The Next Economy and America’s Future with Robert Reich


– [Narrator] This
program is a presentation of UCTV for educational and
non-commercial use only. (soft instrumental music) – Good afternoon, I’m Andrew Serry, Dean of the Graduate Division. We’re pleased along with
the graduate council to present Robert Reich,
this year’s speaker in the Barbara Weinstock
Memorial Lecture Series. In 1902, Harris Weinstock,
a well-known businessman of Sacramento presented the
University of California with a fund to support
an annual public lecture on the morals of trade on
behalf of his wife, Barbara. Weinstock was fundamentally committed to the economic and moral
progress of humankind. He wrote many newspaper columns and gave numerous lectures on topics ranging from Napoleon to socialism. Inspired by Spencer and Newton’s essays on the morals of trade which lamented the state of morals in the mid 19th century business world he argued that a man does not profit if he gains the whole world and loses his soul. Harris Weinstock hoped
that this lectureship would lead to a better life for those who spent their lives
in commercial pursuits. He said, and I quote, “Let men and women the world over “worship character rather than wealth. “Let them do homage to the high-minded “and pure-minded rather than
the merely rich and powerful. “And the ideal age will be at hand “when trade will carry
with it the badge of honor “and the successful man of business “will take the high
place hitherto confined “to the patriot and faithful
servant of mankind.” End quote. Past lecturers who have delivered the Barbara Weinstock Memorial Lectures on the Morals of Trade include; Ralph Nader, member of Parliament, Neil Kinnock and Nobel Laureate Amartya Sen. And now I’d like to welcome
Professor Karlene Roberts, the Chair of the Weinstock
Lectureship Committee to the podium to
introduce Professor Reich. – Before I introduce
Professor Reich to you, all of you I’m sure know
a great deal about him or you wouldn’t be here. But before I do that I’d like to explain why if you look on the
back of your program you’ll find that there has never been a Weinstock lecturer who was
on the faculty at Berkeley at the time he was asked to
be the Weinstock lecturer. And the reason is pretty simple, we forgot. So at our meeting to select this lecturer as Chair of the Weinstock Committee I said, “Look guys” by the way it is guys except for Ellen, “we have never had a professor
who’s on this faculty “and look at all the
sterling professors we have “beginning with Robert Reich.” And that was the end of that conversation. So I want to welcome you all and Professor Reich today and I’m not gonna say too much about him because you have a little blurb about him and most of you know about him and I’ve seen his books flying
around here pretty well. He is the Chancellor’s
Professor of Public Policy at the Goldman School
here at Berkeley, ra! And he was as you probably know the 22nd Secretary of Labor. He was voted by Time Magazine as being one of the most outstanding
secretaries of labor. He’s written quite a bit. I hear him on the radio quite a bit. And so I think we’re all
anxious to get on with it and listen to Professor Reich. I just wanted to tell you
something I didn’t know, he graduated from Dartmouth and then he went on to be
Rhode’s Scholar at Oxford and then he got a law degree from Yale. And he has talked to the Supreme Court on the part of the U.S. government. May I welcome, Robert Reich. (audience applauding) – Thank you, Professor Roberts. And thank you all for coming today. A couple of other points need to be said, about Harris Weinstock and this lecture, The Morals of Trade, many of you in this audience know that about 12 years
before Harris Weinstock endowed this lecture and conceived of this lecture in 1890, the great
economist Alfred Marshall wrote his Principles of Economics. Before that time economics
was not really thought of as a separate discipline. In most of the 19th century it was all called moral,
political economy. And before that in the 18th century it was all called moral philosophy. Adam Smith did not consider
himself an economist, obviously, did not even
really consider himself a political economist. He thought of himself
as a moral philosopher. And so even though I’m going to be talking to you a lot about economics and politics really underlying what I am saying are questions and ethics, questions as how we live together as members of the same society and members of really the same
human species on the globe. We’re all reminded of that notion that we’re all together as
members of the same human species on the globe and what we do is inevitably going to affect what others do, directly or indirectly, by the terrible tragedy
now unfolding in Japan. It is first and foremost a human tragedy and also an environmental tragedy. We don’t know the dimensions yet and probably like you I have been getting every piece of information I possibly can. But it is also way down the list an economic tragedy. Japan is the third largest
economy in the world, in fact of developed economies, so called advanced economies, Japan is second only to us. Which means that we
have an enormous amount of trade with Japan. Japan owns a lot of our debt,
a lot of treasury bills. What happens in Japans inevitably, quite apart from the human suffering, quite apart from the
environmental degradation, quite apart from these
very, very important primary issues, there is also the economic interdependence and the economic consequences which I’ll get to in a moment. A question I want to
address with you today is what is going to happen
over the next few years? In an economy, that is
the United States economy, that is having a painfully difficult time getting out of the gravitational pull of The Great Recession. Now if you listen to people on Wall Street, if you appear as I do on CNBC or listen to, I don’t know how many of you actually watch CNBC? Don’t be embarrassed. That’s about what I expected. (audience laughing) I debate people on CNBC and on MSNBC and
occasionally on the networks and what passes for
economic discussion on CNBC is very much Wall Street’s point of view. That is the issue is
what’s going to happen to stocks and bonds, it’s not really the economy or at least, perhaps I should say it this way. The economy is defined as Wall Street, as stocks and bonds. And that is not to criticize
CNBC or anybody else, that’s what the business
