According to Bill Clinton’s own labor secretary, his administration was “one of the most pro-business administrations in American history.” That labor secretary was Robert Reich, an old friend of the Clintons who was too controversial and radical a critic of business to be very influential in Clinton’s two-term presidency, dominated as it was by the Democratic Leadership Council, Robert Rubin, Lawrence Summers and other business luminaries. Clinton’s presidency embraced market capitalism so ardently that “market democracy” became a synonym for the administration’s stance on big business. The book Reich wrote about his experience as labor secretary with the telling title “Locked in the Cabinet” displayed more spleen than political savvy, but it was a revealing and acute exposition of how much less progressive the administration was in its policies and practices than in its rhetoric.

book cover

Supercapitalism: The Transformation of Business, Democracy, and Everyday Life

By Robert B. Reich

Knopf, 288 pages

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Today, back in the more comfortable setting of academia (and having moved to UC Berkeley from Brandeis), Reich has reconsidered the relationship between government and the market and produced a new book, called “Supercapitalism: The Transformation of Business, Democracy and Everyday Life.” It too is controversial and radical, but Reich has evolved and the new work’s radicalism lies in its tolerant recognition of capitalism’s essential nature as a system driven by the interests of shareholders and thus by profit; and hence in Reich’s insistence on the civic limits of “corporate responsibility” and on the inadequacy of civil society and private-sector reform as surrogates for government regulation and oversight.

“Supercapitalism” may have more impact than Reich’s earlier, more conventional anti-business perspective because in it he cedes to the market its “natural” and necessary selfishness, and expects democracy rather than capitalism to do the actual work of providing equality and ensuring social justice. By recognizing the entailments of capitalism in its new hyper-competitive global form (hence the somewhat overheated term supercapitalism), Reich builds a case for democracy on premises that traditional market liberals and neoliberals can accept. Robert Rubin would not make the argument quite the way Reich does, but he might well accept it. A Financial Times review by Clive Crook grudgingly allows as how “much of what Reich now says is even correct.”

Reich’s argument unfolds as an intriguing story about capitalism’s modern history. He first describes an earlier “Not Quite Golden Age” of capitalism where ostensible competition within national states was trumped by the reality of monopoly. Think Standard Oil or Bethlehem Steel. In that earlier age of cartels, Reich argues, government played the corrective role of trust buster and fairness guarantor. For capitalist competition to flourish, the democratic oversight of a judicious umpire state was required.

According to Reich, this earlier stage of capitalism gave way to a second stage in which globalization opened up markets and forged a new and ferocious competitiveness that made monopoly less feasible, and forced would-be corporate monopolists to seek the assistance of government in securing their privileged positions. Superheated and hyper-competitive, capitalism emerged in the new global marketplace as supercapitalism:

“The central institutions of democratic capitalism in the Not Quite Golden Age — big oligopolisitic companies, big labor unions organized by industry, and government representing communities and local interests through regulatory agencies — came undone. … Power shifted to consumers and investors. Supercapitalism replaced democratic capitalism.”

Key to these changes was a new privatized role for government. Rather than acting as a tool of the common good imposing public interests on private-market outcomes (mandating real competition, creating social safety nets), government became a tool of private interests hoping to repress or circumvent market competition. Companies that once resisted all government intervention now jockeyed for position to assure that it would favor their interests rather than those of their competitors. To take a recent example: Netscape was glad to see the Justice Department go after Microsoft not because it was interested in fairness but because it didn’t want to be pushed out of business by Microsoft’s software and hardware bundling practices.

The massive role of lobbying today, along with the corrosive role of ex-members of Congress as lobbyists, signals this new inverted relationship between government and the market. You may have thought that the effort to secure a legislative ban on offshore oil drilling in California was the work of public-interest environmentalists. Certainly environmental groups supported the proposed ban while the oil industry opposed it, but, writes Reich, “their views did not carry much weight.” The crucial opposition to the oil industry came from a rival private-market sector, the tourist industry, whose aim was to limit drilling to sites that would not adversely affect tourism.

Similarly, in October 2006 when Congress passed legislation barring credit card payments for Internet gambling, the real lobby at work was not citizens against sin but the real-world casino industry, which didn’t want virtual casinos competing with them on the Internet. Again and again, battles which under the rules of traditional democratic capitalism might have been contests between public and private interests turn out under supercapitalism to “boil down to a competitive contest between companies that would be affected differently by whatever rules emerged” from government intercession.

Hence the remarkable power of the new lobbying industry, constituted largely by retirees from the executive and legislative branches of government — by women and men able to use their access to the commonwealth to pursue the interests of private wealth. Reich reminds us that “upon leaving office, more than half of the senior officials of the Clinton administration became corporate lobbyists.” And whereas in 1970 only 3 percent of retiring members of Congress became lobbyists, 35 years later 30 percent were doing so. It is not hard to see how under these conditions democracy is “overwhelmed” and politics is “diverted” from the public to the private sector.

