Aftershock: The Next Economy and America's Future

by Robert B. Reich

Updated for paperback publication, Aftershock is a brilliant reading of the causes of our current economic crisis, with a plan for dealing with its challenging aftermath.
 
When the nation’s economy foundered in 2008, blame was directed almost universally at Wall Street bankers. But Robert B. Reich, one of our most experienced and trusted voices on public policy, suggests another reason for the meltdown. Our real problem, he argues, lies in the increasing concentration of wealth in the hands of the richest Americans, while stagnant wages and rising costs have forced the middle class to go deep into debt. Reich’s thoughtful and detailed account of where we are headed over the next decades—and how we can fix our economic system—is a practical, humane, and much-needed blueprint for restoring America’s economy and rebuilding our society.

Genres: Economics, Nonfiction, Politics, Business, History, Finance, Sociology

208 pages, Paperback

First published September 21, 2010

About the author

Robert Bernard Reich is an American politician, academic, and political commentator. He served as Secretary of Labor under President Bill Clinton from 1993 to 1997. Reich is a former Harvard University professor and the former Maurice B. Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the University of California, Berkeley's Goldman School of Public Policy. Mr. Reich is also on the board of directors of Tutor.com. He is a trustee of the Economists for Peace and Security. He is an occasional political commentator, notably on Hardball with Chris Matthews, This Week with George Stephanopoulos and CNBC's Kudlow & Company.

Reviews

[Emily · Rating 3 out of 5]

I need to do more thinking on this one before writing my review...some things need to percolate a bit...

ok, I'm back.

First, a little background. I've always considered myself comfortably conservative, socially, economically, politically. But in my old(er) age (32 and a half or so) when I'm being brutally honest with myself, I'm finding more and more merit in what would have horrified a younger me - a *gasp* more liberal worldview. I'm not really what anyone would call bleeding heart, but the conservative label doesn't really fit anymore either. The issues facing our country and our world today seem too complex to insist on a one-size-fits-all solution that fits neatly in a single party's platform.

That being said, I found myself being very persuaded by Mr. Reich's arguments regarding the inequitable distribution of wealth in our system today. He speaks of the "basic bargain" upon which a (healthy) economy is based. Simply put, workers are also consumers. Their earnings are used to buy the goods and services other workers produce. If their earnings are not sufficient to create enough demand to purchase the available supply of goods and services, the economy suffers. Mr. Reich points to both the Great Depression and the recession of 2008 as examples of this occurring.

Everyone seems to idolize Keynesian economics, but Keynes himself recognized two faults inherent in capitalism: "its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes." These are still the weaknesses in the system today.

Mr. Reich outlines three coping mechanisms that delayed the onset of economic trouble over the 80s and 90s once wages started to stagnate: people worked longer hours, more people (especially women) entered the work force, and finally people started borrowing against their homes and running up consumer debt. According to Mr. Reich, the downturn of the last few years occurred not because (or at least not only because) individuals got greedy and borrowed too much or were too stupid or short-sighted to understand the terms of their loans, but because they had run out of these release valves. The main problem is that, for the majority of Americans, their earnings had not kept up with their reasonable expectations for what they could afford as the economy grew. The basic bargain had been broken.

Before my conservative friends blow a gasket and start ranting about personal responsibility and pulling yourself up by your bootstraps and making claims about how they did it all on their own without handouts or guarantees from the government (which, frankly, is bullhonky), let me clarify. Yes, individuals should be more concerned with their personal financial health than "keeping up with the Joneses" or maintaining appearances or purchasing luxuries that aren't truly needs. But more and more it's those "needs" that aren't affordable. Like a home in a decent neighborhood with good schools. Or a college education. Or access to quality health care. Or even the ability to save for retirement. It's human nature to compare yourself to others as a gauge of how you're doing and the conspicuous consumption of the very wealthy is, in some ways, driving this discontent. Not saying that it's "right" but that's how it is. A middle-class family today cannot maintain the same standard of living as a middle-class family of fifty years ago without at least one, if not all three, of the coping mechanisms described above.

This country used to be considered a place where someone - anyone - could work hard and make a better life for him- or herself and his/her children. Nowadays that is less and less true. The game seems rigged in favor of the "haves" at the expense of the "have-nots" and that engenders resentment and political discontent. Mr. Reich includes several thinly veiled swipes at the Tea Party or its close cousin which were rather exaggerated and egregious, but captured the frustration and anger that feeds the movement. The very wealthy do have greater access to politicians and policy makers. Besides the incredible amount of money tossed at candidates of both major parties during campaigns, many politicians move on to lucrative private sector jobs as lobbyists or consultants in these very fields they are supposed to regulate. Again, human nature rears its ugly head - you just don't bite the hand that feeds you, or that may feed you very well in the future.

Mr. Reich argues that we face both economic and political threats if these challenges are not overcome. "Unless America's middle class receives a fair share, it cannot consume nearly what the nation is capable of producing, at least without going deeply into debt...The inevitable result is slower economic growth and an economy increasingly susceptible to great booms and terrible busts." It should go without saying that this hurts everyone. Politically, we are in danger as well. "Widening inequality, coupled with a growing perception that big business and Wall Street are in cahoots with big government for the purpose of making the rich even richer, gives fodder to demagogues on the extreme right and the extreme left. They gain power by turning the public's economic anxieties into resentments against particular people and groups." Anyone who has listened to talk radio in the last few years can't really argue with that. Trust in the government in general and politicians in particular is at an all-time low and the more outrageous the statements that come from these talking heads, the higher their ratings climb.

I'm not ready to jump on board with all of Mr. Reich's proposed solutions - and I don't for a second think that there's actually the political will in Washington, D.C., to do anything remotely this extensive, despite his assurance that this agenda is "practical and doable." But I think that for the economy's sake, and for my future and my children's future, we need to take a hard look at the assumptions we have been holding. They need to be reevaluated in the light of who holds the power and the money and how that meshes with our beliefs in democracy and the opportunity for anyone to work to provide a better future.

For more book reviews, come visit my blog, Build Enough Bookshelves.

[Amin · Rating 3 out of 5]

برای خودم سوال بود که چرا این کتاب از مدتها پیش در فهرست مطالعات آینده ام قرار گرفته و در میانه های کتاب پاسخ را به یاد آوردم. کتاب یکی از آثاری است که در خیل عظیم چاپ کتاب بعد از بحران مالی 2009 نوشته شده، اما یک پیش بینی بزرگ هم می کند: اگر اصلاح اقتصادی لازم صورت نگیرد، منتظر ظهور کسی با مشخصه های نزدیک به دونالد ترامپ باید باشید

تز اصلی کتاب که در بخش اول ارائه میشود ساده و قابل تامل است. برای فهم بحرانهای اقتصادی، که تکرار می شوند، باید به شکاف طبقاتی درآمدی توجه کنیم. شکافی که باعث می شود در زمان وقوع بحران، طبقه متوسط دارایی خود را از دست بدهند و شکنندگی مالی آنها موجب از دست رفتن قدرت خریدی شود که لازمه بازسازی اقتصادی است. در مقابل اما دولت ها به سیاست های زودبازده مالی و حمایت از بنگاههای مالی و بانکی دست میزنند که در بلندمدت می توانند موجب تشدید و تکرار مشکل شوند. بنابراین، آنچه چانه زنی اصلی می نامد، یعنی تلاش برای افزایش حداقل دستمزدها و بالا بردن نسبی وضع معیشتی طبقه متوسط بهترین راه حل است. این بخش از کتاب لااقل به لحاظ نظری و تحلیلی، قابل تامل است

