Those in the upper 50% of income earners, but below the top 10% have seen their incomes fall by 2/3rds compared to the top 1%. These "privileged" workers have lost more, comparatively, than anyone else in America since Reagan took office. But they're the ones the GOP is trying to blame for the ultimate failure of Reagonomics in all its ultiimate trickle-down glory. |
Manufacturing is no longer the prime engine of the economy. Finance has eclipsed manufacturing, and a large retail consumer sector, supported by extensive consumer credit, has also grown enormously. The largest employer in the current era is Wal-Mart. And while the automotive sector was based on skilled, high-waged, full-time jobs with benefits in high-tax, high-service Rust-Belt states, the discount consumer retail sector was based on low-waged, low-skill, part-time jobs with no benefits in low-tax, low-service Southern and then more generally Sun-Belt states.
The spread of auto manufacturing and the related industries-direct parts supplies, replacement manufacturers, dealerships, auto-supply stores, mechanics, etc.-meant both the spread of millions of high-wage jobs and the spread of tremendous, broadly-shared earning power, which in turn poured billions and billions of dollars into state and local economies all across the land. It was enormous prosperity-generating machine.
The spread of Wal-Mart represented the exact opposite, as I summarized in a story I wrote for Random Lengths News in 2003, when the major Southern California grocery chains tried to break their unions, using the threat (not reality) of Wal-Mart invading their territory to argue that they had to slash labor costs in order to remain in business. At the time, I wrote about how it was not the "free market" but an amazingly far-reach system of government subsidies that had been the foundation for Wal-Mart's incredible economic growth. And the root foundation of that subsidy system was the low wage structure of the South, which itself was based upon various forms of exploiting the higher-wage, higher-tax, higher-service based economy of the North. The low-wage structure of the South allowed Wal-Mart to keep much more of its corporate income, by virtue of paying much less in wages. It was able to gain much more subsidies-as businesses were always able to gain more favorable subsidy packages in the South. And with the high profit margins from its Southern base, it was able to expand outward, and undercut competitors in more expensive markets, driving them out of business, often with the help of multiple forms of subsidy. It was, in short, the exact opposite of the wage-raising, tax-raising, service-raising dynamic brought about by the spread of the UAW-based auto industry.
The logic of the auto industry had been a unified one: good jobs meant good pay that drove demand for all sorts of other goods, all sorts of other good jobs, in turn driving more demand for more automobiles. Not only were production, wages, buying power and consumption all connected in a "virtuous circle", so too were taxes and public services, including quality education that allowed newly middle-class blue collar workers to send their children to college.
The logic of Wal-Mart, and others like it, was just the opposite-a vicious circle in which everything was driven downhill. High wages were nowhere to be found in its equation. And so the focus was on cutting consumer prices. Everything was sacrificed for that end. But cutting prices inevitably meant that everything else would be cut as well, either sooner or later. As long as some folks remained well-paid, this worked out very well for them. But the longer the pattern played out, the fewer and fewer well-paid workers (and thus, well-paid consumers) there were. And it wasn't just fewer and fewer well-paid workers, but fewer and fewer independent business, too. And more and more tax subsidies chasing a few large businesses who played off different cities, counties and states against one another, further reducing the quality of services as well
The logic of industrial America was not perfect. In fact, it had some very serious flaws in it. For one thing, the industry generated a great deal of waste, including vast amounts of pollution. It also generated tremendous inefficiencies that would not be seen as such for many, many years-traffic jams that wasted people's lives by hours at a time, for example. But there was a sufficiently robust system of positive feedback loops in the system that these flaws could have been corrected-some much more easily than others, as shown by the advent of catalytic converters, for example, or the dramatic advances in fuel efficiency when this was required by law.
Unfortunately, when the economic model underwent strain in the 1970s, fixing these flaws was not the first priority of the industries involved. Instead, they made choices that contributed to, and were part of, the overall shift to the finance/retail credit/consumer discount economy. And this is what we've been living with since the age of Nixon, Ford, Carter, and finally, Reagan.
The Wall Street/Wal-Mart model was never economically viable. It always depended, ultimately, on drawing down the reserves that had been built up by the industrial model that preceded it. And yet, it was very good at propagandizing on its own behalf. Indeed, right now, as it is teetering on the brink of utter self-destruction, it is doing a marvelous job of shifting blame to one of the core driving forces of the very prosperity it has been squandering over the past four decades-that force is the UAW.
In part II, I will draw on three recent documents to elaborate this argument. One is an interview on Democracy Now! from yesterday with union activist and writer Gregg Shotwell, a thirty-year General Motors retiree. The second is a Washington Post Op-Ed by Harold Meyerson, which reviews some of the ways in which the UAW has been crucial to building both the American middle class, and the broader range of progressive American politics. The third is a list of various public subsidies for foreign automakers over the past 28 years, totally over $3.5 billion dollars-nearly $4.7 billion, adjusted for inflation. Together, these documents show how the argument I'm making here can be fleshed out in various directions.
Then, in part III, I will take up the issue of how an ambitiously pro-active alternative plan can do much more than just rescue the domestic auto industry-it can help lay the foundation for an entirely new economy, not just technologically new, but new in its basic conception of how wealth is jointly created, husbanded, and expanded for future generations, not just here in the US, but on a world-wide basis that helps form the foundation for lasting global security as well. The point of this third part is quite deliberately the opposite of the reigning Versailles ideology of "pragmatism." It argues, in short, that we have reached a crisis point beyond which incrementalism and "practical" compromise are doomed. There is no longer anything practical about continuing along this failed pathway. The only practical path available to us involves a radical restructuring of how we put the pieces of our social, political, economic and technological world together. |
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