I have been reading an interesting book – The Unwinding: An Inner History of the New America – by US journalist – George Packer – which traces the evolution of America over the period from 1978 to 2012. It is about how Americans have been dudded by the system they economic and political system that they hold dear to their hearts and how the core institutions that condition those beliefs have declined (changed) in the face of the rising dominance of the investment banksters. I am not so much interested in American history as I am the metamorphosis of Capitalism and the impact it has had on the working class. The book created a number of thought strands, which ultimately, led me to an interesting article in the Proceedings of the National Academy of Sciences of the USA (published December 8, 2015) – Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century – by Princeton University academics Anne Case and Angus Deaton. What we learn is that the neo-liberal race to the bottom in advanced nations is destroying communities and killing workers.
In The Unwinding, George Packer describes the way in which communities are unravelling in the US as a result of a decline in the institutional support structures that were created in the Post World War 2 period which essentially allowed the US middle class to prosper.
He considers wage stagnation and entrenched unemployment (often hidden by dropping out of the labour force) to be significant aspects of these changes, which then lead to despair and human malady.
Evidence of towns and cities being hollowed out by unemployment and their ‘main street’ shopping capacities being put out of business by Walmart and the like, who set up mega stores on the outskirts of towns.
The social aspects of life in these towns is dissolved as a result.
He talks about the rising mortality rate among the less educated, middle class Americans who since the turn of the century have been dying at an ever increasing rates.
These health trends are regionally regional concentrated so predate the GFC which has accelerated the problems.
In an interview with the US PBS service (December 26, 2013) – Tracking the breakdown of American social institutions in ‘The Unwinding’ – George Packer described the “breakdown of institutions” in this way:
And a social contract that sort of underwrote all of them, a contract that said if you work hard, if you essentially are a good citizen, there will be a place for you, not only an economic place, you will have a secure life, your kids will have a chance to have a better life, but you will sort of be recognized as part of the national fabric.
And over the generation of my adult life, going back to the late 70s, that fabric has come unraveled, and the contract has essentially been torn up.
He implicates policy makers who abandoned support from promoting a well-paid workforce:
And, instead, workers became disposable. Their wages flattened out. And the benefits of our free enterprise system went more and more to the top. And so we have more of a society of winners and losers.
All familiar aspects of this neo-liberal era that we are living through – some more easily than others.
The book, in part, is about the bifurcation in the economy between massive wealth and displays of wealth “a brand-new startup being sold to a company for a billion dollars, without any profits, with hardly even revenues” and an increasing number of workers who have to survive on part-time work at Walmart on poverty wages with now public sector support to make living under these conditions easier.
These trends are global as governments of all persuasions have bought into the neo-liberal myth that the ‘state’ is powerless in the face of global financial capital and should legislate to benefit the interests of that cohort while claiming that the endeavour of that cohort will ‘trickle down’ to the rest of us.
That idea was introduced in the 1980s if not before so we have plenty of time series evidence to support the contention that the prosperity has not trickled down. Instead, it flooded up!
These are the trends which, in part, have led to the Brexit outcome, the stunning candidacy of Donald Trump, the rise of the Alternative fuer Deutschland (AfD) party (who were ahead of Merkel’s CDU in a regional election at the weekend) and a host of other related developments.
These trends also should be the central focus of progressive movements, although as long as so-called progressive political parties continue to adopt neo-liberal macroeconomic positions and kowtow to the ‘globalisation’ myth, it will be the right-wing, popularist forces that seize the political support that these trends are generating.
The paper by Anne Case and Angus Deaton referred to in the Introduction:
… documents a marked increase in the all-cause mortality of middle-aged white non-Hispanic men and women in the United States between 1999 and 2013. This change reversed decades of progress in mortality and was unique to the United States; no other rich country saw a similar turnaround.
So it is really specific evidence to support George Packer’s contention that neo-liberalism has brought increasing despair to the US middle class.
Case and Deaton contrasts the general trend towards “a remarkable long-term decline in mortality rates in the United States” since 1970, with the recent experience of “white Americans in midlife” which they describe as a “quiet epidemic that has “killed half a million middle-aged white Americans”.
Increasing mortality in middle-aged whites was matched by increasing morbidity. When seen side by side with the mortality increase, declines in self-reported health and mental health, increased reports of pain, and greater difficulties with daily living show increasing distress among whites in midlife after the late 1990s
The rising death rates are linked to “drugs, alcohol and suicides” and, while have impacted on all “white middle-aged males”, have been concentrated “among those with the least education”.
We read that:
For those with a high school degree or less, deaths caused by drug and alcohol poisoning rose fourfold; suicides rose by 81 percent; and deaths caused by liver disease and cirrhosis rose by 50 percent.
All-cause mortality rose by 22 percent for this least-educated group. Those with some college education saw little change in overall death rates, and those with a bachelor’s degree or higher actually saw death rates decline.
It is exactly the at risk cohort that has been left behind by the shifts in the production and the refusal of the state to intervene and use their fiscal capacities to attenuate the decline in private sector activity.
We read that:
Median household incomes of white non-Hispanics began falling in the late 1990s, and the wage stagnation that began with the economic slowdown of the 1970s continues to hit especially hard those with a high school or less education. Coupled with the changing nature of the financial risk Americans face when saving for retirement as well as the recent financial crisis, economic insecurity may weigh heavily on U.S. workers, and take a toll on their health and health-related behaviors.
