Joe: The CEO of a large American company now makes over 300 times what their typical worker earns. The shocking part? It has almost nothing to do with the 'free market' or even how hard they work. The game itself is rigged. And today, we're showing you how. Lewis: Whoa, 300 times? How is that even possible? That sounds less like a salary and more like a rounding error for a small country's GDP. I assume they’re not 300 times more productive. Joe: That's the billion-dollar question, isn't it? And it's at the heart of a really powerful book we're diving into today: Saving Capitalism: For the Many, Not the Few by Robert B. Reich. Lewis: Right, and Reich is a fascinating figure to be writing this. He's not some outsider throwing rocks. This is a guy who was the U.S. Secretary of Labor under Bill Clinton. He's seen how the sausage gets made from the inside. Joe: Exactly. And that's what makes his argument so compelling. He's not arguing against capitalism; he's arguing that it's been hijacked. The book was a huge deal when it came out, really tapping into that post-2008 financial crisis anger, and it even led to a popular Netflix documentary. Lewis: It's a book with a pretty bold title. It's not Critiquing Capitalism, it's Saving it. That implies it's in danger. Joe: It is. But the danger, as Reich points out, doesn't come from where we think. His whole argument starts by dismantling the biggest, most misleading idea in our entire political debate.

Lewis: Let me guess. The "free market." Joe: You got it. The entire debate we hear constantly—'free market' versus 'big government'—Reich argues is a complete sham. It's a distraction designed to keep us from seeing where the real power is. Lewis: Okay, but come on. When people say 'free market,' they mean less regulation, less government interference. Isn't that what creates prosperity? The government just gets in the way. Joe: That's the myth! Reich's central point is that there's no such thing as a market without government. Government doesn't "intrude" on the market; it creates the market. Think about it like a sport. You can't have a game of football without a rulebook, referees, and lines on the field. The government provides the rules for the economy. Lewis: So the debate shouldn't be about whether there are rules, but who's writing the rulebook? Joe: Precisely. And who the referees are working for. The phrase 'less regulation' is misleading. It's almost always just different regulation, designed to benefit a different group of people. The most devastating example of this is the 2008 financial crisis. Lewis: Ah, the great meltdown. I remember the headlines, but the details are a blur of bailouts and acronyms. Joe: Well, here's the simple version. For decades after the Great Depression, a law called the Glass-Steagall Act kept regular commercial banking—your checking and savings accounts—separate from risky investment banking. It was a wall. But in the 80s and 90s, Wall Street spent millions lobbying to tear that wall down, all in the name of 'deregulation' and the 'free market.' Lewis: And they got what they wanted. Joe: They did. The wall came down in 1999. Suddenly, banks could take the money from your government-insured savings account and use it to make wild, speculative bets on things like mortgage-backed securities. They were packaging up thousands of home loans, including incredibly risky ones given to people they knew couldn't pay them back, and selling them as 'safe' investments. Lewis: That sounds like a disaster waiting to happen. Joe: It was a time bomb. And when it exploded in 2008, the whole system nearly collapsed. But here's the punchline. Did the 'free market' punish them for their bad decisions? No. The government—meaning the taxpayers—bailed them out. Because they were 'too big to fail.' Lewis: So 'deregulation' was just rewriting the rules of the game to say, 'Heads, the banks win. Tails, the taxpayer loses.' That's not a free market; that's a casino with a safety net for the house. Joe: Exactly. It was a massive upward pre-distribution of wealth, disguised as market freedom. And Reich says this happens across the board, through five fundamental building blocks of the market that are always being tweaked and rewritten. Lewis: What are they? Joe: Property, monopoly, contract, bankruptcy, and enforcement. These are the hidden levers. What can be owned? Think about drug patents or even your data. How much market power is too much? Think about your cable company. What kinds of deals are allowed? And who gets to walk away from their debts when things go wrong? These aren't natural laws; they're political choices. Lewis: And I'm guessing the people with the most money get the most say in those choices. Joe: Now you're getting it. The invisible hand of the market is connected to a very visible, very wealthy arm.

