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To what shrinking extent do the rich any longer need the rest of us?

By   Follow Me on Twitter     Message Richard Clark     Permalink
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As large corporations and the rich increasingly rely on cheap labor in and from other countries, how is their disappearing need for American middle class workers damaging our society? And what if anything can be done to reverse this process?

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To begin to answer these questions, I refer you to the main points made by Bill Moyers

at the Boston University Howard Zinn Lecture Series:

For Howard Zinn, democracy was one big public fight that everyone should plunge into. That's the only way, he said, for everyday folks to get justice -- by fighting for it, continuously.

Here are some of the things that prompted Zinn to say that:

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Between 2001 and 2008, about 40,000 US manufacturing plants closed. Six million manufacturing jobs -- one out of every three -- disappeared over the past dozen years. Without any good-paying jobs in the United States, how are people going to pay for their health care, and put their children through school?

Consider the new BMW plant that recently opened in Alabama and advertised that the company would hire a thousand workers. Among the applicants: "a former manager of a major distribution center for Target; a consultant who oversaw construction projects in four western states; a supervisor at a plastics recycling firm. Some held college degrees and resumes in other fields where they made more money." And now these professionals will be paid a measly $15 an hour -- about half of what BMW workers earn in Germany.

Among our political and financial classes, this is known as "the free market at work." A better name is "wage repression," and it's been happening in our country since around 1980. Economists Thomas Piketty and Emmanuel Saez found that from 1950 through 1980, because the nation's economy was growing handsomely, the average income for 9 out of l0 Americans was growing, too -- from $17,719 to $30,941. That's a 75% increase in income in constant 2008 dollars.

But then the increase stopped. The economy continued to grow handsomely after 1980, but the financial rewards started going only to people at the top. On the chart plotting income growth, the income "growth" line flattens for the bottom 90% of Americans after 1980. For them, average income went up, barely, from that $30,941 achieved in 1980 to only $31,244 in 2008, almost 30 years later. Think about that: the average income of Americans increased just $303 dollars in 28 years and the vast majority of that increase went to the top 10%.

There's no better description for this than continued wage repression for the sake of maximally expanding profits and the now stratospheric incomes for the top 1%.

Specific example in the New York Times of how this tremendous transfer of wealth and income occurred: "Industries Find Surging Profits in Deeper Cuts: Despite falling motorcycle sales, Harley-Davidson profits are soaring, with a second quarter profit of $71 million -- more than triple what it earned the previous year. How can Harley keep increasing its profits as motorcycle sales fall? Simple. It's going to cut 1500 more jobs by the end of next year -- on top of the 2000 jobs cut last year."

This is one reason the mood on Wall Street is buoyant while staying pretty glum in so many households, where unemployment problems show no signs of letting up.

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Cash is gushing into companies' coffers as they report what's shaping up to be a third-consecutive quarter of sharp earning increases. But instead of spending on the usual things, such as expanding and hiring people, companies are mostly pocketing the extra profits. And what are their plans for this money? The Washington Post explains:

Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year... But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth.

That's how financial capitalism works these days: Conserving cash rather than bolstering hiring and production; investing in their own shares to prop up their share prices, thus making their stock more attractive to Wall Street. Because of falling wages and unprecedented numbers of layoffs, too few workers any longer have the money to buy the remaining products that are being made, so why should companies invest in producing more product?

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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