The Five Big Things- 1. Income Inequality and the Obsolete Worker

In the pro-growth capitalist market, the goal of large corporations is to make a larger profit than last year. To be clear, this is different than the small business, “mom and pop shop” viewpoint of just needing to make a profit at the end of the year. If you make a billion dollars this year, you better make more next year. This is how corporations kind of have to work. The only accountability is to the nameless, faceless shareholder, who needs their investments to grow in order to finance their lives, far and away from the company they own. Corporate behavior is not about morality, but about producing the increasing stock prices needed by retirement funds and state pension funds alike.

With this in mind, corporations have to minimize costs and maximize profits. One of the largest sources of cost is labor- and corporations have long tried to minimize what they pay for it. Corporate opposition to labor unions was largely about preventing workers bargaining together for a higher wage. Corporate support for everything from deregulation to illegal immigration has been about minimizing labor costs. Outsourcing, whether it be in our hemisphere or further abroad, has been about finding cheaper labor markets. Sweatshops and even slave labor are hardly a thing of the past, but a part of many of the products we use and wear. The move towards robotic labor is about cheaper production costs. In the aftermath of the 2008 market crash, many companies eliminated the former “middle manager,” because they realized they were a cost. Anything that minimizes labor expenses is good for the bottom line.

It is undeniable that the long-term impact of the 2008 economic collapse has been a significant devaluation of labor. Companies learned how to do more with less. People that used to have life sustaining jobs are now greeters at Walmart, and maybe an Uber driver, and probably holding a third job as well. Temps replaced full-time jobs. The worker now has to work much harder to make the wage they once made in the 40 hour week. Those with full-time employment have to be nearly full-time slaves to the company, at all hours of day.

Understanding this makes income inequality very easy to understand- between government deregulation and the devaluation of labor, more money is flowing to the top of companies, who also happen to be the highest paid individuals to begin with. The Eisenhower 90% tax rate is gone, replaced with Reaganism, which gave us the Trump tax cuts. In fact one of the main ideological underpinnings of Trump’s tax cuts was lowering the tax on passive income (stockholders) to raise them on workers (labor). This is the underlying ideology of conservative economics at this point- far more so than faux populism. Let the fruits of corporate success flow up, because capital is more important than labor.

The main flaw with this state of the economist’s mind is very straight forward though- what do we do with all the devalued workers? Part of the deal, the buy-in if you will, for workers in capitalism was that they could work and fulfill their needs and even aspirations with a job. If now we are in a race to the cheapest labor market, or to even eliminate labor costs, how do we fulfill the needs of the working class? Why send your child to college and borrow all that money if there is no upper middle-class job in existence for them after? Things such as overtime pay, minimum wage laws, and unions are the antithesis of unbridled capitalism, but government *used* to be the arbiter between the two, forcing some rules onto the corporations that wanted to avoid at all costs. This “neutral referee” role is all but dead in the post-Reagan world.

So back to the main question at hand- now what? Does the working class simply become serfs, as they have been in human times past? How do we take care of the needs of the masses if their labor no longer does so? To be clear, in times past, imbalances like this have caused revolution and war, as people don’t just sink into poverty lying down. As I see it, there are two options, and only two options, to avoid this fate:

  1. Large scale social welfare spending, which those on the right will call socialism. The state will have to drastically raise taxes on wealth to afford the costs of fulfilling the needs of the masses.
  2. An end to the de-regulated, “pro-growth economy” that is producing income inequality at staggering rates. In other words, the government sets stricter rules and the economic principles of “maximum efficiency” are undone in the interest of full employment and better wages.

The United States faced this choice in the Great Depression and FDR essentially mixed the two options, leaning more heavily towards a more-regulated capitalism. That’s my preference in 2019 as well. Either option still beats accepting an unacceptable status quo that that only can lead us towards the worst of human nature- a fight or flight response that leads to human suffering, or even death. The continuation towards a world of “working poor” has no positive outcome for society.

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4 thoughts on “The Five Big Things- 1. Income Inequality and the Obsolete Worker

  1. Pingback: The Five Big Things- 2. Climate Change and the Coming Natural Resource Wars | Rags to Rich’s

  2. Pingback: The Five Big Things- 5. Taming the Military Industrial Complex | Rags to Rich’s

  3. Pingback: The Five Big Things- 4. The Tax Code | Rags to Rich’s

  4. Pingback: The Five Big Things- 3. Tribalism and Nationalism | Rags to Rich’s

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