pages of the newspapers tell us that’s what many experts focus on because so many people are dependent on what happens on Wall Street, they want to know, their
retirement income depends on it. Their future security depends on it, they like to know where
Wall Street is heading. And I will tell you, before the end of our 45 minutes I’ll tell you exactly
where Wall Street is going. (audience laughing) I’ll do it very rapidly, so listen carefully. You may miss it because it’s so, it will occur so rapidly. But that’s not the economy, the real American economy is
different from Wall Street. If you listen only to the
cheerleaders on Wall Street you see, we’ve had a huge bull market, things are almost back to
where they were before. The Dow Jones Industrial Average is over 12,000. Well that’s not quite
where it was in 2007, but it’s still getting way up there. And on top of that corporate
executives salaries and bonuses on Wall Street are just about back to where they were. And things are looking very good. Yes, there is some concern about the consequences of
the United States economy of what’s happened in Japan and there is some worry about oil prices given what’s happening in the Middle East. But generally speaking there’s an enormous,
almost buoyant confidence that comes out of Wall Street and out of corporate America. Corporate profits by the way are soaring. They really have in my experience never been if you look at the major, large American corporations almost never this high. Big companies in the United States are sitting on 1.8
trillion dollars of cash. Now those estimates vary
between 1.4 trillion and 1.9 trillion. I saw yesterday at the end
of 2010 it was 1.9 trillion, it’s very difficult to estimate. It’s hard to get, but we
know it’s a very big number. There’s a lot of money and
they are sitting on it, it’s in the form of cash. Which means that big
companies don’t even know really what to do with it. Normally, normally after a recession when large companies begin showing profits they take those profits
and they invest them in additional capacity. Which means more jobs, not immediately. There is typically a jobless recovery, at least until businesses
start feeling confident that consumers out there will buy and are capable of buying
all of the goods and services that those companies
are capable of producing at full employment. But then employment cranks up and you get a virtuous cycle
because as employment goes up and people get more wages and they feel more confident and they feel more secure they buy more and as they buy more the
economy naturally rises. Most of the business
cycle in this country, at least most of our recent experiences with the business cycle, by the cycle I’m talking about the cycle of exuberance and expansion and then overshooting which leads to a kind
of downward momentum, often recession is the ending point. Most of those cycles,
those business cycles, are really brought about by
the Federal Reserve Board. And the Federal Reserve
Board either overshoots or undershoots. The Fed either raises
interest rates too high, trying to ward off inflation or it keeps interest rates too low and generates just too
much economic activity given the capacity of the
country to avoid inflation. And that’s what it is usually, but something is different this time. Something is different this time, profoundly different. There is a decoupling between the profits that the
big companies are showing and the extraordinary gains
on Wall Street on the one hand and job growth on the other. There’s a decoupling between how people at the top are doing and they are doing extraordinarily well. I’m talking about the top
1% on the income scale or the top 1% on the wealth scale or even the top 1/10th of 1% to make a point even more dramatically, they’ve never done as well. There’s a dramatic gap
between how they are doing and how everyone else is
doing in this recovery. And going back to Harris
Weinstock’s concern about the morality of trade or the morality of our commercial system something seems out of whack. And many people are asking themselves what’s going on? Now again if you think of this as just the normal business cycle you would expect that when
the Federal Reserve Board kept interest rates near zero or at zero for as long as it has we would see a lot of borrowing going on and that borrowing would
generate more economic activity. You would think when we
had as much spending, at least until recently, as we had at the Federal government level that that would have generated enough of a so-called multiplier effect. That is every one who benefited
directly by the spending would have more money in their pockets, they would turn around and buy more and so on that that would
also have contributed to a vigorous recovery. You would expect that fiscal
and monetary policies, as those are called, would by now have kicked in. And given how deep a hole
we have found ourselves in in this Great Recession you would think that by now not only would unemployment
start really dropping but also the economy would start growing. I mean if you’re in a hole to get back to the surface, back to where you were before, you do need more than normal growth. I mean think of the economy of sort of, almost a climb, a kind
of you’re moving uphill. The economy is growing, but when you fall into
a hole on that climb then you need to have faster growth in order to just get back to the surface where you can then resume
the growth you had before. So what we would normally assume would be, instead of 2.5 and or 3% growth now, we would assume four, or
five, or 6% or 7% growth. It’s not happening. Mystery upon mystery. Something is different. Well I wanna talk about that because it seems to me that what really is happening has a lot to do with
long-term structural changes in the economy, changes that have a lot in
turn to do with inequality, of income and wealth and opportunity and political power. No one likes to talk
about political power, I will. And less and less to do
with the business cycle and this is why it seems to me that people are looking in
the wrong place for answers. Don’t get me wrong, I do think the Fed needs
to keep interest rates as low as possible. I do think and wish Washington were prepared to expand fiscal policy. I think it’s the height of folly for congress and for
the president right now, right now to be concerned
about budget deficits. Yes, be concerned about it three or four or five years from now when we are out of the gravitational pull of The Great Recession. But right now when we need as much aggregate demand as possible, when consumers are still scared, when businesses are still
