|
America’s economic Crash of 2008 was directed closely universally at Wall Street. In his September release, entitled, Aftershock: The Next Economy And America’s Future, Robert B. Reich argues differently. He believes the real problem is structural: There’s an increasing concentration of wealth at the top, while middle class Americans struggle to maintain a decent ordinary of living.
Reich served in three national administrations, most lately as Secretary of Labor under President Clinton. He’s written a good deal of books, and is a university professor of public policy.
Three stages of progressed American capitalism substantiate Reich’s message. The initial stage (1870-1929) was one of increasing concentration of income and wealth. Stage two (1947-1975), featured more broadly shared prosperity; and stage three (1980-2010) is one of increasing wealth concentration. Reich says it’s critical for our future to get started a fourth stage where broad-based successfulness reigns.
Reich profiles Marriner Eccles, a business tycoon for the duration of the Great Depression. Largely forgotten today, Reich believes Eccle’s analysis of the underlying economic stresses of the Great Depression are applicable to the Crash of 2008. His assumption of a quick national recovery proved wrong, as we know today. President Roosevelt summoned him to Washington DC to part his financial acumen which was based on logic and experience.
Eccles chaired the Federal Reserve Board from 1934 to 1948 (the Eccles Building on Constitution Avenue in Washington DC is his memoriam). History repeats itself today, as there’s a tremendous accumulation of income amidst the nation’s wealthiest people. The result is everyone else experiences scaled down purchasing power.
The basic bargain gave workers a symmetrical percentage of the fruits of economic growth. Average laborers had sufficient purchasing power to buy what they produced.
The Great Prosperity years (1947-1975), found America as a whole, implementing the basic bargain. Almost every one who wanted a occupation could find one with good wages or at least wages that were trending upward. The US government developed the conditions for the middle class to wholly share in the nation’s prosperity.
Americans developed three coping mechanisms Reich says, to combat the growing concentration of wealth, which today are ineffective. They are:
- Women move into salaried work. Starting in the late 1970′s, women begun working to supplement family incomes and offset stagnant or declining male- earned wages. Today, the point of diminishing returns exists, as the cost of hiring outside help or childcare outperforms the evident gains of the further and added income.
- Everyone works longer hours. A growing number of people took on two or three jobs, each demanding 20 or more hours. Now, even if they may find more work, they may find no more time.
- We draw down savings and borrow to the hilt. During the Great Prosperity, the American middle class saved when it comes to 9 percent of their after-tax income. In 2008, it slid to 2.6 percent. By 2008, the typical American household owed 138 percent of it is after-tax income. Middle class buyers took on big amounts of debt as a last resort. Median wages had stopped growing and the symmetry of total income going to the middle class shrank.
The Great Recession officially begun in December 2007. The biggest divergence among it and the Great Depression is what happened next after the bubbles burst. The Great Depression inspired government policies that led to new economic order. Social insurance, improvements in the nation’s infrastructure, schools, public universities, and other initiatives, formulated a more secure, prosperous and generative America. The Great Recession has developed no new economic order.
“Technically, the Great Recession has ended,” says Reich, “But it is aftershock has only begun.” Reich says jobs will return over time, notwithstanding they’ll provide lower wages than Americans are accustomed to.
Globalization and outsourcing of American jobs overseas are ofttimes blamed for the nation’s high jobless rate. But, Reich reminds us, those elements don’t tell the whole story. Automation is key too, as a lot of service jobs including bank tellers and telephone operators are now extinct.
Based on current national conditions, Reich forecasts Election 2020. The platform of the Independent Party could triumph, with it is “clear and uncompromising message.” Included are zero tolerance of illegal immigration, increased tariffs on all imports and abolishment of The Federal Reserve Board. Its extreme agenda would be detrimental to US interests home and abroad.
Americans will become growingly outraged if the US economic scheme appears outrigged to favor the rich. Among their worries are Wall Street bailouts, hefty political effort contributions by the wealthy to protect their interests, and elite instructional probabilities for privileged children.
Reich proffers nine important solutions to aid restore the basic bargain to middle class Americans. He admits that a good deal of of his proposals are initially costly, but, over time, the gains outweigh financials. Three highlights include:
- A reemployment scheme vs. an jobless system. Today, most occupation losers never get their jobs back, and long-term jobless is high. Implement wage insurance. Here, any occupation loser who accepts employment that pay less than his or her former position would be entitled for 90 percent of the divergence for up to two years. By then, a lot of laborers would have acquired further and added skills, rendering the reward of similar past pay.
- Public goods. Sizably increase public goods such as public transportation, museums, libraries and recreational facilities. Keep them free vs. the trend in “user fees.” Public goods improve quality of life and help partly compensate for stagnant or declining wages.
- Money out of politics. As inequality has widened, big corporations, Wall Street, and their executives and traders have distorted political conclusions with their hefty donations. Recent Supreme Court conclusions protecting crusade contributions as forms of free speech need to be reversed. In the meantime, all political donations will have to go through a “blind trust,” so that no prospect ever recognise who contributed what.
