Natural Adversaries
By David Kendall
25 March, 2009
Countercurrents.org
In any debate regarding the current economic crisis, the antagonistic relationship between workers and investors seems most conspicuously missing from discussion. Everyone seems to have a solution for fixing the economy, and every theory is a little bit different. The best ones suggest placing purchasing power directly into the hands of consumers, which actually makes the most sense in terms of "fixing" the economy. But even this approach naively assumes a prevailing desire to actually "fix" or stabilize the economy. It also relies heavily upon cooperation from the US government, and as we've already seen, this doesn't seem very likely.
Like Barack Obama, Franklin Delano Roosevelt also received thousands of "open letters" from people all over the world advising him how to "fix" the broken economy. An insightful letter from John Maynard Keynes was among them, but FDR ignored it along with all the others. Roosevelt made genuine efforts to correct the unemployment problem of the 1930s, but nothing helped until World War II finally forced full-employment in the US. Even so, recession returned in 1954, immediately after the Korean conflict , and we've struggled ever since to minimize the many strategies of private investors to drive wages down. [1] Moreover, the US Government has been hijacked by Big Business for at least the past 30-years, and no longer functions as a safety net for the general interest.
So I'm afraid the overall problem is that US wages are simply too high to support investor confidence. The interests of investors and the interests of workers are directly opposed. Yes, there are plenty of other problems. But it always boils down to wages. The general function of economic crisis is to drive wages down. Even if Barack Obama's heart is in the right place, I doubt he can generate investor confidence in US wages compared with far cheaper labor in other countries.
Since before the Great Depression people have been shouting for "social revolution". There's never much agreement about how exactly this should be accomplished, but permanently removing human labor-power from the capitalist system seems the most obvious and proven approach. This can be done in the United States, as it's already been done elsewhere, by simply transferring labor-power to the cooperative system. With a little persistence and organized financial collaboration, business becomes far more regional and democratic. The cooperative movement nonviolently removes both wages and the tyranny of private investors from the economic system altogether, and voila! -- no more crisis.
No, it's not easy. But it is fairly simple: “Tyrants need not be expropriated by force; they need only be deprived of the public’s continuing supply of funds and resources.” [2] If we understand that human labor-power -IS- the “continuing supply of funds and resources”, then Rothbard's observation suggests some very practical application in terms of economic withdrawal -- a real-world "transition" from Capitalism toward Economic Democracy. [3]
For now, the interests of investors and the interests of workers are directly opposed. This mutual antagonism accounts for the instability of our current economic system. Workers strike for higher wages by withdrawing their labor from production. Investors strike for lower wages by withdrawing capital. But Instead of "investment strike", we politely refer to the latter as economic crisis, recession or depression. "The Hoover administration tried to popularize the word 'depression'. They thought this was a milder word that would somehow soothe a worried American public." [1]
However, the battle over wages threatens millions of lives and renders economic stability impossible. Insipid labels don't soothe the heated anger of homeless workers. But the miseries of "Hooverville" don't seem to alter their blind consent much either. Between 1929 and 1933, US investors withdrew 90-percent of their spending from the overall economy. Since wages are a direct provision of capital investment, consumer spending dropped 20-percent and $4-billion in consumer savings were depleted. [1]
Now, Bloomberg News reports $8.85-trillion is being hoarded by private investors. [4] Millions of US jobs have been lost and more of the same is on the horizon. Increased competition for jobs drives US wages down. Whether this is the intended goal or not, it is most certainly the result. The interests of investors and the interests of workers are directly opposed, particularly regarding wages.
Moreover, the capitalist economy will not automatically correct itself. It has no automatic self-regulatory device. [5] Quite the contrary, "an investment strike is a particularly formidable weapon, since it requires no planning or coordination to implement. Indeed, it will come into play 'automatically' if a government should come to power deemed unfriendly to business interests." [6] As long as labor is a cost of production, investors will be highly motivated to drive wages as close to zero as possible through capital flight and capital strike. [7] [8]
Assistant Secretary of the Treasury for the Reagan Administration and a nationally syndicated columnist, Paul Craig Roberts summarizes the function of capital flight: "The off shoring of American jobs is the antithesis of free trade. Free trade is based on comparative advantage. Jobs off shoring is an activity in pursuit of lowest factor cost -- an activity that David Ricardo, the originator of the free trade theory, described as the betrayal of one’s own country in pursuit of absolute advantage." [9] [10] Short-selling is another clever investment strategy. [11] But by yanking jobs out from under millions of workers, "short" becomes a mere technical term for aggressively leveraged capital strike.
The interests of investors and the interests of workers are directly opposed. On this essential point, not everybody agrees. In fact, most people tend to disagree. Sadly, the people who most vehemently disagree are those who stand to benefit the least from continuing the sick relationship. These people are called "workers". Their incomes are derived primarily from work, and they are paid in wages. White collar, blue collar, salary, hourly, middle-class and lower-class all fall into this general group. They also happen to comprise the vast majority of the human population, including a reserve army of unemployed -- "workers".