بخش دوم، جایی است که حرف از ظهور فردی با مولفه های پوپولیستی و تلاشگر برای بازگرداندن آمریکا به روزهای بزرگ خودش میزند. البته در قامت فردی که از حزبی مستقل می آید و مردم طبقه متوسط و ضعیف به وی توجه می کنند. مردمی که از مهاجرین و تبادلات بین المللی و باختن قدرت اقتصادی به چین ناراضی اند. مردمی که فساد سیستماتیک در نهادهای اقتصادی و سیاسی امریکا را می بینند و اگر اصلاح اقتصادی وسیعی رخ ندهد، به گزینه رادیکال روی می آورند. اما فارغ از پیش بینی که شاید جذاب به نظر بیاید، از این جای کتاب رویکرد به نهادهای مالی و اقتصادی بسیار سیاه و سفید است. یعنی اگر من به عنوان فردی از بیرون از این جامعه بخواهم ارزیابی داشته باشم، انگار تمام نهادهای مالی و بانکها و وال استریت و سیاستمداران فاسد هستند و علیه مردم طبقه متوسط. امری که یک طرفه به نظر می آید و پیچیدگی های این روابط و نهادها را نشان نمیدهد

بخش سوم هم راهکارهاست، راهکارهایی که ساده انگارانه به نظر می رسند یا شاید باز مجالی برای توصیف دقیق تر و پیچیدگی های ذاتی فراهم نمی شود. صرف افزایش مالیات و به مرور افزایش رفاه طبقه متوسط از راه بازتوزیع درآمدها و گزاره هایی شبیه به آن، مهم تر از همه مقاومت های سیستم فعلی را بازتاب نمیدهد. حتی اگر هم بگوییم در بلندمدت به نفع قدرتمندان است، با یادآوری این نکته که این جماعت از ابتدای کار با توجه به منافع کوتاه مدت خود به بحران دامن زده اند، راه حل خود را منتفی کرده ایم

[Elaine Nelson · Rating 4 out of 5]

"To summarize: the fundamental problem is that Americans no longer have the purchasing power to buy what the US economy is capable of producing. The reason is that a larger and larger portion of total income has been going to the top. What's broken is the basic bargain linking pay to production. The solution is to remake the bargain." (Ch 11)

That's the whole book in a single paragraph. The first part is all about how the hell we got here, from before the Great Depression to the current day. The second gives some speculation about how people might freak out (basically) and give in to bad impulses. And the third part is a brief and fairly specific set of policy proposals for avoiding that.

Nothing here, outside of the specific proposals, that was completely new to me, but it was very clearly written and engaging. One aspect that was particularly good was starting with Marriner Eccles, chair of the Federal Reserve Board from 1934 to 1948. (No, I hadn't heard of him either.) The process by which he came to proto-Keynesian ideas forms the first chapter, and coming from a Scottish-American Mormon banker, it's fascinating:

"It became apparent to me, as a capitalist, that if I lent myself to this sort of action and resisted any change designed to benefit all the people, I could be consumed by the poisons of social lag I had helped created."

Definitely recommended. (Now, what to do about it?!)

[Edie · Rating 5 out of 5]

I could not believe that I was reading a book about economics that
1. I understood
2. I really enjoyed
3. I couldn't wait to get to the end so I could see what his recommendations were.
This is a well written book that talks about the importance of restoring money to the middle class, describes the repercussions of not doing so and comes up with some other suggestions that might seem extreme but definitely are worth considering (like all public schools free tuition)...

[Mike Robbins · Rating 4 out of 5]

“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth... Instead of achieving that kind of distribution, a giant suction pump had... drawn into a few hands an increasing portion of currently produced wealth. ...In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”

This is from Robert Reich’s book Aftershock. It is a very good summary of what happened in 2008. Except that it isn’t Reich himself and it isn’t about 2008. Reich is quoting a long-ago Fed chairman, Marriner Eccles. And Eccles was writing not about 2008 but about 1929 and the Great Depression that followed.

Reich was Labor Secretary in Clinton’s first administration and is now Professor of Public Policy at Berkeley. His diagnosis, as set out in Aftershock, is simple; it is that the concentration of wealth in the hands of a few will make everyone poorer, because the rich don’t spend anything like enough to generate employment – that needs a mass market, with everyone participating. In fact, the process of wealth concentration had been going on for years before 2008. “The wages of the typical American hardly increased in the three decades leading up to the Crash of 2008, considering inflation. In the 2000s, they actually dropped,” says Reich, and goes on to explain that the economy has grown so much over that period that, had the benefits been divided equally, the typical person would be 60% better off.

If that’s the case, how come no-one seemed to notice this was happening for 30 years? Reich argues that the relative decline in income for most people was masked by longer hours; the participation of women as well as men in the workforce, generating dual incomes; and, most dangerously, by an explosion of credit. A quick look at house prices over the last 30 years suggests where much of that credit went. When the property bubble burst, the game, indeed, stopped.

This is a lucid and persuasive book. Reich writes well; his talent is to explicate and illuminate, rather than lecture. The same can be seen in the film Inequality for All, which arose from the book and sets out the same ideas; Reich comes across as a man of some warmth and humour and a natural communicator.

This book isn’t just a diagnosis, however; it’s a prognosis and prescription as well. And it’s on these two latter that the book does come unstuck a little.

The prognosis, Reich warns, is that if we’re unlucky Americans will at last say “Hell, we were screwed” but then draw quite the wrong conclusion from that, electing a right-wing, isolationist, populist and frightening President. (He is wise enough to make this a fictional character, though she slightly resembles a sort of Palin-Thatcher cross.) Losers of rigged games, as Reich rightly says, tend to get angry. His scenario may come true, but it is just as likely that Americans, and Brits, will vote for governments who see the need for greater equality, but that those governments will be hamstrung by markets, trade treaties and, in the US, legislative stasis. In that case people will, quietly first and then in greater numbers, drift away from the system, and society will lose its cohesion; government will become ineffective; and the Western world will slide into senescence and irrelevance.

Prof Reich also suggests a number of measures to address inequality. One is a “reverse income tax” that will subsidise the middle class (why does the US not appear to have a working class, one wonders?). The money would be added to paychecks. This reminds one of the system of poor relief devised by magistrates at Speenhamland in Berkshire at the end of the 18th century. “Speenhamland” was, when I was young, always taught as an example of the road to hell being paved with good intentions. It simply allowed employers to lower wages, thus accumulating wealth for themselves while making the public pay their wage bill. In fact, recent research has suggested that Speenhamland’s outcomes were not so clear-cut. Still, with many lower-paid workers in Western countries now drawing welfare to supplement their wages, one wonders whether we already have Speenhamland writ large. Wouldn’t we be better off having a much higher, and strongly enforced, minimum wage? Far from bankrupting employers, it’ll make us all richer in the end.

Reich also proposes a carbon tax to fund this wage subsidy. He suggests an indirect tax set at $35 a ton. In suggesting this, he is rather going where angels fear to tread. The whole argument of carbon tax vs. carbon market is a big messy one, and governments have so far had a hard time applying either. The price of carbon on the open market is nothing like $35; moreover permission to emit it is effectively a raw material for industry. Taxing what is, in effect, a raw material at way above its market value may not be a good idea; you wouldn't do it with steel. It's far better to offset emissions with credits bought on the market, as this means positive as well as negative credits can be accrued, giving a much bigger incentive to reduce emissions. I’d argue that the carbon question shouldn't get mixed up with wages; it needs its own solution, and is best left in the separate box where it belongs.

