It’s that time again for new year’s resolutions, presidential “state of the union” speeches, or simply taking stock of capitalism as we know it.
When we hear that the price of a barrel of oil is declining to below $30, should we panic, rejoice, or ignore this data point? Do you recall when it was over $100 and we didn’t know if to panic, rejoice, or ignore it? Is this simply the result of, as economic textbooks have taught us, supply and demand? Or, is something else going on here?
What are the political ramifications of the decline in oil prices? Adversaries, from Russia and Venezuela to Iran and Libya are bound to feel the pain because their domestic budgets depend on high oil prices; even so-called friendly nations, like Saudi-Arabia and Brazil feel the squeeze. Are they all our competitors now?
At home, mixed-messages abound: the stock market tumbles because oil giants are suffering and their losses are reflected in their stock prices which make up the index. Job losses are mentioned everywhere, as if the nation’s latest December upsurge in employment wasn’t real or lasting.
But wouldn’t lower oil prices, as translated into lower gas prices at the pump, not translate into greater discretionary spending elsewhere? And wouldn’t this create a domestic economic boom?
If you have a nagging suspicion that the argument about the natural wisdom of supply and demand and prices isn’t consistently applied to the market, you are not alone.
Robert Reich, the former Secretary of Labor under President Clinton, attempts to help us understand what’s wrong with American capitalism in his latest Saving Capitalism: For the Many, Not the Few (2015).
If anyone suspects Reich to be on the left of the political spectrum, he begins his analysis with the assurance that unlike Karl Marx’s prediction, capitalism isn’t inherently a bad system that will bring its own collapse.
Reich’s focus is on the rules that set up the marketplace, the political system that establishes the laws that support capitalism as an economic system. For him, it’s not the “free market” vs. “the “government,” but rather how the free market is supported by government regulations that are supposed to ensure its fairness and trustworthiness.
Democratic governments set the rules by which market mechanisms work efficiently and for all, or inefficiently and just for the few. In recalling the warnings of politicians and justices from the past century, it becomes clear that the issue for them wasn’t how to protect the free market, but how to protect democracy from the wealthy elite.
Among the ones he quotes, the most blatant was supreme court justice, Louis Brandeis, who said in 1941 that “We can have democracy or we can have great wealth in the hands of a few, but we cannot have both.”
Was his warning prescient?
As far as Reich is concerned, when about half of all the senators and representatives who leave office (regardless of party affiliation) join lobbying firms and then pressure their previous colleagues to pass legislation that protects or promotes the interests of few corporate giants, then, yes, we have a political and economic collusion. to fruition!
Likewise, the concentration of wealth in the hands of the few, as Reich reports, is quite extreme: “the six Walmart heirs together had more wealth (in 2014) than the bottom 42 percent of Americans combined (up from 30.5 percent in 2007).”
Reich calls this a “redistribution upward” or a “pre-distribution” because it’s about the rules of the game of capitalism and how “invisible” they remain from public scrutiny. These rules, from intellectual property rights and monopoly power to contractual relations between corporations and their workers to the laws of bankruptcy and the lack of regulatory enforcement, ensure that the game is rigged in favor of large corporations, Wall Street, and wealthy individuals.
The days of “stakeholder capitalism”—where what was good for General Motors was good for America—have become after the 1980s the days of “shareholder capitalism”—where CEOs make decisions that favor themselves and a few large shareholders.
Reich reminds us of “interest-group populism” that prevailed after WWII when people joined local groups and professional associations to represent their interests, and what resulted was “neither rule by majority nor by minority but by a ‘majority of minorities’.” This way of thinking was inspired by John Kenneth Galbraith who argued for a “countervailing power” to limit the power of the wealthy.
So, instead of listening to pundits that lament the loss of jobs in the oil and gas industry, let’s remember that we can become the largest oil exporting power in the world, and that we can create millions of jobs in alternative energy industries!
Raphael Sassower is professor and chair of philosophy at UCCS. He can be reached at email@example.com See previous articles at sassower.blogspot.com