In the post-war period until the 1970s, there was an across the board increase in the standard of living. The slogan: "What's good for General Motors, is good for America" was credible. At the end of the second world war they top American corporations seemed invulnerable and they were able to accomodate union demands by raising wages. The system was relatively stable.

However, the gradual diffusion into the dinestuc economy of technologies defense indusries during the cold war, destabilized the situation.

Technologies such as integrated transportation, semi-conductors, and the applications of information technology opened up new economic niches. Corporations could maximize advantage by outsourcing. New giants like Wal-Mart and Microsoft emerged, and an era of ruthless corporate competition began.

He writes in his Introduction:

There is no prospect of returning to American democratic capitalism of the 1950s and 1960s--nor should we want to--but it is certainly possible to shape the future in ways that better serve our goals and interests as citizens

The first and most important step is to have a clear understanding of the appropriate boundary between capitlaims and democracy--between the economic game, and how its rules are set--so that the boundary can be better defended. Companies are not citizens. They are bundles of contracts. The purpose of comapnies is to play the economic game as aggressively as possible. The challenge for us is to stop them from setting the rules.

The implications of this are powerful.

His conclusion at the end of the book is compelling. He writes:

The triumph of supercapitalism has led, indirectly and unwittingly, to the decline of democracy. But that is not inevitable. We can have a vibrant democracy as well as a vibrant capitalism. To accomplish this, the two spheres must be kept distinct. The purpose of capitalism is to get great deals for consumers and investors. The purpose of democracy is to accomplish ends we cannot achieve as individuals.

Universal health care, defense of a basic standard of living for everyone, universal health care, social security, environmental protection, regulations to ensure that utilities and transportation are regulated for the benefit of the public--all of these are decisions we make as citizens of a democracy.

Since Reagan came to power in 1980, neo-conservatives have successfully conducted a campaign against the power of government with the big lie of trickle down economics--that untramelled capitalism best serves the interest of all Americans. To the extent they have succeeded they have atrophied our democracy.

How this occurred is the subject of Reich's earlier book, Locked in the Cabinet. This book is the diary of his days as Secretary of Labor during Clinton's first term in office. Reich left the cabinet in 2006, when he could no longer stomach Clinton's across-the-board capitulation to the neo-cons.

He documents how time and again Bill Clinton turned his back on principle as he slavisly followed the dictates of Alan Greenspan and sought to reach a "compromise" with the neo-cons. Clinton was elected on a progressive liberal platform, but his mantra became "balance the budget."

For Reich the last straw was Clinton's campaign in 1996, when he bragged about the success of his first term. Yes, the stock market was thriving, but as Reich documents the income gap was growing, but for the poorer section of the population things were getting worse. Moreover middle income incomes were stagnating and the threat of job loss loomed. The handwriting was already on the wall.

The comparison between 1992 and the present period is fascinating. Reagan and Bush created a huge budget deficit with their tax giveaways and accelerated military spending. For Clinton the military budget was untouchable as were tax cuts for the higher income brackets. To cut the budget deficit at the accelerated pace demanded by Greenspan and the neo-cons, he had to bite into social welfare programs. But only under a Democrat, Bill Clinton, were the neo-cons able to successfully unravel the social network that had been in place since FDR came to office. He provided cover for them.

Reich contends that Clinton could have taken FDR as a role model, but instead he was willing to compromise in the fruitless hope that he could find a middle grounds with the Republicans. Roosevelt went to the population and denounced the economic royalists who were destroying the country. He repudiated Hoovernomics. Clinton chose the opposite course. When faced with Greenspan's threats that he lower the deficit or face an economic blowout, he travelled the road of capitulation

Those were the days of the Bill/Hillary collaboration. Let's hope we don't have a Hillary/Bill re-run in 2008.

There is a lot of food for thought in these two books, and I must say I have come to admire Robert Reich. Even though he resigned his political office in 1998, after Clinton won his second term, he has not given up on politics. Last year, Reich ran in the Democratic Primary election for Governor of Massachusetts in 2006. He lost but its good to know he is still out there in the ring, not just on the sidelines.