I first began working in 1962 as a bus boy in a restaurant within walking distance of my home (a couple miles) as I was still only 15 and unable to drive. My wage was $1.25 per hour AND the restaurant provided me with full health care benefits. My next job was a summer job (in 1965) at the local paper mill and the "boss" I don't know if he was the "CEO" but there were about 400 or 500 workers in the mill - most of them supporting a family on the $3.19 wage (at least that was my wage as a summer employee) and, I believe, he made 4 or 5 times the wages of the workers. I took for granted through the 60's and 70's the benefits which seemed to happen with every job I took. I did go to college (mainly to play basketball) and ended up studying Political Science - because it was easier than math) and once out of college I didn't think too much about workers rights because union jobs were prevalent where I grew up and I always seemed to find one. This little bit gives the context of how, during the Reagan years, I - by then busy trying to be a husband and a father - only paid periferally attention to politics - but, I distinctly remember telling anyone who would listen that Ronald Reagan was turning America into a "me" society instead of "we" society. Subsequent to all this I went back to college and became a Middle School teacher and started reading MANY books about "current evernts," politics, and history - mainly American History. In this reading I've read - a couple times - and, I can't remember the books - I believe one was written by Thom Hartman - but, they both said the "foundation" for this corporate treachery (my characterization) came from the so-called "Lewis Powell Memo" to the Chamber of Commerce back in 1972 (I believe). It was during Reagan's time in the White House, based on my memory, that Powell's "Memo" was employed en masse by the corporate "elite" in America - with GE being, likely, the main "instigator." Of course, Powell would subsequently become a Supreme Court Justice and the "tilting" to the right would begin - with the most memerable (to me) examples being "Bush v Gore," "Citizens United," the gutting of the Voting Rights Act, reversal of Roe v Wade, and, most recently the elimination of Affirmative Action at America's Universities. To me, all of this is part of the same issue - the corporate/republican party "partnership" which has turned America into a semi fascist country - with Trump planning to "finish the job." And, we the people being unaware except for people like Dr. Reich. Dr, Reich's books have had a significant effect on my thinking process as I've grown into "old age." And, his book on the "Common Good" may be the most important one he's written. (I donated about 100 of my books to a local books store and, unfortunately, "The Common Good" must have been one of them - so I'm very grateful for the refresher lessons on one of the most important - if not the most - issue of our time. (Although, it's hard for me to consider any issue greater than the Climate Crisis) Bravo to Dr. Reich!
No disagreement here, but the point is not made complete without mentioning that the Chicago School of Economics and Ronald Reagan deserve blame for the creation of Jack Welsh. Without deregulation (Government is the problem) and the mindset of Milton Friedman and Company this would not have happened. The latest battle on this front is now between the pharmaceutical companies and Medicare under the direction of the Inflation Reduction Act (IRA). The drug giants are screaming because their profits will go down and they won't be able to find/develop new drugs. Well, they seldom find new drugs, the government and small ambitious medical research companies do that. The big boys just buy them out, or get a monopoly contract from the government, and mass produce the drug. I have zero sympathy for their argument, which Robert Reich has just torn to shreds.
An American friend could not comprehend it when I told him about my experience of public transportation in Europe - that even small outlying communities were usually very well-served by bus, train or both. He said that this “isn’t practical because it isn’t profitable” - and that it “only raises the cost of real estate in those areas and drives out many of the locals, so in the end, doesn’t benefit those of lower income.”
He is completely operating from the US corporate “for profit” model without any idea that many societies embrace human values and build infrastructure, labor laws, healthcare, etc around these values. I know a Belgian supermarket chain logistics manager for instance who says the unions are important partners in maintaining a healthy business. Doctors are readily available for top quality healthcare at very low fees or for free under the various forms of national health insurance in the EU. Higher education tuition costs about 1,500E per year in Belgium, so every student has access. These systems create a healthier society than one based solely on profits - and yet, the US press is quick to report on the disastrous UK NHS, while ignoring the excellent systems in place in most of the developed world.
