[This book review was published in the Fall/Winter issue of The Journal of Social, Political and Economic Studies, pp. 476-482.]
The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone
David M. Smick
Public Affairs, 2017
When David Smick speaks, he brings so many years of top-level experience to the table that it’s worth paying attention. A one-time Chief of Staff to U.S. Congressman Jack Kemp, he went on to a 30-year career as adviser to several world-class investors. For that same number of years, he worked editorially with The International Economy magazine. We considered his 2008 book The World is Curved: Hidden Dangers to the Global Economy such a lucid explanation of the causes of the Great Recession that we made our review of it the introductory chapter in our book about the Recession.
A reader’s enthusiasm will be mixed, however, about The Great Equalizer. Its qualities as a book fall far short of the standard Smick set with the first one. Amid much repetition, superlatives, rebuttals of straw men (such as of the view that “all the major technological advances have appeared”), and random eclecticism, Smick puts off his oft-mentioned idea of “Main Street Capitalism” for several chapters before reaching it. When Smick finally gets to the point, he lists a variety of valuable proposals about how the American economy can be made more vital (and more equal, as suggested by the book’s title, which speaks of his Main Street Capitalism as “the great equalizer”) .
It would be a mistake to think that it is just the end of the book that offers valuable content. A reader who pays attention more to the content than to the procrastination will find the lead-in has much to say. Those pages amount to an extended critique of “the mess we’re in.” They review the events of the Great Recession and its aftermath, and point to what Smick believes needs reforming.
He brings much first-hand observation to his writing when he says that the present situation in the United States is marked by “a Corporate Capitalism of top-down mismanagement and backroom dealing.” Government and Federal Reserve policies favor “the big, the corporate, and the status quo at the expense of the small, the young, the new, the inventive, and the entrepreneurial.” It’s a “rigged system” of “inside deal-making, elite special privilege, and dominance by large institutions.” Instead of the largest banks becoming smaller or being broken up, as might have been expected after the debacle of 2008, there has been “a consolidation of financial services.” The sprightly rebound that usually follows a recession didn’t happen, and one of the reasons was that credit remained frozen, not reaching the communities and businesses that needed it.
Smick frequently mentions what he sees as a qualitative collapse within the American people. Citing the rampant cheating in Ivy League schools, he speaks of “today’s collapse of values.” That it isn’t something brand new is evident when he says he was told as far back as the early 1980s that “20 to 30 percent of our workforce [at a Chrysler production plant] comes in with an alcohol- or drug-related problem,” amounting to a “challenged labor pool.” We are justified in thinking that he feels this example from almost forty years ago is still relevant today. (To see that continued relevance, it is enough to sit in the food court of any shopping mall and watch the bizarre parade of nose rings, tattoos and spiked hair walk past.) Many Americans, he says, “have lost faith in the future.” There is “a slime pit of mean-spirited partisanship” and a “new era of hatred” [both of which have risen to an even higher pitch in, say, the summer of 2017 than when his book was written a few months earlier].
Undaunted, however, by what he sees in front of him, Smick holds out an optimistic vision of human nature, and this serves as the basis for the Main Street Capitalism he favors. “Every man and woman is a potential founder of a business startup.” He especially sees women “moving to the forefront of the process of starting new businesses.” Given the reforms he proposes, and a vigorous system of banks both large and small, an innovative high-tech economy can come about. Indeed, Smick sees “the Silicon Valley high-tech crowd [as] the perfect embodiment of Main Street Capitalism.” We see an example of Smick’s propensity toward superlatives when he says this is “America’s only hope.” New enterprise is the key: “I have always thought that at the heart of today’s economic frustration is that Washington, D.C., has no policy for enterprises yet to be born.” [Oddly, he chooses never to discuss Donald Trump’s revitalization program, many aspects of which coincide with what he recommends. He appears to anticipate Trump’s presidency, but prefers to talk policy without getting into the nitty-gritty of personalities and politics.]
