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Prosperity- for most of the people, most of the time?
Hurricane Katrina and its continuing aftermath have exposed both the failure of the
For some in the right-wing in the
"If you're poor, you're powerless. That's why the poor got smashed in the hurricane zone... Every American kid should be required to watch video tapes of the poor in
and see how they suffered because they couldn't get out of town. New Orleans
”...For centuries charlatans have been telling people that the government can provide, will provide, and you deserve to be provided for. That's bull. Acts of nature can kill. Depend on yourself. Get personal resources. That's the lesson of Katrina."
Individualism, red in tooth and claw.
But what of the prosperity of the majority in the
“…the selfish pursuit of profit serves a social purpose. And that is putting it mildly. The standard of living people in the West enjoy today is due to little else but the selfish pursuit of profit.”
The substance of this claim is not as controversial as it should be. Many people who are critical of how the wealth of the developed capitalist countries is used - who are dissatisfied with consumerism and its associated deployment of resources to encourage and satisfy trivial material desires while people in most of the world are in desperate need - might not necessarily dispute it. The capitalist market is generally given credit for achieving, even if only on a quarter of the planet, prosperity for most of the people, most of the time.
In particular, the present weakness of social provision and the trade unions in the
These similarities are evident despite the many differences between
Another is described in Portrait of the USA, published by the United States Information Agency:
“As settlement advanced from east to west,
agriculture attained a richness and variety unmatched in most other parts of the world. This is true still today, in large part owing to the quantity of land and the generosity of nature. Only in a relatively small portion of the western U.S. is rainfall so limited that deserts exist. Elsewhere, rainfall ranges from modest to abundant, and rivers and underground water allow for irrigation where needed. Large stretches of level or gently rolling land, especially in the United States Midwest, provide ideal conditions for large-scale agriculture.”
Following the theft at gunpoint of this huge expanse of fertile land from the original inhabitants, in much of the North and West of the USA a degree of prosperity and equality of wealth arose (excluding black people and native Americans) which was not seen in England. According to Portrait of the
“In most sections of the
, land was too abundant and labor too scarce for the English system -- in which a landed gentry owned vast estates and most farmers were tenants -- to take hold. North American agriculture came to be based on a multitude of family farms. Moreover, these farms tended to be scattered and isolated, rather than clustered around villages, thus enhancing the farmer's individualism and self-reliance.” United States
The state not only organised the theft of land, it regulated its allocation and drove the application of new technology:
“…Enacted in 1862, the [Homestead] Act perpetuated the existing pattern of small family farms by offering a ‘homestead’ of 65 hectares to each family of settlers for a nominal fee…
“Beginning with the creation of the Department of Agriculture in 1862, the federal government took a direct role in agricultural affairs, going so far as to teach farmers how to make their land more productive.”
1870s USA: pioneers heading West
But as in
“The years from the 1870s until about 1900 were especially hard for the American farmer.”
Nevertheless, the expansion of the
The federal and state authorities were not bystanders to the rapid economic growth of the post-Civil War United States. The development of the railroad and telegraph systems was planned and subsidised (at up to $48,000 per mile for the transcontinental railroads) by the central government. The USA used very high tariff barriers (averaging 45% on all imports in 1865, with 50% tariffs on dutiable imports and an overall average of 25% on all imports in 1900) to prevent foreign-made goods from outcompeting its fledgling industries; behind these barriers American capitalists invested in the most up-to-date technology and took full advantage of the enormous mineral resources which were being discovered.
“By 1860, Newark could boast of being not only the largest city in the state [New Jersey], with double the population of second largest city, but the principal industrial center in the nation.
“Meanwhile, living conditions deteriorated. Pigs roamed the streets in search of garbage, animal carcasses littered the streets, and the waterways that traversed the city carried away household wastes in full view for all to see. The poor and immigrant classes lived in dark, wretched tenements without running water or basic sanitary amenities. Consequently,
, like most northeastern cities, was periodically plagued by outbreaks of epidemics. Infectious diseases such as cholera, typhoid, yellow fever, dysentery and small pox claimed thousands of lives, mostly the poor… Newark
was not alone. Most of the nation’s urban centers lacked the necessary infrastructure to ensure public health. As was common in the nineteenth century, sewers were built in an arbitrary fashion without a master plan. The result was poor drainage, constant blockages, chronic leaks and expensive maintenance costs. In some cities, such as Newark Baltimoreand , sewers were simply not built at all… New Orleans
’s Common Council pursued a policy to keep taxes low and avoid public debt in an effort to attract capital and labor to the city. While this policy did have the desired effect of promoting industrial growth, it bankrupt[ed] the city with regard to all public improvements.” Newark
Newark in the 19th Century
As in other capitalist countries, growth took place in fits and starts, with depressions frequently producing mass unemployment. Between 1883 and 1878, and again from 1893 to 1897, approximately 16% of the labour force were out of work, with only charity and begging to support them, and millions more were put onto short-time working. And while they began making high profits, the owners were unwilling to share these gains with their employees or their customers. As Portrait of the USA describes it:
“American industrial development in the 19th century took a toll on working men and women. Factory owners often required them to put in long hours for low wages, provided them with unsafe and unhealthy workplaces, and hired the children of poor families. There was discrimination in hiring: Black Americans and members of some immigrant groups were rejected or forced to work under highly unfavorable conditions. Entrepreneurs took full advantage of the lack of government oversight to enrich themselves by forming monopolies, eliminating competition, setting high prices for products, and selling shoddy goods.”
