Balkinization  

Sunday, August 07, 2011

Shared Sacrifice of Whom?

Frank Pasquale

As Drew Westen observes today, "400 people control more of the wealth than 150 million of their fellow Americans," and "the average middle-class family has seen its income stagnate over the last 30 years while the richest 1 percent has seen its income rise astronomically." These extremes cry out for a theodicy, justifying mammon's ways to man. As wealth gets more concentrated, here is one of the millions of "faces of austerity" whom policymakers must answer to:

Cynde Soto dreads the arrival of yet another benefit notice. Her cash assistance has been cut four times in two years. State medical coverage is getting more expensive and no longer includes dental care or podiatry. And the in-home help she needs to take care of basics has been cut by about 20 minutes a day. "That doesn't sound like a lot to people but ... I'm a quadriplegic," said the 54-year-old Long Beach resident. "I can't even scratch my own nose."


When TV talking heads prate about "shared sacrifice," they might want to pause to consider stories like Soto's. They should also reveal where a particular multimillionaire will invest gains from, say, the continuation of the Bush tax cuts, or the zeroed out estate tax of 2010. How much gold does the rotting teeth of the poor buy? Are volunteer dentists effectively subsidizing summer houses? Executive protection dogs? Private jets to summer camp?

These trade-offs become more compelling as data renders the narrative of "trickle down job creation" implausible. The most recent "recovery" saw 88% of gains go to corporate profits, and about 1% go to wages. Workers are caught in a downward spiral: unemployment reduces their bargaining power, which in turn lets bosses pile more duties onto fewer people, who effectively increase unemployment more by doing the work or 1.5 or 2 or 3 workers for the price of 1. Many women face the brunt of the transition: "When companies decide to lay off secretaries and assistants while making employees pick up the slack, women take the hit." Every margin has to be worked to keep CEOs' pay averaging hundreds of times that of their typical workers.

Gestalt Political Economy

In an ideal world, the S&P downgrade would jolt the US into recognition of how bizarre our economic policies have become. The very wealthy have captured more of the economy's growth, but have seen their taxes reduced to near-record-low levels. As Juan Cole has argued, a self-reinforcing pattern of income gains at the top has left everyone else caught in a downward spiral of deleveraging, cutbacks, and austerity:

Most of our problems come from the US government coddling very rich people, which it does because the very rich pay for politicians’ campaigns and expect a payback. And as more and more of the country’s wealth has gone to the 750,000 families [at the top which have seen the fastest income gains], they have gained more and more control over Congress.


The recent budget deal accelerates the process, slashing funding for fundamental investments in the nation's future in order to preserve the Bush tax cuts for the wealthy. Based on the work of Michael Perelman, Richard Seymour identifies the problems set to intensify:

The pathologies of the US economy are not exactly a secret[. . . ]: long-term underinvestment in research and development, low productivity resulting from a shift toward low wage service jobs, more financial vs productive investment, underinvestment in infrastructure, and an irrational military Keynesianism that results in the best innovation and research being conducted in secrecy . . . .


I have also commented on these trends, and I see them all as epiphenomenal of an increasingly short-termist elite angling for larger pieces of a shrinking pie. A little investment in transport, education, technology, and energy now may pay great dividends in the future. But in a world driven by quarterly profit statements, daily market fluctuations, and nanosecond-denominated high frequency trading, long-term value creation is decidedly unfashionable.

Naturalizing Penury

Still, the S&P downgrade is a call for long-term thinking. As American wealth continues to shrink, how can liquidationists justify the decline in living standards that results? That is the next big intellectual challenge for the Tea Party and its corporate funders. A few trial balloons have emerged:

1) Cutting America's Poor Down to Size

As the fortunes at the top of society become astronomical, the most vigorous agitators for wealth-defense have seized on new strategies for justifying the fate of the economy's "losers." The extreme poverty prevalent in the less developed world can provoke at least two reactions. Some ask: how can we develop new technology and redistribute resources to reduce the suffering of the world's poorest? Others say: why can't America's poor live as cheaply as, say, the favela-dwellers in Brazil, or the Phillipines' poor?

That appears to be the approach of the Heritage Foundation, which thinks poverty is grossly exaggerated in the US. "[T]he typical household defined as poor by the government had a car and air conditioning," the Foundation gripes. By this logic, of course we should keep historically low tax rates on billionaires and slash aid for public housing subsidies. The poor can sell their cars and A/C units to pay for rent! Even those who live on $2 a day have funds left over for tea and saving for family funerals.

