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Moral Capitalism: Why Fairness Won't Make Us Poor
"If anyone can save capitalism from the capitalists, it’s Steven Pearlstein. This lucid, brilliant book refuses to abandon capitalism to those who believe morality and justice irrelevant to an economic system." —Ezra Klein, founder and editor-at-large, VoxPulitzer Prize-winning economics journalist Steven Pearlstein argues that our thirty year experiment in unfettered markets has undermined core values required to make capitalism and democracy work.With a New Introduction by the Author Thirty years ago, “greed is good” and “maximizing shareholder value” became the new mantras woven into the fabric of our business culture, economy, and politics. Although, around the world, free market capitalism has lifted more than a billion people from poverty, in the United States most of the benefits of economic growth have been captured by the richest 10%, along with providing justification for squeezing workers, cheating customers, avoiding taxes, and leaving communities in the lurch. As a result, Americans are losing faith that a free market economy is the best system.In Moral Capitalism, Pulitzer Prize-winning journalist Steven Pearlstein chronicles our descent and challenges the theories being taught in business schools and exercised in boardrooms around the country. We’re missing a key tenet of Adam Smith’s wealth of without trust and social capital, democratic capitalism cannot survive. Further, equality of incomes and opportunity need not come at the expense of economic growth.Pearlstein lays out bold steps we can take as a a guaranteed minimum income paired with universal national service, tax incentives for companies to share profits with workers, ending class segregation in public education, and restoring competition to markets. He provides a path forward that will create the shared prosperity that will sustain capitalism over the long term.Previously published as Can American Capitalism Survive?
247 pages, Kindle Edition
First published September 25, 2018
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Displaying 1 - 30 of 49 reviews
October 13, 2018
Pearlstein has been a jounalist writing about finance and economics for a long time. He described the current problems of American capitalism and some solutions:
1. Corporations run only to maximise profits: chief executives of public companies are so scared of hostile takeovers of corporate raiders that the only defence is a high stock price. Oh and that is good for their compensation as well. Workers are outsourced, work is automated, goods are sourced from the cheapest global source, and taxes are avoided by international companies by locating income receiving units in low tax counties and cost units in high tax countries.
Solution: Let each publicly listed company write a yearly statement to allow them to state who their stakeholders are, e.g. the environment. This would allow investors to know the companies are socially or environmentally responsible etc. However I cannot see how this can solve the problems listed.
2. Inequality in income: superstar economy, chief executives enriching themselves. Some inequality is desirable and too much and too little equality have both been shown to affect growth.
Solution: universal basic income and national service. The money will come from taxing high income earners more from higher income tax rate, estate tax, financial transaction tax. This will not only provide the money but greatly increase the cost of financial transaction, effectively killing high speed Wall Street Trading and a lot of their profits and income. Pearlstein thinks that people who receive money must work at least 50% of the time to make it politically feasible. I think it is going to be extremely difficult as a lot of money is needed and the author had not done the sums at all.
3. Political Power for the rich: the rich can buy influence by financing think tanks, donating to politicians, paying economic thought leaders to support their cause.
Solution: limit donations. However a rich person can still finance multiple entities which in turn champion their cause. Really the poor must vote to let known their preference as this is their only power.
4. Outdated patent laws and too many mergers: numerous patent battles are made and patent trolls just want to collect money. Patents allow incumbents to collect rent, and mergers allow the incumbent to buy out its competitors.
Solution: more anti-trust activities, not approve useless patents and not allowing mergers that decrease competition. I think this is the most doable and had been done many times.
A balanced book with some good suggestions. But some of the problems are so inherent to capitalism that I think it is very hard to solve.
1. Corporations run only to maximise profits: chief executives of public companies are so scared of hostile takeovers of corporate raiders that the only defence is a high stock price. Oh and that is good for their compensation as well. Workers are outsourced, work is automated, goods are sourced from the cheapest global source, and taxes are avoided by international companies by locating income receiving units in low tax counties and cost units in high tax countries.
Solution: Let each publicly listed company write a yearly statement to allow them to state who their stakeholders are, e.g. the environment. This would allow investors to know the companies are socially or environmentally responsible etc. However I cannot see how this can solve the problems listed.
2. Inequality in income: superstar economy, chief executives enriching themselves. Some inequality is desirable and too much and too little equality have both been shown to affect growth.
Solution: universal basic income and national service. The money will come from taxing high income earners more from higher income tax rate, estate tax, financial transaction tax. This will not only provide the money but greatly increase the cost of financial transaction, effectively killing high speed Wall Street Trading and a lot of their profits and income. Pearlstein thinks that people who receive money must work at least 50% of the time to make it politically feasible. I think it is going to be extremely difficult as a lot of money is needed and the author had not done the sums at all.
3. Political Power for the rich: the rich can buy influence by financing think tanks, donating to politicians, paying economic thought leaders to support their cause.
Solution: limit donations. However a rich person can still finance multiple entities which in turn champion their cause. Really the poor must vote to let known their preference as this is their only power.
4. Outdated patent laws and too many mergers: numerous patent battles are made and patent trolls just want to collect money. Patents allow incumbents to collect rent, and mergers allow the incumbent to buy out its competitors.
Solution: more anti-trust activities, not approve useless patents and not allowing mergers that decrease competition. I think this is the most doable and had been done many times.
A balanced book with some good suggestions. But some of the problems are so inherent to capitalism that I think it is very hard to solve.
January 27, 2019
Who lets this stuff get published? Seriously. If you've been following the news at all in the last couple of years, nothing in this hodgepodge of stats or solutions will strike you as new or interesting. It is just a long and tedious take on inequality, wage stagnation with some choice quotes from the typical neoliberal commentators like Fukuyama and Pinker. The one bright spot is that this dude is a clear centrist--the sort of David Brookes of the left and if he's questioning the basis of capitalism, maybe that's progress?
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August 25, 2019Tomorrow will be better for people than just protecting capitalism.
December 27, 2019
In a rousing but measured indictment of American Capitalism in its prevalent form, Steven Pearlstein in this very essential, compelling and relevant book, charts the insidious trajectory of a dangerous variety of capitalism which has gripped both the imagination as well as fervor of its fevered apologists. Raising its seemingly innocuous head as justification to and of the following three ideas (as argued by Mr. Pearlstein), capitalism has spawned a riotously active set of proponents who in the wake of revered economic prophets such as Milton Friedman, Gary Stanley Becker and Co, wax eloquent in its praise:
Idea 1:
“The Government was significantly responsible for the decline in American competitiveness”.
Idea 2:
“The sole purpose of every business is to deliver the highest possible financial return to its investors”.
Idea 3:
“Free markets had to be accepted as fair and just”.
The troika of ideas assumed Biblical proportions and led a ludicrous slew of deregulations spectacular in their sweep and controversial in their wake. At the time of this review, rules setting stringent standards for oil and gas drilling in national parks and wildlife sanctuaries, prohibition of federal student loans at for-profit colleges whose graduates are unemployed etc. are all history or on their way to becoming history. Corporate raiders and remorseless “greenmailers” such as Carl Icahn and his ilk not only gained acceptance but also a new and respectable moniker, imaginatively titled “activist investor”, which was but a mere euphemism for corporate raiders. The darlings of Wall Street such as the notorious Goldman Sachs led the way in birthing “synthetic” securities which allowed people to blindly invest in the mortgage market, than were actual mortgages for them to buy. Practices of this ingenious kind and similar sleights of hand resulted in one of the most crippling recessions (2007 – 2009) seen since The Great Depression of 1929. Mr. Pearlstein also asserts that the capitalists took succor in the writings of both Adam Smith and Charles Darwin, by lending a convoluted twist and more than just a contrived turn to the immortal phrases “The Invisible Hand” and “The Theory of Natural Selection“. Two absolutely evolutionary (no pun intended) terms lay transformed, in the hands of a few buccaneering elites, into terms of pejorative connotations! The objective of ‘maximizing shareholder value’ assumed deadly proportions as it transcended from being an acceptable rhetoric to a veritable zeitgeist. The dastardly behavior of immoral and unscrupulous capitalists such as Martin Shkreli – who after buying up licenses for generic drugs went on to jack up the price of Daraprim, a drug used to treat AIDS from $13.50 to $750 – exacerbated an already worrying trend of income inequality boosting the personal wealth of a select few at the cost of the remaining. According to the Economic Policy Institute , the average Chief Executive of the country’s 350 largest companies control more than $15 million a year, or 271 times the pay of the typical worker. Accumulation of status good and bandwagon accouterments became more a norm than an aberration. This maddening spell of acquisition reached its zenith when the crown prince of Saudi Arabia splurged an eye popping sum of $450 million at an auction to procure a Leonardo Da Vinci painting.
As illustrated by Mr. Pearlstein, the scourge of inequality and the moral predicament surrounding it have been accorded myriad explanations and mesmerizing justifications. From Bernard Mandeville and his fable of bees to Arthur Orkun’s “the big trade off”, both economists and moralists in the words of Mr. Pearlstein have been “bedeviled by the tension of wanting to generate a bigger pie and wanting to cut the slices more equally.”
In an interesting reflection on Professor Robert Nozick‘s entitlement theory, Mr. Pearlstein mulls on the concept of ‘just deserts’ as it is being adhered to today and calls for a realignment of the moral compass governing the distribution of income and establishment of measures of equality. While candidly admitting that he is not in the know of a more objective system than what has been instituted and worked upon currently, he also asserts that, “as a moral concept, just desert is inadequate and incomplete. In determining whether any distribution of income is just, it is not enough to simply enquire whether someone has earned his income through voluntary market exchange playing by the rules. We must also look at the distribution of income and ask whether the rules themselves are just”.
The unrepentant corporate executives – the top five amongst whom in large American Corporations routinely account for a whopping 12 percent of their firms’ annual profits – find themselves in an unforgiving quandary. Caught between paying obeisance to the ‘terror’ of quarterly earnings, thereby sacrificing long term growth prospects at the altar of Wall Street diktat and furthering the economic and reputational prospects of the genuine stakeholders, these titans of business, more often than not succumb to the melodious albeit transient music generated by an exponentially increasing share price. As Mr. Pearlstein brings to us this jaw dropping statistic: A mere 5 percent fall in the share of corporate gross income going to compensation for labour, from around 80 percent since the early 1990s to 75 percent represents “a shift of more than half a trillion dollars a year from workers to shareholders, disproportionately benefiting those at the top”. This one damning statistic bears monument to the pernicious tentacles of wealth and income inequality and a new rampant breed of capitalism that takes no prisoners and flushes scruples down the gutter!
