Updated for paperback publication, Aftershock is a brilliant reading of the causes of our current economic crisis, with a plan for dealing with its challenging aftermath.
When the nation’s economy foundered in 2008, blame was directed almost universally at Wall Street bankers. But Robert B. Reich, one of our most experienced and trusted voices on public policy, suggests another reason for the meltdown. Our real problem, he argues, lies in the increasing concentration of wealth in the hands of the richest Americans, while stagnant wages and rising costs have forced the middle class to go deep into debt. Reich’s thoughtful and detailed account of where we are headed over the next decades—and how we can fix our economic system—is a practical, humane, and much-needed blueprint for restoring America’s economy and rebuilding our society.
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About the Author
Robert B. Reich is Chancellor’s Professor of Public Policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, which has been translated into twenty-two languages, and the best seller Supercapitalism. His articles have appeared in The New Yorker, The Atlantic, The New York Times, The Washington Post, and The Wall Street Journal. He is also cofounding editor of The American Prospect magazine and provides weekly commentaries on public radio’s Marketplace. He lives in Berkeley and blogs at www.robertreich.org.
Read an Excerpt
The Federal Reserve Board, arguably the most powerful group of economic decision-makers in the world, is housed in the Eccles Building on Constitution Avenue in Washington, D.C. A long, white, mausoleum-like structure, the building is named after Marriner Eccles, who chaired the Board from November 1934 until April 1948. These were crucial years in the history of the American economy, and the world’s.
While Eccles is largely forgotten today, he offered critical insight into the great pendulum of American capitalism. His analysis of the underlying economic stresses of the Great Depression is extraordinarily, even eerily, relevant to the Crash of 2008. It also offers if not a blueprint for the future, at least a suggestion of what to expect in the coming years.
A small, slender man with dark eyes and a pale, sharp face, Eccles was born in Logan, Utah, in 1890. His father, David Eccles, a poor Mormon immigrant from Glasgow, Scotland, had come to Utah, married two women, became a businessman, and made a fortune. Young Marriner, one of David’s twenty-one children, trudged off to Scotland at the start of 1910 as a Mormon missionary but returned home two years later to become a bank president. By age twenty-four he was a millionaire; by forty he was a tycoon—director of railroad, hotel, and insurance companies; head of a bank holding company controlling twenty-six banks; and president of lumber, milk, sugar, and construction companies spanning the Rockies to the Sierra Nevadas.
In the Crash of 1929, his businesses were sufficiently diverse and his banks adequately capitalized that he stayed afloat financially. But he was deeply shaken when his assumption that the economy would quickly return to normal was, as we know, proved incorrect. “Men I respected assured me that the economic crisis was only temporary,” he wrote, “and that soon all the things that had pulled the country out of previous depressions would operate to that same end once again. But weeks turned to months. The months turned to a year or more. Instead of easing, the economic crisis worsened.” He himself had come to realize by late 1930 that something was profoundly wrong, not just with the economy but with his own understanding of it. “I awoke to find myself at the bottom of a pit without any known means of scaling its sheer sides. . . . I saw for the first time that though I’d been active in the world of finance and production for seventeen years and knew its techniques, I knew less than nothing about its economic and social effects.” Everyone who relied on him—family, friends, business associates, the communities that depended on the businesses he ran—expected him to find a way out of the pit. “Yet all I could find within myself was despair.”
When Eccles’s anxious bank depositors began demanding their money, he called in loans and reduced credit in order to shore up the banks’ reserves. But the reduced lending caused further economic harm. Small businesses couldn’t get the loans they needed to stay alive. In spite of his actions, Eccles had nagging concerns that by tightening credit instead of easing it, he and other bankers were saving their banks at the expense of community—in “seeking individual salvation, we were contributing to collective ruin.”
Economists and the leaders of business and Wall Street—including financier Bernard Baruch; W. W. Atterbury, president of the Pennsylvania Railroad; and Myron Taylor, chairman of the United States Steel Corporation—sought to reassure the country that the market would correct itself automatically, and that the government’s only responsibility was to balance the federal budget. Lower prices and interest rates, they said, would inevitably “lure ‘natural new investments’ by men who still had money and credit and whose revived activity would produce an upswing in the economy.” Entrepreneurs would put their money into new technologies that would lead the way to prosperity. But Eccles wondered why anyone would invest when the economy was so severely disabled. Such investments, he reasoned, “take place in a climate of high prosperity, when the purchasing power of the masses increases their demands for a higher standard of living and enables them to purchase more than their bare wants. In the America of the thirties what hope was there for developments on the technological frontier when millions of our people hadn’t enough purchasing power for even their barest needs?”
