The following three articles from the same issue of Business Week summarize our country’s betrayal of its working-class citizens.

     If you can’t figure out why, key in on the second article that is remarkably frank—for a conservative financial publication—about the real issue involved: “This widening gap sets up a clash between the desires of the labor force and the investor class.” That’s what the new economy in the U.S. is all about, and the investor class has won with a vengeance.

     And some day, the investor class will wake up to the nightmare their own greed has created for itself.

From Business Week, October 20.

The Productivity Boom Is Just Warming Up

The American economy is beginning to pick up steam, with growth of annualized gross domestic product in the second quarter of 3.3% and a continuing boom in productivity. The evidence on productivity is particularly important since growth in technology and productivity are the most significant determinants of improvements in the standard of living….

The large spurt in technological progress during the past eight years is mainly due to a series of developments: rapid progress in computer capabilities, the explosive growth of the Internet, advances in cellular and other wireless technologies, the growth of fiber optics, advances in biotech, greater world competition for U.S. companies—which induced improvements in business efficiency—and myriad other smaller improvements in technology….

The recent speedup in productivity growth suggests that the IT revolution is progressing along similar lines. If so, prospects are excellent for long-term growth in output per worker at a rate of 3% per year or higher for perhaps decades. Income per worker could double in 25 years or less….

The relatively high unemployment rate and apparent decline in employment gets most of the media and political attention. But the most significant news from the past few years is the continuation and possible acceleration of the sizable productivity advance that began almost a decade ago.

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U.S.: A Jobs Recovery, Yes. A Hiring Boom, No.

Intense cost pressures and weak pricing will keep payrolls from surging

It's about time. The news that the labor markets might finally be turning around certainly elicited sighs of relief from the millions of job seekers who have been unable to find work despite two years of so-called economic recovery….

But the next step in the job revival will be the most difficult. Hiring must now rise to a pace that will assure a self-sustaining economic expansion, where new jobs generate demand that encourages businesses to expand, creating even more hiring. On that front, the data are not yet so encouraging.

THAT'S BECAUSE STRUCTURAL changes within the labor markets will make it harder for job creation to pick up strongly, even if real gross domestic product grows at a solid clip. Companies face unusually intense cost pressures that were rare or nonexistent in prior upturns. Global competition, soaring health-care expenses, and the need to restore pension fund assets are eating away at profit margins at the same time that businesses have little pricing power in a low-inflation economy….

Economists at the Federal Reserve Bank of Kansas City examined how businesses rely on flexible labor inputs to align their payrolls with production. They say that temp workers, part-time employees, and work-time management have allowed companies to delay hiring full-time workers. They also note that a greater number of job losses in this business cycle are permanent….

In the long run, faster productivity growth is undeniably positive. But in the coming year, companies' continued reliance on efficiency will work against a rapid return to strong hiring….

ONE SURE THING is that companies will remain focused on reining in payroll costs. In the year ended in the second quarter, labor expenses grew 3.6%, almost equal to the 4% increase in revenues economywide, as measured by the dollar value of GDP….

…the success businesses have had in cutting payrolls and holding the line on wage gains means labor's share of national income continues to fall this year, as profits' share keeps rising. This widening gap sets up a clash between the desires of the labor force and the investor class. Workers want bigger pay raises and job seekers want to see more hiring. Investors want businesses to concentrate on pumping up the bottom line and lifting stock prices.

History has shown that both can be satisfied, but only if demand growth accelerates to a point that enables the economy to accommodate both its productivity trend and the desires of job seekers….

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Italy: Trying To Ease The Pension Squeeze

Is Italy getting serious about pension reform? Prime Minister Silvio Berlusconi has made it the focal point of his 2004 budget, even taking the unusual move of going on national television to plead his case. Berlusconi appears ready to go head to head with the unions, but he also faces opposition within his coalition government, especially from the Northern League party.

Beginning in 2008, Berlusconi's plan would require all workers to amass 40 years of pension contributions, up from 35 years, with penalties for early retirement. From 2004 to 2007, as an inducement to delay retirement, the plan would pay workers eligible to retire under existing rules a bonus of 32.7% of their salary, equivalent to the contributions they and their employers would continue to pay into the system. Unions, which are receptive to the work incentives but opposed to a longer contribution period and penalties, have set an Oct. 24 strike date to protest the proposal….

     Key statements in these articles:

 

• "The evidence on productivity is particularly important since growth in technology and productivity are the most significant determinants of improvements in the standard of living.” That should be a true statement, but, today, it’s only true for investors because they have all the power and workers have none. Investors and top corporate executives want ALL the benefits of productivity improvement for themselves, and don’t want to share ANY of it with workers.

   

• “The large spurt in technological progress during the past eight years is mainly due to … rapid progress in computer capabilities, the explosive growth of the Internet, advances in cellular and other wireless technologies, the growth of fiber optics, advances in biotech, greater world competition for U.S. companies.” And all of this progress helps American corporations to abandon American communities and workers and go to other countries.

   

• “Companies face unusually intense cost pressures that were rare or nonexistent in prior upturns. Global competition, soaring health-care expenses, and the need to restore pension fund assets are eating away at profit margins at the same time that businesses have little pricing power in a low-inflation economy.” Meaning: If investors and top corporate executives are to continue getting incredibly richer, they must continue the present practice of taking all the benefits of productivity for themselves. Forget health care and pension benefits for workers—more money for the top brass is all that counts.

   

• “…temp workers, part-time employees, and work-time management have allowed companies to delay hiring full-time workers. … a greater number of job losses in this business cycle are permanent." Meaning: globalization is only the biggest cause of job loss and lower wages in the U.S. Corporations have discovered many other ways to cut working-class Americans out of sharing in the benefits of their own increased productivity.

   

• “…the success businesses have had in cutting payrolls and holding the line on wage gains means labor's share of national income continues to fall this year, as profits' share keeps rising.” Meaning: investors and top corporate executives have won the class war with all those who actually work for a living.

   

• “History has shown that both can be satisfied, but only if demand growth accelerates to a point that enables the economy to accommodate both its productivity trend and the desires of job seekers.” This is simply not true. The French Revolution, 1929 in our own country, and a myriad of examples demonstrate that the only thing that counts—in who gets what in an economy—is who has the power. Right now, investors and top corporate executives have all the power, and they’re in the process of destroying the greatest economy ever developed.

     The article about Italy requires more extensive discussion: “Berlusconi appears ready to go head to head with the unions, but he also faces opposition within his coalition government, especially from the Northern League party.”

     This statement is a brief description of the philosophical discussion that is going on in every country: to what extent will the rich share the benefits of the economy with those who work for a living?

     Italy, along with some other European countries, decided to fulfill the promises made decades ago that their workers should share in the benefits of productivity and technology improvements. They continued to pass national legislation that provided for better benefits, better working conditions, and shorter working hours. Result: investors have abandoned these countries in favor of countries that were willing to brutalize their workers. Now the countries with high moral standards, in the ways they protect worker rights, are in economic trouble.

     The U.S. is in both camps. We have better working conditions than most other countries, but they are deteriorating. We’re in the process of joining countries such as Indonesia, China, Guatemala, etc. in the race to the bottom—with the rich getting incredibly richer, and middle and lower-class Americans working harder for less pay.

     And to think that 50 years ago we were predicting—and promising workers—that we’d have 35-hour, 3-day work weeks, with five weeks vacation per year, by the year 2000, along with better health care and pension benefits. We got workers to contribute to corporate productivity by making such promises.

     Then, the betrayal. Those things didn’t happen, because of the greed of those who now have all the political power.

     It’s time for a change (see: A voter’s guide for taking back our government.).