Book Review: Supercapitalism by Robert Reich

Robert Reich was heavily involved with the Clinton administration and is now working as a part of the Obama team. An economist by training, we can presume that he knows something about the workings of the USA.

With this in mind, Supercapitalism is a look at the role of big business in American life and politics over the last several decades.

Reich's basic premise is that as markets have become more competitive and global, large companies can no longer act as stewards for other interests over which they hold influence. In fact, their job is to provide high-quality goods and services at the best price they can (satisfying customers) and earn the highest returns for doing this as they can (satisfying investors). Everything else is outside of their remit.

As such, this means that all of the lobbying they do in Washington, London, Brussels and the rest is simply a way to gain some form of competitive advantage. Or to simply stop other companies from gaining a competitive advantage over them.

This contradicts much of the information that we see in press releases from large firms where the CEO describes a 'new way of working' or whatever. Moves in the direction of becoming carbon neutral, ethical or more responsible are done simply because there is a business case for doing so.

In fact, Reich suggests that without legislation, companies will continue to behave poorly to their staff, the environment, suppliers and more. However, all that lobbying mentioned above will often prevent new legislation from being written and therefore corporations will have an almost free hand to continue.

This often has the effect of neutering legitimate democratic processes and procedures. This squeeze on democracy has happened without most of the population realising - Reich argues.

He goes as far as to say that any corporation that wishes to enact a policy of CSR - Corporate Social Responsibility - need only avoid lobbying and being involved in the political structure to be doing a public service to us all!

As someone that is involved on the periphery of the European Union in Brussels, I can attest to the large amounts of money that corporations are willing to spend. This money will be spent not on bribing or advertising (usually!), but instead of event organisation.

These events will have a cast of high-profile political individuals who are invited to simply discuss an issue. Simply by having big names discuss an issue, the corporation can obtain some publicity and debate for their subject. You see, they are simply trying to have the debate in public. By doing so, both sides are able to state their case and over time, a corporation's opinion will become more mainstream. This is the long-haul approach to influence...

To be clear, this book will not make you a better investor or trader. However, it offers a glimpse into the world in which big corporations work and operate and offers reasons for some of the things they do. For example, he does discuss CEO wages and why they are so high, investor activism and why fund managers are so powerful and environmental legislation and why it is required if global warming is to be taken seriously by American corporations.

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