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The Crisis

A View from Occupied America

William K. Tabb (wktabb@earthlink.net) is the author, most recently, of The Restructuring of Capitalism in Our Time (Columbia University Press, 2012). He has taught economics at Queens College and was on the faculty in economics, political science, and sociology at the City University of New York Graduate Center. This essay is drawn from his opening plenary presentation at the 2012 Left Forum in New York City.

The theme of the 2012 Left Forum, “Occupy the System—Confronting Global Capitalism,” calls for a historical imagination informed by a realistic sense of where we are. To occupy the system is first to be aware of the system as a system—a system of unequal privilege and control. It requires that we occupy the narrative of public debate, which is something the Occupy movement, to a remarkable degree, has been able to achieve. Even President Obama, who so far has followed the economic policies of his Wall Street-friendly advisers, has used campaign rhetoric taken from Occupy Wall Street. But this time around voters are hardly convinced that the “Change” Obama promised last election will happen through the existing system.

The breath of fresh air from Occupy and related activism challenges corporate power and capitalism. It rebukes the dominant political parties, which are dependent on the 1% for their funding and in turn represent them in Congress. As Gordon Lafer has said, “If the Republicans are cheerleaders for the 1 percent, most Democrats are quiet collaborators.”1 Both parties have accepted that the major problem facing the country is the deficit—which of course it is not. The project of class-coded austerity (complete with bad cop Republicans and good cop Democrats) is deemed unavoidable, both to pay for the mess and to continue enhancing the wealth and power of the 1%. Neither party wants to discuss what has happened to working people over the last three decades, a scenario which is likely to continue as incomes stagnate or fall for the vast majority of the 99% and wealth and power further concentrate at the top. This not just true for the 1%, but also for the one-tenth of 1% and even the one-one thousandth of the 1%—that is, those billionaires who decide who the viable candidates are and what economic policies Congress and the media should take seriously.

While this recognition is hardly new to Monthly Review readers, there is a sense among Americans, in numbers not seen for some time, that capitalism is losing (and, for many, has already lost) its legitimacy. There is also an understanding that the dominance by a small, corrupt, and exploitative elite is under challenge, as the upsurges from Cairo to Moscow witness. Around the world massive numbers are looking to a post-capitalist social structure based on participatory democracy and social control over the economy, and a displacement of the 1%—the elites and the ruling classes.

Whatever the Dow Jones stock average reads, the crisis for working people will continue for many years at an intense level of suffering and insecurity. Profitability and growth can pick up in the precincts of monopoly capital, while still leaving working people with less and less of the surplus they create. This is both a general aspect of capitalism and a specific trait of this period of rapid financialization that has become globalized alongside the concentration and centralization of transnationalized corporations. There is a growing awareness that the policies the 1% are imposing as their solution to the crisis will actually make things worse—even if the so-called recovery continues in the United States and can miraculously appear in Europe. The preferred policies of the ruling class prefigure a recovery that will allow a tightening of their control.

Some of the basic numbers have been presented in these pages by Michael Yates. The extreme class redistribution of the surplus cannot be overestimated. Between 2009 and 2011, 88 percent of national income growth went to corporate profits, while just 1 percent went to wages. In terms of personal income, in 2010 (the last year for which we have data) 93 percent of all income gains went to the top 1 percent of Americans. In terms of economic inequality, the CIA’s World Factbook puts the United States behind Cameroon and the Ivory Coast, but just ahead of Uganda.

Largely because of Occupy the press has done a better job of reporting the release of disturbing government statistics. In December 2011 the Associated Press reported:

Squeezed by rising living costs, a record number of Americans—nearly 1 in 2—have fallen into poverty or are scraping by on earnings that classify them as low income. The latest census data depict a middle class that’s shrinking as unemployment stays high and the government’s safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.2

It turns out that over 97 million Americans fall into a low-income category (defined as earning between 100 and 199 percent of the poverty level). Total employment did not grow at all between 2001 and today, and proportionately fewer people are employed in every age group of workers from sixteen to fifty-four. Ironically, it is only retirement-age workers who are actually working more; this is because their retirement has been taken away by changes in corporate pension practices and they cannot afford to stop working. The decline in available work is particularly bad for young people sixteen to twenty-nine. A majority of new college grads are either unemployed or working jobs that do not require a college degree. With an average college debt of over $25,000 many face a life of debt peonage akin to indentured servitude. Unprecedented numbers of college graduates have been forced to move back home.

Things are particularly desperate for young people of color and those without high school degrees. For African-American men, one in three spends some time in prison; for those who do not get high school degrees, it is two in three. Between 1969 and 2009 the median earnings of men who completed high school, but did not go to college, fell 47 percent. Women’s incomes have improved to the point that they are on average all of 80 percent of men’s; but this is not primarily the result of increasing wages for women, but rather because so many men are doing so poorly.