Today firms are urged to pursue corporate responsibility and consumers are pushed to use their private spending (or withhold spending) to underwrite public purposes. In something of a surprise, Reich embraces the late Milton Friedman’s argument that “the business of business is to make a profit, not to engage in socially beneficial acts.” Friedman’s point, writes Reich approvingly, is that companies “should not seek to accomplish social ends because companies are not the appropriate vehicles for social benevolence.” Consumers may like the idea of social responsibility but, Reich observes, are unwilling to pay for it. They may regret trade with countries whose human-rights records are dubious, like China’s, and they may criticize companies whose labor practices are less than savory, like Wal-Mart’s, but they will nonetheless purchase China’s and Wal-Mart’s cheap goods. Thus, argues Reich, we cannot and should not rely on producers or consumers to create the public goods and public regulations that are the provenance of democratic institutions. That is the task of citizens and must be done by them.Take the example of Google in China. If you want to see China’s censorship of free speech defeated, don’t expect Google to do it; its executives don’t — and shouldn’t, according to Reich — “concern themselves with the moral question of when to defy a government. They have no authority to make such a decision. They are in business to make money for their shareholders.” The way to promote human rights in China is to “pass a law barring American companies from helping the Chinese government hobble the free speech of its citizens.” Ultimately, there is no privileged role for consumers or producers in the democratic process; only citizens have a right and an obligation to secure public goods and deal with the social costs of private-market choices.

Thus does Reich consecrate the social division of labor that allows the market to make money and democracy to promote justice. In his variation of Pope Gregory’s medieval doctrine of the two swords (render under Caesar those things that belong to Caesar and unto God those that are God’s), we should as consumers and producers render unto the market the profits that are its due, and as citizens give to democracy the power to regulate and oversee that is its right.

Reich’s is a beguiling argument with much to recommend it. But it is an argument that fails to take the full measure of its own political implications. What Reich seems not to fully understand is that both traditional democratic capitalism and the new supercapitalism oppose, manipulate, infiltrate and exploit government for their own private ends. Firm by firm, sector by sector, the goal is profit-maximizing, cost-slashing monopoly — whether it is secured by preventing government from cartel-busting intervention or using government intervention to put rivals out of business.

The underlying reality is the permanent tension between private-market interests and public goods. Reich’s rather lame argument that women and men are of “two minds” about their role as choosers does not capture the fundamental clash between private and public interests, between consumerism and citizenship. Consumers are indeed torn between their desire to get cheap and diverse goods from Wal-Mart without penalizing workers (Wal-Mart lowers prices on the back of its labor force with low wages and lousy or no pensions); they want extensive choice but do not wish to wreak havoc on local communities (driving small retail stores out of business and undermining the communities these retail stores anchor).

Yet what is at stake is a veritable civic schizophrenia that pits the consumer in each of us against the citizen in each of us. More nefariously, as the market assumes the state’s sovereignty (language Reich does not use), it tries to persuade us that private consumer choices are sufficient to deal with the social consequences of private choice. They are not. There is a profound difference between private liberty (choosing what “I want”) and public liberty (choosing what “we as a community need”). It is not just a matter of a contest between a me and a we, or of balancing private preference and public goods. It is a dispute over the essential meaning of liberty, an argument about whether personal (consumer) liberty, so often trivial and insufficient, can really be a surrogate for political liberty, which alone is public and regulatory. After all, the very meaning of democratic sovereignty is that the democratic we (public liberty) always and necessarily trumps the private me (individual liberty). Only public liberty can serve the commonweal.

Reich has an inkling that our predicament has to do with the unbalancing of the relationship between markets and the state, and the subordination of the latter to the former, but he appears not to understand that these are permanent features of the relationship between capitalism and democracy, not a peculiar feature of supercapitalism. The full restoration of democratic sovereignty is the only way to treat with the malicious social consequences of private consumer choosing. Yes, as consumers we like Wal-Mart and gas-guzzling cars, but as citizens we care about justice, community and ecology, so we make public choices that limit private liberty but enhance our public liberty. It is not consumers versus workers — “consumers get great deals largely because workers get shafted” — it is consumers versus citizens.

The issue is not about how market economics works but how democracy works. It is not about overheated supercapitalism, which is ultimately not so different from the old temperate capitalism, but about underachieving democracy. The battle is not over economic doctrine, but over political ideology, a battle Reich derides or ignores. The struggle is to overcome the privatizing ideology of the right-wing neoliberals — the struggle to confront consumer capitalism’s new and pernicious practices of marketing, branding, targeting children, dumbing down adults, and totalizing our plural life-worlds in order to keep markets humming, at whatever price to democracy and the commonweal.

Reich is on the right road, but pays little heed to real political and civic allies. Capitalism is a cultural and psychological as well as an economic phenomenon, and the ethos of modern consumer capitalism is infantilizing and totalizing in ways that can be neither disclosed nor remedied by economics alone.

Retrieving democracy is the common goal for economic progressives like Reich and humanist and cultural progressives. But to triumph over private interest they must acknowledge each other and work together, recognizing that what is economic is also cultural, what is psychological is also economic, and that the ultimate struggle is political. Under neither the old capitalism, in which monopolies belied the “free” competitiveness of the market sector and opposed government intervention, nor supercapitalism, in which corporate rivals use government to quash their competitors, can the public interest be sustained in the absence of the sovereignty of citizens and the subordination of private to public liberty. The struggle for democratic sovereignty remains the common struggle.

Benjamin Barber, distinguished senior fellow at Demos in New York, is the author of numerous books, including “Jihad vs. McWorld” and “Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole.”

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