By
Robert Reich
At a time many Republican presidential candidates and state legislators are furiously focusing on private morality – what people do in their bedrooms, contraception, abortion, gay marriage – America is experiencing a far more significant crisis in public morality.
CEOs
of large corporations now earn 300 times the wages of average workers. Insider
trading is endemic on Wall Street, where hedge-fund and private-equity moguls
are taking home hundreds of millions.
A
handful of extraordinarily wealthy people are investing unprecedented sums in
the upcoming election, seeking to rig the economy for their benefit even more
than it’s already rigged.
Yet
the wages of average working people continue to languish as jobs are off-shored
or off-loaded onto “independent contractors.”
All
this is in sharp contrast to the first three decades after World War II.
Then,
the typical CEO earned no more than 40 times what the typical worker earned,
and Wall Street was boring.
Then,
the wealthy didn’t try to control elections.
And
in that era, the wages of most Americans rose.
Profitable
firms didn’t lay off their workers. They didn’t replace full-time employees
with independent contractors, or bust unions. They gave their workers a
significant share of the gains.
Consumers,
workers, and the community were considered stakeholders of almost equal
entitlement.
We
invested in education and highways and social services. We financed all of this
with our taxes.
The
marginal income tax on the highest income earners never fell below 70 percent.
Even the effective rate, after all deductions and tax credits, was still well
above 50%.
We
had a shared sense of public morality because we knew we were all in it
together. We had been through a Great Depression and a terrible war, and we
understood our interdependence.
But
over time, we forgot.
The
change began when Wall Street convinced the Reagan Administration and
subsequent administrations to repeal regulations put in place after the crash
of 1929 to prevent a repeat of the excesses that had led to the Great
Depression.
This,
in turn, moved the American economy from stakeholder capitalism to shareholder
capitalism, whose sole objective is to maximize shareholder returns.
Shareholder
capitalism ushered in an era of excess. In the 1980s it brought junk bond
scandals and insider trading.
In
the 1990s it brought a speculative binge culminating in the bursting of the
dotcom bubble. At the urging of Wall Street, Bill Clinton repealed the
Glass-Steagall Act, which had separated investment from commercial banking.
In
2001 and 2002 it produced Enron and the corporate looting scandals, revealing
not only the dark side of some of the most admired companies in America but
also the complicity of Wall Street, many of whose traders were actively
involved.
The
Street’s subsequent gambling in derivatives and risky mortgages resulted in the
crash of 2008, and a massive taxpayer-financed bailout.
The
Dodd-Frank Act attempted to rein in the Street but Wall Street lobbyists have
done everything possible to eviscerate it. Republicans haven’t even
appropriated sufficient money to enforce it.
The
final blow to public morality came when a majority of the Supreme Court decided
corporations and wealthy individuals have a right under the First Amendment to
spend whatever they wish on elections.
Public
morality can’t be legislated but it can be encouraged.
Glass-Steagall
must be resurrected. Big banks have to be broken up.
CEO
pay must be bridled. Pay in excess of $1 million shouldn’t be deductible from
corporate income taxes. Corporations with high ratios of executive pay to
typical workers should face higher tax rates than those with lower ratios.
People
earning tens if not hundreds of millions of dollars a year should pay the same
70 percent tax rate top earners paid before 1981.
And
we must get big money out of politics – reversing those Supreme Court rulings,
providing public financing of elections, and getting full disclosure of the
sources of all campaign contributions.
None
of this is possible without a broadly based citizen movement to rescue our
democracy, take back our economy, and restore a minimal standard of public
morality.
America’s
problems have nothing to do with what happens bedrooms, or whether women are
allowed to end their pregnancies.
Our
problems have everything to do with what occurs in boardrooms, and whether
corporations and wealthy individuals are allowed to undermine our democracy.
ROBERT B. REICH, Chancellor’s Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies, was Secretary of Labor in the Clinton administration.
Time Magazine named him one of the ten most effective cabinet secretaries of
the twentieth century. He has written fourteen books, including the best sellers
“Aftershock, “The Work of Nations," and"Beyond Outrage." He is
also a founding editor of the American Prospect magazine and chairman of Common
Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon.
His new book, "SAVING CAPITALISM: For the Many, Not the Few" is out
9/29.
