The Reich Reich: the Clinton crew has embraced the German model - just as the Germans have realized it doesn't work - emphasis on government-run economic programs as supported by Bill Clinton and Labor Sec Robert Reich - includes related article on the Europeanization of the American economy

National Review, July 11, 1994 by David Gitlitz, Lawrence A. Kudlow

Reich is scathing in his contempt for the incentive-based economic policies of the 1980s. He complains that rather than increasing taxes on the top fifth of the income scale, "the [Bush] Administration ... has sought to reduce tax rates on appreciating capital assets. The apparent justification for lowering, rather than raising, federal taxes on wealthy investors (who own most of these capital assets) is that such a step would motivate them to invest their savings in new enterprise. Profit-seeking, resolutely self-interested individuals, it is assumed, will spur the American economy forward." As in the bureaucracies of Brussels, Paris, and Bonn, Reich's goal is income redistribution. Top marginal tax rates should be returned to their level under Jimmy Carter, Reich says, to allow a "significant down payment" on federal spending for education, training, infrastructure, and industrial subsidies, the heart of Reichian economics. But Reich would not stop there, and "would encourage public spending within each nation in any manner that enhanced the capacities of its citizens to lead full and productive lives [emphasis added]." He envisions an array of federal benefits to induce private enterprises to serve as handmaidens of the state. For companies doing well in international competition, he suggests "public subsidies to firms that undertook within the nation's borders high-value-added production." For companies doing poorly there would be payments, relocation assistance, extra training grants, extra unemployment insurance, regional economic aid, and funds for retooling or upgrading machinery toward high-value-added production."

This, in sum, is a comprehensive agenda for twenty-first-century welfare-state corporatism, in which the middle class and the business class both become clients of the state. As in Europe, growth and competition from below would be blocked, with state-imposed mandates raising nearly insurmountable barriers to start-up companies and government paternalism dulling the drive for individual advancement. The capital that might otherwise be put at risk in new, job-creating enterprise is taxed away ostensibly to ensure income equality, and redistributed through the apparatus of bureaucratic "investment."

Clintonic Communitarianism

Reich does not specifically credit Europe as his model, but his prescriptions mesh nicely with the image of European "communitarian" capitalism offered by MIT professor Lester Thurow in his 1992 book, Head to Head. Thurow writes of subsidy programs "designed to help European firms compete in some major industry. If the United States were to spend what Germany spends (2.5 per cent of GNP), it would be spending more than $140 billion to help its industries in 1991. . . . Germany, the dominant European economic power, sees itself as having a |social market' economy and not just a market economy." In Germany, "Social-welfare policies are seen as a necessary part of a market economy. Unfettered capitalism is believed to generate levels of income inequality that are unacceptable."