The Great Recession will take a long time to come to an end. Even the
most optimistic forecasters expect the official unemployment rate in
the US to stay above 9% through 2011, and it may be 4 or even more years
before we get back to the same level of employment we had before the
recession began. The arguments I want to make are (1) that we should not
fall for the line that “we,” i.e. workers, need to cut back to get out
of this recession and (2) that propaganda about the problems of the
deficits is being used to justify a multi-pronged attack on the standard
of living of working families.
You don’t need me to go over how bad things are for working people,
the working class. And I’m not going to review what led to the Great
Recession, other than to say that recessions are regular occurrences in
the capitalist system in which we live. (Oh dear, a “bad word” –
“capitalism” – but we’re all adults here, and the time for euphemisms is
long past.) This recession is indeed the worst since the Great
Depression of the 1930s, and it resembles it in both its probable length
and its international character, although the decline in production and
the level of unemployment are less than then. It is, however, in some
ways, potentially far more serious and likely to have a far worse
long-term effect.
Here we come to the key feature of today’s Great Recession – namely
the multipronged attack on our standard of living. This attack comes in
several forms and it is important to understand all of them:
- The first, and most obvious, is actual reductions in wages. Even
corporations that are profitable are brazenly cutting wages for the
simple reason that they want higher profits. The threat to move
production within the country or to other countries can force even
strong unions to take substantial cuts. Other people, such as federal
government workers, are seeing wage freezes, despite continuing
(although mild) inflation. More common, but less in the news, is the
slow process through which the unemployed who do manage to get new jobs
do so at reduced wages. Even less well publicized is the process through
which starting wages, for people getting their first jobs, are lower
that the wages of the people hired into the same jobs in previous years.
- The second form of attack is on the government programs that go to
benefit the working class, and in particular Social Security and
Medicare, the so-called “entitlement programs” i.e. programs that do not
require fresh appropriation votes in Congress on an annual basis. Here
the government is playing the old game of asking us whether we would
prefer to cut benefits or raise taxes, rather like asking us which arm
we would prefer them to cut off. A growing economy (and it will grow
again when the recession is over) can easily provide for the health and
well-being of its residents, but the cuts, once made, are extremely
unlikely to be restored when the recession does end. And, despite the
government’s lip-service to the importance of education, local
government employment in education in December 2010 was 463,000 less
than in December 2009.
- The third form of attack is on the poor, and I don’t mean simply
that the people at the lower end of the income distribution suffer more
from all the program cuts than everyone else, although that is true. I
mean that the attacks are making the lives of those who are unemployed,
and those who fall into poverty for this and other reasons (such as
serious illness), more and more miserable. This weakens the working
class as a whole. Unemployment is becoming more and more of a
threat to those who do hold jobs, and fear of unemployment makes those
who are employed weaker and weaker when it comes to fighting pay cuts
and resisting increases in workloads. Being unemployed in the US is
terrifying. Even a short spell of unemployment can do considerable
damage, and longer spells destroy lives. The cuts in the funding of
Medicaid (as distinct from Medicare which is for the elderly and
disabled) are particularly severe. And of course President Clinton long
ago ended “welfare as we knew it.” There are massive holes in our
“safety net,” and far too many people are falling through it. It must be
said here that this is one of the many areas where racism is deadly. It
is of increasing importance to confront the widespread racism which
leads many white workers to believe that somehow the massive poverty in
the Black and Latino communities is due to their inadequacies, and that
such poverty will, therefore, never happen to “fine upstanding (white)
workers like them.” Thus racism can and does lead some workers to
actually support cuts in programs such as Medicaid and subsidized
housing that are limited to those with low incomes.
- The fourth major form of attack is of a different nature. It takes
the form of attacks on the ability of workers to organize. The
percentage of workers who are unionized is now below 12%, and the
percentage of unionized workers in the private sector is only 7%. The
more heavily unionized public sector workers are seeing attempts at the
state level to withdraw their right to collective bargaining. (This
attack is combined with the attempt to reduce the public services that
they provide, which is in turn presented as a way to reduce taxes on
workers.) There are movements underway in at least seven states to pass
“right to work” laws which would forbid unions to collect dues from all
those that they represent. For those who are not unionized, the quickest
way to join the ranks of the unemployed is to be identified by
management as “likely to try to form a union.” On a national level, the
control of our government by the capitalist class is hardly limited at
all by the working class – the capitalists, as they say, have two
parties and we don’t even have one.
