How did Donald Trump win the presidency? In a new podcast interview with International Business Times, former Clinton adminstration Labor Secretary Robert Reich says the Republican was able to take advantage of voters' frustration with both parties' failure to confront corporations' growing power over American life — and Reich faulted Presidents Bill Clinton and Barack Obama for failing to "deal with the structural problems" in the economy.
Reich spoke to IBT during the release of his new Netflix documentary "Saving Capitalism," which argues that an unprecedented flood of corporate campaign cash resulted in public policies that have distorted capitalism and harmed America's middle class.
Reich's desire to rescue capitalism has become increasingly controversial — with the United States facing stagnating wages, intensifying economic inequality and persistent poverty, public opinion polls show more and more Americans are questioning whether capitalism is the right economic system for the country. In 2016, one poll showed that among millenials, 43 percent said they had a favorable view of socialism and just 32 percent said they had a favorable view of capitalism . That same year, democratic socialist Bernie Sanders received millions of votes for president.
Reich, who worked in the Ford, Carter and Clinton administraitons, is now a professor of public policy at the University of California-Berkeley. During his interview with IBT, he reviewed his economic argument through the prism of his relationship with Bill and Hillary Clinton, whom he has known since law school. He opened up about his battles with the Wall Street wing of the Democratic Party while he was serving as Labor Secretary under President Clinton, and recounted his biggest regret from his time in office. He also asserted that capitalism can be saved — but only if Americans are willing to confront and fight back against corporations using huge amounts of money to dominate its political system.
What follows is a lightly edited excerpt of the podcast discussion.
You argue that capitalism needs to be saved, but what is your response to polls showing many Americans want an alternative to capitalism?
If we could come up with something that was much different, we might want to try that, but even the Chinese who call themselves a communist nation practice a form of capitalism in terms of private property and the free exchange of goods and services. I think the real question is what I meant by ‘saving capitalism’: saving capitalism from the moneyed interests that are now distorting our system of capitalism in ways that make it very difficult for most people to get ahead.
The issue is not capitalism versus some other ism, because there really isn't another ism around. The question is how to organize capitalism so that big money doesn't make the rules.
The idea that there is a free market out there some place in nature that can exist without rules, without rules that are generated by politics, by government, by federal agencies and departments and state agencies and departments and legislatures and courts is absurd on its face.
These rules are necessary. They are constantly being changed and adapted and altered. They are, right now, more than at any time since the 1880s and the 1890s, the Gilded Age of the robber barons, they are being made by and for very, very big companies, corporations, Wall Street and economic elite of very wealthy individuals who were politically active. This is a huge problem. This generates the distress and cynicism and anger about a rigged economy and a rigged system that contributed to Donald Trump becoming president.
Some critics of capitalism argue that capitalism is predicated on unsustainable consumption and economic growth, and that crises like climate change show that over-consumption is destroying the planet. Do you agree?
If the point is that we can't just keep on consuming, that the environment, the planet, the resources we depend on can't tolerate the mass consumption and the increasing consumption that this planet is engaged in, I would say absolutely right, but growth itself is different from consumption.
Economic growth gives a society the opportunity to do a lot of things, including environmental protection. Rich societies happen to be cleaner than very poor developing economies. Why is that? Because rich societies have the wherewithal to invest in environmental protection and sewers and water systems and systems that make the environment much, much safer and cleaner for most people. I think the issue of growth versus the issue of consumption is that we do want growth that increases our capacity to conserve and to be responsible in terms of stewardship of the planet.
We want growth that gives us the capacity to do a lot of things beyond that, in terms of education and healthcare. We want growth that enables us to invest in our people, but we don't want growth that simply allows more consumption. They're different. I think that whether we have growth that allows these kinds of public investments or we have growth that simply is focused on consumption, that is a political matter and a cultural matter. There's no reason why growth has to lead to just more material consumption.
You argue that we are living in a an age in which money has an unprecedented influence on politics. But were things really better in past eras?
I think we're back to that Gilded Age right now, but we did have a period beginning after the second World War, culminating in the late '40s, '50s, '60s where we were much more equal society. We were a society that was striving very, very hard, struggling for even more equality in terms of the Civil Rights Act, the Voting Rights Act, Medicare, Medicaid, even the Environmental Protection Act. We were a society that was very much trying to live up to a set of American ideals that included democracy.
