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What’s Good for Capital


“What’s Good for General Motors…”

 

“For years, I thought what was good for the country was good for General Motors and vice versa.”  So said General Motors CEO Charles “Engine Charlie” Wilson to the U.S. Senate when President Dwight Eisenhower nominated him for Secretary of Defense in 1953. A Senator had asked Wilson if as secretary of defense he could make a decision adverse to the interests of General Motors (G.M.).

 

The notion of an identity of interests between G.M. and America may have once been comforting for a leading capitalist coordinator like Wilson, but it was a deadly illusion. The highly sub-divided work on the nation’s giant postwar automobile plants and on their sprawling assembly lines was alienating, dangerous, and exhausting, and strongly segmented by rigid inequalities of race and gender.1Along with other leading corporate players in the petro-industrial complex, moreover, G.M. and other two Big Three U.S. auto manufacturers (Ford and Chrysler) were centrally involved in the creation of an unsustainable, over-extended, oil-addicted, and carbon-spewing way of life that has produced an ecological apocalypse that is already upon us. Automobile dependency has ravaged America ’s cities and landscape for nearly a century now, helping turn the country into an over-extended, atomized, anomie-plagued, and polluted, “asphalt

nation.”2

 

A Conscious Decision to Kill

 

The role of G.M. in the creation of this disaster was more than merely accidental or structural. Over three decades preceding Wilson’s appointment to the Pentagon, G.M. pursued a deliberate strategy of dismantling the nation’s electrical railways – including urban streetcars and inter-urban railways – and replacing them with cars, trucks, and buses. In 1921, fully 90 percent of American trips were by rail, mainly electric rail.  Just one in 10 Americans owned an automobile. There were 1,200 separate electric street and interurban railways in the U.S. – “a thriving and profitable industry with 44,000 miles of track, 300,000 employees, 15 billion annual passengers, and $1 billion in income.” Nearly every U.S. municipality with at least 2,500 residents enjoyed its own electric rail system.3  

 

This was a problem for G.M., which set up a special unit charged with bringing about the great replacement through a variety of means: the use of freight leverage to compel railroads to abandon electric cars, the purchase and scrapping of electric lines, the use of financial (banker) leverage to encourage conversion to motor buses, the forming of holding companies to buy up electric lines and convert them to motor buses directly, the bribing of public transit officials. The conversion was complete by the early 1960s, when I recall my father taking me at the age of four to watch and photograph the very last run of a train on the inter-urban North Shore Line.  That $50 million transit line was “the fastest electric service in the world, providing Wisconsin 's lakeshore cities and Chicago 's northern suburbs high-speed access to the downtown loop.”  The state-of-the-art North Shore was purchased and taken down b G.M. and two bus lines (Greyhound and National City ). As the onetime U.S. Senate Counsel Bradford Snell noted, “The streetcar [and the inter-urban lines] did not die ….because of demographics or economics or disinvestments or evolution; [the] died because GM in 1922 made a conscious decision to kill [them] and, for the next several decades, pursued a strategy designed to accomplish this objective.” 4

 

The Golden Age: “Producing Always More and More”

 

