Monday, May 14, 2012

Aftershock: The next economy and America's future

Aftershock: The next economy and America's future
By Robert B. Reich

Book Review by Richard L. Weaver II

I am not an economist, but I took a basic economics class as an undergraduate at the University of Michigan.  One does not need an economics background to understand (or appreciate) this book.  The reason it helps is simply that it provides a useful backdrop or context for Reich’s ideas.  (As a university education assists all students and graduates in offering challenging ideas for growth, development, and change, most all college courses prove useful in a variety of situations.  This is just one more of them.)

I loved Reich’s book.  First, it proves beyond a shadow of a doubt — as numerous economists have proven over and over (including, of course, Paul Krugman) — that top-down, trickle-down economics is a sham.  It didn’t work under Reagan, it isn’t working now; it hasn’t worked at any time in history, and it won’t work in the future.  It is bad economics.  As “A larger and larger portion of the economy’s winnings [go] to people at the top” (p. 3), the economy grows steadily worse.   “This is the heart of America’s ongoing economic predicament” (p. 3).  This is one of the backbone tenets of this book, and Reich puts it on the first page of his “Introduction.”

Second, it supports a thesis I have often espoused: “redistributing income from rich to poor” makes good economical sense (p. 35).  “ . . . Marriner Eccles [Reich has a chapter devoted to him because Eccles chaired the Federal Reserve Board from November 1934 until April 1948 — crucial years in the history of the American economy, and the world’s” (p. 11)] and John Maynard Keynes saw a broader economic justification for organizing the economy in such a way that the rich did not accumulate a disproportionate share to begin with: the need to maintain enough total demand” (p. 35).

The reason this book should be read by ALL Americans has to do with Reich’s basic argument: “. . . that our fundamentals are profoundly skewed, that the Great Recession was but the latest and largest outgrowth of an increasingly distorted distribution of income, and that we will have to choose, inevitably, between deepening discontent (and its ever nastier politics) and fundamental social and economic reform.  I believe,” writes Reich, “that we simply must — and will — choose the latter” (p. 5).

There are 12½ pages of notes and only 146 pages of text material.  Thus, this is a well-supported, well-written book that is both challenging (thought-provoking), and engaging (attention-holding).

I appreciated Reich’s honesty in assessing counter arguments to his own.  For example, “Some argue that there was simply no need for government intervention [to prevent the Great Recession of 2007].  The economy did better on its own, those people say, without so much government and with lower taxes on the rich.  They point,” writes Reich, “to the great expansion of the 1980s and the long recovery of the 1990s, and to the wildly exuberant bull market of the era. . . This argument is bunk,” he says.  “It equates the stock market with the economy, and turns a blind eye to the revocation of the basic bargain.  The argument does not acknowledge the consequences for an economy when the middle class lacks the means to buy with it produces” (p. 57).

If you ever listen to Robert Reich’s contributions to MSNBC (he is one of the major political economists they consult because he was labor secretary during the Clinton administration, and is currently professor of public policy at U.C. Berkeley‘s Goldman School of Public Policy), you realize how clearly and cogently he explains various economic problems and conditions.  He is straightforward and to the point.  The book is written in the same style.  Reich is always interesting, insightful, and, inevitably, cuts to the chase.

If you wonder why China does not allow its currency (the yuan) to rise freely against the dollar, Reich explains it simply and clearly on page 73.  If you want to know what the fundamental economic problem America is facing [“Americans no longer have the purchasing power to buy what the U.S. economy is capable of producing” (p. 75)], he carefully explains it (and re-explains it) throughout the book.  If you want the ideal solution to the nation’s economic problems, read about the election of Margaret Jones of the Independence Party to the presidency in 2020 and her absolutely ideal economic solutions — a delightful scenario described on pages 79-81.

If you enjoy hypothetical, projection-analysis, Reich offers readers the politics of economics from 2010-2020 (prior to the election of Margaret Jones in 2020).  It is a sobering analysis, and based on projections, it has the earmarks of a potential reality.  For example, “The first painful adjustment will be to a lower standard of living — or at least far lower than we anticipated” (p. 89).  Why not listen to a distinguished economist make his projections?  Why not listen to a person with his credentials offer a worse-case-scenario for the American economy?

In about 20 pages, “What Should Be Done: A New Deal for the Middle Class,” Reich offers eight measures to assist in solving the problem: “Unless America’s middle class receives a fair share, it cannot consume nearly what the nation is capable of producing, at least without going deeply into debt” (p. 127) The second part of the problem is political: “Widening inequality, coupled with a growing perception that big business and Wall Street are in cahoots with big government for the purpose of making the rich even richer, gives fodder to demagogues on the extreme right and the extreme left” (p. 127).

So what are his solutions (and he admits “that he cannot pretend that the following measures would remedy these problems altogether)? 1) A reverse income tax. 2) A carbon tax.  3) Higher marginal tax rates on the wealthy.  4) A reemployment system rather than an unemployment system.  5) College loans linked to subsequent earnings.  6) Medicare for all.  7) Public goods, and . . .  8) Money out of politics.  His final chapter is about how all of this could get done.

This is an excellent book.  The argument is well-explained and well-supported.  The writing is outstanding.  And, like Obama’s Debt-Commission Plan, it is similarly radical.  What the American people do not understand — or do not WANT to understand — is that in order to right the economy, it will take some suffering and sacrifice.  In a land of plenty, with people accustomed to all the accruements of a healthy life and a comfortable lifestyle, suffering and sacrifice do not sit well.  Buy this book!

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