My first job in Washington was as an intern for Senator Robert F. Kennedy. I remember those days as being very idealistic days. People who were involved in government, people who were involved in politics were not in it to make a lot of money off of their service in government. They were not in it to become lobbyists. In those days, in the 1960s and '70s, only 3 percent of Members of Congress who were retiring became lobbyists. Today, almost 50 percent of retiring Members of Congress become lobbyists.
In the '50s, '60s and '70s, you had major movements for improving the quality of life, civil rights, the environment. They were actually making a difference. They were having political consequences. In those days, you didn't have the political money spent on campaigns that you have today. You didn't nearly the degree of political organization by big businesses, by Wall Street, by wealthy individuals. You didn't have anything close to the amount of money being spent by all those various groups.
On top of that, you had countervailing power in the form of labor unions and local banks and farm cooperatives and other groups whose voice in politics counteracted and balanced the voices of big business and the big banks. You don't have those countervailing powers any longer.
Labor unions in the 1950s and '60s represented about 35 percent of all workers in the private sector. Today, labor unions represent fewer than 7 percent of the workers in the private sector. Today, you don't have local banks. You have global banks. Today, you don't have farm cooperatives that were actually growing and becoming a major force in the farm economy. You have huge concentrated farm processors, agribusinesses.
I don't want to romanticize that period. I mean, we still had a lot of work to do, but at least we understood the work we needed to do, and we kept a very, very strong limit on corporate power.
Your new film recounts your battles with Treasury Secretary Robert Rubin and the Wall Street wing of the Democratic Party while you served as Labor Secretary under President Bill Clinton. When you first got the job, were you expecting those battles to be as intense as they were?
I did not expect the difficulties, the extreme difficulties that I ran into because Bill Clinton, in 1992, ran on a platform of investing in people. That's what “putting people first,” his campaign platform, was all about. Investing in education, in job training, in health, in infrastructure. His notion and my notion was that if you made these kinds of public investments in our workers, in our citizens, you build the economy from the bottom up. You make a more productive society. You overcome or begin to overcome widening inequality. You create opportunities for everyone, and you generate economic growth that allows you in turn to do even more public investments.
I didn't realize that the budget deficit that we ran into at the start of 1993 when the administration began would be such a powerful instrument by the conservative forces outside and also inside the administration — the Wall Street wing of that administration — to stop in its tracks a lot of what Bill Clinton promised to do in 1992. I was, frankly, amazed and deeply frustrated.
When you spoke with President Clinton about these issues and your concerns about Wall Street’s influence on his administration, what did he say?
I talked at the time a lot to people inside [the Clinton administration] who I was either expecting to be on my side or were already on my side, or I needed to recruit to my side, including Bill Clinton. I mean I spent a lot of time whenever I could grab him because I knew him for so long, I was able to sneak into his office or sneak into his car. I mean, nobody [but me] could fit into the jump seat opposite Bill Clinton in his presidential limousine because I'm so short. I would do that, and the other Cabinet members and other advisers would be quite annoyed with me for having that face time. I spent huge hours lobbying.
That's what it really came down to — trying to make the strongest case I could for the principles that I thought Bill Clinton was elected on, but the response I got back from Bill Clinton and from others who didn't agree with me was number one, we have got to get the bond traders on our side. We can't afford a huge deficit, budget deficit because that will cause interest rates to go back, that will make it difficult to get jobs back again. We've got to get the Fed and Alan Greenspan to be on our side. We've got to postpone most of what Bill Clinton wanted to do until the economy is better.
Then, of course, came the terrible, well, the nightmare, politically, of the mid-term elections of 1994, the Republicans taking over Congress and from that point on, it was just trying to survive.
What is your biggest regret from your time serving as Labor Secretary?
The biggest thing that I regret not pushing harder on has to do with labor unions. Bill Clinton, as did Barack Obama, promised the unions that there would be labor law reform. That would be one of the major first initiatives of both administrations, when the Democrats had both houses of Congress. By labor law reform, I mean making it easier to form unions, making it harder for companies and employers to fire workers for trying to form unions.
In both instances, both the Clinton administration and the Obama administration, both presidents essentially said, "No, I don't want to spend my political capital on that, even though I promised labor unions that I would. They have no real option. They're going to be with me in the future." That, I should have fought harder for...