Still, the notion of an identity of interests between G.M. and America held no small plausibility in the full flush of the post-WWII boom and the dawning of the “golden age” of U.S.-led western capitalism. It resonated because G.M. generated “many millions of jobs, not only in the direct manufacture, shipping and sale of cars, trucks, and other products, but in its peripheral stimulus for rubber, glass, and all the other components required to make a car” (Saul Landau).5  And it wasn’t just about G.M. (the first U.S. corporations to pay more than $1 billion in taxes), of course. The two decades following World War II marked the apex of what the historian Charles S. Maier calls  “the [American] Empire of Production.”6 Fulfilling a potential for mass-productionist economic hegemony it had exhibited earlier in the century, the U.S. emerged from the war with its remarkable “Fordist” industrial apparatus intact and expanded, remarkably free of foreign competition in an industrialized world that had been laid low by bombs and artillery beyond U.S. shores (the U.S. ended the war as home to almost two-third of the planet’s industrial production)7 The explosion of pent-up market demand at home and abroad translated into the massive creation of livable wage union jobs with health care benefits and pensions for millions of American workers at giant corporations like G.M., Ford, Chrysler, Westinghouse, General Electric, DuPont, Xerox, Caterpillar, International Harvester, Boeing, Grumman, Lockheed, Northrup, U.S. Steel, Bethlehem Steel, Goodyear, Firestone, Dow, Monsanto, and Eastman Kodak.  The contrast with the dark days of the Great Depression was stark, creating a dreamy state of satisfaction and security for masses of ordinary Americans.  The struggles for workers’ control that had been waged from the bottom up in the late 19th and early 20th centuries and partly re-awakened during the 1930s had been lost.8 But who really cared about that defeat amidst the previously unimaginable plenty flowing to much of the populace with the flowering of “the American century”? General Motors and U.S. Steel et al. were thriving like no time in memory and so were an unprecedented number and share of ordinary American working folks.

 

In the March 4, 1951 issue of This Week, a widely read Sunday newspaper supplement, the editor, William J. Nichols, published an article (subsequently reprinted in Readers Digest) titled “Wanted: A New Name for ‘Capitalism.’” Convinced that the word no longer properly matched the American system because “it stands for the primitive economic system of the nineteenth century,” Nichols felt that something new was required to describe “this system – imperfect but always improving, and always capable of further improvement – where men move forward together, working together, building together, producing always more and more, and sharing together in the rewards of their increased production.” He had already heard a large number of alternative descriptions, including “economic democracy,” “industrial democracy,” “distributism,” “mutualism,” and “productivism.” Nichols asked readers to write in with their own ideas for a “better term.”  He received fifteen thousand responses in agreement with the notion that selfish and unequal “capitalism” no longer described the United States ’ underlying privately controlled and profits-oriented system of socioeconomic management. This judgment on the emergence of a supposed new “people’s capitalism” was echoed by the popular writer Frederick Lewis Allen.  In his widely read book The Big Change: America Transforms Itself 1900-1950, Allen compared the “new American system” to a “transformed product which might be likened to an automobile continually repaired.”  The new version, tested and proved masterful during WWII – when “Washington jammed the accelerator right down to the floor boards” and “the engine began to run smoothly and fast” – had “repealed the Iron Law of Wages” and brought about “a virtually automatic redistribution of income from the well-to-do to the less well-to-do.”  For Allen this “big change” was rooted to no small extent in “the dynamic logic of mass production” pioneered by Henry Ford: “the principle that the more goods you produce, the less it costs to produce them; and that the more people are well off , the more they can buy, thus making this lavish and economical production possible.”9

 

No such re-“distributivist” transformation actually occurred. It is true that the Great Depression and war brought about a very slight downward redistribution of income from the top 20 percent to the rest of the U.S. population.  But the trend was over by 1953, when the share of national income enjoyed by the top fifth rose, as did the share of the top 20th.  In 1957, the top quintile received 45.3 percent of all income and the top 5 percent got more than the entire bottom 40 percent.  Meanwhile, economists and statisticians estimate that the top 2 percent of income receivers owned as much as three fourths of all American corporate stock and that as many as 40 percent of Americans (soon to be featured in Michael Harrington’s justly famous book The Other America) lived in poverty As historians Melvyn Dubofsky and Athan Theoharis noted.  “This functional [postwar U.S. ] economic system, which preserved privilege at the top, did not challenge poverty at the bottom.” But millions didn’t care all that much as the rising tide of “the golden age” lifted their boats in ways that made them indifferent to both the size and style of others’ yachts and the misery of others’ leaking rafts.   Rising wages and salaries during the 1940s and 1950s pushed many Americans above the poverty and provided them with access to material comforts unimaginable in the 1930s – helping feed the false notion that the United States had moved beyond the evils of capitalism.10