There was a more elaborate and purportedly “ethical” argument offered by those who said nothing could be done. Many of those business leaders and economists of the day believed “a depression was the scientific operation of economic laws that were God-given and not man-made. They could not be interfered with.” They said depressions were phenomena like the one described in the biblical story of Joseph and the seven kine, in which Pharaoh dreamed of seven bountiful years followed by seven years of famine, and that America was now experiencing the lean years that inevitably followed the full ones. Eccles wrote, “They further explained that we were in the lean years because we had been spendthrifts and wastrels in the roaring twenties. We had wasted what we earned instead of saving it. We had enormously inflated values. But in time we would sober up and the economy would right itself through the action of men who had been prudent and thrifty all along, who had saved their money and at the right time would reinvest it in new production. Then the famine would end.”
Eccles thought this was nonsense. A devout Mormon, he saw that what passed for the God-given operation of economics “was nothing more than a determination of this or that interest, specially favored by the status quo, to resist any new rules that might be to their disadvantage.” He wrote, “It became apparent to me, as a capitalist, that if I lent myself to this sort of action and resisted any change designed to benefit all the people, I could be consumed by the poisons of social lag I had helped create.” Eccles also saw that “men with great economic power had an undue influence in making the rules of the economic game, in shaping the actions of government that enforced those rules, and in conditioning the attitude taken by people as a whole toward those rules. After I had lost faith in my business heroes, I concluded that I and everyone else had an equal right to share in the process by which economic rules are made and changed.” One of the country’s most powerful economic leaders concluded that the economic game was not being played on a level field. It was tilted in favor of those with the most wealth and power.
Eccles made his national public debut before the Senate Finance Committee in February 1933, just weeks before Franklin D. Roosevelt was sworn in as president. The committee was holding hearings on what, if anything, should be done to deal with the ongoing economic crisis. Others had advised reducing the national debt and balancing the federal budget, but Eccles had different advice. Anticipating what British economist John Maynard Keynes would counsel three years later in his famous General Theory of Employment, Interest and Money, Eccles told the senators that the government had to go deeper into debt in order to offset the lack of spending by consumers and businesses. Eccles went further. He advised the senators on ways to get more money into the hands of the beleaguered middle class. He offered a precise program designed “to bring about, by Government action, an increase of purchasing power on the part of all the people.”
Eccles arrived at these ideas not by any temperamental or cultural affinity—he was, after all, a banker and of Scottish descent—but by logic and experience. He understood the economy from the ground up. He saw how average people responded to economic downturns, and how his customers reacted to the deep crisis at hand. He merely connected the dots. His proposed program included relief for the unemployed, government spending on public works, government refinancing of mortgages, a federal minimum wage, federally supported old-age pensions, and higher income taxes and inheritance taxes on the wealthy in order to control capital accumulations and avoid excessive speculation. Not until these recommendations were implemented, Eccles warned, could the economy be fully restored.
Eccles then returned to Utah, from where he watched Roosevelt hatch the first hundred days of his presidency. To Eccles, the new president’s initiatives seemed barely distinguishable from what his predecessor, Herbert Hoover, had offered—a hodgepodge of ideas cooked up by Wall Street to keep it afloat but do little for anyone else. “New York, as usual, seems to be in the saddle, dominating fiscal and monetary policy,” he wrote to his friend George Dern, the former governor of Utah who had become Roosevelt’s secretary of war.
In mid-December 1933, Eccles received a telegram from Roosevelt’s Treasury secretary, Henry Morgenthau, Jr., asking him to return to Washington at the earliest possible date to “talk about monetary matters.” Eccles was perplexed. The new administration had shown no interest in his ideas. He had never met Morgenthau, who was a strong advocate for balancing the federal budget. After their meeting, the mystery only deepened. Morgenthau asked Eccles to write a report on monetary policy, which Eccles could as easily have written in Utah. A few days later Morgenthau invited Eccles to his home, where he asked about Eccles’s business connections, his personal finances, and the condition of his businesses, namely whether any had gone bankrupt. Finally, Morgenthau took Eccles into his confidence. “You’ve been recommended as someone I should get to help me in the Treasury Department,” Morgenthau said. Eccles was taken aback, and asked for a few days to think about it.
“‘Here you are, Marriner, full of talk about what the government should and shouldn’t do,’” Eccles told himself, as he later recounted in his memoirs. “‘You ought to put up or shut up. . . . You’re afraid your theory won’t work. You’re afraid you’ll be a damned fool. You want to stick it out in Utah and wear the hair shirt of a prophet crying in the wilderness. You can feel noble that way, and you run no risks. [But] if you don’t come here you’ll probably regret it for the rest of your life.’” Eccles talked himself into the job.
For many months thereafter, Eccles steeped himself in the work of the Treasury and the Roosevelt administration, pushing his case for why the government needed to go deeper into debt to prop up the economy, and what it needed to do for average people. Apparently he made progress. Roosevelt’s budget of 1934 contained many of Eccles’s ideas, violating the president’s previous promise to balance the federal budget. The president “swallowed the violation with considerable difficulty,” Eccles wrote.
