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The Myth of 'American Exceptionalism' Implodes

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  • shaji
    The Myth of American Exceptionalism Implodes Until the 1970s, US capitalism shared its spoils with American workers. But since 2008, it has made them pay for
    Message 1 of 1 , Jan 19, 2011
      The Myth of 'American Exceptionalism' Implodes

      Until the 1970s, US capitalism shared its spoils with
      American workers. But since 2008, it has made them pay for
      its failures

      by Richard Wolff
      The Guardian/UK
      January 18, 2011

      http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/17/economics-globalrecession

      One aspect of "American exceptionalism" was always economic.
      US workers, so the story went, enjoyed a rising level of real
      wages that afforded their families a rising standard of
      living. Ever harder work paid off in rising consumption. The
      rich got richer faster than the middle and poor, but almost
      no one got poorer. Nearly all citizens felt "middle class". A
      profitable US capitalism kept running ahead of labor supply.
      So, it kept raising wages to attract waves of immigration and
      to retain employees, across the 19th century until the 1970s.

      Then everything changed. Real wages stopped rising, as US
      capitalists redirected their investments to produce and
      employ abroad, while replacing millions of workers in the US
      with computers. The US women's liberation moved millions of
      US adult women to seek paid employment. US capitalism no
      longer faced a shortage of labor.

      US employers took advantage of the changed situation: they
      stopped raising wages. When basic labor scarcity became labor
      excess, not only real wages, but eventually benefits, too,
      would stop rising. Over the last 30 years, the vast majority
      of US workers have, in fact, gotten poorer, when you sum up
      flat real wages, reduced benefits (pensions, medical
      insurance, etc), reduced public services and raised tax
      burdens. In economic terms, American "exceptionalism" began
      to die in the 1970s.

      The rich, however, have got much richer since the 1970s, as
      every measure of US income and wealth inequality attests. The
      explanation is simple: while workers' average real wages
      stayed flat, their productivity rose (the goods and services
      that an average hour's labor provided to employers). More and
      better machines (including computers), better education, and
      harder and faster labor effort raised productivity since the
      1970s. While workers delivered more and more value to
      employers, those employers paid workers no more. The
      employers reaped all the benefits of rising productivity:
      rising profits, rising salaries and bonuses to managers,
      rising dividends to shareholders, and rising payments to the
      professionals who serve employers (lawyers, architects,
      consultants, etc).

      Since the 1970s, most US workers postponed facing up to what
      capitalism had come to mean for them. They sent more family
      members to do more hours of paid labor, and they borrowed
      huge amounts. By exhausting themselves, stressing family life
      to the breaking point in many households, and by taking on
      unsustainable levels of debt, the US working class delayed
      the end of American exceptionalism - until the global crisis
      hit in 2007. By then, their buying power could no longer
      grow: rising unemployment kept wages flat, no more hours of
      work, nor more borrowing, were possible. Reckoning time had
      arrived. A US capitalism built on expanding mass consumption
      lost its foundation.

      The richest 10-15% - those cashing in on employers' good
      fortune from no longer-rising wages - helped bring on the
      crisis by speculating wildly and unsuccessfully in all sorts
      of new financial instruments (asset-backed securities, credit
      default swaps, etc). The richest also contributed to the
      crisis by using their money to shift US politics to the
      right, rendering government regulation and oversight
      inadequate to anticipate or moderate the crisis or even to
      react properly once it hit.

      Indeed, the rich have so far been able to use the crisis to
      widen still further the gulf separating themselves from the
      rest, to finally bury American exceptionalism. First, they
      utilized both parties' dependence on their financial support
      to make sure there would be no mass federal hiring program
      for the unemployed (as FDR used between 1934 and 1940). The
      absence of such a program guaranteed that real wages would
      not rise and, with job benefits, would likely fall - as they
      indeed have done. Second, the rich made sure that the prime
      focus of government response to the crisis would benefit
      banks, large corporations and the stock markets. These have
      more or less "recovered".

      Third, the current drive for government budget austerity -
      especially focused on the 50 states and the thousands of
      municipalities - forces the mass of people to pick up the
      costs for the government's unjustly imbalanced response to
      the crisis. The trillions spent to save the banks and
      selected other corporations (AIG, GM, Fannie Mae, Freddie
      Mac, etc) were mostly borrowed because the government dared
      not tax the corporations and the richest citizens to raise
      the needed rescue funds. Indeed, a good part of what the
      government borrowed came precisely from those funds left in
      the hands of corporations and the rich, because they had not
      been taxed to overcome the crisis. With sharply enlarged
      debts, all levels of government face the pressure of needing
      to take too much from current tax revenues to pay interest on
      debts, leaving too little to sustain public services. So,
      they demand the people pay more taxes and suffer reduced
      public services, so that government can reduce its debt
      burden.

      For example, California's new governor proposes to continue
      for five more years the massive, broad-based tax increases
      [1] begun during the crisis and also to cut state services
      for the poor (reduced Medicaid funding) and the middle
      class(reduced budgets for community colleges, state colleges,
      and the university system). The governor admits that
      California's budget faces sky-high interest costs and reduced
      federal government assistance just when the crisis increases
      demands for public services. The governor does not admit his
      fear to tax the state's huge corporate and private individual
      wealth. So, he announces an "austerity program", as if no
      alternative existed. Indeed, a major support for austerity
      comes from the large corporations and wealthiest
      Californians, who hold the state's bonds and want
      reassurances that the interest on those bonds will be paid.

      California's austerity program parallels similar programs in
      many other states, in thousands of municipalities, and at the
      federal level (for example, social security). Together, they
      reinforce falling real wages, falling benefits, falling
      government services and rising taxes. In the US, capitalism
      has stopped "delivering the goods", as it so long boasted.
      The reality of ever-deeper economic division clashes with
      expectations built up when wages rose over the century before
      the 1970s. US capitalism now brings long-term painful decline
      for its working class, the end of "American exceptionalism"
      and rising social, cultural and political tensions.

      [Richard D Wolff [4] is professor of economics emeritus at the
      University of Massachusetts, Amherst, where he taught
      economics from 1973 to 2008. He is currently a visiting
      professor in the graduate programme in international affairs
      [5] of the New School University, New York City. Richard also
      teaches classes regularly at the Brecht Forum [6] in
      Manhattan. His most recent book is Capitalism Hits the Fan:
      The Global Economic Meltdown and What to Do About It [7]
      (2009)]
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