 

The New Exterminism: Eco-Reckoning Sooner Than Expected

 

How far we have traveled from a time when the notion that what was good for big U.S. capital was good for the country seemed so easy to sell. The ecological price of the oil-driven model and ideology of growth – epitomized by Nichols’ celebration of Americans “producing always more and more” – pioneered by the U.S. profits system is coming due sooner than even some of the most pessimistic prognosticators expected in the 1970s and 1980s. The anthropogenic (human-generated) climate change produced by modern petro-capitalism and the related growth ideology of the wealthy Few[11]does not merely pose grave difficulties for “our grandchildren.”  Massive deleterious transformation in core planetary processes and phenomenon – extreme weather, flooding, burning, deforestation, desertification, drought, erosion, water and food availability, species survival, bacteriology, and more – are no longer merely unavoidable.  They are already underway. The eco-apocalypse created by the profits system is happening now. The need for human intervention was already urgent when President Jimmy Carter (who hosted a White House gathering for the anti-growth eco-economist E.F. Schumacher) tried in his own weak way to warn Americans off the “spiritual emptiness” and peril of “self-indulgence and consumption” – of “owning things” and “piling up material goods” in pursuit of an endless more. Now, as Bill McKibben shows in his important book Earth: Making a Life on a Tough New Planet, we see that we’ve waited too long. “Our old familiar globe is suddenly melting, drying, acidifying, flooding, and burning in ways that no human has ever seen.  We’ve created, in short order, a new planet, still recognizable but fundamentally different.  We may as well call it Eaarth…This,” McKibben muses, “is the biggest thing that has ever happened in human history.”  The recent and ongoing flooding in Australia and Brazil is only the latest indication of the massive changes underway.12 Fordist and post-Fordist “productivism” is looking more and more exterminist[13] with each passing day and glacier.

 

True, the worst consequences are being felt first in the “developing” world, where masses of people are most vulnerable to escalating disease, food shortages, flooding, extreme weather, and other environmental disasters. But the costs of climate-related eco-trastrophe and the related exhaustion of global fossil fuel resources have already been heavily felt in the rich world, contributing to disasters like Hurricane Katrina (2005) and a 2003 heat wave that killed hundreds in Europe and forcing vastly expensive infrastructure investments (e.g. giant dike improvements and other upgrades in the Netherlands and Venice) and other costs in the wealthy nations. Climate-related brush and forest fires have displaced many thousands of homeowners and killed hundreds across the rich world. New York City is already spending millions in anticipation of rising ocean levels.  According to a study commissioned from the Harvard’s Center for Health and the Global Environment by Swiss Re (the world’s biggest insurance firm) six years ago, near-term climate change will create an increasing number of storms and other disturbances that will “overwhelm the adaptive capacities of even developed nations; large areas and sectors [will] become uninsurable; major investments [will] crash; and markets [will] crash….In effect, parts of the developed world would experience developing nation conditions for prolonged periods as a result of the natural catastrophes and increased vulnerability due to the abbreviated return times of extreme events.” McKibben notes that the over-exploitation of oil resources helped precipitate the financial collapse of 2008 by driving up gas prices to a degree that helped undermine suburban home values by raising the commuting cost of living in such residences.14

 

“Profits Are Booming, Why Not Jobs?”

 

Meanwhile the notion of an identity of purely economic interests – ecology aside (I say with no small chilling irony) – between big American capital and the rest of the country has considerably less plausibility than it did half a century ago. The tax cuts for the rich that Barack Obama recently agreed to inherit and pass on from George W. Bush – in what was already the industrialized world’s most unequal and wealth top-heavy society (one where the top 1 percent owns more wealth than the bottom 90 percent15) by far16 – have been sold to the American public as necessary for jobs and the expansion of recovery. Profits for the wealthy American few, the argument goes, mean more employment and income for the broad American populace. 

