Class War in the USA
Multinational Monitor, March 1997
Corporate America's coffers are overflowing with cash. "In
company after company, we're seeing huge buildups of cash,"
Jeffrey D. Fotta, CEO of Ernst Institutional Research in Boston
told BusinessWeek in February. General Motors ended 1996 with
more than $17 billion in cash, Ford with $15.4 billion, Chrysler
with $7.8 billion, Microsoft with $9.2 billion and Intel with
For big business, current earnings are an embarrassment of
riches. "The worry is that many companies are taking on cash
so fast they can't spend it efficiently," explains Business
The source of the cash buildup is soaring U.S. corporate profitability,
which has exceeded market analysts' expectations for 16 straight
quarters. And there is little doubt as to the source of the rising
profits: corporate downsizing and stagnant wages.
There is an important question about why wages remain stagnant,
however. With the U.S. unemployment rate dropping to around 5.5
percent over the past two years, why has there not been substantial
upward pressure on wages?
When unemployment rates fall, the law of supply and demand
says wages should go up - fewer available workers should push
up workers' pay. But wages haven't risen.
The reason is job insecurity, a fact widely understood - indeed,
practically celebrated - by economists, government officials and
"Atypical restraint on compensation increases has been
evident for a few years now and appears to be mainly the consequence
of greater worker insecurity," crowed Federal Reserve Chair
Alan Greenspan in February testimony before the Senate Banking
Committee. Greenspan touted stagnant wages as the central explanation
for the "low-inflation environment" which he called
critical for maintaining "sustainable economic expansion."
Increased capital mobility and foreign competition, wide spread
corporate downsizing, a politically weak labor movement, unenforced
labor laws and technological innovation have all combined to strengthen
business power. Employers have used their power to intimidate
and threaten workers, so that they fear unionizing, asking for
a raise or even quitting and looking for another job.
In recent weeks, impeccable sources have explained the story
in straightforward terms.
Greenspan told the Senate Committee that corporate downsizing
and rapidly changing technology have contributed to job insecurity.
"Technological change almost surely has been an important
impetus behind corporate restructuring and downsizing," he
explained. "Also, it contributes to the concern of workers
that their job skills may become inadequate."
The February 1997 Economic Report of the President notes additional
reasons workers may fear for their jobs and be less willing to
demand higher wages. First, "although imports meet only a
small fraction-around 13 percent- of total demand, the fact that
much of the U.S. manufacturing sector faces potential import competition
may provide significant wage restraint." Second, "changes
in labor market institutions and practices may also have had some
salutary effects on inflation, whatever their other impact."
A ruthless employer class blends these multiple sources of
job insecurity into a whole greater than the parts. Employers
use threats of plant relocation to bust unions; they rely on weak
or non-existent unions to permit downsizing; they capitalize on
technological changes to speed restructuring and to shift production
Consider the enormously important findings by Cornell University
labor researcher Kate Bronfenbrenner in her suppressed study for
the NAFTA labor commission. Bronfenbrenner shows that employers
threaten to close the plant in more than half of all union organizing
drives. Employers regularly refer to NAFTA and Mexican maquiladoras
to prove how easy it would be for them to move operations. ITT
Automotive in Michigan even parked flat-bed trucks loaded with
shrink wrapped production equipment- accompanied by signs reading
"Mexico Transfer Job"-in front of the plant for the
duration of a union organizing drive. Most astoundingly, where
union organizing drives are successful, employers do in fact close
their plant, in whole or in part, 15 percent of the time-triple
the pre-NAFTA rate.
The causes of job insecurity and the resulting stagnant wages
are not primarily impersonal. U.S. employers have accumulated
the piles of money which now burden them by waging a vicious,
all-out assault on workers for the past two decades.
Promotion of NAFTA, the World Trade Organization and other
trade deals, elaborate campaigns to defeat union organizing drives,
break strikes and bust unions, ruthless corporate reorganizations-all
were well planned by big business.
The only hopeful message to extract from this bleak assessment
is that concerted actions can reshape the political economy, and
that well-planned campaigns by organized labor and it allies can
shift a larger portion of corporate income back to the workers
who truly earn it.
World in United States