Robert Reich’s New Book: Aftershock
Robert Reich, an author and professor of public policy at the University of California, Berkeley and a former Secretary of Labor from 1993-1997. Time magazine listed him as one of the ten most successful Cabinet members of the 20th century. The Wall Street Journal listed him as one of the ten most influential business thinkers. In his most recent book, Aftershock: The Next Economy and America’s Future, Reich argues that the underlying fundamentals of the US economy
…are fundamentally skewed, that the Great Recession was but the latest and largest outgrowth of an increasingly distorted distribution of income, and that we will have to choose, inevitably, between deepening discontent (and its ever nastier politics) and fundamental social and economic reform.
Reich believes the core problem emerged in the early 1980’s when the American middle class began experiencing stagnant wages, increased job insecurity, and widening wealth disparity compared to the richest 1 percent of the country. Reich notes that in the late 1970s, the wealthiest 1 percent received less than 9 percent of the nation’s total income. By 2007, the wealthiest 1 percent was taking in over 23 percent of the nation’s total income. Reich’s concern is that an increasing percentage of American households no longer have the purchasing power to buy what the US economy is capable of producing because a larger and larger portion of total national income is going to the top 1 percent. The last time the country experienced this concentration of wealth was 1928.
Marriner Eccles served as the president of the Federal Reserve Board from 1934 to 1948 and helped steer the US economy through the remainder of the Great Depression and World War II. In his 1950 memoirs, Eccles wrote that the major cause of the Great Depression
…had nothing to do with excessive spending during the 1920s. It was, rather, the vast accumulation of income in the hands of the wealthiest people in the nation, which siphoned purchasing power away from most of the rest.
Reich writes that the increasing degree of income inequality poses an economic threat from a financially stressed middle class that no longer has the purchasing power to keep the economy growing; and a political threat from the potential backlash from the public’s economic anxieties and resentment against big business and Wall Street. What is needed, Reich argues, is to remake the implicit bargain linking pay to production that fueled the broadly shared prosperity from 1947-1975. What is needed, Reich argues, is a new deal for the middle class.
Something to think about.