sitting on so much money because they don’t think
that there are customers out there for their goods and services. When we have unemployment
as high as we do, nationally, 8.9%, 8.8%, but also almost 14 million
Americans unemployed, half of them unemployed for
a very long period of time. This is no time to pull in your horns and start cutting and
whacking budget deficits. And oil prices are going up and at the same time state
governments are pulling in and cutting their budgets. And many of the things that are being cut are desperately important to the working class and the middle class and the poor who are
suffering enormously in this. Don’t do it, not now. But having made that
point I want to go beyond and talk about inequality. Here it seems to me is the terrain that we
really need to traverse in terms of understanding
what’s happening. The typical 30-year-old man, and I’ll explain to you in a moment why I’m talking about the 30-year-old man, the typical 30-year-old man today, if he has a job is earning, adjusted for inflation, no more than the typical
30-year-old man earned three decades ago. Adjusted for inflation. Or to put it a different way if you look at the bottom 90% of Americans and looked at their average wage, adjusted for inflation, each worker would be
doing a little bit better, that is would earn this year about $280 more than he or she
earned three decades ago. That’s not much to show
over three decades. The American economy is much larger, it’s twice as large as it was three decades ago. And yet the median wage for
those lucky enough to have jobs has gone nowhere and if
anything it’s gone down. Why? What’s going on and how does this relate to The Great Recession and the difficulty
we’re having getting out of The Great Recession. How does this relate
to questions of ethics and morality? And also where did all the money go? I mean if the American
economy is twice as large as it was 30 years ago and if the median wage is
pretty much stuck in neutral then you’ve got to have some idea of where all the gains went. If you’re in the top 1% you are not stuck in neutral, your share of total income doubled over the last 30 years. If they’re in the top 1/10th of 1%, your share of the national income tripled over the last 30 years. We haven’t seen this degree
on concentration of income and wealth is even more concentrated, since the 1920s. More about that in a moment. How have working families
over the last 30 years managed to maintain
their standard of living? How have they managed
to continue to spend? Well, one of three ways. The first way was women
going into paid work. In great numbers, starting
in the late 1970s, increasing in the 1980s,
increasing again in the 1990s. A huge number of women
in the United States went into paid work. I wish I could tell you it was all because of the wonderful,
professional opportunities open to professional women beginning in the late 70s
and starting in the 80s. No, that was not the primary reason. The primary reason that
women went into paid work in great numbers, even
those with young children, was because they needed
to in order to prop up family incomes where male wage earners were actually showing declines in wages. That’s the only way they could keep up their living standards. But you know we come to an
end of that coping mechanism. In the 1960s, to give an example, only about 20% of women
with young children were in the paid workforce. I say paid, because women
always were working. The question is whether they were getting paid for their work. And 20% of American women in the 1960s with young children were
in the paid workforce. By the 1980s and 1990s we were up to 50 and 60%, in fact by the 1990s it
was up to 60% of women with young children were
in the paid workforce. Well you can’t go much beyond that. American families had to search for a second coping mechanism, a way of keeping going. And the second coping mechanism was for everybody to work longer hours. When I was secretary of labor I remember looking over the data on the number of hours
Americans were working and I couldn’t believe it. In terms of overtime, in
terms of billable hours, in terms of second jobs,
in terms of third jobs. Americans had never worked
that long, that hard, 350 hours a year longer than the typical European. Longer even than they
typical worker in Japan. Two incomes, everybody working longer, I used to have a demographic term I used, DINS, D-I-N-S. Double income, no sex. (audience laughing) I don’t know how we
reproduced in those years. And then that obviously was exhausted, that second coping mechanism because there are only a
certain number of hours people can work. And right about then, late 1990s, a third coping mechanism came along. It was almost as if there were trapezes and you moved from one to the other. There is just a trapeze just in time to save us, to enable us
to keep on maintaining our standard of living and that third coping mechanism, that third trapeze was
rising housing values that enabled the working-middle-class to refinance their homes or to take out home equity loans all of which enabled people to live better than they otherwise could live, going deeper and deeper into debt. But the rising home values seemed an easy means of maintaining that debt. Well, that proved elusory. When I came to Berkeley in 2006 I had an opportunity, I was very, very fortunate to get an offer from the University of
California, Berkeley to come and teach here leaving the East Coast, leaving the weather on the East Coast, leaving snow and sleet and horrid summers and everything that you
don’t even know about that occurs. But I bought a house, I bought a house here in Berkeley. I think it was April, I
think it was the first week of April of 2006. Which is important for you to know because that was when the housing market reached its zenith. (audience laughing) You see my investment
strategy has always been, buy high, sell low. (audience laughing) Those extraordinary houses
values couldn’t keep up. The debt load couldn’t be maintained. There was no way that, that’s what turned out to
be a speculative bubble, could continue. And obviously it didn’t. That debt bubble burst and when it burst the final
coping mechanism also burst. There was no way that the typical American could continue to maintain