A stellar feature of this book is the thrilling degree of empirical evidence drawn upon to back the various assertions. The enviable fount of research that has been done by pioneers in various socio-economic realms is relied upon to the hilt by Mr. Pearlstein in his admirable work. For example, while holding forth on the correlation between income inequality and intergenerational mobility, Mr. Pearlstein brings to the attention of the reader the landmark findings unearthed by Alan Kreuger, one of the former top economic advisors to Obama. Christening this correlation, the “Great Gatsby Curve” , Kreuger predicted that “the surge in inequality in the States during the last 40 years will wind up reducing mobility in the next generation – those born after 1980 – by 20 percent”.
So is there a way to curb this unfettered permeation of greed or are we resigned to living in a Dickensian era characterized by income distortions and wealth inequalities? Mr. Pearlstein proposes a few radical measures which are bound to rankle more than just a few eyebrows and ruffle not just feathers. These range from the much touted Universal Basic Income to more radical notions such as compulsory worker participation in profits and levy of inheritance taxes. A call for the restitution of anti-trust regulations to curb colossal mergers and creation of monopolies is also a proposal put forward by the author.
“Can American Capitalism Survive” is not a mindless and unidirectional polemic seeking to purvey an entrenched ideology. On the contrary it is a highly relevant work informing and urging its readers to lend their attention and efforts towards an urgent and compelling need to critically and consciously relook into an economic practice that has the power to impact civilization in a regressive way.
The time to act, and to react is now!
Idea 1:
“The Government was significantly responsible for the decline in American competitiveness”.
Idea 2:
“The sole purpose of every business is to deliver the highest possible financial return to its investors”.
Idea 3:
“Free markets had to be accepted as fair and just”.
The troika of ideas assumed Biblical proportions and led a ludicrous slew of deregulations spectacular in their sweep and controversial in their wake. At the time of this review, rules setting stringent standards for oil and gas drilling in national parks and wildlife sanctuaries, prohibition of federal student loans at for-profit colleges whose graduates are unemployed etc. are all history or on their way to becoming history. Corporate raiders and remorseless “greenmailers” such as Carl Icahn and his ilk not only gained acceptance but also a new and respectable moniker, imaginatively titled “activist investor”, which was but a mere euphemism for corporate raiders. The darlings of Wall Street such as the notorious Goldman Sachs led the way in birthing “synthetic” securities which allowed people to blindly invest in the mortgage market, than were actual mortgages for them to buy. Practices of this ingenious kind and similar sleights of hand resulted in one of the most crippling recessions (2007 – 2009) seen since The Great Depression of 1929. Mr. Pearlstein also asserts that the capitalists took succor in the writings of both Adam Smith and Charles Darwin, by lending a convoluted twist and more than just a contrived turn to the immortal phrases “The Invisible Hand” and “The Theory of Natural Selection“. Two absolutely evolutionary (no pun intended) terms lay transformed, in the hands of a few buccaneering elites, into terms of pejorative connotations! The objective of ‘maximizing shareholder value’ assumed deadly proportions as it transcended from being an acceptable rhetoric to a veritable zeitgeist. The dastardly behavior of immoral and unscrupulous capitalists such as Martin Shkreli – who after buying up licenses for generic drugs went on to jack up the price of Daraprim, a drug used to treat AIDS from $13.50 to $750 – exacerbated an already worrying trend of income inequality boosting the personal wealth of a select few at the cost of the remaining. According to the Economic Policy Institute , the average Chief Executive of the country’s 350 largest companies control more than $15 million a year, or 271 times the pay of the typical worker. Accumulation of status good and bandwagon accouterments became more a norm than an aberration. This maddening spell of acquisition reached its zenith when the crown prince of Saudi Arabia splurged an eye popping sum of $450 million at an auction to procure a Leonardo Da Vinci painting.
As illustrated by Mr. Pearlstein, the scourge of inequality and the moral predicament surrounding it have been accorded myriad explanations and mesmerizing justifications. From Bernard Mandeville and his fable of bees to Arthur Orkun’s “the big trade off”, both economists and moralists in the words of Mr. Pearlstein have been “bedeviled by the tension of wanting to generate a bigger pie and wanting to cut the slices more equally.”
In an interesting reflection on Professor Robert Nozick‘s entitlement theory, Mr. Pearlstein mulls on the concept of ‘just deserts’ as it is being adhered to today and calls for a realignment of the moral compass governing the distribution of income and establishment of measures of equality. While candidly admitting that he is not in the know of a more objective system than what has been instituted and worked upon currently, he also asserts that, “as a moral concept, just desert is inadequate and incomplete. In determining whether any distribution of income is just, it is not enough to simply enquire whether someone has earned his income through voluntary market exchange playing by the rules. We must also look at the distribution of income and ask whether the rules themselves are just”.
The unrepentant corporate executives – the top five amongst whom in large American Corporations routinely account for a whopping 12 percent of their firms’ annual profits – find themselves in an unforgiving quandary. Caught between paying obeisance to the ‘terror’ of quarterly earnings, thereby sacrificing long term growth prospects at the altar of Wall Street diktat and furthering the economic and reputational prospects of the genuine stakeholders, these titans of business, more often than not succumb to the melodious albeit transient music generated by an exponentially increasing share price. As Mr. Pearlstein brings to us this jaw dropping statistic: A mere 5 percent fall in the share of corporate gross income going to compensation for labour, from around 80 percent since the early 1990s to 75 percent represents “a shift of more than half a trillion dollars a year from workers to shareholders, disproportionately benefiting those at the top”. This one damning statistic bears monument to the pernicious tentacles of wealth and income inequality and a new rampant breed of capitalism that takes no prisoners and flushes scruples down the gutter!
A stellar feature of this book is the thrilling degree of empirical evidence drawn upon to back the various assertions. The enviable fount of research that has been done by pioneers in various socio-economic realms is relied upon to the hilt by Mr. Pearlstein in his admirable work. For example, while holding forth on the correlation between income inequality and intergenerational mobility, Mr. Pearlstein brings to the attention of the reader the landmark findings unearthed by Alan Kreuger, one of the former top economic advisors to Obama. Christening this correlation, the “Great Gatsby Curve” , Kreuger predicted that “the surge in inequality in the States during the last 40 years will wind up reducing mobility in the next generation – those born after 1980 – by 20 percent”.
So is there a way to curb this unfettered permeation of greed or are we resigned to living in a Dickensian era characterized by income distortions and wealth inequalities? Mr. Pearlstein proposes a few radical measures which are bound to rankle more than just a few eyebrows and ruffle not just feathers. These range from the much touted Universal Basic Income to more radical notions such as compulsory worker participation in profits and levy of inheritance taxes. A call for the restitution of anti-trust regulations to curb colossal mergers and creation of monopolies is also a proposal put forward by the author.
“Can American Capitalism Survive” is not a mindless and unidirectional polemic seeking to purvey an entrenched ideology. On the contrary it is a highly relevant work informing and urging its readers to lend their attention and efforts towards an urgent and compelling need to critically and consciously relook into an economic practice that has the power to impact civilization in a regressive way.
The time to act, and to react is now!
April 16, 2020
The author makes a passionate critique of today’s American capitalism, pointing out to its glaring moral deficiencies as a result of changes in social norms in the 80s. These include the increasing income inequality (both within general population and within the ranks of a given corporation), the inequality of opportunity (because of the education and tax systems), firms’ obsession for ‘shareholder value’ creation (at the expense of anything else, including their employees/workers conditions, environment etc.), similar obsession with growth (at the expense of fairness), and the resulting corrosion of ‘social capital’ (trust in institutions, values, sense of community etc.)
The book presents viewpoints from eminent thinkers/economists from Smith to Friedman (and even corrects some misconceptions – Adam Smith was not an advocate of selfish pursuit of wealth! See his Theory of Moral Sentiments), think tanks, research papers, and some interesting experiments (Zak, Muir, Freeman) which I thought helps the author expand on his point.
All fair points, but hardly anything new under the sun. What makes an author original is not his ability to compile what his predecessors wrote (as any college student can), but his propositions/ideas about how to tackle what he/she sees as the main issue. And here, Pearlman flops.
For the most part, he offers well-known solutions that seem to be either too idealistic to be realized in a country like the US (such as limiting special interest money in politics – too entrenched; sharing profits with employees – don’t see that happening anytime soon, especially with unions’ power utterly obliterated; equalizing educational opportunity by decoupling it from local property taxes – have difficulty believing most rich people will consent to this, let alone the districts/municipalities that get a nice stream of income..); reducing concentration – I think that boat sailed after the 2008 crisis and the missed opportunity through Dodd-Frank Act, OR that would not address the issue at hand (universal basic income – would increase inflation so wouldn’t help anyone anyway. The ONLY proposal that I think has some chance of seeing the daylight is the universal service - I thought of that myself at college 😊
Overall, valid points, but not much new discussion added. Still, worth the read for the survey of thinkers’ viewpoints it offers.
The book presents viewpoints from eminent thinkers/economists from Smith to Friedman (and even corrects some misconceptions – Adam Smith was not an advocate of selfish pursuit of wealth! See his Theory of Moral Sentiments), think tanks, research papers, and some interesting experiments (Zak, Muir, Freeman) which I thought helps the author expand on his point.
All fair points, but hardly anything new under the sun. What makes an author original is not his ability to compile what his predecessors wrote (as any college student can), but his propositions/ideas about how to tackle what he/she sees as the main issue. And here, Pearlman flops.
For the most part, he offers well-known solutions that seem to be either too idealistic to be realized in a country like the US (such as limiting special interest money in politics – too entrenched; sharing profits with employees – don’t see that happening anytime soon, especially with unions’ power utterly obliterated; equalizing educational opportunity by decoupling it from local property taxes – have difficulty believing most rich people will consent to this, let alone the districts/municipalities that get a nice stream of income..); reducing concentration – I think that boat sailed after the 2008 crisis and the missed opportunity through Dodd-Frank Act, OR that would not address the issue at hand (universal basic income – would increase inflation so wouldn’t help anyone anyway. The ONLY proposal that I think has some chance of seeing the daylight is the universal service - I thought of that myself at college 😊
Overall, valid points, but not much new discussion added. Still, worth the read for the survey of thinkers’ viewpoints it offers.