I am surprised the famous and profoundly influential Dodge v. Ford case (Michigan, 1919) was not included in this posting. Although the real motivations of the case involve protecting a monopoly and squeezing out certain board members, the short version is that Henry Ford wanted to pay more in wages instead of shareholder dividends, and when he was sued the court ruled that he no right to do that! This has been cited precedent in case after case across the nation, establishing that companies are not legally allowed to do anything that does not maximize near-term shareholder value. This is the foundation of the house that Jack Welch built. As Prof Reich described so well, Welch made it into an aggressive mission, and as he described, today's CEOs *could* effect a counter-mission. But, as variously quoted and attributed, "It is difficult to get a man to understand something, when his salary depends on his not understanding it." (Upton Sinclair?)
All economies are regulated to benefit someone. No markets are truly free. People have other than economic needs, so a system optimized for economics alone can never be optimal for people. What we are missing is a set of widely shared, strong cultural values along the lines of being decent human beings and not assholes. Protecting the planet itself, sharing astoundingly abundant wealth with the people who actually do the work, healthcare and education for all so we approximate a level playing field premised in human decency and compassion -- none of these things would be even slightly controversial if we were not collectively a very ill society.
Thank you for a very clear explanation of the effects of a statement made by my Business Law professor sometime around 1976-1979. He said, and I quote, “the number one responsibility of a business is to maximize stockholder value”. It struck me as not quite right then, and over 40 years later, you have very clearly outlined the effects of that nefarious statement. Thank you.
You are so right. I worked for RBS in UK leaving 2005 to become an entrepreneur. Working to build good businesses basing a fair distribution and employee ownership at the centre is hard hard hard! All sectors are now dominated by a handful of players with vast war chests and massive tax breaks. Why the plutocrats can’t see the pitchforks coming is a mystery to me but they didn’t in France or Russia either.
We face something as a conundrum as a Capitalist society. Money runs EVERYTHING. "It takes money to make money" is VERY true. Being from a household worth $100,000 or less, and all you can do is barely hang on. Come from a household worth 100 million dollars or more and you can do most anything you want. And what the people in the latter category want to do is make **more** money. "Share the wealth" is nowhere to be found in their philosophy. And what they have found is that it is easier to accumulate more wealth by NOT sharing the wealth. In fact, it works better if the vast majority of people have their incomes held down by forces above them and out of their control. (Government and political Parties for instance.) Less money for the Little People means more money for the already Wealthy.
With money being their primary motivation in Life, the Wealthy have not the least inclination to diminish their current wealth or constrain their ability to amass more wealth. Their idea of "spending wisely" is investing in politicians: "donate" a million dollars in "campaign contributions" and odds are the Return On Investment will be $10 million in tax cuts and tax loopholes. Or more. Or MUCH more.
Sure, you can point at exceptions to the rule, billionaire philanthropists that are shelling out millions on (some of) We The People. But for every one of them there's a thousand milking We The People for all We're worth.
How much more obvious does this class warfare have to be before We The People rise up in Our hundreds of millions to win the war?
I grew up in a factory town in the 1960’s. Life was great and so was the health care. By the time I finished college in 1975 all the factories had move south to cheaper labor with no thought of the people left behind. You are so right that these types of communities, which were totally democratic, have become places where people are left to try and make ends meet. They will turn to anyone who says they can make things better for them even if there is no plan to do so. The solution is simple for the wealthiest country in the world and I hope the current administration keeps pushing us in direction of strengthening the middle class.
Bravo! This should be included as a mandatory course for all school kids. I'm so sick of these business schools that worship Welch and still continue to spit out endless and useless "business" grads.
I am a free-lance publisher and a few years ago edited a book called "Fat Cats Don't Hunt" the first chapter of which focused on GE as the poster child of how, starting with the CEO just before Neutron Jack Welch, the shift to the shareholder primacy doctrine away from the stakeholder primacy doctrine destroyed the corporate culture that was, which took care of its employees and, by default, its customers. And how his lieutenants passed over to replace him went on to nearly destroy other corporate entities by infecting them with the same virus. About three months after we released the book, GE was booted from the New York Stock Exchange. Time for a return to Peter Drucker who maintained that the purpose of business was to create good in the universe, so to speak.
