The system is ‘rigged’: Robert Reich on the Supreme Court, economic inequality, and his Twitter beef with Elon Musk
Among writers and thinkers operating at the intersection of economics and public policy, few today are respected as Robert Reich. Over a career spanning the past five decades, he has worked for three presidential administrations—serving as U.S. Secretary of Labor during Bill Clinton’s first term—and written 18 books exploring the economic, social, and political issues at the heart of American society. With filmmaker Jacob Kornbluth, he has produced two documentaries, Inequality for All and Saving Capitalism, and founded Inequality Media, a digital media company that produces videos and interviews expanding on Reich’s work.
An advocate of progressive, socially-minded economic policies, Reich is a fierce critic of unfettered free-market capitalism, which he believes has yielded the heightened economic inequality plaguing the United States today. Earlier this year, he released his most recent book, The System: Who Rigged It, How We Fix It, which argues that private interests have wrested control of the American government from the people it is meant to serve. This has resulted in policies that favor the wealthiest at the expense of most working Americans, and threatens to transform the American democratic system into an “oligarchy,” according to Reich.
When he’s not writing and commentating for media outlets around the world, Reich is a professor of public policy at the Goldman School of Public Policy at the University of California, Berkeley. He recently made some time for Fortune to discuss the ongoing political battle over the late Ruth Bader Ginsburg’s vacant Supreme Court seat, how the Clinton and Obama administrations failed to address economic inequality, and his recent Twitter beef with Elon Musk.
This conversation has been edited and condensed for clarity.
You’ve been critical of the GOP’s efforts to replace Justice Ginsburg, and how it speaks to what you call the “rigged” dynamics of our government system—an issue that you examine extensively in your new book. Why is the current battle over Justice Ginsburg’s former seat on the bench so alarming in this regard?
The Supreme Court is the one institution of our governmental system that requires public respect in order for it to function. If the public doesn’t trust the courts as being above politics, then the courts have absolutely no place to stand with regard to legitimacy; as the founding fathers said, they have neither the purse nor the sword.
I think the big concern right now is that, if Donald Trump replaces Ruth Bader Ginsburg and that nomination is confirmed by the Senate, it will be deemed illegitimate by a vast number of Americans—because, after all, Mitch McConnell did not act on Merrick Garland’s nomination [to the Supreme Court, by President Obama in 2016] at a point much further away from the following administration. It’s laughably arbitrary. And then you would have a majority of the Supreme Court’s justices there by virtue of Presidents who were not elected by majorities, and confirmed by Senate Republicans who don’t represent nearly a majority of the public.
So it’s a compounding of perceived insults to democratic ideals. If it all becomes power politics, then there’s almost no end to it. And what we sacrifice is public legitimacy and public trust.
If the system is “rigged” as you say, then what must be done to bring about the structural change needed and restore public trust in the integrity of our institutions? Do you think we can find the political will to do it?
It’s very much up to the public. Those in power are not going to change the allocation of power; they never have, and they never will. After the first Gilded Age of the late-19th century, the public was so outraged—with abuses of power, with widening inequality, with corruption, with conspicuous consumption by the wealthy and extraordinary poverty—that the country essentially rose up in what were known as the populist and progressive movements of the era.
The country rose up in a way in 1932; people were so desperate that they followed a relatively unknown politician in Franklin D. Roosevelt, who had a lot of ideas, and the country was willing and eager to do something bold and dramatic. And in the 1960s, I think the nation was in a mood to follow the direction that the civil rights movement was taking, and Lyndon Johnson was wise enough to get in front of that parade with the Civil Rights Act and the Voting Rights Act. So at every juncture in this country, those in power don’t simply give up power; the vast majority of Americans have got to mobilize and organize.
In your book, you expound on the economic inequalities that have become increasingly stark over the last 40 years. Seeing how you’ve been active in public life and served in several presidential administrations, what have been the biggest political failures that allowed these inequalities to come to fruition?
There were a great number. I think the biggest failure was to control money in politics. There’s no such thing as a free market in nature; a market is a product of rules, and those rules come out of courts, legislatures, and executive agencies. And if money is too powerful of an influence where the rules of the market are being developed and implemented, then the market is going to tip ever more dramatically in the direction of those who are very wealthy and have, bit by bit, bribed their way into tilting the market in their direction.
You look at any area of the current set of laws and rules that frame the U.S.’s so-called free market—say, bankruptcy, which is an area where most peoples’ eyes glaze over. But you see, step by step, that the financial industry has changed the rules of bankruptcy, making it harder for people to reorganize the mortgages on their first homes or for former students to reorganize their student debt.
We can go on and on. Intellectual property laws have been expanded dramatically over the years; contract laws have been layered so that mandatory arbitration is now fairly standard; and antitrust is almost a dead letter, even though levels of concentration have increased dramatically. It’s harder and harder to form a labor union, and the laws are tilted against labor union formation. Securities deregulation did not actually end with Dodd-Frank; in fact, Dodd-Frank itself has been watered down, and continues to be.
So you get a playing field that is tilted very dramatically in the direction of powerful industries and wealthy people. And the net effect is a vicious cycle in which not only do the wealthy get more and more advantages—and I haven’t even mentioned taxes—but at the same time, the public grows more cynical about a game that appears to be rigged. And it is rigged.
While it’s easy for those on the left to blame Republican administrations in that regard, there has also been a rising backlash from the progressive left targeting the legacies of the Clinton and Obama administrations. What do you make of those Democratic administrations’ failure to address those same issues?
I don’t want to engage in a kind of false equivalency between the two parties because I don’t think they’re identical. But undoubtedly, in both parties, there is a financial and corporate establishment that is very powerful and very often gets its way. In the Clinton administration, I was at loggerheads very often with [former Treasury Secretary] Bob Rubin, who—although I like personally very much—did represent a way of thinking about the economy that was very different from the way I felt and how many people like me, who were more concerned about widening inequality, would come at these issues.