August 6, 2018
I received an advanced readers copy in exchange for an honest review.
This is not a book about how left-wing politics can save our country. This is written from the perspective of someone who would probably have been a moderate Republican in the 1950s or 60s, but now would be considered a Democrat. It’s how we can reform capitalism to make it non-corrupt. But still capitalism.
2018 is sad
This is not a book about how left-wing politics can save our country. This is written from the perspective of someone who would probably have been a moderate Republican in the 1950s or 60s, but now would be considered a Democrat. It’s how we can reform capitalism to make it non-corrupt. But still capitalism.
2018 is sad
March 24, 2021
I'll be honest, I didn't read the first chapter, which consists of 70 pages of prefacing, so maybe this review isn't fair and maybe I should not have marked it as read.
If I had the opportunity, I think I would've given it 3.5 stars. A good read that really made me think a lot about the state of American Capitalism.
As much as I enjoyed the arguments made, and some were very thoughtful, I'm honestly sick of the debate between capitalism and socialism. After thoroughly examining both systems, I feel as if no reasonable remedy exists. This may seem cynical and depressing, but our troubles stem not from the systems themselves, but the proponents behind each of them. Having deeply flawed people try and create systems that don't harm people is laughable, but a noble pursuit. While we can take steps to try and heal the things that are broken, it's also quite okay to understand that not all of our problems can be solved and won't be solved until heaven.
One quote really stands out to me in the argument for better capitalism and more specifically universal basic income applied to the impoverished: "Cutting all Americans a check would also allow us to eliminate a number of existing welfare programs that not only have high bureaucratic costs but, because of all the checking up that is involved, have a tendency to rob the poor of their dignity and self-respect." Just some food for thought.
If I had the opportunity, I think I would've given it 3.5 stars. A good read that really made me think a lot about the state of American Capitalism.
As much as I enjoyed the arguments made, and some were very thoughtful, I'm honestly sick of the debate between capitalism and socialism. After thoroughly examining both systems, I feel as if no reasonable remedy exists. This may seem cynical and depressing, but our troubles stem not from the systems themselves, but the proponents behind each of them. Having deeply flawed people try and create systems that don't harm people is laughable, but a noble pursuit. While we can take steps to try and heal the things that are broken, it's also quite okay to understand that not all of our problems can be solved and won't be solved until heaven.
One quote really stands out to me in the argument for better capitalism and more specifically universal basic income applied to the impoverished: "Cutting all Americans a check would also allow us to eliminate a number of existing welfare programs that not only have high bureaucratic costs but, because of all the checking up that is involved, have a tendency to rob the poor of their dignity and self-respect." Just some food for thought.
June 20, 2019
Ultimately, I feel that Steven Pearlstein's book is very on point and accurate in it's description of why American Capitalism has lost its way and goes decently into detail of how it can be made to serve the common good.
This is likely to anger multiple sides. Market fundamentalists will likely bristle with anger at the mere suggestion that American Capitalism has any flaws or problems, besides what it is they can (try) to pin on the Government (s) they despise. Socialist fundamentalists will be equally angry that anyone would even try to save Capitalism in the first place, and see it's current flaws and weaknesses as a chance to transition to an alternative Economic system (despite the history of failure such an approach has had in the past to actually create a functional system).
This book, however, sings the song that a mixed-market economy Social Democrat will Highly appreciate. I am such a person and highly enjoyed the material. I especially enjoyed the author bringing up other writers and Economics that I highly enjoy as either his advocate or punching bags (as was the case for Edward Conrad and his trash take on Economic theory).
I have but one criticism: the book is neutral on healthcare. Healthcare reform is not brought up once in the entire book. Now, to be fair, he does not endorse BAD healthcare reform. He does not fall into the trap of "we need a market based approach to healthcare reform" that many bland centrists hopelessly cling on to as a supposed answer to the problem (it's not an answer to the problem). And to ALSO be fair, if his plan was followed to the letter, healthcare prices would probably go down (almost certainly from expanded anti-trust enforcement and patient reform).
Still, it's a serious gap in an otherwise flawless book preaching social democratic answers to our Economic problems.
If I could, I'd give it 4.5/5 stars, but I still highly recommend this book for everyone to read.
It just might change your mind on a few issues.
This is likely to anger multiple sides. Market fundamentalists will likely bristle with anger at the mere suggestion that American Capitalism has any flaws or problems, besides what it is they can (try) to pin on the Government (s) they despise. Socialist fundamentalists will be equally angry that anyone would even try to save Capitalism in the first place, and see it's current flaws and weaknesses as a chance to transition to an alternative Economic system (despite the history of failure such an approach has had in the past to actually create a functional system).
This book, however, sings the song that a mixed-market economy Social Democrat will Highly appreciate. I am such a person and highly enjoyed the material. I especially enjoyed the author bringing up other writers and Economics that I highly enjoy as either his advocate or punching bags (as was the case for Edward Conrad and his trash take on Economic theory).
I have but one criticism: the book is neutral on healthcare. Healthcare reform is not brought up once in the entire book. Now, to be fair, he does not endorse BAD healthcare reform. He does not fall into the trap of "we need a market based approach to healthcare reform" that many bland centrists hopelessly cling on to as a supposed answer to the problem (it's not an answer to the problem). And to ALSO be fair, if his plan was followed to the letter, healthcare prices would probably go down (almost certainly from expanded anti-trust enforcement and patient reform).
Still, it's a serious gap in an otherwise flawless book preaching social democratic answers to our Economic problems.
If I could, I'd give it 4.5/5 stars, but I still highly recommend this book for everyone to read.
It just might change your mind on a few issues.
April 5, 2019
This book was a great fix for my nerdy macroeconomics interest. Pearlstein's journalistic style was very readable and understandable. He lays out some progressive solutions to inequality while defending the positive attributes of capitalism. In today's political arena the term "socialism" is being bantered about as a threat to America's capitalistic fervor. My view is that Pearlstein's thoughtful discussion of the shortfalls of unbridled capitalism combined with his progressive ideas, actually lays the foundation for a sustainable approach to capitalism.
June 13, 2020
The author offers insightful walk through the history and criticism of American capitalism. He compiles potential solutions palatable to those subscribing to American values (the American Dream, exceptionalism, aversion towards communist and socialist verbiage, etc.). Overall, a fantastic introduction to the topic of capitalism’s problems with a side offering of ways to fix it.
August 13, 2024
Steven Pearlstein, a professor of political and international affairs at George Mason University and a Pulitzer Prize-winning columnist on business and economics for The Washington Post, offers a timely exploration of contemporary U.S. social and business conditions in his 2018 book “Can American Capitalism Survive?”. Through this work, Pearlstein critiques classical capitalist tenets, questioning whether corporations should solely focus on delivering value to investors, whether market-based compensation is truly optimal, whether meritocracy should be absolute, and whether the pursuit of fairness necessarily hinders growth. This review will examine each of these arguments.
Pearlstein begins by challenging the entrenched belief that a corporation's primary objective is to maximize profit for its investors. He contends that this profit-centric view was not codified in law and did not become the prevailing consensus until the 1970s, when investors became more actively involved in corporate governance, often through hostile takeovers. The emphasis on profit was further intensified by the widespread adoption of stock options as a component of executive compensation packages. This obsession with profit and stock price, Pearlstein argues, leads corporations to neglect other stakeholders, such as employees and customers, while promoting short-termism. When profit is the sole metric of managerial success, companies often pursue market advantages at the expense of social capital—mutual trust, ethical standards, and benevolence. The erosion of social capital, in turn, increases transaction costs and reduces economic efficiency, ultimately undermining America's once-vibrant economy.
This profit-driven mentality has also distorted the financial industry, leading to practices like high-frequency trading and over-securitization, which generate lucrative returns without benefiting the broader economy. Financial institutions, benchmarking against each other's profits, are often compelled to "follow the herd" into risky investments, even when they recognize the perilous nature of such strategies, as seen in the lead-up to the 2008 financial crisis. Pearlstein notes that similar distortions occur in other sectors, albeit less visibly.
Pearlstein argues that companies might achieve better long-term results by adopting a more holistic set of priorities, such as directing more earnings toward employee compensation and making long-term capital investments that might initially depress quarterly profits. To address these issues, he proposes that the Securities and Exchange Commission (SEC) require public companies to declare their mission and clarify whether they are exclusively profit-focused. He speculates that some investors and consumers might be willing to forgo financial returns to support companies that align with their social values.
From my perspective, a focus on profit is not only justified but necessary. First, the emphasis on profit is not a novel concept; classical economics is grounded in the idea of “homo economicus”, the rational individual who prioritizes utilitarian gains. Corporations, as extensions of individuals, can be modeled similarly. Second, public corporations are governed by boards of trustees, typically composed of major shareholders. Executives are hired to serve the interests of these shareholders and lack the legal authority to prioritize other objectives at the expense of shareholder interests.
However, it is true, as Pearlstein points out, that people value more than just money—they seek justice, kindness, and camaraderie, even at the cost of monetary gain. By extension, corporations can embody these values as well. Indeed, this is already happening, as evidenced by the rise of B-Corporations, which balance profit with social responsibility, and the growing focus on Environmental, Social, and Governance (ESG) criteria. It should be noted, though, that this shift is occurring within the current legal and regulatory framework. Therefore, Pearlstein's proposal for new SEC regulations seems unnecessary. Corporate missions are already freely established by governance bodies and are often disclosed in annual reports and other public documents. If a B-Corporation or ESG-oriented company believes its identity is advantageous in attracting investors and customers, it already has the means to communicate its mission.
Given that corporations are governed by and dependent on investors, reform efforts should focus on investors themselves. How can we encourage investors to prioritize companies that emphasize long-term performance and social impact over those that merely generate high short-term profits? One possible solution is to integrate non-monetary considerations into institutional investment practices. Today, ESG-based mutual funds and private equity options provide choices for socially conscious investors. Whether this approach becomes mainstream depends not on regulations and corporate executives but on the decisions of individual investors. Therefore, empowering individual investors should be a priority. We should motivate them to consider non-monetary factors, provide the necessary information to support their choices, and include their voices in institutional decision-making processes, such as those governing pension funds. Unfortunately, Pearlstein's book does not delve into these aspects.
