Reich takes on 'free market' myth

by Vinnie Rotondaro

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By Robert B. Reich
Published by Knopf, $26.95

An impasse exists in the debate between liberals and conservatives over the economy.

Liberals look out over a growing sea of inequality and say that markets need to be better regulated.

Conservatives counter by drawing a theoretical line in the sand. They say that the kind of regulation liberals want is un-American, that it runs counter to capitalism by impeding the "free market." This market needs to be free, they say. It is the guiding spirit of American capitalism. It's what makes our world go round.

Those arguments are totally fictitious, says Robert Reich, former secretary of labor and a popular political economist.

Reich's new book, Saving Capitalism: For the Many, Not the Few, relies more on common sense and recent economic history than economic theory. He dismisses the disagreement between government interventionists and "free market" defenders as a "meaningless debate."

His tone is no-nonsense. Capitalism is a system, he writes, manmade and mutable. There is no godlike "free hand" ready to save the day if only the government would butt out and ax its rules and regulations.

Markets are systems, Reich states. They're artificial. There are always rules and regulations in a market. A government's economic policies do not "intrude on the free market," he explains. "They constitute the free market. Without them there is no market."

This is all a false dilemma, in other words. The debate is not about government "intrusion" or market "freedom," but about power and who wields it.

"The invisible hand of the marketplace is connected to a wealthy and muscular arm," Reich writes.

"Real decisions" tend to be "hashed out behind closed doors, in negotiations influenced disproportionally by giant corporations, big banks, and wealthy individuals with enough resources to be heard. Their money buys lobbyists, campaign contributions, public relations campaigns, squadrons of experts and studies, armies of lawyers, and quiet promises of future jobs."

And so the notion of the "free market" becomes a kind of a smokescreen used by the very rich to continue rigging a system they've already rigged to their benefit.

Reich echoes Pope Francis when he says that shot-callers are increasingly helped by "the fact that the underlying rules are well-hidden in an economy where so much of what is owned and traded is becoming intangible and complex."

In the apostolic exhortation Evangelii Gaudium, Francis warned of a "new tyranny ... invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules."

Reich writes, "Few ideas have more profoundly poisoned the minds of more people than the notion of a 'free market' existing somewhere in the universe, into which government intrudes."

We live in less and less of a democracy, he contends. The "free market" myth helps to draw attention away from a "vicious cycle" where "economic dominance feeds political power, and political power further enlarges economic dominance."

"Widening inequality of wealth and income ... is not due solely to globalization and technological changes that reward the very well-educated and well-connected while punishing those without these advantages," he writes. "Rather, widening inequality has become baked into the building blocks of the 'free market' itself."

This cycle is fed by corruption, but not outright bribery. Instead, it produces a kind of subtle "seduction," Reich writes, making a distinction that brings to mind the work of Zephyr Teachout, the former Fordham University law professor who gave Andrew Cuomo a run for his money in the 2014 New York State Democratic primary election.

Teachout, who authored the well-received Corruption in America: From Benjamin Franklin's Snuff Box to Citizens United, argues that we face a crisis of definition, of what corruption means. She calls it a fundamental political problem that courts now define corruption in increasingly narrow ways, saying that the new definitions leave out important, common-sense psychological considerations.

Similarly, Reich states, "Few if any public officials in the United States solicit or receive direct bribes. ... It is simply easier for officials to choose a path that's been carefully laid out for them by lobbyists, paid experts, and smart and experienced lawyers."

Reich does much explaining and synthesizing in this book. He lifts up the hood of the economic system to examine the myriad ways in which the "free market" debate is used to mask and propel corruption. He puts various realities -- like the "meritocratic myth," the "mechanisms" behind high CEO pay, rise of "the working poor," the rise of "non-working rich," and the "declining bargaining power of the middle" -- into context.

He finishes on an optimistic note, saying it is possible, nay likely, that a "countervailing power to our political-economic system" will be restored.

Why? "Because the bottom 90 percent of Americans ... have far more in common, economically, than they do with the top executives of large corporations, the Wall Street crowd, or America's wealthy," he writes.

According to Reich, "The only way to reverse course is for the vast majority who now lack influence over the rules of game to become organized and unified" and become aware of what the economy really is.

Just how this will be done, God only knows.

[Vinnie Rotondaro is NCR national correspondent. His email address is]

A version of this story appeared in the Oct 9-22, 2015 print issue under the headline: Reich takes on 'free market' myth.

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