2) The Economic Construction of the Zero Marginal Product Worker

What about the unemployed, now out of work on average for nearly 41 weeks? Don't get hysterical over hysteresis, conservative thought leaders concur. Many of these people are "zero marginal product workers," who literally have nothing to add to the economy. Like a portable CD player in a world of iPods, they are obsolete.

Sadly, those most responsible for the ZMP theory don't like to think much about negative marginal product workers (NMPs), like the bankers who diverted vast sums in bonuses on the way to global economic catastrophe. They also appear to be unfamiliar with James K. Galbraith's work (recapped toward the end of The Predator State) about the role of wage floors and labor standards in encouraging innovation. (Hint: involved, stable, and decently paid workforces are a bit more committed to the overall company project than revolving battalions of disposable peons.)

3) The Promise of Prison Labor

Chalk up another concern for America's worried wealthy: how can their profit margins match those of compatriots in countries like Mexico or China, where labor is much cheaper? One solution is to employ people whose health care is provided by the state, and who are guaranteed to show up on time for wages less than an dollar an hour: prisoners. The strategy is closer than you may think:

The breaded chicken patty your child bites into at school may have been made by a worker earning twenty cents an hour, not in a faraway country, but by a member of an invisible American workforce: prisoners. At the Union Correctional Facility, a maximum security prison in Florida, inmates from a nearby lower-security prison manufacture tons of processed beef, chicken and pork for Prison Rehabilitative Industries and Diversified Enterprises (PRIDE), a privately held non-profit corporation that operates the state’s forty-one work programs.


In addition to processed food, PRIDE’s website reveals an array of products for sale through contracts with private companies, from eyeglasses to office furniture, to be shipped from a distribution center in Florida to businesses across the US. PRIDE boasts that its work programs are “designed to provide vocational training, to improve prison security, to reduce the cost of state government, and to promote the rehabilitation of the state inmates.”


Immigrants might also get conscripted to the same cheap labor, high-discipline programs. The more that big businesses complain about having to provide "minimum essential health benefits" to workers, the more appealing low-wage labor in prisons might be. Moreover, if a dollar crash or other macroeconomic disruption raises oil prices and makes shipping from China uneconomical, the massive prison population could rapidly step in to replicate the wages and working conditions that keep Wal-Mart and so many other retailers well-supplied.

4) The Reputation-Ruining Industry

A zero-sum economy like ours teems with the parasitic players of "gotcha capitalism." Hidden late fees, penalties, and charges are common. Credit bureaus are happy to make many them a near-permanent "black mark" on your record if you're foolish enough to ignore or dispute them. Now a new entrepreneurial venture is going after arrestees, trying to assure that their mugshots are near the top of Google results for their name, unless they pay a fee to have them removed. Multiply that by at least the number of embarrassments you can think of offhand, and you have a thriving new industry for the US! And one more source of "disposable people"---a class marked off as not deserving employment, and perhaps eventually many other benefits of modern life.

A Rapidly Shrinking Pie in a Divided Society

It has long been inevitable that the US's share of critical resources would decline. Five percent of the world's population can't continue to consume 25% of the oil, or be home to 40% of the world's listed shares (compared to, say, India's 1%!), or maintain outsized "ecological footprints" we leave on the planet. Fairness demands that those who benefited most from our long hegemony contribute the most toward easing a transition to global parity. But exactly the opposite is occurring: public anger has fueled rapid political change that undermines even the few pillars of social insurance we still have left.

In Class Acts: Service and Inequality in Luxury Hotels, Rachel Sherman describes how workers in the deluxe hospitality service sector are trained to cater to every whim of guests. The workers go so far as to train the guests to want more, to be demanding, to express their every wish to strangers. This is hard cultural work, especially where patterns of social equality and self-reliance taint relations of servility with memories of royalism, unearned privilege, and oppression. But the vast inequality of resources on either side greases the transaction, as a butler angles for a tip each hour that the guest may earn in one minute.

In our society, the "naturalizers of penury" I described above are performing cultural functions similar to the luxury hotel trainers (and trainees) described in Class Acts. Are you a Walgreen's worker who wants a longer lunch break? Sit down, be quiet, and be glad you're not picking up garbage in a Manila slum. Thinking of quitting your job? Watch out---there are 5 applicants for every opening, and the reputation industry is quick to report any of your indiscretions to a would-be employer. Are you a chicken-patty-maker hoping for a pay raise? Why should the boss give you one when the prisoners down the road will do the job for 20 cents an hour? For individuals, there are no easy answers in any of these situations. The resulting mood of defeated quietism seeps into our culture and politics, undermining the collective actions that offer the only constructive response to these dilemmas. As C. Wright Mills argued, these personal economic problems can only be solved by political action.

Image Credit: CBPP.

X-Posted: Concurring Opinions.

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