As I elaborate in Part III, the solution is not to create more or less government. The problem is not the size of government but whom the government is for. The remedy is for the vast majority to regain influence over how the market is organized. This will require a new countervailing power, allying the economic interests of the majority who have not shared the economy's gains. The current left-right battle pitting the "free market" against government is needlessly and perversely preventing such an alliance from forming.
As I will explain, the biggest political divide in America in years to come will not be between the Republican and Democratic parties. It will be between the complex of large corporations, Wall Street banks, and the very rich that has fixed the economic and political game to their liking, and the vast majority who, as a result, find themselves in a fix. My conclusion is that the only way to reverse course is for the vast majority who now lack influence over the rules of the game to become organized and unified, in order to re-establish the countervailing power that was the key to widespread prosperity five decades ago.
While this book focuses on the United States, the center of global capitalism, the phenomena I describe are increasingly common to capitalism as practiced elsewhere around the world, and I believe the lessons drawn from what has occurred here are as relevant to other nations. Although global businesses are required to play by the rules of the countries where they do business, the largest global corporations and financial institutions are exerting growing influence over the makeup of those rules wherever devised. And the growing insecurities and cumulative frustrations of average people who feel powerless in the face of economies (and market rules) that are not working for them are generating virulent nationalist movements, sometimes harboring racist and anti-immigrant sentiments, as well as political instability in even advanced nations around the globe.
I believe that if we dispense with mythologies that have distracted us from the reality we find ourselves in, we can make capitalism work for most of us rather than for only a relative handful. History provides some direction as well as some comfort, especially in America, which has periodically readapted the rules of the political economy to create a more inclusive society while restraining the political power of wealthy minorities at the top. In the 1830s, the Jacksonians targeted the special privileges of elites so that the market system would better serve ordinary citizens. In the late nineteenth and early twentieth centuries, progressives enacted antitrust laws to break up the giant trusts, created independent commissions to regulate monopolies, and banned corporate political contributions. In the 1930s, New Dealers limited the political power of large corporations and Wall Street while enlarging the countervailing power of labor unions, small businesses, and small investors.
The challenge is not just economic but political. The two realms cannot be separated. Indeed, the field on which I draw in this book used to be called "political economy"-- the study of how a society's laws and political institutions relate to a set of moral ideals, of which a fair distribution of income and wealth was a central topic. After World War II, under the powerful influence of Keynesian economics, the focus shifted away from these concerns and toward government taxes and transfers as means of both stabilizing the business cycle and helping the poor. 1 For many decades this formula worked. Rapid economic growth generated widespread prosperity, which in turn created a buoyant middle class. Countervailing power fulfilled its mission. We did not have to attend to the organization of the political economy or be concerned about excessive economic and political power at its highest rungs. Now, we do.
In a sense, then, this book harkens back to an earlier tradition of inquiry and a longer-lived concern. The book's optimism is founded precisely in that history. Time and again we have saved capitalism from its own excesses. I am confident we will do so again.
Note: The emergence of economics as a discipline distinct from political economy began in 1890 with the publication of Alfred Marshall's Principles of Economics. The new discipline sought to identify abstract variables applicable to all systems of production and exchange and paid little or no attention to the distribution of those resources or to a specific society's legal and political institutions. The study both of economics and of many other aspects of society thereafter began shifting from historically specific political, moral, and institutional relationships to more universal and scientific "laws." John Maynard Keynes's General Theory of Employment, Interest, and Money (1936) dominated American economic policy from the end of World War II until the late 1970s.
Reich, Robert B. (2015-09-29). Saving Capitalism: For the Many, Not the Few (Kindle Locations 190-195). Knopf Doubleday Publishing Group. Kindle Edition.
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