Aftershock: The Next Economy and America's Future

Written by Robert B. Reich

Narrated by Robert B. Reich

The author of 12 acclaimed books, Robert B. Reich is a Chancellor's Professor of Public Policy at the University of California, Berkeley, and has served in three national administrations. While many blamed Wall Street for the financial meltdown, Aftershock points a finger at a national economy in which wealth is increasingly concentrated at the top-and where a grasping middle class simply does not have the resources to remain viable.

• Language: English
• Publisher: Recorded Books, Inc.
• Release date: Sep 21, 2010
• ISBN: 9781449839871

Robert B. Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley. He has served in three national administrations and has written fifteen books, including The Work of Nations, which has been translated into twenty-two languages, and the best sellers The Common Good, Saving Capitalism, Supercapitalism, and Locked in the Cabinet. His articles have appeared in the New Yorker, the Atlantic, the New York Times, the Washington Post, and the Wall Street Journal, and he writes a weekly column for the Guardian and Newsweek. He is co-creator of the award-winning film Inequality for All, and the Netflix original Saving Capitalism, and co-founder of Inequality Media. He lives in Berkeley.

Reviews for Aftershock

[moukayedr · Rating: 4 out of 5 stars]

This is one of the books I have collected during my four-year stay in New York. These years were very difficult for me and I was plagued by a sense of deep disappointment with the dissonance between my image of America and the reality I lived every day. Even in affluent New York, you can see that things are going wrong for the majority of the working-class, you can see the growing divide between Walmart shoppers and the clients of 5th Avenue, it is not pretty.
I tried to understand all this by accumulating books on the subject of the financial crisis and the mortgage fiasco. I had a nascent interest in economical theory that I never developed because as worker in the giant mill of the city I had too much to worry about, and never any time to think. In comparison to most Americans I had a cushy and well-paid job, but the unease of living in this human mill permeated my soul and I had to escape to preserve my sanity. Now I catch up with my reading and learn about the source of my unease.

This book gives an excellent idea about what is happening in the American economy. It even gives a dire prediction about the rise of populism (a version of which has indeed come true in the Trump presidency). What is put forward here is that the state must keep a basic bargain with its working class. They need to be able always to buy what they produce. Because oncethe working-class are unable to do so, having exhausted their coping strategies and sources of credit, the economy will also stop growing. Higher taxes for the rich are not a punishment, they have to be applied to the advantage of everyone including the rich who will make bigger profits in a growing economy. The middle class is the engine that keeps the economy running, buying products and services, so by curtailing their spending power and limiting it to paying for necessities like healthcare and education the market will face an inevitable slowdown. It is a very potent idea and I think it has its merit. I have anecdotal evidence from comparing Berlin to New York.

[benkline · Rating: 3 out of 5 stars]

This was an interesting read about economics with some thoughtful insights. It feels a bit dated since its pre-Trump and I think the Trump presidency has... exacerbated some of the problems mentioned in the book, as well as changed a lot of other factors the book discusses with regards to economy.

The economy is certainly not an easy resolve issue. I am not a very smart economical person or political person, as its so multi-faceted that it completely goes above my head. Its hard to believe I'm a banker's son sometimes. I do subscribe to the idea of production over taxes to facilitate growth. Though, I think as automation and computers take over, this might become less and less of a situation, that it might become a by-gone relic. And we'll be relying on so many other factors that production might be the least of the issues.

Just my 2 cents anyway.

[bicyclewriter · Rating: 4 out of 5 stars]

Short book, fast read. Some really good ideas regarding potential solutions to the financial mess we've created over the past 30 years. While I don't agree with everything he says, I think he's pretty spot-on in a lot of areas.

[mikerobbins-1 · Rating: 4 out of 5 stars]

“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth... Instead of achieving that kind of distribution, a giant suction pump had... drawn into a few hands an increasing portion of currently produced wealth. ...In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”

This is from Robert Reich’s book Aftershock. It is a very good summary of what happened in 2008. Except that it isn’t Reich himself and it isn’t about 2008. Reich is quoting long-ago Fed chairman Marriner Eccles. And Eccles was writing not about 2008 but about 1929 and the Great Depression that followed.

Reich was Labor Secretary in Clinton’s first administration and is now Professor of Public Policy at Berkeley. His diagnosis, as set out in Aftershock, is simple; it is that the concentration of wealth in the hands of a few will make everyone poorer, because the rich don’t spend anything like enough to generate employment – that needs a mass market, with everyone participating. In fact, the process of wealth concentration had been going on for years before 2008. “The wages of the typical American hardly increased in the three decades leading up to the Crash of 2008, considering inflation. In the 2000s, they actually dropped,” says Reich, and goes on to explain that the economy has grown so much over that period that, had the benefits been divided equally, the typical person would be 60% better off.