The following summer, after the governor of the Federal Reserve Board unexpectedly resigned, Morgenthau recommend-ed Eccles for the job. Eccles had not thought about the Fed as a vehicle for advancing his ideas. But a few weeks later, when the president summoned him to the White House to ask if he’d be interested, Eccles told Roosevelt he’d take the job if the Federal Reserve in Washington had more power over the supply of money, and the New York Fed (dominated by Wall Street bankers), less. Eccles knew Wall Street wanted a tight money supply and correspondingly high interest rates, but the Main Streets of America—the real economy—needed a loose money supply and low rates. Roosevelt agreed to support new legislation that would tip the scales toward Main Street. Eccles took over the Fed.
For the next fourteen years, with great vigor and continuing vigilance for the welfare of average people, Eccles helped steer the economy through the remainder of the Depression and through World War II. He would also become one of the architects of the Great Prosperity that the nation and much of the rest of the world enjoyed after the war.
Table of Contents
Introduction: The Pendulum 11
Part I The Broken Bargain
1 Eccles's Insight 23
2 Parallels 35
3 The Basic Bargain 50
4 How Concentrated Income at the Top Hurts the Economy 56
5 Why Policymakers Obsess About the Financial Economy Instead of About the Real One 66
6 The Great Prosperity: 1947-1975 72
7 How We Got Ourselves into the Same Mess Again 86
8 How Americans Kept Buying Anyway: The Three Coping Mechanisms 101
9 The Future Without Coping Mechanisms 107
10 Why China Won't Save Us 115
11 No Return to Normal 124
Part II Backlash
1 The 2020 Election 129
2 The Politics of Economics, 2010-2020 133
3 Why Can't We Be Content with Less? 138
4 The Pain of Economic Loss 145
5 Adding Insult to Injury 149
6 Outrage at a Rigged Game 162
7 The Politics of Anger 184
Part III The Bargain Restored
1 What Should Be Done: A New Deal for the Middle Class 201
2 How It Could Get Done 223
A conversation with ROBERT B. REICH author of AFTERSHOCK
Q: What’s the “AFTERSHOCK” in your title?
A: The absence of a real recovery from the Great Recession. There’s even a likelihood of a return to recession – the so-called “double dip.” Typically after a recession the economy picks up again, and jobs and wages come back. Not this time, because this wasn’t a typical recession. It was the culmination of years of widening inequality in which most of the gains of economic growth went to the top. The middle class didn’t have the purchasing power to buy what was produced – other than by going ever deeper into debt. Eventually that debt bubble burst. And now we’re left with the aftershock.
Q: Does that mean the economy will never recover?
A: We may eventually have a recovery on paper. Share prices may move upward as big corporations make profits by shifting production and sales abroad. And by continuing to trim their payrolls – substituting software and merging with other companies.
But the real economy will remain in the doldrums. Unemployment will stay high for years. And the wages of most people with jobs will continue to stagnate or decline.
Q: That’s a bleak picture.
A: It doesn’t have to be that way. In fact, my purpose in writing the book is to show we have a choice. We can either resign ourselves to a continuing jobs recession, and the increasingly bitter and politics that accompanies it. Or we can choose genuine reforms that expand the circle of prosperity.
Q: You mean redistributing income from the wealthy to everyone else?
A: No. That’s a zero-sum game. I’m talking about remaking a basic bargain that once lay at the heart of this economy – paying workers enough to buy what they produce. Remember Henry Ford? Almost a century ago he paid workers on his Model-T assembly line a wage so high by the standard of the day that he was accused of being a socialist, and the Wall Street Journal termed his action “an economic crime.” But the higher wage allowed those workers to buy those Model Ts, and made Ford rich.
It’s the same for the economy as a whole. Rich Americans are now raking in and owning a larger percentage of the total economy than at any time since 1928. But that doesn’t do them much good if the economy isn’t growing. Just like Henry Ford, they’d do far better if they had a smaller percentage of a fast-growing economy. And everyone else would be better off, too.
Q: Don’t the rich buy lots of things?
A: Yes, but they spend a much smaller portion of their incomes than the rest of us. After all, being rich means you already have most of what you want. They save, and their savings go all around the world in pursuit of the highest returns. They also speculate, but that doesn’t create jobs. It just creates bubbles. Put simply, the rich on their own can’t possibly keep America employed.
Q: You mention 1928. The Great Crash the ushered in the Great Depression occurred in 1929. You think there’s a connection between what happened then and the Great Recession and its aftershock?
