Book Review:
Supercapitalism: The Transformation of Business, Democracy and Everyday Life
Author: R. Reich

Reich, R. (2008). Supercapitalism: The Transformation of Business, Democracy and Everyday Life Scribe, Melbourne

Reviewed by: Martin Brueckner

Supercapitalism by Robert Reich, whilst at first glance striking as a critique of corporate America, is in fact a refreshing, critical appraisal of western democracy. Reich argues convincingly that society’s condemnation of, and expectations on, the corporate sector are misplaced and ultimately a deflection from the core issue; the responsibility of citizens to acknowledge their complicity in alleged corporate wrongdoings and to affect change in corporate conduct through the democratic process and through changes in consumer and investor behaviour. Environmental harm, social imbalances and economic distortions are seen as the result of politically untamed capitalism as opposed to the excesses and moral wrongs of CEOs, company boards and their directors. In fact, according to Reich, big business merely follows the rules of the free market game in quest for profits and competitiveness. Companies’ so-called “wrongdoings” resulting in excess pollution, large job losses or community decline are sanctioned by all of us who seek maximum returns on our investments and cheap consumer goods. If we want companies to change, Reich suggests we change the rules so that they “reflect our values as citizens as well as our values as citizens and investors”.

Robert Reich is a professor in Public Policy at the University of California at Berkley, a noted liberal economist who is known more widely in his former role as Secretary of Labour under the Clinton US Administration. His work demystifies misconceptions about what can and cannot be expected of publicly listed companies, moving corporate social responsibility (CSR) out of the theoretical stalemate of business ethics into the realm of public debate and policy.

Reich opens his work by foreshadowing his line of argument that over the last 40 years capitalism has become ever more powerful while by comparison democracy has become weak and fragile. In contrast to conventional wisdom, however, Reich does not attribute these changes to a spiralling of corporate corruption and greed which have brought us not only high investment returns and low consumer prices but also low wage labour, unemployment, human right abuses. Instead, he suggests that the roles of corporations have changed from that of guardians of social and economic stability to being mere profit seeking entities for shareholder benefit. It is the beginning of this transition Reich describes in Chapter 2 “The Not Quite Golden Age”.

The Not Quite Golden Age is a period marked by what Reich describes as the extraordinary “accommodation between capitalism and democracy”. It is seen as a period during which the CEOs of corporations were “corporate statesmen” able to rely on government protection and pricing power, sheltered from global competition and industrial action. Post war America is described as a stable, almost planned economy with the public good at its core. Despite the social inequalities and economic inefficiencies of this era, US democratic capitalism ensured that the interests of middle class America were protected based on an intact social contract between the government, companies and a strongly unionised workforce. Yet, as described in subsequent chapters, a confluence of national and global events was to unravel this stability and to change America’s and the world’s corporate landscape forever.

Chapter Three, “The Road to Supercapitalism”, describes how the face of the global economy changed in the 1960s with the arrival of efficient freight technologies, cheap overseas labour and increased international competition, leading to the emergence of global supply chains. In America, burgeoning production technologies coupled with the arrival of large pension funds and the birth of a culture of investment also served to increase the pressure on CEOs to cut cost, boost efficiency and increase profits. Consequently, many American jobs were lost threatening the community cohesion and economic security that tended to characterise the “Not Quite Golden Age”. Local businesses on Main Street were replaced by large retail chains, and what was once stable employment turned into unsecure, low paying work. CEOs, however, whose “tough decisions” helped maximise shareholder wealth attained celebrity status, serving to drive up the levels of senior executive pay and over the years served to escalate income equalities increasingly visible across Western countries.

In Chapter Four, “Of Two Minds”, Reich addresses the conundrum society faces. While we as consumers and investors enjoy the fruits of supercapitalism in the form of product choice, low product prices and strong returns on our investments (the most recent economic downturn aside), we lament the loss of what once has been. Reich confronts us with the old truth that “we cannot have our cake and eat it, too”. The unconformable truth is that low consumer prices and high investment returns require companies to squeeze production costs. Our desire to have more for less puts local workers out of a job, drives down wages and puts children to work overseas.

Chapters Five, “Democracy Overwhelmed”, and Six, “Politics Diverted”, highlight the in ability of the democratic system to provide a needed counterweight to corporate dominance. The quest for profits and competitive advantage has meant that over years corporate influence in political decision making processes has increased, reducing the capacity of ordinary citizen to be heard and affect change in the political realm. NGOs and community groups and individual citizens are no match to the big business of corporate lobbying. The corporate subversion of public policy has left the public good in the hands of profit motivated companies whose responsibilities to their shareholders contractually limits the management of their broader social responsibilities. Whilst the economic beneficiaries of hardnosed corporate conduct, we as citizens criticise this lack of corporate ethics, and we question companies’ virtuousness.

The final chapter, “A Citizen’s Guide to Supercapitalism”, brings together the arguments of political failure and individual responsibility, making a well reasoned plead for the resuscitation of democratic processes and active citizenship. Reich sees corporate behaviour as an extension of social values, norms and laws. If society disagrees with certain aspects of corporate behaviour it is upon us to demand and implement change using the political process. We need to accept, however, that markets with virtue come at a premium that we need to absorb as consumers and investors.

Reich’s arguments are well structured and supported through a wealth of case examples, which illustrate vividly the US’s transition from democratic capitalism to supercapitalism. Reich’s key contribution can be seen in his unearthing of the drivers of this transition and the critical reflection he demands of his readers. Many of us might lament the loss of Main Street, but are far less willing to accept personal responsibility for this loss. Reich’s call for personal engagement and critical reflection is therefore not only timely, but also justified.

While this book makes a rounded and compelling case, two perceived weaknesses that bear note. Reich’s call for a new politic and public engagement is refreshing. Yet at the same time, calls such as these strike as na├»ve because of the way complex questions of political mobilisation and more importantly questions of power and power differentials are being addressed. How do you mobilise a detached citizenry within a system in which votes are for sale? In Reich’s defence, this was not the focus of the book. Secondly, throughout the various chapters Reich come across as an apologist for corporate misdemeanours, portraying corporations as the victims in the hands of whimsical market forces. While the pressures from competitors, consumers and investors are corporate realities, they do not fully explain nor excuse the corporate excesses we witnessed in recent years.

Notwithstanding, this is an important book which redefines public and academic debates about corporate social responsibility and public policy. It is a valuable historical account and much needed mirror for a society in need of reminding that capitalism is a social construct for which we all need to take responsibility.

Martin Brueckner
Curtin University of Technology
Western Australia