Reich writes: "As President Obama said in his inaugural address last week, America 'cannot succeed when a shrinking few do very well and a growing many barely make it.'"
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
The Non Zero-Sum Society
29 January 13
s President Obama said in his inaugural address last week, America "cannot succeed when a shrinking few do very well and a growing many barely make it."
Yet that continues to be the direction we're heading in.
A newly-released analysis by the Economic Policy Institute shows that the super-rich have done well in the economic recovery while almost everyone else has done badly. The top 1 percent of earners' real wages grew 8.2 percent from 2009 to 2011, yet the real annual wages of Americans in the bottom 90 percent have continued to decline in the recovery, eroding by 1.2 percent between 2009 and 2011.
In other words, we're back to the widening inequality we had before the debt bubble burst in 2008 and the economy crashed.
But the President is exactly right. Not even the very wealthy can continue to succeed without a broader-based prosperity. That's because 70 percent of economic activity in America is consumer spending. If the bottom 90 percent of Americans are becoming poorer, they're less able to spend. Without their spending, the economy can't get out of first gear.
That's a big reason why the recovery continues to be anemic, and why the International Monetary Fund just lowered its estimate for U.S. growth in 2013 to just 2 percent.
Almost a quarter of all jobs in America now pay wages below the poverty line for a family of four. The Bureau of Labor Statistics estimates 7 out of 10 growth occupations over the next decade will be low-wage — like serving customers at big-box retailers and fast-food chains.
At this rate, who's going to buy all the goods and services America is capable of producing? We can't return to the kind of debt-financed consumption that caused the bubble in the first place.
Get it? It's not a zero-sum game. Wealthy Americans would do better with smaller shares of a rapidly-growing economy than with the large shares they now possess of an economy that's barely moving.
If they were rational, the wealthy would support public investments in education and job-training, a world-class infrastructure (transportation, water and sewage, energy, internet), and basic research - all of which would make the American workforce more productive.
If they were rational they'd even support labor unions - which have proven the best means of giving working people a fair share in the nation's prosperity.
But labor unions are almost extinct.
The decline of labor unions in America tracks exactly the decline in the bottom 90 percent's share of total earnings, and shrinkage of the middle class.
In the 1950s, when the U.S. economy was growing faster than 3 percent a year, more than a third of all working people belonged to a union. That gave them enough bargaining clout to get wages that allowed them to buy what the economy was capable of producing.
Since the late 1970s, unions have eroded - as has the purchasing power of most Americans, and not coincidentally, the average annual growth of the economy.
Last week the Bureau of Labor Statistics reported that as of 2012 only 6.6 percent of workers in the private sector were unionized. (That's down from 6.9 percent in 2011.) That's the lowest rate of unionization in almost a century.
What's to blame? Partly globalization and technological change. Globalization sent many unionized manufacturing plants abroad.
Manufacturing is starting to return to America but it's returning without many jobs. The old assembly line has been replaced by robotics and numerically-controlled machine tools.
Technologies have also replaced many formerly unionized workers in telecommunications (remember telephone operators?) and clerical jobs.
But wait. Other nations subject to the same forces have far higher levels of unionization than America. 28 percent of Canada's workforce is unionized, as is more than 25 percent of Britain's, and almost 20 percent of Germany's.
Unions are almost extinct in America because we've chosen to make them extinct.
Unlike other rich nations, our labor laws allow employers to replace striking workers. We've also made it exceedingly difficult for workers to organize, and we barely penalized companies that violate labor laws. (A worker who's illegally fired for trying to organize a union may, if lucky, get the job back along with back pay - after years of legal haggling.)
Republicans, in particular, have set out to kill off unions. Union membership dropped 13 percent last year in Wisconsin, which in 2011 curbed the collective bargaining rights of many public employees. And it fell 18 percent last year in Indiana, which last February enacted a right-to-work law (allowing employees at unionized workplaces to get all the benefits of unionization without paying for them). Last month Michigan enacted a similar law.