If that’s the case, how come no-one seemed to notice this was happening for 30 years? Reich argues that the relative decline in income for most people was masked by longer hours; the participation of women as well as men in the workforce, generating dual incomes; and, most dangerously, by an explosion of credit. A quick look at house prices over the last 30 years suggests where much of that credit went. When the property bubble burst, the game, indeed, stopped.

This is a lucid and persuasive book. Reich writes well; his talent is to explicate and illuminate, rather than lecture. The same can be seen in the film Inequality for All, which arose from the book and sets out the same ideas; Reich comes across as a man of some warmth and humour and a natural communicator.

This book isn’t just a diagnosis, however; it’s a prognosis and prescription as well. And it’s on these two latter that the book does come unstuck a little.

The prognosis, Reich warns, is that if we’re unlucky Americans will at last say “Hell, we were screwed” but then draw quite the wrong conclusion from that, electing a right-wing, isolationist, populist and frightening President. (He is wise enough to make this a fictional character, though she slightly resembles a sort of Palin-Thatcher cross.) Losers of rigged games, as Reich rightly says, tend to get angry. His scenario may come true, but it is just as likely that Americans, and Brits, will vote for governments who see the need for greater equality, but that those governments will be hamstrung by markets, trade treaties and, in the US, legislative stasis. In that case people will, quietly first and then in greater numbers, drift away from the system, and society will lose its cohesion; government will become ineffective; and the Western world will slide into senescence and irrelevance.

Prof Reich also suggests a number of measures to address inequality. One is a “reverse income tax” that will subsidise the middle class (why does the US not appear to have a working class, one wonders?). The money would be added to paychecks. This reminds one of the system of poor relief devised by magistrates at Speenhamland in Berkshire at the end of the 18th century. “Speenhamland” was, when I was young, always taught as an example of the road to hell being paved with good intentions. It simply allowed employers to lower wages, thus accumulating wealth for themselves while making the public pay their wage bill. In fact, recent research has suggested that Speenhamland’s outcomes were not so clear-cut. Still, with many lower-paid workers in Western countries now drawing welfare to supplement their wages, one wonders whether we already have Speenhamland writ large. Wouldn’t we be better off having a much higher, and strongly enforced, minimum wage? Far from bankrupting employers, it’ll make us all richer in the end.

Reich also proposes a carbon tax to fund this wage subsidy. He suggests an indirect tax set at $35 a ton. In suggesting this, he is rather going where angels fear to tread. The whole argument of carbon tax vs. carbon market is a big messy one, and governments have so far had a hard time applying either. The price of carbon on the open market is nothing like $35, and taxing what is, in effect, a raw material at way above its market value may not be a good idea, particularly if emitters cannot buy in credits from the market to pay the tax. (If they could, the proposal might make some sense in environmental terms; it would greatly increase incentives to reduce emissions). I’d argue that carbon is best left in the separate box where it belongs.

The author also does not really address the whole question of governance. True, he clearly perceives poor governance as a driver of inequity; many of the evils of the last 30-odd years would not have arisen if the privileged hadn’t been able to buy power and influence through lobbyists, or hold politicians in thrall through campaign contributions. Reich therefore suggests measures to get money out of politics, and he is clearly right. What he does not discuss is the weakness of electoral systems that give voters a limited choice between at most two candidates, both of which will in effect be part of the system he deprecates. You want to throw the bums out? Give space for alternative candidates to stand.

Reich’s prognosis and prescription are incomplete, and are the reason why I give this book four stars and not five. But in a way that is not the point of Aftershock. There can be no prognosis or prescription without diagnosis, and the diagnosis in this book is spot-on. What is more, it is delivered with clarity, warmth and charm. Anyone who wants to know how we god into such a mess in 2008, and 1929, should read this book, then think for themselves – long and hard – about where we go next.

[epersonae_1 · Rating: 4 out of 5 stars]

"To summarize: the fundamental problem is that Americans no longer have the purchasing power to buy what the US economy is capable of producing. The reason is that a larger and larger portion of total income has been going to the top. What's broken is the basic bargain linking pay to production. The solution is to remake the bargain." (Ch 11)

That's the whole book in a single paragraph. The first part is all about how the hell we got here, from before the Great Depression to the current day. The second gives some speculation about how people might freak out (basically) and give in to bad impulses. And the third part is a brief and fairly specific set of policy proposals for avoiding that.