Lewis: Okay, so if these rules are being manipulated, show me the money. How does a change in a 'bankruptcy' rule, for example, actually make a CEO richer and a regular person poorer? Joe: Great question, because this is where the abstract rules hit our bank accounts. Reich calls it 'upward pre-distribution.' It’s the idea that wealth is funneled to the top before taxes are even collected. Let's contrast two stories. Lewis: The tale of two economies. I'm ready. Joe: First, the CEO story. Why has CEO pay gone from 20 times the average worker's pay in the 1960s to over 300 times today? A big part of the answer is stock buybacks. For a long time, it was considered market manipulation for a company to use its own profits to buy its own stock. But in 1982, the SEC created a rule that gave companies a legal safe harbor to do just that. Lewis: Why would a company buy its own stock? Joe: To make the stock price go up. Fewer shares on the market means the value of the remaining shares increases. And who benefits most from a rising stock price? The CEO, whose pay is now almost entirely in stock options and awards. Lewis: Wait, so the company is using its own money—money that could have gone to raising wages or investing in new products—to pump up its stock price, just so the execs can get a bigger payday? Joe: That's the game. Reich points to IBM, which spent over $100 billion on buybacks between 2000 and 2013. Their revenues were flat, but their stock price soared, and their CEOs made a quarter of a billion dollars. That money could have gone to the workers who actually created the value. Lewis: That feels like a heist happening in plain sight. It’s not creating any real value, just moving numbers around on a spreadsheet to enrich a few people. Joe: It's financial engineering. Now, contrast that with the worker's story. In the post-war decades, over a third of private-sector workers were in a union. Unions were a powerful 'countervailing power.' They negotiated for higher wages and better benefits, and even non-union companies had to compete with those standards. Lewis: But that's not the world we live in anymore. Joe: Not even close. Starting in the 1980s, there was a coordinated assault on unions. The turning point was in 1981 when President Reagan fired over 11,000 striking air traffic controllers and banned them for life. That sent a clear signal to every corporation in America: it's open season on labor. Lewis: And the balance of power just completely shifted. Joe: Completely. Companies started moving jobs overseas, threatening to close plants if workers unionized, and using bankruptcy to tear up union contracts. Today, fewer than 7 percent of private-sector workers are in a union. And the result is clear in the data. Since 1979, American productivity has risen about 65 percent. Lewis: Okay, so we're all working smarter and harder. Our pay should be up 65 percent too, right? Joe: You'd think so. But the median worker's compensation has increased by just 8 percent in that same period. Lewis: Eight percent? Where did the other 57 percent go? Joe: It was pre-distributed upward. To the CEOs with their stock buybacks, to the Wall Street financiers with their government-backed bets, to the owners of capital. The rules of the game were changed to ensure they got the lion's share of the gains.

Lewis: So the whole narrative we're sold—that if you work hard in the free market, you'll be rewarded what you're 'worth'—is a comforting fiction. The 'worth' is determined by these rules, which are set by those with the power and money to influence them. Joe: Exactly. And that's the real threat to capitalism Reich identifies. It's not socialism or some foreign enemy. It's the loss of faith in the system itself. When a vast majority of people feel the game is rigged, they stop playing by the rules. They become cynical, angry, and distrustful. Lewis: And we're seeing that everywhere. The political polarization, the anti-establishment anger on both the left and the right. People know something is fundamentally broken. Joe: And we've seen this before in American history. Reich draws parallels to the Gilded Age of the robber barons and the roaring twenties. Both were periods of massive technological change, soaring inequality, and rampant financial speculation. And both ended in a crisis that forced a political reckoning. The Progressive Era and the New Deal weren't about destroying capitalism; they were about rewriting the rules to save it from its own excesses. Lewis: It's not about punishing the rich. It's about making the game fair so everyone has a real shot. The book isn't called Destroying Capitalism, it's called Saving Capitalism. He’s making a conservative argument, in a way. He’s saying this system is worth preserving, but it can't survive if it only works for a tiny fraction of the population. Joe: That's the core of it. The central choice isn't more government or less government. It's about who the government is for. Lewis: And that leaves us with the fundamental question Reich poses: Is the market organized for broadly based prosperity, or is it designed to deliver the gains to a select few at the top? Joe: And who gets to decide the answer to that question is what this is all about. It makes you look at every economic headline completely differently. Lewis: It really does. It’s not just numbers on a page; it’s a story about power. Joe: This is Aibrary, signing off.