UFPPC ( www.ufppc.org ) — Digging Deeper CLVIII: May 2, 2011, 7:00 p.m.

Robert Reich, Aftershock: The Next Economy and America's Future (New York: Vintage Books/Random House, April 2011). Original Knopf edition published September 2010.

[Thesis. "Concentration of income and wealth at the top continues to be the crux of America's economic predicament. . . . The answer . . . is to reorganize the American economy so that its benefits are more widely shared, as they were decades ago" (2)]

Introduction: The Pendulum. . The alternative to the solution above is "deepening discontent (and its ever nastier politics)" (3). Reich predicts a weak recovery (3-4). Around 1980 deregulation and privatization were embraced, creating problems which have been patched up by temporary expedients rather than the fundamental reforms they require (4-7).

PART 1: THE BROKEN BARGAIN

Ch. 1: Eccles's Insight. Marriner Eccles, chairman of the Federal Reserve Board (1934-1948), realized that widening inequality chokes off prosperity by undermining mass consumption (11-18).

Ch. 2: Parallels. The larger lesson of the Great Depression went unlearned: "that when the distribution of income gets too far out of whack, the economy needs to be reorganized so the broad middle class has enough buying power to rejuvenate the economy over the longer term" (19). Analysis of income statistics 1913-2007 along the lines of the 2006 paper by Piketty and Saez, "The Evolution of Top Incomes" (20-25). The Great Depression produced a new economic order, but the Great Recession has not (25-27).

Ch. 3: The Basic Bargain. Eccles and Keynes understood the connection between income and demand (28-31).

Ch. 4: How Concentrated Income at the Top Hurts the Economy. The problem: the rich don't spend enough (32-38).

Ch. 5: Why Policymakers Obsess About the Financial Economy Instead of About the Real One. Many policymakers are biased toward finance because their own experience blinds them to the real economy (38-43).

Ch. 6: The Great Prosperity : 1947-1975. The federal government ended the Great Depression by "actively creat[ing] the conditions for the middle class to fully share in the nation's prosperity" (44; emphasis in original). The means: reorganization of work, increasing workers' bargaining power, increasing Americans' economic security, providing low-cost mortgages, widening access to higher education, and defense spending (45-50).

Ch. 7: How We Got Ourselves into the Same Mess Again. During the Clinton administrations, Greenspan's insistence on cutting the deficit choked off economic structural change (50-52). The problem is pay, not jobs (52-54). The reason the pendulum failed to swing back: power (lobbyists, campaign financing, etc.) (54-60).

Ch. 8: How Americans Kept Buying Anyway: The Three Coping Mechanisms. Reich argues Americans lived as if they were earning the higher incomes they in fact might have had by

borrowing, working longer, and spending savings (60-64).

Ch. 9: The Future without Coping Mechanisms. But these mechanisms can no longer avail (64-69).

Ch. 10: Why China Won't Save Us. The notion that Chinese demand will lift the U.S. economy is wishful thinking (69-74).

Ch. 11: No Return to Normal. Given current conditions, the U.S. economy cannot return to normal (75-76).

PART II: BACKLASH

Ch. 1: The 2020 Election. Imagines the victory of an isolationist anti-big business, anti-big government Independence Party, with disastrous economic consequences (79-81).

Ch. 2: The Politics of Economics, 2010-2020. How the economy could tank (82-84).

Ch. 3: Why Can't We Be Content with Less? The notion that we could learn to be happy with less is seductive and partly true (85-89).

Ch. 4: The Pain of Economic Loss. But loss has more of an impact psychologically than gain (89-92).

Ch. 5: Adding Insult to Injury. Growing inequality produces frustration and resentment (92-100).

Ch. 6: Outrage at a Rigged Game. Most intolerable and infuriating of all is the sense that the game is rigged (101-14).

Ch. 7: The Politics of Anger. These factors will produce a nasty politics of which the Tea Party is a harbinger (114-23).

PART III: THE BARGAIN RESTORED

Ch. 1: What Should Be Done: A New Deal for the Middle Class. Rather than making a moral argument, Reich appeals to economics and politics (127-28). Proposals: a reverse income tax, a carbon tax, higher marginal tax rates for the wealthy, introduction of a reemployment system, school vouchers based on family income, college loans linked to subsequent earnings, Medicare for all, investment in public goods like libraries and public transportation, campaign finance reform (129-40).

Ch. 2: How It Could Get Done. So far the Obama administration has not been able to address economic and political reform (141-43). Enlightened business leaders may embrace change (143-45). Optimism that Americans will embrace reform rather than reaction (145-56).

Acknowledgments. Colleagues in dialogue, students, assistant, "my partner, Perian Flaherty," and agent.

Notes. 13 pp.

Index. 12 pp.

About the Author. Robert Reich was secretary of labor under Clinton. He is Chancellor's Professor of Public Policy at UC Berkeley. He is the author of a dozen books, most notably The Work of Nations.

[Additional information. Robert Reich was born (with Fairbanks disease—he is 4' 10-1/2" tall) on June 24, 1946, in Scranton, PA. In 1968 he graduated summa cum laude from Dartmouth and was a Rhodes Scholar. He holds a J.D. from Yale Law School. After clerking for Judge Frank M. Coffin on the U.S. Circuit Court of Appeals for the First Circuit, he was assistant to U.S. Solicitor General Robert Bork (1974-1976) and served in the Carter administration at

the Federal Trade Commission. From 1980 to 1992 he taught at Harvard's Kennedy School, where he wrote a number of influential books and articles. The Work of Nations (1991) argued that "human capital" was more important than financial capital. Reich headed Bill Clinton's economic transition team and served as secretary of labor 1993-1997. He is a prominent critic of the financialization of the U.S. economy. In 2007 Reich was commencement speaker at Pacific Lutheran University. In 2008 the Wall Street Journal ranked him 6th in a list of "influential business thinkers."]

[Critique. Reich srtives for accessibility, and his text is conversational, easy to read, reassuring, upbeat, and concise. As a result, his analysis can seem simplistic. Where is there evidence of the "basic bargain" he keeps talking about, for example? — The terms of analysis are determinedly within mainstream parameters. No mention here of plutocracy, militarism, media concentration, and imperialism. — Reich's criticisms are offered in discreet fashion, sparing obvious culprits like the GOP, doubtless in order not to alienate readers.]