These are challenging times for our nation indeed, as we adjust to the growing pains of globalization. Despite housing foreclosures, continued high unemployment, lower earnings, less economic security, widening inequality and soaring remunerate on Wall Street, Reich concludes on a voice of optimism.
He emphasizes that America, when faced with a depression, an enveloping war and other moral urgencies, has always risen to the occasion. “We will choose reform, I believe, because we are a sensible nation, and reform is the only sensible option we have.”
To learn more regarding Reich’s perspective on restoring the basic bargain to save middle class America, visit his blog at http://robertreich.org.
Aftershock The Next Economy And Americas
Updated for paperback publication, Aftershock is a brilliant reading of the causes of our current economic crisis, with a plan for dealing with it is challenging aftermath.
When the nation’s economy foundered in 2008, blame was directed almost universally at Wall Street bankers. But Robert B. Reich, one of our most experienced and trusted voices on public policy, proposes another reason for the meltdown. Our real problem, he argues, lies in the increasing concentration of wealth in the hands of the richest Americans, while stagnant wages and rising costs have forced the middle class to go deep into debt. Reich’s thoughtful and elaborate account of where we are headed over the next decades—and how we may fix our economic system—is a practical, humane, and much-needed blueprint for restoring America’s economy and rebuilding our society.
From Publishers WeeklyReich (Supercapitalism), secretary of labor beneath Bill Clinton and former economic adviser to President Obama, argues that Obama’s stimulus package will not catalyze real recovery because it fails to address 40 years of increasing income inequality. The lessons are in the roots of and responses to the Great Depression, according to Reich, who compares the speculation frenzies of the 1920s–1930s with present-day ones, while showing how Keynesian forerunners like FDR’s Federal Reserve Board chair, Marriner Eccles, diagnosed wealth disparity as the leading stress leading up to the Depression. By contrast, sharing the gains of an expanding economy with the middle class brought unexampled successfulness in the postwar decades, as the majority of workers earned sufficient to buy what they produced. Despite occasional muddled analyses (of the offshoring of industrial production in the 1990s, for example), Reich’s thesis is well argued and frighteningly plausible: without a return to the “basic bargain” (that laborers are also consumers), the “aftershock” of the Great Recession includes long-term high jobless and a political backlash–a crisis, he notes with a sort of grim optimism, that just might be painful sufficient to give hope or courage to necessary structural reforms.
Copyright © Reed Business Information, a section of Reed Elsevier Inc. All rights reserved.
From BooklistSince his tenure as secretary of labor in the 1990s, Reich has expounded his economic and political views in books, and here he reviews the recent recession. His retrospective diagnosis for the recession’s cause is simple: too much national income went to the rich, which induced the federal government and the middle class to subsist on credit, creating a bubble that inevitably burst. From his identification of stagnant buyer purchasing power as the problem, Reich’s solution unfolds with ineluctable Keynesian predictability: raise income, inheritance, and capital-gains taxes on the rich, and move the revenue down the income scale in the form of expanding programs such as Medicare and Medicaid or tax breaks such as the earned income tax credit. Reich also wants a “wage insurance” program and a carbon tax: blissfully, the federal government’s debt would not increase under such a restoration of the “bargain” amongst rich and nonrich, according to Reich. Ensured a current-events hearing by his public prominence, Reich may find his readership specified by those in tune with his short tract’s expansionist view of government. –Gilbert Taylor
Review
“Important and well executed. . . . Reich is fluent, fearless, even amusing.”
—The New York Times Book Review
“A good read. . . . [Reich] provides a thoughtful dialog when it comes to the structural troubles that led to the recent recession. . . . His ideas are worth exploring.”
—The Washington Post
“One of the clearest explanations to date of . . . how the United States went from . . . ‘the Great Prosperity’ of 1947 to 1975 to the Great Recession.”
—Bob Herbert, The New York Times
“All Americans will gain from reading this insightful, timely book.”
—Bill Bradley
“Lucid and cogent.”
—Kirkus
“Well argued and frighteningly plausible: without a return to the “basic bargain” (that workers are also consumers), the “aftershock” of the Great Recession includes a long-term high jobless and a political backlash—a crisis, he notes with a sort of grim optimism, that just might be painful sufficient to give hope or courage to necessary structural reforms.”
—Publishers Weekly
Aftershock The Next Economy And Americas Image
Aftershock The Next Economy And Americas Photo
Aftershock The Next Economy And Americas Pic
Aftershock The Next Economy And Americas Pic
Most helpful client reviews
380 of 394 humans found the following review helpful.
 An essential book supplying critical clear or deep perception into the unfeigned cause of the economic crisis
By Robert Stryzinski
AFTERSHOCK may well be the most essential book written on the current economic crisis. I say this because it offers a critical clear or deep perception that I have seen in very few other places: The rudimentary cause of our troubles is the relentless drive toward income concentration. The problem with concentrating income into the hands of a few humans is that you take cash from millions of humans who would spend almost all of it, and give it to a tiny number of people who can’t and won’t spend it — but will rather save it, gamble with it, or invest it offshore. The end result is merely too few viable buyers to drive the economy.
