Robert Reich's new book, Saving Capitalism, offers a road map for revival of federal NDP

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      The federal New Democrats are probably still wondering what hit them.

      Topping the polls in late August, it looked like their leader, Tom Mulcair, was well on his way to becoming Canada's first NDP prime minister.

      But out of nowhere, the Liberals mounted a stunning comeback under the charismatic leadership of Justin Trudeau, winning a majority government on October 19.

      The NDP finds itself far back in third place with just 44 of the 338 seats in Parliament. The party captured only 19.7 percent of the vote.

      So where do the New Democrats go from here?

      A good start would be for every member of caucus to pick up a new book by Robert Reich, a political economist at the University of California, Berkeley, and former secretary of labour under Bill Clinton.

      In Saving Capitalism: For the Many, Not the Few, Reich builds on the ideas in his two last books, Beyond Outrage and Aftershock, which chronicled how growing inequality leads to economic stagnation.

      He makes an excellent case that we've entered a new Gilded Age. The modern robber barons enjoy extreme wealth while the masses are becoming relatively poorer.

      Rules are created from the top

      In Reich's view, increasing income disparities are a result of the powerful rigging the game in their favour with a long list of legislative changes.

      The market is not free, according to Reich: it operates according to a series of rules created by politicians under the spell of the billionaires.

      This was demonstrated in a 2014 study by Princeton University professor Martin Gilens and Northwestern University professor Benjamin Page. Reich reports that they examined 1,799 policy issues from 1981 to 2002 before determining that lawmakers almost exclusively catered to the wealthy and business interests.

      Reich maintains that the real debate is not over whether there should or shouldn't be more government intervention. Rather, the discussion should focus on what rules will ensure that the market works for far more people than it does now. 

      He shows how this can be addressed in a range of areas, including linking corporate tax rates to executive compensation, strengthening competition laws, busting monopolies, promoting more collective bargaining, and providing regulators with sufficient resources to enforce laws already on the books.

      Politicians won't challenge the billionaires

      Just as occurred in 1890s America, Reich argues that corporate monopolists are crushing competition and stifling innovation. And there's little appetite for governments to take on business titans because they've accumulated so much political power through U.S. political-financing laws. 

      His book highlights how companies like Facebook, Google, Apple, Alibaba, Twitter, and Amazon own important platforms, enabling them destroy or buy anyone who gets in their way.

      "The larger their networks become, the more data they collect, and therefore the more powerful and effective they become," Reich writes. "Customers may be satisfied with the results, but they will never know what innovations have been squelched or stymied, how much more they are paying than they would otherwise, and how the rules of the game are being changed to the advantage of the owners of the standard platforms."

      At the turn of the 20th century, then U.S. president Teddy Roosevelt busted the trusts, bringing working people, urban immigrants, and progressive reformers into the Republican tent. This saved capitalism, according to Reich, and it was saved a second time in the 1930s when another U.S. president, Franklin Delano Roosevelt, created the Securities and Exchange Commission as part of the New Deal to roll back corporate power.

      But nowadays, none of the major political parties has demonstrated any desire to make similar moves to challenge the hegemony of multinational companies.

      Reich also addresses CEO pay

      In Saving Capitalism, Reich also zeroes in on how executive pay has shot into the stratosphere in recent years, particularly in the United States. Hedge-fund managers collect obscenely high compensation.

      Moreover, a U.S. legislative change enables executives to sell their shares into the market when they know that their corporations are buying back stock, pushing up the price.

      Compounding the problem is a U.S. Supreme Court ruling declaring that corporations are persons when it comes to political fundraising.

      "By effectively eviscerating campaign finance laws, the Supreme Court accelerated the vicious cycle to which I have referred, in which large corporations and wealthy individuals pay to shape the rules of the game to their advantage," Reich writes, "thereby becoming even richer and having even greater influence over the rules. Even worse, much of this is in secret."

      Fortunately, Canada isn't stuck with this problem at the federal level, but there are still no donation limits in B.C. provincial and municipal politics.

      Reich also notes that for the first time since the Second World War, median incomes of the bottom 90 percent of Americans recently fell during an economic recovery. This occurred from 2009 to 2012. That's when the 90 percent saw incomes fall by nearly 20 percent.

      The top 10 percent of income earners saw their compensation rise nearly 120 percent over the same period.

      "This trend is not sustainable, neither economically nor politically," Reich writes.

      All is not lost, however. If politicians focus their efforts on building up countervailing forces to the corporations, their dominance can be curbed in ways that will promote competition, encourage innovation, enhance communities, and provide a better deal for workers.

      One of his proposals is linking corporate tax to the multiple of CEO pay over company employees' median income. If a CEO is paid 400 times higher than the median, the corporation would pay more tax. But if the CEO's total compensation, for instance, is only 20 percent of the employees' median income, then the corporation would pay less tax. This would encourage companies to increase workers' salaries and lessen the bosses' income, which would stimulate the economy.

      Reich also raises the prospect of imposing higher taxes on corporations that contract out low-paying jobs to other companies. The book contains other intriguing ideas, such as requiring "expert witnesses, academics, and inhabitants of think tanks...to disclose any and all sources of outside funding for testimony, books, papers, or studies that are put into the public domain".

      This would apply to climate-change deniers funded by the billionaire Koch brothers, among others.

      "It is likely that in coming years, the major fault line in American politics will shift from Democrat versus Republican to anti-establishment versus establishment—that is, to the middle class, working class, and poor who see the game as rigged versus the executives of large corporations, the inhabitants of Wall Street, and the billionaires who do the rigging," Reich writes.

      He points out in Saving Capitalism that if the Democrats and Republicans refuse to reorient themselves away from established economic power, they could face a new challenge. A third party could emerge to unite disaffected anti-establishment forces within both parties.

      In Canada, the federal Liberals under Justin Trudeau capitalized on this mood by promising a better deal for the middle class. It included personal-income tax increases on the rich and income-tax cuts to the middle class.

      Trudeau also promised changes to the universal child-care benefit to put more money in the pockets of middle-income Canadians while halting these payments to the wealthy. 

      Justin Trudeau offers tax cuts for the middle class and hikes for the rich.

      But the Liberals also didn't do much to upset corporate Canada, apart from opposing the Enbridge's Northern Gateway pipeline and making noises about lowering the cost of prescription medicines.

      That's because in their core, the Liberals are not really anti-establishment. They are the establishment.

      This is reflected in their policies around corporate taxation and their reluctance to condemn international trade deals that lock in corporate power.

      That offers room for the federal New Democrats to revive themselves by seizing on the political schism being created by growing inequality.

      The way to do this is outlined in Reich's book: become the voice of the anti-establishment. In the process, this can expand the party's appeal to small business people feeling under siege from corporate monopolists.

      By relying on Reich's ideas, NDP MPs could make the case for "saving capitalism". And they just might find there's a receptive audience when the next election is called in 2019.

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