This report will give you a synopsis of Robert Reich’s Saving Capitalism: For the Many Not the Few and whether the issues raised may or may not be important to business in the future. It will also give strategies businesses could consider to deal with the future implications of the issues Reich raises. It will also address how these issues may impact the upcoming US Presidential Election in 2020.
In Saving Capitalism: For the Many Not the Few, Robert Reich emphasizes that many Americans want to be heard but don’t feel they have a voice in the political arena. The middle class wants the same thing they wanted 30 years ago, a better life for them and their families. Americans have little trust in today’s economic and governmental systems. They believe the system is rigged; helping those in the wealthy classes (the few) while hurting the middle class and working poor (the many). The anger this issue is causing is creating a divide among or nation.
Reich gives the example that all the money earned in an average middle-class household goes upward to corporations, CEO’s, and shareholders. As corporation’s profits are growing, the middle-class wages are shrinking. Many Americans work two or three jobs but still struggle to make ends meet. Their wages are not rising with the rate of inflation. They are having to pay outrageous prices for necessities due to corporate greed. Many young people are strapped with student loan debt and are not finding jobs.
As the wealth goes to the top so does political power. The upper class has more and more ability to influence the rules of the game. Corporations and CEO’s are getting more powerful in Washington and therefore getting more power over the legislative process. Businesses persuade our congress to make laws that favor them by threatening to stop donating to their campaigns.
Reich does not believe that there is such thing as a free market. For a free market to exist, there would be no government interference. Currently, our government is setting the rules and creating legislation that is being influenced by the large corporations. Such rules are to do with property, monopoly, contracts and bankruptcy. This was evident in 2008 when the US Government helped bailout banks during the mortgage crises instead of letting the “free market” fix itself. This is also a good example of the government helping the top level and not the working-class Americans who were behind on their mortgages.
Reich believes the problem can be fixed. He believes the America “many” need to do more than vote and pay taxes. Reich says “America needs to come together and create institutions that countervail the big wealth.” Reich believes that America is repeating history. Back in 1880 there was a similar divide and people became angry. They used that anger move things in positive direction. People organized and changed the political and economic system. Legislation started being passed to control big business and concentration of wealth. Reich has hope that we can reclaim or democracy and or economy.
The issues that Reich raises will be important to business in the future. Consumers are starting to look at the ethics of corporations and what they are doing to better our society. With quick and easy access to social media, word spreads quickly when a corporation is doing good things for our society or when they are acting immorally.
The growing CEO pay compared to the average worker is becoming a hot topic. The Securities and Exchange Commission adopted a rule that requires a public company to disclose the ratio comparing its CEO’s salary to the median compensation of its employees. This disclosure began January 1, 2017 (“SEC adopts rule,” 2015).
Based on the AFL-CIO’s analysis of CEO pay they calculated a pay ratio of 361:1. “In 2017 CEO’s of S&P Index companies received, on average, $13.94 million in total compensation. America’s production and nonsupervisory workers earned only $38,613” (Executive Paywatch, n.d.).
This transparency could trigger more divide and Americans will demand change. Perhaps, legislation will be initiated to complete Reich’s work during the Clinton administration to end the tax break for CEO’s on all compensation.
The issue of corporate power in our government is an issue for businesses as well as our representatives. With the rise in the cost of medication, this issue is becoming apparent with the pharmacy and health industry. The biggest outrage started a couple of years ago when the price of an EpiPen skyrocketed. Today we are looking at the same issue with insulin medication. Insulin users are rationing their medications or not buying it at all. An article on the Washington Post website states, “According to IBM Watson Health data, Sanofi’s popular insulin brand Lantus was $35 a vial when it was introduced in 2001; it’s now $270. Novo Nordisk’s Novolog was priced at $40 in 2001, and as of July 2018, it’s $289.” Some families budget up to $1,700 per month for their insulin costs (‘What happens when”, 2019).
When people are having to choose between life and death, this creates a bigger distrust Americans have with the government and corporations. Another example Reich gave of corporate power influencing our legislation was the Medicare Modernization Act. This piece of legislation looked positive since it helped our senior citizens pay for prescription medication, but it also barred the government from interfering and being able to negotiate cheaper prices for drugs. This was a measure to protect “Big Pharma” which will give them a market and political advantage.
