The last great surge in productivity occurred between 1870 and 1928, when the technologies of the first industrial revolution were combined with steam power and electricity, mass produced in giant companies enjoying vast economies of scale, and supplied and distributed over a widening system of rails. That ended abruptly in the Great Crash of 1929, when income and wealth had become so concentrated at the top (the owners and financiers of these vast combines) that most people couldn't pay for all these new products and services without going deeply and hopelessly into debt -- resulting in a bubble that loudly and inevitably popped.For such a smart man it's amazing how dense Reich can be. Look at that policy agenda he just laid out. Not socialism? Give me a break. Reich just described modern "democratic socialism" to a T. That's the creeping socialism of the European welfare state, the model that's frankly bankrupting the nations of the EU. Mark Steyn wrote precisely of the Reich model shortly after Obama came to office: "The Europeanization of America."
If that sounds familiar, it should. A similar thing happened between 1980 and 2007, when productivity revolution of computers, software, and, eventually, the Internet spawned a new economy along with great fortunes. (It's not coincidental that 1928 and 2007 mark the two peaks of income concentration in America over the last hundred years, in which the top 1 percent raked in over 23 percent of total income.)
But here's the big difference. During the Depression decade of the 1930s, the nation reorganized itself so that the gains from growth were far more broadly distributed. The National Labor Relations Act of 1935 recognized unions' rights to collectively bargain, and imposed a duty on employers to bargain in good faith. By the 1950s, a third of all workers in the United States were unionized, giving them the power to demand some of the gains from growth. Meanwhile, Social Security, unemployment insurance, and worker's compensation spread a broad safety net. The forty-hour workweek with time-and-a-half for overtime also helped share the work and spread the gains, as did a minimum wage. In 1965, Medicare and Medicaid broadened access to health care. And a progressive income tax, reaching well over 70 percent on the highest incomes, also helped ensure that the gains were spread fairly.
This time, though, the nation has taken no similar steps. Quite the contrary: A resurgent right insists on even more tax breaks for corporations and the rich, massive cuts in public spending that will destroy what's left of our safety nets, including Social Security and Medicare and Medicaid, fewer rights for organized labor, more deregulation of labor markets, and a lower (or no) minimum wage.
This is, quite simply, nuts.
And this is why a second Obama administration, should there be one, must focus its attention on more broadly distributing the gains from growth. This doesn't mean "redistributing" from rich to poor, as in a zero-sum game. To the contrary, the rich will do far better with a smaller share of a robust, growing economy than they're doing with a large share of an economy that's barely moving forward.
This will require real tax reform -- not just a "Buffett" minimal tax but substantially higher marginal rates and more brackets at the top, with a capital gains rate matching the income-tax rate. It also means a larger Earned Income Tax Credit, whose benefits extend high into the middle class. That will enable many Americans to move to a 35-hour workweek without losing ground -- thereby making room for more jobs.
It means Medicare for all rather than an absurdly-costly system that relies on private for-profit insurers and providers.
It will require limiting executive salaries and empowering workers to get a larger share of corporate profits. The Employee Free Choice Act should be an explicit part of the second-term agenda.
It will require strict limits on the voracious, irresponsible behavior of Wall Street, from which we've all suffered. The Glass-Steagall Act must be resurrected (the so-called Volcker Rule is more ridden with holes than cheese), and the big banks broken up.
And it will necessitate a public educational system - including early child education - second to none, and available to all our young people.
We don't need socialism. We need a capitalism that works for the vast majority. The productivity revolution should be making our lives better -- not poorer and more insecure. And it will do that when we have the political will to spread its benefits.
Of course, it hardly helps Reich's case that the occupy movement is one big socialist revolutionary project --- and that he's an abject shill for the movement. I've written about this over and over again, for example, "Manifesto: Occupy for the Revolution," and "Occupy Wall Street: The Communist Movement Reborn."
Reich is defining socialism down --- or, more precisely, redefining capitalism up to a statist redistributionist economic system. Classic, isn't it? Words mean only what progressives want them to mean.
Added: From Elizabeth Foley, guest blogging at Instapundit, "ROBERT REICH: THE ANSWER ISN’T SOCIALISM BUT MORE WEALTH REDISTRIBUTION: Er, um, so wouldn’t that actually be more like communism? You can’t make stuff like this up."