30,000 people attended the funeral of union leader Joe Hill in Chicago, 1915. Hill was framed on a murder charge and executed.
"Organized labor… does not place its reliance upon reason and justice, but on strikes, boycotts, and coercion.... It denies to those outside its ranks the individual right to dispose of their labor as they see fit, a right that is one of the most sacred and fundamental of American liberty."
By the 1920s, after union membership reached a peak at over four and a half million – almost 20% of the total work force – some capitalists, for instance Henry T. Ford, were prepared to offer higher wages in return for stability and loyalty.
In parallel, political struggles – for instance the ‘Progressive Movement’ associated with the presidency of Theodore Roosevelt – resulted in national and local state action to ameliorate some of the worst excesses of capitalism. Sanitation was improved, child labour was restricted, food quality was controlled and those monopolies and trusts which were deemed unhealthy for the economy as a whole were reined in.
A further aspect of government activity was also significant in the growing wealth of the
But the boom which the
The slump coincided with an ecological disaster. The ‘Dust Bowl’ phenomenon, resulting from unsustainable farming methods, sent hundreds of thousands of small farmers from their ruined fields, roaming the land in search of any kind of work. Where they found it, for instance as fruit-pickers on the big estates of California, the free-market laws of supply and demand ensured that their pay was barely enough to feed themselves, let alone their children.
Family of migrant workers, 1930s USA
The rest of the world followed the
The Great Society
“The NRA [National Recovery Administration] attempted to revive industry by raising wages, reducing work hours and reining in unbridled competition. Portions of the NRA were ruled unconstitutional by the Supreme Court in 1935; however, the Works Progress Administration (WPA), which was the second part of the NRA, was allowed to stand. The majority of its collective bargaining stipulations survived in two subsequent bills…
“Employees were guaranteed the right to negotiate with employers through unions of their choosing by the Wagner Act of 1935, and it established a Labor Relations Board as a forum for dispute resolution…
“Workers were given the right to bargain collectively through the National Labor Relations Act of 1935.
“The Fair Labor Standards Act of 1938 promulgated a 44-hour workweek with time-and-a-half for overtime and pegged a minimum wage of 25 cents an hour. The act also provided that the hours worked would drop to 40 and the wage would incrementally rise to 40 cents. In addition, the bill made child labor under the age of 16 illegal…
“Beginning in 1935, Congress enacted the Social Security Act of 1935 (and later amendments) that provided pensions to the aged, benefit payments to dependent mothers, crippled children and blind people, and unemployment insurance. Small businesses, homeowners and the oil and railroad industries were given help by other legislation.”
Workers on a New Deal employment program
In 1936 and 1937 a wave of industrial action resulted in the recognition of the left-led United Auto Workers Union (UAW) by General Motors and Chrysler; US Steel also agreed to union recognition; the bitterly anti-union Ford was paralysed by a strike in 1941 and also had to recognise the UAW.
“With the war's end, a wave of nationwide strikes battered the maritime, railroad, coal, oil, auto, electrical, telephone, and steel industries; four and a half million workers were on the picket lines during the strike wave in 1946.” [my emphasis]
Average hourly wages of non-supervisory employees in
It is important to note that trade union activity improved the pay and benefits of employees in non-union firms also. Companies wishing to avoid penetration by the unions could not allow their remuneration to fall too far behind that of the unionised workplaces.
The principles behind the New Deal were extended during President Lyndon Johnson’s administration under the slogan of ‘The Great Society’. As Richard E. Schumann of the US Department of Labour notes:
“… the Social Security Act was amended to include Medicare in 1965 and the FLSA [Fair Labour Standards Act] was amended in 1961 and 1966 to extend coverage to millions of additional workers. In addition, the Welfare and Pension Plans Disclosure Act of 1958, the Labor-Management Reporting and Disclosure (Landrum-Griffin) Act of 1959, the Manpower Development and Training Act of 1962, the Equal Employment Act of 1963, the Civil Rights Act of 1964, and the Age Discrimination Act of 1968 were passed by Congress.”
