Saving Capitalism: For the Many, Not the Few

Bill Clinton (born 1975) was the 42nd president of the United States and served from 1993 to 2001. Reich served in Clinton’s cabinet and both observed and influenced the political and economic policy of his administration. As such, Reich often uses Clinton and his policies as examples and comparisons to the time of writing (2015).

Reich’s assessments of Clinton’s influence on the effects of American capitalism are mixed. Although Clinton was a Democratic president and had strong support from progressive liberals, his policies as president were very pro-business and, in some ways, exacerbated income inequality. In Chapter 11, Reich explains that the Clinton administration, in 1993, “decided to allow companies to deduct from their taxable income executive pay in excess of $1 million if that pay was linked to corporate performance—that is, if it came in the form of stock options and awards linked to share prices” (101-02). Thereafter, adds Reich, stock options boomed. For Reich, Clinton’s policy was a significant point of departure in the trajectory toward inflated executive pay and the prevailing beliefs in the myths of the free market and meritocracy.

Ronald Reagan (1911-2004) was the 40th president of the United States and served from 1981 to 1989. A former Hollywood actor and Democrat turned Republican, Reagan is a conservative icon because of his small government rhetoric and pro-business, financial deregulating policies. Reich explains in Chapter 13 that in the early 1980s, the Reagan administration loosened many banking and financial regulations “and simultaneously cut the enforcement staff at the Securities and Exchange Commission” (121). In Saving Capitalism, Reagan is a largely negative figure, whose policies led to the erosion of countervailing power, labor rights, and financial market regulation.

The United States Securities and Exchange Commission (SEC) is an agency within the federal government that enforces laws pertaining to market manipulation. Created in the aftermath of the Wall Street Crash of 1929, the SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Reich makes references to the SEC a number of times in Saving Capitalism, primarily in regard to how its enforcement of market rules has loosened in recent decades. Although Reich supports the existence and purpose of the SEC, he is critical of its weak effect in practice and its inability to enforce regulation through a combination of poor funding, reduced power, and conflicts of interest.

Technically, Wall Street is a street in the financial district of New York City, but it has become a metonym to refer to America’s financial services industry and its financial markets. It is in this way that Reich refers to Wall Street throughout Saving Capitalism. Compensation for the CEOs of large corporations and Wall Street banks has skyrocketed in recent years at the same time that workers’ wages have flattened, leading to America’s massive disparity of wealth and income. The many reasons for this disparity are the foci of Reich’s book, with Wall Street being a key figure in his argument. One of the most significant reasons in Reich’s view is that Wall Street’s influence has grown in Washington due to its increasing financial contributions to policy makers, which Reich calls a “revolving door.” Reich is highly critical of Wall Street’s role in promoting vested interests and proposes an alternative system of political funding and a firewall between Wall Street and Washington in order to limit the skewed political influence of the financially powerful.

Charles (born 1935) and David Koch (1940-2019) figure in Saving Capitalism through their influential roles as billionaire businessmen and Republican political donors. They operated Koch Industries, the second largest privately owned company in the United States. The Koch brothers were (and are) among the largest donators to libertarian and conservative political causes, with preventing a raise in the minimum wage being a major focus. Reich points out that their “political network alone spent more than $400 million,” which was more than twice as much as the 10 largest labor unions put together (173). In the run up to the 2016 elections, the Kochs joined forces with other donors to assemble a war chest of nearly $1 billion, putting their political organization “on the same scale as the Republican and Democratic parties” (178). Reich uses the figures of the Koch brothers as examples of the outsized political power of wealthy individuals, especially their ability to maintain and widen America’s inequality in wealth and power.