The second topic Pearlstein tackles is market-based compensation. He acknowledges Robert Nozick's argument that voluntary exchanges lead to optimal distribution but argues that the notion of "getting paid based on the value created" is impractical in a modern economy. Most people work in teams and benefit from the infrastructure and knowledge accumulated by others. Compensation is influenced more by bargaining power and circumstances than by the elusive "value created." For example, companies with rent-seeking power, such as high-tech monopolies and investment banks, can pay their employees—particularly executives—more than their peers in other industries. The vast disparity between executive pay and that of rank-and-file employees is difficult to justify purely based on value creation. Moreover, the decline of unions and job displacement due to globalization have diminished labor's bargaining power in recent years, further skewing income distribution in favor of capital. To address these issues, Pearlstein proposes mandatory or "strongly encouraged" profit-sharing to boost employee compensation.
In practice, however, profit-sharing is already prevalent, at least among professionals. Many companies offer employees free or discounted stock as part of their compensation. However, this does not necessarily improve overall compensation levels. While an employee might strike it rich if their company’s stock soars, they could also suffer financial losses if the company performs poorly. Furthermore, any employee can participate in capital investment by purchasing stock on the open market, thereby decoupling their investments from their employment. The key issue here is not whether profit-sharing should exist but how to optimize the balance between potential benefits and risks for employees with varying financial circumstances. How do we accurately value total compensation, which combines cash and company assets? Although Pearlstein’s balanced views invite further discussion, he does not address these questions in detail.
Pearlstein then turns to the American ideal of equality of opportunity, which holds that society should provide everyone with a level playing field, leaving individuals to achieve varying outcomes based on their choices. This ideal, meritocracy, rewards people according to their performance. However, reality is far more complex. A person's success depends on many factors beyond their control, such as their physical and intellectual inheritance, family background, and luck. Ethical philosophers have long debated how society should address differences arising from personal choices and other factors. While Pearlstein agrees with the principles of meritocracy, he zeroes in on one key factor: Pre-K and K-12 education. Studies show that family poverty is strongly correlated with student performance, not only because poor families often reside in areas with underfunded schools but also because peer performance significantly influences a student's success. Additionally, data indicate that social mobility in the U.S. has declined both compared to the past and relative to other industrialized countries, meaning that children from different social classes do not have equal opportunities. Pearlstein claims that contemporary America has a segregated school system based on socioeconomic status and advocates for measures to integrate students from poor and wealthy families.
While I agree that improving the academic performance of students from low-income families is crucial, addressing this issue requires more than forced integration. First, preventing residential segregation based on socioeconomic status would be extremely difficult without imposing draconian housing regulations. Second, schools in low-income neighborhoods do not necessarily receive less funding when accounting for federal and state aid in addition to local tax revenues. However, they often allocate funds differently, prioritizing social services and security. Third, even if students from diverse backgrounds are forced to attend the same schools, they may still be socially segregated. Social integration is essential to sustaining American liberal democracy, but it involves more than just schools and students—it requires the integration of society as a whole. Until that is achieved, we must recognize the limitations of the meritocracy principle, as explored in Daniel Markovits’s “The Meritocracy Trap.”
The best part of the book is when Pearlstein untangles the relationship between fairness and growth. In this context, "fairness" refers to equity in income and wealth distribution. Conventional wisdom suggests that these two concepts are in a trade-off relationship: uneven distribution motivates people to excel, and allocating resources to the most capable individuals enhances overall output. However, Pearlstein argues that excessive unfairness can harm growth in several ways: it distorts the balance of political power, prevents the poor from realizing their potential, redirects societal resources toward "status goods" rather than genuinely useful activities, slows down economic growth by suppressing consumption, and hinders the investment in public infrastructure. He further contends that for the elite class, a reduction in income would not diminish their motivation to work, as they often seek rewards such as recognition, status, and power more than money. The key takeaway is that "excessive" inequality does not promote growth but rather stifles it, and Pearlstein believes that America has reached this excessive point. To improve equity, he considers both "pre-distribution" and "re-distribution" strategies. Pre-distribution involves creating mechanisms to make distribution more equitable, such as limiting the role of money in politics, empowering unions, and encouraging profit-sharing with employees. Re-distribution, on the other hand, involves transferring wealth from the rich to the poor. In this realm, Pearlstein advocates for a version of universal basic income (UBI) that combines unconditional payments with those conditioned on working.
I find Pearlstein's discussion on equity and growth to be both enlightening and convincing. It is crucial to understand that the relationship between these two concepts is not linear; we must find an optimal balance. I also appreciate Pearlstein's endorsement of UBI as a way to help the poor while minimizing government bureaucracy. Although a practical solution requires much more work, the framework provided by the book is valuable.
Many books analyze American inequality and propose solutions, but “Can American Capitalism Survive?” stands out due to its balanced approach. First, Pearlstein acknowledges and challenges opposing views, supporting his thoughtful arguments with facts and logic, making the book a thought-provoking read for readers across the political spectrum. Second, the book offers a balanced analysis. For each topic, Pearlstein begins by summarizing available data and studies that support both sides, acknowledging the complexity of the issues and the limitations of various statistical studies. He then presents his own views and thoughts with varying certainties commensurable with the strengths of the evidence. Finally, the book maintains a balanced stance. Instead of advocating for ambitious goals like eliminating inequality, Pearlstein recognizes the necessity and benefits of the current market-based and meritocratic systems while highlighting the discrepancies between theory and reality and the dangers of extreme inequality, regardless of its justifications. This balanced approach not only broadens the book's appeal but also lays the groundwork for further debate.
However, Pearlstein's background in journalism, rather than economics, is evident in the book’s strengths and weaknesses. While the book excels in summarizing current research, it lacks the depth of analysis that might come from an economic perspective. Most of Pearlstein's proposed solutions involve increased government regulation and intervention, but these measures often lead to unintended consequences that should be considered as part of the analysis. A potentially more fruitful approach would be to identify and address the root causes of the problems, such as market failures or information asymmetry. Unfortunately, the book tends to focus more on symptoms than on underlying issues.
In conclusion, “Can American Capitalism Survive?” offers a nuanced critique of contemporary capitalism, challenging long-held beliefs about corporate priorities, compensation, meritocracy, and the relationship between fairness and growth. Pearlstein's balanced approach and willingness to engage with opposing views make the book a valuable contribution to ongoing debates about economic inequality and the future of capitalism in America. While the book's proposals may not fully address the root causes of these complex issues, Pearlstein succeeds in raising critical questions and providing a framework for further discussion. Whether one agrees with his solutions or not, Pearlstein’s analysis prompts readers to reconsider the assumptions underlying American capitalism and consider how the system might evolve to better serve society as a whole.
Pearlstein begins by challenging the entrenched belief that a corporation's primary objective is to maximize profit for its investors. He contends that this profit-centric view was not codified in law and did not become the prevailing consensus until the 1970s, when investors became more actively involved in corporate governance, often through hostile takeovers. The emphasis on profit was further intensified by the widespread adoption of stock options as a component of executive compensation packages. This obsession with profit and stock price, Pearlstein argues, leads corporations to neglect other stakeholders, such as employees and customers, while promoting short-termism. When profit is the sole metric of managerial success, companies often pursue market advantages at the expense of social capital—mutual trust, ethical standards, and benevolence. The erosion of social capital, in turn, increases transaction costs and reduces economic efficiency, ultimately undermining America's once-vibrant economy.
This profit-driven mentality has also distorted the financial industry, leading to practices like high-frequency trading and over-securitization, which generate lucrative returns without benefiting the broader economy. Financial institutions, benchmarking against each other's profits, are often compelled to "follow the herd" into risky investments, even when they recognize the perilous nature of such strategies, as seen in the lead-up to the 2008 financial crisis. Pearlstein notes that similar distortions occur in other sectors, albeit less visibly.
Pearlstein argues that companies might achieve better long-term results by adopting a more holistic set of priorities, such as directing more earnings toward employee compensation and making long-term capital investments that might initially depress quarterly profits. To address these issues, he proposes that the Securities and Exchange Commission (SEC) require public companies to declare their mission and clarify whether they are exclusively profit-focused. He speculates that some investors and consumers might be willing to forgo financial returns to support companies that align with their social values.
From my perspective, a focus on profit is not only justified but necessary. First, the emphasis on profit is not a novel concept; classical economics is grounded in the idea of “homo economicus”, the rational individual who prioritizes utilitarian gains. Corporations, as extensions of individuals, can be modeled similarly. Second, public corporations are governed by boards of trustees, typically composed of major shareholders. Executives are hired to serve the interests of these shareholders and lack the legal authority to prioritize other objectives at the expense of shareholder interests.
However, it is true, as Pearlstein points out, that people value more than just money—they seek justice, kindness, and camaraderie, even at the cost of monetary gain. By extension, corporations can embody these values as well. Indeed, this is already happening, as evidenced by the rise of B-Corporations, which balance profit with social responsibility, and the growing focus on Environmental, Social, and Governance (ESG) criteria. It should be noted, though, that this shift is occurring within the current legal and regulatory framework. Therefore, Pearlstein's proposal for new SEC regulations seems unnecessary. Corporate missions are already freely established by governance bodies and are often disclosed in annual reports and other public documents. If a B-Corporation or ESG-oriented company believes its identity is advantageous in attracting investors and customers, it already has the means to communicate its mission.
Given that corporations are governed by and dependent on investors, reform efforts should focus on investors themselves. How can we encourage investors to prioritize companies that emphasize long-term performance and social impact over those that merely generate high short-term profits? One possible solution is to integrate non-monetary considerations into institutional investment practices. Today, ESG-based mutual funds and private equity options provide choices for socially conscious investors. Whether this approach becomes mainstream depends not on regulations and corporate executives but on the decisions of individual investors. Therefore, empowering individual investors should be a priority. We should motivate them to consider non-monetary factors, provide the necessary information to support their choices, and include their voices in institutional decision-making processes, such as those governing pension funds. Unfortunately, Pearlstein's book does not delve into these aspects.
