Cutting through the bullshit.

Sunday, 17 June 2007

Alms for the rich

Although she claims never to have read ‘more than a couple of pages of Das Kapital’, Barbara Ehrenreich writes in an article in The Nation posted Wednesday, ‘A great deal of the wealth at the top is built on the low-wage labor of the poor’.

…Larry Summers, the centrist Democratic economist and former Harvard president, is now obsessed with the statistic that, since 1979, the share of pretax income going to the top 1 percent of American households has risen by 7 percentage points, to 16 percent. At the same time, the share of income going to the bottom 80 percent has fallen by 7 percentage points.

As the Times puts it: "It's as if every household in that bottom 80 percent is writing a check for $7,000 every year and sending it to the top 1 percent." Summers now admits that his former cheerleading for the corporate-dominated global economy feels like "pretty thin gruel."

…the reality that a great deal of the wealth at the top is built on the low-wage labor of the poor … You think it's a coincidence that this union-busting low-wage retail empire [Wal-Mart] happens to have generated a $200 billion family fortune?

...Gentrification is dispersing the urban poor into overcrowded suburban ranch houses, while billionaires' horse farms displace the rural poor and middle class. Similarly, the rich can swallow tuitions of $40,000 and up, making a college education increasingly a privilege of the upper classes.

…the huge concentration of wealth at the top is routinely used to tilt the political process in favor of the wealthy…if we don't end up with universal health insurance in the next few years, it won't be because the average American isn't pining for relief from escalating medical costs. It may well turn out to be because Hillary Clinton is, as The Nation reports, "the number-one Congressional recipient of donations from the healthcare industry."

As Michael Moore points out in a clip from his new film Sicko, in case it wasn’t obvious, the issue is not health insurance, but health care. I suppose from an American perspective, the idea that people are actually entitled to medical attention when sick or injured is so remote that universal health insurance looks like the real thing. But Moore characteristically sees way past this, even if he doesn’t manage to get the whole picture. It turns out that because health insurers are profit making corporations, they are required by law to maximise shareholder profits, which means that they put a great deal of effort into denying claims. Anyway, as Moore points out,

There is no room for the concept of profit when it comes to taking care of people when they're sick. That question of how will this affect our bottom line? How will this affect our profit? That is an immoral question and it should never be asked!

Ehrenreich reckons that America would ‘be more prosperous, at the individual level, and democratic’ if the rich were banished to the Aleutians. I have a sneaking suspicion, however, that the Aleuts might not be too happy with the prospect.


  1. The top 1% of the population going from having 9% of the national income to 16% is pretty massive. The way to see where the extra 7% of national income the top 1% have has come from is to look at the distribution in the late 70s. I haven't seen the stats, but I've been watching the news & I have seen a steady destruction of the high-paying unionised working class jobs that were established by the AFL-CIO during the 40s, 50s & 60s.

    The set-up until the 60s could be termed the Cold War Settlement. The AFL-CIO achieved high-paying jobs for a large slab of the working class. It wasn't for all workers, since the South (with a few mostly coastal exceptions) and the territory between the Missisippi & the Rockies was left unorganised. It achieved its aim, however, and that was for a strategic majority of the organised US working class to be convinced that its prosperity depended on continued US domination of the world. The AFL-CIO was a key part of locking the working class into anti-communism at home and abroad.

    The economic crisis of the 70s, however, broke the Cold War Settlement. The continuing restructuring of US industry has led to massive attacks on jobs, wages and conditions. The AFL-CIO, which refuses on principle to organise strikes to win, has been responsible for the fact that almost every noteworthy attack on the working class in the past 30 years has resulted in a victory for the bosses. As a result, most of the high-paid union jobs that existed in the 70s have either been destroyed or had their pay rates cut dramatically. The process, moreover, is not yet complete.

    Only hard class struggle can defeat these attacks. As the Sparts say, "Labor's gotta play hardball to win". Playing hardball requires the consciousness that will enable the rank and file to over-ride their union "leaders" to establish a winning strategy. Since that doesn't seem to be much in evidence at the moment, I feel it is safe to assume that the destruction of high-paying union jobs in the US will continue until the handful that are left make no material difference to aggregate statistics.

    This, however, is where things will get interesting. Once the high-paid unionised jobs are gone, and I'd have to look at the relevant stats to estimate when that is likely to be, the ruling class (i.e. the top 1% of the US population) will find that their contiuned enrichment will depend on their finding new targets to rip off. If they attack workers further down the scale, they will collide with a newly-unified working class living on the breadline - a perfect invitation to start up militant class struggle. We've seen hints of this in the US in recent years, with the immigrant sections of the multi-cultural US working class raising their heads for the first time in decades, but there's a lot more to come.

