Economist Robert Reich thinks that many Western countries are witnessing a crisis of capitalism, which can be overcome if co-ops spread their business model and become more visible.
Speaking at the International Summit of Cooperatives in Quebec during a lunch sponsored by Agropur co-operative, he looked at what the future might bring for the USA, as well as the world.
“I am certain Hillary Clinton will win, she will be our next president,” he told delegates, joking about his “personal stake” in the election.
In his 20s, Prof Reich attended Dartmouth College, where he met Hillary Rodham and her future husband, Bill Clinton. While at Darmouth, he went on a date with Hillary – a fact, he says, reporters still ask him about.
Later, he served as Secretary of Labor under Bill Clinton’s administration. He initially backed Bernie Sanders, but is now supporting Ms Clinton. He now serves as chancellor’s professor of public policy at the Goldman School of Public Policy at the University of California, Berkeley.
Prof Reich thinks the crisis affecting capitalism can be shown by looking at wages in the USA, pointing out that a typical American family is earning less than it did in the year 2000, and has 14% less wealth than in 1984.
Similarly, in Canada or other European countries, people face a stagnation of income combined with greater economic insecurity.
“People accuse me of being a class warrior; I am a class ‘worryer’. I worry about stagnant or declining income, wealth of the top and the poor going nowhere,” he said.
Three economic trends concern him.
The first is an overall economic stagnation with the middle class not earning enough to keep spending and grow the economy. “There is less and less purchasing power, which means you get economic stagnation and very slow economic growth,” he said.
A second trend is the shrinking of opportunities for the poor to ascent to the middle class.
Third, in light of these changes, populist politicians in the USA and across Europe are using people’s anxiety and fear to build division and win votes. “This is not new,” he said. “Demagogues thrive on downward mobility.”
Prof Reich criticised Republican candidate Donald Trump for using globalisation to antagonise US workers and companies against foreign employees and firms. Mr Trump’s approach is a zero-sum game, he argued, in which one side benefits only to the extent to which the other loses.
“Everything is made everywhere: we are in a completely interdependent economy; everybody is working together,” said Prof Reich, who questioned Mr Trump’s statements regarding the USA having to compete with countries with low wages.
“It is not a matter of fearing a race to the bottom but competition regarding innovation and value added,” he said, pointing towards his replacement hip – designed in France and produced in Germany.
Low wages are not the result of technological developments, he said, but of the failure to adapt to their fast past or invest in training people to get jobs that pay as well as the ones they are losing.
“The pace of technological displacement is much faster than our ability to do something about it,” he said.
After delivering this gloomy overview, Prof Reich suggested a solution, calling for policies and mechanisms to enable people to cope with these changes.
He said these remedies could include wage subsidies or action to address monopolies like the US banking sector. When the crisis occurred in 2008, the five largest banks had together 22% of the market’s assets but today they have 44%.
“They were too big to fail,” he said, “and are even more so now.”
Prof Reich said co-ops offered another way to tackle the growing crisis.
“If you follow my logic – whether stagnant wages or concentrated wealth or people getting nowhere – we have a big problem – a problem that co-ops, given their meaning and structure, are ideally suited to contributing to answering.”
He called on co-operatives to countervail the power of large corporations and big banks monopolising the market.
“Co-ops offer an alternative model of capitalism,” added Prof Reich, encouraging co-operators to join efforts and speak with a louder voice.
“Only you can help people understand that,” he said. “Spread the model, it is a matter of public understanding and visibility.
“I urge you to have not only the courage of your conviction, but pride in what you are already accomplishing. Our future, in many respects, is in your hands.”
- For more of our coverage of the International Summit of Co-operatives, visit thenews.coop/summit.
