Hello everyone, welcome to today's virtual commonwealth club program, my name is molly wood I'm the host and senior editor of marketplace tech on national public radio and i'll be your moderator for today during our program We will have time for your questions. Please. Feel free to submit those in the chat box We are all getting so good at zoom, aren't we? My it is my absolute pleasure and honor to introduce robert reich The carmel p friesen professor of public policy at the goldman school of public policy at uc Berkeley senior fellow at the bloom center for developing economies and best-selling author of the system Who rigged it and how we fix it? It is such a slim volume and it contains so much professor resh served in three national administrations and was the u.s secretary of labor Under president bill clinton. He's the co-founder of inequality media. It's a non-profit that uses the power of storytelling To inform and engage the public about the realities and the impacts of inequality and the imbalance of power in america You can watch his videos every monday and tuesday on topics ranging from reimagining public safety health care social security taxes And the socioeconomic effects of the pandemic and if you don't follow him on twitter or on facebook, I highly recommend it Professor reich was also the co-creator of the award-winning film inequality for all and the netflix original saving capitalism Please join me in welcoming professor wright Well, hello molly and thank you so much for for moderating this discussion What a pleasure to talk to you. I'm really looking forward to this. Um And I want to ask you right off the bat The probably the biggest question the title of your book is the system who rigged it and how to fix it So let's start at the beginning who rigged it Uh, well, it's been rigged, uh over time, uh in incremental steps by people who have the political power To change the laws and change the regulations to Help themselves, uh now who has the political power to do that? Well, You go back 40 years and you see the biggest change in politics and the economy in the united states has been the concentration of wealth at the top and Therefore the concentration of political power. So the rigging really has been done by a group that I call the oligarchy It's it's a good old-fashioned greek term Meaning, uh a small rather small group of people who have the wealth and the power and control over a society Uh, we tend to only think of the russians as having an oligarchy molly, but I think that the united states, uh It's fair to say either has one now or we are very shortly going to have one uh, because most of the wealth or a great deal of the wealth, I should say and power, uh, The power that is necessary to rig the game to get more wealth You see it's so so it's sort of a self-fulfilling, uh prophecy. It's a it's a vicious cycle, uh is at the top Well, and it I mean it really is Cyclical and you look at this sort of cycle throughout american history you talk about the gilded age and the trusts What was it though? You write about this period after world war ii where america really did create this incredible expansion of the middle class capitalism appeared to be working For everyone, what were the forces 30 or 40 years ago that started this change and to where we find ourselves now? Well, it really was the largest middle class the world had ever seen not just the united states and the entire politics our democracy our economy centered on the growth of that middle class not just stagnation, but the growth It was possible for many poor people, uh, including many people who had been marginalized including black people and latino people and others to begin to join the middle class And we had enough confidence in ourselves and the middle class had enough Confidence, uh that it embraced legal changes like the voting rights act and the civil rights act and the fair housing act Uh, which would further enlarge the middle class and enable more poor people disproportionately black and latino to join that middle class Now what were the factors that contributed to the growth of that middle class? You ask? Well number one, uh, we all I would say virtually all of us have been through world war ii Uh and almost all of us had been through great depression and those experiences though those common experiences I think resulted in a degree of social solidarity Uh, so that coming out of world war ii the ceos of big corporations. Uh did not get Uh, 300 times, uh, the salaries and compensation uh as they do now of the typical worker they Typically got 20 times, uh, the salary and the the total compensation of the average worker Um, it would have been unseemly not to uh be given that social solidarity Uh banks were not running the economy In fact banking was kind of boring and it was thought to be appropriate that it was boring because after 1929 we clamped down on the old form of casino-like banking we also made sure that unions had a fair shot at uh, At increasing their membership so that by 19 the mid 1950s about a third of the the workers in the private sector were unionized now compare that to today when 6.4 Of the workers in the private sector are unionized but you see that enabled workers, uh, because they were unionized and because the corporation was not organized so Relentlessly to maximize shareholder value, but was more organized around the notion of stakeholders including workers and communities so it was possible for workers to Get a significant not huge but a significant portion of the gains from economic growth And that in turn contributed to a larger and larger middle class. You see it was a virtuous cycle And it worked well for the many But apparently not well enough for the few. What happened. Was it just a matter of forgetting our history? I think it was partly a matter of forgetting our history by the late 70s early 1980s corporate raiders You may remember them They began to change the goal of the corporation from Uh doing well by all stakeholders to doing well only by the shareholders and indeed siphoned off many of the gains that other Stakeholders such as workers and people in the communities where the corporations did business uh were enjoying uh, secondly at the same time you had and for much the same reason you had efforts by corporations to bust unions And those efforts had proved, uh, certainly by now in fact by the 1990s When I was secretary of labor, it was very evident. Those efforts were proving successful, uh, and thirdly, uh, you also had finance, uh, Growing and and and becoming uh much larger breaking the laws. In fact changing the laws, you know After a certain point a an industry or a sector of the economy becomes so large and powerful that it exerts political influence and finance, uh, certainly by the 1980s 1990s was becoming powerful enough politically, uh to uh, Deregulate