    On the other hand, if the top 1% tries to continue their enrichment by attacking the next 19% (i.e. the petit bourgeoisie - after all, the pickings will be richer there), it will be a sign of the complete collapse of the established political coalitions. It will also be a sign that the State is no longer prepared to abandon the rule of law even in the area of economics. Bourgois politics would become completely demoralised and the way would be open for a working class upsurge.

    The US ruling class has been implementing a winning strategy for the last 30 years or so. It may not be long, though, before they start to pay the price for their success. Their strategy will not be sufficient to guide them in the new world which the success of their strategy has created.

    My heart bleeds for them.

  2. Thanks for your interesting comment, Abim.

    On the whole, in very rough terms, I think much of your analysis stands up. I don’t think a comment is where I want to elucidate income statistics in full, but…

    The top percentile in the US is the group with household incomes over US$350,000. There are probably at least a few households where two or three highly paid workers – professors, employee engineers, lawyers, and the like – could gross a combined income in that range. There are certainly self employed professionals with household incomes in that range. As they do not exercise control over the means of production in any meaningful sense, apart from their own offices and perhaps a handful of employees, I would not want to include them in the ruling class, as I understand it. Furthermore, there are almost certainly still people who really do preside over the extraction of surplus value on behalf of shareholders or a board of directors whose cash earnings would not exceed $350k. Bear in mind that in the US, as in Australia, income statistics only reflect cash income (‘money income’ in the US). That means it excludes in kind receipts, like company cars, company provided school and university fees, use of houses and flats, travel, and significantly, stock options.

    Income from business, what the US Census Bureau calls ‘Net income from nonfarm self-employment’, is basically the difference between receipts and expenses. In principle, household use of business facilities would be excluded, but you can imagine how these things are fudged. Furthermore, household consumption of stock is in principle in kind, so excluded.

    The period during which what could be termed ‘the Cold War Settlement’ pertained is usually called ‘the Long Boom’. But because it was underpinned in large measure by arms production – production of the means of destruction in Department III, if you will – I think ‘the Cold War Settlement’ is quite apropos. Indeed, this may be the material basis for both the prosperity of the workers and their amenability to anticommunism.

    Now, what happens when the working class is squeezed quite dry. For one thing, I would expect it, and indeed, observe it, to be creating a layer of workers in precarious and sporadic employment, some of it outside the overt ‘legitimate’ economy. In other words, the growth of a lumpen element. What happens when the ruling class attempts to squeeze the middle classes historically is that an alliance forms between the middle classes and the lumpen to crush the working class comprehensively. Fascism, in other words.

    It’s not inevitable, of course, but as you say, we definitely need a much higher level of organization and class consciousness than at present, and in particular, as the Builders Labourers used to say, a willingness to ‘Dare to struggle, Dare to win!’

  3. Just two quick comments:

    1. In the penultimate paragraph of my previous post, I put in a badly-edited sentence:

    It will also be a sign that the State is no longer prepared to abandon the rule of law even in the area of economics.

    To get the sense right, change abandon to observe.

    The value of payment in kind and the non-counting of stock options are certainly limits to the income stats. I do think, though, that people on >$350k are in practice members of the ruling class even if they are wage labourers. This is because their income is so high that it it rapidly enables them to accumulate enough capital to live off the proceeds of their investments. For this reason, I assess what class people are in on the basis of their reasonable expectations over the course of their lives, rather than what their position is at any one point in time.

  4. Thanks for the clarification, Abim.

    I definitely disagree with you about the composition of the ruling class. For one thing, we are not talking about ‘people on >$350k’. We’re talking about HOUSEHOLDS on >$350k. Now gross household income isn’t a great indicator. For one thing, households vary a lot in composition. There could just be the one person commanding all that income, or 10 people. For another, some households with high incomes may have to absorb extraordinary expenses, like if one or members suffers from any kind of disability.

    More importantly, class composition is determined on the basis of actual, not potential control of the means of production. I gather that you are saying that with that high an income, a household could ‘invest’ it and live off interest and dividends. That may or may not be the case, but if true, it only gives the household some formal ownership of means of production. What characterises the ruling class is CONTROL of means of production. Households subsisting on annuities and the like may get a vote at the shareholders’ meeting, but they don’t get to make decisions about what to produce, who to hire, where or when to relocate… They have no meaningful control.