Don't blame globalization and technological change for why employees at Walmart , America's largest employer, still don't have a union. They're not in global competition and their jobs aren't directly threatened by technology.
The average pay of a Walmart worker is $8.81 an hour. A third of Walmart's employees work less than 28 hours per week and don't qualify for benefits.
Walmart is a microcosm of the American economy. It has brazenly fought off unions. But it could easily afford to pay its workers more. It earned $16 billion last year. Much of that sum went to Walmart's shareholders, including the family of its founder, Sam Walton.
The wealth of the Walton family now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.
But how can Walmart expect to continue to show fat profits when most of its customers are on a downward economic escalator?
Walmart should be unionized. So should McDonalds. So should every major big-box retailer and fast-food outlet in the nation. So should every hospital in America.
That way, more Americans would have enough money in their pockets to get the economy moving. And everyone - even the very rich - would benefit.
As Obama said, America cannot succeed when a shrinking few do very well and a growing many barely make it.
Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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Comments
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http://www.businessweek.com/the_thread/economicsunbound/archives/2009/08/get_it_straight.html
So, in fact, what passes as "consumer" spending also includes what alot of us would count as business spending or consumption. In other words, businesess (or,in Reich's terms the very wealthy) don't necessarily need all of us to have alot of disposable income to keep raking in their super profits. It may not be good for the rest of us or the country as a whole but that's another story
The condition you describe in the short term will continue to enrich the wealthy. Over the longer term that wealth transfer will begin to diminish eventually turning negative. His point is that we are currently on an unsustainable path. Wealth is being sucked into a virtual black hole and instead of circulating rapidly and creating more wealth it eventually slows dsown. Also, you missed as a major part of Reich's argument which is that by sharing the wealth not only do the non-wealthy get richer, but in an economy where the wealth is evenly distributed the wealthiest also benefit. In fact, they tend to benefit better than they do during periods of wealth hoarding.
My point overall is that i think that we have to be clear that there is no short- or even mid-term compulsion for capital to do anything to put more money into the hands of consumers as there is still alot of other spending to sustain them including gov't and their own business to business and as the piece i provided the link to shows it is misleading to talk about how 70% of the economy is driven by consumer spending.
So, again, i agree it is not "sustainable" but what does that mean? 1 year, 10 years? And, if they can go on this way for years i think that changes or should change our perspective.
Thanks for the thoughtful response (i wish RSN would set up a way for people to have longer ongoing conversations about stuff as this format makes this almost impossible).
I agree with you completely and never meant to suggest that i believe businesses are run by "kind, loving sharing people...." and agree completely they are only interested in and their only goal is to make money.
I would argue that businesses cutting of wages and other benefits was a response to the profit squeeze that capital has been suffering since the late 60s/early 1970s (see Andrew Klimans great book "The Failure of Capitalist Production: Underlying Causes of the Great Recession"). It is part of the nature of the internal contradictions of capitalism (i.e., the tendency of the rate of profit to decline).
And, i agree that in the long run (but, again, the question is how long is the long run and my point is that i think this can be for a pretty long time indeed) businesses need consumers but again, given that businesses (particularly large one) have returned to their robust levels of profitability despite the recession and high levels of unemployment to me suggests that they do not need to hire and or raise wages in the short-term. My other point was simply that the 70% number that Reich (and most others) use to talk about how much of the economy is dependent on individual consumer spending is very misleading.
Yes it should change our perspective. Because those large businesses don't need U.S. consumers. They can sell to China, India, etc etc. They don't really care if the U.S. economy goes into the toilet. They'll just start using the U.S. as cheap labor.
How it should change our perspective is to ask "What does the average American get out of our huge tax breaks and subsidies to these behemoth international corporations? Why are there no tariffs to protect U.S. based businesses competing with countries with no environmental or labor laws? Why are we OK with the Fed giving essentially 0% mega-loans to the Big Banks while homeowners can't even get their loans modified? And why are politicians pretending to be so obsessed with the deficit when we, as a country, could borrow at interest rates below inflation and invest in domestic projects in the U.S.?"
