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David Brooks on American Capitalism

A recent op-ed by NY Times columnist, David Brooks, asserts that “Forty years ago, corporate America was bloated, sluggish, and losing ground to competitors in Japan and beyond.”  However, the rise of private equity firms and “bare-knuckled corporate executives” contributed to structural changes from which “American businesses emerged leaner, quicker, and more efficient” even though the “process was brutal and involved streamlining and layoffs” (1).

That last part is crucial and it’s likely that the corporate apologist and bobo-expert regrets including it.  The latter term was a reference to his book Bobos in Paradise in which he argues that the modern American yuppie-elite is an amalgamation of the bohemian rebel of the 60s and the wealth-seeking corporate climber of the 80s.  If you read the book, you’ll find that the “bobo” is the primary beneficiary of the vitalized American business that he celebrates.  And he’s quite right that American business emerged leaner and more efficient.

Businesses exist to make profits for the investors and shareholders that own the business.  It’s this incentive that free market fanatics tout as central to the doctrine’s celebrated efficiency.  These businesses operate on the efforts of rented wage labor of both blue and white collars.  However, even though it’s true that American business has experienced booming profits since the 1970s, what Brooks fails to mention is that these benefits have been sharply concentrated at the top alone.

It’s barely news that wealth and income distribution in recent decades has been dramatically lopsided with the top 1% taking in 10% of the nation’s income since 1979 and holding on to about 30% of the nation’s wealth (2) (3).  Being in the top 1% is no easy task, either.  The average salary is $1 million per year (4).  If you care to look closely enough, you’ll find that these figures come right out of the Congressional Budget Office.

Furthermore, the “leaner, quicker, and more efficient” American business indirectly reflects the decline in American manufacturing industry and the rise of multinational institutions that sell no product but continuously engage in complex financial manipulations and specialized transactions.  This process of financialization was set off by the United States’ decision to unilaterally disengage from the Bretton Woods monetary system that it and Britain championed after World War II.  The dollar was no longer accountable to gold convertibility and thus began policies associated with “neoliberalism” (5).

The general trend was that American businesses found it much cheaper to open the door to foreign imports of goods and products from both unskilled and skilled labor.  This crippled the American manufacturing industry by debasing workers in textiles, steel, automobiles, and consumer electronics.  So, even though computers were invented on the college campus using American taxpayer funding throughout the 1950s and 1960s, it became possible to cheaply assemble them abroad in the Third World by foreign workers and subsequently import them (6).

Obviously the effects followed a class-specific distribution.  Manufacturing was where you could find a decent job without a college degree.  The working class mix included poor native-born whites, African-Americans, and southern and eastern European immigrants.  They were dealt with accordingly.  Black life was recriminalized under what Michelle Alexander termed “The New Jim Crow” (7).  With more blacks currently imprisoned than were ever enslaved, black communities can’t even pretend to reap the benefits of Brooks’ celebrations (8) (9).  Those who were able to hold on to their jobs saw their real wages more or less stagnate and working hours increase.  The skilled workers that lost their manufacturing jobs were forced into the menial service economy in competition with Latin American immigrants (10).  This competition was only exacerbated by the devastating effects of the North American Free Trade Agreement that was designed specifically to enrich big business at the expensive the American worker (11).  The growing dispossessed formed the basis of today’s Tea Party Movement (12).

Those that could not find employment at all watched lifelines slip away for themselves and their families with the decline of the United States welfare system under Reagan, Bush I, and Clinton (13).  20 million Americans currently live in extreme poverty with incomes below half of the poverty line.  For 6 million Americans, the only source of income is food stamps (14).  What’s rarely mentioned is that with conservative reforms of programs such as Temporary Assistance to Needy Families and what used to be Aid to Families with Dependent Children, the core issue remains single mothers and impoverished children.  Jason DeParle described the recession-era trend of food stamp users skyrocketing while welfare cash payouts remained on the decline in a recent NY times article.  He noted that the 90s economic boom, no doubt the kind that Brooks had it mind, was accompanied aggressively by the drive to “end welfare as we know it” (15).  However, according to Brooks, “Many voters have come to regard their desires as entitlements” and “they become incensed when their leaders are not responsive to their needs.”  He asserts that “like any set of human begins, they command their politicians to give them benefits without asking them to pay” (16).  I suppose you have to hand it to him for finding it so easy to categorize a “set of human beings.”

“Successful” middle class citizens including myself sometimes found their way through institutions of higher learning which were often touted as the means to personal enlightenment and economic prosperity.  College was central to the American dream.  However, one peak behind the curtain reveals that tuition only imposes a new set of chains in the form of debt burden as the New York Times recently described (17).  The trillion dollar debt bubble in the United States drives the population further into the pockets of the 1%.  The rest, I suppose, rent themselves to the military.

So Mr. Brooks was certainly right.  Without question, the neoliberal agenda has dramatically invigorated American businesses from “sluggish” to “leaner, quicker, and more efficient.”  It accomplished this by adopting a simple strategy that came right out of the University of Chicago economics department: protect domestic business interests but open the labor force to market pressures.  This entailed subsidizing American exports using tax payer funding, but simultaneously pulling the rug right out from underneath the very same taxpayer.  The highly respected American economist Richard Wolff summed it up perfectly (18):

“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 labour, 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.”

Ravi Katari works for a health law firm  in Washington D.C.  He graduated from the University of Virginia with a degree in Biomedical Engineering. 

Notes.

(1)    http://www.nytimes.com/2012/05/22/opinion/brooks-how-change-happens.html?ref=davidbrooks

(2)    http://www.motherjones.com/kevin-drum/2010/09/simple-look-income-inequality

(3)    http://economix.blogs.nytimes.com/2011/03/30/inequality-is-most-extreme-in-wealth-not-income/

(4)    http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

(5)    http://business.pages.tcnj.edu/files/2011/07/VanArnum.Thesis.pdf

(6)    http://www.brookings.edu/research/papers/2011/01/china-challenge-baily

(7)    http://www.huffingtonpost.com/michelle-alexander/the-new-jim-crow_b_454469.html

(8)    http://pbstandards.org/news/article/221?newstype=1

(9)    http://www.huffingtonpost.com/inimai-chettiar/prison-system-jim-crow_b_1297413.html

(10)http://economyincrisis.org/content/service-economy-taking-over-us

(11)http://www.huffingtonpost.com/ellen-r-shaffer/immigration-is-a-nafta-pr_b_642484.html

(12)http://www.usnews.com/opinion/blogs/peter-roff/2010/10/07/the-tea-party-movement-is-a-middle-class-revolt

(13)http://www.nber.org/papers/w5774.pdf?new_window=1

(14)http://www.democracynow.org/2012/5/23/so_rich_so_poor_peter_edelman#transcript

(15)http://www.nytimes.com/2012/04/08/us/welfare-limits-left-poor-adrift-as-recession-hit.html?_r=1&pagewanted=all

(16)http://www.nytimes.com/2012/05/18/opinion/the-age-of-innocence.html?_r=3&ref=opinion

(17)http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?ref=tuition&gwh=A192E2C120C487DF2288577E2C662C39

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

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