Supercapitalism: The Transformation of Business, Democracy and Everyday Life
robert reich's book explains the new power structure. it reads like a cautionary tale for african-americans
2008-01-08
By Hal Logan

Power and influence in the United States are concentrated in three major sectors—government, corporations, and Wall St.  African-Americans have been successful at using one of them—government—in our struggle for full participation in this society. But if Robert Reich is right, the power sector we’ve been leaning on is the wrong one for the 21st century.

Reich is a professor of public policy at the University of California at Berkeley, and served as Secretary of Labor in the Clinton administration.  In his new book, “Supercapitalism:  The Transformation of Business, Democracy and Everyday Life” (New York, Alfred A. Knopf, 2007), he argues that the forces of capitalism—corporations and Wall St.—are overwhelming the forces of democracy—government, labor unions, and grassroots political organizations—to the detriment of the common good.  It’s a compelling argument.  And it does not augur well for African-Americans.

Reich defines Supercapitalism as a dramatic shift in the U. S. and world economies to a ruthlessly competitive market system, in which consumers and investors have been big winners.

“Meanwhile,” he argues, “the democratic aspects of capitalism have declined.  The institutions that undertook formal and informal negotiations to spread the wealth, stabilize jobs and communities, and establish equitable rules of the game—giant oligopolies, large labor unions, regulatory agencies, and legislatures responsive to local communities—have been eclipsed.  Corporations now have little choice but to relentlessly pursue profits…Democratic capitalism has been replaced by Supercapitalism.”

Reich traces the dawn of the era of Supercapitalism to the1970s, when deregulation, the advent of global supply chains, and the migration of powerful new technologies such as semiconductors, fiber optics, and the Internet from the laboratories of the Pentagon to the world of business sent the U. S. and world economies soaring. 

Following the deregulation of the U. S. financial industry in the mid-70s, Reich argues, Wall St. became extremely effective at aggregating the power of investors to force corporate executives to maximize the market value of their companies.  If they failed to do that, he says, capital moved quickly and efficiently to more profitable companies, with dire consequences for the laggards.  The power of consumers was aggregated in much the same way.

As investors, we like high returns in our pension plans, mutual funds and 401ks.  And as consumers, we’ve come to expect great products at bargain prices, with high-quality customer service available at the touch of a telephone or computer keypad.

But the consequences of Supercapitalism are not so benign for us as citizens, according to Reich.  Wal-Mart can’t offer the bargains we find on its shelves without keeping its employees’ wages low and cutting their benefits to the bone.  Energy companies can’t heat our homes and power our cars at today’s price levels without polluting the environment and producing global warming.  Corporations can’t maximize profits without compensation practices that create a level of income inequality we’ve never seen before in the history of this country.

Reich sees the problem as an imbalance in the widely differing efficacies of capitalism and democracy in performing their separate and often conflicting jobs. 

Capitalism’s job, he says, is straightforward—to grow the economic pie.  And, he argues, corporations and Wall St. are performing that job superbly.  Democracy’s job is much more complicated:  determining how the slices of the pie should be divided up, and setting the rules under which capitalism operates.  The institutions of democracy, he argues, are failing in their performance of those tasks.

So what of African-Americans?  Does Supercapitalism affect us any differently than it affects other Americans?

African-Americans, like everyone else who lives in this country, are consumers, investors and citizens.  As consumers, we benefit from the wide selection of products and services, innovative new offerings, and low prices that Supercapitalism breeds.  In fact, because we consume a higher proportion of our incomes than other Americans do, we probably benefit more from Supercapitalism’s consumer impact than most other Americans.

As investors, however, we devote a much smaller share of our household incomes to growing our assets, and so, do not derive benefits from Supercapitalism at the same return rate as our white and Asian neighbors. 

But it is in our roles as citizens that we suffer most from the fallout.  The issues that are most important to our continued progress toward the mainstream—education, health care, criminal justice, economic opportunity—are more likely to be addressed in the realm of democracy than in the realm of capitalism. 

But as democracy withers under the onslaught of Supercapitalism, our ability to use its levers—courts, legislatures, regulatory agencies—withers apace.  And until we learn how to manage the power of post-industrial capitalism, resident in corporations, on Wall St., in Silicon Valley and in the new media that are eclipsing the traditional ones, African-Americans are likely to be net losers in the era of Supercapitalism that Reich so convincingly describes.