Saving Capitalism: For the Many, Not the Few

In the three decades immediately following World War II, the average compensation for workers rose in lockstep with productivity gains, meaning that as the economy grew, so did America’s middle class. This continued until the late 1970s when wages began to flatten even as productivity gains continued and the economy continued to grow. The standard explanation given for this drastic turn is “market forces,” especially globalization and technological advances that have rendered working Americans less competitive. Reich argues, however, that this does not account for why the change occurred so rapidly, nor why other advanced economies did not have the same rapid transformation when facing similar forces. The reorganization of the market increased the profitability of large corporations and Wall Street while reducing the bargaining power of the middle class, resulting in an upward redistribution in which those at the top altered the rules of the game.

According to Reich, in the 1950s, America’s CEOs acted as industrial statesmen, concerned with their communities as much as personal profit. A “radically different” style of corporate ownership characterized the late 1970s and early 1980s. This included a drastic rise in corporate raiders, hostile takeovers, and leveraged buyouts.