Power and influence in the United States are concentrated in three major sectors—government, corporations, and Wall St. African-Americans have been successful at using one of them—government—in our struggle for full participation in this society. But if Robert Reich is right, the power sector we’ve been leaning on is the wrong one for the 21st century.
Reich is a professor of public policy at the University of California at Berkeley, and served as Secretary of Labor in the Clinton administration. In his new book, “Supercapitalism: The Transformation of Business, Democracy and Everyday Life” (New York, Alfred A. Knopf, 2007), he argues that the forces of capitalism—corporations and Wall St.—are overwhelming the forces of democracy—government, labor unions, and grassroots political organizations—to the detriment of the common good. It’s a forceful and compelling argument. And it does not augur well for African-Americans.
Reich defines Supercapitalism as a dramatic shift in the U. S. and world economies to a ruthlessly competitive market system, in which consumers and investors have been big winners.
“Meanwhile,” he argues, “the democratic aspects of capitalism have declined. The institutions that undertook formal and informal negotiations to spread the wealth, stabilize jobs and communities, and establish equitable rules of the game—giant oligopolies, large labor unions, regulatory agencies, and legislatures responsive to local Main Streets and communities—have been eclipsed. Corporations now have little choice but to relentlessly pursue profits…Democratic capitalism has been replaced by supercapitalism.”
Reich traces the dawn of the era of Supercapitalism to the1970s, when deregulation, the advent of global supply chains, and the migration of powerful new technologies such as semiconductors, fiber optics, and the Internet from the laboratories of the Pentagon to the world of business sent the U. S. and world economies soaring.
“The real explanation” for the triumph of capitalism and the decline of democracy, Reich writes, “involves the way technologies have empowered consumers and investors to get better and better deals—and how these deals, in turn, have sucked relative equality and stability, as well as other social values, out of the system.”
Following the deregulation of the U. S. financial industry in the mid-70s, Reich argues, Wall St. became extremely effective at aggregating the power of investors to force corporate executives to maximize the market value of their companies. If they failed to do that, he says, capital moved quickly and efficiently to more profitable companies, with dire consequences for the laggards.
Corporations responded to Wall St.’s imperatives by becoming equally efficient at aggregating the power of consumers to provide innovative products at low prices. Wal-Mart is the poster child for this phenomenon, Reich notes, using huge economies of scale, relentless pressure on suppliers, and aggressive employment practices to make available a wide variety of goods and services at rock-bottom prices.
Most Americans—African-Americans included—benefit from Supercapitalism, Reich argues. As investors, we like high returns in our pension plans, mutual funds and 401k’s. And as consumers, we’ve come to expect great products at bargain prices, with high-quality customer service available at the touch of a telephone or computer keypad.
But the consequences of Supercapitalism are not so benign for us as citizens, according to Reich. Wal-Mart can’t offer the bargains we find on its shelves without keeping its employees’ wages low and cutting their benefits to the bone. Energy companies can’t heat our homes and power our cars at today’s price levels without polluting the environment and producing global warming. Corporations can’t maximize profits without compensation practices that create a level of income inequality we’ve never seen before in the history of this country.
Something’s badly out of balance in the era of Supercapitalism, Reich says. He locates the imbalance in the widely differing effectiveness of capitalism and democracy in performing their separate and often conflicting jobs.
Capitalism’s job, he says, is straightforward—to grow the economic pie. And, he argues, corporations and Wall St. are performing that job superbly. Democracy’s jobs are much more complicated: determining how the slices of the pie should be divided up, and setting the rules under which capitalism operates. And the institutions of democracy, he argues, are failing in their performance of those tasks.
So what does all of this mean for African-Americans? Does Supercapitalism affect us any differently than it affects other Americans?
African-Americans, like everyone else who lives in this country, are consumers, investors and citizens. As consumers, we benefit from the wide selection of products and services, innovative new offerings, and low prices that Supercapitalism breeds. In fact, because we consume a higher proportion of our incomes than other Americans do, we probably benefit more from Supercapitalism’s consumer impact than most other Americans.
As investors, however, we do not derive the same benefits from Supercapitalism as our white and Asian neighbors do. That’s because we devote a much smaller share of our household incomes to investments than they do.
According to a recent survey conducted by Ariel Mutual Funds and the Charles Schwab Corp.:
• African-Americans are half as likely to be investors as whites are, even when demographic factors such as age, income, gender, family structure, education are held constant;
• 40% of African-Americans with household incomes of $50,000 or more have no money in stocks, compared with just 25% of whites;
• African-Americans who enroll in retirement plans save a median amount of $173 per month, compared with $252 for whites;
• Middle-class African-American households on average have just $48,000 in savings, while their white counterparts hold more than twice that amount, at $100,000.
But it is in our roles as citizens that we suffer most from the effect of Supercapitalism. The issues that are most important to our continued progress toward the social and economic mainstream of this country—education, health care, criminal justice, economic opportunity—are more likely to be addressed in the realm of democracy than in the realm of capitalism.
But as democracy withers under the onslaught of Supercapitalism, our ability to use its levers—courts, legislatures, regulatory agencies—withers apace. And until we learn how to manage the power of post-industrial capitalism, resident in corporations, on Wall St., in Silicon Valley and in the new media that are eclipsing the traditional ones, African-Americans are likely to be net losers in the era of Supercapitalism that Robert Reich so convincingly describes.