|Crisis of US Capitalism or the Crisis of the US Wage
and Salaried Worker?
by James Petras
July 18, 2006
PROGRESSIVE, LEFTIST, RADICAL AND even a few ‘Bearish’ Wall Street pundits have been arguing for years about the coming collapse, decline or demise of US capitalism. No amount of continued growth of billionaires, millionaires and multimillionaires, record earnings by investment houses and double digit profit growth of major corporations can convince our doomsayers to re-think their prophecies. Nothing has discredited the US left more than its apocalyptic visions of the Big Fall, in the face of robust growth. Given the ‘long term’ or imprecise time frame and a ritualistic litany of profound structural weaknesses, their predictions are swallowed and regurgitated in the progressive media, websites and blogs where they are spread to a dubious public.
While the Left preaches ‘the crisis and end’ of US capitalism, most workers are complaining about the bigger take of their bosses, their intensified exploitation leading to rising productivity, their extended work day and work year because of cuts in vacation, sick time and holidays.
For too many years, the Left has premised an ‘awakening’ and presumable shift to the left by the working and middle classes on the ‘Collapse of Capitalism’ (COC). In fact this argument has ignored several crucial issues, which I will discuss.
The COC has not taken place because business, banking and the government have shifted the entire burden of adapting US capitalism to the demands of the market onto the back of the wage and salaried workers. What is called the ‘Crisis of Capitalism’ is in reality the ‘Crisis of Labor’, by which I mean several things: 1) the relative and absolute decline in living standards -- evident in the elimination of a) corporate-funded pension plans and the increase in worker payments to pension plans; b) the elimination or reduction in payments to health plans and the increased deductions from workers wages to pay for health, or the loss of any health coverage; c) the double-digit growth in the costs for energy, health, education and medicines which are not calculated in the consumer price index, used as a marker to estimate wage, social security and pension payments and d) the rising tide of ‘give backs’ by sclerotic, over-paid (six-digit) trade union executives, which decrease living standards and increase profits for the corporations.
The deregulation of environmental, workplace and consumer protection agencies has led to health problems and loss of income for wageworkers but greater profits for the corporate beneficiaries.
The central thesis of this paper is that the correct focus for a radical revival is in the intensification and extension of exploitation of labor, the environment and consumers by corporate capital, which enables the US corporate economy to continue growing and overcoming any momentary down-turn. Predictions of US capital collapse are built on a specious set of arguments, which are easily turned on their head and which misdirect our attention from the real tasks of joining the struggle at the workplace, the environment and in the sites of consumption.
Myths About the ‘End of US Capitalism’
Several arguments have been circulating for over a decade predicting the coming collapse of US capitalism. They include the following:
1. The US Budget Deficit -- annual and cumulative
2. The US Balance of Trade Deficit
3. The speculative nature of the US economy
4. The weakness of the US dollar
5. The energy crisis -- the high price of energy resources (‘Big Oil’)
6. The ‘unsustainability’ of the US model
7. The ‘export’ of skilled jobs overseas
Combined and separately, the proponents of the coming collapse have cited one or more of these arguments. While not dismissing these problems out of hand, they are not as serious as their proponents argue for a number of reasons.
While the prophets of the COC were breathlessly pointing to the ‘ballooning budget deficits’ leading to an economic implosion, the data for 2006 indicate a declining deficit from 3.2% of GDP predicted in February to 2.3% in July of this year, according to the US Office of Management and Budget. The reason is that tax revenues are projected to rise by 11% over the year -- largely from owners of capital and high earners whose profits, salaries, rents and royalty payments extracted from labor are at record levels. In other words, the budget deficit is declining because the exploitation of labor is intensifying -- earning greater wealth for the rich and, even with the big tax cuts, has led to increased tax revenues by 19%. (Financial Times, July 12, 2006 p.4) Individual income tax revenue has increased by 15% largely due to the profits accruing to small business owners who file tax in profits under the individual code.
While the deficit may increase after 2006, the point is that its financing via intensifying labor exploitation is the key issue, not some self-induced collapse.
In the meantime, the concentration and centralization of capital and the robust fees of investment banks proceed on their merry way: mergers and acquisitions of the first half of 2006 hit $1,930 billion dollars, a record number of billion-dollar deals. The driving force is the capacity of capitalists to cut labor costs, relocate to low wage areas, the high liquidity and low interest rates. The mergers and acquisitions all take place because there is no resistance by the ‘trade unions’ to any of management’s plant closures and demands for increased productivity and higher profits. Buyouts are hardly likely to take place where workers have a role in plant decisions, resist intensified speed-ups and cutbacks in wages and benefits.
No doubt in the next year or two there will be a sharp rise of bankruptcies resulting from over-indebted firms engaged in speculative acquisitions which fail to turn sufficient returns to pay the corporate debt contracted in the buy-outs. This is likely to lead to another chorus of the imminent ‘Collapse of Capitalism’… when in fact it will merely serve to enrich the bankruptcy billionaires who look to the process as an opportunity to invest in undervalued assets.
Budget deficits have traditionally been an argument raised by conservatives, especially bankers and the IMF because of their alleged tendency to stimulate inflation, and devaluate the currency, resulting in paying down debts with devalued currency. Keynesians and leftists on the other hand nave not opposed deficits, particularly if they finance employment and increase mass consumption. The joining of the Left with the conservatives in focusing on the deficit as a catastrophic event, is thus anomalous and out of keeping with the Left’s concern with demand side economics. The real issue is not the deficit but the way the deficit is structured -- based on tax cu