The Hunger Games Economy
Jeff Faux: Dreams of Wall St. and Military Industrial Complex are not compatible with dreams of American middle class
Jeff Faux is the Founder and now Distinguished Fellow of the Economic Policy Institute in Washington, DC. He is an activist, economist and writer, He has written extensively on issues from globalization to neighborhood development. His latest book is “The Servant Economy; Where America¹s Elite is Sending the Middle Class.”
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.
There's been some debate amongst the American governing elite about America's place in the world and its declining power. Barack Obama went to Australia not long ago and declared that America will continue to be an Asia-Pacific power. And the issue of the Brzezinskian grand chessboard is still very much on their mind. But what does this maintaining America's position in the world mean for ordinary Americans? Who's going to pay for all this? When it comes to competitiveness, it really means wages, although that word doesn't get talked about very much, not in the mainstream press or in the halls of Congress.
Well, it does get talked about in a piece written by Jeff Faux, and he's now joining us. Jeff is a founder and distinguished fellow of the Economic Policy Institute in Washington, D.C. He's an activist, economist, and writer. He's written extensively on issues from globalization to neighborhood development, and his latest book is The Servant Economy: Where America's Elite is Sending the Middle Class. Thanks very much for joining us, Jeff.
JEFF FAUX, AUTHOR: Oh, it's great to be here, Paul. Thank you.
JAY: So, I mean, clearly we are dealing with a different world. And it's not just that it's militarily different, in the sense that China's now somewhat of a power, so is Russia and—back somewhat of a power—I mean, nothing on the scale of the United States, but the geopolitics and chessboard has changed somewhat. But where it's changed a lot more is with this massive industrial capacity in areas of the world where 20, 30 years ago there was nothing like it—advanced technology, high-quality production, very low wages. And America wants to maintain its competitiveness in all of this. So talk a bit about that and what that might mean for ordinary Americans, and maybe what the word competitiveness means.
FAUX: Well, I think—start from what I think is the basic assumption, and that is the United States can no longer satisfy the three great dreams that have driven American politics over the last decades. The first dream is the dream of Wall Street and business for unregulated access to speculative profits. The second dream is the dream of the military and foreign-policy elite and the military-industrial complex for global hegemony. The third dream is the dream of ordinary Americans for a rising living standard.
Now, we can have one out of three, certainly. Two out of three, maybe. Three out of three? No way. So in effect the decision is being made right now—or has been made—by this country's elite.
There's a lot of talk in Washington, as you know, about the grand bargain between Republicans and Democrats over budgets and taxes. But the real deal has already been cut. The average American income in real wages is going to decline over the next 10 years, 15 years, as far into the future as we can see. Now, this has been coming for a long time. It's not just about the recession and it's not temporary. As you probably know, for the last 30 years we've had stagnant wages in America. After wages rise steadily since World War II, they flattened out after 1979 and essentially have been flat.
So the question is: if wages were flat, how come everything looked so good? That is, people went to shopping centers and bought cars and houses during those 30 years that ended in 2008. And the reason is two. One, family incomes kept up because we sent more members of the family to work, usually the wife. Now there are more women than men in the labor force so that that strategy for most people is exhausted. The second is debt. People weren't getting raises, but they were getting access to cheaper and accessible credit. That has evaporated with the collapse of the financial sector.
JAY: Jeff, before you continue, let me ask: so if this process more or less began in the '70s, why? What happened? Why? If you could—you know, to some extent one could say that third dream of ordinary Americans, you know, to own a house, send the kids to college, not to be terrified of losing their job, to some extent that's—dream was still possible, at least in the early '60s.
FAUX: Oh, yeah. And the reason—.
JAY: So what happens?
FAUX: Yeah. There are three things that happened since the end of the '70s. The data starts from 1979; the kink in the curve starts from 1979. One was globalization, and by that I mean, essentially, exposing American workers to a very brutal and competitive global labor market before they were prepared.
Second, the weakening of the bargaining position of the average American worker. A lot of that had to do with the decline of unions. But it affected union members and nonunion members. The second thing that happened was the weakening of the bargaining position of the average American worker. This was not just about weaker unions, but weaker unions played a key role, not just for union members, but for people who aren't union members. Because unions were strong—or certainly stronger than they are now—the threat of unionization kept the bosses and kept the employers from cutting wages too much, cutting pensions too much, even though they would have liked to. So weaker unions, weaker bargaining positions [crosstalk]
JAY: And is weaker unions and bargaining positions linked to number one, which is globalization and the threat of moving offshore?
FAUX: That's right, certainly linked to number one. And number three, later, was the shredding of the safety net, the real value of the minimum wage, and the kinds of New Deal protections for labor that have been frayed away over the last 10 or 15 years.
But on the first, on globalization, there's something very important here to remember, and that is it not only affected working people, but it changed the culture of the American elite. You know, if you go back to the early part of the 20th century, labor and capital were in fierce struggles. But both labor and capital knew that they needed each other and were stuck in the same country. So, you know, when Henry Ford raised the wages of his Ford employees to $5 a day, the Wall Street guys said, Henry, what are you doing here? I mean, you can't pay—you're spoiling these people, you're paying them too much. And Henry Ford, who was a SOB union buster, said, look, I've got to pay them enough to come in to make the cars, but I also need to pay them enough to buy the cars. So it was an economy in which, while there were labor and capital disputes, we were all in it together.
What happened—what's happened since the 1980s is that globalization, the deregulation of trade and investment, has allowed the American commercial and economic elite to roam the world in search of lower wages, in search of government subsidies by Third World countries, etc.
JAY: Yeah, so you now have a situation where they saved GM and Chrysler, but workers'—starting worker wages go from, what, $26 to $14 an hour, and you probably couldn't buy a new car at $14 an hour.
FAUX: Exactly. And unlike Henry Ford, the people who run the Ford Motor Company today, you know, have other people they can use to sell their cars to. And so high wages, which we sort of learned after the 1930s were good for the economy because it created consumer demand and consumers bought the goods that were being produced, high wages in America are no longer what they were. They're now a threat to multinational corporations who still produce and sell things. And that's been a critical change.
JAY: They also seem to no longer think they need an educated workforce. I used to—in the '50s and '60s, all this talk about, you know, America will compete because it's going to be the most educated working class and this and that, they don't seem to care anymore. The public school system can go to hell and they don't seem to care.
FAUX: They don't care. But that's sort of the last excuse of the political governing class. I mean, whether it's, you know, Barack Obama, George Bush, Bill Clinton, they're all the so-called education presidents, and their answer to this decline in living standards and wages is not to worry, just go get an education. Barack Obama was in Florida about a year ago touring the country, saying the way we're going to compete in the world is to out-educate everyone.
Well, first what's obvious: that we're shrinking the schools, we're laying off teachers, kids can't go to college because it costs too much. But second, which is really important, we are not creating jobs for educated young people. You go into Apple, in the Apple Store, there is the future. And it's not the technology. It's in all those smart college-educated kids working as retail clerks for $10, $12 an hour. The Bureau of Labour Statistics—government agency—projects that between 2010-2020, the largest, fastest-growing occupations in this country, of the ten largest and fastest-growing, only one requires a college education.
JAY: Well, Jeff, we're going to pick this up in part two, and what I'll be asking in part two is it seems to me while this may make sense for Apple and it may make sense for a lot of individual companies to drive wages down and have more and more service jobs, as an economy somebody's got to be making money to buy all this stuff, and that seems to be where the rub is. So join us for part two of our series of interviews with Jeff Faux on The Real News Network.