Let’s compare what is happening in Europe with what is happening
here. In Europe the “safety net” has long been far, far stronger than in
the United States. Universal health care, paid maternity leave,
unemployment benefits that are very generous by US standards, far higher
levels of job security… the list could go on. These have been coming
under attack for many years, often in the form of the promotion of what
the IMF and others call “labor market flexibility” – a code phrase that
can translated as “reducing the power of workers.” But the attacks are
taking place in a new and much more virulent form today. In response
there have been massive protests and general strikes. European workers
are vigorously defending their standard of living.
In the US, in contrast, there has been very little protest. In fact a
recent poll showed that, when people were asked about whether higher
taxes “on people like you” were necessary, 41% said they were. And 55%
believed it was necessary to cut back “government programs that benefit
people like [them.]” Why do people believe this? The short answer is
that they have been scared into this by those who cite the need to cut
the government’s deficit and its debt.
So let’s look at this. People understand debt all too well from their
personal experience, including those whose homes have been foreclosed.
One in five of all homes with mortgages are “under water” i.e. people
owe more than their homes are worth. And of course those who are
unemployed quickly run up additional debts. But government debt is very
different. In the first place, the US government can always borrow what
it wants because it can pay the lenders back with money raised by taxes.
But more importantly, when the government increases its spending or
allows households to increase their spending by cutting taxes, the
increase in spending leads to an increase in production and employment.
Thus the increase in the government’s debt, unlike any increase in the
debt of individuals, has the effect of putting idle labor (and idle
plant and equipment) back into production. Then, when the economy is
back at full employment, it can pay off its debt by increasing taxes, or
reducing spending without damaging total production.
It is useful to distinguish between the short-term deficit and the
issue of long-term debt. The deficit always increases during a
recession because tax revenues fall and expenditure rises (for example
on unemployment benefits). But in a serious recession like this one, a
government stimulus program (consisting of increased government spending
and cuts in taxes either or both of which increase the deficit) can
pull the economy out of the recession. In order for tax cuts to work,
however, they have to go to the working class, because this is the only
form of tax cuts that leads to increased spending. The very rich (who
are of course capitalists, because you don’t get rich by working!)
barely alter their spending. And giving tax cuts to corporations does
not lead to increased spending. Corporations aren’t going to carry out
new investment by buying new machinery and building new factories and
office buildings, as long as they have some of their offices half-empty,
much of their machinery sitting idle, and their factories shut down. So
that leaves government spending as a way to stimulate the economy. One
step desperately needed is the transfer of federal money to states and
local governments, but we hear little about this. President Obama, in
his State of the Union address, spoke instead about government
“investment” i.e. spending money in ways that would benefit private
corporations. (Food for the hungry and housing for the homeless aren’t
considered “investment.”) But the amounts proposed were small, and
Obama proposed a “freeze” in federal spending when in fact more, rather
than less spending is needed. The disagreement between the Republicans
and the Democrats is over how much to reduce the deficit, not on how
much of a deficit-increasing stimulus we need.
The capitalist class is taking advantage of this Great Recession,
both here and in other countries, to reduce the standard of living of
the working class and thus increase its own income, in the form of
profits and interest. We need to understand that even a long recession
can eventually be “profitable” if it can accomplish that, and big
capital thinks long-term. Thus it is not at all clear that big capital
even
wants to end this recession quickly. Instead, it seems to
see this as a wonderful opportunity to make long-term gains at the
expense of the working class. To see this we need to look more carefully
at the role that recessions play in the development of capitalism.
It is during recessions that weaker capitalists fail and the big
corporations take over their markets and grow ever bigger and ever
stronger. Then, as this happens, they start investing again and the
economic recovery begins. That is how the relatively mild recessions in
the post-world War II period have generally come to an end. Recessions
also keep down wages, and this is also good for profits. But reducing
wages is usually a relatively slow process, and the short recessions
which have taken place since World War II have not made much of a dent
in wages. [In the US, of course, unlike in Europe, wages have not
increased even during the good years. US wages today, after allowing for
inflation, are no higher than they were 40 years ago. (Check it out
online:
Economic Report of the President, 2010, Table 47.) This
is the basic reason for the fact that the share of income going to the
top 1% of US households has more than doubled between 1979 and 2007.]
In Europe, the better-organized working class managed to keep wages
growing in the post WWII period. Minimum wage in Ireland, before Ireland
fell victim to the crisis, translated into above $13 an hour! Now the
European workers, like us, are taking pay cuts, sometimes very large
ones. Latvian government employees took a 50% pay cut. But this is
because it is a
Great Recession, and is lasting a very long
time. A lengthy recession is capable of doing much more damage to wages
than a short one, and major sections of capital are therefore in no
hurry to end the recession because of this. Of course, when the
recession does end, there is no reason on earth to expect corporations
to “give back” the cuts they have forced on us. Instead, they can look
forward to permanently higher profits as a result of the recession.
