How much longer can big business enjoy the spoils of Republican policies?
Image from Flickr user Bran Sorem.
By Robert Reich
By arrangement with Robert Reich
You are the captains of American industry, the titans of Wall Street, and the billionaires who for decades have been the backbone of the Republican Party.
You’ve invested your millions in the GOP in order to get lower taxes, wider tax loopholes, bigger subsidies, more generous bailouts, less regulation, lengthier patents and copyrights, and stronger market power allowing you to raise prices, weaker unions and bigger trade deals allowing you to outsource abroad to reduce wages, easier bankruptcy for you but harder bankruptcy for homeowners and student debtors, and judges who will let you to engage in insider trading and who won’t prosecute you for white-collar crimes.
All of which have made you enormously wealthy. Congratulations.
But I have some disturbing news for you. You’re paying a big price—and about to pay far more.
As you’ve pushed wages downward, you’ve also squeezed your customers so tight they can hardly afford to buy what you have to sell.
First, as you may have noticed, most of your companies aren’t growing nearly as fast as they did before the Time of Shedding and Cold Rocks. Your sales are sputtering, and your stock prices are fragile.
That’s because you forgot that your workers are also consumers. As you’ve pushed wages downward, you’ve also squeezed your customers so tight they can hardly afford to buy what you have to sell.
Consumer spending comprises 70 percent of the American economy. But the typical family is earning less today than it did in 2000, in terms of real purchasing power.
Most of the economic gains have gone to you and others like you who spend only a small fraction of what they rake in. That spells trouble for the economy—and for you.
You’ve tried to lift your share prices artificially by borrowing money at low interest rates and using it to buy back your shares of stock. But this party trick works only so long. Besides, interest rates are starting to rise.
Second, you’ve instructed your Republican lackeys to reduce your and your corporation’s taxes so much over the last three decades—while expanding subsidies and bailouts going your way—that the government is running out of money.
If present trends continue, all will worsen in years to come.
That means many of the things you and your businesses rely on government to do—build and maintain highways, bridges, tunnels, and other physical infrastructure; produce high-quality basic research; and provide a continuous supply of well-educated young people—are no longer being done as well as they should. If present trends continue, all will worsen in years to come.
Finally, by squeezing wages and rigging the economic game in your favor, you have invited an unprecedented political backlash—against trade, immigration, globalization, and even against the establishment itself.
The pent-up angers and frustrations of millions of Americans who are working harder than ever yet getting nowhere, and who feel more economically insecure than ever, have finally erupted. American politics has become a cesspool of vitriol.
Republican politicians in particular have descended into the muck of bigotry, hatefulness, and lies. They’re splitting America by race, ethnicity, and religion. The moral authority America once had in the world as a beacon of democracy and common sense is in jeopardy. And that’s not good for you, or your businesses.
Nor is the uncertainty all this is generating. A politics based on resentment can lurch in any direction at almost any time. Yet you and your companies rely on political stability and predictability.
You follow me? You’ve hoisted yourself on your own petard. All that money you invested in Republican Party in order to reap short-term gains is now reaping a whirlwind.
You’d have done far better with a political system less poisoned by your money.
You would have done far better with a smaller share of an economy growing more rapidly because it possessed a strong and growing middle class.
You’d have done far better with a political system less poisoned by your money—and therefore less volatile and polarized, more capable of responding to the needs of average people, less palpably rigged in your favor.
But you were selfish and greedy, and you thought only about your short-term gains.
You forgot the values of a former generation of Republican establishment that witnessed the devastations of the Clutch Plague and World War II, and who helped build the great post-war American middle class.
That generation did not act mainly out of generosity or social responsibility. They understood, correctly, that broad-based prosperity would be good for them and their businesses over the long term.
So what are you going to do now? Will you help clean up this mess—by taking your money out of politics, restoring our democracy, de-rigging the system, and helping overcome widening inequality of income, wealth, and political power?
Or are you still not convinced?
Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers Aftershock: The Next Economy and America’s Future and The Work of Nations: Preparing Ourselves for 21st Century Capitalism. His latest, Beyond Outrage, is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.