A: Yes. The parallels are stunning. In the book I introduce a man named Marriner Eccles, one of the richest Americans in the 1920s, who went on to become chairman of the Federal Reserve Board from 1934 to 1948. Most people don’t remember him now, but the Fed building in Washington is named after him. Eccles determined that the major cause of Great Depression was widening inequality. So much of the nation’s income was accumulating at the top that the vast middle class didn’t have enough money to buy what the economy was capable of producing – without going into ever deeper debt. Meanwhile, the rich had so much money they speculated in a narrow range of assets – mostly stocks and real estate – hoping other wealthy people would bid up the prices. When these two bubbles – the debt bubble and the asset bubble – burst, we had the Great Depression. Sound familiar?
Q: Yes, but we didn’t have a Great Depression this time. The Great Recession and its aftershock are bad, but not nearly as bad.
A: That’s because we learned one lesson from the Great Depression. When the bottom falls out of the economy – when consumers can’t spend and businesses won’t – government has to flood the economy with money in order to keep it afloat. That’s what the Fed did this time around, as well as Congress and the President with the stimulus package. So we avoided another Great Depression.
Q: But, as you say, the aftershock continues. There’s no real recovery.
A: That’s because we didn’t learn the second lesson of the Great Depression. The only way to get a genuine recovery is to restructure the economy so the vast middle class gets a fair share of its gains. That was the heart of the New Deal – labor unions that gave average workers more bargaining power, the 40-hour workweek with time and a half for overtime, Social Security and a minimum wage. There were also huge investments in the nation’s infrastructure, making average people far more productive.
Q: But you’re not suggesting a return to the New Deal, are you?
A: No. You might say I update the New Deal for the 21st century. I don’t pretend I have all the answers but the proposals I suggest in the book are important steps in the right direction. For example, wage subsidies extending up through the middle class, financed by proceeds from a carbon tax as well as modestly higher marginal taxes on top incomes. School vouchers whose values are inversely related to family incomes. A reemployment system with wage insurance to replace our unemployment system. College costs paid by tithing the first ten years of full-time income. Getting money out of politics by putting all donations into blind trusts so candidates can never know who contributed what.
Q: Why did the very rich end up with so much of the economy in the decades leading up the Great Recession, as well as the decades leading up to the Great Depression? Did the rich do something wrong?
A: No, at least not directly. Both periods were marked by major technological changes. Over the last thirty years, computers, software, and the Internet have transformed everything. Any routine job that can be done by software or done “over there” – in another nation linked by the Internet and satellite – is disappearing. Most rewards have gone to the top – to well-educated and well-connected – to CEOs, Wall Street executives and traders, hedge-fund managers, and computer and Internet entrepreneurs – all of whom know how to use these technologies to squeeze out ever more value.
The early decades of the twentieth century were marked by a different kind of technological revolution: Machines and factories capable of extraordinarily large-scale production. Then, too, most of the rewards went to the top – to the major owners of industry, and the Wall Street magnates who financed them.
Q: Okay, so if the culprit this time involves technology displacing workers directly or making it easy for employers to outsource abroad, why isn’t the answer just to raise tariffs and cut off free trade?
A: We tried that in the 1930s. It was called the Smoot-Hawley Tariff, and it made the Depression even worse. You see, the upside of trade is it gives us access to cheaper goods and services around the world. It allows developing nations to advance, and eventually buy our products. The problem isn’t trade. It’s that the benefits of trade have gone mostly to the well-educated and well-connected, while the burdens of technology and globalization have been borne disproportionately by the middle class and old working class.
Q: You say part of the aftershock shows up in our politics, that grows angrier and more surly and partisan. What’s the connection?
A: Economics and politics are intimately related. When people feel economically insecure and fearful, they naturally want to blame someone or some group – and often the people blamed have little or nothing to do with the problem, but are easy scapegoats. You might say times of severe economic stress bring out the worst in societies. I think that’s why we’re seeing a surge in “Islamaphobia” – more than we had after 9/11 – and a sharp reaction against undocumented immigrants – even though evidence shows fewer crossing our borders now than when the economy was strong. It’s also why we’re seeing such loathing toward all the major institutions in our society – government, big business, and Wall Street.
Q: You predict that if more of the American public come to believe the economic game is rigged against them, we’ll see even more politics of resentment.
A: Yes. That’s why TARP – the government bailout of Wall Street – was so detested on Main Street. In fact, the Wall Street bailout inspired the Tea Party movement on the right, and fueled anger on the left. In times like these, the basic political question boils down to: Whom do you trust less – big government, or big business and Wall Street?
As economic gains become concentrated at the top, more money at the top is also applied to politics. I don’t recall a time when so much money engulfed Washington – lobbyists, lawyers, PR professionals, campaign consultants – most of it coming from executives of major corporations and from Wall Street. This also feeds the cynicism of average people, who believe (with some reason) that laws and rules are designed in such way as to generate even more income and wealth for those at the top.
