s twins — according to one website. We show a reluctance to spend more money to pursue higher priced goods that would allow local workers to keep high paying jobs. We seem addicted to the cult of celebrity.

•    The need to have legislation and regulation that embeds the standards we say we value — Reich laments the tendency people have to look on corporations as humans, rather than bundles of contracts driven by the profit motive. He notes that, when a company like McDonalds starts promoting good health food options, it may be because the market demands that focus and not through some innate desire of that company to look after people’s health. In fact, notes Reich, the job of a McDonalds’ CEO is to make money under the law.

And that ultimately is Reich’s point — the law as it currently stands promotes profits (it allows high competition, low wages, global supply chains), not intangibles. If we do not like the way society works, then we should change the rules of the game. Reich does not preach that there is one pathway and he does not seek to have supercapitalism abandoned for a non-market alternative. Rather, he hopes to spark meaningful debate about how the legislature can regulate the worst excesses of supercapitalism so we can all enjoy a better quality personal life.

Critique of the Argument

Under the ballasts of that broad argument, Reich undertakes many interesting studies — some of classic American competition cases involving the likes of Google and AT&T; and, of most interest, the American system of political lobbying.  In Reich’s view it is lobbying and the amount of money it now takes for Americans to win government that has led to the disenfranchisement of individual voters towards a situation where large corporate entities set the political agenda.

Having lived in Dallas, Texas, on sabbatical, the year after Enron, I appreciate and accept the crux of Reich’s argument. Lobbyists serve vested interests and, in the US system, where an individual politician’s voting record is extremely important (they do not simply vote on party lines), money clearly talks. Further, I know, from having lived in Dallas’ Park Cities, that there is a sickening gap between rich and poor. Each Sunday, I went to church at Highland Park United Methodist Church with former Enron employees and saw the damage that supercapitalism had done to them.

But even so, I also saw the implementation of the Sarbanes-Oxley Bill after it had been through US Congress.  I know the systems the Dallas community put in place to help its own. While those systems are not as strong as, say, an Australian government would enact (indeed, my argument in my sabbatical article was consistent with Reich’s view — American governments should do more, systemically, for individuals, not just companies), the United States is not morally bereft.  And that would be my only criticism of this book. It may be a tad cynical in parts. My criticism does not take away from the strength of Reich’s overall argument, however. Rather, it gives his ultimate purpose — of fostering social debate – a stronger foothold.

Relevance of the Work to Australian audiences

In a year that has seen saturation coverage of US primaries — and Senator Barack Obama’s successful plea that people vote for “change” — undefinable though that change seems to be — the US political system is surely of interest, in itself.

But the book bears relevance to Australian life, law and political processes, also. The last month has seen questions about financial support in NSW politics and, of course,  we, too, have seen a new federal government swept to power at the peak of a boom because we were apparently at the ‘fork in the road’ just searching for something new.

Obviously, though, we are, in Australia, a somewhat more recalcitrant lot.  Through the success of campaigns such as “Your Rights at Work” to unseat one of the best economically performing federal governments in this nations history, “countervailing forces” in this country have some proven ‘street cred’.  While there is, no doubt, the need for Australians to debate the issues Reich annunciates, one cannot help but think Reich would smile if reflecting on us.

Conclusion

On the day I started reading Supercapitalism, I remember sipping coffee from my genuine Spode Blue Italian cup which, equally genuinely, was made in China, reading a copy of The Australian newspaper which I had purchased from the corner store down the road, which is run independently by a local family and looking out at the Coral Sea and Magnetic Island. At once, I was both living that quintessentially Australian life of unique physical beauty, quirky locals and a free flow of ideas and I was supporting a global supply chain.  And that is why I recommend this book2. Because it reminds us of the need to balance our capitalist pursuits and to temper them with debate and action that promotes intangibles and independent thought.

Dr. Louise Floyd Townsville 2 June 2008

Footnotes

1. Scribe Publications was voted Small Publisher of the Year in 2006. It was founded by Henry Rosenbloom in 1976. It is based in Drummond Street, North Carlton.
2. The recommended retail price is eminently reasonable at $32.98.