Workers not only needed unions and still need unions but also the Democratic party needed labor unions because labor union members were the ground troops of the Democratic party. Without them, the Democratic party is really just a big fundraising machine. It has no members, no real active membership, apart from people who are party functionaries.
Do you believe the Obama administration was much different on economic issues than the Clinton administration?
I think the Obama administration really was very similar to the Clinton administration. It was a continuation, in many ways, of the Clinton economic policies. Many of Obama's advisors were holdovers from the Clinton administration. Gene Sperling, Larry Summers and so on. Many of the decisions made by the Obama administration were consistent with the decisions made by the Clinton administration.
As a result, the economy did reasonably well after the financial crisis. It was a long sustained, and has been even now, a long sustained economic expansion starting in 2009, but the problem of inequality got worse, steadily worse. The fact that median wages were stuck in the mud, that most people did not get a raise. If you're talking about the bottom 80 percent of Americans, hourly workers, they actually, most of them, lost ground during the Obama years as they did during the George W. Bush years, as they did during the Clinton years. This is a long-term problem.
Then, of course the, financial crisis, the bailout of Wall Street exacerbated the anger and frustrations of a lot of people. They did not get much, much benefit out of TARP, which was supposed to be just a transitional program for not only the banks but also for homeowners. The homeowners didn't get bailed out. The banks got bailed out. Homeowners did not. That was a huge problem for many people, that the legacy of that great recession is still with us.
Most Americans, particularly in the bottom 60 percent, are not yet back to where they were before the great recession. They lost jobs. Some of them still have not got back into the labor force. They lost their savings. They haven't got back to where they were in terms of their capital, their assets. Their houses, they lost. Many of them lost their homes. That legacy is very much a foundation stone, sadly, for the Trump administration, for the emergence of Donald Trump, for the power of the authoritarian right that we now see.
In retrospect, I think that both Bill Clinton and Obama, although they were good stewards of the economy, they didn't deal with the structural problems. They didn't turn the economy around in ways that most people would say generated a truly fair economy — an economy in which anybody could make it.
Do you believe the Democratic Party is part of the problems you outline, or part of the solution?
I think that the party is nothing. The Democratic Party — there's no there, there. It's just a big fundraising machinery. The real energy, the core, the heart of the Democratic Party to the extent that there is one, is at the grassroots. It's bubbling up right now. It's this resistance to Donald Trump. It's more than that. It's people who are committed to single-payer, committed to getting big money out of politics, committed to many things that Bernie Sanders instigated or at least was a vehicle for getting people energized about.
The energy in the Democratic Party is progressive energy, if that's the way you want to characterizes it, and the responsibility and the only hope for the Democratic Party as a party is to link up and take advantage of this energy. If it doesn't, then, the party, I'm afraid, is just going to maybe limp through 2018 and maybe pick up some seats, hopefully get control of the House and maybe get control of the White House again in 2020. It will not be a vital force.
Democrats seem energized in opposing Trump — but do you believe the party unity around “resistance” to Trump stifles systemic questions about whether Democrats should move in a more progressive direction?
Initially, the resistance to Trump is all about Trump and his lying... I think that the resistance is moving beyond that because as you get closer to the 2018 elections and then the 2020 elections, many people who are now in politics for the first time were running for office, who are engaged at the grassroots, many of them are coming up to the question you raised. What are we for? What's the positive agenda? Out of that positive agenda is coming many of the ideas that animated the Bernie Sanders campaign such as universal healthcare, single pair, such as getting big money out of politics...
These are thing that were already there in the progressive lexicon and agenda but had not been fully understood, fully appreciated, I think, by many people who call themselves Democrats.
It has been, I think, a massive learning experience for many people. Getting involved in politics and seeing it up close, people I know who have never been political before are saying things like, "We have got to reform our voting system. We've got to get rid of the gerrymandering that is going on and voter suppression. We've got to get big money out of politics. We've got to also do something very, very dramatic with regard to healthcare and the environment." These are people who are beginning to form a new Democratic Party.
If the old Democratic Party only understood that they are not opponents, they actually are potentially the source of energy and momentum and mobilization and the future for the Democratic Party. Then, I think the Democratic Party really does have some potential for taking back the system of government and also our economic system for average people and for the poor and embracing social justice as the Democratic Party once did.