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OpEdNews Op Eds    H3'ed 3/25/09

Natural Adversaries

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Everybody has a brilliant solution for fixing the economy. The best ones suggest placing purchasing power directly into the hands of consumers. But the interests of workers and investors are directly opposed. US wages are too high to support investor confidence, and the general function of economic crisis is to drive wages down. So why not just get rid of wages and investors altogether?

Like Barack Obama, Franklin Delano Roosevelt also received thousands of letters advising him how to "fix" the broken economy. Among them was one from John Maynard Keynes, ignored by FDR along with all the others. Roosevelt did make valiant efforts to correct the unemployment problem of the 1930s, but nothing helped much until World War II finally forced full-employment in the US. Even so, recession returned in 1954, immediately following the Korean conflict , and we've struggled ever since to survive the many strategies of private investors to drive wages down. [1]

Moreover, the US Government has been hijacked by Big Business for at least the past 30-years, and no longer functions as a safety net for the general interest. US wages are too high to support investor confidence, and the general function of economic crisis is to drive wages down. This is no accident. But consumer purchasing power relies almost entirely upon wages. This basic contradiction is the foundation of our entire economic system. Of course there are plenty of other problems, but it always boils down to wages. Even if Barack Obama's heart is in the right place, it's doubtful he can generate investor confidence in US wages compared with far cheaper labor in other countries.

Since before the Great Depression people have been shouting for "social revolution". There's never much agreement about how exactly this should be accomplished, but permanently removing human labor-power from the capitalist system seems the most obvious and proven approach. As it's already been done elsewhere, this could be accomplished in the United States by simply transferring labor-power to the cooperative system. With persistence and organized financial collaboration, business becomes far more regional and democratic. The cooperative movement nonviolently removes both wages and the tyranny of private investors from the economic system for the most part.

Easier said than done, but it's actually quite simple: "Tyrants need not be expropriated by force; they need only be deprived of the public's continuing supply of funds and resources." [2] If we understand that human labor-power -IS- the "continuing supply of funds and resources", then Rothbard's observation seems very practical in terms of economic withdrawal [3] -- a real-world "transition" from Capitalism toward Economic Democracy. [4]

In the meantime, mutual antagonism between workers and investors accounts for the instability of our current economic system. Workers strike for higher wages by withdrawing their labor from production. Investors strike for lower wages by withdrawing capital. But Instead of "investment strike", we politely refer to the latter as economic crisis, recession or depression. "The Hoover administration tried to popularize the word 'depression'. They thought this was a milder word that would somehow soothe a worried American public." [1]

However, the battle over wages threatens millions of lives and renders economic stability impossible. Insipid labels don't soothe the heated anger of homeless workers. But the miseries of "Hooverville" don't seem to alter their blind consent much either. Between 1929 and 1933, US investors withdrew 90-percent of their spending from the overall economy. Since wages are a direct provision of capital investment, consumer spending dropped 20-percent and $4-billion in consumer savings were depleted. [1]

Now, Bloomberg News reports $8.85-trillion is being hoarded by private investors. [5] Millions of US jobs have been lost and more of the same is on the horizon. Increased competition for jobs drives US wages down. Whether this is the intended goal or not, it is most certainly the result. The interests of investors and the interests of workers are directly opposed, particularly regarding wages.

Moreover, the economy will not automatically correct itself. It has no automatic self-regulatory device. [6] Quite the contrary, "an investment strike is a particularly formidable weapon, since it requires no planning or coordination to implement. Indeed, it will come into play 'automatically' if a government should come to power deemed unfriendly to business interests." [7] As long as labor is a cost of production, investors will be highly motivated to drive wages as close to zero as possible through capital flight and capital strike. [8] [9]

Assistant Secretary of the Treasury for the Reagan Administration and a nationally syndicated columnist, Paul Craig Roberts summarizes the function of capital flight: "The off shoring of American jobs is the antithesis of free trade. Free trade is based on comparative advantage. Jobs off shoring is an activity in pursuit of lowest factor cost -- an activity that David Ricardo, the originator of the free trade theory, described as the betrayal of one's own country in pursuit of absolute advantage." [10] [11] Short-selling is another clever investment strategy. [12] But by yanking jobs out from under millions of workers, "short" becomes a mere technical term for aggressively leveraged capital strike.

The interests of investors and the interests of workers are directly opposed. On this essential point, not everybody agrees. In fact, most people tend to disagree. Sadly, the people who most vehemently disagree are those who stand to benefit the least from continuing the painful relationship. These people are called "workers". Their incomes are derived primarily from work, and they are paid in wages. White collar, blue collar, salary, hourly, middle-class and lower-class all fall into this general group. They also happen to comprise the vast majority of the human population, including a reserve army of unemployed -- "workers".

"Investors", on the other hand, is a term that refers to people whose incomes are derived primarily from ownership -- not wages. This group unanimously agrees (albeit very quietly) that the interests of workers and the interests of investors are directly opposed. This group also stands to benefit most from the adversarial relationship. Workers' lives depend upon wages while investors provide and control those wages. A general conflict of interest in this regard seems readily apparent. But there is no confusion amongst the tiny group of immeasurably powerful investors regarding -- wages.

Even as independent competitors, the decisions amongst individual investors tend to be very consistent, sometimes presenting the appearance of conspiracy or even central planning. If wages are too high or business is too regulated in a certain region, then investors either transfer investments to regions where wages are cheaper and business is less regulated (capital flight), or they stop investing altogether (capital strike). This is the main reason why Barack Obama's regulation will not likely "save Capitalism from itself". [13] The interests of workers and the interests of investors are directly opposed.

But while investors tend to be very unified in their understanding of Capitalism, workers tend to be stubbornly and chaotically divided. This is a powerful advantage for investors and a severe disadvantage for everyone else. Investors don't need to organize a union or meet in a secret room to plan an investment strike. Nowadays, they can do this from the comfort of their own homes, sitting in their underwear in front of a computer screen.

Investors simply understand how the capitalist system works and they respond -- "automatically" -- against the best interests of every life on the planet whose sustenance relies upon wages. Since private investment is the primary source of wages and workers have little or no control of those wages, workers always find themselves at the mercy of investors -- particularly regarding wages.

If we could all agree that this sick relationship is the root of all our socioeconomic problems, we might have withdrawn from it in favor of more balanced and sustainable arrangements a long time ago. But we don't all agree. Unfortunately, no matter how painful the relationship becomes, most proud "Americans" continue chasing an illusion called "The American Dream". Since US wages are generally insufficient to maintain exorbitant levels of US consumption, brave Americans throw themselves head-long into debt to maintain their delusional pursuit of upward mobility.

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David Kendall lives in WA and is concerned about the future of our world.
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