America’s Inequality Dilemma

On August 31, 2012, in economic theory, income inequality, by admin

Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00 In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle [...]

Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00

In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle class blame Congress than they do President Obama for their perceived difficulty in maintaining their standard of living. Most alarming, and one which likely will have an impact on this year’s elections, is the fact that median net worth took a nosedive during the Great Recession, plunging from $152,950 to $93,150. Furthermore, whether today’s college graduates, many of whom are underemployed and are living back at home with their parents, will achieve the trappings of middle class status anytime soon remains uncertain. One suspects we may be witnessing the emergence of the American equivalent of Japan’s Lost Generation.

Fortunately, however, we might comfort ourselves by knowing that the United States remains a land rich in opportunity much as it was in the past, unique among nations in its lack of a rigid class structure and its social mobility. But we’d be deceiving ourselves. In The Great Divergence, Timothy Noah of The New Republic posits that, since 1979, there has been a “particularly extreme” divergence in income inequality in the United States. Noah synthesizes the work of economists, political scientists, and sociologists to argue that income inequality has increased, and that this is not good for American society. In the book’s final chapter, he advocates specific actions and policies that he believes would help reverse this trend. His suggestions are largely politically progressive proposals, including increasing taxes on the super-rich, bolstering the federal workforce, and breaking up the too-large-to-fail banks. While there are likely some conservative-libertarian policy wonks that would be amenable to his proposal to break up the large banks, few would likely support Noah’s proposal to revive organized labor.

The author takes the title of the work comes from a phrase used by Paul Krugman, an outspoken advocate for Keynesian stimulus, in his 2007 book, The Conscience of a Liberal. Noah defines the Great Divergence as a socio-economic phenomenon as one not primarily involving the poor. Rather, it “is about the difference between how people lived during the half century preceding 1979 and how they lived during the three decades after 1979.” The story he tells, however, is not just about income inequality; it is about diminishing access to the top. According to Noah, over the past several decades, opportunities for upward social mobility have not increased.

Unlike some pundits who rehash talking points, Noah commendably cites ample scholarship to support his claim. In The Great Divergence, the reader learns that the United States now offers its citizens less intergenerational economic mobility than northern and western European nations. (I would venture, however, that the United States still allows for greater social mobility for children of first-generation immigrants than do Scandinavian and other western European countries.) Noah also highlights an intriguing sociological finding which indicates that Americans tend to overestimate the degree to which American society fosters upward socio-economic mobility.

Notable within the pages of The Great Divergence then is the fact that Noah challenges Paul Ryan for an October 2011 speech in which the Wisconsin Congressman contrasted what he perceived to be American social mobility with a rigid European welfare state class structure. Ryan, according to Noah, “had it exactly backward.” In truth, European countries now offer more social mobility than the United States. While Noah penned his study of income inequality prior to Mitt Romney’s choosing Ryan as his running mate, The Great Divergence takes on a more salient political implication in this new found context.

So what caused the Great Divergence? According to Noah, the Great Divergence did not result from prejudice against African-Americans or women. The failure of the American educational system to meet the demand for higher skilled workers is part of the story, as is trade with low-wage nations such as China and the increase of business lobbying in Washington. The decline of organized labor also played a role. Noah also refers to the rise of extremely wealthy (“stinking rich,” in his parlance) as a “separate and distinct phenomenon” that can be thought of as “the Great Divergence, Part 2.” The last several decades have been witness to the emergence of what are, in essence, new social classes within the top 1%, namely the top 0.1% and the top 0.01%. Wall Street, according to Noah, played a substantial role in the emergence of these extremely wealthy individuals. Top income shares are rising faster in the United States than in other developed countries.

Overall, Noah may succeed in persuading the reader in that income inequality not only is on the rise and that it is problematic for society. He is less convincing in his policy proposals to remedy the situation. To be fair, he does rightly acknowledge that many of his proposals, many of which are further to the left than President Obama, are not “politically salable today.” Noah could have bolstered his work, and perhaps the reception to it, had he offered a list of concrete and specific policies that would both reverse income inequality and be palatable to a large slice of the American electorate. The work also suffers from the fact that it is largely a summary of other scholars’ work, much of it very technical, making it less accessible to a general audience that it deserves to be.

