Tuesday, July 10, 2018
Makers and Takers, by Rana Foroohar
The name of the book comes from an idea coined by Republicans in the early 2010s. Republicans such as Paul Ryan and Mitt Romney divided the country into two classes, the makers who work and pay taxes, and the takers who Romney described as ''...dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them.''
Foroohar takes this narrative and flips it on its head, arguing that the makers are the 90-95% of the population who live and work in the real economy are the real makers who produce goods and services that make the economy function, while the takers are the wealthy top percent of the country, which is hard to disagree with when the wealthiest 5% in the country control 67% of the country's wealth. This is aided by our financial system that focuses on taking money out of American companies and transferring it into the already bloated wealth of the 1%. Not only is the American dream at risk, but the future of American democracy as well.
Foroohar focuses on a process she calls financialization, where finance has come to dominate the economy and making money becomes an end in and of itself. This affects not only the finance industry but other parts of the American industry as well. She assigns a significant part of the blame to the financial sector itself, which she argues should not be a dominant industry in and of itself, but a means to allocate capital and resources to other industries. She points out that while the finance sector accounts for only 4% of the jobs in the United States, it accounts for 25% of the corporate profits. However these profits are generated by moving money around and turning it into more money, opposed to producing goods and services consumed by the majority of Americans. Foroohar argues that the financial sector has become a parasite on the American economy, draining money and talent into an area of the economy that ultimately produces nothing.
Foroohar also blames the domination of American companies by accountants who focused on the company's bottom line and reducing all the company's processes to numbers. Foroohar traces this back to Robert MacNamara and the ''Whiz Kids'', who became known as the beancounters and dominated Ford and other American companies opposed to the car guys and other innovators who had previously dominated American business. While the car guys were focused on producing the best cars possible for market, the beancounters were concerned with one thing, and one thing only, the bottom line. The beancounters would try to squeeze as much profit from as many sources as possible. Rather than whatever material was best for the job at hand, the beancounters would choose whatever was cheapest. Foroohar argues that this actually had a negative effect on American business by reducing quality and standards of American products resulting in disasters such as the infamous Edsel and Ford Pinto. This weakening of American industry left it vulnerable to foreign competition.
Foroohar's arguments are strongly compelling and suggest that American business's priorities have been skewed towards short-term profits rather than long-term sustainable growth. If America is to become a place where all of us can thrive, there will have to be serious changes in how America does business. Whether that will be accomplished remains questionable, but I think this book is worth reading.