I agree with you completely. My main (or perhaps only) point in responding to the way that Reich lays this out is to suggest that in order for businesses in the US to be profitable that they need to hire more workers and or raise wages to put more money in the hands of US consumers. As you rightly point out, given the global nature of capital at this point US businesses can both produce as well as sell abroad (not to mention sell to each other and if they lower their wage costs they have more money to spend on business to business purchases as well as buying from and selling to the gov't).
I was not suggesting that this is "good" for the 99% but rather that capital in fact does just fine when they keep labor costs down either by laying off and or not hiring more workers and keeping wages low. This is what capital has always done and i fully expect them to continue to do so (even if it goes against their long-term interests) and thus i don't think that making a rational appeal to business by saying it would be better for them to put more money in the hands of consumers by hiring and or raising wages is particularly persuasive to capital as a whole.
In general I would not expect "capital" to hire or raise wages on the basis of an intellectual appeal or concept, Henry Ford being the exception. The only thing that matters in such negotiations is power - which is why unions are so important and why they have been targeted for elimination, and also why tariffs are important and NAFTA/CAFTA etc are so destructive. Tariffs and unions help to even the playing field a bit.
My gut tells me that it is likely a geometric progression and not linear so while it may take an industry 5 years to saturate the first market, all subsequenty ones will take much faster.
That ain't a full answer, but it provides insight into why I buy into Reich's non zero sum point.
http://www.google.com/imgres?imgurl=http://www.beatlebay.com/images/Art_Animation/YSAC006.jpg&imgrefurl=http://www.beatlebay.com/artanimationDrRobert.htm&h=1169&w=1609&sz=201&tbnid=DE31iaQazR2RwM:&tbnh=90&tbnw=124&zoom=1&usg=__3JoVy2mUxQIdFElggjWYhJpL368=&docid=E2CelJhf0cDFaM&sa=X&ei=W1AJUeiVGJPs9AS8r4CYCA&ved=0CEMQ9QEwBA&dur=8464
What happens when we return to 60% poverty and the middle class are actually lower merchants.
What he is saying is this is not sustainable. What companies do is simply raise the price of their goods/services. Prime example is movies. Less people go to see a movie now but they make more money. These are BO receipts. Eventually fewer and fewer people will be able to go see any movie.
I agree that in the long-run it is not sustainable just as i believe that in the long-run capital by its very nature devours itself or put another way is prone to crisis (and the crisis is its way out i.e., crisis in capitalism is not the "problem" but rather it's "solution", albeit temporary, to overcoming its own internal contradictions and problems. But, at the same time, if capital can keep wages low, increase productivity, and in today's environment borrow at virtually no cost and is able to shift capital around the globe to where it can get the best return then "it" doesn't necessarily care about conditions in any particular place.
In the case of your example of movies, one of the ways capital has gotten around this problem is to create new markets for itself i.e., they now make a hell of alot more money both internationally as well as from sales to cable TV as well as DVD sales so declining movie attendance may be a problem for theater owners but not necessarily for the studios
What are you talking about anyway? Sure international sales have gone up but again it is not due to attendance. It is due to raising the price of a ticket MIB III made more money than the two previous BUT a lot less people saw it. This is what has been happening. DVD sales are another matter. They made 5-6 times that of the BO in DVD sales. It is back down to 3-4 times. They are not looking at total units sold but total money made. Theater owners as well jack up the price of their concessions making it even harder for a family to take themselves to the movies, hence why DVD sales shot up. The release of things like blu ray though put a damper on things and literally where I work they could not figure out why sales were low. OH it has to due with piracy. NO it has to do with the price tag is too high. Cost a 1.98 per unit total cost but they retail it at near 30 bucks and could not figure out why the regular DVD sold at 14 dollars sold more.