itself or to have uh members of congress and regulators deregulate finance So, uh, and that continued right up until 2008 And the the financial bubble, but even now uh finance still controls a big big portion Of the economy Uh, and we could go on. Uh, but you see that the the shift really occurred the big change really occurred uh in the 1980s You are I want to talk about finance for a second and you are Particularly and personally hard on. Jamie. Dimon throughout this book in fact you address him directly in the beginning and the end of the book as almost the avatar of I think it's fair to say capitalistic hypocrisy um, and I wonder why I'm, glad you use those those terms I don't really use the term kepler. This is paraphrasing. Yes. This is paraphrasing no, the reason I I I entitled the book the system is because I really don't want to Create the impression or to further Uh, the impression that a lot of people have that All you have to do is get rid of certain people, you know get donald trump out of office and get some of the captains of industry, uh Changed to have a more equitable society that's not really going to happen just by moving people and I chose jamie dimon as the kind of uh, the person I talk about mostly because jamie dimon is styles himself as a democrat capital d Uh, he talks a lot about corporate social responsibility He is the ceo of the largest bank in the united states. One of the largest banks in the world jp morgan chase And he seems to recognize many of the problems, uh that we have In the united states in terms of widening inequality and an angry Middle class working class that can easily be manipulated and yet he doesn't go the next step Uh, he doesn't actually want to change the structure of power That brought him to power and enables him to be chairman of the business roundtable and to get a gigantic tax cut for big corporations and the wealthy uh from the trump administration and to get all the deregulation that corporations want from the trump administration and To do everything else that is going on now. It's it's you you use the word hypocrisy. I think it's it's self delusion Uh, and that's what uh worries me about a lot of corp so-called corporate social responsibility The most responsible thing that jamie dimon and large corporations can do uh is fight to prevent jaime diamonds and large corporations from having nearly as much influence and power as they now have Right, and I it is and I do want to make clear hypocrisy was my word um, but I it is interesting because you do note that we're at a position where There is so little power Among everyday people that the people in charge of fixing these systems are the people who benefit the most from it And that that's pretty obviously an upside down system that Is really really hard to change, right? We're not. I mean you you argue in some ways that we're not even all having the same conversation because democrats republicans the wealthy ceos Are essentially completely sidestepping this question of power and wealth yes, utterly sidestepping the question of power and you see There are some very good ideas as to how to reform the system But the system won't fundamentally be reformed unless power is restructured and reallocated And you can't do that from the top down Because the jamie diamonds in the world don't want to do that fundamentally. I mean they're in a very privileged position It has got to come from everybody else and therein lies the paradox and the difficulty Uh, in other words the vast majority of americans have theoretically the voting power Uh through our democracy to change the rules and make uh our system much more equitable Uh, but they the majority can't come together. Uh, it's almost as if uh, racism and xenophobia and uh Vicious politics have all intervened to make it harder for people to come together to fight The oligarch the oligarchy and if I weren't so Optimistic and we could get to my optimistic my optimism later if I weren't optimistic, I would say that We're doomed that the only way we actually change The system and the power structure embedded in that system is through some sort of mass uprising revolution I don't think that's necessary and i'm afraid of it to be perfectly candid. I think historically revolutions Can go in any direction. I mean, they're like they're they're they're Impossible to control. Yeah but historically income inequality has almost always been a precursor to some kind of massive change whether it was Authoritarianism or revolution or some kind of big social change? Like do you feel that we're laying the groundwork now for? things that we can look back on historically and be pretty worried about Well, I think social change is going to happen and must happen the trends we're seeing now uh both with rarity inequality uh and racism and climate change and uh, all these others Are not sustainable The question is how change comes about? And if you look at the last gilded age, we're now in another gilded age But if you look at the last gilded age when inequality was as wide as it is today And the captains of industry were as irresponsible uh as they are today, uh, really the lackeys of the robber barons, uh Took uh sacks of cash literally and put them down on the desks of plant legislators in the 1880s and 1890s Well, what happened after that point really is important to understand. It was not a revolution it wasn't even understood as dramatic reform It was america And americans large numbers of people saying wait a minute What's happening now violates our values the basic tenets of this country our ideals And they rose up in various ways Uh all across the country and we had what's come to be understood and known as the progressive era starting in around 1901 And extending through the first world war and then picking up again some historians might stay Uh with franklin d roosevelt in 1933 How much of that awareness in Everyday people relies on understanding and I want to go back to the the idea of the rigging because I was talking to my 13 year old son about your book and he said well What why is it so bad if jeff bezos? works really hard and creates amazon and invents this Incredible thing and changes all our lives and then makes a lot of money. He should make a lot of money And I yeah, and there's been and people Excuse me for I didn't mean to interrupt you No, no, please I was just going to jump in and say that in the 1880s and 1990s uh There were probably a lot of 13 year olds like your son and many many other people who said well what's wrong with cornelius vanderbilt? And andrew carnegie, uh, and the other robber barons of the era making huge amounts of money They they were the they they've they founded the railroads and the oil companies and the steel companies Uh, they ushered america into a new era of industrialization Didn't they weren't they entitled? And I suppose what you