Reviewed by Shannon Bradley~
This book, published in 2015 examines how the term “free market” has been used by those satisfied with the status quo to justify continuation of policies and practices that undermine the power of the underprivileged. The author discusses how we arrived at our current state, how it relates to historical events as well as possible solutions to the economic crisis facing all of us. He explains that the current system is not simply unjust, it is unsustainable.
First, Reich states that the idea of a free market is that the market should be allowed to exist and function without government intervention. The absence of government intervention causes the market to be more efficient, and the consequences to individuals and companies are just part of the process. Reich asserts that in contrast, markets should be governed so that the rules are fairer for everyone and that those in favor of a free market actually use the term as a disguise for supporting policies and practices that favor the wealthy.
According to Reich, those who govern need to make decisions regarding the “Building Blocks of Capitalism”. Ownership of property should be regulated to ensure that buying and selling is done fairly, and that the property is something that should be sellable in the first place. Government should ensure that monopolies are not allowed to exist so that consumers have choices and employees are not subject to unfair practices. Contracts that allow undue pressure and coercion should be illegal, and bankruptcy laws should be examined to make sure they are working favorably for everyone. Finally, rules are no good without proper enforcement. Those who break the law need to be held accountable, with appropriate consequences to prevent future wrongdoing.
Certain historical events have played a major role in shaping our current economic state, according to Reich. Among those described in the book was the decision by the Supreme Court in Citizens United v. Federal Election Commission in which corporations gained the status of personhood. This opened the floodgates to massive political spending by large corporations. Corporations have become extremely influential in changing the rules in their favor. Using attorneys and lobbyists, they have managed to establish monopolies, lengthen patents, stifle trade unions, increase executive salaries while they lower employee salaries and block employees lawsuits with arbitration contracts. However, history also shows that the balance of power can shift, such as when Sherman’s Antitrust Act passed in 1890 after public outrage over Wall Street control of the economy.
Reich also details the flawed thought process of those not in power by explaining how political party divisions keep people preoccupied while corporations quietly exert influence over people and policies. An example of this is a law that prevents Americans from buying pharmaceuticals from foreign pharmacies, thereby eliminating foreign competition. Another flawed thought process is employees thinking that they are not worth any more than they are paid, when they are not paying attention to where all the company profits are going. CEO pay has risen exponentially while the average worker has lost ground. One of the most interesting charts in the book shows the “Distribution of Average Income Growth During Expansions”. Back around 1950, the bottom 90% received 80% of the growth and the top 10% received 20%. The numbers kept moving toward equal measures of growth for the bottom 90% and the top 10% until around 1980. Then the top 10% began to rapidly outpace the 90%, ending with the 90% at -15% from 2009-2012. Reich states that the current trend is not sustainable, because in order for the economy to keep growing, the workers have to be able to afford the products being produced. He describes a needed “countervailing power” for balance. Complicating matters is the emergence of technological innovations that will cause many jobs to be eliminated.
Some of the suggestions Reich offers to make the market more fair include limiting patents, stopping the formation of monopolies, taxing estates, changing the tax rates, and providing a basic minimum income for all Americans. He also emphasizes how important it is for people to understand what is going on and to work together to make things better for everyone.