 

The argument is transparently wrong in ways that are openly discussed in mainstream media. As the Associated Press (no leftist organ, to say the least) reported just 13 days after Obama signed the tax cut legislation, there is currently a savage disconnect between corporate interests and the needs of American working people. American corporate profits and stock prices are way up, the AP reported, but hiring is not.  All but 4 percent of the nation’s top 500 companies reported profits in 2010.  The stock market is approaching its highest peak since the financial meltdown of 2008. But the jobs dividend that is supposed to filter down to ordinary Americans when the American rich prosper is nowhere to be seen. The official unemployment rate crept back to 10 percent (the real or functional unemployment rate is closer to 20 percent) at the end of the year. The AP cited Harvard Business School Dean Nitin Nohria, who is concerned about the disparity between U.S. profits and U.S. job creation. Last November in the Harvard Business Review, Nohrira worried that “business leaders” will lose legitimacy in American society if U.S. corporations keep flourishing while millions of Americans struggle.17 

 

In a recent article titled “Profits are Booming, Why Not Jobs?,” the New York Times reported that corporate “earnings” had exploded “even as 15 million Americans remain mired in unemployment [the real number is closer to 25 million[18] – P.S.],  a number without precedent since the Great Depression” and while the citizenry experiences “record levels of foreclosures and indebtedness.”  At the current sluggish level of job growth, Times business writer Michael Powell noted, the U.S. economy will require 90 months just to replace the jobs lost in the Great Recession of 2008-2009. And that did not include the 5 million jobs required merely to keep up with population growth.

 

The Times found numerous logical reasons for the U.S. profits-jobs disconnect. Some big American firms are showing higher profits simply because their competition has collapsed.  Following the financial collapse of 2008, for example, the Wall Street giants Goldman Sachs and Morgan Chase no longer had to compete with Bear Stearns, Lehman Bros. and Merrill Lynch. Many jobs disappeared with the departure of the defeated firms. 

 

Many companies are sitting on capital and storing up liquidity like never before in the wake of the financial collapse. Firms who no longer believe they can borrow quickly have decided to keep a lot more cash on hand for precautionary purposes.  Low interest rates produced by the recession create an incentive for many companies to simply “exploit the spread between a zero funds rate and rates on Treasury bonds.”  This permits corporations to “mark profits without selling much or hiring anyone.”

 

A large reserve army of unemployed workers is a profits boon to corporate America . Desmond Lachman, a former managing director at Salomon Smith Barney who now works as a “scholar” at the influential right-wing policy group the American Enterprise Institute, speaks about this in candid terms.  “Corporations,” Lachman told Powell, “are taking huge advantage of the slack in the labor market — they are in a very strong position and workers are in a very weak position,” he said. “They are using that bargaining power to cut benefits and wages, and to shorten hours.” 19 That’s not unemployment as an anomaly for capitalist profits; it is joblessness as a source of them. It’s straight out of Karl Marx (1818-1883) sixty years after William J. Nichols and Frederick Lewis Allen waxed eloquent on America ’s glorious transcendence of “primitive” and “nineteenth century” capitalism. 

 

Global Players

 

And then there’s the little matter of U.S. capital’s global nature – also consistent with the irrelevant writings of Marx.  The “dynamic logic” of corporate-managed mass production for mass markets has left America ’s shores to no small extent and for some time. Lachman worries that capital’s wage- and benefit-cutting strategy “serves corporate and shareholder imperatives” but “very much jeopardizes our chances of experiencing a real recovery.” But how much does big “American” capital really care about America ’s economic health (or the economic health of any specific nation for that matter)? Another great factor behind the profits-jobs disconnect is the basic fact that the big U.S. companies are actually global outfits.  Insofar as the rise in U.S. corporate profits is creating jobs at all, the Associated Press (AP) reported, the employment dividend is being enjoyed primarily abroad. The Economic Policy Institute (EPI) finds that American firms created 1.4 million jobs outside the U.S. in 2010, compared to less than 1 million in the U.S. Leading “American” firms like Caterpillar (which has invested in three new Chinese plants in the last two months), DuPont (which shrank its U.S. workforce by 9 percent and increased its Asia-Pacific workforce by 54 percent from 2005 to 2009), and Coca Cola (less than 13 percent of its 93,000 global employees are in the U.S.) are drawn to emerging middle-class markets and an increasingly skilled but low-cost workforce in south and east Asia. Reflecting on such facts, the EPI’s senior international economist Robert Scott told the AP that “There’s a huge difference between what is good for American companies and what is good for the American economy”20 – a total inversion of “engine Charlie” Wilson .