could say was in response is uh, yes, they were certainly entitled to make a lot of money But were they entitled to undermine democracy with their money? Uh, were they entitled to keep millions of people in poverty? Uh were they entitled to fight unions, uh, sometimes uh, really with a lot of bloodshed involved? were they entitled to use their wealth and their power in ways that actually hurt millions of americans and you might say No antitrust law came out of the sherman act of 19 1890 And if we had antitrust laws today That were as vigorously employed as the anti-trust laws were after teddy roosevelt became president amazon would not be able to Dominate or for that matter any of the other four or five major high-tech firms wouldn't be able to do what they're doing uh antitrust would prohibit that Is there a point I mean it obviously it's hard to pinpoint but is there a point at which innovation And success starts to turn to corruption because really what you're arguing this book in some ways. Is that there? There is no such thing as a free market as we like to think of it. The rules are set by governments influenced heavily by oligarchs and that sometimes Government and oligarchy are indistinguishable yes, the the I think that's That's certainly what I argue and I think it is the case. We have been sold a lot of mythologies And the oligarchy and emerging oligarchy Has been responsible for selling a lot of mythologies to us so we don't realize what's going on One of the biggest mythologies is that the choice is between government or the free market? and and people don't understand that the free market itself, uh depends on rules, uh, Thousands of rules everything from the nature Of property including intellectual property how long intellectual property patents trademarks and so on are going to be utilized I mentioned anti-trust laws and anti-monopoly policies But also uh contract laws, uh, you know, how are contracts going to be administered what uh is a fair contract? Uh, Liability laws, uh what? What what kind of activities are going to generate harms? Are going to be recognized as harmful and who is going to be able to collect on those bankruptcy laws Uh, I mean what who can co with bankruptcy who is going to be shielded Uh from having to repay and who is who is going to be immunized who is not going to be immunized? And we could go through a very very long list But that list changes over time the rules of the market Are changing and over the last 40 years they have changed dramatically as the power and the wealth at the top have changed the rules have exerted their influence over legislators and Regulators and others, uh, i've seen this very of a very close molly. I mean one of the uh things that uh, when I was uh director of policy planning in the carter administration, uh, when I was uh assistant to the solicitor general in the ford administration, uh, and when I was secretary of labor in the clinton administration, I In each of those instances. I I saw the power of wealth change the rules in favor of wealth and in each of those time frames It was greater and greater. I mean By the time I was secretary of labor, it was much more intense than it had been before and I did some work with the obama administration And I saw to an even greater extent then Yeah, I wonder when you look at because we can't say that people are not aware. There is uh, you know, obviously the anger over this system is what in many ways has led us to the political climate that we find ourselves in today, and I wonder When you look at that how much? How much of that was exposed by the financial collapse in 2008 and Let's be honest. The fact that there were not consequences for that that the obama administration did not punish banks or compensate consumers After that recession how much of that do you think contribute to the uprising of anger? That's found its way to populist politics a lot of it, uh before that time from the Let's say early 1980s all the way through 2008 uh a lot of the Middle class, uh who started to see their fortunes dimming and their wages stagnating adjusted for inflation They used some uh Well, you might might say they bought into some mythologies. Uh one was uh, Uh that uh, the market knew best, uh, and there was nothing they could do about it Um, a lot of women went into paid work in the 1970s 80s and 90s in order to prop up. Uh, Family incomes that were actually dropping because male wages were dropping because uni unions were being busted. Uh, Because there was more outsourcing and more uh efforts to substitute uh machinery for labor, uh We also saw through that period of time leading up to the financial crisis Uh that uh more and more people were working harder and harder and right before the financial crisis many of them were using their homes as piggy banks, uh, basically, uh Getting new loans or refinancing their homes or whatever have you but it was that financial crisis that really Took the blinders off of everybody's eyes But it didn't do it in the same way On the left you had the brief What's what's called the occupy movement That was angry about what had happened But most of their angry was directed at big corporations and finance And on the right you had the tea party movement, uh, just as angry about what had happened But most of their anger was directed at government But you see both sides were saying essentially the same thing and the lineal descendants of both Uh the tea party movement the lineal descendant was ultimately donald trump in 2016 and the lineal descendant of The occupy movement, uh was bernie sanders, uh in 2016 And uh those those those political movements and attitudes are still very much with us Um, I feel like i've done a similar thing to the book which is spend a lot of time on the problem and I was I kept waiting to get to the solution now we've done the same thing because I want to get to people's questions But the second part of your promise is how to fix it And yet a big part of the conversation all throughout the book is how little power people have So what do we do? Well, here's where my optimism uh comes in Because I I think that people are beginning to catch on maybe not to every detail But the pandemic and I wrote the book actually before the pandemic the pandemic and the the movement against uh, institutional systemic racism and some of the Anger we've seen now directed at incompetent government because government under donald trump was not able to do what many other governments around the world In rich countries especially have been able to do in terms of containing the pandemic a lot of people are seeing all of that molly and and that is leading to uh What I thought would take many more years and that is the beginning of a coalition a very very broad coalition people who used to call themselves republicans Now maybe they do or maybe they don't but they're