Sunday, November 04, 2007

Super Capitalism=Super Imperialism

Sorry I didn't get this up immediately, but here are excerpts from part II of Henry Liu's latest series:

PART 2: Deregulation: Global war on labor
By Henry C K Liu

...Under Clinton, 1992-2000, the policy focus centered largely on promoting and expanding neo-liberal "free trade" under dollar hegemony. Additionally, the Clinton period was characterized by the introduction of new formulas for enabling health care cost shifting from corporations to workers, by accelerating the diversion of social security payroll taxes to the US general budget to create the false appearance of declining federal budget deficits and by-passing government rules, encouraging the further decline of the traditional private pension system. The Clinton surplus was largely funded from the pockets of US workers. Clinton deregulated world trade and introduced dollar hegemony to put the US middle class in debt in order to feed corporate global profit. The Clinton prosperity was built on debt addiction, otherwise known as "Rubinnomics", after Clinton treasury secretary Robert Rubin.

...While the tax, trade, wage and benefits policies were being implemented top down during the two decade between 1980-2006 under four presidents from both parties, deregulated corporate policies and practices that further contributing to the growing income inequality gap were being simultaneously overhauled from the bottom up, shifting from full-time, permanent jobs to part-time, temporary, and independent contract work. Growing consistently since the 1980s, more than 44 million of the 137 million employed workforce in the US, close to one third, are now part time, temporary, and contract workers earning 60-70% of the pay of full-time workers and typically 20% of the benefits.

Management-promoted de-unionization policies launched in the 1980s resulted in the decline of union membership from 22% of the workforce in 1980 to barely 7% in the private sector in 2006. Two decades of corporate job outsourcing policies sent millions of high-paying, liberal benefit jobs in manufacturing, technology, and business professional services overseas, a loss filled with lower paying domestic service jobs - frequently part-time, temporary, and contract jobs. Corporate fringe benefits policies shifted fundamentally during the same period, resulting in the dismantling of more than 100,000 traditional pension plans and their replacement with cheaper cost 401-K plans; the discontinuance and/or shifting of costs of health insurance plan coverage; widespread unilateral corporate elimination of retiree health benefits; reduction of paid vacation and other paid time off; and other similar company-driven cost reduction measures.

[An example]...The push by GM to unload its "legacy cost" is aimed at matching lower Japanese worker benefits. Both GM and Japanese wage are now around $25 per hour. The gap in total labor cost between Detroit and Japan is in benefits, with $75 an hour for GM as compared to Japanese producers of $55. A pro-labor solution would be to force the Japanese car makers to raise its benefit cost to $75 an hour rather than to lower GM worker benefit to $55. A pro-labor trade policy would impose countervailing tariffs to offset the difference and level the playing field between GM workers and Japanese auto workers. But neo-liberal free trade is designed to push global wages down, not up.

...Given the magnitude of these income shifts away from workers, it is not surprising that corporate profits have increased at double-digit rates every quarter for the last three and a half years to more than $1.4 trillion; or that CEOs and the top five managers of US corporations have increased their total share of national income from around $50 billion a year in 2001 to more than $140 billion a year in just five years; or that the wealthiest 1% (1.1 million) households have seen their share of total national income reported grow to levels of 20-22% of total national income, levels not seen since the gilded age of the 1920s.

...Reich continues in his Wall Street Journal piece: "Yet the philosophical debate [on inequality] is coming up all the time these days, and it helps explain the new economic populism. Consider, for example, the Bush cuts. They've mainly benefited the top fifth of taxpayers. Supply-siders argue the cuts have generated enough extra revenues to pay for themselves so they haven't enlarged the budget deficit. That's debatable but let's make the heroic assumption the supply-siders are correct and no one has been made worse off. Yet even so, most Americans have not benefited - nothing has trickled down. Real median wages have barely budged since they were enacted. So the underlying question is whether they're justified by the fact that rich Americans have gained from them while no one has lost ground. The answer is no. They've widened inequality."

...US corporate earnings are at an all-time high because wages have been stagnant. Corporations are overflowing with cash but they refuse to pass it on to their workers. Instead, corporations adopt share buybacks scheme with the surplus cash to raise the market value of the stocks.