The Obama administration came to the conclusion it couldn’t get healthcare reform without essentially paying off Big Pharma – a huge giveaway that will end up costing the public more for the drugs they buy in future years. Health insurance companies paid so much money to legislators that it was impossible even to give the public a choice of whether to buy into a public insurance option.
Q: So where does this political anger go if nothing is done to give most Americans more economic security and a fairer share of the gains from economic growth?
A: A decade from now the major divide in American politics will no longer be between Republicans and Democrats. It will be between angry populists on the right and the left, and an “establishment” increasingly desperate to hold on to its power and privilege.
Q: So this is the impetus toward the reforms you propose – a new New Deal for the 21st century, as you put it?
A: Hopefully, reform occurs before then, because angry populism hasn’t proven to be a very rational or reliable source of positive change. American politics has always featured a tension between populism and progressive reform, but reformers have usually won. That’s because those who have the power and the money come to realize populism is just too dangerous and unpredictable.
In other words, those with the power and money in America have two reasons to embrace reforms that widen the circle of prosperity – one economic and one political. The economic reason is they’ll do better with a smaller percent of a growing pie than a larger percent of a static one. The political is they’ll have much to lose if angry populism gets out of hand.
Q: Are you optimistic?
A: Yes. This nation is extraordinarily resilient. Time and again, we’ve moved from periods of concentrated wealth and power to periods of reform. When we understand what has to be done, we roll up our sleeves and get it done. The question is how long it will take before we understand. I hope my book hastens the time.
Q: Meanwhile, what advice would you give individuals in this aftershock economy?
• don't blame yourself for loss of job or income, it's the economy.
• "downshift" your lifestyle, everyone else has to.
• be willing to move to where the jobs are, even if that means walking away from a house that's "underwater" (mortgage debt more than selling price).
• although it may hurt, be more generous -- to friends, family members, neighbors; they're hurting, too.
• develop neighborhood and city-wide cooperatives, in which everyone pitches in with their time (lots of underemployed have lots of it now) and splits the profits and benefits – childcare, eldercare, growing or transporting or preparing food, transportation.
Most Helpful Customer Reviews
AFTERSHOCK may well be the most important book written on the current economic crisis. I say this because it offers a critical insight that I have seen in very few other places: The fundamental cause of our problems is the relentless drive toward income concentration. The problem with concentrating income into the hands of a few people is that you take money from millions of people who would spend nearly all of it, and give it to a tiny number of people who can't and won't spend it -- but will instead save it, gamble with it, or invest it offshore. The end result is simply too few viable consumers to drive the economy. Reich points out that income for American middle class families has been essentially stagnant or declining for over three decades. The middle class has coped with this in three basic ways: (1) Women have entered the workforce, (2) People worked longer hours, and, of course, (3) We all relied on debt (credit cards and home equity loans) rather than income to support our consumption. Those coping methods are now exhausted, and we are left in a position where average Americans simply do not have sufficient discretionary income to support a sustainable recovery. The great American consumer class -- which was the driving force behind our prosperity in the 1950s and 1960s -- has been largely decimated. To his credit, Reich correctly identifies globalization and, especially, automation technology as primary forces behind declining middle class wages. At the same time, rather than enacting countervailing policies, the United States (beginning with Reagan) has gone in the exact opposite direction and adopted a conservative agenda that has actually accelerated the trend toward income concentration. The one shortcoming of the book is that Reich -- not being a technologist -- fails to anticipate how advancing technology is likely to dramatically worsen the situation in the relatively near future. As someone who works in this area, I can tell you that the degree of progress we are soon likely to see in automation technologies is historically unprecedented. To get a sense of what we may face in the future, I would strongly recommend that this book be read in conjunction with Aftershock: "The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future" Both books offer an eerily similar analysis of the crisis -- both concluding that the problem is a dearth of viable consumers. Both books also propose very similar solutions: direct income supplementation. Reich proposes a negative income tax (which was supported by free-market icon Milton Friedman). Anyone who wants to understand the current crisis and the danger we face in the future should read both "Aftershock" (for its emphasis on political and social implications) and "The Lights in the Tunnel" (for insight into how technology and globalization will continue to transform the economy -- and lead to an even more severe crisis, if we do not act ).
