On balance, this book proved to be a huge disappointment.
I approached Mr. Reich's latest book with great anticipation. After all, he is a political economist and legal scholar with some renown, he has served in government as Secretary of Labor and he is a liberal progressive with ideas that I generally agree with -- yes, I admit to a liberal bias.
In Part 1, "The Broken Bargain" he describes the parallels between the Great Depression (1929) and the "Great Recession", as he calls the financial meltdown of 2008, in that previous to both events the concentration of income and wealth had been concentrated in the top 1%, peaking in both cases above 23% of income. His heroes, Mr. Marriner Eccles, head of the Federal Reserve Board during Roosevelt, and John Maynard Keynes, are used to argue his main points - that for the economy to remain healthy and grow, a large, prosperous and confident middle class is needed in order to purchase and consume the products and services produced by a free market economy, and that the government must protect the middle class against the natural tendency of free-market capitalism to concentrate wealth in a small oligarchy. Moreover, when there is a downturn in the cyclic economy, the government must step in to boost investment, spending, as well as direct support of the middle class so as to maintain their purchasing power to reinvigorate the economy.
He calls this balance between the rich and the middle class"The Bargain".
Although I fully agree with these notions, Mr. Reich, an academic economist, does not deal at all with the current thinking that Keynesian economic theory has been invalidated by the fact that it cannot explain the simultaneous inflation and unemployment of the 1970's (see, for example, "How the Economy Works", by Roger E.A. Farmer). As a non-economist, I don't really care, because all of the so called "economic theories" and "models" are simplistic hot air balloons in my mind, but I would have at least expected some mention of this from Prof. Reich.
Prof. Reich also glosses over the colliery to Keynesian policy proscriptions, that during economic prosperity the government needs to save and repay the "loans" it took out to intervene on behalf of the middle class. The author is very one-sided in his praise of unionization and protection of workers without addressing the excesses of union rules, which brought some industries down, and the effects of the global markets vis-a-vis national employment protection, which allows corporations to freely move jobs to the cheapest markets.
In Part 2, "Backlash", Mr. Reich succumbs to what seems to be the fashion de-jour of these kinds of books, and paints a rather silly Armageddon scenario of the extreme way in which the increasing income inequality, and the consequent political inequality and frustration, could resolve itself - the fictional election of 2020. Although I agree that increasing concentration of wealth and political power in the hands of a small oligarchy, as we are again witnessing today (just as before the Great Depression), can and often does lead to frustration and political extremism and paranoia (for example, the Tea Party), I have much more faith in the American electorate than Mr. Reich seems to have. Having immigrated from Germany, one of the characteristics of the American electorate is their ultimate common sense in rejecting some of the extremes which other countries have chosen in response to great economic hardships. Although when interviewed individually, American voters often seem frighteningly ignorant, as a group they did not choose Fascism or Communism when push came to shove.
The real letdown of this book, however, is Part 3, "The Bargain Restored", where I expected a well thought out set of policies and suggested steps, based on academically sound reasoning and real-world political experience, on how to move this country out of its current disastrous economic decline and political gridlock, back to an America of equality, prosperity, hope and optimism.
Instead we get a warmed over "New Deal" (much of which I would agree with as broad objectives), but without any sensible or realistic steps to implement them. Basically Prof. Reich counts on increasing poverty and frustration on the part of a beaten down and disenfranchised middle class (that is, the same forces underlying his Armageddon scenario) to be recognized and appreciated by a suddenly enlightened economic oligarchy and political elite, which will then miraculously implement the proposed new New Deal policies.
There is no attempt to deal with all the multitude of differences in the world we live in today as opposed to the world in which his heroes, Eccles and Keynes, made their observations and proposed their solutions. We live in a "global economy" where corporations know no national boundaries, but where the rules are set by national governments with very limited control over the flow of capital, resources and jobs. We live in a world where "consumption" is the be-all-end-all. We live in a world where our technological know-how has far outstripped out moral, legal and emotional ability to deal with all its positive and negative ramifications. Although Prof. Reich pays lip service to some of these issues, it is as if his economic and political thinking is confined to a bubble of New Deal thinking.