 

“We are a global player out to succeed in any geography,” a leading DuPont official told the AP – an honest statement. Nationally bound U.S. taxpayers bailed out big U.S. capital to the tune of more than $14 trillion in 2008 and 2009.  We did so out of the belief that such massive state-capitalist corporate welfare was required to rescue the American economy. But elite U.S. capital – owned by the top 1 percent that insisted on and predictably (under the openly plutocratic rules of American “dollar democracy”) received the preservation of the Bush tax cuts – is not nationally bound.  Its agents are brazenly “global players” whose only allegiance is their own bottom line, pure and simple. In the early 1990s, Ford Motor Company chief Alex Trotman told Robert Reich that “Ford isn’t even an American company, strictly speaking.  We’re global.  We’re investing all over the world.  Forty percent of our employees already live and work outside the United States , and that’s rising.  Our managers are multinational.  We teach them to think and act globally.”21 America ’s elite business class holds no particular attachment to the people, communities, health, or even competitiveness of the United States per se.

 

Failure to acknowledge this harsh reality can lead to depressing Orwelliann absurdities. In mid-January of 2011, Obama won accolades from the business community for tapping General Electric’s president Jeffrey Immelet to head the White House’s newly formed President’s Council on Jobs and Competitiveness. "The council’s title referred to specifically American jobs and competitiveness – something that made Immelet’s appointment more than a little darkly Orwellian. With less than half its workers located in the U.S. and more than half of its revenue coming from non-U.S. activities, liberal New York Times columnist and Princeton economist Paul Krugman noted, “G.E.’s fortunes have very little to do with U.S. prosperity.” 22

 

Sadly but predictably, Obama’s 2011 State of the Union Address completely ignored the problem of corporate out-sourcing. In the name of “Winning the Future,” the president called for the United States to meet the challenge of increasing economic competition from foreign countries but never mentioned the multinational nature of the leading “American” business firms and the critical fact that “American” capital invests heavily in overseas labor, raw materials, and consumer markets.23

 

A Modern Henry Ford: “A Harsh Environment is a Good Thing”

 

The noted neoliberal “shock therapy” economist Jeffrey Sachs of Columbia University claims that “American” multinationals “have no choice” but to move their operations overseas, especially as the educational quality of the workforce beyond the U.S. has improved. He points out that the United States has declined in global rankings for higher education while other nations (most notably India and China ) have risen.  “We are not fulfilling the educational needs of our young people,” Sachs says.  “In a globalized world, there are serious consequences to that.”24  

 

Sachs has a point, though it’s not just about higher education. The U.S. does not provide the technical and skill training that is standard for most of the workforce in more advanced industrial states like German and Japan . In an age of production when most of the standardized and repetitive tasks are automated, employers only require workers to perform the more skilled labor. 25 The United States ’ growing failure to develop basic skills including elementary literacy and numeracy and its relative lack of  investment in vocational education imposes a real price on American working people in a global economy.