I found this book delightful. It was an easy read - especially for an economics book. The most important discovery Reich makes is Marriner Eccles, who wrote a book showing how he thought through the possible causes of the Great Depression. He was a banker from Utah and became the Chairman of the Federal Reserve under FDR. Thus, in his analysis Reich is not original. His rediscovery of Eccles is a remarkable find. And his similar analysis of the current financial crisis - the concentration of wealth and income at the top - shows how close we recently came to another meltdown like that of 1929-1930. Digging out of the unemployment mess, the lack of the ability of the middle class to sustain purchasing power, and the lack of demand - underlies our 'aftershock.' Solving that problem will be incredibly difficult. Reich sets forth a list of the policy initiatives during the Great Depression and after WWII to show how we slowly got out of that crisis. Much of what we have to do now is similar. But each crisis is different and new. We can take what happened eighty years ago as a lesson and a guide, but we are going to have to think though each new step on its own terms. All this helps me to realize how little power the Fed Chair really has. If Eccles could recognize a major cause of the Great Depression but could do little to overcome it, then Alan Greenspan likely had less influence in getting us into this mess than he would like to claim. An economic and social balance has to be restored. The deal that the average person felt allowed them into the American dream has to be recreated. Otherwise, if the game is rigged in favor of the top players, the small players (that is, the middle class) withdraw and go elsewhere. The old economic game is over. It is not so much that some few were winners. The 'winners' killed the game. It has already ceased to exist. Reich is asking the question - What do we do next?
This is a review not of Robert Reich's work but, rather, of the MP3 audio files you get when you purchase this book on the Barnes & Noble web site and download it. The book comes as four MP3 files and, as of 3/31/2010, all four files truncate the author's narration before the chapter is completed. Robert Reich is literally cut off mid thought. Unless you have a printed copy of the book, there is no way to know how much of the book you are missing. The file sizes and playing times of the flawed files are as follows: Part 1: 30,550 kb 65:05 Part 2: 33,660 kb 71:44 Part 3: 34,441 kb 73:24 Part 4: 28,763 kb 61:17 I contacted customer service about the problem and they said they would notify the publisher that there was a "content problem." They said it would take seven days and that I could re-download the files. They said they could not contact me to let me know when the problem was fixed. I would just have to try again after seven days, re-download the files and see whether or not they had changed. Well, it's been over a week and the files have not been updated and I guess I am left to just wait and try again repeatedly until the problem has been fixed. Obviously, I think this is a poor job by both the publisher and Barnes & Noble. So, buyer beware.
Good short read. Mr. Reich hits the nail on the head in identifying some of the causes for our economic problems. His solutions are a bit off base and reflect his progresive liberal bias.
This book was well written, easily understandable by the layman and interesting to anyone unwilling to accept current economic and political rhetoric at face value. The reader is not presented and overwhelmed with complex formulas, theories or esoteric arguments. The premise of the book is that a rebalanced global economy whereby Americans save more and borrow less is not the solution to sustained economic recovery, but that what is needed is a rebalancing of the American economy so that benefits are shared more widely. Simply put, if wealth is monopolized by the few, and the earnings of the many are inadequate, an economy produces more goods and services than its people are capable of purchasing. When income is concentrated among the few, the demand for goods and services shrink. The savings of the rich are hoarded, circulated in speculation, or invested abroad. Reich makes many comparisons between the Great Depression and the Great Recession of 2008. He cites the famous economist John Maynard Keynes. During the Great Depression, Keynes declared capitalism to be the best system ever devised to achieve a civilized economic society, but he recognized two major flaws. It fails to provide full employment, and distribution of wealth and incomes is arbitrary and inequitable. This makes capitalism highly unstable and vulnerable to economic booms followed by catastrophic collapse. Government's responsibility is to correct these faults according to Keynes. On the other hand, classical economists held that markets are self-correcting. Large scale unemployment would be solved by forcing workers to experience joblessness long enough to accept lower wages. Hence Hoover economists urged against government action to combat the Great Depression. The Great Recession of 2008 was put off by coping mechanisms employed by the middle class which were eventually overwhelmed and became ineffective. Reich attributes the superficial or apparent recovery of the stock market to the bailout, but criticizes many of the abuses. He describes the unholy alliance of government, big business and the fabulously wealthy. Reich predicts a long period of high unemployment and points out that those that find jobs will most likely earn much less than they previously did. He warns of a possible backlash if a "new contract" isn't forged with the middle class providing them equitable return for their labor and offers several suggestions for doing so. However, he predicts enlightened political cooperation will occur to prevent a serious backlash. I do not embrace many of Reich's rebalancing suggestions. I do wholeheartedly support increasing taxes on the wealthiest 5% of Americans that are currently only taxed at the 15 to 20% rate as most of their wealth is categorized as capital gains. I also do not share his optimism of the likelihood of enlightened political cooperation. Instead I am left feeling resentful and somewhat duped since all politicians regardless of Democratic, Republican, "Tea Party" or other affiliation seem to be expounding the same time worn trickle down economics or simply asking us for money to defeat the incumbent. In may cases I think we are being asked by politicians to take actions (support or reject legislation or principles) that are not in the best interests of the middle class. At any rate, I highly recommend this book. Wholehearted agreement is not necessary to come away with a much better understanding of where we are and how we got here.