The trends for working people have been bad for decades. This is something that must be stressed. We are not in a temporary crisis but a long standing systematic attack on the lives of working people. From 1973 to 2006 (the year before the current deep crisis began), real wages grew by less than 1 percent, even while productivity increased by more than 80 percent. That is, the gains from the work we do went almost exclusively to capital. In the wake of the ensuing crisis, it is the height of chutzpah (to use the technical term) for business lobbyists to call for all manner of additional tax cuts for the 1% and changes in regulation—changes that will do nothing to create jobs, but instead will grow inequality to still greater heights, while damaging the environment and making work less safe, less healthy, and more onerous for workers. What should be clear is that the policies now being pushed on us are the same ones that led to the collapse of the economy, and in fact will lead to greater inequality, just as they have done in the past. Inequality itself, as economists are now establishing, makes downturns more frequent and deeper. Even economists from the International Monetary Fund, of all places, suggest that inequality and unsustainable growth are two sides of the same coin.3

This pattern has been going on for three decades under both Republican and Democratic presidents. During the Clinton administration in the 1990s, the top one percent garnered 45 percent of the increase in disposable income in this country. In the 2000s under George W. Bush, the 1% received 73 percent of the same increase.

The 1% now has more private net wealth than the bottom 90 percent, and the fastest growing group within the 1% are the Wall Street financial types who brought the economy low. You can find the top one-tenth of 1% and the top one-hundredth of 1% on Wall Street, running the large transnationals, where they offshore jobs and cash in options from appreciating stock that results when they lay off workers and then speed-up the remaining employees, whose benefits they have taken away.

The budget crisis is not because Obama is “the food stamp president.” It is because the rich do not pay taxes anywhere near the levels they did in the postwar period when progressive movements were strong. The number of Americans receiving food aid from the Supplemental Nutritional Assistance Program (SNAP, which replaced Food Stamps in 2008) hit an all-time high this past summer: 44.6 million people, which is almost 15 percent of the country. But they are enrolled in this program because in this hideous economy so many desperately need such help to feed themselves and their families.

Since Mitt Romney was forced to release some of his tax returns, Americans have become better acquainted with the use of Swiss banks and tax black holes in the Caribbean. In 2008, eighty-three of the one hundred largest U.S. companies maintained subsidiaries abroad making tax evasion not a very difficult task. Citigroup alone had over 400 tax haven subsidiaries—ninety-one in Luxembourg and another ninety in the Cayman Islands. Moreover tax lawyers and avoidance accountants see to it that the 1% pay a radically decreasing proportion of taxes collected. According to the U.S. Treasury Department, the average effective corporate tax rate paid was 13.4 percent in 2007, which was substantially lower than in other rich countries.

An early 2012 story in the Wall Street Journal said “U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view.” And what is this puzzling phenomenon? It is that “Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.”4 That is the Wall Street Journal, not the Occupied Wall Street Journal. The source for the story, and the radicals who presented the “puzzling” data, was the non-partisan Congressional Budget Office.

The federal government spends 24 percent of GDP but collects only 15 percent of GDP in tax revenues. There are two ways to close the gap. The first—the one which the Democrats, Republicans, and Wall Street all agree on—is to cut back. But the alternative is to demand seriously raising the taxes on transnational corporations, international finance, and the 1%. Capital understands this and prefers to use the crisis to force down government spending and destroy public unions, which now represent more workers than private sector unions, thereby using the crisis to their long-term advantage by reducing the organized power of labor.

A good deal of energy and new information is percolating in communities across America as a result of the heightened activism. While the general thrust is not yet anti-capitalist, the politics carry a powerful moral critique of the system. It is clear to many, as Michael Zweig of U.S. Labor Against the War has written, that “Budgets are not just arithmetic documents. Budgets are also moral documents.”5 Budgets reflect the choices we make as a society. There is nothing necessary about who pays how much in taxes and who gets what benefits from spending. The right’s insistence that the military is sacrosanct and wars of choice, that murder untold victims, are necessary to fight something called “terrorism”—while we do all too little for jobless, homeless veterans, and other working-class people—is itself a choice. This moral arithmetic matters, and so do the numbers. Zweig says that the amount taxpayers spent on the wars in Iraq and Afghanistan in 2011 was enough to have prevented all the deficits in all fifty states (and of course the loss of countless lives and untold suffering in those now-devastated countries). Budgets, and how they are paid for, are political and moral choices that reflect class power.

As a senior Bank of England economist has suggested, the system is now in a “doom loop.”6 Debt creation brings huge compensation for bankers, while financial bubbles and collapses are resolved by taking tax dollars to save the 1% from paying for the consequences of their actions. The financialization centered in New York and London has now spread globally,7 and economic crises are now globally synchronized.8

We have been through all of this before in the Great Depression. From 1923 to 1929, 70 percent of the income increase went to the richest 1% and only 15 percent to the bottom 90 percent.9 Inequality was at the core of the Great Depression, just as it is in the current crisis. Unions were weak, farmers were leaving the countryside, and new immigrants flowed into the cities, which cheapened labor costs. Income inequality grew, financial speculation reached new heights, and low wages created insufficient demand for goods and services, all of which led to the crash.

