Saving Capitalism

This book follows up the author's earlier Supercapitalism, in which he discusses the dangerous undermining of democracy by capitalist elites. The situation has become more acute since I reviewed the earlier book, with economic inequality and political discontent at record levels. The author reverts to the older expression, current when I myself learned economics, of political economy. This reminds us that economics and politics are related and, crucially, that economic and political power can shape markets for their own benefit. The author reminds us that the free market is not some abstract and neutral concept, but is rather shaped by interests for their own benefit. In the last 30 years, this has been increasingly the financial and political elite – CEOs now earn 200 times the average wage, when it was 20 in the 1970s. Meanwhile, the average wage in real terms has declined from $35 to just over $10.

The first part analyses the five building blocks of capitalism in terms of property, monopoly, contracts, bankruptcy and the enforcement mechanism. Market power can maintain more monopolistic prices, while revolving doors between government and industry ensure continuing influence and, in the case of Monsanto, an army of lawyers is employed to defend their corporate interests. In addition, there has been considerable consolidation, for instance in banks, where the five largest now control 45% of banking assets where the figure was 25% in 2000. The second part considers pay and work, exploding the myth of executive pay being related to meritocracy as tautological and a 'fabricated logic'. It turns out that CEO pay has also been driven by the award of stock options, which in turn encourages short-term thinking.

The third part is above countervailing power. It is clear that there is widespread social discontent as expressed in the results of recent elections, and there is an urgent need for a countervailing power to capitalism. Although the reader can appreciate the absolute necessity for this, the way in which this might come about is as yet unclear and we know that existing powerful interests will defend their positions from behind a free-market smokescreen demonising government interference. The author suggests a number of necessary reforms, including on campaign finance, and the shifting balance from shareholders to stakeholders in terms of the make-up of corporations. He also looks at trends in different types of work - routine production services, in-person services and symbolic-analytic services. It is clear that the economic model of mass production by many for mass consumption by many no longer holds, and in the future is likely to be 'unlimited production by a handful for consumption by whoever can afford it'. Hence his support for the idea of a universal income, which is now widely discussed, including recently on France Culture. I wholeheartedly agree with Paul Krugman that this is a very good guide to the state we are in - essential reading.