Aftershock: The Next Economy and America’s Future. By Robert Reich.
Alfred A. Knopf, 2011. 192 pp.
Robert Reich’s new volume of popular economics is imaginative, engaging
and clear-eyed—but one somehow expects more from it. The title alone,
Aftershock: The Next Economy and America’s Future, leads a reader to hope for
some serious trembling: an ‘aftershock’, after all, evokes surprising tremors
coming after a larger quake, it conjures the picture of already weakened
edifices collapsing, and even the hope of creative destruction that accelerates
the construction of something new. The larger quake Reich has in mind here is
the great financial crisis of 2008. But this book is unfortunately not the
story of an aftershock. It is not the tale of reverberations in an unstable
system and how we might manage and control them. Instead it is a book that
points at a fracture that still underlies American society—inequality—and then
offers some well-known ideas about how best to close that dangerous gap. But
the book is not courageous or aggressive enough in talking about how perilous
this problem is, and how sadly limited our economic imagination for dealing
with it has become. We need now an aftershock—perhaps several—and what Reich
gives here is essentially little more than an afterwobble. It’s not enough
shaking, either for a book or for economics.
Reich begins by highlighting the link—what he calls a ‘virtual pendulum’—that
binds American politics and economics. The country, he notes, has historically
swung from periods in which economic gains are centralized in the hands of a
few to periods in which prosperity is widely spread. And while the immediate
reasons for the pendulum’s movements are economic, its real motor force is
political. Policy choices lead to either distribution of wealth (as in the
period after the Second World War) or historic and embarrassing levels of
wealth concentration (see the last four decades). The aftershock Reich is now
uneasily pondering is the snap-back of the political pendulum as a result of
the excesses of concentration, which Reich believes is robbing the American
economy of its vitality.
Reich’s book then becomes a discussion of how a more equal society
consumes more. He retells the stories we all know of negative real wage growth
in recent years and an economy that has produced no new net jobs in over a
decade. Until America’s middle class is empowered—and employed—so that it can
consume more, he sees no resolution to the have–have not economic conflict, and
the inevitable emergence of a political fight as well.
What Reich proposes in Aftershock is a collection of sensible ideas to
restore income equality: tax credits and other assistance for Americans earning
less than $50,000 a year—the heart of the middle class—paid for by a
combination of resource taxes and higher taxes on the wealthiest. Reich would
tax the richest at 55 percent and eliminate most capital gains taxes—an attempt
both to rebalance consumption and to balance out the absurd situation in which,
as he explains, the very wealthiest Americans paid taxes at a 17 percent rate
in 2009. He has in mind a world in which the market is allowed to breathe life
into the economy, but in which the state helps press more people into that
market on an equal basis.
Fundamentally, Reich is on to something powerful and important in
understanding the way in which an unequal society—one of unequal opportunity
and unequal security—will chew away at America’s politics. He does a good job
recounting the challenges to fundamental reform, but what he is missing is the
sort of overarching idea that would make such substantial reform possible. He
relies too much on the market in most places and doesn’t ask the hard questions
about ways in which markets are now failing. Reading Reich you’re left with the
sense of the need for a new economics. And you have as well a feel for the
forces he sees devouring American politics: greed chewing away at the top,
anger at the bottom. When the greed and anger meet, we can likely expect that
shock he has in mind. But it’s not likely to be an aftershock of the 2008
crisis so much as the first tremors of a much larger fault line, a shock that
this book unfortunately tells us too little about how to manage, navigate, and
survive with our values intact.
Joshua Cooper Ramo is the managing director of Kissinger Associates, an international consulting firm based in New York. His most recent book is The Age of the Unthinkable: Why the New World Disorder Constantly Surprises Us and What We Can Do about It. In an influential paper called “The Beijing Consensus” in 2004, published by the Foreign Policy Centre in Britain, he described the Chinese model of economic development and its attraction for developing nations. Ramo is a member of the World Economic Forum’s Young Global Leaders, and is a former assistant managing editor and world section editor of TIME.