In conclusion, one can think of The Great Divergence as a plea to the American public to recognize that income inequality is a problem. It is also to acknowledge that social mobility is no longer operating the way in which it used to. I would contend that the frustration that many Americans feel with Washington in many ways reflects the fact that the system is not producing the same results as it did for people’s parents and grandparents. Income inequality currently is a topic of concern among the country’s economists, political activists, and pundits. Whether it will be a broadly discussed national concern remains to be seen. It would be heartening to see at least one moderator in the upcoming presidential debates ask each of the candidates where they stood on the topic of income inequality.

Jonathan Eric Lewis (c) 2012

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Obama’s Deficit Gamble

On August 23, 2012, in derivatives, Dodd-Frank, economic theory, by admin

Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00 When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and [...]

Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00

When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and confidence about the nation’s long-term fiscal prospects hovered somewhere between hope and despair. To his significant advantage, President Obama did enter the White House with Democrat majorities in both the House and Senate. Although the former Illinois Senator’s supporters did not necessarily know it at the time of the new president’s inauguration, the first two years of the Obama Presidency would be crucial years for the country’s recovery from the worst economic downturn since the Great Depression. For decades to come, historians will debate whether President Obama helped or hindered what, in fact, would prove to be an anemic recovery from the near meltdown of the American financial sector.

In The Escape Artists: How Obama’s Team Fumbled the Recovery, Noam Scheiber provides a comprehensive narrative detailing the personalities and policies of the Obama economic team. He argues that President Obama and his team made a mistake in focusing on deficit reduction, rather than putting jobs foremost on the agenda. A senior editor at The New Republic and a Schwartz Fellow at the New America Foundation, Scheiber posits that while it is certainly the case that, “Team Obama helped avert catastrophe,” they nevertheless failed in their self-appointed task of restoring the economy to close to where it was prior to the financial crisis.

Readers most interested in the personalities behind the recovery will find much to appreciate in Scheiber’s extremely well researched book. Although he treats the complex economic issues with dexterity, Scheiber focuses his attention on the educational, personal, and professional backgrounds of the major players on Obama’s economic team than on complex and nuanced economic and legal issues. He devotes individual chapters to differing members of Team Obama, including Larry Summers of the National Economic Council, Treasury Secretary Tim Geithner, and Gary Gensler of the Commodities Futures Trading Commission (CFTC).

Overall, Scheiber is successful in documenting how the personal backgrounds of the key players on Obama’s economic team affected their policy decisions during their tenures in the administration. Occasionally, however, Scheiber’s narrative goes slightly off course. This is never more the case when, perhaps in an attempt to be comprehensive, he seemingly diverts his attention from the topic at hand. There are sections in the work where Scheiber spends perhaps too much time detailing some of the interesting, albeit not immediately relevant, details about the aforementioned personalities. One such case in point is a detailed discussion of Larry Summers’ childhood and high school years, which could easily have been condensed into two short paragraphs.

When he is at his best, however, Scheiber provides a fascinating look at the decision-making process of Obama’s economic team. This includes the numerous, and sometimes colorful, internal squabbles within the West Wing and other agencies and departments. Scheiber recounts how Christina Romer of the Council of Economic Advisers (CEA) had advocated for a larger stimulus package than the one that eventually was put into place is perhaps well known, details the tensions between Summers and Geithner, and recounts the different personalities and policy views of those tasked with deciding how to regulate derivatives, for instance, in the wake of the crisis.

Scheiber does, however, devote significant attention to Treasury Secretary Tim Geithner’s career and policy decisions. The reader learns how Geithner’s years overseas, first in his youth and then early in his career at Treasury, shaped his worldview. According to the author, Geithner’s approach, describing as a “willingness to set aside concern for appearances and keep kicking dirt on the fire until he smothered it,” is probably responsible for saving the financial system. On the other hand, recounts Scheiber, the bailouts really demonstrated how deeply embedded both personally and professionally Geithner was in the financial world.

As for President Obama himself, Scheiber portrays him as an idealistic politician who both sought bipartisanship on economic matters and was committed to his health care agenda, but was ultimately faced with an intransigent Republican opposition. For those readers who think that only Congressional Republicans cared about the deficit, The Escape Artists will provide a different perspective. In fact, Scheiber contends that Obama was too focused on deficit reduction. This, according to the author, played into the Republicans’ hands, as if to concede the point that the larger American public was most concerned with cutting spending. “By agreeing that deficits were the biggest threat to the economy,” he writes, “the president lent credence to the fallacious argument that cutting breeds prosperity, which Republicans wielded against his efforts to secure more stimulus.” Scheiber’s own view, then, is more in line with Keynesianism than with the cutting spending crowd.