The author also does not really address the whole question of governance. True, he clearly perceives poor governance as a driver of inequity; many of the evils of the last 30-odd years would not have arisen if the privileged hadn’t been able to buy power and influence through lobbyists, or hold politicians in thrall through campaign contributions. Reich therefore suggests measures to get money out of politics, and he is clearly right. What he does not discuss is the weakness of electoral systems that give voters a limited choice between at most two candidates, both of which will in effect be part of the system he deprecates. You want to throw the bums out? Give us a system that allows alternatives.

Reich’s prognosis and prescription are incomplete, and are the reason why I give this book four stars and not five. But in a way that is not the point of Aftershock. There can be no prognosis or prescription without diagnosis, and the diagnosis in this book is spot-on. What is more, it is (as in the film) delivered with clarity, warmth and charm. Anyone who wants to know how we got into such a mess in 2008, and 1929, should read this book, then think for themselves – long and hard – about where we go next.

[L · Rating 3 out of 5]

p. 53 "Remember bank tellers? Telephone operators? The fleets of airline workers behind counters who issued tickets? Service station attendants? These and millions of other jobs weren't lost to globalization; they were lost to automation. America has lost at least as many jobs to automated technology as it has to trade... But contrary to popular mythology, trade and technology have not really reduced the number of jobs available to Americans. Take a look at the rate of unemployment over the last thirty years and you'll see it has risen and fallen with the business cycle... The real problem was that the new ones they got often didn't pay as well as the ones they lost. That largely explains why the median wage flattened between 1980 and 2007, adjusted for inflation. Over the longer term, the problem is pay, not jobs."

p. 109 "In return, the politician may or may not get a campaign contribution from the wealthy executive. But as far as the politician is concerned, that donation is not the point of the transaction. Through the executive, the politician gains access to a network of wealthy people: the executive's friends, business partners, and colleagues, and members of his club or board. When the occasion arises, the wealthy executive introduces them to the politician. Then come their own invitations to breakfast, coffee, dinner, golf. In time, the new acquaintances will give money, and also ask that others do so.
"No policy has been altered, no bill or vote willfully changed. But inevitably, as the politician enters into these endless social rounds among the networks of the wealthy, his view of the world is affected. Increasingly the politician hears the same kinds of suggestions, the same concerns and priorities. The wealthy do not speak in one voice, to be sure, but they share a broad common perspective. The politician hears only indirectly and abstractly from the less comfortable members of society... They do not speak continuously into the politician's ear about their concerns. The politician learns of those concerns from his pollsters, and from occasional political appearances back in his home district, but he is not immersed in them as he is in the culture of the comfortable. In this way, access to the network of the wealthy does not necessarily buy a politician's vote. It buys his mind."

[Sven · Rating 5 out of 5]

Progressives: read this! Conservatives: read this! Liberals: read this!

Robert Reich should know something about government, public policy, money, and crises. He outlines the reasons why our current "recovery" will not be sufficient to bring back prosperity unless we reform aspects of our economic and political systems. His messages is compelling: increasing inequity causes recession, breaks down social cohesion, and threatens democracy. He points out the the greatest inequality in income through American history were in 1927 and 2007, and this was both a symptom and a cause of the Great Recession of the last few years. Our 3 ways of coping with erosion of real income since the late 1970s (two-income households, working longer hours, and borrowing) are exhausted. We face some critical decisions now, and those choices can lead to anger and a "kill the cow" mentality, or to reform of our social contract.

The author's assertion that America's common sense and optimism will help us reform our social, political, and economic systems is compelling. His solutions may strike some as radical, but they are definitely worth considering as ways to restore a more equitable, harmonious, and prosperous American society.

[Scott Lupo · Rating 5 out of 5]

Robert Reich somehow went into my brain and took all my ideas about the economy and put them into a great, focused, readable book. If you are at all interested in a measured, logical look at the economy and what truly makes it run please pick up this book and take a weekend to read it. This book is not about blame and pointing fingers although the evidence he puts forward may make the reader come to some conclusions on who to point the finger at. No, this book is about the bigger picture. What type of world do we want to live in? What kind of economy must persist for that type of world to exist? If the majority of wealth is concentrated at the top where does that leave an economy? By comparing the Great Depression with today's predicament, Reich makes a persuasive and logical argument for what has caused both incidents. At the end Reich gives his solutions to these pressing problems. Fantastic book for those whose eyes glaze over just by reading the word Economy. This book is in plain English and very understandable.

[Jim · Rating 5 out of 5]

All the stale, old economic text books used in high schools and colleges around the country should be tossed in favor of using this book. In plain english, certainly Reich's forte if you've ever heard him, he explains why the economy is in the state it's in and what can be done about it. Even if some of his blueprint bears closer scrutiny, this is a great reference for understanding just what the heck is going on.

[Adam Floridia · Rating 2 out of 5]

1.5

The movie is better than the book. Forget entertainment, rhetorically the movie is better than the book.

The film crafts a more effective argument by successfully weaving together the right amounts of ethos, pathos, and logos. Bravo. Also, the film made me really like Robert Reich.

The book is repetitive beyond belief. Claims are REPEATED rather than SUBSTANTIATED. Not only is supporting evidence lacking, but the completely one-sided argument never pauses to address and rebut counterarguments. While I tend to actually agree with all most of the points Reich sets forth, I do not think that he has proven them effectively enough at all.

Some Favorite (and summative) Quotations:

-“As mass production has to be accompanied by mass consumption, mass consumption, in turn implies a distribution of wealth—not of existing wealth, but of wealth as it is currently produced—to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery” (17).

-“It is no mere coincidence that the two years in the last hundred that marked the apogees of inequality—when the richest 1 percent received a record 23.5% of total income—were 1928 and 2007” (5).

-“It is both an economic challenge and a moral challenge; concentrated income and wealth will threaten the integrity and cohesion of our society, and will undermine democracy” (65).

-“Just before the Great Recession, personal consumption in America equaled almost 70 percent of the country’s gross domestic product (more than 75 percent if you include the purchases of homes” (84).

“By 2000s, before the Great Recession, the typical American worker put in 2,200 hours/year…All told, the typical American family put in 500 additional hours of paid work, a full twelve weeks more than it had in 1979” (62).

-“The 400 richest Americans now own more wealth than the bottom 150 million combined.”

[Joe · Rating 5 out of 5]

Aftershock is a very concise and readable evaluation of American tax and economic trends since the Great Depression. Reich observes that America prospered greatly from the WWII era until the end of the 70's and seems to decline at an exponential rate following the end of the 70's. His main point seems to me to be that the consolidation of great wealth in the hands of a few is not just immoral, but is economically destructive.

Pre 1980 America was marked by very high tax rates on the wealthiest Americans and a significant government (tax-payer) investment into the social safety net, public works, public schools, etc. Basically the wealthy were taxed at marginal rates as high as 90% and the significant investment into public works benefited the society as a whole. In post 1980 America, the top marginal tax-rate has been cut in half, decreasing government investment is made in public works and the gulf between poor/middle class and the super-rich continues to grow. The wealthiest 1% keeps getting richer at higher and higher rates while middle-income earners see their adjusted wealth steadily decline.