the same living standard and continue to be a customer, continue to consume in ways that Americans had
for three decades before. And without customers, without as many customers, without people being as willing to buy the economy is not going
to hire that many people. Companies are not going to hire, the entire wheels of commerce begin grinding to a halt. Now I know that the version of events that you have in your head about why The Great Recession occurred has much more to do with
Wall Street’s excesses than anything I’ve said to you so far. And I don’t want to let
Wall Street off the hook. Wall Street did over reach. And regulators who were
supposed to look at Wall Street did look the other way. I’m just saying that
behind all of this lies a deeper, structural story. That has more to do with the plights of the working and
middle classes of America and stagnate incomes. And the final failure of
the third coping mechanism which was debt to enable
people to continue to buy as before. Right after President Obama was elected he had a meeting of several of his economic
advisors in Chicago and I attended the meeting. And I remember Paul Volcker was there along with my colleague at Berkeley, Laura Tyson and several others. Paul Volcker, as you may know, was the former head of
the Federal Reserve Board. He’s very, very tall, he’s remarkably tall,
he’s irresponsibly tall. (audience laughing) I mean in environmental terms, (audience laughing) he uses up more energy and exudes more carbon than anybody I know. But in any event we were talking about The Great Recession and of course this is
a very important time. The new president has just been elected. Things look like they’re collapsing and they were collapsing and the new president wants to know why, what’s going on. And Paul Volcker I remember said, “Mr. President, yes Wall
Street has gone berserk “and exceeded the boundaries
that we expect of Wall Street “and there wasn’t adequate regulation “but underlying all of
this, Mr. President, “underlying all of this “is the simple fact that Americans “spent more than they earned. “They lived beyond their
means for too long.” Lived beyond our means, we have lived beyond our means. That’s what Paul Volcker’s view was and that view you can still see around. It is a rather moralistic view to go back to Harris Weinstock. But then Laura Tyson, my colleague here, piped up and she said, “No, Paul, I think you’re wrong. “I don’t think the underlying problem “is Americans spent beyond their means, “or lived beyond their means, “I think the problem is their means “did not keep up.” and of course Laura was absolutely right. Their means did not keep up
with what we would expect an expanding economy, a
growing economy, to permit. Now this being Berkeley many of you in this room, obviously, and I don’t mean to
sound in any way snarky about the comment I’m about to make. But this being Berkeley, may of you in this room
think about consumption in a way that many people in
the rest of this country don’t think about it. That is to you, consumption
is just the acquisition of a lot of material goods, just filling up houses with stuff. And maybe, although I don’t
really want to presume to read your heads, maybe you may be saying to yourself, “Look, what’s wrong with
us not consuming as much?” In fact we are consuming too much. We are consuming about a quarter of the world’s energy resources. Maybe it’s a good thing that
we’re not consuming as much? I want to draw a distinction, just for you in this room and for anybody who’s
watching on streaming video, (audience laughing) between consumption and consumerism. What you may be worried about and I worry about it too is just a mentality of consuming
more and more and more. No, I’m talking about
consumption in broader terms, it’s not just individuals or families buying and consuming it’s also public goods. It’s what we as a people, as a nation are able to afford to do. It’s better education and more education. It’s more healthcare
and better healthcare. It’s public transportation, it’s all sorts of things that also could if we did more of it utilize our productive
capacity as a nation. Some of that will actually
be on a better environment, we can if we spend more and this sounds ironic and paradoxical, but if we spend more we
might actually be able to move away from carbon fuels. It means some investments
in basic research in non-carbon-based fuels, you get my drift. I just want you to, in your heads, I want to cut off what I
expect some questions might be, isn’t it good that we are
not consuming as much? Again, consumerism, this is not
an argument for consumerism, this is an argument for
having enough aggregate demand in the system to keep the system going. And that aggregate demand could come from a variety of
sources including sources that are public goods that
everybody in this room or most of you might approve of. Now, I want to go back because some of you may having heard this story want to understand, because obviously what I’m doing now is trying to explain why we are
in the predicament we’re in, why it’s so hard to get out of the gravitational pull
of The Great Recession. What we need to do next, what we need to do next. What I’m trying to lay the foundation for is that kind of next move, how do we get out of the
predicament that we’re in. Some of you may be asking
yourselves right now, what do we know about why beginning three decades ago? So much of the nations income and wealth started going to the top. I mean there must be some
reason for all of this and did it ever happen before? The answer is yes and yes, there is a reason and
it did happen before. And by looking at when it happened before we can get a glimpse at or a clue as to why it began happening again beginning in the late 70s
and beginning in the 1980s and maybe that will give us some notion of what to do next. Of what we need to do next. In 2007 the top 1% by income in the United States got 23.5% of total national income. Now as I said to your before that was more than double
what they had 30 years before. 30 years before they
were getting about nine or nine-and-a-half percent of total national income. Now go back in time in the United States and ask yourself when
was it that the top 1% had anything close to 23.5%
of total national income? Was there another time? And if you look at the data what you see is that
there was another time, in fact there was another year that almost remarkably, exactly parallels the peak year of 2007, in terms