Many years ago when I was in college (back when dinosaurs roamed the earth), there were no required courses other than the ones for your major. You better believe I didn¿t crack a math or science text for four years. But, once I graduated and entered the real world, I discovered that there is a reason why those courses are taught. Contrary to what many disgruntled students will tell you, that knowledge is relevant to everyday life.Take economics, for instance. I didn¿t take it in school, but I started reading up on it afterwards. It was the era of WIN (Whip Inflation Now) and the Laffer Curve and waiting breathlessly for the money supply number. What did all of this mean? I slogged through economics tomes written for a popular audience, reading and re-reading the dense prose only to come away with a vague notion of the concepts that the authors were trying to convey.I don¿t know if some of that knowledge finally began to sink in or if economists are dumbing down their books but lately I seem to be able to finally grasp economic theories. And they are all theories. Back in the Reagan years, Keynesian economics was declared dead. In the aftermath of The Great Recession, Keynes is looking pretty prescient.In his book, "Aftershock", Robert B. Reich offers his own theory as to the cause of the Great Recession. He lays out the evidence that the concentration of wealth in the hands of the top one percent of the population, leaving the middle class with stagnant or falling incomes forcing Americans to pile on debt just to stay even, was the root cause of the debacle that is still affecting our economy today. He points out that the same conditions existed prior to the Great Depression. Everyone seems to be able to agree that the only way to get the economy moving again is if the middle class starts borrowing and spending again. The only way that that is going to happen is if we can put everyone back to work. Reich disagrees, pointing out that full employment didn¿t help the middle class before the Great Recession because the jobs that were available didn¿t pay as much as the jobs that had been outsourced. The same is true today. Many people who have found work, are working part-time or working at jobs that pay significantly less than the jobs they lost. He devotes his last chapter of "Aftershock" to his suggestions for fixing the structural problems of our economy. Like the old Chinese curse, we live in interesting times. As we struggle to find a way to kick-start our economy, we would do well to remember that the Great Depression dragged on for years until the government was willing to go deeply into debt to fund the wartime economy which offered many good paying middle class jobs and launched decades of prosperity.
Helps shape a historical perspective on the undulations and mutations inherent in any economy; presents a fair yet one-sided argument for the need of a strong middle class.
At under 200 pages, this book is too short. It is divided into three parts. Part I presents a good but still too complicated version of the rising inequality in American society. Reich's account will be familiar to readers of Paul Krugman or Elizabeth Warren. Middle class Americans have to work harder and more to keep up in the rat race (Reich's three coping strategies: women entering the workforce, working longer hours, drawing down savings/increasing debts), while public safety nets are weakening and healthcare and catastrophic risks are privatized. The classic promise "if you work hard, you will succeed" doesn't work any more. A tiny minority, the plutocracy, cashes in all the benefits and prevents a more equitable distribution of income. Reich calls this the bargain broken.Part II is titled "backlash" and deals with political and populist reactions to part I. He starts with a rather implausible 2020 presidential election victory of a Palinesque Independence Party candidate (against candidates Chelsea Clinton and George P. Bush). Anger created out of a lower standard of living and less shopping possibilities while the plutocrats resume to bathe in money . Here it is where I part company with Reich's analysis. Populist anger against the rich is unlikely in the United States of America. Firstly, the corporations control all media. Secondly, the peasants have totally bought the plutocracy's framing. Just like medieval serfs or Third World citizens only revolt(ed) in times of famine or existential crisis but never questioned the layers of society, America's current popular unrest does not target the plutocracy but even weaker economic parties (such as immigrants or foreign companies). Thus the backlash is inflicted on the wrong actors. Longstanding limping democracies such as Italy and Argentina show that inequality persists despite popular anger.In part III, Reich develops a sensible, textbook-like plan of economic measures to curb inequality. In an ideal world, his plan would be adopted the next day. Reich has to appeal to the Democrats, their ideals and their longterm self-interest to undertake the transformation process. Unfortunately, the sweet melody of money is much more alluring to most politicians than Reich's message. Reich does not even have the ear of the Democratic Party. I venture that the writing of this book was mainly triggered because Reich could not get his message through in private. He should have used an additional fifty pages to sketch a winning strategy for his message.Currently, the economic analysis of the rising US inequality is getting better. Out of Krugman,Moore, Taibbi, Reich and Warren, a common narrative is emerging. It still needs sharpening to survive against the reptilian brain explanations of his opponents. The next step is creating organizations to sustain and amplify the message. Unfortunately, this runs against the Bowling Alone trend of diminishing social capital. The message has to reach and capture the suburbs to be successful. Finally, politicians need reliable populist support to stay on message and prevent their co-optation by the plutocracy. As long as these elements are not in place, Reich's vision remains a dream and the United States will continue to drift.