The issue of long-term deficits is a different one. The projections
of federal government revenue and expenditure if no changes are made in
either our tax structure or in government programs undoubtedly show a
growing gap between the two – hence the received wisdom says this is a
major long-term problem that will continue to exist when the recession
is over. It may sound flippant, but the solution to this problem is
really very simple – tax the capitalist class and cut back expenditures
on the wars and other programs that benefit them. (In the United States
in the 1950s, hardly a heyday of liberalism, the top tax rate on
personal income was 91% – a quite reasonable figure and perhaps we
should go back to those “good old days!”) The capitalist class’s
proposed “solution” is, not surprisingly, to increase taxes on the
working class and cut back the programs that benefit us. Thus we need to
look at the federal budget
as a whole, and ask both who pays
taxes and who gets the benefit of the government’s expenditures. Then we
can look more clearly at the role of the federal government in the
distribution of the wealth of our society between the working class and
the capitalist class. It is not the projected deficits that are the
“problem” but the very real intent of the capitalist class to use the
federal government to further enrich itself.
Let me lead into my conclusion by looking at a recent decision by
President Obama which has important symbolic significance – the
appointment of Jeffrey Immelt, Chairman and CEO of GE as chair of a
“Council on Jobs and Competitiveness.” Competitiveness, you may
remember, was an important theme in Obama’s State of the Union Address.
GE is a multinational corporation, which, incidentally, was helped by a
$16 billion purchase by the US government of its short-term debt when it
was in trouble. Over half of its workers are employed in other
countries and over half of its profits are earned outside the US. Its
“competitiveness” would be enhanced, and its profits increased, by lower
wages in both the US and other countries. The word “competitiveness”
needs to be translated as “lower wages.”
The “Great Recession” is providing the multinational capitalist class
with the opportunity to launch a major assault on the standard of
living of the working class in
developed countries such as the United States and the countries of Europe. Unlike previous recessions,
the Great Recession is taking place mainly in the
developed
countries. Developing countries have not been greatly affected and
production in those countries continues to grow far faster than in the
developed world, although of course the workers there get to share in
very little of this. Today’s multinational corporations are increasingly
able to pit workers in the US and Europe against those in Indonesia,
India and China. Of course in the long run, they would like to employ
all of us, in all of these countries – but at lower wages. The problem
cannot be understood as one of “outsourcing” – a continuous movement of
jobs away from the US to other countries, particularly those with lower
wages. If this were the problem, unemployment would have been
increasing steadily over at least the past 30 years, if not the last
200, rather than fluctuating around the 5% mark. In fact the proportion
of workers in the US employed by foreign multinational corporations is
increasing – other countries’ multinationals are “outsourcing” jobs to
the US, just as US multinational corporations are increasing their
hiring of foreign workers! No, the problem is the continuous effort of
all these multinational corporations to lower wages everywhere.
Did we and other workers in developed countries really believe that we could,
without a fight,
continue to draw wages many time greater than those of equally
intelligent, hard-working, and, today, increasingly, equally skilled
workers in Asia and other parts of the world who are working for the
same corporations that we are working for? Corporations can, of course,
well afford to pay us these higher wages (as they could afford to pay
higher wages to workers in developing countries.) Obviously they are
making a profit by employing workers in the US and other developed
countries, or they would lay us all off! But wages are not based on
what the capitalists can afford to pay but on what the working class is
able to make them pay. This Great Recession is making it clear, to those
who look at it realistically, that the working class must be organized
on a multinational basis in order to confront the multinational
capitalist class if we are to share in the wealth that we produce.
Right now, the task in the US is a more limited one – we must
recognize, and get everyone else to recognize, that there is no need at
all for the working class to “cut back.” Doing so will only encourage
further attacks on our standard of living, and prolong the recession.
Instead we must ORGANIZE, ORGANIZE, ORGANIZE! NO CUTS IN WAGES, NO CUTS
IN PUBLIC SERVICES, REPAIR THE SAFETY NET, TAX CAPITALISTS, NOT
WORKERS! END THE WARS!
As Black Friday approaches many of us in the retail sector dread the onslaught of nasty customers and time away from our families. Many companies are forcing workers to come in ON "Thanksgiving" day and one is even OPENING ON "Thanksgiving".