of concentration of income. And that other year is 1928. (audience laughing) And then came 1929, now I’m not suggesting
that The Great Crash and also the 2008 crash, were necessarily only responsive to these widening disparities but there are very important parallels. The head of the Federal Reserve Board between 1934 and 1948, was a man named Marriner Eccles. How many of you have
heard of Marriner Eccles? Put up your hand. I’m surprised, 17 of you. (audience laughing) Marriner Eccles, in
researching my latest book about all of this, I came across Marriner Eccles work on The Great Depression. Marriner Eccles came to the conclusion that The Great Depression was a function of widening inequality because he said, “So much income concentrated at the top “that the only way the
vast majority of Americans could keep spending and
maintain the economy and the government could keep maintaining to the extent that the government
was spending in those days was by means of going deeper
and deeper into debt. And that debt bubble
could not be sustained. It exploded. And it exploded in 1929. And so there is a very powerful parallel. What did Franklin D. Roosevelt do? He did two things. Belatedly, one of them he did very poorly. One of them it turned out he did very well but he didn’t know he was doing it. What did Barrack Obama do after 2008? Well he did one of the things that Franklin D. Roosevelt did do, but he did it much better than Franklin D. Roosevelt did, but he didn’t do the other thing that Franklin D. Roosevelt did. Let me stop being so opaque. (audience laughing) Franklin D. Roosevelt, first of all, there was a liquidity crisis, a banking crisis. What Franklin D. Roosevelt did and he built upon Herbert Hoover, he basically closed the banks, he tried to provide some more liquidity. He didn’t know exactly what he was doing, there were runs on banks. You remember Jimmy Stewart, It’s a Wonderful Life. You’re money is in her property and her money is in your property, it didn’t matter there
were still runs on banks. But Franklin D. Roosevelt did try to stop the runs on the banks with pumping in more money, not nearly enough. The Obama Administration
learned from that. Ben Bernanke was a student, he’d written a lot about
The Great Depression and others in the, both the
George W. Bush Administration, but more importantly in
the Obama Administration understand the important
of flooding the economy with liquidity, of getting
confidence in the banks back, even to the extent of giving
the banks, the major banks, a taxpayer funded bailout. Now it’s easy to say in retrospect, but even at the time I was advising that the bailout of the banks be connected to conditions put on the banks. Conditions such as supporting legislation that would allow homeowners
to declare bankruptcy on their first homes and thereby give them a little bit more leverage
in their negotiations with lenders. Putting caps on bonuses and so forth, but none of this happened. But nevertheless, this was the lesson that came out of The Great Depression, what you do when you
have a banking crisis, when you have a financial crisis. And I think that really, the Obama Administration apart from not being
tough enough with banks did that pretty well. We avoided a meltdown. Unfortunate choice of words right now. But what the Obama
Administration did not do that Franklin D. Roosevelt did do, and herein lies the very important lesson unlearned. Franklin D. Roosevelt took an economy in which the gap between the very rich, the super rich and everybody else was
growing immeasurably and did several things that
actually changed the equation. Number one, the Wagner Act, the National Labor Relations Act in 1935 creating a right to collective bargaining. Imposing on employers the duty to bargain in
good faith with employees. That it turned out had a huge effect, by the 1950s when 35% of
Americans were in trade unions. And those, I’m talking
about American workers, and those were not in trade unions benefited by the negotiations that unions created with employers because the prevailing wages really were set even
in the non-union sector by employers who feared
that if they did not mimic what was in those labor agreements they would be next to become unionized. So it had an effect all over the economy. Franklin D. Roosevelt also
created a minimum wage. A 40-hour workweek with time-and-a-half for overtime. Social Security including aid for families
with dependent children, disability came later. A long list of things that we
almost take for granted now. Unemployment insurance, 1938. All of the foundation
stones for a modern economy based on the idea that workers are also consumers. And there’s no way in which
an economy can function unless that basic bargain linking workers and their productivity to their pay so that they can turn around and consume would be maintained. By the 1950s not only did we have all of that but we also had a GI Bill, many Americans were attending college. We had a huge investment in infrastructure under Eisenhower, the National Defense Highway Act creating the entire
Interstate Highway System. After Sputnik, investments
in the education and training of a whole
generation of science and mathematics teachers and new investments in the classrooms in terms of math and science teaching. We rebuilt Europe in those years. We rebuilt Japan. How did we do that after
the Second World War? Well in part because our economy was growing very fast. But I remember we also had a huge deficit. In fact we came out of World War II with a national debt that was as a proportion of our
whole national product over 100%. The national debt was larger than the yearly national
product of the United States after World War II. I remember in 1950, my father, this was my first economics lesson, my father saying to me, “Bobby, you and your children “and your children’s children “will be paying the national debt “created by Franklin D. Roosevelt.” It scared the hell out of me. (audience laughing) I remember I couldn’t sleep. I didn’t know what national debt was, (audience laughing) but I knew it would
haunt me and my children and my children’s children. But my father, who was
right about most things, was wrong. How did we afford all of that? Well we afforded it
because the economy grew so buoyantly. Because that pact between workers and employers, many of the investments that had been made in education and infrastructure began to pay off. Also the marginal income tax, on the highest earners, was substantially higher. Coming out of the Second World War it was over 70% and under Dwight D. Eisenhower, who nobody to my mind has ever