This was a very interesting and readable examination of the current economic crisis in America. Reich is critical of both parties, which is rather refreshing, since most people are content to blame the other side completely without looking at their own actions. While examining and comparing the Great Depression to the Great Recession, Reich sees some common threads. He then offers his own analysis and ideas of how America can get through this crisis and be better for it in the end.While I agree with some of these measures, I think that they'll never be adopted. Our government - BOTH parties - are already controlled by the rich, as Reich demonstrated. Unlike him, however, I doubt that they'll do anything at all to change this fact. Both parties have been content to stand on the sidelines and watch as people lost their homes, their livelihoods, and their lives, while doing little to nothing to prevent it. Reich hasn't lost complete faith in the government yet, but I certainly have.Still, it's interesting, and it's nice to see someone who is critical of both sides of the aisle.
There¿s much to like about this book. Its central claim about the increasing inequalities between the richest Americans and the middle class are irrefutable and supported with good historical analysis. Reich identifies three realities which have pacified the middle class: women in workplace, increased credit, increased work hours. Arguing that these cannot be sustained, he believes¿probably rightly so¿that we¿re heading for a day of reckoning. It¿s in his proposals to stave this catastrophe where Reich missteps¿mostly because he has a fundamental misunderstanding of human nature. Instead of seeing people as complex beings who require purposeful lives who can¿t be fully satisfied with consumption, Reich proves himself the economist and assumes that all jobs are created equal and that as long as a person finds work, they¿ll be able to find happiness in their ability to bring home a paycheck. In fairness, Reich is better than most economists. At times he does recognize that monetary acquisition does not correlate to increased happiness. But even so, his policies seek to increase production (What should we produce, Mr. Reich? We have everything we need.) and thereby increasing the number of available jobs. Like a 2010 politician, Reich seems to think that more jobs is the answer, not taking into account that people devoting their work lives to fulfilling the human whims of the market is unsustainable.
This is a book every American should read. I'm sure you've heard that before, but in this case, it's really true. This is not a rant or a screed, but a very informed and rational look at the current state of the US economy, and where it's likely headed. It's critical of Obama and his recent predecessors, including GW, Clinton, and Reagan. Want to understand the rage behind the Tea Partiers? Want to know why "trickle down" doesn't? Read this book. Short and succinct, I read it in an evening (and I'm a slow reader).
This book is similar to others that I have read recently about the problems that led to the "Great Recession" of 2008. I like that Reich focuses on income inequality. All of his critics can attack other aspects of this book, but the data clearly supports the fact that income for the upper 1% has a much greater share of total income than it did in 1980(pre Reagan). It is also logical that 1 person with a billion dollars cannot spend it as completely as 20,000 with $50k each. Reich shows that during the time of better income equality(1947-1980) our economy and the fast majority of Americans did better economically. I recommend this book mainly because it is short, to the point, and not full of vast and confusing information. It is something that almost everyone can read and understand. Unfortunately, his recommendations would have a hard time being implemented. What happened with health care reform proves that point. I read Reich regularly and find him a voice I support and agree with.
Reich seems to have a grasp on the world economy and how it has effected the U.S. over the past century. His writing can be complex since the topic is such! But he explains it in a way that actually makes sense. Agree or not with his position - he understands where our economy has come from and where we might go if we don't think about all repercussions. I'd like to sit in a lecture of his sometime to learn more.
An Important Read Whether You Agree or Not ***** Robert B. Reich’s Aftershock has helped me understand the American economy of the past and present far more than any other article or Wiki-page that I have read before. That being said, I highly suggest spending $13 on this book to stimulate the economy… also because Reich gives genius and powerful reasons for the concentration of wealth at the top of the ladder. It’s a great start to finding an interest in the economy. Reich pulls from Eccles and Keynes, two famous economists who found their heyday in the beginning of the 20th century, and directs the book like that of history; he uses their ideas in order to describe (or prescribe with economic antibiotics, rather) the traumas of the past, present, and future. And, although he shows a humorous side quite, stereotypically, uncommon of former Secretaries under the President’s cabinet, Reich treats this book like a burning building: he goes in, masterfully releases information to the public (albeit smashing down others’ doors), and exits swiftly before it crashes on him. The book is simply short and sweet. Aftershock is divided twenty perfectly sized chapters, which, in turn, are segregated into three parts: The Broken Bargain, Backlash, and The Bargain Restored. A main theme recurring in all of his chapters is the concept of ‘the bargain.’ It insists that the United States needs to maintain combined demand so that the productive capacity of the economy does not “outrun the ability of ordinary people to buy, which would give businesses less incentive to invest” (page 31). This basic bargain, Reich seems to agree with Eccles, will give the working class a fair share in economic growth. This book is exceptionally applicable to today’s concerns, especially with media’s popular coined term and broad coverage of the “99%.” Though, it does seem too sure in its answers. With all great theorists, Reich gives good resolutions but does not run through the repercussions that might result. It only leaves the reader to decide. With that, I recommend everyone to get their hands on this book and do so for themselves.