The rest of most of the world is working at poverty wages. What is happening in the US is the slow erosion of pay. We will eventually slide back to the 1890s. We will have higher and higher amounts of people living in poverty. This is why walmart does so well.
Again, i think we agree. But, just as you point to our sliding back tothe 1890s (and here, too, i agree with you completely), businesses, particularly large businesses, were doing just fine during the "gilded age" when most Americans had little or no disposable income. I agree that this sucks for the 99% and is not in any way an economic policy (or business practice) i support. My only point was that just as low-wages did not hurt business during the "gilded age" i'm not convinced that it hurts them now (if by hurt we mean short- or even medium-term profitability) as long as they can continue to keep their labor costs down and continue to increase productivity (given that virtually all of the productivity gains in the last 30 years have gone to the wealthy).
The rest of us are to be the working poor with fewer and fewer of us buying these products. The ONLY thing that keeps the illusion going is cheaper products. This is why Walmart thrives and places like dollar stores. People are able to spread their buck further.
We have abandoned a wage growth economy for that of an asset growth economy and has Welch said (to paraphrase), pay your upper crust really high and the middle will scramble like rats to try to get that same pay while you squeeze the bottom.
Here to i completely agree with your take. But Reich is saying that this situation is not only bad for "us" but also bad for "them" and given the rapid return of (particularly big) business to pre-crisis levels (or to use your example of the 1890s) i'm not sure that this argument is correct or makes sense.
I looked up your link. It does make a bunch of sense and it looks like the 70% number is an accepted factoid that needs debunking. It does not affect how I look at the issues since I was never concerned with how much spending is done by people vs. government vs. business, etc. I am more concerned with what money gets spent on. For example, the government buying nuclear weapons has a lesser impact than guaranteeing each person a living wage.
But what i was questioning what the idea that capital or capitalism as a whole needs a large middle class or people who have alot of disposable income in order for it to maintain profitablility; i think this is a somewhat flawed and does not take into account both the non-individual "consumer spending" mentioned in the piece i provided the link to as well as business-to-bus iness spending. For example, if we look at the "gilded age" of the robber barons where the wealth gap was as big as it is now business was not suffering a lack of profits because most people did not have much disposable income...growth and profit rates were quite robust for the uber rich. It was the resistance and protest of people below (e.g., the Populist and early Labor Movements) that brought about change.
In other words, Reich's attempt to say that if only the super wealthy were "rational" and realized their own self-interest they would hire, raise wages etc., i think is a faulty argument.
I couldn't access your link nor find it by googling. I did find another article on Businessweek that separates consumer from business spending & attributes a similar percentage of spending activity in the U.S. to consumers - 65%.
http://www.businessweek.com/articles/2012-10-24/the-u-dot-s-dot-economys-personality-disorder
Sustainability is very different if you separate small businesses from international corporations. Large corps can simply flip the functions of countries - ie China can become the big market & the U.S. can become cheap labor. So yes, Monsanto, GE & Exxon don't care if the U.S. has a middle class. But for U.S. workers to continue to nurture the U.S. economy, we need a living wage (& so do any businesses that want to sell in the U.S.). I assume what Reich is defining as sustainable would be a living wage for U.S. workers that enables them to attain at least a lower middle class standard of living, which isn't sustainable if wages continue to fall.
thanks for the thoughtful resonse. don't know why the link isn't working...i tried it again and it opened for me so here it is again in case you want to try it.
http://www.businessweek.com/the_thread/economicsunbound/archives/2009/08/get_it_straight.html
I would agree that "our" definition of sustainable should be more in line with what you suggest ie., a middle-class standard of living. My only point was that i'm not sure Reich is correct in believing that this standard of living for the vast majority of americans is needed by capital in order for it to be "healthy" (on its own terms), profitable and continue to grow.
Again, i'm not saying this is what we want or should support in any way but that's a very different argement from saying that capital needs the same thing that we do in order for it to thrive (which for them is only defined by the bottom line)
Is it the kind of society we want?