Near the end of the book, Smick lists a 14-point program to enliven the American economy. These suggestions constitute the real meat of the book. Before we get to them, however, four observations are in order: (1) They seem far more geared to an overall revitalization of the economy than to stimulating a profusion of small-business growth in which, as he says, “every man and woman is a potential founder of a business start-up.” We had expected proposals much more directed to what most of us would think of as “Main Street” (i.e., of the myriad enterprises that line the main drag in countless communities across the country). (2) When he says that Silicon Valley is his ideal for “Main Street Capitalism,” we find that he is thinking of high-tech par excellence, not the much more prosaic pursuits of millions of people in communities large and small. That he should think the average person fitted for such a thing – by intelligence, temperament and inclination – strikes us as unbelievably naïve. (3) Smick is well aware of the job and enterprise displacement that is occurring (with much more in the offing) from the advancing non-labor-intensive technology. Instead of seeing this as a problem that poses a radical challenge of how an economy can be structured to accommodate both non-job remuneration and continued consumer demand where great numbers of people are economically superfluous, he clings to the easy answer, which is to reiterate (as so many conventional commentators do) what was until recently a well-founded truism – that new technologies inevitably bring more jobs in their wake. He speaks of “thousands of innovators [who can] start new spin-off firms that expand the job base.” This naivete may suffice for the present, while “jobs” continue to be the centerpiece of how people gain their living and while improved economic activity is indeed capable of creating more employment; but “for the present” is the best that can be said for it. (4) The book is not an in-depth study of any issue or policy. It does not provide data or even particulars, and is best understood as a distillation of Smick’s insights based on his long experience. Those insights, as we have said, deserve to be taken seriously, subject to the caveat that he has not intended the book to be more than it is.
Here is what Smick presents as “Main Street Capitalism’s 14-point Plan.” We suspect he had Woodrow Wilson’s 14 points in mind when he gave it that name. Several of the points are by no means singular, mentioning more than one policy proposal.
1. He calls upon Congress to get together on a bipartisan basis for two “grand bargains.” One is to trade “entitlement reform” (particularly featuring means testing) for infrastructure spending selected by “a distinguished independent panel.” The other is to trade tort reform for “a change in Medicare’s policies with drug companies.” Although this latter point seems rather specific, he sees it in the broad context of a “challenge to the medical-industrial complex.” [Needless to say, whole books could be – and are – written about each of these things, which call for a much more detailed treatment. We would do well to see Smick’s mention of them as in effect “flagging” them for us as subjects for further study elsewhere.]
2. Capital amounting to $2.5 trillion, he says, can potentially be repatriated to the United States by a one-time tax holiday. He adds a twist of his own that raises interesting Constitutional questions: that the companies bringing capital back in be required to buy “specific amounts of special infrastructure bonds paying 1 percent.”
3. In light of a world debt crisis amounting to a total load of more than $180 trillion, there should be a “global debt summit” to arrive at plans for potential rescheduling and writing-down of debts in case central banks exhaust their means to respond to a debt crisis.
4. Make the tax rates the same for corporations as for individuals. This would accomplish something he has mentioned earlier in his text, getting rid of the “preferential tax treatment for carried interest.” [“Carried interest” is the income made by private equity firms.] A point that relates directly to small-business incentives is that he wants to raise the exemption on the federal estate tax.
5. He would like to see the United States adopt a British idea and have every new-born American receive a “tax-free stock investment account” of perhaps $8,000 funded by a 60-year low-interest government loan. The account could be invested in any of several “diversified global investment options.” The idea would be to make “everyone a capital owner.” This fifth point also includes “finding the next generation’s superstars,” so their investment ideas can be financed. [This would need to be fleshed out with a lot more detail before we could decide whether it is feasible and desirable.] He would also like to see the community colleges focus on “basic technology skills training.”
6. A global financial summit is needed, he says, to restructure the “world’s financial architecture.” This point goes on to include some eclectic elements: “championing local community banks,” and a major effort to prevent cyber-attacks that could paralyze American life by simultaneously shutting down the various “codependent sectors” such as “the electric grid, financial transactions, and telecommunications.”
7. Under “encouraging new enterprises,” Smick calls for having the Federal Reserve’s mandate include “encouraging large financial institutions” to earmark a certain portion of new credit to business startups. The reason he wants “special attention” given to “encouraging women” is that they initiate twice as many new businesses as men do. The connection isn’t obvious, but he wants the government’s statistics on inflation and employment redefined. And he says the accounting reforms under the 2002 Sarbanes-Oxley legislation, passed in reaction to the Enron scandal, are “onerously expensive.” [This is a good example of where much more needs to be said. What, say, does he think the appropriate accounting rules should be?]