In conclusion, The Escape Artists is an enjoyable read detailing how President Obama and his advisers ultimately failed to revive the American economy. The book, however, sometimes does not live up to the very provocative subtitle regarding fumbling the recovery. Indeed, if one were to judge this book by its cover, one would think it was just another right-wing critique of the president. While Scheiber occasionally gets bogged down in details that detract from the overall flow of the larger narrative, he does provide a lucid study of how individuals, personality quirks and all, do ultimately shape policy. Scheiber thinks that the president should have focused more on jobs. Whether he will get a chance to do so in a second term is ultimately up for the voters to decide.

Jonathan Eric Lewis (c) 2012

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Why America Is Not in Decline

On June 15, 2012, in economic theory, by admin

Daniel Gross. Better, Stronger, Faster: The Myth of American Decline . . . and the Rise of a New Economy. Free Press, 2012, pp. 260, $26.00 Is the United States is economic decline? There certainly have been enough commentators and pundits who have made this point in one form or another. Even a cursory glance [...]

Daniel Gross. Better, Stronger, Faster: The Myth of American Decline . . . and the Rise of a New Economy. Free Press, 2012, pp. 260, $26.00

Is the United States is economic decline? There certainly have been enough commentators and pundits who have made this point in one form or another. Even a cursory glance at the news would lead most observers to conclude that this country faces some entrenched, systemic, and nearly unsolvable economic problems. In June 2012 alone, news outlets have reported that the trade deficit is at its highest in the past three years, employment for 16-to-19 year olds is at the lowest level since the Second World War, and that foreclosures are on the rise. All of this data hardly inspires optimism about America’s ability to recover from the Great Recession. In addition, there is a growing worldwide perception that China is a stronger economic power than the United States.

Despite this doom and gloom, however, one economics writer has chosen to see past the constant pessimism that seems to pervade the nation’s policy discourse. In Better, Stronger, Faster, Daniel Gross (Yahoo! Finance) seeks to challenge what he perceives as the conventional wisdom that the United States is in a state of economic decline. According to Gross, many on the political left and right, as well as those in the center, have succumbed to economic declinism. While Keynesians consider President Obama’s response to the economic crisis as too passive, the Tea Party sees the current occupant as the White House as a socialist. All the while, academics published works detailing how American glory days are over.

Gross refuses to accept the narrative of American decline and challenges it at every turn. Indeed, the vast majority of the information presented in Bigger, Stronger, Faster is intended to build the case against declinism. The title of the author’s most recent work is an allusion to The Six Million Dollar Man, the 1970s television show in which doctors rebuilt the character Steve Austin, an injured astronaut, as the world’s first bionic man. In the show’s opening credits, it was stated that the doctors could rebuild the wounded Austin, played by Lee Majors as better, stronger, faster.

“And like Steve Austin,” writes Gross, “the U.S. economy can bounce back from its catastrophic wipeout. In fact, the process has already started.” This is the central thesis of Gross’s work, and one which he goes to great lengths to support. He marshals a vast array of evidence in the form of both statistics and anecdotal observations. Significantly, in his point of view, when trying to understand why things may not be as bad as they first appear, American Exceptionalism matters. “The reality-based case for optimism rests in large measure on an understanding of America’s core competencies and competitive advantages; attitudes, habits, and capabilities that, even in this age of globalization remain unique.” In the American context, adaptability is key.

Gross delineates three internal factors that, in his estimation, lend credence to his argument against declinism: policy decisions, including the bailouts and stimulus, which, in the author’s estimation, succeeded in preventing a second Great Depression and laying the groundwork for a recovery; the speed by which the private sector responded to the crisis by restructuring; and a move toward efficiency. That said, Gross considers that external forces matter even more than internal ones. “And while these efforts [government policy decisions, business restructuring, and efficiency] were vital and useful, the main forces that have helped propel growth came from external sources, not internal ones.” The United States, Gross reminds us, ranks first in foreign direct investment (FDI) and is the world’s top exporter, including in service exports.