I'm not sure I understand how the economy works, but I am a human being, so I operate from a "people first" platform as best I can. The first time I heard the phrase "maximize shareholder value," instinctively, I knew we were heading towards a cliff at breakneck speed with no apparent way to stop this runaway train. If life isn't all about loving and supporting one another -- and life just becomes a game of who can outsmart the other -- then I really don't want anything to do with it. "Maximize shareholder value" implies that there will always be winners and losers. In my lifetime, it has come to mean money over people. Unless this mentality changes, we will never have real prosperity or real peace. How much money do you really need to live a happy life? In my case, not much and I'm okay with that, if it means my neighbor can house, clothe, and feed her children. Thanks, Mr. Reich, for this post which confirmed my worst fears.
I remember the “Reganomics” 80’s with the promise of the trickle down effect that I’ve never felt a drop of. They were convincing.
Then in 2000 George Bush saying, “outsourcing was good for the economy.” Whose economy. Soon after his announcement my sisters Abbott Laboratories job, a plant of 900 people, moved to Guatemala. But before Abbotts move, Eaton Corporation, right across the road employing 800 people moved department but department to warez mexico.
The mind blowing thing for me is the way in which moneyed interests have persuaded the same people they have robbed to be the most fervent supporters of continued hollowing out of American communities. The people moving jobs overseas are the same people financing the demagogue politicians. The politicians who work to secure more and more advantages for the wealthy and corporations are the same politicians who are promising to represent the interests of people in these distressed communities. They use cultural issues to separate people from their economic interests! We have got to get rid of Citizens United and we have got to get criminals out of powerful political offices!
I am more grateful to you, Prof Reich, with nearly every post you produce. Your breadth of knowledge, perspective, and skillful communication are each rare, and certainly in combination in one person. For the zillionth time, thank you.
Right on! There is little common good in American Corporations. It's just money. That approach leads to fascism because the common folks who have been relegated to surfs see no future.
When the allies settled WWII, they forced Germany to have a representative from labor on all corporations' boards to help assure the common good. As you implied, Robert, Common Good is essential for a stable democratic society.
I first began working in 1962 as a bus boy in a restaurant within walking distance of my home (a couple miles) as I was still only 15 and unable to drive. My wage was $1.25 per hour AND the restaurant provided me with full health care benefits. My next job was a summer job (in 1965) at the local paper mill and the "boss" I don't know if he was the "CEO" but there were about 400 or 500 workers in the mill - most of them supporting a family on the $3.19 wage (at least that was my wage as a summer employee) and, I believe, he made 4 or 5 times the wages of the workers. I took for granted through the 60's and 70's the benefits which seemed to happen with every job I took. I did go to college (mainly to play basketball) and ended up studying Political Science - because it was easier than math) and once out of college I didn't think too much about workers rights because union jobs were prevalent where I grew up and I always seemed to find one. This little bit gives the context of how, during the Reagan years, I - by then busy trying to be a husband and a father - only paid periferally attention to politics - but, I distinctly remember telling anyone who would listen that Ronald Reagan was turning America into a "me" society instead of "we" society. Subsequent to all this I went back to college and became a Middle School teacher and started reading MANY books about "current evernts," politics, and history - mainly American History. In this reading I've read - a couple times - and, I can't remember the books - I believe one was written by Thom Hartman - but, they both said the "foundation" for this corporate treachery (my characterization) came from the so-called "Lewis Powell Memo" to the Chamber of Commerce back in 1972 (I believe). It was during Reagan's time in the White House, based on my memory, that Powell's "Memo" was employed en masse by the corporate "elite" in America - with GE being, likely, the main "instigator." Of course, Powell would subsequently become a Supreme Court Justice and the "tilting" to the right would begin - with the most memerable (to me) examples being "Bush v Gore," "Citizens United," the gutting of the Voting Rights Act, reversal of Roe v Wade, and, most recently the elimination of Affirmative Action at America's Universities. To me, all of this is part of the same issue - the corporate/republican party "partnership" which has turned America into a semi fascist country - with Trump planning to "finish the job." And, we the people being unaware except for people like Dr. Reich. Dr, Reich's books have had a significant effect on my thinking process as I've grown into "old age." And, his book on the "Common Good" may be the most important one he's written. (I donated about 100 of my books to a local books store and, unfortunately, "The Common Good" must have been one of them - so I'm very grateful for the refresher lessons on one of the most important - if not the most - issue of our time. (Although, it's hard for me to consider any issue greater than the Climate Crisis) Bravo to Dr. Reich!
