Robert Reich on Saving Capitalism and Democracy

From The Browser:

In a recent post on your website, you said there was “moral rot” in America. And you say: “It’s located in the public behaviour of people who control our economy and are turning our democracy into a financial slush pump.” Can you expand on this?

An economy depends fundamentally on public morality; some shared standards about what sorts of activities are impermissible because they so fundamentally violate trust that they threaten to undermine the social fabric. Without trust it has to depend upon such complex contracts and such weighty enforcement systems that it would crumble under its own weight. What we’ve seen over the last two decades in the United States is a steady decline in the willingness of people in leading positions in the private sector – on Wall Street and in large corporations especially – to maintain those minimum standards. The new rule has become making the highest profits possible regardless of the social consequences.

In the first three decades after World War II – partly because America went through that terrible war and also experienced before that the Great Depression – there was a sense in the business community and on Wall Street of some degree of social responsibility. It wasn’t talked about as social responsibility, because it was assumed to be a bedrock of how people with great economic power should behave. CEOs did not earn more than 40 times what the typical worker earned. Rarely were there mass layoffs by profitable firms. The marginal income tax on the highest income earners in the 1950s was 91%. Even the effective rate, after all deductions and tax credits, was still well above 50%. The game was not played in a cutthroat way. In fact, consumers, workers, the community, were all considered stakeholders of almost equal entitlement as shareholders.

Around about the late 1970s and early 1980s, all of this changed quite dramatically.

More here.