Reich wastes no time arguing from a moral standpoint, but limits himself to an economic one. As wealth is consolidated in the very, very few, he argues, the possibility of that wealth activating the economy declines. The rich don't spend money at the same rate as the poor. Consequently, the poor/middle class masses whose discretionary spending would actually invigorate the economy have less and less money to spend. Meanwhile the super-rich have more money than they can meaningfully spend and instead over-invest creating "bubbles" or unhelpfully invest overseas.
His prescription, obviously, is to return to the high marginal tax rates of the Eisenhower 50's and and to return to the substantial public investment that once made for a socially dynamic society.
Reich also explains the coping strategies the middle class has employed to stave off experiencing the bite of their decline in economic status. Women have gone from working by choice to working by necessity, people have taken second jobs, people have taken the money out of their mortgages, people have maxed out their credit cards, etc. The decline in the middle class has been creeping up on us steadily, but we haven't really felt it much because we've staved off the hurt with these coping mechanisms. Now, we have reached the point where no coping strategies remain for people to mask their poverty and a resulting social frustration is growing. Reich lays out a doomsday scenario in which a populist presidential candidate makes sweeping radical changes. People earning over 1 million would have be taxed at a 90% rate. If they didn't like it, they can cash in their citizenship and live elsewhere. (This scenario seemed pretty good to me.) Reich concludes with some more modest and moderate prescriptions.
Reich writes very clearly and his explanations remained gripping to this non-economist. I completely recommend this meditation on the economy.

[Susan · Rating 4 out of 5]

For a book written in 2010, a very prophetic read about the current state of America's economy and political atmosphere, in which Reich gives readers a proper background in the history of American economics and why the current system is broken, rigged, and making people angry. He explains the inevitable problems that occur, not just here and now, but throughout history and in other countries, when the inequality of wealth becomes so great that the nation as a whole starts to fracture. He also actually offers workable solutions to the economic crisis, and points out the way almost the exact same problems came to fruition during the Great Depression, how they were overcome then, how the situations differed and, yet, how they are the same. Though I have never really been actively interested in economic theory or history, I found this book relevant and important, as well as concise, interesting, and readable. Four stars.

[Patrick · Rating 4 out of 5]

Review originally published in THE FUTURIST, March-April 2011

The inequality of wealth in the United States will result in a stagnant economy and political turmoil by the year 2020, argues public-policy scholar and former U.S. Labor Secretary Robert B. Reich in Aftershock. Millions of deeply indebted Americans will embrace isolationism, reject both big government and big business, and sever America’s ties with the rest of the world, he predicts.

To illustrate the size and scope of this disaster, Reich sets up a credible and horrifying scenario: The year is 2020. The recently elected president, Margaret Jones of the Independence Party, is about to set forth on a legislative agenda reflecting the frustrations of the broad, outsider constituency that elected her. Her objectives: a freeze on legal immigration and the swift deportation of all illegal immigrants; increased tariffs on foreign goods; prohibition against foreign investment; withdrawal from the World Bank, the United Nations, and other international organizations; and a default on the U.S. debt to China.

The results are immediate.

“On November 4, the day after Election Day, the Dow Jones Industrial Average drops 50 percent in an unprecedented volume of trading,” writes Reich. “The dollar plummets 30 percent against a weighted average of other currencies. Wall Street is in a panic. Banks close. Business leaders predict economic calamity. Mainstream pollsters, pundits, and political consultants fill the airwaves with expressions of shock and horror. Over and over again, they ask: How could this have happened?”

This aftershock, says Reich, is a direct result of Americans failing to learn the lessons of the Great Depression, thus setting the country up on a course for yet another economic crisis. The most important of these lessons is that too much money resting in the hands of too few people cannot grow an economy. What’s needed is an orderly division of income spread across lower, middle, and upper classes, he argues. When income (hence, wealth) is too concentrated among elites, the economy atrophies and declines.

It’s a classic Keynesian argument that would ring shrill and tinny if we didn’t live in such Dickensian times. Consider that, prior to the Great Recession of 2008, income and wealth inequality in the United States were higher than they had been any time in the recent past other than just before the Great Depression, with the top 1%—those with incomes more than $380,000 per year—owning roughly 23% of the assets. Median wages for workers have been stagnant since the 1970s, at about $45,000 a year, despite the fact that the economy itself is much larger than it was three decades ago. Those gains mostly went to those at the top.

This present situation is, of course, not without historic precedent. In the 1700s, wealth inequality in the American colonies was similar to that of the United States today. The situation was particularly dire in Boston, where the top 5% of the population controlled 25% of the wealth in the 1720s (this would become 50% by 1770). Too often we forget that the decades leading up to the American Revolution were marked by the burning of rich merchants’ shops, occasional riots, and massive resentment over the issue of debt and wealth inequality, as chronicled by the late historian Howard Zinn in A People’s History of the United States: 1492-Present.

Today’s wealth inequality is a moral failing, says Reich, but it’s also an operational malfunction at the root of many of America’s other problems. An economy that is growing across all income levels encourages people to buy more things like new cars, consumer electronics, bachelor’s degrees, bigger houses, and the like. Instead, over the last two decades, a larger portion of the wealth went to a smaller group; as a result, Americans were forced to resort to a number of coping mechanisms to continue to consume at ever higher levels.

The first of these coping mechanisms was the two-income household. In the 1970s, the mass entry of women into the workforce increased household income, but only up to a point. Over the last decades, those economic gains have been eaten up by such things as the costs of child care.

The second coping mechanism that Americans employed to mitigate stagnant wages was longer working hours. This also worked well until, by the mid-2000s, Americans were putting in 500 more hours—that’s 12 more weeks—of paid work a year than they were in 1970.

Finally, Americans resorted to saving less and borrowing more in order to continue consuming at ever higher levels. Reich points out that average household debt was 138% of household income in 2007, up from a manageable 55% in the 1960s. This represents the largest gap since the Great Depression. Much of that debt was tied up in home loans that people would never be able to pay off.

The question becomes, Does voluminous spending by the well-funded few necessarily lead to reckless spending on the part of the many? Reich argues that it does. There is some recent independent research to back him up on this. In an October 2010 paper titled “Expenditure Cascades,” Robert H. Frank of Cornell University, Adam Seth Levine of Vanderbilt University, and Oege Dijk of the European University show that “changes in one group’s spending shift the frame of reference that defines consumption standards for others just below them on the income scale....”

What of the gainers, the 10% who saw unprecedented wealth and income increases? They didn’t fare as well as you might expect. With too much capital to ever spend efficiently, many of them invested in a series of asset bubbles through unscrupulous Wall Street intermediaries, with predictably lackluster results.

The battle against falling middle-class wages is one that Reich has been fighting for decades, since serving as labor secretary in the Clinton White House. He acknowledges that, even in those instances when he’s had the ear of the president (he also served briefly on the Obama administration team), he hasn’t had much success in implementing the sorts of structural changes that would set the nation’s distribution of income on a more equitable path.

“We in the Clinton administration tinkered. We raised the minimum wage.… We offered students from poor families access to college and expanded a refundable tax credit for low-income workers.… All these steps were helpful but frustratingly small in light of the larger backward lunge.”

Reich lays out several proposals—either reasonable or radical depending on your point of view—to correct the imbalance of wealth in the next decade:


*A reverse income tax. The government would put extra money into the paychecks of low wage earners and cut taxes on middle class Americans (those earning less than $90,000 per year). The policy would be modeled after the Earned Income Tax Credit but would be more ambitious in reach. Reich speculates that the cost to the government would be about $600 billion per year.

*A carbon tax collected against energy companies. Reich estimates that, if set at $35 per metric ton of CO2, this tax would raise about as much as the reverse income tax (wage supplement) would cost—around $600 billion.

*A one-time “severance tax” levied against employers who lay off long-term workers, equal to 75% of a worker’s yearly salary.