accused of being a socialist, Republican, former general,
Dwight D. Eisenhower, the marginal income tax on the top earners was 91%. Now of the effective rate, when you got rid of all the deductions and the tax credits, was lower than that but still much, much higher than anybody is talking about today. My point to you is that the legacy of The New Deal right through Truman and Eisenhower, right through John F. Kennedy and Johnson, right through those years those legacies of public investment and shared prosperity and shared sacrifice and a deal, a basic bargain between employers and employees built a new American economy. That grew faster than the
economy has ever grown since in those 30 years after the
Second World War, we grew, we grew. Sometimes people ask me when I talk about where we should go, I talk about the principles
of shared prosperity and shared sacrifice. I talk about public
investment in education and infrastructure, basic research and development. I talk about renewing the bargain between employers and employees. People say to me, name a nation, What are you talking
about the Netherlands, the Netherlands or Sweden or Norway, they’re not like us. Are you talking about Canada? They’re socialists up there. People say to me and I get on these talk shows and people form the Cato Institute and the Heritage Foundation, they say, you’re a socialist. You’re talking about Scandinavia. And I say no, I’m talking
about the United States. For the 30 years after
the Second World War we did it here. And if we did it in the 30 years after the Second World War there’s no reason we can’t do it again. In terms of those principles, we can’t exactly replicate
precisely what we did then. We’ve got to do something different and we can talk about individual
specific public policies, all I’m saying to you is that those principles have
got to guide us once again. And going back to Harris Weinstock and his concern about morals and trade, fundamentally, fundamentally these principles are ethical principles about how we live together. It’s just coincidental
that these principles also support a vibrant
and buoyant economy. In other words, if we
adhere to these principles we all gain. Even people at the top would do better to have a smaller percentage of a rapidly growing buoyant economy than they would with a larger percentage as they have now of an economy that is anemic. And prone more than ever
before to booms and busts. One final point and then
I invite your questions. There’s a great deal of anger in America if you haven’t seen it or experienced it already. On one of these talk shows
that I alluded to before on television, not long ago, the producer during a station break said to me in my ear piece, “You need to be angrier.” (audience laughing) And I said, “I’m sorry, “I thought we were
having a very respectful, “good discussion, I don’t
want to be angrier.” And she said, “You have to be angrier.” And I said, “Why do I have to be angrier?” And she said, “You have to be angrier “because people are surfing
through the channels “and they stop when people
are yelling at each other.” (audience laughing) “Because it’s like a gladiator contest, “it’s very exciting.” And I said, “I don’t want to do that.” And she said, “You must.” And I’m afraid at that
point I lost my temper. (audience laughing) But I think the reason that people when they are surfing through channels want a gladiator contest has something to do with
the degree of frustration, anxiety and anger so many
people feel out there. Who want to work, who know that they’ve played by the rules, who feel that somehow the
game is rigged against them. A few days ago I got a
call from somebody who, and I checked on this, was an organizer of The Tea Party. And I said, “It’s very
interesting to talk to you “because I know we don’t see
eye-to-eye on many issues.” but it turned out after
about 45 minutes of talking I discovered that there was
a great deal of overlap. One of the most surprising
points of overlap that I hadn’t really thought through but this person reminded me, the Tea Party got it’s start in a kind of revulsion against
the bail out of Wall Street, that’s what started it. And I asked, “Well why are you so
much against government, “why are you not against
Wall Street and big business? “Why have you taken out your
ire against government?” And the response I got back was because we don’t trust that government is not
going to be in the pocket of big business and Wall Street. Well I can’t say that I became
a Tea Partier at that moment, (audience laughing) but I at least understand
that there’s a vast overlap between progressives who are very upset about the direction things are going and Tea Partiers and
others who are very upset. And I’m not talking about the fellow who yells out the window, “I’m mad as hell and I’m not
gonna stand for it anymore.” I’m talking about genuine, upset that is based upon some sense that the game is rigged in favor of those with wealth and power. So what we also need to do in addition to adhering to
principles of shared prosperity and shared sacrifice a new contract between
labor and management and also public investment. What we also need to do is dedicate ourselves
to freeing our democracy from the scourge of big money. The decision by the
Supreme Court last year in Citizens United against the
Federal Election Commission was one of the most grotesque decisions ever enunciated by the
Supreme Court, in my view. (audience applauding) And I have no doubt that with a few new
Supreme Court appointees, hopefully from President Obama or his successor who has the same values that case will be reversed. If not we are going to see
the game rigged more and more. More big money from big corporations, the attempt to reduce taxes on the rich, the attempt to starve government and make it impossible for people to have the education
and the infrastructure and the public investments
that they so desperately need. While all the time turning people in the middle
class and working class against each other,
against public employees. Against the poor, against immigrants, against unions, against China. You see how many scapegoats there are? We’ve got to get beyond scapegoating and we’ve got to return
to original principles that we learned 75 years ago. Thank you very much. (audience applauding) (soft instrumental music)