A range of related problems accompanied the rising mortality rates – “increasing reports of pain”, “psychological stress” – and have “shot up in middle-aged white non-Hispanics … with the least education”.
Last year (March 25, 2015), a study of suicide rates in Greece – What has happened to suicides during the Greek economic crisis? Findings from an ecological study of suicides and their determinants (2003–2012) – found that:
The suicide rate overall rose by 35% between 2010 and 2012 … There was a clear change in suicide trends after 2010 for both men and women of working age and older women …
The mean suicide rate in Greece after 2010, when austerity began, was significantly higher than in the period 2003–2010 … In particular, the suicide mortality rate for men increased from 5.75 (period 2003–2010) to 7.43/100 000 population (period 2011–2012; p<0.01) ... The most affected age group was working men aged 20–59, in whom the suicide rate increased from 6.58 to 8.81/100 000 population ... [They] ... observed a significant association of male unemployment rates and suicide mortality among working age men 15–64 years
They acknowledge that in “an observational study” it is “never possible … to establish causality”. But they use a range of techniques, which suggest that since the crisis and the imposition of austerity, there has been a “reversal of a long-term decline in suicides … in almost all European countries”.
In the US, there has been an “acceleration” of the “long-term upward trend ” in suicide rates, a finding supported by the research of Case and Deaton.
In other words, the damaging effects of neo-liberalism on the health of workers left behind by the hollowing out of communities has been exacerbated by the GFC.
The Greek study concluded that “Our analysis provides preliminary evidence that increased suicide mortality in Greece is a health hazard associated with radical austerity”.
He argues that “There are two types of businesses in America today: those that pay their workers a living wage — the real economy — and those that don’t — the parasite economy. And all of us who live and work in the real economy should be royally pissed at the way the parasite economy is sucking us dry.”
The argument is a sort of underconsumptionist one that was prominent in the C18th which Marx elaborated upon (in part) and, arguably, formed the basis of the work of Keynes, Kalecki, and others in the 1930s.
The idea was that “because workers are paid a wage less than they produce, they cannot buy back as much as they produce”.
Hanauer’s contentions are linked to George Packer’s observations that the rise of Walmart has undermined community stability in the US.
Hanauer writes that:
… in the parasite economy — where companies large and small cling to low-wage business models out of ignorance or habit or simple greed … tens of millions of Americans work for poverty wages with few if any benefits, often in the face of abusive scheduling practices that make it impossible to plan their life from day to day, let alone month to month …
low-wage workers at parasite companies—mostly giant and profitable corporations like Walmart and McDonald’s—cannot afford to robustly consume our products, or most anybody else’s, in return. The parasite economy is simply bad for business.
He rejects the claim (which he himself previously believed) that “parasitic business practices … were an inherent and unavoidable feature of capitalism” and, now, believes that “Some companies just choose to pay their workers as little as possible, and others don’t … there is no line of work worth doing that cannot command a living wage.”
In other words, there is nothing intrinsic going on here – it all comes down to temporal perspectives (short-termism) and greed.
He argues that the public sector picks up the tab for the parasitic business practices:
… a majority of the money we collectively spend on anti-poverty programs doesn’t go to the jobless, it goes to the working poor.
He also highlights the mainstream economics myth (built into so-called ‘marginal productivity theory’) that workers “get paid what they are ‘worth'”.
This is a central aspect of wage theory in mainstream economics and was introduced into the literature in the late C19th to offset the growing support for Marxian exploitation theories.
Accordingly, if everyone gets back what they contribute to production then the system is ‘fair’.
Hanauer, as a business person himself rejects that construction of the wages system.
Take it from someone who has created dozens of businesses — people don’t get paid what they are “worth.” They get paid what they negotiate. We can all point to examples of CEOs who negotiated far more than they are worth, but there are many, many more people in our country who are worth far more than they negotiated.
That’s because more than any other market, the labor market is distorted by a profound imbalance of power between buyers and sellers; in fact, other than the small share of workers who have a collective-bargaining agreement, the vast majority of workers enjoy little bargaining power at all. Most workers have limited resources and immediate needs — to eat, to pay rent, to provide for their children — while most employers could leave any particular position unfilled indefinitely without suffering any personal hardship at all.
A modern rendition of what Marx had observed way back then.
The ‘parasitic companies’ “relentlessly” exploit the “power imbalance” in the labour market to capture an ever greater share of real income for themselves.
But, steadily, given the problems that researchers are now observing (for example, the medical meltdown discussed above) and the collapsing communities, the ‘low wage’ model will collapse.
A race to the bottom might succeed for a while but cannot be the basis of social development in any advanced nation (or developing nation, for that matter).
There is a reason trade unions and the welfare state emerged out of the train wreck of late C19th capitalism. Those reasons are being reasserted as the neo-liberal era matures into the nightmare we observe now.
Legislative action is required. Hanauer says (after admitting to running parasitic companies himself that “People, like me, when faced with brutal competitive dynamics, will not pay workers a living wage unless all of our competitors do the same. And the only way that will happen is if citizens like you require employers like us to do it.”
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.