In the book’s conclusion, Gross does rightfully concede that the United States does indeed face some daunting challenges. “There’s no question,” he writes, “the United States has a very long way to go to make up for the lost ground in the economy at large, in housing, and in jobs.” But he also contends that the United States has experienced “a huge comeback.” There is nothing necessarily inaccurate about Gross’s thesis that we are on our way to an economic recovery.

Better, Stronger, Faster does provide ample evidence against the declinist faith. But the more salient question might be what the American economy would look like today but for the Great Recession? Coming back from the brink of disaster is one thing; having avoided the debacle in the first place is a different thing entirely.

In my estimation, Gross, in his zeal to prove the declinists wrong, somewhat overstates his case. Although he does acknowledge the debt and the deficit, he gives them short shrift. In addition, nary a word is said about the plight of the Millennials, many of who are in debt, are living back at home with their parents after graduation from college, and have bleak job prospects outside of unpaid internships. The American economy may have recovered better, stronger, and faster, but this means very little to those saddled with tens, if not hundreds, of thousands of dollars in non-dischargeable student loans.

In conclusion, Better, Stronger, Faster is a largely accessible and an engaging study that seeks to combat the pervasive narrative that the United States is in economic decline. Whether one agrees with the author’s thesis is perhaps situational, in the sense that a graduate-educated, gainfully employed technology professional in Silicon Valley would agree that things are getting better, while an underemployed college graduate in the Sun Belt saddled with student debt would think Gross highly mistaken. Whatever the case may be, the debate about whether or not America is in economic decline likely will continue to rage throughout the next year.

Jonathan Eric Lewis (c) 2012

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Where You Live Matters More Than You Think

On May 25, 2012, in economic theory, by admin

Enrico Moretti. The New Geography of Jobs. Houghton Mifflin Harcourt, 2012, pp. 294, $28.00 If you worked in a bookstore, but had dreams of possibly going to law school and eventually buying a home close to the city where you resided, where would you rather live: Nashville, Tennessee, or the Boston suburbs? Each individual, based [...]

Enrico Moretti. The New Geography of Jobs. Houghton Mifflin Harcourt, 2012, pp. 294, $28.00

If you worked in a bookstore, but had dreams of possibly going to law school and eventually buying a home close to the city where you resided, where would you rather live: Nashville, Tennessee, or the Boston suburbs? Each individual, based on his own personal preferences, would have to weigh the choices carefully. If one absolutely could not live without access to country music, Nashville would be the logical choice. Similarly, a Boston Bruins fan might prefer to live in southern New Hampshire than in a small town in Tennessee. But if one were more concerned solely with one’s long-term economic prospects, what city would be a better choice? Indeed, is there a clearly better choice? And what data would one employ to make that decision?

In The New Geography of Jobs, Enrico Moretti (University of California, Berkeley) contends that, when it comes to prosperity, where you live matters more than you might think. “America’s new economic map,” writes Moretti, “shows growing differences, not just between people but between communities.” He calls this divide the Great Divergence, and argues that it has its roots in the 1980s when the character of different American cities began to be defined by the educational levels of their residents. Indeed, he posits that, at the same time that American communities are desegregating along racial lines, they are becoming more segregated in terms of education and income. Moretti’s argument is that, “the growing economic divide between American communities is not an accident but the inevitable result of deep-seated economic forces.” Think of the differences between Boston and Silicon Valley, on the one hand, and Detroit and Bakersfield, California, on the other.

If one has been paying even scant attention to American demographic trends, one would certainly realize that, over the past ten to fifteen years, cities like San Jose, Seattle, and Austin have become attractive destinations for graduate-educated professionals. Oklahoma City, Cleveland, and Flint, Michigan, are not typical destinations for the same demographic. What explains the difference? In a word: innovation. According to the author, cities that have become centers of innovation, broadly construed, have become magnets for educated professionals whose presence in a city has a positive multiplier effect on those in the service industries around them. Indeed, Moretti posits that, “the best way for a city or state to generate jobs for less skilled workers is to attract high-tech companies that hire highly skilled ones.” In other words, innovators are the new engines of economic growth. Human capital is what matters.