Currently even the poor contribute to our economy and infrastructure, but their services are economically valued only by those able to provide effective demand; like the old Bantustans of South Africa, there is a role for the poor as servants of the rich. For now.
The solution may have to be the construction of a separate underground economy based on more equal distribution and sustainability to support the disenfranchised -- increasingly becoming the majority. Perhaps co-opting bits of the old system.
Assuming that this current system does not destroy the earth first.
I agree with you completely that this is not the kind of society we want. But Reich is making another point which is that it is not the kind of society that "they" (the wealthy) want either or that it is not in their own self-interest and this is the only point of his that i was questioning.
I agree completely that this is in large part an ethical question but that is very different from trying to make it into an objective economic one as Reich does (i.e., that it is not in "their" interest to have so many people without enough disposable income to buy their stuff).
By a certain light, Reich's statement could be seen as an apology for capitalism. Remember that FDR's biggest accomplishment, ironically, is that he saved capitalism from it's excesses. He wanted to go further, (at one time he proposed a $21,000.00 ceiling on all income for everyone, not simply a 94% top tax rate) and had he really tackled Wall Street might have accomplished a more lasting "peace." Obama doesn't even come close to the liberal policies of FDR.
If FDR had not introduced any liberal changes, what might have resulted? Violent revolution? Fascism? Hard to say. What price will we have to pay for a peaceful, fair and just world with individuality? (Cause this ain't it.)
I can understand Reich and other liberals wanting to prop up the system, reform it, even when it may not be possible-- because abrupt changes can be pretty explosive. Yet the more we fight to maintain the excesses, the bigger the explosion when it eventually comes-- liberals need to worry about doing too little as well.
It could be stated that the lack of access to health care , we are already telling those with the $8 jobs to go ahead and die, we don't have any use for you.
The Economist closes his notebook and wipes his glasses as The Farmer looks out declaring, "Beautiful isn't it? These fields mean food through the winter."
The Economist sighs knowingly, "Possibly but scarce resources mean we must better manage resources to optimize production."
The farmer seemed confused and a little dejected that The Economist could not behold what lay before his eyes but then a gnawing doubt came over The Farmer and he asked The Economist to explain how things could be better.
The Economist did just that.
The Farmer excited by the prospects of such amazing abundance practiced exactly what The Economist preached. This went on for years, despite decreasing results.
Finally one winter The Farmer decided that he would go back to The Old Ways as the people in the valley had suffered since the advent of The Economists' wisdom.
The Farmer found that once again the abundance he produced was quite enough to feed the people of the valley.
The Farmer received an unexpected visit from The Economist. The Farmer said, "I took your advice and the people of the valley barely made it through the winter whereas before we lived in abundance. Now I've gone back to The Old Ways and the people are fed.
The Economist spoke, "Yes, I can see. That explanation may be all well and good in reality, but it will never work in theory."
2012 6 5 ZOC Job Pyramid
http://www.youtube.com/watch?v=l6qjvLSCtpc
Watch it, share it, and join the fight against those who want to kill all of us with destructive social policies.
i can see you have skills in "Second Life" ... interesting video ...
Some will say well sounds like you just need to find another job. lol. Everyone is doing this though. I do not mean simply that millions are looking for work but this outsourcing is being done by all of them.
He says all the right things
and does all the wrong things.
If government was limited as Jefferson observed in his inaugural address that the sum of good governance was limited to preventing people from harming one another otherwise leaving them free to their peaceful pursuits we would all benefit.. Unfortunately the slave master top down control model forced upon us abhors such freedom, they want to sell us a utopia under their control.
A very good point. Your comment regarding Jefferson's concept of good governance seems to justify my personal interpretation of his famous quote, "The government that governs best, governs least". I don't believe that was a plea for a government as Grover Norquist colorfully describes as small enough to drown in a bath tub. Nor is either the description of good governance you quoted or the famous one I noted another way of saying that "government is the problem" as President Reagan famously said.