"Investors", on the other hand, is a term that refers to people whose incomes are derived primarily from ownership -- not wages. This group unanimously agrees (albeit very quietly) that the interests of workers and the interests of investors are directly opposed. This group also stands to benefit most from the adversarial relationship. Workers' lives depend upon wages while investors provide and control those wages. A general conflict of interest in this regard seems readily apparent. But there is no confusion amongst the tiny group of immeasurably powerful investors regarding -- wages.
Even as independent competitors, the decisions amongst individual investors tend to be very consistent, sometimes presenting the appearance of conspiracy or even central planning. If wages are too high or business is too regulated in a certain region, then investors either transfer investments to regions where wages are cheaper and business is less regulated (capital flight), or they stop investing altogether (capital strike). This is the main reason why Barack Obama's "regulation" will not likely "save Capitalism from itself". [12] The interests of workers and the interests of investors are directly opposed.
But while investors tend to be very unified in their understanding of Capitalism, workers tend to be stubbornly and chaotically divided. This is a powerful advantage for investors and a severe disadvantage for everyone else. Investors don't need to organize a union or meet in a secret room to plan an investment strike. Nowadays, they can do this from the comfort of their own homes, sitting in their underwear in front of a computer screen.
Investors simply understand how the capitalist system works and they respond -- "automatically" -- against the best interests of every life on the planet whose sustenance relies upon wages. Since private investment is the primary source of wages and workers have little or no control of those wages, workers always find themselves at the mercy of investors -- particularly regarding wages.
If we could all agree that this sick relationship is the root of all our socioeconomic problems, we might have withdrawn from it in favor of more balanced and sustainable arrangements a long time ago. But we don't all agree. Unfortunately, no matter how painful the abusive relationship becomes, most proud "Americans" continue chasing an illusion called "The American Dream". Since US wages are generally insufficient to maintain exorbitant levels of US consumption, brave Americans throw themselves head-long into debt to maintain their delusional pursuit of upward mobility.
All goes well for 40-years or so, even as Big Business continues to castrate labor and deregulate banking. Our trusted government plays along with the game, and nobody seems to notice. After all, we're getting what we always wanted, right? Something for nothing -- the "American Dream" -- Yay team.
But then the spring-loaded trap slams shut with a loud metallic "CLANK!" Workers suddenly lose their jobs and their homes, unemployment and crime escalate, and government officials point fingers at each other to evade the blame as a supposedly "liberal" administration not-so-coincidentally comes into power.
"Save us, Obama! Save us!" comes the desperate cry of the American middle-class as they look down in horror at the rest of society, "We don't want to be like THOSE people!"
But FDR didn't "save Capitalism from itself", and neither will Barack Obama. [12] Turns out the Japanese actually "saved" the American economy when they bombed Pearl Harbor in 1941. Expensive as they might have seemed, Roosevelt's “New Deal” programs were far too small to stop the avalanche of growing US unemployment.
Instead, the Great Depression finally ended with the vast production of the wartime economy. "Government spending, which had frightened Roosevelt when atop $15-billion in 1936, soared above $100-billion in the middle of the war. The massive government intervention in the economy finally brought full production and full employment." [1] And for a short time after World War II, fiscal policy seemed like an effective counter strategy for the ups and downs of investor confidence.
But now, even Keynesian government intervention seems awash, as Big Business controls our trusted government with seductive lobbying and campaign finance. Moreover, US workers are now confronted with an army of competition in the labor market imposed by civil rights, feminism, immigration and the hypermobility of capital driven by technological advancement. [6] [13] Forced into poverty by a US middle-class pursuit of the "American Dream", cheap labor in Mexico, India, China, Korea and the Philippines are now the greatest competitors for middle-class American jobs.
Justice is a funny thing, ain't it? Groping and grabbing and stabbing each other in the back, "Americans" stand on each other’s throats in a desperate attempt to ascend the corporate ladder of individual success. But the greatest obstacle to "The American Dream" seems to be -- "The American Dream" -- and there's not a thing that George W. Obama can do about it.
Thanks to all his Republicratic predecessors, the bulk of Uncle Tom's [14] "economic recovery plan" will most likely be paid to workers outside the United States -- because -- most of the world's manufacturing now resides outside the United States. [15] As Obama himself has observed, batteries for electric cars and hybrids are manufactured in Japan and wind turbines for electric power are manufactured in Europe. Meanwhile, Bill Gates and friends are pressuring the US Congress for more lenient immigration laws so that Microsoft and other US corporations can avoid hiring "American" workers within the United States. [9]
None of this comes as much of a surprise. Workers and investors are natural adversaries because their interests are directly opposed. Human beings tend to produce more than they consume, and human labor-power is the one commodity that creates more value than it costs to buy. But as long as labor is a cost of production, investors will try to drive wages as close to zero as possible. This conflict of human interest is the dysfunctional root of our entire economic system.
