Capitalism is the problem, and by capitalism, I mean a particular genus: American-style, laissez-faire capitalism — unregulated, corporate-dominated, finance-controlled, and driven exclusively by the bottom line in all significant matters. That’s the kind of pure, raw capitalism we had prior to the 1930s, and it’s the kind we have once more; it’s a type of economic arrangement that, in different ways, inspired figures as diverse as polar opposites Andrew Carnegie and Karl Marx, who set its parameters for discussion in the 19th century.
Carnegie, whose spiritual descendants include (among others) modern-day plutocrats Sheldon Adelson and the Koch brothers, Charles and David, was the single-minded and ruthless industrial magnate who founded what later became US Steel. At the height of his notoriety in 1889, he penned the justification for the system that enriched him, which he termed the Gospel of Wealth: “We accept and welcome ... as conditions to which we must accommodate ourselves, great inequality of environment, the concentration of business, industrial and commercial, in the hands of a few, and the law of competition between these, as being not only beneficial, but essential for the future progress of the race.”
The inequality Carnegie hailed as part and parcel of American capitalism — its indispensable component — was viewed differently by his contemporary, economic philosopher Karl Marx. In Capital Marx offered socialism’s antithetical view: “When commercial capital occupies a position of unquestioned ascendancy, it everywhere constitutes a system of plunder.” Not much room for compromise here, but the search for a third way has been the motivating force behind the American left — from the original Populists, through the Progressives, to the New Dealers.
Since 1980, America’s progressive project, which succeeded in ameliorating Gilded Age capitalism, has stalled. According to a new generation of economic thinkers and analysts, Thomas Piketty (Capital in the Twenty-First Century) being lately the most celebrated, we’re entering a second Gilded Age, one where Andrew Carnegie would feel right at home and Karl Marx would be talking up revolution. In today’s America, inequality is again the watchword, poverty is on the rise, and ordinary people have once more been turned into disposable objects, as they were a century ago.
Evidence of the deteriorating fortunes of the mass of Americans is all around us, even during what is purported to be a “recovery” from half a decade of near-depression. A just-completed in-depth study of international trends in median income, commissioned by the New York Times, shows the US, once the ultimate middle-class country, to no longer have the world’s richest middle class; Canada and the nations of Western Europe either have, or shortly will, bypass it. Significantly, in only one category, upper-class income, does the US reign supreme (by far).
A concurrent analysis of upward mobility by several prizewinning American economists, based on tax records, indicates a similar comparative decline — stagnant upward economic movement in the US over the past 15 years that makes escaping poverty here half as likely as elsewhere in the developed world.
Recent press reports have reinforced these formal investigations. For instance, although the unemployment rate for American workers appeared to be trending downward at the end of April, private-sector wages and salaries for the first quarter of this year actually grew at the slowest pace since the US Bureau of Labor Statistics began tracking them in 1980. Furthermore, two-thirds of the jobs created since the recovery began in 2009 have been low-wage jobs, with 40% of private-sector hiring during that time occurring in areas like food services (especially fast-food restaurants), waste collection, and retail trades — hardly entrees into the middle class.
The National Employment Law Project, which compiled this data, says the economy lost 3.6 million high-wage jobs during the recession and gained 3.8 million low-wage jobs during the recovery, basically replacing good jobs with bad ones and spurring inequality. Beyond the globalization of labor markets, a quintessentially capitalist form of technological innovation — what some have called “capital-biased technical change” — has been uniquely responsible; it’s a process by which business deliberately replaces well-paid skilled workers with computers and automation, making technology a substitute for, not a complement to, labor. The practice, described recently by New York Times economics writer Eduardo Porter, developed around 1980 and accelerated after 2000; it’s now approaching critical mass, undermining jobs, wages, and benefits, while providing soaring returns to capital.
But job loss and pay stagnation are not the only measures of working America’s declining position in the new Gilded Age. According to the Employee Benefit Research Institute, one-third of employed Americans in 2014 have less than $1,000 in savings and investments, and two-thirds have less than $25,000. Meanwhile, reports the research firm Realty Trac, a fifth of the country’s mortgaged homes, denied loan modifications, remain “seriously underwater;” and aspiring homeowners are being shut out of the housing market by America’s bailed-out, too-big-to-fail banks unless they have perfect credit. Finally, the charity Feeding America, using federal statistics, says 49 million Americans are “food insecure” in 2014, and private food banks are serving 12 million more customers than in 2006.
In the face of this assorted misery, some are doing quite nicely, thank you. The stock market, representing the upper one-fifth of American households (holders of 90% of all equities, according to the Economic Policy Institute), tells the tale. With the Federal Reserve providing unprecedented stimulus, Wall Street had the recovery Main Street never did. The Dow Jones industrial average rose 130% between March 2009 (the trough of the Great Recession) and May 2013 on its way to record territory, while workers’ average hourly wages, flat since the 1990s, barely budged; corporate earnings approximately doubled over the same period.
Prosperity at the top is reflected in median CEO pay at the 100 largest American
companies, which a New York Times survey pegged at $13.9 million for 2013, up 9% over 2012. Meantime, USA Today reports, the median annual wage for America’s 105 million full- time workers inched up to $40,872 in 2013, barely 1.4% more than in 2012. There is a great disconnect here that has to be addressed. We’d better address it soon.
Anger is building, and a day of reckoning is at hand.
Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He is the author of two prizewinning books.
From The Progressive Populist, June 15, 2014
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