The second topic Pearlstein tackles is market-based compensation. He acknowledges Robert Nozick's argument that voluntary exchanges lead to optimal distribution but argues that the notion of "getting paid based on the value created" is impractical in a modern economy. Most people work in teams and benefit from the infrastructure and knowledge accumulated by others. Compensation is influenced more by bargaining power and circumstances than by the elusive "value created." For example, companies with rent-seeking power, such as high-tech monopolies and investment banks, can pay their employees—particularly executives—more than their peers in other industries. The vast disparity between executive pay and that of rank-and-file employees is difficult to justify purely based on value creation. Moreover, the decline of unions and job displacement due to globalization have diminished labor's bargaining power in recent years, further skewing income distribution in favor of capital. To address these issues, Pearlstein proposes mandatory or "strongly encouraged" profit-sharing to boost employee compensation.
In practice, however, profit-sharing is already prevalent, at least among professionals. Many companies offer employees free or discounted stock as part of their compensation. However, this does not necessarily improve overall compensation levels. While an employee might strike it rich if their company’s stock soars, they could also suffer financial losses if the company performs poorly. Furthermore, any employee can participate in capital investment by purchasing stock on the open market, thereby decoupling their investments from their employment. The key issue here is not whether profit-sharing should exist but how to optimize the balance between potential benefits and risks for employees with varying financial circumstances. How do we accurately value total compensation, which combines cash and company assets? Although Pearlstein’s balanced views invite further discussion, he does not address these questions in detail.
Pearlstein then turns to the American ideal of equality of opportunity, which holds that society should provide everyone with a level playing field, leaving individuals to achieve varying outcomes based on their choices. This ideal, meritocracy, rewards people according to their performance. However, reality is far more complex. A person's success depends on many factors beyond their control, such as their physical and intellectual inheritance, family background, and luck. Ethical philosophers have long debated how society should address differences arising from personal choices and other factors. While Pearlstein agrees with the principles of meritocracy, he zeroes in on one key factor: Pre-K and K-12 education. Studies show that family poverty is strongly correlated with student performance, not only because poor families often reside in areas with underfunded schools but also because peer performance significantly influences a student's success. Additionally, data indicate that social mobility in the U.S. has declined both compared to the past and relative to other industrialized countries, meaning that children from different social classes do not have equal opportunities. Pearlstein claims that contemporary America has a segregated school system based on socioeconomic status and advocates for measures to integrate students from poor and wealthy families.
While I agree that improving the academic performance of students from low-income families is crucial, addressing this issue requires more than forced integration. First, preventing residential segregation based on socioeconomic status would be extremely difficult without imposing draconian housing regulations. Second, schools in low-income neighborhoods do not necessarily receive less funding when accounting for federal and state aid in addition to local tax revenues. However, they often allocate funds differently, prioritizing social services and security. Third, even if students from diverse backgrounds are forced to attend the same schools, they may still be socially segregated. Social integration is essential to sustaining American liberal democracy, but it involves more than just schools and students—it requires the integration of society as a whole. Until that is achieved, we must recognize the limitations of the meritocracy principle, as explored in Daniel Markovits’s “The Meritocracy Trap.”
The best part of the book is when Pearlstein untangles the relationship between fairness and growth. In this context, "fairness" refers to equity in income and wealth distribution. Conventional wisdom suggests that these two concepts are in a trade-off relationship: uneven distribution motivates people to excel, and allocating resources to the most capable individuals enhances overall output. However, Pearlstein argues that excessive unfairness can harm growth in several ways: it distorts the balance of political power, prevents the poor from realizing their potential, redirects societal resources toward "status goods" rather than genuinely useful activities, slows down economic growth by suppressing consumption, and hinders the investment in public infrastructure. He further contends that for the elite class, a reduction in income would not diminish their motivation to work, as they often seek rewards such as recognition, status, and power more than money. The key takeaway is that "excessive" inequality does not promote growth but rather stifles it, and Pearlstein believes that America has reached this excessive point. To improve equity, he considers both "pre-distribution" and "re-distribution" strategies. Pre-distribution involves creating mechanisms to make distribution more equitable, such as limiting the role of money in politics, empowering unions, and encouraging profit-sharing with employees. Re-distribution, on the other hand, involves transferring wealth from the rich to the poor. In this realm, Pearlstein advocates for a version of universal basic income (UBI) that combines unconditional payments with those conditioned on working.
I find Pearlstein's discussion on equity and growth to be both enlightening and convincing. It is crucial to understand that the relationship between these two concepts is not linear; we must find an optimal balance. I also appreciate Pearlstein's endorsement of UBI as a way to help the poor while minimizing government bureaucracy. Although a practical solution requires much more work, the framework provided by the book is valuable.
Many books analyze American inequality and propose solutions, but “Can American Capitalism Survive?” stands out due to its balanced approach. First, Pearlstein acknowledges and challenges opposing views, supporting his thoughtful arguments with facts and logic, making the book a thought-provoking read for readers across the political spectrum. Second, the book offers a balanced analysis. For each topic, Pearlstein begins by summarizing available data and studies that support both sides, acknowledging the complexity of the issues and the limitations of various statistical studies. He then presents his own views and thoughts with varying certainties commensurable with the strengths of the evidence. Finally, the book maintains a balanced stance. Instead of advocating for ambitious goals like eliminating inequality, Pearlstein recognizes the necessity and benefits of the current market-based and meritocratic systems while highlighting the discrepancies between theory and reality and the dangers of extreme inequality, regardless of its justifications. This balanced approach not only broadens the book's appeal but also lays the groundwork for further debate.
However, Pearlstein's background in journalism, rather than economics, is evident in the book’s strengths and weaknesses. While the book excels in summarizing current research, it lacks the depth of analysis that might come from an economic perspective. Most of Pearlstein's proposed solutions involve increased government regulation and intervention, but these measures often lead to unintended consequences that should be considered as part of the analysis. A potentially more fruitful approach would be to identify and address the root causes of the problems, such as market failures or information asymmetry. Unfortunately, the book tends to focus more on symptoms than on underlying issues.
In conclusion, “Can American Capitalism Survive?” offers a nuanced critique of contemporary capitalism, challenging long-held beliefs about corporate priorities, compensation, meritocracy, and the relationship between fairness and growth. Pearlstein's balanced approach and willingness to engage with opposing views make the book a valuable contribution to ongoing debates about economic inequality and the future of capitalism in America. While the book's proposals may not fully address the root causes of these complex issues, Pearlstein succeeds in raising critical questions and providing a framework for further discussion. Whether one agrees with his solutions or not, Pearlstein’s analysis prompts readers to reconsider the assumptions underlying American capitalism and consider how the system might evolve to better serve society as a whole.
February 2, 2022
I knew there was a good reason for my deep animosity towards finance bros
July 24, 2024
Yo yo yo I understood most? If this book? I think? Nothing groundbreaking but I like now having the facts to back it up. Some interesting thoughts and ideas idk
-NOTES-
INTRODUCTION
* Why is morale so low? (i.e., we’re losing sight of the American dream)
* Only 60% of Americans agree with the statement that the free market economy is the best system, compared with 80% in 2008
* Only 42% millennials support capitalism, the majority backing the idea of socialism and/or something different than what’s being done now
* Only 37% believe they’ll do better financially than their parents
* The inflation adjusted income only increased 4% between 2001 and 2016, compared to the 54% between 1953 and 1968
* Common “left wing” beliefs:
* To become rich you must become morally corrupt
* There is no more trust in social capital/the economic system
* Common “right wing” beliefs:
* The govt is responsible for “poor work ethic and competition”
* You should do what’s best financially for the company, no matter other considerations
* ARGUMENT: capitalism must evolve to survive…… and we must come together to decide what it must be
CHAPTER 1 - IS GREED GOOD?
* Adam Smith & the invisible hand
* Mandeville’s fable of the bees
* What is the definition of greed? (Different theories)
* wanting more than you need; ex: a billionaire still going to work to make more money
* Midas - wanting so much that you forget what you already have
* Wasteful consumption and mid allocation of rare resources
* Smith’s argument: greed is not someone who wishes for luxury, but someone who gets to luxury and then believes their success is due to higher moral character
* Do we each have a selfish/self-preservation gene? As well as a cooperative one? (Darwin)
* This is what then creates tribes which fight to be victorious over other tribes, and thus natural selection
* Paul Zak - trust game experiment - player A & B given $10, player B’s $ will be matched - result: players come to 50-50 compromise - argument: people are inherently self-interested
* Three forces dramatically changing economics: globalization, deregulation, rapid technological change
* ARGUMENT: the move to shareholder capitalism has given managers and CEOs the upper hand…… and we need to focus our needs on the employees and giving above average return instead of “maximizing shareholder value”
* The pressure for executives to be constantly doing SO well doesn’t provide a long-term view, where profits and jobs increase dramatically
* American Airlines CEO Doug Parker (2017) - set a minimum $70k salary for employees, set his own salary to $70k - shareholders angry that they’re the last priority & shares decrease
* Apple tax avoidance - intellectual property was in the hands of Irish subsidiary - saved $9 billion in taxes; Google did a similar thing to the UK
* ARGUMENT: We no longer trust each other bc of the increase of self-interest, which bleeds into everything
CHAPTER 2 - NOT SO JUST DESSERTS
* PROBLEM: The income ratio
* The 1% = income above $450k/yr
* Income inequality is a problem in Brazil, Mexico, and Chile as well
* Charts show 220.5% growth in household income for the top 1% since 1979, while the other quartiles are much lower (highest: 95.4%, fourth: 37.7%, middle: 26.3%, second: 22.9%, first: 15.3%)
* Note that AFTER TAXES, all of these numbers stay the same or increase… (227.8, 97.2, 69, 46.9, 39.5, and 36.3 respectively)
* So, taxes reduce income inequality by about 1/3… which is “much less than other advanced economies”
* Argument: we should be looking at inequality of consumption rather than inequality of income
* Over a lifetime, one with a bachelor’s will earn $800k more than a high school graduate in their lifetime
* WHY?
* Is technology to blame? That low wage jobs are being taken by machines? Or globalization and sourcing out for labor?
* This author argues that four points are widening the gap in household incomes: 1) fewer people are getting/staying married 2) people are marrying within their class 3) more married women are working 4) college premium has increased
* Also note - deregulation, shrinking of private sector labor unions, the decline of values of minimum wage, “govt policies”
* Globalization that has come with the internet - you can find “the best” anywhere in the world
* Aim is to increase profits while paying workers the same/less so that the shareholders benefit rather than the worker
* It’s no longer about getting skills in your chosen field, but choosing the field & the business with the most payout
* Monopolies! Consolidation!