Jefferson was pleading for an efficient government. When the regulation describes a financial transaction such as a loan or an investment, it should fall under clear and concise set of rules. The rules should be clear and undestandable by any educated person. If not, or if the transaction type (e. g. derivative type transactions and hedge funds) allow one party to harm another, then it is unambigously illegal. It should not take years to prosecute. So in short, laws and regulations that are clear and unambiguos make for a Jeffersonian nation where people are prevented from harming one another and government governs least. Note that in my view I do not get rid of regulation as much as I make convoluted contractual agreements that are subject to subjective interpertation illegal.
To add Jefferson was a slave master. He NEVER freed his slaves and he bought and sold them oh but under the table so it would stay out of the public eye.
XYZ companies moves in next door to us and uses it as a toxic waste dump. No govt as in no zoning laws. What do you do Martin when your pets die and your kids are now getting sick? Do you get out that assault rifle and walk on over telling them about your god given rights to breath clean air and clean soil to grow your food in? Do they use their money to point more guns back at you?
Martin most of us are slaves to the grind and that is the private sector.
FIRST: In the global economy, the ultra-rich and their corporations aren't loyal to any country. An American like Mitt Romney makes money in China and sends his profits to a bank in the Cayman Islands. So, for some of the rich Americans, the future of American workers isn't important. (Are American workers willing to work and live like Chinese workers? Might be a popular idea in some corporate circles.)
SECOND: An energy revolution is in progress in the global economy.... Developing nations are trying to raise per capita energy use in order to lift their people out of poverty.... Some people say, "There may be opportunities to develop clean sources of energy, for all nations, so that human life is improved while protecting the environment."
The big corporations ask, "Can we make money in a clean energy economy?"
Workers ask, "Can we get decent jobs?"
Some of the big conservation groups run around shouting, "Save the polar bears! Don't even think about economic growth and increased energy use. Keep the poor in poverty and we'll say that it's good for Mother Nature."
If the economy doesn't provide justice, it won't be "sustainable" for very long.
When conservationist s talk about "sustainable economics," start shouting, "Justice First!"
Kick the status quo!
Seriously? Please explain how NOT saving the polar bears - ie allowing drilling for oil in the Arctic - creates economic growth and increased energy use. It would obviously create big money for oil companies, and a short burst of economic activity in the area where the drilling is, but since the corporations are multi-national, avoid U.S. taxes and send their profits abroad (as well as their product), how would this really benefit the U.S.? Most of the local tribes in Alaska oppose drilling. How is it serving justice to allow drilling in ANWR?
I do agree with you that the green movement needs to get clear about the big picture for humans, but that is exactly what many environmental orgs are doing these days - working with local people on projects that benefit the local population of humans as well as "nature".
Will that be sustainable? Silicon Valley did not last but a generation? I do not have a clue. Do you?
There is a new IGA franchise partnering with what was a local independent grocery store owned by a right-wingnut holy-roller who still has an interest but has passed it on to his sons. Well, this crowd have fired four and maybe more good, honest people who are friends of mine with no recourse. When I asked why in each case, the first time it was "Oh, he was good worker but one of the family didn't like him"! Most recent case, one of the sons (married) was boasting to another meat cutter friend about an affair he was having, then in a spate of remorse at his own stupidity, set up my mate by taking money from the meat department till and firing my bhim for pilfering. There is more but if the employees were unionized, this could never have happened without a fight. They are hurting themselves though, because my wife and I and an increasing network of friends are boycotting the new store and getting the word out, as this entire family are as corrupt as Hell, with one daughter-in-law , former teacher, doing hard time for sexually abusing students. The God-a father, who ran a campaign heavy with bribery for state office, is a member of the Koch's "Americans for prosperity" but fortunately lost heavily.
A larger scale example is the contrast between COSTCO and Walmart, the former which pays good living wages and benefits with hardly any turnover and Walmart -well y'all know about them, right!?
Sadly, as always, the thread devolves with the usual name-calling. Those authors cannot help but discredit themselves.
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