Economic Recovery: Losers and Winners

The American economy, indeed capitalism itself, has always gone through boom and bust cycles. Like night dawning into day, cyclical recessions followed by economic recoveries are inevitable, no matter what the policies of the party in power. Where political policy has an impact is on the nature of the cycle: which sectors of the economy are losers and which sectors do best in the recovery.

A new study by economists at the Center for Labor Market Studies at Northeastern University in Boston, titled "The Unprecedented Rising Tide of Corporate Profits and the Simultaneous Ebbing of Labor Compensation: Gainers and Losers from the National Economic Recovery in 2002 and 2003", gives a statistical underpinning to what is readily observable. Corporations and their executive officers are making-out like bandits. Meanwhile, hundreds of millions of working people have nothing to show for their workaday efforts.

The Center's study, important not only for its statistical data but for the geopolitical implications, was first publicized by New York Times columnist Bob Herbert on April 5, 2004. . As Herbert pointed out, the study has been ignored by the national media. "Employers took the money and ran," he wrote, "but very few people are talking about it, which tells you something about the hold that corporate interests have on the national conversation."

The gist of the study is this: "The U.S. economy's output performance in the second half of 2003 was the strongest in the past two decades." And "The share of national income growth accruing to corporate profits...was by far the highest ever recorded for any economic recovery period in the post-World War II era." Yet, the study points out, "Labor's share of national income growth during the past two years of economic recovery has been the lowest for any recovery period since the end of World War II." What the data shows is that corporate profits have more than doubled from a previous historic high of 19% to 40.5% while labor's share has diminished from a historic high of 55% to 38.6%.

This is all readily observable. Outsourcing of high-wage manufacturing jobs (and increasingly high-tech white-collar jobs); rabid opposition to union organizing; tax-giveaways to multinational corporations and the wealthiest Americans; cheating by corporations on employee wages; obscene payments to corporate executives; lower safety standards; naked corporate grabs for political power; and incessant global pressure, promoted by ideological free-traders, to erode worker rights and minimize benefits and wages are all part of the dynamic.

Some recent examples: An article in the New York Times (4/4/04), "Altering of Worker Time Cards Spurs Growing Number of Suits" by reporter Steven Greenhouse tells how managers are secretly altering computerized employee time-cards to deny them overtime and other wages legitimately earned. Some of these suits have led to out-of-court settlements; others are going to trial. In all cases, spokespeople for the accused corporations blame their in-store managers and insist that screwing their workers is not corporate policy. But even if this were true, it's pressure from corporate headquarters to maximize local profits that encourages managers to rip off their workers. If cutting costs are a necessity for staying in business, and if top corporate executives insist on rewarding themselves with multi-million dollar pay hikes, the cuts have to come from other areas. Low-level employees, without union protection, are the easiest targets. Those who stand up and fight for their rights can be easily fired.

Traditionally, corporations try to influence public policy by bundling campaign contributions. Now some are trying to directly purchase political power. In Inglewood, California, the local government rejected a Wal-Mart plan to develop a huge superstore on a vacant property. The locals believed that such a store would destroy their local downtown and locally owned retail businesses. Wal-Mart then mounted a million-dollar campaign to overturn the government's decision so that they could build their superstore without any public oversight or regulation. Inglewood is a strong union town and unions raised $110,000 to rally behind the local government. The voters defeated the Wal-Mart initiative by an overwhelming vote of 60 to 40 percent. But experts who follow Wal-Mart see this as only the beginning. The Arkansas-based mega-store wants to wipe out all retail and grocery competition. The goal, whether stated or not, is to become a Soviet-style retail monopoly. In the old Soviet Union, the publicly owned GUM department store was the only game in town. If Wal-Mart gets its way, it will become a privately owned GUM equivalent.

This is nothing new, of course. Corporations have always tried to maximize their profits and have traditionally moved their plants and employees to low-wage areas. What is new, with the Bush administration, is government itself promoting corporation initiatives and doing everything in its power to weaken worker rights. Even more important is the rise of the global economy. There was a time when jobs in New England went south where companies did not have to pay union wages. Then they moved jobs to Mexico and other developing nations where wages were lower. Now countries like Mexico are losing their jobs to countries that offer even more minimal compensation.

Downward pressure on wages and benefits is relentless. What we're seeing is people throughout the entire world, without rights and without unions, working long hours for poverty wages, all in harness to increase the wealth of corporate honchos.

How long can this trend continue before people start fighting back? Corporations, trapped in a competitive winner-take-all environment of their own creation, have declared class war on working people. When will blowback begin, here and abroad? Our impudent economic policies feed into the anger and cultural despair of impoverished nations. Whether in five, ten or twenty years, rebellion is inevitable. The only way to avert it is to begin regulating the corporate economy and creating policies that advance worker rights in the Untied States and the world over

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