144 of 150 humans found the following review helpful.
“History does not repeat itself, but it at times rhymes” Mark Twain
By Johnny Na
Every middle class American will have to read this book. Many observations regarding income disparities have been written up not long back but Reich pulls the important points together in a powerful and accessible way.
Reich’s main thesis is that the current transition the US economy is under is misunderstood. Many of the policy elite (Geithner, Volcker) have repeated the intimate assert that Americans are living beyond their means. Personally I don’t discount that altogether but Reich’s clear or deep perception goes much deeper and rings truer: “The problem was not that American expended beyond their means but that their means had not held up with what the more prominent economy could and will have to have been competent to provide them.”
“We cannot have a sustained recovery until we address it. … Until this transformation is made, our economy will carry on to experience phantom recoveries and speculative bubbles, each more distressing than the one before.”
Anyone looking at the jobless info since WWII has to wonder why the jobless element of the last three recessions is so prolonged. Instead of a sharp trend up, there are long slopes of delayed returns to peak employment. (Google “calculated danger blog” and look at Dec. 2010 articles.) I believe Reich has demonstrated the main culprit this. To be clear, he is not describing the elaborate mechanics of what triggered the Great Recession. (Nouriel Roubini has a good book that I would commend for more on the financial fraud, leverage and credit risks involved – Crisis Economics: A Crash Course in the Future of Finance. ) But Reich is taking a long term view and discloses a dysfunctional trait of the US economy that no one may afford to ignore. It is this weakness that will delay the current recovery and carry on to create dandier risks in the future.
Reich draws the parallels among the Great Depression and the Great Recession, peculiarly the imbalance of wealth concentrated in less hands and middle class laborers with less income to convert into buyer demand. One of the arousing and attention holding gimmicks he found to do this was the writings of Marriner Eccles (Fed chair amidst ’34 to ’48):
“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth – not of existent wealth, but of wealth as it is presently invented – to provide men with buying power equivalent to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-1930 drawn into a few hands an increasing share of presently developed wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers refused to themselves the kind of effective demand for their productions that would warrant a reinvestment of their capital accumulations in new plants. In consequence as in a poker game where the chips were concentrated in less and less hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
Reich likewise shares a couple of powerful and disturbing graphs that show how the middle class has been squeezed and also how since the late 70s, every hour wages have not only not held up with the rise in productivity but have remained basically flat.
Another driving theme Reich presents is the “basic bargain” and he evokes Henry Ford, the man that took mass production to new heights and paid his laborers well:
“[Henry] Ford understood the basic enconomic bargain that lay at the heart of a modern, highly procreative economy. Workers are likewise consumers. Their earnings are continuously recycled to buy the goods and services other workers produce. But if net income are highly inadequate and this basic bargain is broken, an economy formulates more goods and services than it is persons are competent of purchasing.”
I was concerned early in the book that Reich would leave out some of the essential complexities of the topic but he covered related finances, politics and even consumer/voter psychology in a succinct yet informative way. His summary of changes to the labor market in the last 30+ years was very good.
His ideas for correcting this were interesting if perchance difficult to employ politically. My take away nonetheless was that this is a strong indicator of how bad he thinks the circumstance genuinely is. Many Americans may be yearning to return to “normal”. Reich is the introductory to exhaustively convince me that it is not going to happen.
This is a very quick read of 144 pages and is well worth the time.
84 of 92 humans found the following review helpful.
 Redistributing the Wealth
By Victor A. Gallis
In this concise and well reasoned book, Robert Reich shows that the origin of the “Great Recession” lay in the widening gap amongst the very rich and the middle class. In brief, middle class incomes, adjusted for inflation, have stagnated or even declined, while the very rich have assembled a more spectacular and larger part of the nation’s wealth. The nation’s wealth has without doubt been redistributed: upward.
This formulated a structural problem in the economy, since middle class laborers no longer may afford to buy the merchandise and services they produce, and the very rich cannot perchance spend the tremendous amounts of cash they accumulate. Businesses stay “profitable” by outsourcing jobs or replacing workers with technology; this compounds the middle class dilemma because a great deal of of the jobs they did are gone forever.
With a shrinking buyer base for the productions they offer, businesses can not warrant expansion, and do not create jobs. The rich, looking for places to put the huge amounts of cash they control, are attracted to speculation; new bubbles are inevitable. At the same time, outstanding wealth translates into political power, making any utile alter exceedingly difficult.
Since the difficultnesses are structural, they will have to be solved with structural changes, and Reich ends with a list of suggestions for the kinds of changes that could support direct more cash and success to middle class Americans. Many readers will think his suggestions are politically unfeasible, and while he makes a valiant stab at optimism, it is clear that Reich is very much conscious of the obstacles in the way.
Before things get better, it seems, they will have to get worse. Much worse.
See all 129 client reviews…
|