*Federal subsidization of less-profitable but socially valuable college majors. Public universities, under a Reich plan, would be free, and loans for private schools would be available at low cost. Upon graduating, a student who took such a loan would pay about 10% of his or her income on the loan for 10 years. After that, the loan would be considered fully paid. “This way,” says Reich, “graduates who pursue low-income occupations such as social work, teaching, or legal services would be subsidized by graduates who pursue high-income occupations including business, finance, and corporate law.”

The effect of these proposals, with the exception of the college funding one, would be to transfer investing power away from the private sector (rich people and their money advisors) and put it in the hands of the federal government, which would then distribute those funds to the people to buy consumer goods.

There’s a libertarian argument against this, but also a practical one. As Reich himself points out, a rising share of consumer spending now goes abroad, as more Americans purchase products made in other countries. Taxing U.S. energy companies—at a time when a larger than ever portion of the fuel the country uses comes from Canada, Mexico, and Saudi Arabia—in order to pay Americans to purchase electronics from Malaysia, toys from China, and wine from Spain seems unlikely to have a positive effect on national GDP.

A better use of such money might be infrastructure or public works, which would put more money in the hands of Americans. Reich acknowledges the dilapidated state of the country’s roads and bridges, but he doesn’t propose a single large-scale public infrastructure project. In fact, he derides the 1990s as a time when too much private investment capital resulted in “more miles of fiber-optic cable than could ever be profitable.” The 1990s telecom asset bubble was certainly severe, but Reich disregards or ignores the types of services that can be offered over the Internet once bandwidth limitations are removed. Perhaps, while serving in the White House, he never experienced the frustration of a slow download.

The idea of a company paying severance costs of 75% of a terminated employee’s yearly salary—in essence paying the “social costs” for outsourcing—is a radical one for the United States. Businesses would argue that such a measure would crimp their flexibility and that the ability to hire and fire freely helps keep companies lean, nimble, and competitive. They might say that, faced with a 75% severance requirement, firing anybody would be too difficult and American companies would come to resemble Japanese companies during the 1990s—the so-called “lost decade,” when every employee was guaranteed a high degree of job security regardless of whether or not he (it was mostly men) helped or hindered the overall corporation. The suggestion that companies be penalized for firing people reads like an open pander to labor interests, not a viable revenue generating strategy. A straight tax hike on corporate entities, regardless of hiring or firing behavior, would seem to meet the same objective with fewer downsides.

The principal argument against Reich is that his proposals are politically untenable in an environment where any effort to raise taxes on any American, for any reason, meets with nearly insurmountable resistance from the Right and passionate charges of socialism on the floor of the House of Representatives. The 2010 election saw a number of Tea Party candidates rise to power in some very poor states like Kentucky—places that would benefit greatly from the wealth-redistributing policies that Reich proposes. How did these candidates win? They succeeded by promising to thwart any increase on taxation for the very wealthy, no matter what the cost; they promised to halt any remaining “bail-out” funds from being spent. They vowed to undo the recently enacted health care law and its provisions to expand health coverage to more Americans.

It’s one thing to argue that the country, running a record deficit, cannot afford such policies. It is another thing entirely to suggest that such policies are not in the interests of the growing poor. Yet, people in the first district of West Virginia and the first district of Arkansas voted against their own interests.

What does this show? Perhaps the worst enemy of the American middle class is not the most wealthy 1%, but the mistrustful and ever-angrier middle class itself, all of which adds to the timeliness and value of Reich’s achievement with this important book.

About the Reviewer

Patrick Tucker is the senior editor of THE FUTURIST magazine and the director of communications for the World Future Society.

[Micah Atwater · Rating 1 out of 5]

This book is badly written, unoriginal, irrational, intellectually dishonest, and extremly immoral.

Full disclosure: I have not completed this book yet. This is my initial review of the first quarter or the book. I may change my opinion of it later although in this case I doubt it.

First, the opening has several typos. This is the least of Robert Reich's sins but should not go unmentioned. Typos indicate haste or recklessness or both.

The entire concept presented here is simply Kaynesianism repackaged and rebranded as capitalist. Robert Reich implies that Keynesianism is a capitalist alternative to Marxism. Keynesianism, the idea that government must create demand by spending vast amounts of money to keep prices up and therefore employment, is characteristically a product of Marxism in that it favors a demand economy over a capitalist free market economy, demand economy being one in which the government decides what is bought and sold, at what price, and at what quantity. In Marxism, a demand economy directly opposes the free will of the people; in Keynesianism, indirectly.

In a free economy, as demand falls, prices and/or supply falls until the goods or services become cheap or sufficiently rare enough that buyers are willing to pay. The falling of prices and supply necessarily means that the industry shrinks meaning these workers need to find another industry to work in, one for which demand is higher. In a demand economy, if demand falls, the government synthesizes the demand, in order to keep the prices high by going into debt and paying for goods and services that the majority of people find worth less. "Worth less" is not a typo; if prices are falling, it's because the product or service is not worth the original price and therefore people pay less for it. But the government, to prop up demand, continues to pay the higher price. In the Great Depression and Great Recession when wages fell with demand, prices must also be allowed to fall as they naturally would so people can still afford the goods and services they need. Otherwise some people in cities starve to death while Roosevelt pays farmers to pour out "extra" milk and not to plant crops. Reich ridicules the free market economy as being nonsense, casting its proponents as being superstitious and deterministic. But Reich never explains why free market principles don't work, he just dismisses them.

Several times Reich claims that the rich don't spend or invest enough of their money and instead they either save it or "speculate" with it. What do you think speculation is if not investing? Where do you think that money goes? Speculation is the same thing as investment. This money goes to companies and businesses to fund various ventures, some profitable, some not, but all ventures employ people, often the middle class workers. Furthermore, in one paragraph Reich says that the middle class would/should (he's not clear which) spend the money they get from the redistribution on non-material goods such as entertainment, experiences, and fun so as to promote jobs and boost the economy without contributing to climate change. Then in the next paragraph he lists several prominent wealthy people who have poured large amounts of money into building things like libraries and opera houses, and millions more into charitable causes, but these things don't create more jobs or help the economy. So Reich's argument is that any sum of money spent by one rich person would necessarily have a better effect on the economy if it we're spend by many middle class people, even if spent on the same things. In addition, Reich engages in a foolhardy math exercise to show how many people would get a decent salary by splitting up that of the failed Lehman Brotherz CEO, justifying it by the fact that paying the CEO that much didn't accomplish what it was supposed to. Neither the fact that we could split up one person's income into many people's income nor that the CEO of Lehman Brothers made a horrible costly mistake while receiving $500 million the year before is justification for redistribution. Every person is entitled to what others have consciensiously agreed to pay him or her and vice versa; this is fair by every moral standard and it holds true if the amount exchanged is pennies or millions of dollars. Also, there were many other institutions with CEOs that did see what was coming in 2007 and did respond appropriately; why would we redistribute their income because one CEO couldn't deliver?

Finally, and most disturbingly, Reich justifies redistribution by saying taking a thousand dollars from a rich person makes them only a little unhappy while giving that thousand makes a middle class person very happy so there's more happiness overall in the end. This is pure mob-think and it's horrifyingly evil. People have been guillotined by this same logic. Who is Reich to decide what makes anyone happy or unhappy? If a thousand people would be made happy of Robert Reich was slapped across the face would that make it any less wrong? This prospect is truly frightening.This idea turns democracy into cannibalism and anarchy; anyone can do anything if they think it increases their happiness more that it decreases that of the person they may harm.

Read this book if you want but do not expect to be intellectually stimulated even if you agree with the author.

[Book Shark · Rating 4 out of 5]

Aftershock: The Next Economy and America's Future by Robert B. Reich
“Aftershock…” is the interesting concise book that deals with how our economy came to be, how we can learn from history and some specific ideas on how we can address these problems. This insightful 194-page book is broken out into three major parts: Part I. The Broken Bargain, Part II. Backlash, and Part III. The Bargain Restored.