     

There are two other problems with Sachs’ formulation.  First, it fails to give proper agency to the American capitalist elite – the most powerful actor by far in the making of U.S. domestic (including educational) policy – in the deterioration of American education. Sachs deletes the important and revealing fact that the ever more globalized American business class makes no serious effort to reverse the nation’s declining performance and investment in the critical areas of education, research, job training, infrastructure, health, energy efficiency, and the like.  As EPI founder Jeff Faux noted in his 2006 book The Global Class War, “business elites that cared about America ’s future would be demanding new government investments” in quality education and national research and development and the like.  “Instead, they send their lobbyists to demand more tax cuts, now.”26

 

Second, “American” capital is often drawn to foreign labor because of something very different than educational qualification.  It gravitates towards the cheap and super-exploited status of labor in places like Foxconn's Longhua factory campus in Shenzhen, China— where “a dutiful army of 300,000 employees eats, sleeps, and churns out iPhones, Sony PlayStations, and Dell computers” (Bloomberg BusinessWeek)  Employing more than 920,000 workers across 20 mainland Chinese factories, Foxconn “leverag[es]  masses of cheap labor, mainly 18-to-25-year-olds from rural areas, to make products like the iPhone at seemingly impossible prices” (BloombergBusinessWeek reports). Foxconn does business with leading “American” multinationals, including IBM,   Cisco, Microsoft, Sony, Hewlett-Packard, and Apple. Foxconn factor workers receive a mere ($176) per month in return for performing specialized labor tasks under conditions so alienating that 11 of the company’s workers committed suicide in early 2010, most of them by leaping from Foxconn’s high-rise worker dormitories.  The company subsequently strung “more than 3 million square meters of yellow-mesh netting around its buildings to catch jumpers and set up a 24-hour counseling center staffed by 100 trained workers.” According to BloombergBusinessWeek, the entrance to the Longhua campus “looks like a border crossing, with seven toll-booth-like lanes and uniformed guards.” The “drab and utilitarian” production complex includes “huge LED screens that flash public-service announcements and cartoons, and a bookstore that sells, among other things, the Chinese-language translation of the Harvard Business Review.”  The bookstore prominently displays biographies of Foxconn founder and CEO Terry Gou, the so-called “Henry Ford of China ” and the richest man in Taiwan , estimated by Forbes to have a personal fortune of $5.9 billion. One of the Gou biographies collects his many pithy aphorisms, including "work itself is a type of joy," "hungry people have especially clear minds," "an army of one thousand is easy to get, one general is tough to find,” and "a harsh environment is a good thing” – all no doubt comforting to the Foxconn workers telling the company’s crisis-line counselors of their depression. 27 How nineteenth century – Dickens would be as impressed as Orwell.

 

The difficult nature of working class life in Shenzen and across the super-exploited peripheries of the world economic system is a leading factor behind the fact that American workers no longer make any but a small portion of many of the consumer goods sold in the U.S. A harsh environment for developing country workers is a very good and profitable thing for globally mobile “American” capital.

 

The System is Working,for Its Owners

 

It is nice to see corporate media give some candid, reality-based coverage to the conflict between the interests of big American capital and those of American workers and communities. But critical matters must go unstated in that media and the broader ideological milieu. It is beyond the boundaries of doctrine in that media to root that conflict in how the profits system works. There’s a misleading sense of angry puzzlement and paradox in the recent coverage and commentary: “American corporate profits are booming, so why aren’t American jobs?” The message is that the system isn’t working the way it’s supposed to – the way it ought to function, on behalf of the common American good.  But when has capitalism ever been about the creation of good jobs and lives for working people and the broad mass of citizens in the U.S. or any other specific country? As Karl Marx and Frederick Engels, those unparalleled chroniclers and critics of nineteenth century capitalism, noted in 1848:

 

‘The bourgeoisie, wherever it has got the upper hand…has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment”. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned…The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.’

 

‘The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes’.28

 

My Webster’s New Twentieth Century Dictionary (unabridged) defines cap/i-tal-ism, n. as follows: “the economic system in which all or must of the means of production and distribution as land, factories, railroads, etc., are privately owned and operated for profit, originally under fully competitive conditions; it has been generally characterized by a tendency toward concentration toward concentration of wealth, and, in its later phases, by the growth of great corporations, increased government control, etc.” Notice, please, the absence of any reference in that definition to various things that are routinely identified with capitalism in American political and intellectual discourse – demo

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