* Also note the historical significance (when income equality was better, WWII had just happened/fear of communism/increased patriotism/etc). Now we’re in a “roaring twenties” era
* Trickle down economics doesn’t exist, it’s the policies that make it so
* Solutions:
* Pre-distribution: change minimum wage, encourage unions, restrict trade with China
* *more common in US
* Redistribution: progressive taxation and government spending
CHAPTER 3 - IS EQUALITY OF OPPORTUNITY POSSIBLE OR EVEN DESIRABLE?
* idea comes from 1910 speech from Roosevelt
* Income differences can come from attractiveness, IQ (if already in a well paying trade), etc…. Nature plays a role in success, but is not the key factor - environment is
* Think ADLs
* Which means…. We NEED to be funding schools better (not based on income level….)
* Tbh this is all stuff I know (the impact of poverty levels on education) - very important information, though!
* Putting low income kids in high income schools didn’t increase IQ, but it did improve health outcomes, $, lack of criminal activity, and just brought less stress…
* SATs are targeted to the rich
* Only in 14 states do schools with high poverty get more in per pupil funding than those with lower/no poverty
* The homogeneity of neighborhoods -> income taxes and funding -> different $$
* Lower income families spend an average of $1400/year on kid’s vocational activities; higher income families spend about $9600
* Net tuition (fees + tuition) in public colleges has increased 90% in the past 20 years accounting for inflation (but only 19% for private schools, even if pay a ton more)
* Only 21% of low SES feel prepared for college (compared to over half of middle and upper class kids)
* Income elasticity - how predictable is a child’s wages from their parent’s?
* The great gatsby curve - it’s more difficult in the US compared to other countries (uk, Canada, Nordic countries) to move up the economic ladder
CHAPTER 4 - FAIRNESS & GROWTH: A FALSE CHOICE
* is the free market really the best system? This author believes yes
* Post 2006, workers are much less satisfied by their jobs… but it doesn’t result in unions, it now results in changing careers altogether. (Which isn’t always the best choice)
* Doesn’t redistribution discourage work? Arguments either way depending on who you ask
* The average 1%er saves half of income, middle class 10%, and lower class nothing (gosh I wonder why 🙄)
* The amount of outstanding college loans has increased by 450% since 2003
* Now, money influences everything more than ever, from art to politics
* Capitalism is no longer for the people, it’s for the rich
CHAPTER 5 - A BETTER CAPITALISM
(Note: details of how the author wishes to carry out each idea is not listed here)
* instead of focusing on welfare (negative connotation), we should work on predistribution (altering how incomes are set in the market before taxes) - ie a universal basic income
* Follow the social security model (safety net programs) versus assistance that is conditioned on being poor
* Dividend Program / Create program where all who “serve” 2-3 yrs (not necessarily military, but something like CCC) get access to a “citizen dividend”
* $ comes from getting rid of welfare and raising income taxes for 1%
* Limit special interest money in politics
* Share profits with employees
* Equalize education (change profits from property taxes)
* Restore competition my decreasing monopolies and concentration
* Better antitrust policy
* Less acquisition of industries or double sided industries
* Use local banks
* Copyright creates intellectual monopolies and “useless” debates full of $$$
* Stop the idea that shareholders should be the ones guiding profits and companies
****Capitalism should be for the people
-NOTES-
INTRODUCTION
* Why is morale so low? (i.e., we’re losing sight of the American dream)
* Only 60% of Americans agree with the statement that the free market economy is the best system, compared with 80% in 2008
* Only 42% millennials support capitalism, the majority backing the idea of socialism and/or something different than what’s being done now
* Only 37% believe they’ll do better financially than their parents
* The inflation adjusted income only increased 4% between 2001 and 2016, compared to the 54% between 1953 and 1968
* Common “left wing” beliefs:
* To become rich you must become morally corrupt
* There is no more trust in social capital/the economic system
* Common “right wing” beliefs:
* The govt is responsible for “poor work ethic and competition”
* You should do what’s best financially for the company, no matter other considerations
* ARGUMENT: capitalism must evolve to survive…… and we must come together to decide what it must be
CHAPTER 1 - IS GREED GOOD?
* Adam Smith & the invisible hand
* Mandeville’s fable of the bees
* What is the definition of greed? (Different theories)
* wanting more than you need; ex: a billionaire still going to work to make more money
* Midas - wanting so much that you forget what you already have
* Wasteful consumption and mid allocation of rare resources
* Smith’s argument: greed is not someone who wishes for luxury, but someone who gets to luxury and then believes their success is due to higher moral character
* Do we each have a selfish/self-preservation gene? As well as a cooperative one? (Darwin)
* This is what then creates tribes which fight to be victorious over other tribes, and thus natural selection
* Paul Zak - trust game experiment - player A & B given $10, player B’s $ will be matched - result: players come to 50-50 compromise - argument: people are inherently self-interested
* Three forces dramatically changing economics: globalization, deregulation, rapid technological change
* ARGUMENT: the move to shareholder capitalism has given managers and CEOs the upper hand…… and we need to focus our needs on the employees and giving above average return instead of “maximizing shareholder value”
* The pressure for executives to be constantly doing SO well doesn’t provide a long-term view, where profits and jobs increase dramatically
* American Airlines CEO Doug Parker (2017) - set a minimum $70k salary for employees, set his own salary to $70k - shareholders angry that they’re the last priority & shares decrease
* Apple tax avoidance - intellectual property was in the hands of Irish subsidiary - saved $9 billion in taxes; Google did a similar thing to the UK
* ARGUMENT: We no longer trust each other bc of the increase of self-interest, which bleeds into everything
CHAPTER 2 - NOT SO JUST DESSERTS
* PROBLEM: The income ratio
* The 1% = income above $450k/yr
* Income inequality is a problem in Brazil, Mexico, and Chile as well
* Charts show 220.5% growth in household income for the top 1% since 1979, while the other quartiles are much lower (highest: 95.4%, fourth: 37.7%, middle: 26.3%, second: 22.9%, first: 15.3%)
* Note that AFTER TAXES, all of these numbers stay the same or increase… (227.8, 97.2, 69, 46.9, 39.5, and 36.3 respectively)
* So, taxes reduce income inequality by about 1/3… which is “much less than other advanced economies”
* Argument: we should be looking at inequality of consumption rather than inequality of income
* Over a lifetime, one with a bachelor’s will earn $800k more than a high school graduate in their lifetime
* WHY?
* Is technology to blame? That low wage jobs are being taken by machines? Or globalization and sourcing out for labor?
* This author argues that four points are widening the gap in household incomes: 1) fewer people are getting/staying married 2) people are marrying within their class 3) more married women are working 4) college premium has increased
* Also note - deregulation, shrinking of private sector labor unions, the decline of values of minimum wage, “govt policies”
* Globalization that has come with the internet - you can find “the best” anywhere in the world
* Aim is to increase profits while paying workers the same/less so that the shareholders benefit rather than the worker
* It’s no longer about getting skills in your chosen field, but choosing the field & the business with the most payout
* Monopolies! Consolidation!
* Also note the historical significance (when income equality was better, WWII had just happened/fear of communism/increased patriotism/etc). Now we’re in a “roaring twenties” era
* Trickle down economics doesn’t exist, it’s the policies that make it so
* Solutions:
* Pre-distribution: change minimum wage, encourage unions, restrict trade with China
* *more common in US
* Redistribution: progressive taxation and government spending
CHAPTER 3 - IS EQUALITY OF OPPORTUNITY POSSIBLE OR EVEN DESIRABLE?
* idea comes from 1910 speech from Roosevelt
* Income differences can come from attractiveness, IQ (if already in a well paying trade), etc…. Nature plays a role in success, but is not the key factor - environment is
* Think ADLs
* Which means…. We NEED to be funding schools better (not based on income level….)
* Tbh this is all stuff I know (the impact of poverty levels on education) - very important information, though!
* Putting low income kids in high income schools didn’t increase IQ, but it did improve health outcomes, $, lack of criminal activity, and just brought less stress…
* SATs are targeted to the rich
* Only in 14 states do schools with high poverty get more in per pupil funding than those with lower/no poverty
* The homogeneity of neighborhoods -> income taxes and funding -> different $$
* Lower income families spend an average of $1400/year on kid’s vocational activities; higher income families spend about $9600
* Net tuition (fees + tuition) in public colleges has increased 90% in the past 20 years accounting for inflation (but only 19% for private schools, even if pay a ton more)
* Only 21% of low SES feel prepared for college (compared to over half of middle and upper class kids)
* Income elasticity - how predictable is a child’s wages from their parent’s?
* The great gatsby curve - it’s more difficult in the US compared to other countries (uk, Canada, Nordic countries) to move up the economic ladder
CHAPTER 4 - FAIRNESS & GROWTH: A FALSE CHOICE
* is the free market really the best system? This author believes yes
* Post 2006, workers are much less satisfied by their jobs… but it doesn’t result in unions, it now results in changing careers altogether. (Which isn’t always the best choice)
* Doesn’t redistribution discourage work? Arguments either way depending on who you ask
* The average 1%er saves half of income, middle class 10%, and lower class nothing (gosh I wonder why 🙄)
* The amount of outstanding college loans has increased by 450% since 2003
* Now, money influences everything more than ever, from art to politics
* Capitalism is no longer for the people, it’s for the rich
CHAPTER 5 - A BETTER CAPITALISM
(Note: details of how the author wishes to carry out each idea is not listed here)
* instead of focusing on welfare (negative connotation), we should work on predistribution (altering how incomes are set in the market before taxes) - ie a universal basic income
* Follow the social security model (safety net programs) versus assistance that is conditioned on being poor
* Dividend Program / Create program where all who “serve” 2-3 yrs (not necessarily military, but something like CCC) get access to a “citizen dividend”
* $ comes from getting rid of welfare and raising income taxes for 1%
* Limit special interest money in politics
* Share profits with employees
* Equalize education (change profits from property taxes)
* Restore competition my decreasing monopolies and concentration
* Better antitrust policy
* Less acquisition of industries or double sided industries
* Use local banks
* Copyright creates intellectual monopolies and “useless” debates full of $$$
* Stop the idea that shareholders should be the ones guiding profits and companies
****Capitalism should be for the people
This entire review has been hidden because of spoilers.