Positives:
1. Engaging, well-written, well-researched book that is accessible to the masses.
2. Thought-provoking.
3. A lot of wisdom packed in a small book.
4. Fascinating and eye-opening facts. “In the late 1970s, the richest 1 percent of the country took in less than 9 percent of the nation’s total income. After that, income concentrated in fewer and fewer hands. By 2007, the richest 1 percent took in 23.5 percent of the total national income”.
5. A recurring them that Mr. Reich hits out of the ballpark, “without enough purchasing power, the middle class will be unable to sustain a strong recovery”.
6. The realization that we are not playing on a leveled economic playing field.
7. The impact of Marriner Eccles, who chaired the Federal Reserve Board from November of 1934 until April 1948. His astute imprint is all over this book.
8. How widening inequality is the main culprit behind our economic woes.
9. Interesting historical examples. Consider Henry Ford.
10. How John Maynard Keynes theoretical explanation provided Eccles the right justification to his successful approach.
11. A look at the “Great Prosperity” the three decades from 1947 to 1975.
12. Medicare and Medicaid and their link to prosperity.
13. How the rich have stacked the cards in their favor.
14. An interesting chapter on the three coping mechanisms: Women move into paid work; everyone works longer hours; and we draw down savings and borrow to the hilt.
15. The link between the economy and elections.
16. Good use of behavioral research.
17. The “demonstration effect” defined.
18. What lead to the crash of 2008.
19. Lobbyists, lobbyists, lobbyists…argh. The numbers are staggering!
20. The 2010 grotesque decision by the Supreme Court, find out which one and the impact.
21. How gutting the estate taxes impact as us all.
22. Government bailouts…
23. Some very interesting ideas on how to “fix” our economy. Reverse income tax and Earned Income Tax Credit (ETC), higher marginal tax rates on the wealthy to name a few.
24. How the rich make a mockery of the progressive tax system, can you say capital gains?
25. Links worked great!
Negatives:
1. A bit repetitive.
2. Mr. Reich was too nice. He is reticent to go after specific individuals. It’s not that he doesn’t name some names but he seems to go out of his way to be politically correct.
3. In a brief somewhat repetitive book, you expect a lack of depth on a number of economic issues. Just glances over deregulation, the housing bubble and a number of other pertinent topics.
4. Limited use of charts and illustrations.
5. There are better and more thorough books on this topic.


In summary, this book was a good intellectual appetizer. Mr. Reich provides a number of compelling arguments and really drives them home. The fact that the middle class is getting squeezed is hurting our entire economy. He makes a very clear point that will stick with me, unless this widening gap between the very rich and the rest of us is addressed systematically we will continue to struggle. He ends the book with a number of interesting suggestions and on a positive note. I recommend this book.
Further suggestions: “Winner-Take All Politics” by Jacob S. Hacker, “Screwed the Undeclared War Against the Middle Class” by Thom Hartmann, “The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America…” by Michael W. Hudson, “Perfectly Legal…” by David Cay Johnston, “The Looting of America” by Les Leopold and “The Great American Stickup” by Robert Scheer.

[John Hively · Rating 2 out of 5]

"Aftershock" is a copycat ripoff of several other books. There are significant differences. Aftershock lacks the depth of analysis of similar books.

On the other hand, like many others starting a decade or more ago, Reich correctly identifies the mal-distribution of income in the USA that has occurred over the last thirty years as the primary problem with the economy. Okay, give Reich credit. Like a lot of other people, he figured that one out.

After that Reich moves off into a fantasy world when he blames automation as the primary culprit for the loss of jobs in the United States and one of the chief culprits for the redistribution of income from working people to the rich over the last thirty years. What nonsense! Perhaps this is a way for Reich to exonerate the Clinton Administration and its support of free trade agreements like Nafta. Reich was labor secretary under Clinton. The problem is that free trade agreements are a primary agent of income redistribution.

A corporation ships high paying job overseas and then redistributes the difference between the old compensation in the USA and the new lower compensation in third world nations to rich CEOs and shareholders via higher dividends and share prices. Anybody with half a brain can see this, but Reich can't.

Reich's book came out just in time to give corporate Democrats the rationale they need to support free trade agreements this summer with South Korea, Columbia and Panama. The Economic Policy Institute estimates nearly a million American jobs will be lost over the next ten years to the South Korea free trade agreement alone. Millions more might be lost to Panama and Columbia.

Liberal Democratic Senator Ron Wyden has been preparing a summer offensive in the latest round of his war against the middle class. This corporate plutocrat is a member of the Senate Finance Committee. Wyden is also the chairperson of the subcommittee on trade. Those three trade agreements have to come through Wyden. He supports them.

Jaymie White is Wyden's point man on trade for the subcommittee. At a recent meeting with activists opposed to these free trade income redistribution agreements, White insisted that free trade did not cost our nation any jobs. He insisted automation is the culprit.

Thank you Robert Reich for giving talking points to the corporate Democrats even though knowledgeable people know this is a lie. Free trade is an income redistribution scam and Reich knows this. By the way, the idea of automation as a permanent job destroyer goes back to David Ricardo and Karl Marx.

Look what automation has done for manufacturing in China. It has created millions of jobs. It's true that automation kills jobs, but the forces that bring about automation also bring more jobs. Think in terms of a store clerk twenty years ago. Nowadays, some of them have been replaced by machines. So those people have lost their jobs. But the machines have to be designed, built, installed and maintained. That creates more jobs.

Same thing with typewriters. They're still around but not widely used compared to fifty years ago. They've been replaced by computers. The computer industry supports a lot more jobs per capita than the old typewriter industry used to. Ergo, Reich is completely wrong on this.

That's why despite automation, and productivity increases, the number of jobs actually increase. That's why Reich and this book are full of it.

[Arlen · Rating 4 out of 5]

This is an important discussion and does a great job of clearly laying out the evidence of how
our country's economic status, especially for the middle class and working poor, has changed since the period of the Great Prosperity (late 1940's through mid 1970's). The evidence is clear about the economic changes leading to stagnation and decline in wages and purchasing power for the vast majority of Americans.

Mr. Reich lays out the reasons for this tragedy in clear and easy to follow instances and examples. His concern for the sustainability of this direction we're in is, I believe, authentic, informed and worth consideration by all Americans sharing any sense of responsibility for the world we'll leave our successors. The important and valuable ideas at the heart of this book might be fully apprehended not only by those at the undergraduate and graduate levels, but by perceptive and thoughtful high school students, too.

[Greg B · Rating 5 out of 5]

An engrossing look at the Great Recession of 2008, along with an overview of the factors that caused it. Reich brilliantly underscores the process by which both right and left-wing presidents and politicians have caused America's middle class to become poorer and poorer over the last 25 years, even as the economy boomed. Taking us on a journey from 1928 to 2008 in a scant 140 pages, this book is simple (and short) enough for ANYONE to read while clever enough to provide an elegant picture of the American economy. I recommend this book to anyone who is frustrated and terrified and wants to know what the hell is going on with this country.

[Andy · Rating 4 out of 5]

A quick, timely read, Aftershock lends insight and clarity to the frustrations being incoherently expressed by Occupiers and Baggers. Some of the solutions seem a bit overboard (50% taxes on income over $160k a year and education vouchers) but other solutions are presented as obviously necessary (campaign finance reform, influence peddling curbs, and equal access efforts). Whether you're an Occupier, abagger, or a bloviator, this is a worthy read.

