AFTERSHOCK

Former Secretary of Labor Reich (Public Policy/Univ. of California, Berkeley; Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, 2007, etc.) argues that America will not have a sustained economic recovery until the middle class has more buying power.

In this call for reform, the author writes that the increasing concentration of wealth among a small percentage of Americans was the main culprit in the destabilization of the U.S. economy in 2008. For three decades, the wealthy reaped inordinate benefits from a growing economy while middle-class wages stopped climbing. As the rich spent only a fraction of their fortunes (“The sheer magnitude of the task of spending obscene amounts of money can be surprisingly challenging”), they deprived the economy of the multiplier effect of many millions of dollars. Instead of trying to rebalance the distribution of income, the federal government deregulated, privatized and celebrated the idea of free markets. The middle class coped for a time, working longer hours, sending more women into the work force and borrowing as much as possible. Then came the crash. Now, in a period of aftershock, many Americans are moving from distrust to anger over an economy that seems certain to bring high unemployment and lower real wages for years to come. Before their resentments slow economic growth or open the door to demagogues, the author writes, massive structural reforms are needed to reestablish shared prosperity. Reich examines such “practical and doable” reforms as higher taxes on the rich; a “reverse income tax” to supplement the wages of the poor and middle class; a carbon tax on fossil fuels, with revenues going toward wage supplements; more widespread unionization; and strong campaign-finance laws. He notes, however, that it may take another deep recession to spur such action. Reich draws heavily on the thinking of banker and economist Marriner Eccles, who blamed a similar but worse economic trauma—the Great Depression—on the vast accumulation of income in the hands of the wealthy in the ’20s, which siphoned purchasing power away from other Americans.

Lucid and cogent.