Biden has revived democratic capitalism – and changed the economic paradigm
Robert
Reich
The president’s domestic successes offer a rebuke to
disciples of Reagan: the ‘free market’ has never existed
Mon 6 Feb
2023 01.00 EST
How can inflation be dropping at the same time job
creation is soaring?
It has
taken one of the oldest presidents in American history, who has been in
politics for over half a century, to return the nation to an economic paradigm
that dominated public life between 1933 and 1980, and is far superior to the
one that has dominated it since.
Call it
democratic capitalism.
The Great
Crash of 1929 followed by the Great Depression taught the nation a crucial
lesson that we forgot after Ronald Reagan’s presidency: the so-called “free
market” does not exist. Markets are always and inevitably human creations. They
reflect decisions by judges, legislators and government agencies as to how the
market should be organized and enforced – and for whom.
The economy
that collapsed in 1929 was the consequence of decisions that organized the
market for a monied elite, allowing nearly unlimited borrowing, encouraging
people to gamble on Wall Street, suppressing labor unions, holding down wages,
and permitting the Street to take huge risks with other people’s money.
Franklin D
Roosevelt and his administration reversed this. They reorganized the market to
serve public purposes – stopping excessive borrowing and Wall Street gambling,
encouraging labor unions, establishing social security and creating
unemployment insurance, disability insurance and a 40-hour workweek. They used
government spending to create more jobs. During the second world war, they
controlled prices and put almost every American to work.
Democratic
and Republican administrations enlarged and extended democratic capitalism. Wall
Street was regulated, as were television networks, airlines, railroads and
other common carriers. CEO pay was modest. Taxes on the highest earners
financed public investments in infrastructure (such as the national highway
system) and higher education.
America’s
postwar industrial policy spurred innovation. The Department of Defense
developed satellite communications, container ships and the internet. The
National Institutes of Health did trailblazing basic research in biochemistry,
DNA and infectious diseases.
Public
spending rose during economic downturns to encourage hiring. Even Richard Nixon
admitted “we’re all Keynesians”. Antitrust enforcers broke up AT&T and
other monopolies. Small businesses were protected from giant chain stores. By
the 1960s, a third of all private-sector workers were unionized.
Large
corporations sought to be responsive to all their stakeholders – not just
shareholders but employees, consumers, the communities where they produced
goods and services, and the nation as a whole.
Then came a
giant U-turn. The Opec oil embargo of the 1970s brought double-digit inflation
followed by the Fed chair Paul Volcker’s effort to “break the back” of
inflation by raising interest rates so high the economy fell into deep
recession.
All of
which prepared the ground for Reagan’s war on democratic capitalism.
From 1981,
a new bipartisan orthodoxy emerged that the so-called “free market” functioned
well only if the government got out of the way (conveniently forgetting that
the market required government). The goal of economic policy thereby shifted
from public welfare to economic growth. And the means shifted from public
oversight of the market to deregulation, free trade, privatization,
“trickle-down” tax cuts, and deficit-reduction – all of which helped the monied
interests make more money.
What
happened next? For 40 years, the economy grew but median wages stagnated.
Inequalities of income and wealth ballooned. Wall Street reverted to the
betting parlor it had been in the 1920s. Finance once again ruled the economy.
Spurred by hostile takeovers, corporations began focusing solely on maximizing
shareholder returns – which led them to fight unions, suppress wages, abandon
their communities and outsource abroad.
Corporations
and the super-rich used their increasing wealth to corrupt politics with
campaign donations – buying tax cuts, tax loopholes, government subsidies,
bailouts, loan guarantees, non-bid government contracts and government
forbearance from antitrust enforcement, allowing them to monopolize markets.
Democratic
capitalism, organized to serve public purposes, all but disappeared. It was
replaced by corporate capitalism, organized to serve the monied interests.
Joe Biden
is reviving democratic capitalism.
From the
Obama administration’s mistake of spending too little to pull the economy out
of the Great Recession, he learned that the pandemic required substantially
greater spending, which would also give working families a cushion against
adversity. So he pushed for the giant $1.9tn American Rescue Plan.
This was
followed by a $550bn initiative to rebuild bridges, roads, public transit,
broadband, water and energy systems. And in 2022, the biggest investment in
clean energy in American history – expanding wind and solar power, electric vehicles,
carbon capture and sequestration, and hydrogen and small nuclear reactors. This
was followed by the largest public investment ever in semiconductors, the
building blocks of the next economy.
Notably,
these initiatives are targeted to companies that employ American workers.
Biden has
also embarked on altering the balance of power between capital and labor, as
did FDR. Biden has put trustbusters at the head of the Federal Trade Commission
and the Antitrust Division of the justice department. And he has remade the
National Labor Relations Board into a strong advocate of labor unions.
Unlike his
Democratic predecessors, Biden has not sought to reduce trade barriers. In
fact, he has retained several from the Trump administration. But unlike Trump,
he has not given a huge tax cut to corporations and the wealthy. It’s also
worth noting that in contrast with every president since Reagan, Biden has not
filled his White House with former Wall Street executives. Not one of his
economic advisers – not even his treasury secretary – is from the Street.
I don’t
want to overstate Biden’s accomplishments. His ambitions for childcare,
eldercare, paid family and medical leave were thwarted by Senators Joe Manchin
and Kyrsten Sinema. And now he has to contend with a Republican House.
Biden’s
larger achievement has been to change the economic paradigm that has reigned
since Reagan. He is teaching America a lesson we once knew but have forgotten:
that the “free market” does not exist. It is designed. It either advances
public purposes or it serves the monied interests.
Biden’s
democratic capitalism is neither socialism nor “big government”. It is, rather,
a return to an era when government organized the market for the greater good.
Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.co
Sem comentários:
Enviar um comentário