Supercapitalism | Robert B. Reich

Summary of: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life
By: Robert B. Reich


In ‘Supercapitalism: The Transformation of Business, Democracy, and Everyday Life,’ Robert B. Reich examines the evolution of capitalism in the United States, focusing on the shift of power away from citizens and toward consumers and investors. He analyzes how economic trends have weakened democracy and widened the income gap between the rich and the poor. Reich provides an in-depth look at the three pillars of post-World War II capitalism: corporations, labor, and government, and how the emergence of supercapitalism has disrupted their balanced and collaborative relationship. The book summary provides a comprehensive overview, detailing the technological advancements that enabled supercapitalism, the resulting benefits and disadvantages, the influence of corporate lobbying on politics, and the complex role of corporate social responsibility.

The Tradeoff of American Capitalism

American capitalism has been successful in creating wealth for individuals and companies alike. However, the shift of power away from citizens to consumers and investors has caused economic hardships which have unevenly affected all classes. The use of market interests rather than the interests of the population has hurt American democracy and increased inequality. Though consumers and investors have sway over corporations, citizens have lost their ability to influence government, causing a large divide between the rich and poor and a lack of confidence in the government’s abilities. This is a dramatic shift from previous decades where a balance of trade unions, corporations, regulatory agencies, community organizations and political parties allowed for growth of the middle class and a reduction in income inequality. Thus, supercapitalism has caused a tradeoff where Americans have gained in some areas but suffered in others.

The Three Pillars of US Capitalism

Between the end of World War II and the mid-70s, the US economy was sustained by three pillars: corporations, labor, and government. Corporations were dominant in each industry, investing their profits in plants and equipment, while managerial compensation was based on rank and seniority. Trade unions represented about a third of the workforce and negotiated uniform pay and benefits throughout a given industry. The government ensured that no one interest dominated the others, regulating monopolies and providing necessary services such as telecommunications, power, and transportation. Tax policies supported a broad defense program that included highways, education, market expansion, and direct spending on weapons and aerospace. Through these pillars, hourly workers received a big enough share of the economic pie to move into the middle class, consuming U.S.-made products rolling out of local factories. Strikes were rare, and production and profits were steady. These pillars worked together to sustain U.S. capitalism in its heyday.

The Cost of Democratic Capitalism

Democratic capitalism brought balance and a middle-class, but it was expensive, inefficient, and favored corporate interests. CEOs saw themselves as “corporate statesmen,” putting their country’s interests before stockholder gains. Return on stocks was mediocre, and products were lower in quality due to regulations and lack of competition. Companies like Wal-Mart squeezed wages to drive costs out of the supply chain.

The system of democratic capitalism achieved remarkable balance among different interest groups, benefiting society with productivity, profitability, stable employment, a broad-based middle class, and an upsurge in consumption of U.S.-made goods. Corporate leaders saw their roles as balancing all stakeholders’ interests, from employees to communities to the nation. However, the economic perspective of democratic capitalism was costly and inefficient. Regulations, trade union power, and an uncompetitive economy led to high prices and reduced product quality, with mediocre returns on stocks. Investors had no say in CEO decisions. The system also favored the country’s interests over stockholders’ gains, and corporate leaders saw themselves as “corporate statesmen.” To drive supply chain costs down, companies like Wal-Mart squeezed their suppliers’ wages, and the stock market was almost insignificant to most people. Democratic capitalism’s promises of balance and equality came at a high price, reflecting corporate interests over consumer interests.

Cold War Technologies and Supercapitalism

The U.S. government invested in technologies such as the Internet, satellite communications, container shipping, fiber optics, and aeronautics during the Cold War era. These technologies paved the way for supercapitalism, enabling companies to develop supply chains, improve efficiency, and increase productivity. However, CEOs became more replaceable than ever under pressure to lower prices and increase profits. The market became efficient at responding to individual desires for better deals but failed to respond to goals that the society could achieve together.

The Pros and Cons of Supercapitalism

Supercapitalism has brought undeniable economic benefits, but it has also given rise to several problems. While investors are earning higher returns and consumers have access to better-quality goods at affordable prices, some companies prioritize profits over values such as health and the environment. The book explores the impacts of financial deregulation on various industries and advocates for a renewed focus on balancing the needs of all stakeholders, including the public at large.

Supercapitalism has fundamentally transformed the economic landscape. By prioritizing competitive advantage and profitability above all else, corporations have been able to deliver remarkable savings and new technologies to consumers. Wal-Mart, often criticized by liberals, is an excellent example of a company that provides immense value to both shareholders and shoppers. Through economies of scale and efficient supply chain management, the retail giant saves shoppers from $100 billion to $200 billion every year, or an average of $600 per family.

Deregulation has enabled formerly regulated industries such as air travel and telecommunications to thrive in a highly competitive landscape. For instance, air travel cost $35 per passenger mile in 1962; by 2000, it had dropped to less than $15. Southwest Airlines alone has saved travelers $20 billion. Similarly, telecommunication costs have decreased by half or more, and people can now use Voice-over-Internet Protocol (VoIP) to call any country in the world for free.

However, not everything about supercapitalism is rosy. Healthcare costs, for instance, have risen steeply, although this is partly due to the development of new medical technology that saves lives and enhances health. Many corporations are solely profit-driven and have little regard for their impact on the environment or society. The book points out that the corruption of knowledge is also rampant, with experts being paid to provide half-truths or outright lies in support of corporate interests.

The financial deregulation that has enabled market success has also created numerous problems. Companies that focus solely on the bottom line may cut corners and ignore safety, health, and environmental concerns. The book argues that consumer-investor interests are so dominant that hardly anyone questions the system, leading to a society where corporations wield incredible power. To counter this trend, the book advocates for a renewed focus on balancing the needs of all stakeholders, including the public at large, rather than solely aiming to maximize profits.

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