America – from dream to nightmare

This article has been reproduced from the special world issue of the Socialist Standard (August 1996), the monthly journal of the Socialist Party of Great Britain.

A spectre is haunting America – the spectre of the middle class. Ever since Alexis de Tocqueville proclaimed the US to be a “middle-class country”, North Americans have anxiously sought to moralise and ennoble their notion of class struggle:

Most were regular employees of major corporations like McDonnell Douglas, Grumman and Hughes Aircraft. If they didn’t go to work, they risked losing their livelihoods, their houses and their cars. They were, in fact, not middle- class at all in the Marxian sense of the word. They were working-class, but, unlike similar people in Britain or Germany, they called themselves middle-class (‘Who Killed the Middle Class?,’ John Cassidy, The New Yorker, 16 October 1995).

But by some evil design of fate, this middle class seems to have died at the hands of the Reaganauts and the Bushmen. According to Cassidy:

Living standards have fallen or stagnated for the majority of Americans, while a small minority have enjoyed bonanza. These trends appear to be intensifying regardless of which political party is in office.

The rich have of course got richer (the top one percent of families were worth 78 percent more in 1989 than they had been ten years earlier, according to the Census Bureau). No guesses out of whose hides it came:

Twenty years ago, the typical chief executive officer of a large American company earned about 40 times as much as a typical worker did. Now he earns 190 times as much, according to Graef Crystal, an expert on executive compensation.

The USA leads the industrial world in child poverty, according to a Christian humanitarian coalition. Around 22 percent of Americans under 18 years old live in poverty. One child in four under 13 is hungry or at the risk of hunger, according to a survey by the Bread For The World Institute issued in Luxembourg.(The Guardian, London – 24 October 1996)

The not-so-invisible hand of the economic system may have put on a velvet glove for college graduates but has shown a mailed fist to those who have gotten no further than high school; while it has, with a typical capitalist sense of fairness, ruthlessly put the squeeze on dropouts and recent immigrants.

Naturally, not everyone is wringing their hands over this development:

Many experts argue that this is just what the doctor ordered… if companies are using their new-found profits to fuel a capital spending boom rather than pay artificially high wages to a workforce that views itself as entitled, what better way to keep the US competitive in a cut throat global economy?… Corporate America is once again in fighting trim, able to compete with the best of the world’s producers (‘The Wage Squeeze’, Aaron Bernstein, Business World Week, 17 July 1995).

All of this “good behaviour”, as Business World Week calls it, derives partly from capital’s shedding of assets to promote a recovery and partly from a self-serving capitalist belief that “re-engineering” promotes productivity, which in turn will (someday) push wages up:

Already, shareholders are enjoying a juicy stream of dividend payments and capital gains. Historically, efficiency improvements have led to real wage and income gains for the average employee. ‘In the long run, labor productivity will rise, and eventually, this will put upward pressure on wages’, says former Federal Reserve Board Governor Wayne D. Angell.

Only if workers regard a given rate of profit as “natural” can they swallow the assertion that their wages are “artificially high”. “The rise of global competition may have encouraged managers to break unions and invest in computer technology,” argues John Cassidy in The New Yorker. “Similarly, the threat of corporate relocation and the growth of cheap immigrant labor may have contributed to the weakness of labor unions.” Given such interactions, however, who iskidding whom about wages following productivity up? If “cheap immigrant labor” and corporate relocation to low-wage countries are themselves all about the desirability of reducing capital’s “wages bill” for the sake of profit margins, why should managers overlook the other obvious opportunity of breaking unions that promote “artificially high” wage levels? Wages are simply supposed to stay low no matter what any sweet-talking economist may say about them.

Strangely enough, this doctrine that wages follow productivity up (like the expectation that it should have started happening already) does not seem to include anything about the “plummeting” of wages ( New Yorker, 16 October 1995). Unless the elementary rules of mathematics have been revised, ordinary addition and subtraction ought to show that wages which have gone down (as they have) and then are supposed to rise again can hardly show a significant net gain (if any). Or is it that only the wages of productive workers are supposed to follow increases in productivity up the scale? In that case, the declining numbers of production workers in the United States would tend to inhibit any overall net increase in wages for workers in all sectors.

Falling wages

But when all is said and done, the concept itself is really nothing more than a propaganda device to prove that workers don’t need unions. The whole productivity-wages relation argument in effect rigorously excludes the need for the action of any “external” agencies like trade unions. Embarrassment over the failure of wages and salaries to rise as predicted seems nevertheless to have made no dent in the thinking of corporate execs.

To the capitalist class it is all just a matter of “corporate restructuring” for the sake of “economic efficiency” in securing an “open economy” and “free trade”. As a spokesman for Mobil Oil acidly put it:

There’s a very intense determination in executive suites across America not to give away hard-fought improvements. It may be a long time before this shakes through and wages rise (Business World Week, 17 July 1995). Meanwhile, in the past three years, wages have continued to fall while productivity, profits, and stock prices have all soared.

With inimitable Yankee aplomb, the writer of the Business World Week article assures us that “longer term, of course, the argument is that as economies grow overseas, they will buy more US-made goods, creating more jobs and demand here. Over a truly extended time frame, overseas wages will rise to meet ours”. But overseas wages will, only “rise to meet ours” if overseas workers can impose some much-needed restraint on their employers’ appetite for profits by organising effective trade unions. Businessmen can accept this during the boom phase of the business cycle; but to the extent they ultimately succeed in busting unions (as they do when the “longer-term” rate of profit threatens to sink), they will be quite happy to settle for that, too.

Historically, the changing patterns of capital investment follow an international curve, and the fortunes of the working class change with them. From Latin America to Asia new working-class populations have been integrated into a multinationalising world economy. ‘This is not an aberration, it’s a permanent trend,” says Dean Witter’s [Joseph G.] Carson, who believes global competition and technological change will keep the pressure on wages” (Business World Week, 17 July 1995).

Describing all this as “an unprecedented redistribution of income toward the rich” ( NewYorker, 16 October 1995) shows only how narrowly – if not how nationalistically – some writers like to have their history. Capitalism is by its very nature a system for “redistributing income toward the rich”. Profit (surplus value) is the economic translation of the unpaid labour of which the working class is robbed at the point of production. What has been happening since the 70s is unprecedented only in its scale; it has been a reality since the very beginning. The early economists, speaking for their colleagues in the capitalist class, certainly understood it.

During and after the Second World War’s flood of artificially high profits, real unions turned into company unions that talked down to their own members and limited themselves to conveying management’s wishes to them. A new breed of leaders stifled whatever there was of the grassroots or the democratic in organised labour.

Management got this opportunity to expand the market only at the price of “artificially high” wages: but once the competition got tougher internationally, the Uncle Tom outfits that unions had become started looking like too much of a luxury, so capital set about “busting” them (although they were already spontaneously decaying on their own). Wages had no place to float to but back to where they had come from originally. Thus it is not so much that income is being “redistributed” as that capital is seeking to return wages and salaries to pre-Depression levels (in current values) to shore up a sagging long-term rate of profit. In this sad little world made by capital, it would appear the period of mid-century prosperity was really only a fluke after all.

Author: ROEL

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