No disagreement here, but the point is not made complete without mentioning that the Chicago School of Economics and Ronald Reagan deserve blame for the creation of Jack Welsh. Without deregulation (Government is the problem) and the mindset of Milton Friedman and Company this would not have happened. The latest battle on this front is now between the pharmaceutical companies and Medicare under the direction of the Inflation Reduction Act (IRA). The drug giants are screaming because their profits will go down and they won't be able to find/develop new drugs. Well, they seldom find new drugs, the government and small ambitious medical research companies do that. The big boys just buy them out, or get a monopoly contract from the government, and mass produce the drug. I have zero sympathy for their argument, which Robert Reich has just torn to shreds.
An American friend could not comprehend it when I told him about my experience of public transportation in Europe - that even small outlying communities were usually very well-served by bus, train or both. He said that this “isn’t practical because it isn’t profitable” - and that it “only raises the cost of real estate in those areas and drives out many of the locals, so in the end, doesn’t benefit those of lower income.”
He is completely operating from the US corporate “for profit” model without any idea that many societies embrace human values and build infrastructure, labor laws, healthcare, etc around these values. I know a Belgian supermarket chain logistics manager for instance who says the unions are important partners in maintaining a healthy business. Doctors are readily available for top quality healthcare at very low fees or for free under the various forms of national health insurance in the EU. Higher education tuition costs about 1,500E per year in Belgium, so every student has access. These systems create a healthier society than one based solely on profits - and yet, the US press is quick to report on the disastrous UK NHS, while ignoring the excellent systems in place in most of the developed world.
I am surprised the famous and profoundly influential Dodge v. Ford case (Michigan, 1919) was not included in this posting. Although the real motivations of the case involve protecting a monopoly and squeezing out certain board members, the short version is that Henry Ford wanted to pay more in wages instead of shareholder dividends, and when he was sued the court ruled that he no right to do that! This has been cited precedent in case after case across the nation, establishing that companies are not legally allowed to do anything that does not maximize near-term shareholder value. This is the foundation of the house that Jack Welch built. As Prof Reich described so well, Welch made it into an aggressive mission, and as he described, today's CEOs *could* effect a counter-mission. But, as variously quoted and attributed, "It is difficult to get a man to understand something, when his salary depends on his not understanding it." (Upton Sinclair?)
All economies are regulated to benefit someone. No markets are truly free. People have other than economic needs, so a system optimized for economics alone can never be optimal for people. What we are missing is a set of widely shared, strong cultural values along the lines of being decent human beings and not assholes. Protecting the planet itself, sharing astoundingly abundant wealth with the people who actually do the work, healthcare and education for all so we approximate a level playing field premised in human decency and compassion -- none of these things would be even slightly controversial if we were not collectively a very ill society.
Thank you for a very clear explanation of the effects of a statement made by my Business Law professor sometime around 1976-1979. He said, and I quote, “the number one responsibility of a business is to maximize stockholder value”. It struck me as not quite right then, and over 40 years later, you have very clearly outlined the effects of that nefarious statement. Thank you.
You are so right. I worked for RBS in UK leaving 2005 to become an entrepreneur. Working to build good businesses basing a fair distribution and employee ownership at the centre is hard hard hard! All sectors are now dominated by a handful of players with vast war chests and massive tax breaks. Why the plutocrats can’t see the pitchforks coming is a mystery to me but they didn’t in France or Russia either.
We face something as a conundrum as a Capitalist society. Money runs EVERYTHING. "It takes money to make money" is VERY true. Being from a household worth $100,000 or less, and all you can do is barely hang on. Come from a household worth 100 million dollars or more and you can do most anything you want. And what the people in the latter category want to do is make **more** money. "Share the wealth" is nowhere to be found in their philosophy. And what they have found is that it is easier to accumulate more wealth by NOT sharing the wealth. In fact, it works better if the vast majority of people have their incomes held down by forces above them and out of their control. (Government and political Parties for instance.) Less money for the Little People means more money for the already Wealthy.