...A Federal Reserve survey shows that between 2001 and 2004, the median income of US workers with college degrees barely budged, rising from $72,300 to $73,000, after adjusting for inflation. The Clinton administration did almost nothing to advance the interests of organized labor or working people more generally. Union membership continued its long decline during the Clinton presidency, standing at 13.5% of the total workforce when he left office. A paper co-authored by Rubin observed: "Prosperity has neither trickled down nor rippled outward. Between 1973 and 2003, real GDP per capita in the United States increased 73%, while real median hourly compensation rose only 13%."

...the national income has increasingly flowed disproportionately into corporate profit and the rich. They call for a review of US-led globalization and for new terms of trade that do not put the cost of economic expansion entirely on the chronic poor, the newly poor and the powerless both domestically and globally. They call for government regulation in the terms of trade to distribute the benefits more equitably.

The free traders accused the new populists of being protectionists. Rubin admits that globalization has not brought job security or rising incomes to US workers and that as the global economy expands to benefit the US in general, it does so at the expense of shrinking the US middle class's share of the economic pie. Yet Rubinomists stick to the worn-out Maragret Thatcher claim of TINA (There Is No Alternative), arguing that regulating trade and imposing market restrictions would be self-defeating. There is now enough historical data to question the false claim about the benefits of financial globalization, which has brought about monetary and financial crises around the world every few years. The emergence of unregulated capital, debt and currency markets has prevented government around the world from effectively using sovereign credit to finance domestic development and force all nations to distort their economies toward over-reliance on exports for dollars and to compete by joining the race to the bottom on wages and environmental abuse.

...Reich admits that the real scandal of CEO pay has to do with what has happened to the pay of most workers as CEO pay has soared. Shareholder returns have kept up with CEO pay, but median wages have not. In 1980, the CEO of a major company took home about 40 times what the median worker earned; by 1990, CEO pay was about 100 times the median worker's pay; in 2006 it was close to 300 times. In 2006, Wal-Mart's Lee Scott Jr earned 900 times the pay of the average Wal-Mart worker.

Reich recognizes that CEO pay is part of a much larger problem: the growing portion of the nation's income that is going to a small number of people at the top. The pay packages of many denizens of Wall Street are even more outrageous than CEO pay - last year reaching $40 million for top traders and over $1 billion for top hedge-fund managers. Not since the robber-baron era have income and wealth been as concentrated as they are today.

This doesn't threaten shareholders; after all, most shares are held by the wealthy. It threatens democracy, as the wealthy bankroll politicians who tilt public policies in the direction of the wealthy - by, say, reducing their taxes and cutting public services for everyone else. It also threatens our economy, as more and more investment decisions are made by fewer and fewer people, and as the middle class loses its capacity to pay for the goods and services the economy produces.

...The purpose of taxation is not to be punitive but to anchor fiat currency while maintaining equity. What gives the dollar currency its role as legal tender for payment of US taxes and for "all debts, public and private", as inscribed on every dollar, which is a Federal Reserve note. The key to fair taxation lies on both the revenue side and the expenditure side: where the tax revenue comes from and how the tax revenue is spent. A fair tax regime requires revenue to be sourced from all fairly, but not equally, and to be spent on public services and affirmative action programs to moderate inequality. The problem with the current US tax regime is that not only is the revenue sourced from the working poor but it is also spent to further enhance the already substantial advantages of the rich.

Tax cuts for the rich coupled with privatization of public utility and services add up to a most onerous regime, on which the former labor secretary is strangely silent. In simple terms, it is a regime that puts money in the pockets of the rich, who do not need it, and takes money from the pockets of the working poor who already are in debt up to their ears. It is bad enough to milk prosperity from a debt economy, but a debt economy that allows the rich to borrow to make obscene profits and forces the working poor to borrow merely to survive will soon turn populism into radicalism. It is time for all countries to seek solutions to problems created by runaway exploitative terms of world trade by focusing again on fundamental issues of domestic development before the prodigal global trading system collapses from its own contradictions to bring forth a global depression. Unless and until an equitable international trading system is negotiated, economic nationalism is a proper response to neo-imperialism.

This installment is also worth printing out and reading in its entirety. These excerpts, I think, do give you a good sense of the highlights of the article.

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