joining in league with a lot of democrats many Black people and white people are marching together and joining together We're seeing many young people who are getting very active in politics actually the midterms of 2018 to me were a turning point in terms of young people and people of color and women getting more politically active uh and the results were not only the takeover of the house by the democrats again, but also, uh, huge numbers of uh people, uh Women and people of color and young people in politics for the first time in in certainly my my memory And all of that I think is is good because it enables it's the beginning of people coming together to see to reclaim our democracy To say wait a minute, uh the way we're going, uh doesn't work. We've got to Make democracy work, uh at the very least we've got to get big money out of politics But there are many other things that need to happen but also to reclaim our our economy, uh saying that the rules that we are we are now working by Are not good for most of us. Uh, they actually are siphoning off more and more wealth to the top Yeah, you call it harsh capitalism and I feel like there's no better term defeat to To apply to the way that people are experiencing capitalism under the pandemic where economic assistance has gone to a lot of businesses and corporations and where And the racial protests which is exposed over and over How economically unfair capitalism has been for a long time, but you also argue that That that sort of the three legs of the oligarchy power stool are belief systems essentially bribes and lobbying and division How much are you worried about division because to hear? Me and my colleagues in the media tell it that is the defining characteristic of american discourse right now well Obviously, I don't want to be a cock-out optimist. Uh, I mean Uh, the three legs of the oligarchic stool, um are still with us Um selling the notion that the market knows best uh that the market sort of is exists separate and apart from from nature or is part of Nature and there's nothing we can do about it. Uh, I think is is a is a lie Uh people have got to understand the workings of the markets. I mean bankruptcy law, for example Um should be available to people on their first homes or their only homes bankruptcy should be available to students Or or former students who are laden with student debt. It used to be until the big banks change bankruptcy laws but we could go through all of the the laws and regulations that really do need to be changed so that people uh Have a better shot at making it the other thing That I pointed out and you've just pointed out is is the divisiveness the divide and conquer strategy Of the oligarchy. Um racism is is sort of the oldest Divide and conquer strategy. It's something that has been used in american politics, uh for Uh since the start since before we had in america But more intensively over the last 20 years in fact When george h.w bush used willie horton Because lee atwater His advisor, uh told him that that would sell and would win him, uh the election in 1988 Uh, that was an example of the worst forms of of oligarchic use of racism, but it continues and it's in both parties And and finally, it's very important that people understand Uh that the bribes that are being paid by the oligarchy are not literal bribes. I mean yes, they are bribes to to uh to congress people to members of congress and to senators and to legislators state legislatures legislators and and to governors but we're talking about a a A much larger sense of bribe we've got so many people in the top 10 percent of the income ladder. Uh whose Uh whose well-being and salary depends? On ultimately getting paid by the oligarchy, uh, and they are in the job They they wouldn't they wouldn't say they're in this job but they really are in the job of advancing and protecting the oligarchy and I think It's important that that 10 percent Understand uh that uh, they they are part of an unsustainable system Well, and I guess fundamentally that's the question how unsustainable is the system not just politically and in terms of the rage and the potential for Revolution, even if revolution is defined as the election of donald trump Is it also economically unsustainable? to create A scenario in which most people can't even afford your goods and services It's completely unsustainable economically because the more money and wealth go to the top, uh The less there is for everybody else to buy goods and services with so you get this top-heavy economy The fact of the matter is we know. Uh, it's people in the bottom 80 percent who do much much of the spending The economy depends on spending this economy 70 Of the united states economy, uh is consumer spending. It's personal expenditures if people don't have the money They can't keep the economy going This is why this ludicrous uh debate that's going on in congress right now where the republicans saying 600 a week? Extra unemployment insurance is too much. Uh, people will be deterred from getting jobs Misses the whole point. First of all, they're not many jobs. Uh, secondly the jobs that are there are very often unsafe But thirdly most importantly people need extra cash in order to be able to turn around and buy things and if you if you reduce that 600 dollars a week, uh by Nearly as much as the republicans now want to reduce it We're going to lose more jobs because they're not going to be as much of a multiplier effect in the economy And that's really why the total American economy, really even before the pandemic molly was very fragile, uh that fragility Uh, we've seen again. And again, there's too much debt too. Many people are in debt uh, they are in debt because they there's no other way of maintaining their spending and if they don't maintain their spending the economy collapses Right. So was it always? Destined for some sort of Well collapse. I mean we're buying goods that cost less than it costs to actually manufacture them and destroying the climate in the process like it sort of seems Is that why you see the jamie diamonds of the world? Taking these kind of baby steps Towards it like do they think that there's an incremental solution? I I It's a good question. And and I Um have had conversations not with jamie dimon about this i've had conversations with others Uh, I think the the problem is uh what it might be called a collective action problem That is there might be individual billionaires who understand that their long-term interest is on a more equitable society That is there's no way That people are going to continue to use amazon, uh, if jeff bezos, uh and others like him, uh siphon off Uh so much of the of the income and wealth of the country But jeff bezos alone, uh, even though he has extraordinary wealth and power. I can't actually change the system and Probably has very little incentive in the