Cinching Our Belts With No Economic Recovery

LOUD VOICES FROM the
worlds of business and
government have called
for people to pay a larger
share of the costs of their
maintenance. These voices
call for cutting back on
payments to working people in wages,
healthcare, retirement pensions, social
security, and welfare. Tax support for education
has dropped, and students and their
parents are called upon to pay more.
Grants for higher education are disappearing.
Some of these have been converted to
student loans, but even these are much
harder to come by. Meanwhile, the cost of
public utilities like water and power has
risen dramatically, as of course has the cost
of health care.
Conservatives scream about job losses
when the minimum wage is raised 25 or
50 cents an hour. They should save their
breath. The Illinois minimum of
$8.25/hour or the federal minimum of
$7.00/hour doesn’t matter much now; by
global standards these wages are already
way too high and the jobs long gone.
Want to see jobs come back? Try minimums
somewhere between $1.00 and
$4.00 an hour.
In a world where business and money
can and do go all over, why should any
company pay an assembly-line worker
more than the $1 per hour it costs in China
or the $2 per hour it costs in Mexico? But
while we are at it, why pay a college-educated
engineer, doctor, lawyer, accountant,
or teacher more than $12,000 to $20,000
per year? Licensing and regulation currently
protects professionals from global competition,
but that can be changed.
In addition to financial costs, the majority
of citizens are being told to give over
more of their time; between increases in
the retirement age and longer work-weeks
without overtime, the very lives of citizens
are being sacrificed to production and
profit in the name of “progress.”
All this amounts to quite a squeeze!
It may hit the “working-class” and poor
hardest, but it’s coming for almost everyone.
But how can this be? Both the U.S.
and the global economy have grown enormously
over the past few generations. In
this sense then, there is no problem
“affording” wage increases, benefit increases,
a stable social security system, and long
and secure retirements. If you look at raw
wealth and productive capacity, you’d be
misled into thinking that every generation
should be able to enjoy higher wages, better
health care, and still be able to retire
earlier than the previous generation. So
why are we talking about cutbacks instead
of increases all the time?
The answer is simple: markets are fundamental
to both the U.S. economy and
the global economy. Markets are the main
way goods and services, and jobs and payments
are distributed. However, markets
do not say, “Gee, lets see how much has
been produced; Ok, it’s a little more than
last year, so everyone will get a little more.”
Instead, in markets it’s, “ask not what the
economy can do for you; ask what you can
do for the economy;” or, what you can do
to the economy. Your benefits are directly
tied to your power for good or for harm. If
you are powerless, you’ll get no cash and
no attention.
That’s the secret. Technology has rendered
much routine labor obsolete, while
colonialism left a legacy across the world
of extremely unequal wage rates. When
placed head to head, those in “the West”
who benefited most and first from social
and technological revolutions are now the
least competitive. The more global and
technologically advanced the economy,
the less most people will be able to personally
contribute. So they will eventually
get paid less too. That’s how things work
in markets. This may be of some comfort,
though not much, to people elsewhere
who live in poverty under oppressive conditions,
and who are now getting the lowpaid
jobs. It is of much more comfort to
owners and entrepreneurs who profit
from this competition.
As productive power shifts from
Europe, North America, Japan and Korea
to countries like China, India, Indonesia,
Viet Nam, Egypt, Nigeria and Brazil—and
those places with raw material reserves—
unions, whether cohesive as in many parts
of Europe or fragmented as in the US, lose
bargaining power. The ultimate threat, the
strike, is defanged. “You want to strike?
Well, we were thinking of moving the
plant in five years anyway, maybe we’ll just
do it now.” It is worthwhile to note that
unions in China, working under conditions
more oppressive than here, have
recently been able to achieve wage gains of
ten to twenty percent a year. That’s the
advantage of not being priced out of the
market right from the start.
Union power combined with political
action pushed wages up in the old industrial
countries, and that led to an expansion
of benefits, pensions, and government-
run programs. Another secret is that
the confidence and self-respect with which
workers once formed unions gave entrepreneurs
and property owners the clue that
investment in workers can be worthwhile
when dealing with socially and technically
skilled people who know what they offer.
But the current economic situation
deprives many unions here of any power,
and with their powerlessness come
reduced wages and cutbacks in benefits,
pensions, and government programs. Since
unions cannot demonstrate how workers
here are essential, they cannot persuade or
coerce anyone into paying us. Except for
technical experts, resource owners and
entrepreneurs, we are worth less, a lot less
on the market than we have been led to
expect. Successful property owners and
entrepreneurs, making their money mostly
outside this country, don’t understand why
they should support us with their taxes any
more than necessary to avoid the worst of
social disruptions.
So when will we bounce back here?
When will all budgets be balanced and
ordinary people start again to improve
their standard of living? I don’t seriously
expect that to happen until either this
country retreats into a drastic form of protectionism,
or wage rates, working conditions
and benefits become reasonably similar
across the globe.