Reich: America will swing back
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TEXT OF INTERVIEW
Kai Ryssdal: There are a couple of things that despite what we all thought at the time just didn’t happen as a result of the financial crisis. Wall Street is still Wall Street even without Lehman Brothers and Bear Stearns. The economy is still there, if tempered by the credit squeeze and the recession. But our regular commentator Robert Reich argues in his new book — it’s called “Aftershock” — that there’s been something more fundamental at work that changed the American economy the past couple of decades — more significant than just bank failures and global recession.
Robert Reich: Hi Kai.
Ryssdal: The standard answer — if someone were to ask how we got into this mess to begin with — would be some combination of “the banks did this, and real estate did that and it all went kerflooey.” You, though, have a different thesis on this one, don’t you?
Reich: Yes, I think the underlying structural problem is that consumers basically don’t have the income, they don’t have the purchasing power any longer. This is actually something that started about 30 years ago, when wages started to level out and a lot of the economic gains went to the top.
Ryssdal: If they are at the top then, Bob, how do you pry them loose? Because that is no mean feat.
Reich: Well, I don’t think you have to pry them loose in the sense of kind of creating class war. I’m a class worrier, not a warrior. Look, one of two things is going to happen over the next five to six years. Either we are going to mobilize the kind of reform instincts that we have, and really have an economy in which the middle-class and lower middle-class share a larger portion of prosperity and economic gains. And therefore, have the money to get the economy going again. Or we are going to have a period of regression.
Ryssdal: Yeah, but here’s the thing: We had our wack, right? We had the chance to do financial reform, we had this once in a generation crisis that shook us to our core, and yet, your position is that it hasn’t done enough. So my question is: If it wasn’t that, then how are we going to fix this?
Reich: Unlike the 1930s, the Great Depression, when we went into the Great Recession, when we actually saw things starting to fall apart, we knew enough and had learned enough from the Great Depression to do all of the things that they did not do in the 1930s and should’ve done in the 1930s to avoid the collapse. But the paradox is, that by doing all of this, by avoiding that financial collapse, we in a sense avoided and took away the degree of political will, the kind of political pressure to do something more dramatic about income and equality that is really at the root of all of this.
Ryssdal: You end, it must be said, optimistically. You point out the reservoir of resilience that the American population has, and you say that we have had these pendulum swings of concentration of wealth and then distribution of wealth throughout our history. Question for you though is, if the economy is fundamentally different now, if this Great Recession changed everything, how do you know that that pendulum will continue to swing, and when it does, it’ll go back towards more equal distribution of wealth?
Reich: Well, because it always had in the past and we don’t really have much choice.
Ryssdal: Yeah, you know what Wall Street’s saying, right? Past performances no indicator of future returns, Bob.
Reich: Yes, the pendulum doesn’t swing in American history doesn’t swing exactly to where it was before. I mean, right now, you’ve got about 23.5 percent of total national income going to the top 1 percent. When 30 years ago, about 9 percent of total national income’s going to the top 1 percent. You just can’t keep going in that direction without the economy, number one, suffering. But number two, there being a political reaction. American history tells us over and over again, over and over again, that Americans, unlike many other cultures and societies, when the going gets hard, we put ideology aside. We roll up our sleeves, we figure out what needs to be done and we do it. We did it in the Great Depression, we did it before that in the first decades of the 20th century and the progressive era. We’re going to do it again.
Ryssdal: Robert Reich teaches public policy at the University of California Berkeley. He’s a regular commentator on this broadcast and he writes books, lots of them. Most recent one is called “Aftershock: The Next Economy and America’s Future.” Bob, thanks a lot.
Reich: Thanks Kai.
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