short term to change the system anyway If you go back to the first decade of the 20th century the progressive era that I mentioned before What was interesting to me about that is that you had franklin d roosevelt as president in 1901? And many of the captains of industry began. I say many not all certainly not Cornelius vanderbilt and but maybe andrew carnegie in a way began to understand that unless the rules of the game were fundamentally changed so that There was much more widespread, uh wealth and much more widespread well-being Not only did they risk revolution, but they also couldn't keep their own economy going henry ford Understood that his his employees and all other employees needed a raise Because otherwise, they couldn't afford to buy model t fords And so you you begin to get this understanding among even the uh, the wealthiest business leaders But it's it's it's hard to come by Right, and it's fundamentally self-interested. So it has a big hill to climb when it comes up against the other self-interest which is their billions of dollars exactly Um, I do I have some questions coming in From our viewers and so I want to start to pepper some of those in and we're actually going to start With a video question because we have a question from one of your students. Hi, my name is amadeus I'm, an indigenous student attending uc berkeley who also took your wealth in poverty class last spring semester I also work at my path a national youth financial capability non-profit that envisions bridging the racial wealth gap This generation of youth has been hit hard due to the pandemic those of us between the ages of 19 to 25 Hold 35 percent of minimum wage jobs that are experiencing the highest loss of income So now is the time to make change and so my question for you professor reich Is what do you think about guaranteed income paired with financial services and education? As one way to give young people that foothold Thank you. Let me just say that it's such a treat to be questioned by one of my students Uh this pandemic i've been teaching remotely and uh, it's awful. I mean, I I I love teaching But I don't see their faces and I don't get their questions directly. Like I just did uh I might also add when I talked about my optimism a while ago molly. Uh, a lot of that is fueled by teaching. Uh, the most socially aware And I think in many many respects a dedicated generation of students that i've taught in in all of my 40 years of teaching And you got an example of that just now. Um, the question was do I uh, do I support a minimum Basic income or a universal basic income. I think that's that's a good idea and as we Move toward more and more automation. Uh, it may be necessary uh just for the economy to survive that is if people don't have money in their pockets, uh, nobody's gonna buy Uh, what's left? I mean you you just I was watching yesterday. I don't know if you watched the Anti-trust hearings. Oh, yes well, you know you you have At least these four people these four people who represent the you know, maybe 20 of the entire gdp of the united states And they're sitting there. Um, and and I just kept asking myself do they understand? that if if their machinery if they're if they're they're extraordinary software and hardware Takes more and more and more and more of the jobs replaces more and more of the jobs Who's going to be left to buy anything that they produced? so Yes a minimum Guaranteed or universal basic income is probably going to be part of what's necessary And amadeus actually also mentioned pairing that with financial services and investment in things like education and in your book you do talk about how as a contrast to the american system china has this huge and very You know an ability to have a very deliberate investment in productivity and you say the key to our economic growth is american productivity So I think there's an idea that ubi suddenly means people get a check And that's all we ever do To grow our economy and clearly that's not the case. That's right Uh, it means that people have the wherewithal to get more training more education more skills become more productive and A point that really does need to be made When we're talking about international trade or international competitiveness is that the competitiveness of the united states or any nation depends? Uniquely on the people of that country and their ability to be productive. Uh, it's not the Corporations headquartered in that country because all these big corporations are becoming global very very rapidly Many american corporations are doing their research and development all over the world The the real issue is what is learned here. Uh and how well is it learned and how productive people can be here? and that's why investments in education and job training and lifelong learning are so absolutely critical and are just as important as investments in infrastructure and investments in basic r d Let's uh talk about those big tech companies we have a question from a listener and I think this is Very relevant because those hearings did just happen and it was sort of historic. It did feel like a real guild of age moment where the heads of these four big trusts came The financial times I think did a piece Just a couple of months ago talking about mark zuckerberg specifically as an american oligarch And when you look at these companies and the the the size and power that they wield Does that seem like an obvious case of antitrust to you Does it seem like that's an example of where a breakup should occur or as this person puts it what can be done to redistribute their economic influence Yes, when we when we talk when we think about antitrust most of us think immediately about breaking up Companies like mabel or the standard oil trust of the beginning of the last century But there are many other things that can be done Uh, I mean mark zuckerberg who incidentally I think during the course of the hearings themselves Uh, just those hours I calculated um his income went up or his wealth went up about 11 million dollars And just a few days before Bezos, actually he increased his wealth in one day by 13 billion But let's let's talk about what can be done There is absolutely no reason why Zuckerberg should be able to use the wealth of uh his company uh facebook and can and continue to buy Uh instagram and uh and other companies that could have been competitors uh, in fact I think that antitrust law if it really had any teeth in it like it used to would prohibit Those kind of purchases and would unwind them uh right now, uh would say no, you've got to get rid of instagram You've got rid of get rid of all the other. Uh, uh, Companies that you've acquired, uh, because they are they could be freestanding competitors to you You also can't favor your own products if you're google or if you're amazon. Um you know there there's a lot of uh, evidence