In the book’s fourth chapter, Moretti first notes that there is no obvious explanation in terms of natural advantages to explain why innovative companies are located in particular locations. “As it turns out, in the world of innovation, productivity and creativity can outweigh labor and real estate costs.” Three forces, collectively known as the forces of agglomeration, are responsible for the aforementioned Great Divergence, the process that is separating American communities from each other in terms of education and income.

These three forces are: thick labor markets, specialized service providers, and, in the author’s opinion, most important, knowledge spillovers. Put simply, innovation hubs such as the Bay Area remain so because those with special skills move and remain there, because of the close proximity to venture capitalists, and because skilled innovators in a city enhance innovation and prosperity. Innovation, it turns out, is actually a fairly local phenomenon. “In the end, geographical proximity to venture capitalists still matters. Skype and cell phones have not changed this simple fact. This is one of the reasons that the world of high tech is and will remain geographically concentrated.” Where you live and work and, more importantly, whom you interact with, matters deeply for both a city’s and an individual worker’s economic prospects.

Earlier in the book, Moretti directly challenges Friedman’s world-is-flat theory, by noting that the opposite of a flattening world is occurring. “In innovation, a company’s success depends on more than just the quality of its workers—it also depends on the entire ecosystem that surrounds it. This is important, because it makes it harder to delocalize innovation than traditional manufacturing.” Indeed, one of the highlights of Moretti’s work is his willingness to challenge shibboleths on both the left and the right. While he calls for more government financial support for scientific academic research, and private R&D through tax credits, he also rightly calls out those who falsely claim that greedy bankers killed blue-collar jobs by pointing to the real, structural culprits responsible: globalization and technological progress.

If Moretti’s thesis about the divergence of American communities is valid, then what can, or should, be done to remedy the situation? Specifically, he notes two different policy approaches that will help the United States continue to lead in innovation and economic prosperity: drastically reform the immigration system to allow for more college- and graduate-educated workers to come to the United States and, alternatively, increasing human capital at home through spending programs that would revamp secondary education and greatly increase higher education.

Overall, The New Geography of Jobs is a well-written and engaging work of scholarship. Moretti does an excellent job at making complex economic concepts accessible. The work does, however, contain a strong bias toward Silicon Valley and northern California. Perhaps this is due to, at least in part, the author’s position in the Economics Department at Berkeley. As the debacle surrounding the Facebook IPO demonstrates, innovation hubs are not without potential pitfalls. I do not mean to suggest that Silicon Valley will be displaced anytime soon. Rather, it suggests that one should always be skeptical of any overarching thesis regarding American economic trends. Moretti is correct in pointing out that long-term economic trends matter more than the short-term policy thinking that dominate contemporary policy discussions would have us believe. “Our ethos of immediate reward and our almost structural inability to take responsibility for long-term problems is leading us to underinvest in our future.” Sobering thoughts indeed.

In conclusion, The New Geography of Jobs is filled with interesting data and is well worth consideration. Intuitively, one feels as if Moretti is largely correct in his assessment about the diverging fortunes of American cities. A larger question, and one beyond the scope of his work, is whether the people in those cities with large salaries are truly happy and doing work that they love, or whether they are there because of nearly insurmountable student debt. Whatever the case may be, it is very likely the case that Boston, New York, and Seattle won’t be displaced anytime soon.

Jonathan Eric Lewis (c) 2012

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Business To Save Capitalism?

On October 19, 2011, in economic theory, by Jon Lewis

Capitalism at Risk: Rethinking the Role of Business. Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine. Harvard Business Review Press 2011, pp.254, $29.95 The message of the ongoing Occupy Wall Street protests remains unclear. Nevertheless, it is safe to say that some of the most virulent Occupy Wall Street (OWS) protesters are questioning [...]

Capitalism at Risk: Rethinking the Role of Business. Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine. Harvard Business Review Press 2011, pp.254, $29.95

The message of the ongoing Occupy Wall Street protests remains unclear. Nevertheless, it is safe to say that some of the most virulent Occupy Wall Street (OWS) protesters are questioning the very underpinnings of the American capitalist system. While it is easy to mock the most outrageous elements among the self-described occupiers, those who underestimate this burgeoning movement do so at their peril. Even Republican Majority Leader Eric Cantor backtracked from his original criticism of OWS as a “mob” and has rightly acknowledged that too many Americans are indeed facing an uncertain economic future.