With money being their primary motivation in Life, the Wealthy have not the least inclination to diminish their current wealth or constrain their ability to amass more wealth. Their idea of "spending wisely" is investing in politicians: "donate" a million dollars in "campaign contributions" and odds are the Return On Investment will be $10 million in tax cuts and tax loopholes. Or more. Or MUCH more.
Sure, you can point at exceptions to the rule, billionaire philanthropists that are shelling out millions on (some of) We The People. But for every one of them there's a thousand milking We The People for all We're worth.
How much more obvious does this class warfare have to be before We The People rise up in Our hundreds of millions to win the war?
I grew up in a factory town in the 1960’s. Life was great and so was the health care. By the time I finished college in 1975 all the factories had move south to cheaper labor with no thought of the people left behind. You are so right that these types of communities, which were totally democratic, have become places where people are left to try and make ends meet. They will turn to anyone who says they can make things better for them even if there is no plan to do so. The solution is simple for the wealthiest country in the world and I hope the current administration keeps pushing us in direction of strengthening the middle class.
A masterpiece!
Bravo! This should be included as a mandatory course for all school kids. I'm so sick of these business schools that worship Welch and still continue to spit out endless and useless "business" grads.
I am a free-lance publisher and a few years ago edited a book called "Fat Cats Don't Hunt" the first chapter of which focused on GE as the poster child of how, starting with the CEO just before Neutron Jack Welch, the shift to the shareholder primacy doctrine away from the stakeholder primacy doctrine destroyed the corporate culture that was, which took care of its employees and, by default, its customers. And how his lieutenants passed over to replace him went on to nearly destroy other corporate entities by infecting them with the same virus. About three months after we released the book, GE was booted from the New York Stock Exchange. Time for a return to Peter Drucker who maintained that the purpose of business was to create good in the universe, so to speak.
I'm not sure I understand how the economy works, but I am a human being, so I operate from a "people first" platform as best I can. The first time I heard the phrase "maximize shareholder value," instinctively, I knew we were heading towards a cliff at breakneck speed with no apparent way to stop this runaway train. If life isn't all about loving and supporting one another -- and life just becomes a game of who can outsmart the other -- then I really don't want anything to do with it. "Maximize shareholder value" implies that there will always be winners and losers. In my lifetime, it has come to mean money over people. Unless this mentality changes, we will never have real prosperity or real peace. How much money do you really need to live a happy life? In my case, not much and I'm okay with that, if it means my neighbor can house, clothe, and feed her children. Thanks, Mr. Reich, for this post which confirmed my worst fears.
I remember the “Reganomics” 80’s with the promise of the trickle down effect that I’ve never felt a drop of. They were convincing.
Then in 2000 George Bush saying, “outsourcing was good for the economy.” Whose economy. Soon after his announcement my sisters Abbott Laboratories job, a plant of 900 people, moved to Guatemala. But before Abbotts move, Eaton Corporation, right across the road employing 800 people moved department but department to warez mexico.
The mind blowing thing for me is the way in which moneyed interests have persuaded the same people they have robbed to be the most fervent supporters of continued hollowing out of American communities. The people moving jobs overseas are the same people financing the demagogue politicians. The politicians who work to secure more and more advantages for the wealthy and corporations are the same politicians who are promising to represent the interests of people in these distressed communities. They use cultural issues to separate people from their economic interests! We have got to get rid of Citizens United and we have got to get criminals out of powerful political offices!
I am more grateful to you, Prof Reich, with nearly every post you produce. Your breadth of knowledge, perspective, and skillful communication are each rare, and certainly in combination in one person. For the zillionth time, thank you.
Right on! There is little common good in American Corporations. It's just money. That approach leads to fascism because the common folks who have been relegated to surfs see no future.
When the allies settled WWII, they forced Germany to have a representative from labor on all corporations' boards to help assure the common good. As you implied, Robert, Common Good is essential for a stable democratic society.