that google and amazon and even facebook in a slightly indirect way, uh have Steered, uh consumers toward their own favored products that uh, actually Is illegal under the antitrust laws that that can be stopped. It should be stopped Um, there should be no favoritism whatsoever there should that used to be called an illegal tying arrangement under the antitrust laws? There are many ways and we could you know until people's eyes glazed over molly. We could go through them uh, but there are ways in which practices uh business practices of the four or five major high-tech firms need to be altered, uh and need to be uh, They need to be forced to be altered. They're not gonna alter it, uh, simply because uh, it would be a nice thing to do Right. I feel like this is where the misunderstanding of the rigging or the lack of understanding of the rigging comes into place like if my answer to my child was Jeff bezos built a great business. He should have paid taxes on that business. He should not have allowed He should not have written laws that benefited his business That it that there's a point at which you exceed fair competition Because monopoly is like the natural goal of a really good businessman. That's right. And Even as needed. Yeah precisely and even even intellectual property the misuse of patents and trademarks, uh by high-tech, but also by the pharmaceutical industry In terms of entrenching themselves making it very hard for new entrants to get in. Uh, that is a violation It's an anti-trust violation. It should be considered to be a monopolization. Um much These big companies also the tech companies are are acting as monopsonists As well that's a fancy term meaning they're using their power not just vis-a-vis consumers, but also suppliers Amazon is making it is holding down prices For all sorts of suppliers, uh, making it, uh, much much reducing the incentives for people to actually create businesses Uh, you know, the united states is supposed to be this font of new uh new businesses Actually, the rate of new business formation has been cut in half even before the pandemic from 2000 to uh january of 2020 the rate of new business formations dropped by by half in large part in my view, uh, because of the dominance of these, uh, big big corporations particularly high tech Um, we'll keep moving through these questions here it you you talk about in the book i'm gonna read this because I was so notable um that it had been written before the pandemic and you said that when it comes to People coming together and creating these great changes quote. Sometimes it's an economic shock And then you talk about you know The depression and the great recession you said sometimes we just reach a tipping point where the frustrations of average americans turn into action and this listener's question is If the depression in world war ii brought us together in a common experience. Can this pandemic also become a pivot point And if so to what do we pivot a better democracy or more oligarchy? Well, that's the question though you that's exactly the question. I was going to ask uh, where do we pivot? I mean what I think that um Obviously where we need to pivot is a stronger democracy Capable of changing the rules of the market In just the ways we've been talking about so that they are more equitable so that the results of the market are more equitable so that the Pre-distributions. In fact this is something that I think a lot of people don't fully focus on but it's very important that we focus most of our attention on redistribution that is after the market has done its work what then Needs to be redistributed from the wealthy to the poor or from the rich to the working class, but the real I think more important distribution Occurs inside the market, uh, and they could I think one we might see this as a pre-distribution And it's mostly from average people upward. I mean the big banks for example. Jamie dimon's bank and other major banks on wall street Are enjoying a huge? Pre-distribution upward because they're too big to fail after 2008 Uh, they're they're even bigger than they were before and that that that guarantee that too big to fail guarantee Implicit guarantee from the government is worth uh tens of billions of dollars to the big banks That's an example of a pre-distribution upward and there are many many others I actually wanted to ask you about this. This is very specific and maybe slightly off topic, but you mentioned that that That kind of this implied subsidy a hidden 83 billion dollars in government insurance I didn't totally follow that can you explain how that works? How does that? Translate into sort of a subsidy for banks like that. Oh, very simply because everybody doing business with a bank Uh assumes that because the biggest banks will get bailed out if they ever get into trouble We don't have to worry about them getting into trouble. In other words you as a business person dealing with a major bank You are actually willing to settle for maybe not quite as good a deal As you might get from a very much smaller bank because the biggest bank has this implicit guarantee from the government In its worth studies have shown its worth to the biggest banks 83 billion dollars per year now That's not chunk change Yeah, got it. Now. I understand. I'm so excited that I got to ask you this teaching question directly. Um Speaking of moral hazard. We have a question about how uh very specifically again about how the repeal of the glass-steagall act and this is a big part of your book and you talk about Uh, jamie dimon advocating for this the repeal of a glass-steagall act Affected where we're at today Uh, well the the starting in the 19 early 1980s uh the banks Began, uh having enough political power because they were getting to that wealth tipping point that they began chipping away at the Many laws and regulations that were put into effect in the 1930s after the great crash of 1929 when the banks Really did pull the economy with them, uh, and those It was not just one of them. I mean glass-steagall was one of them, but there were many of them, uh and the banks Uh were chipping away at them constantly after about 19 starting with the reagan administration So by the time of the clinton administration, uh, the banks argued well look Uh glass-steagall is just is the last little remaining bit Uh, and we can do most of what we want anyway, so it's not really significant Uh, why don't you just give it to us and the efficiency gains will be much greater Than any risks And so the clinton administration along with republicans in congress said fine Well the sum total of all of that chipping away including the glass-steagall act meant that there was really nothing between uh, the kind of explosion we saw in 2007 and 2008 And uh the banks the the casino, I mean finance really did uh have no restraints left glass-steagall Basically