When the state intervened in the economy, the trade unions and political struggles were powerful and the fear of communism was rife, the majority of the
* A 30% decline in the inflation-adjusted value of the minimum wage between 1968 and 2005.
* Welfare cuts started under Reagan and continued by
* Declining union power; union membership has been falling (as a percentage of the total workforce since the 1950s, and in numerical terms since 1978); the mass dismissal of the striking air traffic controllers in 1981 has set the national tone for industrial relations.
* Deregulation of the economy, including the liberalisation of international financial markets which began under Nixon, and the deregulation of domestic industries, from the scrapping of controls on transport industries under Carter to the introduction of ‘competitive’ markets for energy in the 1990s.
* A series of tax cuts for the rich, starting with cuts in capital gains tax under Reagan, which have reduced the scope for national and state provision to address social problems and maintain the shared infrastructure.
* The exposure of US workers to competition from lower-paid producers in foreign countries, through institutional arrangements such as the North American Free Trade Area (NAFTA) and the Free Trade Area of the Americas (FTAA); technological changes have added to this pressure by facilitating the international outsourcing of intellectual of intellectual as well as manual labour.
The Central Intelligence Agency's Economic Overview of the
has the largest and most technologically powerful economy in the world, with a per capita GDP of $40,100. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy considerably greater flexibility than their counterparts in Western Europe and US in decisions to expand capital plant, to lay off surplus workers, and to develop new products... Japan
"Since 1975, practically all the gains in household income have gone to the top 20% of households...
"Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups." [my emphases]
For thirty years, the bottom 80% of households in the
"Median household money income in the nation in 2004 was $44,400, and was unchanged from 2003 in real terms… The median earnings of both men and women who worked full-time, year-round declined in 2004…
"This is the second consecutive year that households did not experience an annual change in real median income, after declining in real terms for two years (in 2001 and 2002)…
"The number of people in poverty (37.0 million people) increased by 1.1 million in 2004, and the poverty rate rose from 12.5 percent to 12.7 percent. This is the fourth consecutive year in which the poverty rate has increased...
"Earnings are by far the biggest component of income. Median earnings for men who worked full time, all year, declined by 2.3 percent in real terms in 2004. The earnings of year-round, full-time women decreased 1.0 percent in 2004 from the year before, the second consecutive annual decline for women."
But the 'charlatans' attacked by Mr O'Reilly of Fox News still have existing achievements to their credit. The standard of living of US citizens, even today, rests on a floor which is set, not in the marketplace but by state actions and other non-market factors. This floor is falling, but it has by no means been completely broken.
As Katrina revealed, many of the worst-off in the USA are public housing tenants, in receipt of welfare benefits or 'working poor' on wages underpinned by the federal minimum wage of $5.15 per hour and supplemented for those with children by the Earned Income Tax Credit, a reverse income tax on the same model as Britain’s means-tested Working Tax Credit. Federal food stamps, introduced in 1964, still keep outright starvation at bay. The 6,000 workers for the
The tragedy of the market
In July 2005, the Heritage Foundation, a right-wing think tank linked to the Bush administration, issued a statement written by Phil Kane PhD, welcoming the splitting of four unions, including the Teamsters, from the
"The demise of companies like General Motors, with its exorbitant health care costs, and United Airlines, with its bankrupt pension plans, does not reflect well on the unions themselves. Yes, the unions negotiated aggressively for workers at those companies years ago, but the overly generous health care and pension promises they ‘won’ were not victories in hindsight. They made the companies less competitive, and in the end, the promises could not be met. If ‘unionized’ continues to equate with ‘uncompetitive,’ unions will never grow.”
Of course, the Heritage Foundation does not propose that the state should arrange reliable health care and a decent retirement income to balance the shedding of these responsibilities by employers.