[Ietrio · Rating 1 out of 5]

The solution is the same Socialists have sold for the past two hundred years: make everyone poor. After all, Reich is not that rich. All his servants are paid by the tax payers. And by the suckers who get student loans for life. His office, his house, his health care, all paid by someone else. And he doesn't even have to bother coming in to work, after all he is an important person. So see? Money is not important, when other people work for your expenses.

[Leah · Rating 5 out of 5]

Wow. Wow. Wow.

This book about income inequality in the United States and the growing wealth gap between the uber rich and everyone else was written in 2010, but in the first sections, when Reich lays out the problem, it sounds like it could just as easily have been written today. The situation is familiar to just about everyone at this point: CEO salaries are skyrocketing. Middle class incomes remain stagnant, forcing families to take on ever-increasing debt. This state of affairs, Reich argues, is problematic not only in a moral sense (it seems inherently unfair) but also in very real economic terms: the middle class does not have the purchasing power to buy the full extent of what the economy is capable of producing.

So far, so predictable.

But then Reich pulls out his crystal ball and goes full-on oracle on us, giving us his 2010 predictions for what 2020 will look like.

The current (aka 2010) state of affairs will lead to one of two outcomes, Reich predicts: Backlash or Reform.

In the backlash scenario, an increasingly outraged populace grows more and more mistrustful of systems, institutions, and the "elites" in government and the media. They believe the system is "rigged" against them and the solution involves more tariffs, isolationist and anti-immigrant policies, and a general "let's take back our country" ethos.

In the reform scenario, Americans embrace an array of new policies such as Medicare for All (the newly signed Affordable Care Act won't stop rising medical costs, he predicts), school vouchers, an expanded earned income tax credit for the middle class, free tuition at public universities, and free public transportation.

Americans will embrace the reform scenario, Reich concludes, because it is the only sensible solution, and Americans are a sensible people.

Well.

We all know how that turned out.

5 stars because I am well and truly amazed at how accurately Reich was able to predict the future (at least the backlash version of it.)

2021 Reading Challenge Category: A book about a social justice issue.

[Daniel Blanchard · Rating 4 out of 5]

Eye-Openig

I knew a lot of these changes had been taking place in our society, but always struggled to explain it to others. This book has given me a simple way to help others see what I was already feeling.

[Brian Kramp · Rating 2 out of 5]

This book is an opinion piece about the problems with inequality in America, and suggestions about what to do about it. It is a narrative about how the government is not fulfilling its bargain by giving people sufficiently high paying jobs. And he clarifies that the greatest issue facing this country, is not a lack of jobs, but of high paying jobs. The great bargain is not being fulfilled, and the rich are getting the earnings that should be spread throughout the lower and middle class. I don’t recommend the book, because he didn’t provide sufficient data or insights into either the causes of these issues, or the transition path to where he wants to go.

He writes about Henry Ford, and his “basic bargain” to provide his workers with enough money to be able to afford a car. According to the author this wage was 3 times the going rate. Supposedly this worked because it spurred more car ownership, but I find it odd that a national car company would dramatically increase it’s costs to sell a few thousand more cars, and call it even. Now it’s an incredibly noble thing, and one that I admire. I’d like to learn much more about it, and understand its economics. Is it different than Bill Gates and others donating their wealth to charity? Is it something that could be considered at a large scale?

Reich uses the common liberal tactic of confusing freedom (from coercion) with freedom from want. Freedom from want really means tampering with other’s freedom, by taking their money, and giving it to others. His arguments didn’t particularly appeal to me because our thinking is on 2 different planes. His basis for argument is: “People should be equal.” Whereas the basis for capitalism is: “People are free,” with the important extension that a free trade transaction increases the wealth of both parties in the transaction. In high school I learned that the proper way to debate is to attack the basis or the strong point of the opposing view. But he didn’t even mention counter points. My whole reason for reading was to have a mental debate with him, but he avoided all my points, rendering it useless.

I’ve done enough reading that I consider myself an armchair economist, and found myself constantly waiting to hear the data, to make a conclusion for myself, but alas, the book is simply filled with generalizations, and only takes the thought process through a single stage, without visiting unintended consequences of his proposals. As a quick example, he wants to rework higher education tuition. Tuition would be effectively free, but graduates have to pay 10% of their salaries for 10 years. The lower earners will be subsidized by the higher earners. Now if he’d have thought about this more deeply, he would have realized that the high potential earners would opt out of the program, and it would dramatically distort incentives and promote cheating the system in a remarkable number of ways. It’s interesting how it turns the mental model of paying for college from “How can I save money for college?” to “How can I decrease my payments?” which is a psychological change for the worse.

That said, I thought that his system for helping the poor was pretty reasonable. He’s in favor of a negative income tax for the poor instead of the 100s of other programs, but he encouraged a 60% highest income tax on the rich. No discussion on what that is likely to do to the incentives of these people, with him only mentioning first-order effects.

The book is sprinkled with partisan comments, such as “President Obama brought the economy back from the brink.” But he tried pretty hard to keep it neutral, and I appreciated that. I really wanted to see some history and evidence, but I guess I should have researched the book a little more. If I wanted opinion, I could just listen to any politician.

As Milton Friedman always said, you cannot judge a program by its intentions, but by it’s results. Reich has noble intentions, but I’m afraid that they just would not work, and he has not even tried to make the case that they would.

[Arminius · Rating 5 out of 5]

Mr. Reich wrote a very good economic book based off the ideas of Marriner Eccles and John Maynard Keynes. He claims the reason for recessions and depressions is caused when the disparity between the rich and the middle class wealth is greatest.

He said that the wealthy will not spend the money and the middle class does not have enough money to spend. This contracts the economy. The middle class will spend on credit and when they run out the economy fails. He said that is what happened during the 2000 -2007 growth cycle. As the price of homes rose people were able to borrow against them. They maxed out their credit and the housing market crashed. That is what produced the recession of 2007.

Mr. Reich calls the period from 1947 to 1975 the “Great Prosperity” period. During this time Americans made enough in wages to buy what America made. Americans were able to do this because of the liberal programs created since the 1940’s like a 70% -90% top income tax rate, strong labor unions, and social security.

He claims that the real problem with the U.S. economy is that Americans no longer have the purchasing power to buy what the U.S. is capable of producing. This is because so much of American income goes to the top wage earners. These top wage earners do not spend.

His solutions to this problem are intriguing. First he wants to replace the current income tax with a reverse income tax. His plan is to give people making $20,000 or less a supplemental amount of $15,000. The supplement would decrease incrementally until it reached workers making $50,000 -$90,000. However the $50,000 – $90,000 would pay income taxes at the low 10% rate. The $90,000 to $160,000 earners would be a $20% rate.

He acknowledges that his tax restructuring will produce less revenue to the government. He solves this by instituting a carbon tax and wealth tax. It is interesting how he admits that the carbon tax will cause inflation and add $1.00 to the price of gas. That is the reason is why it is not politically possible.

He would also replace unemployment insurance with wage insurance. If a person loses a job then gets a new lower paying one he would receive up to 90% of his last jobs earnings for two years.

He also prescribes school vouchers to improve education with $14,000 going to parents of poor children used to purchase education at the best school they can.

He proposes free tuition to attend public colleges paid for by a 10% tax on previous college graduates during their first 10 years of work.
There are also some other minor programs he proposes.

My opinion is that he may be correct in the disparity between rich and poor being responsible for recessions. I like his reverse income idea, wage insurance, vouchers and college education funding. The carbon tax is the worst idea he has. It would make everything more expensive which would take away from middle class income and hurt his plan to decrease middle class/upper-class income.