Although the authors conceptualized and wrote Capitalism at Risk prior the advent of the inchoate OWS protest movement, they begin with the premise that capitalism is imperiled and subsequently argue that business itself must take the lead in maintaining the viability of the global capitalist system. In their recent co-authored book, Bower, Leonard, and Paine, all three of whom are professors at Harvard Business School, set forth what they described to be a “radical proposition.” It is their belief that business needs to adapt. “The capitalist system,” write the authors, “has generated enormous wealth in recent decades, but if the system continues to operate more or less as it has been operating, then it is vulnerable to breaking down in serious ways.” Unlike other scholars who would prefer to see governments taking the initiative in ameliorating the excesses of capitalism, while simultaneously preserving its undeniable benefits, the authors want business itself to take the lead in this regard.

Conceptualized as a project to commemorate the centennial of Harvard Business School, Capitalism at Risk is the resultant product of a series of off-the-record meetings, as well as some on-the-record interviews, which the authors conducted with forty-six prominent Harvard MBA program graduates in Asia, Europe, Latin America, and the United States. Although the work would have benefited from a more clearly delineated timeline, detailing exactly when the authors met with the forums’ participants, it would appear that the discussions were conducted prior to the financial meltdown of late 2008. As part of their discussions and interviews with the aforementioned business leaders, the authors presented them with a World Bank Study. This document, also drafted prior to the financial crisis, projected how the global economic system might appear in the year 2030. The authors then asked the participants to reflect upon the report.

Building on these discussions, Bower, Leonard, and Paine identify what they consider ten disruptive forces, both internal and external, to the success and viability of the free-market system: the financial system; the state of trade; inequality and populism; migration; environmental degradation; failure of the rule of law; public health and education; state capitalism’s rise, radical movements, terrorism, and war; and evolution and pandemics. They then add their own argument regarding the inadequacies of existing institutions to cope with the ten disruptors. In light of the spread of the OWS movement to Europe, it is notable that the authors found that the business executives they spoke with expressed deep concern with capitalism’s current tendency to produce gross inequality and how this could give rise to populist, anti-free market political movements.

In phraseology sure to endear themselves to sociologists and to frustrate those readers who would prefer less academic jargon, the authors conceptualize market capitalism as embedded in an ecosystem. “But if market capitalism is viewed in relation to the larger sociological system in which it is embedded, many, if not all, of the concerns voiced by our executives appear to be interrelated and to lie at the interface between the market system and the larger system that supports and legitimizes it.” In other words, businesses do not operate in a vacuum; rather, they function within a broader context and have to be responsive to both internal negative consequences of capitalism as well as to exogenous factors.

In the second half of Capitalism at Risk, the authors make the case for what they term the “business as leader” approach, arguing that “business can and must play a central role in sustaining the market system and improving its performance for society.” They build the case for innovative business models and institutional activism. As an example of an innovative business model, they point to China Mobile’s success in bringing rural Chinese into the market system and also making a profit. In the final chapter, “Rethinking the Role of Business,” the authors argue that, in light of government’s inability to provide necessary public goods, firms will have to find a way to do so, while simultaneously finding a way to be profitable.

Although Capitalism at Risk contains many important insights, its central argument, that business needs to change, is perhaps not so radical after all. Successful corporate executives need to be cognizant of the political worlds in which they work, and successful global businesses have repeatedly adapted to differing geopolitical circumstances. Generally well presented, at times the book’s prose seems uneven; this is perhaps due to the fact that there were three authors. The book’s greatest weakness, however, is that the business executives’ concerns discussed in Capitalism at Risk were expressed prior to the massive bailouts of the financial sector, the sovereign debt crisis in Greece, and the rise of both the Tea Party and the OWS movement. This, it must be stressed, is hardly the authors’ fault. Nevertheless, one wonders what the resultant product would have been had the authors’ conducted the forums in 2009 and 2010.

In conclusion, Capitalism at Risk provides a framework for business executives who are concerned about the state of global capitalism and would like to adapt their firm’s business structures to address new socio-political challenges. The authors are clearly passionate about advancing their argument and should be commended for addressing very serious issues and providing possible solutions. Although some executives may reject the authors’ arguments, it would be far better for business to change on its own, rather than be overtaken by anti-capitalist political forces prone to excess and sloganeering.

Jon Lewis (c) 2011

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