Foreign Affairs, the theoretical magazine of the business, policy and security elite of the
“According to President Bush's 2002 National Homeland Security Strategy, ‘The government should only address those activities that the market does not adequately provide -- for example, national defense or border security. ... For other aspects of homeland security, sufficient incentives exist in the private market to supply protection.’ Unfortunately, this expression of faith has not been borne out…”
Because he is applying his analysis to defences against Islamist terrorism, Flynn is unlikely to be accused of giving ground to opponents of American values. But the argument he presents, if true, must hold for any activity which is beneficial for the whole community but does not give the individual company a competitive advantage over other firms:
“Security is not free. A company incurs costs when it invests in measures to protect the portion of infrastructure it controls. If a company does not believe other companies are willing or able to make a similar investment, then it faces the likelihood of losing market share while simply shifting the infrastructure's vulnerability elsewhere. If terrorists strike, the company will still suffer the disruptive consequences of an attack right alongside those who did nothing to prevent it. Those consequences are likely to include the cost of implementing new government requirements. Therefore, infrastructure security suffers from a dilemma commonly referred to as the ‘tragedy of the commons.’
“Take the case of the chemical industry. By and large, chemical manufacturers have a good safety record. But security is another matter. Operating on thin profit margins and faced with growing overseas competition, most companies have been reluctant to incur the additional costs associated with improving their security. Now let us imagine that the manager of a chemical plant looks around his facility and gets squeamish about the many security lapses he finds. After a fitful night of sleep, he wakes up and decides to invest in protective measures that raise the cost to his customers by $50 per shipment. A competitor who does not make that investment will be able to attract business away from the security-conscious plant because his handling costs will be lower. Capable terrorists and criminals will target this lower-cost operation since it is an easier target.
“In the event of an incident, particularly one that is catastrophic, two consequences are likely. First, government officials will not discriminate between the more security-conscious and the less security-conscious companies. All chemical plants are likely to be shut down while the authorities try to sort things out. Second, once the dust clears, elected and regulatory officials will scramble to impose new security requirements that could nullify the proactive plant owner's earlier investments. Given this scenario, the most rational behavior of the nervous manager would appear to be to keep tossing and turning at night while focusing on short-term profitability during the day.” [My emphases]
This is but an elaboration of the point which was very briefly made by Dr Kane – but while the Heritage Foundation is very happy to see the end of ‘generous’ health care and pension provision for working class people as a result of increased competition, at least some members of the Council on Foreign Relations do not wish to see further successful terrorist strikes against the USA’s economic infrastructure.
Contracted to the private sector, reconstruction following Katrina is proceeding very slowly
What Flynn calls ‘the tragedy of the commons’ would be more accurately described as the tragedy of the market . Anyone who disputes the truth of the argument needs to explain why the over-riding objectives of the
The competitive cesspool
So far we have looked at the functioning of the market in relation in what ought to be the showcases of global capitalism – the richest ‘market economies’ of the past two centuries.
For many years, the contribution to prosperity and welfare of the collective, less individually selfish factors – political struggles, trade unions, welfare systems, state regulation, subsidies and public ownership – has been in the shadows, seen as holding back progress or, at best, mopping up in the dark corners where market forces cannot yet reach.
But a consideration of the evidence points in another direction – that the capitalist market, to the extent that it really is free, not impeded, regulated, rescued or supplanted by state or other non profit-seeking collective actions, results in the following:-
Impoverishment of the majority – a polarisation of wealth and income, so that the rich get richer and the masses get poorer; not merely an increase in inequality (which is conceded by most pro-market commentators) but a driving down of the living and working conditions of most of the people, preventing them from having access to the benefits which human productive activity could otherwise offer.
Social and environmental destruction – by paralysing the capacity of people to act collectively to address their shared problems, the market creates disasters and social tragedies and obstructs their solution.
Failures of development – because human and material resources are applied according to what is profitable for the shareholders and executives of individual firms rather than what is beneficial for overall optimum economic development, the market causes chaotic, unbalanced, wasteful and interrupted growth rather than progress towards meeting human needs.
But when the beneficence of the market is clearly exposed as a fraud, it is asserted that, in a competitive world, there is in any case no alternative but to play the game. The Common Council of Newark in the 1860s refused to build a sewerage system because the necessary taxes might put off capitalists who could invest their money in cheaper cities. Gordon Brown at the British TUC in 2005 invoked the competitive challenge of
The defeats of communism in the East, social democracy in the West, and the state-led developmental models of the South are usually held to provide a negative answer to this question. But, as we have seen, the rise of
Portrait of the
US Department of Labour: http://www.dol.gov/asp/programs/history/chapter4.htm
The New Deal: http://www.u-s-history.com/pages/h1851.html
US Bureau of Labour Statistics: http://www.bls.gov/opub/cwc/cm20030124ar04p1.htm
CIA World Factbook: http://www.cia.gov/cia/publications/factbook/geos/us.html
Doug Henwood, After the New Economy, The New Press, 2003
US Census Bureau: http://www.census.gov/hhes/www/income/income04/prs05asc.html
Heritage Foundation: http://www.heritage.org/Research/Labor/wm808.cfm