59 thoughts on “The Next Economy and America’s Future with Robert Reich

  1. Never understood the point of these introductions. People in the audience wouldn't be there in the first place if they didn't have rough ideas about the speaker and here on YouTube, we've got Google.

    Anyway, Robert Reich is on at 4:40.

  2. Other than his segmented views on historical data which are completely biased towards the exponential expansion of government, the flawed focus on government funded school systems show that he is indeed a dying breed. Thankfully.

  3. This is the best explanation of the financial problems we have in our country.

    Skip the long introductions and start at 4:40 in.

  4. The American people are obsessed with Competition, which makes up the largest part of their entertainment. All the Reality shows…Professional Sports…Hollywood's Academy Awards…Music's Grammy Awards…the list goes on. And with this Competition there are Winners and Losers. The American people Endorse and Sanction the entire culture of Winners and Losers. So how is this ANY different in the Economic realm? This is what the American people want! Winners and Losers….and that's exactly what

  5. @Jeronimosdc Anyone who studies history can see that the future society will be much much much more like socialism.
    But the power elite, the guys in charge dont want that. Because a socialised system means that you get what YOU NEED. But you dont get anything more.

  6. 4 rich bastards watched this
    46 low income earners watched this
    2356 middle income earners watched this
    150,000,000 Americans have not yet watched this and should….

  7. Reich is a fool. The economic problems he relates are caused by the very government action he advocates. All he can do is call for more of it.

  8. @KnightxxArrow I think your probably a pauper.. but even if not, w that arrogant a-hole comment in the face of reality, I hope one of the millions of poor men takes everything you got and leave your body on the side of the road.

  9. Politicians are the prostitutes that lie and tell little johnny public that his 4" johnson is amazing,while the banksters are the pimps that slap the political bitch to keep her in line.

  10. As much as Wall Street and the top 1% are against regulation and increased taxation , unless there is a change in regulation, tax rates, upper management compensation, and Golden Parachutes, we will have a self destructed economy. A destructed economy in which every American will share the responsibility for its failure. Americans of every class will be just as responsible as Wall Street for the failure for allowing for such events to take place.

  11. I have the outmost respect for those individuals who protested in several cities across the nation, however my respect would have been much greater had a proactive plan been put in place.

    Obama coined the phrase " Change", I think it's time for our president to take this to the next level and deliver this change. In occasion Obama said " "Change in America doesn't start from the top down. It starts from the bottom up." I agree and believe it is time for us to start this change.

  12. maybe they will replace it with something that is backed by something, say gold, silver or a basket of currencies? Maybe we will have a one world currency, or a chip in our hands? I hope not though

  13. THIS IS MEYER HAVEN DEAR CHINA BAN CARPET USA TRAP CANCER IS MANMADE THERE 'S A SPY IN MY HOUSE ROTTEN OLD CATPETS CANCER FILLES YOUR LUNGS AN DESTROYS BODY PARTICELLS CHINA I HANDED YOU YOUR BALLS HILARY WILL LINE OUR POCKETS WITH GOLD

  14. GOP CANCER MONEY MAKING MACHINES THERE'S SO MUCH MONEY IN AMERICA WE PAVED ROADS IN GOLD 2099 PEOPLE WALK AROUND ME THROW DIAMONDS AT ME

  15. I drive a jeep rubicon, spent a lot of nights at home while others went out partying. I work hard for what I have, which isnt much. I'm part of the 99% and proud of who I am. god bless the rich.

  16. I agree that people that produce ignorance should keep their legs closed. That being said you shouldn't of been born..

  17. I said nothing about ignorance, but only that we should "encourage" poor people to take get a job, because that why their poor. If they don't love their kids enough to seek gainful employment, they should not reproduce only to have their offspring grow up blaming others for their lack of opportunity. Now I go to work every day pay taxes and contribute to society. So check.

  18. Those poor, poor poor people. It's all their fault. Rich people are right. Poor people deserve what they get. Rich people get their fair share. Some people are no more than animals. They deserve to starve. Don't care about those people! They're worthless. If Jesus liked them let it be his problem

  19. lol you are playing off of blind extreme and you yourself have an extreme false perception of poor people. Have you talked with poor people on the streets of San Diego. They love it. No taxes, no bills, no worries about money. They can make it far easier by holding out a sign. But on the other hand there are legitimate poor people. They do need help but they should be helped by neighbors family and friends first before government to ensure that people do not take advantage of our government.