The financial community and big contributors to the Democratic Party undoubtedly had a lot of influence—you’ll remember the Lincoln Bedroom controversy during the Clinton administration. Both Clinton and Obama promised that, if elected, they would embrace labor law reform, making it easier to form unions—and yet neither did it, even though the first two years of both administrations saw both the House and Senate under Democratic leadership.
I don’t want to engage in false equivalency because I think overall the Republican Party has been more willing to let business have whatever tax cuts and regulatory rollbacks it has wanted. The Trump administration is a good example. But certainly, you find that imbalance in both parties.
Yet polls continue to indicate that Republicans still garner more support than Democrats as far as who voters trust to handle the economy. As far as Democrats’ inability to compete in this regard, is it simply a matter of poor messaging, or have they failed in a larger sense?
I think messaging is part of it. The Democrats, in my view, over the years have done a bad job at educating the public about the importance of public investment: education, basic R&D, infrastructure, public health, even health insurance. Those kinds of public investments have more to do with future economic growth than private investments, for the simple reason that much private sector investment is being done by big companies that are global. They don’t care where they make the investments, as long as they get a good return on those investments. They have no intrinsic loyalty to the United States—that’s how they’re constructed and organized.
So you need public investment in order to attract the right kind of private investment. Democrats have not gotten this basic point across.
In lieu of public investment, we’ve seen heightened importance placed on notions of “stakeholder capitalism” and corporate responsibility—and relying on private sector investments, rather than government intervention, to grow our economy. I understand you view such notions with a great degree of skepticism.
My view is really very similar to the views expressed 50 years ago by Milton Friedman. You cannot expect the private sector to do a good job being socially responsible—it’s not their responsibility to begin with. What they do, which is called “socially responsible,” is usually an elaborate form of public relations. Shareholders, if they wanted to be charitable, would put their money into a charity, or they would pay their taxes in full. We look to government to be the agent for the public when it comes to making public investments, and allocating public money where it can get the highest return.
But this goes back to the discussion we had before. The biggest problem over the last 50 years is that the private sector has flooded government with money. Not only lobbying and corporate campaign contributions but also the kinds of public relations campaigns that have made it very difficult for the public to trust government and to hold government accountable.
One counterpoint to that perspective, for those skeptical of government’s role in the economy, would be Silicon Valley—specifically, hugely successful private entrepreneurs whose innovations, they claim, have done more to advance our economy and quality of life than the government could. Elon Musk is one such figure, someone who many consider a forward-thinking capitalist who is working to make the world a better place. You were recently critical of the way he’s run his company as it relates to Tesla’s labor practices, and he took a shot back at you on Twitter. What do you think of him and his ilk, who you may consider “robber barons,” but whom others may consider captains of industry?
We’ve gone through this before historically, as you’re alluding to. It’s not bad for people to make a lot of money, but we have to have guard rails. We have to protect workers and consumers; we’ve got to protect the environment. Just look at what we’ve gone through in California over the last couple of weeks. We see what happens when there are no guard rails. In 2008, when the financial sector exploded, we saw what no guard rails meant.
Any society has to rely on government for two things fundamentally. One is to establish these guard rails, so that the Elon Musks of the world can make a lot of money, but they can’t exploit their workers, treat them badly, and expose them to unsafe work conditions. The second is that government needs to undertake the fundamental public investments in education, infrastructure, and basic R&D that the Elon Musks of the world are not going to make. And if we don’t make them, then we end up with a very ugly society, and one that is not going to be all that productive. We may be able to send people to Mars, but life on Earth is not going to be very pleasant.
The central theme of your new book is that the American system presently finds itself in a conflict between “democracy versus oligarchy.” As far as the 2020 presidential election is concerned, many critics would point to both major candidates and their parties as having enabled this disenfranchisement of the American people, in favor of moneyed, corporate interests. With that in mind, it’s going to take more than just electing a new president to bring about the deeper, structural change it appears we need, isn’t it?
Yes, of course it’s going to take a lot more. But when I say that the underlying conflict in our society is between democracy and oligarchy, what I’m getting at is that behind any individual election, with increasing frequency and intensity over the last 30-40 years, we see a drama unfolding in which the bottom 90% of Americans by income and wealth are getting a raw deal. Not only in terms of income and wealth; the typical American in the U.S. doesn’t do nearly as well as the typical European in terms of education, health care, pensions, all sorts of other public benefits. Even though taxes are higher in Europe, the typical European gets all sorts of public benefits that the typical American lacks.
And you combine that with everything else we’ve been talking about—the lack of guard rails with regard to making a lot of money, the kind of shareholder capitalism to the extreme, and the lack of public investment—and you get a very brutal capitalism here. The choice is really not between socialism and capitalism; it’s between a capitalism whose rewards go disproportionately to a relatively small number of people who live wonderfully well, while everybody else is exposed to huge levels of economic insecurity, or a capitalism in which almost everyone has a fair shot and democracy is much more vibrant and buoyant than it is here.
People very often ask me, whom should we emulate? Should the United States be more like the Nordic countries? And I say no—let’s just emulate ourselves between 1945 and 1980. A time when inequality was dropping dramatically, when the bottom-fifth had more opportunity and was pushing ahead even faster than the top-fifth, when CEOs were paid only 20 times or 30 times more than the average worker, when over a third of the workforce was unionized. In other words, when there was countervailing power in our system.
We didn’t do it entirely right then, but at least we were moving in the right direction. We were moving towards civil rights and voting rights and more opportunities for women. We were on the right path, and we’ve gone off that path.