Eventually, the "marginal utility" of this sick relationship must come into question. Eventually this general dysfunction must be rejected and replaced. Most of our economic problems could be solved by permanently removing the antagonism between workers and investors with regard to wages. Since about 99-percent of us happen to be workers, the most obvious approach might be to get rid of both wages and investors to arrive at a more balanced and sustainable system of "Economic Democracy". [3]
But the proposal of a new economic model, or even reform agendas, only raises more questions about "transition". How can we possibly get from "here" to "there"? In this regard, the power of economic withdrawal seems largely misunderstood and grossly underestimated. If most of us can't even admit that the current crisis was created by collective consent, then how can we possibly reform or replace the existing model through either democracy or consensus?
Despite Barack Obama's flowery claims regarding faith and hope, it was "work" -- human labor and innovation -- that made the United States a dominating force in the modern world. The US could continue to provide an innovative and glimmering example for the rest of the world to emulate. But if we cannot generally agree that labor-power is the most fundamental basis for any human economy, then how can we collectively withdraw that power from the current crisis in favor of a more balanced and sustainable system?
Of course, a new and improved economic system will not save the earth or even save the human race. Turns out the planet doesn't need any "saving" --WE DO-- For the first time in the Earth's 4.5-billion-year history, human influence is THE most significant factor in ecological change that threatens to kill us all. Assuming this self-created human disaster doesn't completely exterminate the human species, how should human survivors reorganize to prevent similar calamities in the future?
These and many other questions must be explored with regard to "transition" from Capitalism toward Economic Democracy. In general, creation cannot dominate its creator. People like to worship their own creations just as dogs seem to enjoy sniffing their own feces. But at some point the human species needs to grow up and realize that Capital cannot dominate People, and People cannot dominate Nature. The model is upside-down, ladies & gentlemen. It’s time to flip it over.
David Kendall lives in Washington state and is concerned about the future of our world.
Notes:
[1] Shoumacher, David and Richard Gill. (1997 - 2008). "Economics USA: John Maynard Keynes". Annenberg Media. ISBN: 1-57680-527-1. http://www.learner.org/resources/series79.html
[2] Rothbard, Murray N. (1975). "The Politics of Obedience". LewRockwell.com.
http://www.lewrockwell.com/rothbard/rothbard29.html
[3] Wikipedia. (01/02/2009). "Economic Democracy". Wikipedia.
http://en.wikipedia.org/wiki/Economic_democracy
[4] Martin, Eric, and Michael Tsang. (01/04/2008). "Cash Glut Could Take Markets on a Ride". Bloomberg News/The Washington Post.
http://www.washingtonpost.com/wp-dyn/content/
article/2009/01/03/AR2009010300027_pf.html
[5] Shoumacher, David, and Rober L. Heilbroner. (1997 - 2008). "Economics USA: John Maynard Keynes". Annenberg Media. ISBN: 1-57680-527-1. http://www.learner.org/resources/series79.html
[6] Schweickart, David (June 2002). "After Capitalism". Rowman & Littlefield Publishers, Inc. ISBN 0742513009
[7] Wikipedia. (3/21/2009). "Capital flight". Wikipedia.
http://en.wikipedia.org/wiki/Capital_flight
[8] Wikipedia. (3/21/2009). "Capital strike". Wikipedia.
http://en.wikipedia.org/wiki/Capital_strike
[9] Roberts, Paul Craig. (2/19/2009). "President Of Special Interests". Countercurrents. http://www.countercurrents.org/roberts190209.htm
[10] Wikipedia. (3/21/2009). "Comparative advantage". Wikipedia.
http://en.wikipedia.org/wiki/Comparative_advantage
[11] Wikipedia. (3/21/2009). "Short (finance)". Wikipedia.
http://en.wikipedia.org/wiki/Short_(finance)
[12] Obama, Barack (2006). "The Audacity of Hope: Thoughts on Reclaiming the American Dream". Crown Publishing Group. pg 155. ISBN 0307237699.
[13] Barnes, Peter and Chuck Collins. (11/1/2006). "Capitalism 3.0: A Guide to Reclaiming the Commons". Berrett-Koehler Publishers. ASIN: B001KYEZPG. http://www.capitalism3.com/
[14] Kendall, David L. (11/10/2008). "The Truth About Ralph Nader and Uncle Tom". OpEd News.
http://www.opednews.com/articles/The-Truth-About-
Ralph-Nade-by-David-Kendall-081110-496.html
[15] Ford, Glen. (2/25/2009). "How Can the U.S. Economy Recover Without Manufacturing Capacity?". The Market Oracle.
http://www.marketoracle.co.uk/Article9109.html
