In defence of capitalism

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: corporations or their executives for the passing of this consensus. Instead, he constructs an economic argument: technological innovation has empowered consumers in terms of choice, both through reducing the costs of search, and barriers to entry. This in turn destabilised the great cartels of two or three firms that had dominated industries such as steel, automobiles, airlines and chemicals; as they faced competition or the threat of competition, their CEOs were forced to cut costs, even at the price of breaking explicit and implicit contracts with unions and of giving up their statesmanlike image. Financial innovation played a part as well: fragmented holdings were consolidated into great funds, which meant that they exerted greater control over management: CEOs could no longer “balance” the interests of those whom they technically represented with those of the wider world.

The nature of “big business” thus underwent a change. “Bigness” earlier meant that firms reaped benefits from returns of scale, some of which could be shared with government and their workforce in return for tacit acceptance of their quasi-monopolistic status. With changes in supply chains and entry costs, it began to mean something else: leveraging size into acquiring a direct voice in politics, for one. This is one of Reich’s core concerns: that declining margins and the breakdown of consensus permit rent-seeking behaviour to flourish. In one eloquent passage he compares K Street in Washington DC, where lobbying firms congregate, across two eras: in the 1960s it was filled with greasy-spoon diners and grungy offices; now, there are plush restaurants with hundred-dollar steaks and flashy offices staffed with former Senators.

Together with what he sees as an attempted takeover of government by business, and no less pernicious in Reich’s opinion, are calls for corporate social responsibility. Again, it is impossible to pigeonhole Reich: he delivers for an entire chapter an impassioned defence of the concept that a company’s sole role in today’s world is to defend its bottom-line, and that activists and officials urging other considerations on corporations are not performing any useful function. Calls such as Bill Gates’ for alteration of capitalism, he clearly thinks, are doomed to fail. Capitalism is what it is, liberal democracy is what it is, and the duty of a citizen is to try and distinguish them.