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From new introduction to ‘High Tech, Low Pay’

How changes in capitalist cycle have impacted workers

Published Aug 17, 2009 7:58 PM

Following is the second part of an excerpt from the introduction by Fred Goldstein to an upcoming reprint of the ground-breaking work “High Tech, Low Pay” written by Sam Marcy in 1986 during the early stages of capitalist restructuring. Goldstein is the author of “Low-Wage Capitalism: Colossus With Feet of Clay.” Read part one in the Aug. 13 WW issue.

Even before the 1990s the capitalist business cycle, described a century earlier by Engels, had changed in favor of capital. Marcy, in Chapter 3, focuses on the fact that capitalist recession lengthened in the post-World War II period and that “this is very important in relation to strike strategy, which had a lot to do with the duration of the capitalist economic crisis.” It raises the question of what workers can do if a recession turns out to be protracted and the bosses can hold out for a long time.

Workers, ‘boom-and-bust’ and low-wage capitalism

The new era of low-wage capitalism, worldwide wage competition and slowing capitalist economic growth has put workers under pressure even during times of capitalist upturn. The booms have weakened, benefiting only the bosses, with not even relative gain for the workers.

The era of rapid accumulation, that is, rapid and tempestuous growth of capital investment, has been undercut by the growing productivity of labor and the speed with which markets become saturated. The relative labor shortage during the upturn is a thing of the past. Instead, there are jobless recoveries and the consequent eradication of the opportunity for the workers to make up lost wages by forcing increases on the bosses.

The “golden chains” Marx referred to are not so golden anymore. Marx spoke of workers getting higher wages during a boom while the capitalist got even higher profits. This meant that workers’ real wages went up, although their wages declined relative to the larger profit gains of the bosses. In the present era, these conditions no longer obtain.

For the last several decades, with a slight exception in the mid 1990s, workers’ real wages have gone down or stagnated even during the periods of expanded capitalist accumulation—during upturns. Because of off-shoring, outsourcing and wage competition with workers in low-wage areas, workers in the United States went into massive personal debt and worked extra jobs; whole families worked just to compensate for the wage decline. Not only did the relative wages of the workers decline, but their absolute standard of living plummeted—and this was before the crisis.

This makes Marcy’s work, his admonitions to the labor movement to develop new strategies to deal with protracted crisis, to engage in class-wide struggle, to break out of the traditional capital-labor relationship, more pressing than ever before.

Engels spoke of the continuous cycle of boom and bust. Certainly the cycle continues, but under conditions of structural changes to capitalism. Booms have become weaker and weaker over time. The classic booms that reemploy most of the workers laid off during the bust are a thing of the past. That is the meaning of the increasingly protracted jobless recoveries.

Solving a crisis by creating a bigger one

In fact, the immediate roots of the latest global capitalist crisis, which began in December 2007, can be traced back to the attempt by the financial authorities to overcome the jobless recovery of 2001-2004 and the weakness of the capitalist upturn.

The Federal Reserve System pumped hundreds of billions of dollars into the economy by lowering interest rates from 5.5 percent to 1 percent. Alan Green-span directed much of this credit toward creating an artificial housing boom. He publicly urged home buyers to take out adjustable-rate mortgages. The housing market regulators gave a pass to the most egregious, often racist, subprime mortgage-lending practices. The Securities and Exchange Commission synchronized its efforts with the Fed by deliberately closing its eyes to the burgeoning market in mortgage-backed securities, derivatives and other shady practices. The rating agencies Moody’s and Standard & Poor’s played their part by giving potentially toxic assets triple-A ratings.

Much of the credit made available went straight to stock market speculation and banking operations. Huge sums of fictitious capital, paper wealth with no underlying value, found their way through an unregulated conduit known as the shadow banking system—hedge funds, private equity funds and insurance companies—backed by the big Wall Street banks. This shadow system was used to evade even the minimal constraints on finance capital.

In the end, a crisis emerged in the overproduction of housing. The bubble burst, housing prices plummeted and masses of people lost their homes. Throughout the economy, production had outstripped consumption. Auto sales and construction collapsed. Record credit-card debt could not bridge the gap. Debts based on housing sales, credit cards, student loans and auto loans became bad debts. Banks were insolvent.

As Engels had predicted, hard cash disappeared, credit vanished, goods piled up, means of production were destroyed. And in the end the attempt to stem the original crisis by artificially creating a housing boom led to an even greater crisis that enveloped the globe at the speed of light.

To be continued.