Robert Reich: Debunking Myth #5: ‘The Market Doesn’t Play Favorites’ – OpEd

As I’ve emphasized in this debunk series, the “free market” is nothing but a set of rules, established and enforced by government.

The real question — hidden behind the supposedly neutral supply-and-demand curves of textbook economics — is whether the system is improving the lives of most people or is mainly making the rich even richer. Unfortunately, the answer has been the latter. 

The market is playing favorites, because of all the money flowing into politics. And the favorites are the sources of the big money — large corporations and the wealthy. 

I saw the stream of money into politics in the late 1970s turn into a rivulet by the 1980s and a vast river by the 1990s, then a floodplain by the 2000s, an ocean by the 2010s, and a tsunami by the 2020s. 

Laws that limit campaign donations have been weakened or repealed by the Supreme Court, allowing wealthy individuals and corporations to essentially bribe politicians. 

On Wednesday, the court dealt its latest blow to federal anti-corruption law in Snyder v. United States, which held that “gratuities” — gifts and payments provided after a public official does what the briber wants — are not technically “bribes” and therefore not illegal. Bribes, said the court, in this bizarre 6-3 decision, are only issued before the desired official act. The court has thereby continued its ongoing effort to legalize official corruption, using the flimsiest logic to rob federal anti-corruption statutes of all meaning.

As bribes have rigged the game in favor of powerful corporations and the wealthy, I have seen the disillusionment of working Americans in the 1990s turn to frustration and rage — especially after the bailout of the biggest banks in the financial crisis of 2008. 

Joe Biden has done a good job trying to reverse the rigging, but far more needs to be done. If Trump gets another term and is able to stack the Supreme Court with more corporate stooges, the court will allow big money to drown democracy.

A sampling of how the market has been altered because of big money in politics:

Trade agreements have encouraged corporations to outsource jobs abroad — protecting the firms’ intellectual property and financial assets but not the jobs and wages of the people who had worked for those firms. 

Safety nets that emerged from the Depression decade of the 1930s have been shredded, along with the implicit social contract that if a corporation did well, its workers would too. Full-time workers who put in decades with a corporation have found themselves without a job overnight — with no severance pay, no help finding another job, and no health insurance. 

Employment benefits have shriveled. The proportion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent.

Labor unions have shrunk. The unionized share of the American workforce dropped from 35 percent of all private-sector workers in the 1950s to just 6 percent today. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker earned $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical entry-level Walmart worker earns about $9 an hour. The GM worker was not better educated or motivated than the Walmart worker.

The deregulation of finance has enabled corporate raiders — now dubbed “shareholder activists” and “private-equity managers” — to force CEOs to abandon all other stakeholders. It allowed high-paid bankers to pocket huge sums while exposing most Americans to extraordinary economic risks, culminating in the financial crisis of 2008 and the taxpayer-funded bailout of large Wall Street firms. 

Taxes on corporations and wealthy individuals have been lowered, while taxes on estates have been almost eliminated. An increasing portion of government revenue now comes from Social Security taxes, sales taxes, property taxes, and user fees (such as tolls), that fall heaviest on the bottom 80 percent. Tax loopholes have been created for the partners of hedge funds and private-equity funds, the oil and gas industry, pharmaceuticals, Wall Street, Big Agriculture, and Big Tech. 

Intellectual property rights — patents, trademarks, and copyrights — have been enlarged and extended, thereby allowing pharmaceutical, high tech, biotechnology, and entertainment corporations to preserve their monopolies longer — which has meant higher prices for American consumers, including the highest pharmaceutical costs of any advanced nation.

Antitrust laws have been relaxed (until the Biden administration revived antitrust), resulting in large profits for firms like Monsanto, which sets the prices for most of the nation’s seed corn; for a handful of high-tech companies with market power over network portals and platforms (Amazon, Facebook, Apple, and Google); cable companies with little or no broadband competition (Comcast, Time Warner, AT&T, Verizon); and the largest Wall Street banks, among others. Two-thirds of all corporate sectors have become more concentrated since the 1990s, making corporations far more profitable than at any time since the 1920s. All this has also meant higher prices for consumers, fewer choices of employer for workers, and greater political power for the monopolistic corporations.

Bankruptcy laws have been loosened for large corporations, allowing them to rip up labor contracts, threaten closures unless they receive wage concessions, and leave workers and communities stranded. Notably, bankruptcy has not been extended to homeowners who owe more on their homes than the homes are worth, or to graduates overburdened with student debt.

Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. 

Securities laws have been relaxed to allow insider trading of confidential information and permit corporations to manipulate stock prices through stock buybacks. CEOs have been allowed to use stock buybacks to boost share prices and cash in their stock options.

Public funds have been withdrawn from higher education, requiring students to take out massive college loans.

These and thousands of other policy decisions didn’t just happen. They were pushed by wealthy elites on Wall Street and corporate C-suite executives, who made mammoth donations to politicians on both sides of the aisle — mostly but not exclusively Republican — to ensure that their wishes would be honored. As these changes — and thousands like them — have gone into effect, wealth and power have further shifted upward. 

As a result, bargaining power has shifted away from workers to large corporations and Wall Street. This has caused a giant but hidden upward distribution of income and wealth from the bottom 90 percent up to the top.

It’s been a vicious cycle. Each change in laws has ratcheted wealth and power upward, making it easier for the wealthy and powerful to gain further legal changes that ratchet even more wealth and power upward.

We must get big money out of politics

• This article was published at Robert Reich’s Substack