Nothing here, outside of the specific proposals, that was completely new to me, but it was very clearly written and engaging. One aspect that was particularly good was starting with Marriner Eccles, chair of the Federal Reserve Board from 1934 to 1948. (No, I hadn't heard of him either.) The process by which he came to proto-Keynesian ideas forms the first chapter, and coming from a Scottish-American Mormon banker, it's fascinating:

"It became apparent to me, as a capitalist, that if I lent myself to this sort of action and resisted any change designed to benefit all the people, I could be consumed by the poisons of social lag I had helped created."

Definitely recommended. (Now, what to do about it?!)

[tuke_1 · Rating: 3 out of 5 stars]

Pro-growth liberal manifesto. Too bad it's completely fanciful given the state of the electorate.

[nivramkoorb · Rating: 4 out of 5 stars]

This book is similar to others that I have read recently about the problems that led to the "Great Recession" of 2008. I like that Reich focuses on income inequality. All of his critics can attack other aspects of this book, but the data clearly supports the fact that income for the upper 1% has a much greater share of total income than it did in 1980(pre Reagan). It is also logical that 1 person with a billion dollars cannot spend it as completely as 20,000 with $50k each. Reich shows that during the time of better income equality(1947-1980) our economy and the fast majority of Americans did better economically. I recommend this book mainly because it is short, to the point, and not full of vast and confusing information. It is something that almost everyone can read and understand. Unfortunately, his recommendations would have a hard time being implemented. What happened with health care reform proves that point. I read Reich regularly and find him a voice I support and agree with.

[ebnelson · Rating: 4 out of 5 stars]

There’s much to like about this book. Its central claim about the increasing inequalities between the richest Americans and the middle class are irrefutable and supported with good historical analysis. Reich identifies three realities which have pacified the middle class: women in workplace, increased credit, increased work hours. Arguing that these cannot be sustained, he believes—probably rightly so—that we’re heading for a day of reckoning. It’s in his proposals to stave this catastrophe where Reich missteps—mostly because he has a fundamental misunderstanding of human nature. Instead of seeing people as complex beings who require purposeful lives who can’t be fully satisfied with consumption, Reich proves himself the economist and assumes that all jobs are created equal and that as long as a person finds work, they’ll be able to find happiness in their ability to bring home a paycheck. In fairness, Reich is better than most economists. At times he does recognize that monetary acquisition does not correlate to increased happiness. But even so, his policies seek to increase production (What should we produce, Mr. Reich? We have everything we need.) and thereby increasing the number of available jobs. Like a 2010 politician, Reich seems to think that more jobs is the answer, not taking into account that people devoting their work lives to fulfilling the human whims of the market is unsustainable.

[analogwhale · Rating: 3 out of 5 stars]

Helps shape a historical perspective on the undulations and mutations inherent in any economy; presents a fair yet one-sided argument for the need of a strong middle class.

[schatzi_5 · Rating: 4 out of 5 stars]

This was a very interesting and readable examination of the current economic crisis in America. Reich is critical of both parties, which is rather refreshing, since most people are content to blame the other side completely without looking at their own actions. While examining and comparing the Great Depression to the Great Recession, Reich sees some common threads. He then offers his own analysis and ideas of how America can get through this crisis and be better for it in the end.

While I agree with some of these measures, I think that they'll never be adopted. Our government - BOTH parties - are already controlled by the rich, as Reich demonstrated. Unlike him, however, I doubt that they'll do anything at all to change this fact. Both parties have been content to stand on the sidelines and watch as people lost their homes, their livelihoods, and their lives, while doing little to nothing to prevent it. Reich hasn't lost complete faith in the government yet, but I certainly have.

Still, it's interesting, and it's nice to see someone who is critical of both sides of the aisle.

[jcbrunner · Rating: 4 out of 5 stars]

At under 200 pages, this book is too short. It is divided into three parts. Part I presents a good but still too complicated version of the rising inequality in American society. Reich's account will be familiar to readers of Paul Krugman or Elizabeth Warren. Middle class Americans have to work harder and more to keep up in the rat race (Reich's three coping strategies: women entering the workforce, working longer hours, drawing down savings/increasing debts), while public safety nets are weakening and healthcare and catastrophic risks are privatized. The classic promise "if you work hard, you will succeed" doesn't work any more. A tiny minority, the plutocracy, cashes in all the benefits and prevents a more equitable distribution of income. Reich calls this the bargain broken.

