Today's free market isn't exactly free. Not according to Robert Reich, secretary of labor during the Clinton administration. Now a professor at the Goldman School of Public Policy at the University of California at Berkeley, Reich has just published his 11th book, "Supercapitalism: The Transformation of Business, Democracy, and Everyday Life." In it Reich acknowledges that the global market has afforded consumers more choices and cheaper goods. But these benefits, he warns, come at a steep price.
NEWSWEEK's Daniel Gross talked to Reich about those hidden costs, the motivations behind the rise of corporate responsibility and why Wal-Mart really isn't the enemy.
NEWSWEEK: Rather than paint big corporations as the villains, as many contemporary critiques of capitalism do, you're sympathetic to them. You even claim that corporations are victims. How so?
Robert Reich: I don't subscribe to the usual corporate conspiracy [theories]. Under Supercapitalism, consumers have a world of choice and can switch almost effortlessly to better deals. That means all businesses face far more intense competition than ever before. But that competition, although great for consumers and investors, has slopped over into politics, as companies seek to influence public policy to benefit themselves. And that has been a huge problem.
You argue that the movement for better corporate governance makes companies less likely to be socially responsible.
Yes, because as CEOs' incentives become better-aligned with shareholders', CEOs are likely to be even more ruthless in pursuit of shareholder interests. That means cutting costs more aggressively. Where do we as consumers and investors assume we get good deals from? We get them because companies and their executives are slashing payrolls, outsourcing abroad, draining our main streets of shops and offering us great deals in big-box retailers. If we don't want these sorts of social consequences, we have to have laws to stop them.
And things were different in the past?
During what I term the Not Quite Golden Age, between 1945 and 1975, consumers faced far less choice. Most industries were dominated by oligopolies, such as the Big Three in autos, and Ma Bell. Investors were lethargic, and there was very little innovation. But corporate statesmen often participated in public policy debates in ways that weren't necessarily consistent with their companies' own profitability. Jobs were far more stable than they are today. Labor unions were large and powerful. And regulatory agencies, although often captured by the industries, nonetheless paid attention to the public interest. Political parties were also far more vital, and reached down to the local level. We had a system for seeking the common good. Most Americans in that era, when asked, felt that our democratic institutions reflected our interests. That's very different from today, when the same question elicits a much more cynical answer.
But that period wasn't quite golden for everybody. Segregation was the order of the day in many parts of the country, and women faced immense barriers in the workplace.
That's why I call it the Not Quite Golden Age. At least we were making progress then: civil rights and environmental protection acts were passed; we opened the doors to women in the professions and in education. The country was far from perfect, but we had confidence in the future.
How much of this is political. Were things different in the 1990s, when you were part of the Clinton administration? And would you still be writing this book if Al Gore had won the 2000 election.
The issues I'm talking about transcend the business cycle. They were occurring during the Clinton administration, even though the nation had a boom that drove wages upward.… Democrats and people on the left tend to blame corporations for all that has gone wrong. Republicans tend to believe that the so-called free market has all the right solutions. Both sides are dead wrong. Wal-Mart is not the enemy. The problem for the left is in anthropomorphizing corporations and assuming that they are moral beings. The problem on the right is assuming that the market is a creature of nature.
What do you think about the movement among corporations to act on climate change and alternative energy?
If companies do nice things because it helps their brand image or wards off stricter regulations, in my book that's not being motivated by social responsibility, that's just good business. If companies can save money by going green, that's also good business. They ought to be doing it anyway. But under Supercapitalism companies cannot sacrifice shareholder returns or good deals for consumers in pursuit of some vision of the social good. Entry barriers are too low. If we want Google and Yahoo to stop cooperating with the Chinese and stop suppressing human rights we have to pass a law that has that extraterritorial effect. When members of Congress parade Yahoo and Google executives in front of them and scold them, that's only for the cameras.
You write that Supercapitalism has spilled over into politics, through lobbyists, paid experts and the like. Doesn't technology provide a countervailing force to big money, with groups like MoveOn, or Barack Obama's online fund-raising?
The Internet, including the blogosphere, is accounting for a more robust debate. But there's no systematic connection between what happens in the blogosphere and what happens in politics. It's no substitute for grassroots organizing with real parties and real platforms.
So what's the solution?
The solution is to erect a stronger barrier between Supercapitalism and democracy. In the book I give a list of innovations that ought to be taken. But my basic point is that nothing will happen until we—citizens and the media—get our thinking straight about what's real and what's not. We can't expect that when companies lobby and proclaim such legislation is in the public interest, that it has any bearing on the public interest. Businesses are there to represent the interests of their investors and consumers. As citizens, we have to be more aware of what's BS and what's reality.