Re: [Marxism] Brooks column (Was Wage share...etc.)

[Marvin Gandall <marvgandall@xxxxxxxxxxxx>]

On September 8, Sayan Bhattacharyya wrote:
> Yesterday David Brooks published an op-ed in the  New York Times
> which, however, cites statistics to show that workers over all are not
> getting smaller slice of pie, that offshore outsourcing is not
> decimating employment, that jobs are not more insecure, that workers
> are not stuck in dead-end jobs, and that declining unionization has
> not been driving force behind inequality.
>
> I would be interested in knowing about counter-arguments to the points
> Brooks makes, so that we can argue back to him and his likes.
----------------------------------------------------------------
I think we should start by acknowledging there is some truth to his point
that "the populists, who usually live in university towns, paint a portrait
of unrelieved misery that badly distorts reality." The fact is that
capitalism has expanded and demonstrated remarkable resiliency and has
delivered improved living standards over the past century, contrary to the
early predictions by the classical Marxists that the world system was on the
verge of collapse and socialist revolution. Especially in the past two
decades, rapid advances in technology and communications and the
simultaneous collapse of the fSU and transformation of China have both
improved productivity and opened up vast new pools of cheap labour for US,
European and Japanese firms, resulting in record levels of profits.

But it is one thing to deny the existence of mass immiseration and another
to make the leap, as Brooks does, that "workers over all are not getting a
smaller slice of the pie". While he does concede a "big rise in inequality",
he sees this only among those he knows best: "middle managers
(who) are falling behind top executives...within the office parks, among
people who were never unionized". Beyond that, he sees nothing, asserting
that "the working class is not falling behind the middle or upper-middle
class" - an unsupported claim contradicted by the overwhelming mass of
statistical and anecdotal evidence.

For example, a hasty and partial search of my files yields the following:

* US government figures show that profits from current production as a share
of national income rose from 7 per cent in mid-2001 to 12.2 per cent in
2005 - a shift unprecedented since the collection of these statistics began
in 1947. ("US groups boost share of economic pie", Financial Times, June 4
2006).

*US census data indicate median household income fell 3.8 percent or $1,700,
from 1999 to 2004 - also the first time since the government began
collecting the data that median household income has lagged behind inflation
through five straight years of a recovery. While prices have fallen for
consumer electronics, basic foodstuffs, and clothing, these have been
counterbalanced by soaring costs for the big-ticket items which really
matter to working class Americans - housing, college education, health care,
and child care.  ("Stagnant Wages? Made in USA", Boston Globe, April
1,2006 ),

*A study by Northwestern University's Robert Gordon reveals annual income
growth of the top 1 per cent of Americans having grown by 3.4 per cent since
1973 compared to a paltry 0.3% annually for the bottom 90 per cent over the
same period. The difference between the earnings of chief executives and the
average American rose from a multiple of 26 to more than 300
between1973-2004. Nor has social mobility, that great American myth,
mitigated the growing disparity in earnings. A study by the liberal Center
for American Progress earlier this year showed the chances of Americans
remaining in the same income bracket as their parents is higher than in
every other developed country barring the UK. ("Blue-collar US sees a
precarious future" Financial Times May 2 2006)

*Real wages have declined by 0.3% since 2000 and are only now starting to
catch up. ("Wages Fail to Keep Pace With Productivity Increases, Aggravating
Income Inequality", Wall Street Journal, March 27, 2006).

I don't have the documentation handy, but it's widely accepted that the
rising cost of benefits, which are also notionally included in employee
"income", are no longer being passed on to workers as improvements but are
being transferred to the health care and insurance industries. In fact,
soaring benefit costs are now being used by employers in both unionized and
non-union firms to roll back existing medical and pension plans across all
industries.

These are not, as we know, uniquely American trends, nor are they restricted
to the least educated and poorest paid sectors of the working class. A
recent Economist article on growing global social inequality notes "the
evidence is that the low-skilled are not the only people being squeezed. In
America, the euro area and Japan, total wages have fallen to their lowest
share of national income in decades, whereas the share of profits has
surged. This is exactly what would have been expected, given that the
integration into the world economy of the emerging economies has sharply
increased the ratio of global labour to capital." ("On the Hiking Trail",
Economist, August 31 2006)

If, as would appear, we are at the tail end of a recovery, and the US
housing downturn now underway presages a US recession - or even, as some
fear, a global depression - Brooks' column may seem a lot more bitterly
outdated one year from now than it does today.

A word on Brooks' comment that offshore outsourcing is not "decimating
employment". That's largely true because of the limited number of
"tradeable", ie. outsourceable, jobs, but outsourcing has depressed wages,
on which Brooks is conspicuously silent - as he is, incidentally, on the
crushing debt load which has provided the fragile prop for mass purchasing
power.