  20. In “Occupying Chairlifts” a simple rule tweak on inheritance ends up changing the direction and purpose of modern human life! Here’s a fair way to transition forward to where we’re rewarded for cooperating and creating instead of competing and conquering.
    It's something specific we can demand. If this isnt the best answer, at least we’re thinking about what might be. Are we really just this close to having it work right?
    Oh yeah, it's a Ski movie! “Occupying Chairlifts” on Youtube!

  21. Words of the Messiah:
    Whoever wants to be my disciple must deny themselves and take up their cross and follow me. .. What good is it for someone to gain the whole world, yet forfeit their soul? Or what can anyone give in exchange for their soul? If anyone is ashamed of me and my words in this adulterous and sinful generation, the Son of Man will be ashamed of them when he comes in his Father’s glory with the holy angels.”

  22. The Wagner act was the seed of your economic destruction. Collective bargaining is a communist idea as an 'interim' towards worker dictatorship. Even Hitler saw this."By my twentieth year I had learned to distinguish between a union as a means of defending the general social rights of the wage-earner, and obtaining better living conditions for him as an individual, and the trade union as an instrument of the party in the political class struggle." Unions= "Class struggle"= "the end" for USA

  23. Dr Reich.. you DID it in the 30 yrs after the war..because CHINA DID NOT EXIST as an economic power…so "those principles" simply don't apply! It's a whole new ball game.
    If you can extract Ike type tax from the upper income mob.. go for it..but..BUT.. who pays for Obama/Dems re-election? aaaaah.. truth hurts right? THEY DO.. and given Obama's track record of rewarding those who help him… I don't think we'll see that any time soon. Fix that and Fix many of your problems.

  24. Jesse Ventura and Alex Jones have no trouble talking about political power! But anyway, how can Robert say we're no better off than we were 30 years ago when Milton Friedman told Jamie Johnson that allowing the rich to get richer brings up the poor as well!? But the disparity between CEO and worker compensation all begs the question, "How does CEO compensation fit into the 'free market' model, since it's the board, not the market, that sets CEO salary & bonuses?"

  25. I knew he was going to say 1928 as the year that paralleled 2007, since of course 1928 was the year before the 1929 crash, just as 2007 was the year before the 2008 crash. But given that obscene concentrations of income seem to precede crashes, and given that basic human greed causes board members to hoard profits for themselves and hide profits from employees, how do you force board members to be less greedy… for the benefit of all?

  26. We need a constitutional amendment that properly rids money from politics. There are two ways to do this: 1) Two thirds of the house and senate passes a bill that creates this constitutional amendment. Our house and senate will NOT do this. They are absolutely all bought. Option 2) Two thirds of the states hold an article V convention where they agree on a new constitutional amendment. This is much easier than you realize. Google search Wolf PAC for one approach.

  27. You identified great talking points back then that probably helped create the current political atmosphere today. However, the talking points from today are even more egregious than that. Foster Friess says that the rich shouldn't pay any taxes at all, and he's not the only multi-millionaire who is saying this. This is how scary the conversation has become in recent years because the extremely wealthy have benefited that much under the last five administrations.

  28. Im suprised. Reich talks in the first minutes about the businnes cycle…and using the "austrian" model. He becomes interesting

    look at this video:
    watch?v=fUlyHTQ4Q7E

    Great forecaster

  29. I dont get it, why would we want to keep interest rates low? That causes the US Treasury to increase the debt. So this guy wants to sell our future so there is more capital in the system now. Just like everyone else, kick the can down the road. Deficits do matter. More debt equates to more taxes allocated to debt, which means less taxes allocated to bridges, roads, other stuff that some people argue we need.

  30. 1928 Concentration of Income came at a time when America was not outsourcing its manufacturing to India, China and Mexico. When American jobs are exported, the top 1% will increasingly take in a greater portion of national income, while the bottom 99% will get the short end of the stick. American corporations are now responsible to Global shareholders and are oblivious to American interests. And this is why we have the Trilateral Commission and the Council on Foreign Relations to coordinate the global econo-political landscape. The landscape of 2014 is not what it was in 1975, 1948 or 1928. Corporations rule, not governments.

  31. Insightful. History's foundation stones from 1929 systemically overlooked in 2008. President Obama got a little but, for such a bright guy, not much beyond disaster control for the relatively short term. Reich offers a historically profound perspective on long term political economic challenges, framed as originally understood by the profession addressed to anyone whose ears are actually open, and THEN CONnected with their gray matter to the need for at once an informed and fresh reconsideration of contemporary public policy and public affairs…

  32. Conditions on the bailouts. Banning largesse, top-down cuts, lay-off freezes, or you get nothing! I argued for that from the start!

  33. Consumer income drives the economy, not supply and demand. The one thing that Adam Smith and his disciples couldn’t understand.

  34. Citizens United was the worst miscarriage of Justice since Roe v. Wade, upon deeper inspection it actually runs contrary to the 13th Amendment.

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