kept investment banking separate from commercial banking, uh, but once but that was again That was the last brick in the in the in the wall taken down Uh, and that meant uh, basically finance could do anything and right now molly. There's not much left I mean there is the dodd-frank act but that has been whittled back too step by step. Jamie dimon and others on wall street they've done everything they can to uh to to get rid of the dodd-frank and uh, The trump administration has been very helpful to them. Uh, so the big banks I would say are quite fragile right now You um This seems like a good point to draw a distinction you there's a quote in the book Henry demaris lloyd liberty produces wealth and wealth destroys liberty and this feels like a good point to say that that It seems to me that what you're arguing for is Regulated capitalism that it is unregulated capitalism it's capitalism with no rules that is what is ultimately suicide for societies and the planet and Democracy maybe. Um That you're not saying chuck it all out and have a socialist society Which I think is a is an argument that gets lobbed a lot No, I think these these these big terms like capitalism and socialism Really hide all of the interesting and important detail I am not arguing for a regulated capitalism capitalism is now very regulated I mean There are huge subsidies going to the big banks huge subsidies going to pharmaceutical companies through intellectual property laws, uh huge, uh subsidies going to Oil and gas uh, and uh military, uh contractors. Uh, I mean you you know, this is not a Deregulated, uh economy in any any way shape or form? It's just regulated in the wrong direction, uh there I want to I want to stress again There is no such thing as a free market without government setting the rules of the game and those rules of the game are Regulations. Uh, I mean we might call them laws. We might call them whatever. We want to call them. It doesn't matter. There are rules If you take away all rules you don't have a free market what you have is uh is survival of the fittest you have you have uh sort of a state of nature in which just the Strongest and most powerful can beat down everybody else. That's not a civilization. That's that's that's you know, we we would all be constantly in a state of fear, uh if that were in fact where we were living I don't know exactly what socialism is supposed to mean but I do know that we do have to have rules and regulations and laws That make capitalism work for most people instead of a handful We need investments in People in education job training research and development roads and bridges, uh infrastructure of all sorts because those investments Public investments are as important as private investments We need social insurance, uh, because social insurance Enables us to be safe and feel safe Uh, and we can see in this pandemic the mere I mean the fact that we are the only country that doesn't provide uh You know, uh sick leave Uh paid sick leave. I mean we all suffer because there is no paid sick leave for most Most workers so that if they get sick or if they feel they they have the coronavirus They dare not take time off that hurts all of us And so that that is that is a kind of lacking. Uh, that is uh, that is that is harmful broadly harmful um We'll do a couple more specific viewer and listener questions does finance is of course a big part of your book and a big part of this argument does public banking this person asks factor into Helping to dismantle the rigged system if by public banking the Viewer listener is is suggesting um a bank that is not a not-for-profit bank a bank that is run according to Uh rules that are set up by Not its investors, but by the public that uses the bank it's kind of its consumers essentially. Yes I think that would be preferable Uh, just like I think that uh, we should move to the kind of health care system We had a health insurance system. We had in the 1950s Which was not for profit. It was actually the big blues You know, we we evolved into a for-profit private uh health insurance system, uh really because the the the not-for-profit system was losing ground, uh in a kind of uh, uh competitive process, uh, in which uh it you know, The only people left for the not-for-profits were people who actually had very very high health costs Well, you know, we it it just makes sense to move back to a not-for-profit Healthcare system and one that is ideally single-payer Uh just on the grounds of you know, look at every other system Um, I have so many questions of my own but I will be disciplined and keep reading these ones because they are also really good Do you support employee ownership as a means of broadening the ownership of capital? Yes, and this is an old idea. Um, I wrote a piece for the times recently talking about profit sharing and employee ownership uh, and it goes back to before 1916 There was a great wave in the progressive era That I was referring to before Uh, a lot of big companies, uh began offering their employees Uh profits a share of the profits and a share of the the uh, the shares of the firm literally shares in the firm And uh and that became very very popular up through the 1980s when the takeovers occurred, uh, you know, the some of the unfriendly takeovers that forced companies to Focus only on their shareholders and not on their workers or their communities It should we specify that that's different from the kind of employee ownership that we see in the tech industry We're both in the bay area. Where? Employees are granted stock options and that makes them feel as though they have ownership in the company. That's not the same thing Well, it's very different. And one of the biggest differences has to do with who gets the shares and why they get the shares, I mean if you go back in american history between 1908 uh, and uh, the 1980s, uh, many many large companies offered their employees shares of stock as a way of Giving the employees not only a fair Uh part of the profits but also a stake psychologically in the success of the firm When high-tech companies are giving out shares of stock. They're doing it to attract and keep talent They're not doing it for their I mean amazon is not giving shares of stock to its warehouse workers. Uh, I mean you know, I mean jeff I would wish it did it was giving out little Two shares of stock a year to its warehouse workers until about four years ago, uh, and then stopped doing that No, uh jeff bezos and and all of the other high-tech, uh moguls are giving out shares of stock Uh to people they want to attract and keep as a way of uh of motivating the quote-unquote talent, uh a very different Very different motive and a very different uh goal um and an output outcome than we had uh in the first part of the 20th century if you could or maybe could have written a prescription for How to stabilize the