October 19, 2018
Pearlstein makes convincing arguments that we should be concerned about the growing inequality between the rich and the poor, and that capitalism shouldn't be a winner-takes-all game. This book might be preaching to the choir (which I'm in) and I wonder whether the Republicans would have similarly compelling rebuttal about the issues discussed.
September 30, 2018
The author laid out facts on how America can still have Capitalism, but in a non-corrupt way and how our current situation is destroying us. Very well written and easy to follow.
March 28, 2020
As someone with admittedly little concrete economic education yet would confidently sooner align themselves with the democratic socialist than the chest-thumping capitalist, this book provided some enlightening insight into the nuances of capitalist thinking.
This book explained in mostly approachable terms some of the most amoral deficiencies of the current American capitalist system: companies that prioritize the shareholder over the laborer, an upper class consolidating an ever-increasing share of the nation's wealth, and an educational system that sets poorer students up to fail among them. Stats-heavy sections additionally include graphs that clearly illustrate concepts like consolidatiom of wealth, the widening inequality gap, etc. to make the chapters more digestible. Although Pearlstein is more right-wing a figure than I'd normally associate with, to a left-leaning person like myself, I found myself agreeing wholeheartedly in what he was saying. Additionally, the solutions he presents (primarily in the last chapter, which could honestly be the only chapter I'd probably need to revisit should I want to reread this) for the most part seem politically workable even in today's climate. Well, maybe except overturning Citizens United, but I guess that's the nightmare we live in innit.
As far as cons, I of course think that Pearlstein doesn't dream as big as I'd like, but that's moreso a matter of personal bias than a knock against the writing or information. The real con I'd want to draw attention to is that the writing style is no exception from every other pop-econ book written by Pulitzer-winning columnists: dull. The testimonials on the back of the print edition proclaiming this as "bold" and "passionate" might be correct if compared to, say, a dictionary, but it's not exactly a page turner all the way through. Plus, and this is more of a pet peeve, Pearlstein does the same thing Thomas Friedman does, where he makes a one-or-two-sentence template, copy and pastes it three or five or ten times, then drops in different examples and calls it a paragraph. Like:
It's the difference between writing with purpose and writing with style.
It's the difference between helpful structure and lazy writing.
It's the difference between having an editor and kind of just reviewing your own work.
It's the difference between something good and something bad.
It's the difference between this and that or this and the other and blah blah blah do you see what the hell I mean
Like, really? Are there people editing these books? Do I need to send my English 101 professor across campus to kick down his door and smother these sections in red felt-tipped pen? Again, it's definitely a pet peeve, but it's still stupid and I hate it and I refuse to leave it uncriticized.
But yeah, in short, definitely still a good read, even for leftists, as a way to see what centrists and the left-of-center see as a potential progressive future, as well as a digestible overview of the moral slights of capitalism in today's America.
This book explained in mostly approachable terms some of the most amoral deficiencies of the current American capitalist system: companies that prioritize the shareholder over the laborer, an upper class consolidating an ever-increasing share of the nation's wealth, and an educational system that sets poorer students up to fail among them. Stats-heavy sections additionally include graphs that clearly illustrate concepts like consolidatiom of wealth, the widening inequality gap, etc. to make the chapters more digestible. Although Pearlstein is more right-wing a figure than I'd normally associate with, to a left-leaning person like myself, I found myself agreeing wholeheartedly in what he was saying. Additionally, the solutions he presents (primarily in the last chapter, which could honestly be the only chapter I'd probably need to revisit should I want to reread this) for the most part seem politically workable even in today's climate. Well, maybe except overturning Citizens United, but I guess that's the nightmare we live in innit.
As far as cons, I of course think that Pearlstein doesn't dream as big as I'd like, but that's moreso a matter of personal bias than a knock against the writing or information. The real con I'd want to draw attention to is that the writing style is no exception from every other pop-econ book written by Pulitzer-winning columnists: dull. The testimonials on the back of the print edition proclaiming this as "bold" and "passionate" might be correct if compared to, say, a dictionary, but it's not exactly a page turner all the way through. Plus, and this is more of a pet peeve, Pearlstein does the same thing Thomas Friedman does, where he makes a one-or-two-sentence template, copy and pastes it three or five or ten times, then drops in different examples and calls it a paragraph. Like:
It's the difference between writing with purpose and writing with style.
It's the difference between helpful structure and lazy writing.
It's the difference between having an editor and kind of just reviewing your own work.
It's the difference between something good and something bad.
It's the difference between this and that or this and the other and blah blah blah do you see what the hell I mean
Like, really? Are there people editing these books? Do I need to send my English 101 professor across campus to kick down his door and smother these sections in red felt-tipped pen? Again, it's definitely a pet peeve, but it's still stupid and I hate it and I refuse to leave it uncriticized.
But yeah, in short, definitely still a good read, even for leftists, as a way to see what centrists and the left-of-center see as a potential progressive future, as well as a digestible overview of the moral slights of capitalism in today's America.
June 10, 2023
Pearlstein begins this book by summarizing 3 American political and business leader ideas that came out of the later part of the 20th century to justify changes in the business-customer relationship:
1 - that the US government had a lot to do with the decline in American competitiveness,
2 - that the sole business goal was to deliver the highest possible returns to its investors, and
3 - that it's naive and ineffective to allow moral concerns re employee/customer welfare and the distribution of income and wealth to interfere with the running of businesses.
His take is that these tenets have had an adverse effect on US society, undermining productive social behavior. That in fact there is a delicate balance between selfish individualism and cooperative altruism in a successful society; that this delicate balance between selfish individualism and cooperative altruism, identified by Adam Smith and Charles Darwin as key to human progress, has been lost.
Pearlstein writes that at major business organizations today, the sense of collective social responsibility has given way to the grubby, narrow pursuit of self-interest, irrespective of social consequences; that now the only purpose of a corporation is to maximize shareholder value. The result has been an increased skewing of wealth - as Pearlstein points out, the top 10% of US households now hold 80% of all financial assets. And yet, in the recent Trump era tax cuts 80% of the cuts went to the top 1 percent of households.
Later Pearlstein writes --
--those with money buy votes; in the 2016 presidential campaign, the 100 largest political donors gave more than the 2 million smallest donors. (there should be limits on special interest money in elections),
--advocating for a national service program and a universal minimum, basic income,
--that public education, being currently locally funded, undermines the idea of universal education as a basic right,
--he advocates the break up big oligopolistic, monopolistic firms, and
--he notes, from the Organization for Economic Cooperation & Development, the economic research group of the world's richest countries, that "Growing inequality is harmful for long-term economic growth."
And note the quotation from a Robert Kennedy 1968 campaign speech on the last 2 pages of text - good stuff!
1 - that the US government had a lot to do with the decline in American competitiveness,
2 - that the sole business goal was to deliver the highest possible returns to its investors, and
3 - that it's naive and ineffective to allow moral concerns re employee/customer welfare and the distribution of income and wealth to interfere with the running of businesses.
His take is that these tenets have had an adverse effect on US society, undermining productive social behavior. That in fact there is a delicate balance between selfish individualism and cooperative altruism in a successful society; that this delicate balance between selfish individualism and cooperative altruism, identified by Adam Smith and Charles Darwin as key to human progress, has been lost.
Pearlstein writes that at major business organizations today, the sense of collective social responsibility has given way to the grubby, narrow pursuit of self-interest, irrespective of social consequences; that now the only purpose of a corporation is to maximize shareholder value. The result has been an increased skewing of wealth - as Pearlstein points out, the top 10% of US households now hold 80% of all financial assets. And yet, in the recent Trump era tax cuts 80% of the cuts went to the top 1 percent of households.
Later Pearlstein writes --
--those with money buy votes; in the 2016 presidential campaign, the 100 largest political donors gave more than the 2 million smallest donors. (there should be limits on special interest money in elections),
--advocating for a national service program and a universal minimum, basic income,
--that public education, being currently locally funded, undermines the idea of universal education as a basic right,
--he advocates the break up big oligopolistic, monopolistic firms, and
--he notes, from the Organization for Economic Cooperation & Development, the economic research group of the world's richest countries, that "Growing inequality is harmful for long-term economic growth."
And note the quotation from a Robert Kennedy 1968 campaign speech on the last 2 pages of text - good stuff!
December 4, 2018
Steven Pearlstein’s heart is in the right place, but he lets his mind wander in Can American Capitalism Survive?
Does a distinctly American capitalism exist? I think not.
Is Can American Capitalism Survive? a battle cry? Yes.
Does it present a workable strategy? No.
Pearlstein didn’t have to write a whole book to make the argument that greed is not good, opportunity is not equal, and fairness won’t condemn folks to poverty. Lots of other folks have done that.
Can American Capitalism Survive? is appropriately detailed, and Pearlstein makes sensible and compelling assessments about the facts of rogue corporate political power, governmental failure to protect most citizens from the abuses of the rich and powerful, and the consequences of our collective failure to prevent American corporate power from abusing and threatening our lives, our troubled democracy, and our planet.
Nevertheless, the book is weak. Pearlstein’s “policy prescriptions” for “a better capitalism” are laudable but laughably extreme proposals for the current political environment. Universal national service, a universal basic income, sharing profits with employees, breaking up concentrated industries—these are essential policies that we need to keep in the public eye, essential policies that we must try to implement slowly and incrementally, accepting sensible compromise at every turn.
Pearlstein hasn’t given us solutions or wise guidance. He has pounded the drums for sensible, liberal progressive concepts. He has thrown down the gauntlet to all of our American neighbors who think this kind of stuff is madness, dangerous, and un-American.
Read more of my book reviews and poems here:
www.richardsubber.com
Does a distinctly American capitalism exist? I think not.
Is Can American Capitalism Survive? a battle cry? Yes.
Does it present a workable strategy? No.
Pearlstein didn’t have to write a whole book to make the argument that greed is not good, opportunity is not equal, and fairness won’t condemn folks to poverty. Lots of other folks have done that.
Can American Capitalism Survive? is appropriately detailed, and Pearlstein makes sensible and compelling assessments about the facts of rogue corporate political power, governmental failure to protect most citizens from the abuses of the rich and powerful, and the consequences of our collective failure to prevent American corporate power from abusing and threatening our lives, our troubled democracy, and our planet.
Nevertheless, the book is weak. Pearlstein’s “policy prescriptions” for “a better capitalism” are laudable but laughably extreme proposals for the current political environment. Universal national service, a universal basic income, sharing profits with employees, breaking up concentrated industries—these are essential policies that we need to keep in the public eye, essential policies that we must try to implement slowly and incrementally, accepting sensible compromise at every turn.