The "efficiencies" which Brooks lauds from outsourcing refer to the increase
in corporate profitability based on cheap labour which has presumably
allowed the multinationals to "create more jobs at better wages" at home.
Brooks here appears to be borrowing from a recent controversial paper by two
Princeton economists presented to last month's meeting of central bankers in
Jackson Hole, Wyoming which argues that outsourcing has, on balance, had
more positive than negative effects on American workers. But their own
calculations also showed that between 1997 and 2004 the productivity and
profit gains to US corporations from moving operations abroad, whatever the
employment effect, was not large enough to offset an overall downward
pressure on US wages, particularly at the lower and middle rungs of the wage
scale. So while it may be true that outsourcing has created more highly paid
jobs, the evidence is all in the other direction that it has created more
and better jobs in total than it has destroyed, which is really at the core
of the debate over outsourcing. If the highest-salaried executives,
managers, and professionals who have benefited from outsourcing represent
for Brooks an example of "the meritocracy...working almost too well", for
most Americans outsourcing has become a symbol of the widening inequality
and deteriorating working conditions which Brooks' article denies and their
own daily experiences confirm.

Finally, not having read the paper by the Berkeley economist which he cites,
I don't know on what basis Brooks can conclude that "declining unionization
has not been the driving force behind inequality...that de-unionization
(only) explains between 10 and 20 percent of the rise in inequality, and
that effect was probably strongest decades ago." I think it's self-evident -
not least to employers who will use all legal and illegal means to keep them
out - that unions boost pay and benefits when they are allowed to organize
freely across industries, and that if unionization is no longer as much of a
factor in reducing disparities in income and power than it was "decades
ago", it is the result primarily of the sharp drop in union density
precipitated by the exploitation of cheap labour abroad and reactionary
labour legislation at home applauded by Brooks and his ideological kin.

Below, more ammunition from Paul Krugman refuting his fellow columnist
Brooks, without naming him, in yesterday's New York Times:

*    *    *

Whining Over Discontent
By PAUL KRUGMAN
New York Times
September 8, 2006

We are, finally, having a national discussion about inequality, and
right-wing commentators are in full panic mode. Statistics, most of them
irrelevant or misleading, are flying; straw men are under furious attack.
It's all very confusing - deliberately so. So let me offer a few clarifying
comments.

First, why are we suddenly talking so much about inequality? Not because a
few economists decided to make inequality an issue. It's the public - not
progressive pundits - that has been telling pollsters the economy is "only
fair" or "poor," even though the overall growth rate is O.K. by historical
standards.

Political analysts tried all sorts of explanations for popular discontent
with the "Bush boom" - it's the price of gasoline; no, people are in a bad
mood because of Iraq - before finally acknowledging that most Americans
think it's a bad economy because for them, it is. The lion's share of the
benefits from recent economic growth has gone to a small, wealthy minority,
while most Americans were worse off in 2005 than they were in 2000.

Some conservatives whine that people didn't complain as much about rising
inequality when Bill Clinton was president. But most people were happy with
the state of the economy in the late 1990's, even though the rich were
getting much richer, because the middle class and the poor were also making
substantial progress. Now the rich are getting richer, but most working
Americans are losing ground.

Second, notice the amount of time that inequality's apologists spend
attacking a claim nobody is making: that there has been a clear long-term
decline in middle-class living standards. Yes, real median family income has
risen since the late 1970's (with the most convincing gains taking place
during the Clinton years). But the rise was very small - small enough that
other considerations, like increasing economic insecurity, make it unclear
whether families are better or worse off. And that's the point: the United
States as a whole has grown a lot richer over the past generation, but the
typical American family hasn't.

Third, notice the desperate effort to find some number, any number, to
support claims that increasing inequality is just a matter of a rising
payoff to education and skill. Conservative commentators tell us about wage
gains for one-eyed bearded men with 2.5 years of college, or whatever - and
conveniently forget to adjust for inflation. In fact, the data refute any
suggestion that education is a guarantee of income gains: once you adjust
for inflation, you find that the income of a typical household headed by a
college graduate was lower in 2005 than in 2000.

More broadly, right-wing commentators would like you to believe that the
economy's winners are a large group, like college graduates or people with
agreeable personalities. But the winners' circle is actually very small.
Even households at the 95th percentile - that is, households richer than 19
out of 20 Americans - have seen their real income rise less than 1 percent a
year since the late 1970's. But the income of the richest 1 percent has
roughly doubled, and the income of the top 0.01 percent - people with
incomes of more than $5 million in 2004 - has risen by a factor of 5.

Finally, while we can have an interesting discussion about questions like
the role of unions in wage inequality, or the role of lax regulation in
exploding C.E.O. pay, there is no question that the policies of the current
majority party - a party that has held a much-needed increase in the minimum
wage hostage to large tax cuts for giant estates - have relentlessly favored
the interests of a tiny, wealthy minority against everyone else.

According to new estimates by Thomas Piketty and Emmanuel Saez, the leading
experts on long-term trends in inequality, the effective federal tax rate on
the richest 0.01 percent has fallen from about 60 percent in 1980 to about
34 percent today. Meanwhile, the U.S. government - unlike any other
government in the advanced world - does nothing as more and more working
families find themselves unable to obtain health insurance. The good news is
that these concerns are finally breaking through into our political
discourse. I'm sure that the usual suspects will come up with further
efforts to confuse the issue. I say, bring 'em on: we've got the arguments,
and the facts, to win this debate.





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