[Ra · Rating 4 out of 5]

This is one of the books I have collected during my four-year stay in New York. These years were very difficult for me and I was plagued by a sense of deep disappointment with the dissonance between my image of America and the reality I lived every day. Even in affluent New York, you can see that things are going wrong for the majority of the working-class, you can see the growing divide between Walmart shoppers and the clients of 5th Avenue, it is not pretty.
I tried to understand all this by accumulating books on the subject of the financial crisis and the mortgage fiasco. I had a nascent interest in economical theory that I never developed because as worker in the giant mill of the city I had too much to worry about, and never any time to think. In comparison to most Americans I had a cushy and well-paid job, but the unease of living in this human mill permeated my soul and I had to escape to preserve my sanity. Now I catch up with my reading and learn about the source of my unease.

This book gives an excellent idea about what is happening in the American economy. It even gives a dire prediction about the rise of populism (a version of which has indeed come true in the Trump presidency). What is put forward here is that the state must keep a basic bargain with its working class. They need to be able always to buy what they produce. Because oncethe working-class are unable to do so, having exhausted their coping strategies and sources of credit, the economy will also stop growing. Higher taxes for the rich are not a punishment, they have to be applied to the advantage of everyone including the rich who will make bigger profits in a growing economy. The middle class is the engine that keeps the economy running, buying products and services, so by curtailing their spending power and limiting it to paying for necessities like healthcare and education the market will face an inevitable slowdown. It is a very potent idea and I think it has its merit. I have anecdotal evidence from comparing Berlin to New York.

[Donna · Rating 4 out of 5]

Economics is a complicated subject.

First, for all of us, there's the fundamental problem of trying to balance money received and money spent. That issue applies to everyone, from kids buying penny candy to businesses and governments. Simplistic thinkers, including a good many Tea Party-type "fiscal conservatives"-tend to think that's all there is to it.

Most middle class people, however, also need to deal with interest rates on savings and loans, bank and card usage fees, discounts and fines—not to mention the often counter-intuitive ways in which large sums of money behave over time.

When you arrive at the level of major corporations and governments, there are further layers of complexity, including the interrelationships of currencies, international stock markets, trade agreements, and commodities like oil.

In Aftershock, Robert Reich manages to explain the intricacies of the current economic situation, especially in America, in plain English. He lays bare the history of the American economy, from the Great Depression through what he calls the Great Prosperity, making a compelling argument that we have arrived back at the place where the economy teetered and fell in the 1920s and 30s.

The drastic efforts to prop up the economy after the meltdown of 2008 have only served to create a false sense of security by masking the basic problem: the dramatically widening gap between the tiny minority of extravagantly rich—who suck a large percentage of money out of circulation—and the rest of us, who continue to get poorer, both in real terms and relative to the very rich. As money is power, there are powerful forces committed to maintaining this dangerous trajectory.

This is not a doomsday book. However, it is a call for those who are politically aware and active to learn more, share more information, and stop being passive and politically correct about the conservative agenda to impoverish and dis-empower the middle class.

[Sara · Rating 4 out of 5]

Great history of America's economy by a former Labor Secretary and current professor. He begins with the writings of Marriner Eccles, a Utah businessman and later, head of the Federal Reserve, after the Great Crash in 1029, which was interesting and new to me. Reich compares the build-up to that with 2007-8, noting that the stock market and banks were basically doing the same things and then pointing out that our greatest economic prosperity occurred from 1947-1975 when the middle class was strongest. During that time, taxes were fair, with the wealthy paying more than the middle or lower income earners and therefore, the middle class had enough money to buy the things they needed and wanted, which is not the case now. People now have to have several incomes/family or be heavily in debt in order to live. He points out that America is a consumer society and if people don't have enough money to buy, companies have to cut back, laying off even more people and the vicious cycle continues. And he mentions Henry Ford as an example of a businessman who paid his workers $5/day in a time when the going rate was $3/day just so they could afford to buy the cars they were producing at $575. Compare that to the $100 million Ken Lewis, CEO of Bank of America is paid---in fact 50 percent of all the income earned in America goes to the top 10 percent of earners, who then pay only 15 percent tax rate instead 25-39 percent lower earners pay. This is a book that both saddens and enrages along with educating you.

[Minesweeper · Rating 3 out of 5]

This book attempts to explain what caused the Great Recession and tries to provide solutions. The main points of the book:

1. Real wages of middle class Americans have generally remained stagnant for decades while the super rich are taking home more and more.

2. Americans have coped with #1 in three ways: a) women entered the workforce; b) men and women have worked longer hours; and c) families have take on huge amounts of debt.

3. Workers are consumers. With the coping mechanisms from #2 gone, the middle class can no longer afford to consume like it used to.

4. Jobs are not the problem; pay is. Globalization and automation are punishing Americans whose jobs are no longer needed.

5. The "basic bargain" needs to be reinstated through government regulations (reverse income tax, taxing the rich, school vouchers based on need, worker insurance, healthcare for all, campaign finance reform, etc).

Overall, Mr. Reich is very persuasive with his arguments. Unlike a lot of politicians, he has a specific plan (even though not everyone will like it) to achieve his goals (which he presents in this book; i.e., #5). However, two things of note:

1. Americans who financed lifestyles through debt are not entirely blameless. There is such a thing as personal responsibility, and keeping with the Joneses is not a valid excuse for going over budget.

2. As technology continues to advance rapidly, more and more jobs will become obsolete. Any economic policy dealing with jobs needs to address this issue.

[Tiffany Conner · Rating 4 out of 5]

Not too much of what's in this book is news, but it's certainly stuff that's worth knowing. Some of what Professor Reich says? The disparity between rich and poor is bad for our country. Period. Middle class and working class wages have not risen, even though productivity gains for these groups have risen considerably. The only winners? You guessed it! The top 1 percent of earners in our country. God bless America. The problem with that? We are a consumer-based economy. If the largest segments of our population (the working and middle class) cannot afford to consume (gasp!) the economy will eventually find itself stagnant for much longer than even the top 1 percent will be willing to tolerate. The "new normal" of lower wages and high unemployment cannot be combated with tax cuts or imprecise stimulus packages. The problem is of a magnitude requiring the abandonment of economic solutions aligned with strict ideological preconditions. The system itself is broken. It does not need to be tweaked. It needs to be addressed from top to bottom and until that happens, we're keep seeing booms where only a relative few are beneficiaries and busts where everyone but the very top pay the price. Who wants that? I sure as hell don't.

By the way, this book is plenty short and very accessible. So don't shy away from it, even if you're not really into "economics" and things.

[Naveed · Rating 2 out of 5]

Robert Reich makes some very eye opening and relevant points in his book. His premise is essentially that the divide between the rich and the middle class has grown substantially over the years, and this clash of lifestyles has repercussions that reverberate for generations. His opinions on the economic downfall are very sound and well researched. Unfortunately, if you partially disagree with his reasoning on the economic crisis, you'll find the entire book baseless. Despite falling into that camp, his sound viewpoint made it hard for me to put the book down in anticipation of another "that's insightful" moment. His solution to the economic problem also was sound, however it fell apart for me here because GETTING to this economic solution would require the ultra-rich to agree to practically doubling their tax rate. Reich mentions in Aftershock that history teaches us a crisis is what it takes to bring people together and do what was considered impossible earlier. And the crisis that we are going to face will certainly get aspects of his solution implemented, thereby beginning the end of the wide disparity between the rich and the middle class. Insightful, yet not practical enough (for me). A great book, but two stars due to the feasibility of implementation of his plan in today's environment.