Review of Supercapitalism

The following review by me appeared in this week’s Fund Strategy.

Robert Reich blames big business and technological progress for the erosion of democracy. But his flawed thesis is self-serving and – worryingly – he calls for a lowering of living standards.

Supercapitalism is about a fundamental schism in contemporary society. Robert Reich, a professor at Berkeley and labor secretary under President Bill Clinton, argues that big business is increasingly undermining democracy. Although people have benefited enormously as consumers and investors from this trend they are losing out in their capacity as citizens. His understated conclusion is that people should be pushed into accepting falls in living standards in return for greater democracy.

Reich’s critique of contemporary capitalism is more sophisticated than many. He eschews explanations that simply attack human greed or slate conservative politicians. Reich also acknowledges that the recent era of big business has brought some substantial benefits.

But Reich’s confusion of basic categories leads him to serious errors and damaging political conclusions. The key development to understand is the demise of the role of humans as producers rather than the rise of consumption. To the extent that consumption has become more important it is largely through default. The striking trend of the past 30 years is in the reduction in importance attached to humanity’s productive role.

This productive side of humanity should not be understood simply in terms of making widgets. It needs to be put more broadly in the context of what might be called “the human subject”: the capacity of people to make and remake the world around them. The diminished sense of human subjectivity, rather than the rise in importance of consumption, is the key to understanding the trends identified by Reich.

Reich’s notion of supercapitalism has to be set against the “not quite golden age” of 1945-75. That period embodied many of the values that he holds dear: it was an era of relative equality, job security and trust. There was also a compact between labour unions and big business. Yet Reich is balanced enough to acknowledge it was far from perfect. For example, women and minorities suffered severe discrimination.

For Reich this set-up began to break down in the second half of the 1970s. New technology increased competition between corporations. This in turn led to a new era of globalisation, new production techniques and deregulation.

He acknowledges that the new era has brought enormous benefits. Thanks largely to innovations in medical science the average American lives almost 15 years longer than in 1950. Americans are also rich and have a far wider range of consumer choices than in the 1970s. Other countries too have benefited from similar developments.

However, many of the positive features of the not quite golden age have gone too. Societies have become more unequal, job security has diminished and trust in politicians has disappeared. Corporations through their incessant lobbying have, in Reich’s view, undermined the democratic process.

Against those who argue that conservative politicians, such as Ronald Reagan in America or Margaret Thatcher in Britain, are to blame for this shift Reich points out (correctly) that the shift predates their time in office. Reagan was president from 1981-89 while Thatcher was prime minister from 1979-1990 yet the shift started in the 1970s. Both leaders simply intensified an attack on the post-War consensus, particularly in relation to unions, that had started before their time in office.

However, in relation to this point Reich seems to be suffering from a temporary memory lapse. The attack on the consensus in America started in earnest under the presidency of Jimmy Carter (1977-81). It was under Carter’s presidency that Reich himself was a political appointee at the Federal Trade Commission. Reich does not deny his position but is shy of drawing any conclusions about the role of the Democrats in breaking the consensus. In Britain the Labour government of 1974-9 played a similar role in launching an assault on unions and destroying post-War institutions.

More broadly the way to understand this shift is as a response to the end of the post-War boom. After the second world war the world economy, particularly the developed countries, grew at record rates. But by the early 1970s signs of economic crisis were clear. This lead governments on both sides of the Atlantic to launch an assault on the unions and give much freer rein to business.

This trend in turn meant that ordinary people had much less of a say in their lives. Politics was no longer about competing camps or competing visions of how to organise society. Instead the era of “Tina” – as Thatcher put it “There Is No Alternative” came to the fore. The focus of politics switched to regulating individual behaviour – including such areas as drinking, smoking and even eating – rather than battling over how to organise society.

This is a much more convincing explanation for the shifts that Reich identifies than his focus on technology. Although Reich denies being a technological determinist his explanation exaggerates the role of technology and understates the role of political defeat in creating the current climate.

Reich’s outlook also leads to some deeply conservative conclusions despite his reluctance to spell them out in detail. He is in favour of “new rules of the game” (read regulation) particularly in relation to corporate lobbying. Reich seems to lack confidence in the capacity of others to counter the arguments of corporations.

More worryingly, he twice advocates “sacrifice” by ordinary people by which he seems to mean an acceptance of lower living standards. He appears to take the peculiar view that reducing living standards will somehow bolster democracy.

In reality democracy can only be achieved by a revival of politics in the proper sense of the term. This means relaunching a battle of ideas over competing visions of how to organise society. It involves a struggle that is entirely consistent with raising rather than lowering the living standards of the bulk of the population. It is Reich’s demand for sacrifice that is the antithesis of democracy.