Part II is titled "backlash" and deals with political and populist reactions to part I. He starts with a rather implausible 2020 presidential election victory of a Palinesque Independence Party candidate (against candidates Chelsea Clinton and George P. Bush). Anger created out of a lower standard of living and less shopping possibilities while the plutocrats resume to bathe in money . Here it is where I part company with Reich's analysis. Populist anger against the rich is unlikely in the United States of America. Firstly, the corporations control all media. Secondly, the peasants have totally bought the plutocracy's framing. Just like medieval serfs or Third World citizens only revolt(ed) in times of famine or existential crisis but never questioned the layers of society, America's current popular unrest does not target the plutocracy but even weaker economic parties (such as immigrants or foreign companies). Thus the backlash is inflicted on the wrong actors. Longstanding limping democracies such as Italy and Argentina show that inequality persists despite popular anger.

In part III, Reich develops a sensible, textbook-like plan of economic measures to curb inequality. In an ideal world, his plan would be adopted the next day. Reich has to appeal to the Democrats, their ideals and their longterm self-interest to undertake the transformation process. Unfortunately, the sweet melody of money is much more alluring to most politicians than Reich's message. Reich does not even have the ear of the Democratic Party. I venture that the writing of this book was mainly triggered because Reich could not get his message through in private. He should have used an additional fifty pages to sketch a winning strategy for his message.

Currently, the economic analysis of the rising US inequality is getting better. Out of Krugman,Moore, Taibbi, Reich and Warren, a common narrative is emerging. It still needs sharpening to survive against the reptilian brain explanations of his opponents. The next step is creating organizations to sustain and amplify the message. Unfortunately, this runs against the Bowling Alone trend of diminishing social capital. The message has to reach and capture the suburbs to be successful. Finally, politicians need reliable populist support to stay on message and prevent their co-optation by the plutocracy. As long as these elements are not in place, Reich's vision remains a dream and the United States will continue to drift.

[oldroses · Rating: 4 out of 5 stars]

Many years ago when I was in college (back when dinosaurs roamed the earth), there were no required courses other than the ones for your major. You better believe I didn’t crack a math or science text for four years. But, once I graduated and entered the real world, I discovered that there is a reason why those courses are taught. Contrary to what many disgruntled students will tell you, that knowledge is relevant to everyday life.

Take economics, for instance. I didn’t take it in school, but I started reading up on it afterwards. It was the era of WIN (Whip Inflation Now) and the Laffer Curve and waiting breathlessly for the money supply number. What did all of this mean? I slogged through economics tomes written for a popular audience, reading and re-reading the dense prose only to come away with a vague notion of the concepts that the authors were trying to convey.

I don’t know if some of that knowledge finally began to sink in or if economists are dumbing down their books but lately I seem to be able to finally grasp economic theories. And they are all theories. Back in the Reagan years, Keynesian economics was declared dead. In the aftermath of The Great Recession, Keynes is looking pretty prescient.

In his book, "Aftershock", Robert B. Reich offers his own theory as to the cause of the Great Recession. He lays out the evidence that the concentration of wealth in the hands of the top one percent of the population, leaving the middle class with stagnant or falling incomes forcing Americans to pile on debt just to stay even, was the root cause of the debacle that is still affecting our economy today. He points out that the same conditions existed prior to the Great Depression.

Everyone seems to be able to agree that the only way to get the economy moving again is if the middle class starts borrowing and spending again. The only way that that is going to happen is if we can put everyone back to work. Reich disagrees, pointing out that full employment didn’t help the middle class before the Great Recession because the jobs that were available didn’t pay as much as the jobs that had been outsourced. The same is true today. Many people who have found work, are working part-time or working at jobs that pay significantly less than the jobs they lost. He devotes his last chapter of "Aftershock" to his suggestions for fixing the structural problems of our economy.

Like the old Chinese curse, we live in interesting times. As we struggle to find a way to kick-start our economy, we would do well to remember that the Great Depression dragged on for years until the government was willing to go deeply into debt to fund the wartime economy which offered many good paying middle class jobs and launched decades of prosperity.

[bobnolin · Rating: 5 out of 5 stars]

This is a book every American should read. I'm sure you've heard that before, but in this case, it's really true. This is not a rant or a screed, but a very informed and rational look at the current state of the US economy, and where it's likely headed. It's critical of Obama and his recent predecessors, including GW, Clinton, and Reagan. Want to understand the rage behind the Tea Partiers? Want to know why "trickle down" doesn't? Read this book. Short and succinct, I read it in an evening (and I'm a slow reader).