Reich: How to save capitalism from itself

I'm stitching several of Robert Reich's remarks together here:

In the United States, the progressive movement in the early 20th century pursued a very similar agenda: They sought a progressive income tax, limits to campaign spending, break-ups of corporate monopolies, food safety and health regulations, labor rights, etcetera. Those changes occurred not because of a cataclysm but because political reformers had enough influence to push extremely important reforms. I am looking to those historical periods for inspiration about the future. They give me hope.

[...] In the United States, we can already see the beginning of a populist and progressive reaction to the concentration of economic wealth. I disagree with the goals of the Tea Party, but it’s important to remember that the movement began as opposition to the bail-outs of Wall Street and rejected the establishment of the Republican Party. On the Left, you had the short-lived Occupy movement. But we can see the rebirth of progressivism in the election of people like Bill de Blasio or Elizabeth Warren. They were elected on explicitly progressive platforms. And if we are to believe surveys, the U.S. public is increasingly weary of concentrated economic power. The Supreme Court decisions on campaign finance are widely greeted with dismay and anger.

[...] I have nothing but admiration for Thomas Piketty’s book, but I think that it shows a lack of political sophistication if you believe that only crises can generate waves of political reform. I believe – and I think that history bears me out – that democratic capitalism has something like a balance wheel: The public becomes deeply offended by great concentrations of economic and political power. That offense quickly moves to outrage, and that can have serious political consequences. 

Reich: "I am optimistic because I see no alternative"

Interview with Martin Eiermann

June 17, 2014 | The European

URL: http://www.theeuropean-magazine.com/robert-reich--2/8636-robert-reich-on-inequality-and-austerity

Summers: Piketty is right about the past, but the future is ours

I'm tired so I'm not going to analyze now in depth Larry Summers' analysis of Piketty's seminal, once-in-a-generation economic treatise, I'm just gonna say what Summers says Piketty's data should lead us to believe [emphasis mine]:

Perhaps the best way of thinking about Piketty’s wealth tax is less as a serious proposal than as a device for pointing up two truths. First, success in combating inequality will require addressing the myriad devices that enable those with great wealth to avoid paying income and estate taxes. It is sobering to contemplate that in the United States, annual estate and gift tax revenues come to less than 1 percent of the wealth of just the 400 wealthiest Americans. With respect to taxation, as so much else in life, the real scandal is not the illegal things people do—it is the things that are legal. And second, such efforts are likely to require international cooperation if they are to be effective in a world where capital is ever more mobile. The G-20 nations working through the OECD have begun to address these issues, but there is much more that can be done. Whatever one’s views on capital mobility generally, there should be a consensus on much more vigorous cooperative efforts to go after its dark side—tax havens, bank secrecy, money laundering, and regulatory arbitrage.

Beyond taxation, however, there is, one would hope, more than Piketty acknowledges that can be done to make it easier to raise middle-class incomes and to make it more difficult to accumulate great fortunes without requiring great social contributions in return. Examples include more vigorous enforcement of antimonopoly laws, reductions in excessive protection for intellectual property in cases where incentive effects are small and monopoly rents are high, greater encouragement of profit-sharing schemes that benefit workers and give them a stake in wealth accumulation, increased investment of government pension resources in riskier high-return assets, strengthening of collective bargaining arrangements, and improvements in corporate governance. Probably the two most important steps that public policy can take with respect to wealth inequality are the strengthening of financial regulation to more fully eliminate implicit and explicit subsidies to financial activity, and an easing of land-use restrictions that cause the real estate of the rich in major metropolitan areas to keep rising in value.

I'm no fan of Summers, yet his last two prescriptions are, I daresay, things you will never hear discussed in depth on Fox, MSNBC, CNBC, CNN or elsewhere. Wherefore the lib'rul media, indeed!

The only thing I will criticize now, is Summers' argument that "productivity" and "entrepreneurship" explain the outsized gains of U.S. managers. A look at average CEO pay among U.S. corporations and others gives the lie to this argument.  Nobody is arguing that U.S. CEOs are that much better, yet they earn orders of magnitude more than their workers.

As wonkish and un-sexy as it may be, I've talked about this before and will continue to talk about the OECD's effort to fight BEPS (tax base erosion and profit shifting) among global corporations. This is indeed a global problem, not just a U.S. problem, and the U.S. cannot hope to solve it in isolation, but must nevertheless play a leading role in ending this global "race to the bottom."

Thomas Piketty Is Right About the Past and Wrong About the Future

By Lawrence Summers

May 16, 2014 | The Atlantic

URL: http://www.theatlantic.com/business/archive/2014/05/thomas-piketty-is-right-about-the-past-and-wrong-about-the-future/370994/

Study: 19th-cent. U.S. wealth vested in slaves

I've said it before: America was a country built by slaves; and that wealth persists. To ignore that, and yet to revere our Founding Fathers who got rich on the backs of slaves, is to deny reason and history.

To wit, let's recall this brief but fascinating Bloomberg analysis last year:

The U.S. won its independence from Britain just as it was becoming possible to imagine a liberal alternative to the mercantilist policies of the colonial era. Those best situated to take advantage of these new opportunities -- those who would soon be called "capitalists" -- rarely started from scratch, but instead drew on wealth generated earlier in the robust Atlantic economy of slaves, sugar and tobacco. [...]

This recognizably modern capitalist economy was no less reliant on slavery than the mercantilist economy of the preceding century. Rather, it offered a wider range of opportunities to profit from the remote labor of slaves, especially as cotton emerged as the indispensable commodity of the age of industry.

In the North, where slavery had been abolished and cotton failed to grow, the enterprising might transform slave-grown cotton into clothing; market other manufactured goods, such as hoes and hats, to plantation owners; or invest in securities tied to next year's crop prices in places such as Liverpool and Le Havre. This network linked Mississippi planters and Massachusetts manufacturers to the era's great financial firms: the Barings, Browns and Rothschilds.

But you know... maybe that is indeed what the Tea Parties and far-right conservatives really want: a return to late 18th and early 19th-century America, when a white elite got rich on the backs of dark-skinned slaves?  What else can we infer from the Republicans' recent "work or starve" political economy?

America's Slaves Were More Valuable Than All Its Industrial Capital Combined  

By Matthew Yglesias

July 18, 2013 | Slate

Thomas Piketty and Gabriel Zucman have a new paper out (PDF) about the historical evolution of wealth in a number of different prominent countries, and it features this chart for the United States that really drives home the amazing reality of America's antebellum slave economy. The "human capital" consisting of black men and women held as chattel in the states of the south was more valuable than all the industrial and transportation capital ("other domestic capital") of the country in the first half of the nineteenth century. When you consider that the institution of slavery was limited to specific subset of the country, you can see that in the region where it held sway slave wealth was wealth.

In their discussion, the point Piketty and Zucman make about this is that slave wealth was the functional equivalent of land wealth in a country where agricultural land was abundant. The typical European wealth-holding pattern was of an economic elite composed of wealthy landowners in a environment of scarce usable land. In America, land was plentiful since you could steal it from Native Americans. That should could have led to an egalitarian distribution of wealth, but instead an alternative agrarian elite emerged that did happen to own large stocks of land but whose wealthy was primarily composed of owning the human beings who worked the land rather than owning the land itself.