Before he was Labor Secretary for Bill Clinton, Bob Reich was already alarmed by rising inequality. It was commonly believed that this inequality could be explained by rising skills levels at the middle to higher levels of society as the 1st, 2nd and 3rd quintiles saw their incomes increasing faster than the bottom 2 income quintiles. Between his time in the WH and now it’s become quite evident that the core problem wasn’t skills based at all (or at least not chiefly) as that 1st quintile started leaving the 2nd and 3rd in the dust and then the top 1% just exploded into the stratosphere like it was on top of a Saturn rocket.
Economists struggling to make sense of economic polarization are, increasingly, talking not about technology but about power. This may sound like straying off the reservation—aren’t economists supposed to focus only on the invisible hand of the market?—but there is actually a long tradition of economic concern about “market power,” aka the effect of monopoly…
… Monopolists get to set the price of their product; monopsonists—sole purchasers in a market—get to set the price of things they buy. Oligopoly, where there are a few sellers, is more complicated than monopoly, but also involves substantial market power. And here’s the thing: it’s obvious to the naked eye that our economy consists much more of monopolies and oligopolists than it does of the atomistic, price-taking competitors economists often envision.
Saving Capitalism: for the Many Not the Few is a pretty ambitious title. I have no doubt Reich will have insights and suggest actions that live up to the ambition. Smart guy.