Pearlstein hasn’t given us solutions or wise guidance. He has pounded the drums for sensible, liberal progressive concepts. He has thrown down the gauntlet to all of our American neighbors who think this kind of stuff is madness, dangerous, and un-American.
Read more of my book reviews and poems here:
www.richardsubber.com
May 13, 2019
In Can American Capitalism survive, Pulitzer-winner Steven Pearlstein sets out to address how, "in less than a generation, what was once considered the optimal system for organizing economic activity is now widely viewed, at home and abroad, as having betrayed its ideals and its purpose and forfeited its moral legitimacy."
This is a work of how we got here, a clear-eyed history lesson that examine at the assumptions underlying "Capitalism is Great!" dogma. When and why did we decide greed was good? At what point does greed become detrimental to people and societies? When do people decide to drop out of the job market due to poor wages and prospects? Pearlstein addresses this and more.
There are some truly stellar bits of history here, such as the history of the rise of shareholder capitalism, whereby modern firms insist their primary fiduciary responsibility is to shareholders at the expense of workers, customers, their communities, and the environment. There is no basis for this in law or history, Pearlstein finds, but is more likely explained by the market tumults of the 70s and the rise of shareholder activism.
Some other excellent examples in the book include a look at groups that have thrived or failed based on the trust and shared worldview between participants; as Pearlstein writes, "societies with more trust and cooperation and strong moral codes tend to be more prosperous, while greedy societies in which corruption is rife and people can’t do business on a handshake tend to be poor". I expound on these more in this longer review.
This is a work of how we got here, a clear-eyed history lesson that examine at the assumptions underlying "Capitalism is Great!" dogma. When and why did we decide greed was good? At what point does greed become detrimental to people and societies? When do people decide to drop out of the job market due to poor wages and prospects? Pearlstein addresses this and more.
There are some truly stellar bits of history here, such as the history of the rise of shareholder capitalism, whereby modern firms insist their primary fiduciary responsibility is to shareholders at the expense of workers, customers, their communities, and the environment. There is no basis for this in law or history, Pearlstein finds, but is more likely explained by the market tumults of the 70s and the rise of shareholder activism.
Some other excellent examples in the book include a look at groups that have thrived or failed based on the trust and shared worldview between participants; as Pearlstein writes, "societies with more trust and cooperation and strong moral codes tend to be more prosperous, while greedy societies in which corruption is rife and people can’t do business on a handshake tend to be poor". I expound on these more in this longer review.
March 24, 2019
This book examines the myths promoted by the apologists for “market justice” or the idea that some form of market capitalism is inherently good and that any tinkering with the so-called “free market” will inevitably lead to economic disaster. Although the author is not an economist or political scientist he has long experience writing on these issues and has consulted a range of thinkers and data sources.
The author contends that the worship of maximized shareholder value in the short run is destructive of our democracy, is based on fallacious theories, and in the end cannot even be shown to produce optimal long-term growth for the corporations that pursue it.
The author proposes a more balanced approach to the market and advocates some ideas for reform of laws and business practices which will reduce the extreme “inequality” of our current system. This tendency to inequality is shown to be a long-term brake on growth in addition to its corrosive effect on society.
The book ends with a sketch of the areas of reform and quotes one of Robert Kennedy’s last speeches in which he states: “[The Gross National Product] measures everything in short, except that which makes life worthwhile. And it can tell us us everything about America except why we are proud that we are Americans.”
The author contends that the worship of maximized shareholder value in the short run is destructive of our democracy, is based on fallacious theories, and in the end cannot even be shown to produce optimal long-term growth for the corporations that pursue it.
The author proposes a more balanced approach to the market and advocates some ideas for reform of laws and business practices which will reduce the extreme “inequality” of our current system. This tendency to inequality is shown to be a long-term brake on growth in addition to its corrosive effect on society.
The book ends with a sketch of the areas of reform and quotes one of Robert Kennedy’s last speeches in which he states: “[The Gross National Product] measures everything in short, except that which makes life worthwhile. And it can tell us us everything about America except why we are proud that we are Americans.”
June 9, 2020
Throughout the book the author attempts to provide a balanced view on why our current economic system needs to be changed to not only survive, but succeed. He shows how over that over the years, even policy ideas that used to be lead by fiscal conservatives such as balancing budgets have now been abandoned. Today, they are much more focused on tax cuts, that further aggravate the issue.
The author outlines the impact this has had on our collective social cohesion, and social capital. Because of rising inequality, and slowing rates of growth people our society are becoming more and more fragmented. The hunt for higher and higher stock prices have led to rampant market manipulation, and ever increasing CEO pays.
The author again and again explains how the level of regulation, and tax rate increases reached in the 80s were harmful, but shows that today the markets inequality leads to lower living standards. While growth is important, he outlines a certain level of inequality stops producing higher economic growth.
Simply, today's inequality has broken the social contract, and has disrupted the idea of equality of opportunity. The author ends the book with solutions to the problems he outlined(although some solutions seem to be very surface level), including some that have now entered the mainstream of policy discussion such as UBI.
The author outlines the impact this has had on our collective social cohesion, and social capital. Because of rising inequality, and slowing rates of growth people our society are becoming more and more fragmented. The hunt for higher and higher stock prices have led to rampant market manipulation, and ever increasing CEO pays.
The author again and again explains how the level of regulation, and tax rate increases reached in the 80s were harmful, but shows that today the markets inequality leads to lower living standards. While growth is important, he outlines a certain level of inequality stops producing higher economic growth.
Simply, today's inequality has broken the social contract, and has disrupted the idea of equality of opportunity. The author ends the book with solutions to the problems he outlined(although some solutions seem to be very surface level), including some that have now entered the mainstream of policy discussion such as UBI.
February 9, 2019
This excellent book not only outlines the problems with our economic system, but suggests how we can fix things. The title is a bit of a teaser. One of the author's main points is that the idea that corporations are to be managed with the idea of maximizing profits for shareholders and no other purpose has lead to or contributed to a lot of problems in the American economy and in society. That orientation is not legally required, and it exacerbates inequality and means that other stakeholders--the employees, the communities where the corporation is located, and so on--are not considered in the business's decisions, which has bad results. This philosophy and others are matters of societal choice and could be changed to lead to a better and higher standard for public policy in the United States.
February 10, 2019
We don't need another book telling readers the fact that Goldman Sachs had a conflict of interest in the financial crisis. This book fails to dig deeper beyond the surface of popular anger.
Also, the author lacks some fundamental understanding of the market and financial instruments, or simply neglects to present and ponder the other side of the argument. To name one: he hammers on the stock buybacks as only serving the needs of corporate executives and directors. While the rationale behind buybacks can be subject to debate from case to case, this practice also produces tax savings for shareholders compared to dividends (no double taxation) - Warren Buffett's Berkshire Hathway is a prime example.
This book is a vent of a financial journalist, not a reflection or introspection as the title may have suggested to readers
Also, the author lacks some fundamental understanding of the market and financial instruments, or simply neglects to present and ponder the other side of the argument. To name one: he hammers on the stock buybacks as only serving the needs of corporate executives and directors. While the rationale behind buybacks can be subject to debate from case to case, this practice also produces tax savings for shareholders compared to dividends (no double taxation) - Warren Buffett's Berkshire Hathway is a prime example.
This book is a vent of a financial journalist, not a reflection or introspection as the title may have suggested to readers
This entire review has been hidden because of spoilers.
October 9, 2023
I think Pearlstein makes an important and good argument about why capitalism shouldn't be abandoned, but the shareholder capitalism of the last forty years has strayed from Adam Smith and classical liberalism in ways that endanger the common good.
There's nothing really wrong with this book, but I don't feel like he provided much meat on the bones of his argument - I don't anticipate thinking about the questions he raised in new ways, or feeling more prepared for discussion on these topics. It's mostly an overview for the center-left of why the excesses of capitalism are problematic, but that capitalism at its roots is not the problem.
There's nothing really wrong with this book, but I don't feel like he provided much meat on the bones of his argument - I don't anticipate thinking about the questions he raised in new ways, or feeling more prepared for discussion on these topics. It's mostly an overview for the center-left of why the excesses of capitalism are problematic, but that capitalism at its roots is not the problem.
February 1, 2019
A confirmation of an impression I've had for some time, that capitalism has gone off the rails in the last several decades. Much of what has happened seems to have come from the corrections to the harsh business climate of the 1970's, but after the pendulum swung toward the side of a less restrictive business climate it just continued to swing on in that direction. I agree with the author that there is room to correct American capitalism without throwing it out entirely and embracing socialism. Or perhaps I hope he is correct in that belief.
November 11, 2018
The book diagnoses the issues well but I found the solutions less convincing. I'm not sure it would convert those on the fence, but it's a good set of arguments and overviews of the positions. It's a short read covering brief arguments on dense topics including a history of inequality and the strengths of bottom-up democracy. Some of the solutions are still caught in an old job ecosystem but it's worth thinking about, and the solutions have to start somewhere.
January 26, 2019
I thought Pearlstein’s explanation of what capitalism has done in the United States was right on. However, I find it very interesting that ANYONE thinks for two seconds that equality has a chance to improve or change. Even after we finally bring forth the fact that brains are not identical so we can’t all think and therefore behave identically, one must consider why we behave as we do. After you explain greed to me, please tell me when enough is enough.
March 1, 2019
I'm a Libertarian and strongly believe capitalism has brought benefits(economically, socially and educationally) to the greatest amount of people in the shortest amount of time than any other system could have provided and will continue to do so if not co opted as it has now. The author does an outstanding job of pointing out a few place where the system needs to be tweaked and how to do so while not destroying capitalism as we know it.
March 3, 2019
Pearlstein identifies flaws in the current execution of regulated capitalism, that it does not reward productivity gains and it values the individual over the community good. He presents several stories to help the reader understand that many success stories have two sides. He presents remedies to these shortcomings. He is an engaging writer since he believes in capitalism but will admit its current flaws.
June 2, 2019
I read this book because I wanted a fuller fleshing-out of post-cspitalism alternatives, along the same vein as Kim Stanley Robinson touched on in his Mars books. But this book is very pragmatic, and offers solutions like minimum income and a civil service corps that I hope we will whole-heartedly adopt as a society.
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