From Robert B. Reich, a public policy professor at the University of California and formerly President Clinton’s secretary of labour, have come a breakthrough book on the clash between capitalism and democracy.
In “Supercapitalism” Reich sets out to write a book about the problems that exists in this world such as rising inequality, environmental degradation and a dysfunctional health and educational system. The book is aimed at America, but stretches its tentacles over an increasingly globalized world. The wonderful thing with Reich’s book is that he starts by making it clear how we cannot hope to solve our problems, without first understanding what forces have caused them. A stroke of genius is also Reich’s notion of the three roles we have as people in a society. We are all consumers and investors as well as citizens. These roles allow Reich with great precision to argue how social critics are wrong to attribute the problems of the world to increased greed and to capitalism in general. Today’s corporate and political leaders are no different, he says, from their earlier counterparts. What has changed is that new technology and global supply chains has made the economic environment dramatically more competitive. Blaming single individuals is pointless.
One of the main pillars of Reich’s book is the notion that these developments in the economy have turned traditional capitalism into a globalized, internet-driven, turbocharged capitalism. He makes it very clear that while supercapitalism is doing remarkably well in enlarging the overall economic pie, democracy, charged with caring for all citizens, is struggling under the burden of this new supercapitalism.
Reich’s argument can thus be boiled down into one simple sentence: don’t blame the companies, blame governments and in the end ourselves as citizens. By carrying out this loop back to us, the people, he recognises the truth in Milton Friedman’s aphorism that “the business of business is to make a profit, not to engage in socially beneficial acts”. I often thought that this saying was proof of Friedman’s inhumanity but it is now likely that the saying is true on a much more fundamental level for today’s society.
In line with German sociologist Niklas Luhmann, Friedman simply recognizes that modern society consists of different social spheres like politics, economy and religion. These systems have a tendency to specialize and seek influence by interpretating the world through their lens. The problem however is that these spheres are based around very different logics that cannot communicate and understand each others purpose. This is of course a great simplification, but it has relevance for society’s ability to set a course for our continued evolution. It means that the modern supercapitalized society is thus a form of advanced social anarchy with no centre and ultimately no overall direction. The modern world can best be described a bit like a ship without moorings. This partly underlines our incapacity to come to terms with the hypercomplexity of modern societies.
In short this means that while the functional specialization and professionalization of the economic system have created a larger economic pie, it has done so at the expense of growing irrationality and instability in the overall democratic system. Capitalism is because of its turbo drive forcing its logic upon other subsystems like religion, education and perhaps most importantly democracy. That is the ultimate and demoralising message of ’sociological enlightenment’ in the hands of supercapitalism.
Adam Smith first described how individuals or organizations that pursue their own narrow interests in a competitive system, often create widespread social gains - but not always. There is no natural law saying market powers are the best to regulate themselves - although many modern economic schooled people seem to think so before the current crisis. Unlike many of his modern disciples, Smith was keenly aware of the invisible hand’s limitations. Individual and greater social interests often diverge, and in such cases, greater competition can make matters worse. If a firm can cut costs by using child labour, for example, it will feel a much greater pressure to do so when competition intensifies - unless addressed by law not to do so.
If many of our social ills are thus indeed rooted in increased competition, our only recourse, Reich and I will argue, is to reinstate democracy’s superiority to the other systems and increase its independence from the other systems by law. Denouncing personal and company greed is simply wasted energy. If we want less inequality, we must make taxes more progressive. If we want cleaner air and water, we must adopt more stringent environmental laws. If we want our global economy to grow more stabile and equal across the world, we must turn the current trend of financial deregulation. The list continues and democracy seems to be the only tools capable of doing the job…
Why hasn’t government stepped in or managed to maintain its central position? Once some companies discovered they could gain an edge by influencing government decisions in their favor, rivals had little choice but to join the fray - thus creating the fundament for modern theoretical schools like public affairs, shareholder theory, the theory of the political company and ideas of corporate social responsibility. All do they make sense for the individual company pursuing success in their own economic logic, but they are making us more likely to fail our social agenda because they make companies increasingly more active on the political scene.
Following Luhmann’s and Friedman’s theoretical ideas, supercapitalism has forced companies to take on a task that they from an overall democratic perspective, not necessarily are the best agents to carry out. Reich documents in lurid detail the explosive growth of corporate lobbying expenditures and campaign contributions since the 1970s compared to government and NGO spending - a clear proof that the economic logic of supercapitalism has spilled in to democracy. You almost feel tempted to say: “how could it not?”
Reich’s book is a forceful argument that the spheres of business and politics must be kept distinct. He calls for an end to the legal fiction that corporations are citizens, as well as the illusion that corporations can be “socially responsible” until laws define social needs. Reich explains why we must stop treating companies as if they were people and hold individuals rather than corporations guilty of criminal conduct. For, as Reich says, “only people can be citizens, and only citizens should be allowed to participate in democratic decision making… “Keeping supercapitalism from further spilling over into democracy,” he writes, “is the only constructive agenda for change.”.
It’s often useful to get angry when things don’t seem to be going in the right direction. A feeling I think many citizens are left with today, as overall trust in our political system continues to decline. We feel increasingly alienated from the economic monster we have ourselves created and nurtured as consumers in pursuit of better deals - and as investors looking for increased personal wealth.
Moral ideas do however remain counterproductive unless directed at the right targets. By focusing our attention back to our own responsibility as citizens in a democracy Reich has produced one of the most important books in many years. I sincerely hope leaders of the world are studying this book intensively to come up with solutions for the structural problems modern society face in the shadow of global recession. But in the end we are all responsible, so this book is in fact a must read for all citizens in a modern economic democracy. Over the course of our history we have developed far, but we must remember to stay on the right course and don’t take democratic rights and influence for granted.
Tags: capitalism, democracy, Luhmann, Richard Reich, social change