I have become interested in health and natural healing. I listen to health podcasts and watch several health documentaries. There are issues with the food and health industry influencing our government from doing what is right. Studies have shown that increasing whole healthy foods and eliminating highly refined and processed food will often reverse some of the chronic illnesses that American’s are having to take medications for. We are a nation that is taking the most medications but are still the sickest. The food and pharmacy industry use their power and finances to lobby against legislation that will make any attempt to reduce America’s consumption of these processed foods.
I’ve also seen firsthand the struggle the small American farmer is facing, such as the farmer in Reich’s documentary. I grew up on a small farm in North Dakota and experienced the classic example of all the money going upward. When we sold our grain, I remember thinking how much money we had. In reality, we were left with very little after paying back the loans that were used to purchase seed, fertilizer and machinery. It is tough for the small farmer to compete against the big conglomerates, who are getting the highest share subsidies from the US government. According to an article by Chris Edwards, the US government contributes more than $20 billion in subsidies to farmers. The biggest share of subsidies goes to the largest 10% of farms (Edwards, 2018). My brother still tries to keep the farm going, but he also has a full-time job with a construction company to survive.
Corporations could take the strategy of self-regulation to deal with some of these issues. They could take the first step to fix what is wrong and do what is right. With the data of the pay inequality between its CEO and workers, shareholders and other stakeholders should demand better pay and health care benefits for the average worker. A CEO should not get bonuses until all the corporation’s full-time workers are making a wage that is, at minimum, above poverty level.
Many corporations have Corporate Social Responsibility policies. Those policies often include the welfare of their employees along with ethical standards. A CEO’s pay may be legal, but the question is, is it ethical? A reduction in the CEO to worker pay ratio should be a measurable goal on all Corporate Social Responsibility reports.
I anticipate the upcoming 2020 presidential election is going to be another close and contentious race. I don’t think it will be one that will bring Americans together. We saw from the election of Trump that America is fed up with the current political system and the same old politicians. Trump promised to “drain the swamp” and “Make America Great Again” by getting rid of the corruption in Washington and creating jobs our middle-class Americans once had. America spoke and a non-politician was elected as President of the United States.
Trump’s promises are not coming to fruition, and he’s had one scandal after another. Americans are still looking for the change they were hoping Trump would bring. “The Many” are looking for a candidate who will bring fairness to the government and give them a voice. America is likely to support another non-politician or someone along the lines of Bernie Sanders. Although Reich indicates the divide is not necessarily Democrats vs. Republicans, I think after the 2016 election it is now. With Howard Schultz’ talk about running on the independent ticket, Democrats are already battling to persuade him not to as they do not have the confidence their party line will beat Trump. I get the sense it is going to be another election of division rather than unity.
With consumerism at the level it is, I often wonder if the majority of Americans are really struggling. I do understand our working poor are suffering and that needs to be fixed. I do agree that corporate power and government corruption needs to be fixed. But at the same time when I look at social media, I get the feeling many Americans want the government to take care of their necessities so they can afford luxuries. People are complaining about the high cost of everyday necessities, while at the same time our houses are jammed packed with stuff we don’t need or use. The money that we spent on those unnecessary items went upward to the corporations and CEO’s, giving them more power. Now we are paying for people to come in to help us organize and get rid of our over consumption, often being socially irresponsible and sending it to the landfill.
Consumers need to be part of the solution as well as the businesses and government. Americans are pleading for government to step in so they can afford their basic needs. American’s are pleading for businesses to be more socially responsible. Each of us also needs to examine what we are doing at an individual level. We need to examine what we are spending our money on and where. Vote with your dollar. Research companies and spend your money with those you believe are making an impact in the areas you believe in.
There is a divide among the American nation, the divide is growing between the upper class and our middle class that is shrinking. The pay ratio between the executive members of a corporation and the average worker is growing. The average citizen is losing their voice in government as the power is going to the upper-class. Citizens are becoming angry and loosing trust in our economic and political system.
There is hope we can fix this. We need to do more than complain. Citizens need to come together and unite for our voices to be heard. Don’t expect someone else to do it for us. Act by getting involved in discussions with our community leaders, neighbors and representatives. Go to the open houses our representatives hold to let them know your ideas and concerns. Above all, treat each other with dignity and respect regardless of what side the political spectrum or social class you fall.