A key difference between now and then is that in the 1930s everyone suffered—including the 1%, whose fortunes were diminished and whose class confidence was shaken. As a result, the more far-sighted members of the ruling class embraced Keynesianism to revive the economy and, after fierce resistance, accepted the unions (which at the time were backed by a militant mass movement). In comparison, today the 1% have done quite well in the crisis. Wall Street was bailed out and corporate profits, bonuses, and stock options have increased. There is a sense that not only can they make workers pay the cost of the crisis caused by the 1%, but that the 1% will actually come out stronger for it. The resistance they are meeting globally suggests this may not be the case.

Everywhere the question is the same: Who pays for the crisis, capital or labor? Governments of the 1% have one answer. The people have another.

The center political parties, both left-center and right-center, have lost the confidence of people everywhere. The traditional economic tools of Keynesianism, while better than the false promises of pro-business budget and tax cuts, are inadequate to make the needed changes. Stimulus is better than no stimulus, but in a world in which most of the gain goes to the 1%, this does not solve the structural crisis either. The 1% continue to claim the lion’s share of whatever short-term growth is created. Keynesians have underestimated the extent to which tax cuts now end up in the hands of the 1% and feed speculative excess. What matters is who receives the surplus a society produces and how it is used.

Only a powerful left movement of the kind built in the 1930s, and that appears to be rising again—and not just in the Middle East, the United States, and Europe—can change this.10 The active resistance that is breaking out in countries around the world—resistance to the elite rule over our lives by the 1%—suggests that we may be in the process of creating a movement to build another world.

The U.S. Chamber of Commerce, one of the most class-conscious organizations in America, opposed the New Orleans living wage ordinance by filing an amicus brief with the Supreme Court of Louisiana. The Chamber declared that “Living wage proposals are economically unfair because they change the basis on which our economy operates.” And they are right.

In a similar tone of alarm Frank Luntz, perhaps the most important Republican strategist alive, two months after Occupy Wall Street took up residence in Zuccotti Park told the Republican Governors Association, “I’m so scared of this anti-Wall Street effort. I’m scared to death. They’re having an impact on what the American people think of capitalism.” And he was right too. These folks are right to be scared.

The opinion research firm GlobeScan began tracking people’s views in 2002; that year, four in five Americans (80 percent) saw the free market as the best economic system for the future. (This was the highest level of support among all of the countries surveyed.) But support started to fall away in the years following and has plummeted since 2009—falling 15 points in a year. Now, fewer than three in five (59 percent) see free-market capitalism as the best system for the future. “This is not good news for American business,” GlobeScan’s head suggests.11 Surely this is an understatement.

The thought behind the next stage of “occupy the system” is that militants need to call attention to how each of the areas of struggle—from health care, quality education for all, and environmental sustainability to ending the systematic imprisonment and warehousing of black men, and to full employment and equal opportunity—are connected. We live in a toxic system that must be confronted in its global dimensions. Our problem is not with abuses of an otherwise sound system. Our problem is the system.12

Notes

  1. Gordon Lafer, “Why Occupy Wall Street Has Left Washington Behind,” The Nation, November 14, 2011, http://thenation.com.
  2. 1 Associated Press, “Dismal Prospects: 1 in 2 Americans Are Now Poor or Low Income,” December 15, 2011, http://usnews.msnbc.msn.com.
  3. 2 Andrew G. Berg and Jonathan D. Ostry, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” Research Department, International Monetary Fund, April 8, 2011, http://imf.org.
  4. 3 Damian Paletta, “With Tax Break, Corporate Rate Is Lowest in Decades,” Wall Street Journal, February 3, 2012, http://online.wsj.com.
  5. 4 Michael Zweig, “Beyond Wisconsin: Seeking New Priorities as Labor Challenges War,” in Michael D. Yates, ed., Wisconsin Uprising: Labor Fights Back (New York: Monthly Review, 2012), 239.
  6. 5 Andrew Haldane, “The Doom Loop,” London Review of Books, February 23, 2012, http:// lrb.co.uk.
  7. 6 William K. Tabb, “The International Spread of Financialization,” in Martin H. Wolfson and Gerald Epstein, eds., Oxford Handbook of the Political Economy of Financial Crises (New York: Oxford University Press, 2013).
  8. 7 See the valuable essay by Michael Mah-Hui and Khor Hoe Ee, “Fom Marx to Morgan Stanley: Inequality and Financial Crisis,” Development and Change 42 no. 1 (January 2011): 209–27.
  9. 7 José Gabriel Palma, “The Revenge of the Market On the Rentiers: Why Neo-liberal Reports of the End of History Turned Out to Be Premature,” Cambridge Journal of Economics 33, no. 4 (July, 2009): 4.
  10. 8 Jayati Ghosh, “The Emerging Left in the ‘Emerging World’,” MRZine, June 26, 2012, http://mrzine.monthlyreview.org.
  11. 9 GlobeScan, “Sharp Drop in American Enthusiasm for Free Market, Poll Shows,” April 6, 2011, http://globescan.com.
  12. 10 William K. Tabb, “Extending Occupy Wall Street’s Message and Critique,” International Critical Thought 2, no. 3 (September 2012) : 13.
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