8. Pointing to the fact that the U.S. government owns vast amounts of property, he wants it to be managed to generate much more revenue – “for a bonanza of billions, or even trillions, of dollars.”
9. Smick would like to see a “careful, incremental raising of the minimum wage.” He says this could make up for flat wages, while at the same time not being enough to “threaten small business solvency.”
10. Job mobility can be increased, he says, by giving financial aid to “disadvantaged families” to help them move to regions where workers are in greater demand.
11. Smick argues for drawing the innovative talent from the rest of the world by issuing a green card to “every foreign graduate student in math, science, business, technology, and the classics.” More generally, he wants merit-based immigration reform to “entice the Einsteins, Picassos, Curies, and Neels of the world.”
12. Unless there is a pending health or safety problem, there should be a two-year break from new regulations, and a bipartisan panel should be charged with finding the fifty worst regulations so they can be removed. He figures these have largely come about through business lobbying to gain competitive advantage. When at this point he calls for increased anti-trust enforcement, he must be relating it to decreased regulation in some way.
13. We have seen that he wants the community colleges to become technical training centers. As his 13th point, he adds that there should be federal funding for adult technical education at those colleges on evenings and weekends.
14. Somewhat incongruously, it is under “reinvent government” that he calls for a reform of the patent system (earlier, he had cited the enormous cost to consumers from extortionate patent lawsuits). More to the point, he would modify the Civil Service Reform Act of 1978 to allow a more expeditious firing of bad government employees. Right now, he says, the “review process is grueling.”
This is quite a list, and could provide the grist for an active political program. Some of it overlaps with issues Donald Trump raised during his campaign: enticing the trillions of dollars of capital being held overseas to return to the United States; the elimination of the tax break for carried interest; the introduction of a merit-based immigration system; the removal of a great many regulations that impede economic activity; and a major thrust toward infrastructure spending.
What Smick does not mention is also important. There is nothing about the hollowing out of American manufacturing through imports, out-sourcing and off-shoring; or about the undercutting of American wages by the tidal wave of immigration, both legal and illegal; or about the sort of trade agreements the United States has entered into. His book on the Great Recession gave chapter-and-verse about the rot within the American financial system that led to that debacle, but Smick has little to say in the present book about the needed correctives. And, as we have indicated, he recognizes the on-rushing displacement from jobless technology, but does not think far enough ahead to confront its challenges.
The Great Equalizer is good for what it is. And that may be enough to say for it. It’s short and readable, and certainly worth a reader’s time.
Dwight D. Murphey
1. See The Great Economic Debacle – and Beyond: Reviews and Commentary (Council for Social and Economic Studies, 2011). The Smick review is at pages 7 through 14. The book, with the review, can be accessed free of charge on www.dwightmurphey-collectedwritings.info.
2. In the United States today, “one-day delivery” is becoming an attractive competitive feature for retailers, grocery stores, and the like. It is interesting that in China there has been an even greater move toward one-day delivery, accomplished by the use of many thousands of Chinese runners, for whom it is their “employment.” That sort of low-grade work, spread among masses of people, is not out of the question for the future even in Western economies as they provide a “minimum income guarantee.” Such a semblance of work is, however, hardly what we would call “getting your livelihood through remunerated employment.”
3. We’re not sure what “Neel” he’s referring to. Is a bit of mystery interjected here, perhaps?
 See The Great Economic Debacle – and Beyond: Reviews and Commentary (Council for Social and Economic Studies, 2011). The Smick review is at pages 7 through 14. The book, with the review, can be accessed free of charge on www.dwightmurphey-collectedwritings.info.
 In the United States today, “one-day delivery” is becoming an attractive competitive feature for retailers, grocery stores, and the like. It is interesting that in China there has been an even greater move toward one-day delivery, accomplished by the use of many thousands of Chinese runners, for whom it is their “employment.” That sort of low-grade work, spread among masses of people, is not out of the question for the future even in Western economies as they provide a “minimum income guarantee.” Such a semblance of work is, however, hardly what we would call “getting your livelihood through remunerated employment.”
 We’re not sure what “Neel” he’s referring to. Is a bit of mystery interjected here, perhaps?