    But even more importantly, in my analysis, class is not a personal attribute, it is a social force. Many individuals appear to have an ambiguous class position. And this is usually because their class position really is ambiguous. This may be clearest in a hierarchical organisation where there are some on reasonably high salaries who do not preside over the extraction of surplus value from supervisees, and others who are directly involved in the exploitative process who earn much less. They all have ‘investments’ willy nilly through compulsory superannuation contributions. Those on higher salaries may have more and voluntary investments. You know the sort of thing.

  5. 1. Yes, a household of 10 with an income of $350k would be very different from a household of 1 or 2 with that income. There aren't that many 10-person households around these days, though.

    2. Not all members of the bourgeoisie actually participate in the extraction of surplus value. The members of long-established rich families (e.g. the Bancrofts, who own Dow-Jones) are capitalists even if they aren't managing the firm. They just hire senior executives to manage it for them. And they can replace them if they aren't satisfied with their performance. Similarly, not all members of the proletariat actually participate in having their surplus value extracted. Retired workers and people engaged in home duties in working class households are also members of the proletariat.

    3. Social forces don't come out of nowhere. They develop from the social, political and economic actions of people with common interests. In other words, your class is decided by what side your bread is buttered on (though people in ambiguous positions can be unsure or hold divided opinions on that one). If you are living on interest, rent & dividends and, in addition, your income is such that you can accumulate substantial additional capital after deducting reasonable living expenses, you are a capitalist. As a technical note, I would exclude people living on defined benefit pensions & annuities funded by investments (unless the annuity was such as to enable substantial further capital accumulation), because the interests of the pensioner are not linked to the profitability of the investments.

    Further, if you have a reasonable expectation (i.e. more than just a hopeful ambition) that you will reach a senior executive corporate position, your interests will be with those of the capitalist class. Take the example of the junior clerk who confidently and reasonably expects to be the Financial Controller in 10 years. Is it in their interests to observe the picket line, or to cross it? I think it's the latter. Of course, there are far fewer of these people now than in the past, since the explosion of mass white collar work has proletarianised clerical employees and lower level clerks now realise that promotion to senior managment is doubtful at best. There would still be some places around, though, where the lad from the good private school, equipped with a Melbourne University degree, can join at the bottom and expect that, in the absence of some monumental stuff-up, ten years later he'll be a big boss. And, of course, it helps if he's chosen his parents carefully.

  6. 1. Abim, there are lots of 10 person households around these days, but probably not so many in the US, which is what we’re talking about. It was an exaggeration to make the point. Obviously, though, ceteris paribus, a couple only household would enjoy a higher standard of living than a couple with three kids on the same income. That’s why variables like per capita and equivalised household income are preferred to gross household income as measures of economic wellbeing. There is also, unsurprisingly, a strong correlation between average household size and household income.

    2. The crucial element of your example is ‘They just hire senior executives to manage it for them. And they can replace them if they aren't satisfied with their performance.’ That is at least one aspect of what I am content to call ‘control’. Obviously, I agree with you entirely that not every member of the capitalist class is personally involved in that level of control. Even the bourgeoisie procreate and their children don’t generally exercise much control until they grow up. Similarly, unemployed persons and a significant proportion of persons not in the labour force are in the working class, along with children and other dependents of ordinary wage earners.

    3. The populations you describe are what I would call parasitic, but without the capacity to exercise actual control, I don’t think I consider them, and their dependents of course, as strictly ‘ruling’. You may be able to bring me around to your view, but you’ll need a better argument to do it. As for the aspirational new middle class, I can’t put them in the same basket as the kid with the shiny new Harvard MBA who Daddy tells to work in the warehouse for a few years before taking control of the company. As you’ve probably noticed, big organisations recruit lots of new graduates and give them lots of training and mentoring, breakfasts with the big bosses, and encourage them to believe that they are headed for senior management. Obviously only a handful of them actually ‘achieve’ that distinction. They are all aware that respecting a picket line, should they ever have the good fortune to see such a thing in this day and age, much less joining the union or standing on a picket line, is not the most prudent career move they could make. They are probably aware that the best move is to be in the office working hard before the picket is set up in the morning! Anyway, none of them actually knows in advance whether they are going to end up exploiting the others or not. So they will probably not behave as if they were class conscious workers. That has no effect whatsoever on their class membership, in my view. Many, most workers are not class conscious and do not always act in the best interests of the class as a whole or even of themselves as workers. It’s unfortunate, but irrelevant to this question.