us economy in the wake of the pandemic What would you do? What would someone put it this way? What concerns you the most as we deal with this pandemic? What should be done to help stabilize our economy? Well the the economy and the pandemic are um are linked But they're different that is there is no way we can get the economy going again until the pandemic is contained Uh, that's very important. We have a lot of people using uh in in very loose ways this term stimulus But we're not the goal is not to stimulate the economy because you can't stimulate an economy that is uh, that is fraught uh, overrun, uh with covet 19. uh, You know people are not going to go to the malls, uh or into theaters or concerts or into airplanes. Uh, as long as they fear for their lives, uh, and that's um as You know this this is where a lot of confusion lies because donald trump even monday trump said we need to reopen Uh, let's let's reopen everything the reason that So much is closing now The reason that we are going into another economic dip is because we've gone into another resurgence of the virus Because we didn't close down appropriately. We didn't uh have the testing and the tracing uh that we needed It's the coronavirus is the problem folks Uh, and um, we do need to do everything we can to for humane reasons number one but number two for the economy, uh to Contain this virus the fact that we in the united states uh with four percent of the world's population Have 20 to 25 percent of all of the cases of this virus and the deaths Is I think testament to how? Extraordinarily we botched this whole thing you know people who have friends in italy uh or in or even in france or in sweden or certainly in norway, I mean These the average person in norway or in italy they are right now. They're they're They're they're in restaurants. They are actually enjoying themselves They are living a different life than we are living And the reason we are living the life we are living with masks and with social distancing, hopefully hopefully, uh is because we are still in the midst of a virus and they aren't I do wonder how The emergence of the virus and this sort of massive social change that we're starting to see how does that change if anything the conclusions? In the book. It's like a moment in time where you wrote right up to? this massive upheaval And I wonder if that changes your sense of our potential unity Or of the path that we're on Uh, well as I suggested, I I think that I have been impressed with the unity uh black people and white people getting together, uh Uh marching and demonstrating and and and being activists with regard to ending systemic racism so many young people getting involved in american politics so many Even the bernie people getting together with the joe biden people. I mean this would not have happened Uh were it not for the plight that we are now suffering, uh and part of the plight Let's be clear. I I don't want to get Too partisan here And I don't mean to be partisan, but the pandemic would not be this bad if it weren't for uh how badly donald trump, uh Blew it I mean his uh his inability to use the defense production act on willingness to use the defense production act to get critical materials his His unwillingness to assert leadership, uh his playing down the seriousness of the virus for months, uh his giving responsibility uh to the states and locales, uh Who who handled it in a haphazard way as only the states and locals would because we don't you know, they are not national governments So donald trump is part of the problem part of the problem also is we don't have a public health system In this country, and we don't have a health insurance System in this country, and I think now people are beginning to say wait a minute. This is crazy We do need a a a health insurance system that covers everybody. We do need a public health system We do need uh paid sick leave for everybody and so on. So I think to that extent the pandemic has been educational I guess what worries me most right now is that There's no end in sight we're likely to go into a a second wave Which also suggests and means a second economic downturn possibly deeper than the one we're already in and uh That anger, um, then it's going to generate a lot of anger and a lot of uh destitution a lot of suffering um That could backfire in in so many ways. There's no reason to suppose it's going to be a constructive thing It could be I hope not I pray not it could be destructive. We could just end up being angrier and angrier at each other Um, we have about five minutes left, so that's the point in our program where there's time for just one last question And I guess the question I want to ask you is So much of what you're saying I think seems and feels really obvious to a lot of people especially right now And yet it's clearly not right. There are clearly arguments on the other side. There are clearly people who are saying publicly The system is working. The market is working. The market will work. The economy will write itself It What do you say to them? Like is there an argument that you think you have that will that will sort of get us over that dogmatic hump? You know, I mean, I I don't know molly It's very much. Like, you know, people said in 1929 after the crash herbert hoover was saying oh, well, the economy will write itself Uh, the system is is fundamentally stable. It is perfectly fine Well, you you had to go through a couple of years of that to see how hollow all of those arguments were now are we approaching a 1933 again, uh, and if so will joe biden be another fdr. Uh, I I certainly hope so but there are a lot of crazy arguments and i'm not talking only about The sinclair broadcasting fox news conspiracy stuff i'm talking about just a bad economics Uh, a bad understanding of our political and democratic system. Uh, so until we get that straight Uh and until everybody reads my book No, I don't mean that Uh until we do though, at least at least get get all of the understand the system Uh, and that's that's that's critical. I mean people uh democracy Depends upon people being literate about the system and hopefully My small contribution, uh will advance that Thank you very much that is a perfect place to close with the book plug and everything it is such a shame you can't be outsigning books in the lobby, but We'll do whatever the virtual version of that is our great Thanks to robert reich author of the system who rigged it how we fix it. I hope we did some fixing here today Uh, and we encourage you to pick up your copy of robert reich's book through your local independent bookstore I think is the appropriate plea here Thank you. Molly. I really thank you And thanks to everybody who joined us online. We really appreciate you showing up in the middle of the day I'm, molly wood and this virtual commonwealth club program is adjourned Foreign
