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Jeb, Donald and the Future of Capitalism

Jeb Bush and Donald Trump, both very wealthy men who made their fortunes from real estate and other business endeavors, and were born into positions of great privilege, do not think much of American wage earners. When questioned at the last debate whether he sympathizes with protesters demanding an increase in minimum wage, which is significantly below its inflation-adjusted peak of over $10 in the late 1960s, Trump said that American wages are actually “too high,” and that we simply cannot be competitive with other countries if workers are paid too much (perhaps he believes America should pay its workers the same as China, where the annual income average is about $9000, so that he can produce his ties domestically). Bush, on the other hand, said back in July that American workers who are struggling need to work longer hours to boost the economy and their paycheck (as if more hours are always freely available):

“We have to be a lot more productive. Workforce participation has to rise from its all-time modern lows. (This GOP talking point is largely because of baby-boomer retirement) It means that people need to work longer hours and through their productivity gain more income for their families. That’s the only way we are going to get out of this rut that we’re in.”

Bush may be surprised to learn that worker productivity has grown quite rapidly since since the 1970s, while hourly compensation has almost stagnated (From 1973 to 2013, productivity increased by 74.4%, while wages increased by 9.2%).  Trump may be even more surprised to learn that if minimum wage had kept pace with worker productivity, it would have been around $21 in 2012. Instead, most of the benefit has gone to the top one percent of wage earners, who earn around $400,000 or more.  (Since 1979, the top one percent of wage earners saw their pay increase by 138%, while the bottom 90% saw their wages increase by a mere 15%).

One thing that Republicans tend to always be in agreement on is that people who are struggling to make ends meet probably did it to themselves because they were lazy or incompetent, and that everyone is paid exactly what they’re worth, no more, no less. In the minds of Bush and Trump, anyone can accomplish what they did with a little hard work; after all, Trump only started out with a “small” one million dollar loan from his father. It is this idea that all of the economic inequalities that we see today can be explained away by the fact that people have different aptitudes and attitudes, and that in a free market, individuals are rewarded fairly for the value that they bring to the economy. It is a view that ignores the economic institutions of today, as if we were still living in a time when economically autonomous artisans and farmers crafted and produced commodities and exchanged them individually on the market, rather than individuals selling their labor power to capitalists.

The economic relations of capitalism are the core producers of inequality, not the innate differences between Trump and one of his employees. There are ways that inequality can be mediated within capitalism, of course — particularly by the state with redistributive policies or by supporting wage earners in forming unions. But capital is always evolving. As the economic history of the 20th century illustrates, the more powerful wage earners become in one region, the more capital must revolutionize to match that power and increase productivity. This is an inherent process in capitalism that Marx wrote about one and a half centuries ago. Throughout the mid-nineteenth century in Victorian England, for example, pieces of legislation called the Factory Acts were passed that regulated factory conditions (mostly for women and children), from working hours to sanitation and ventilation requirements. In Volume one of Capital, Marx writes:

“The industrial revolution which takes place spontaneously, is artificially helped by the extension of the Factory Acts to all industries in which women, young persons and children are employed. The compulsory regulation of the working-day as regards its length, pauses, beginning and end, the system of relays of children, the exclusion of all children under a certain age, &c., necessitate on the one hand more machinery and the substitution of steam as a motive power in the place of muscle. On the other hand, in order to make up for the loss of time, an expansion occurs of the means of production used in common, of the furnaces, buildings, &c., in one word, greater concentration of the means of production and a correspondingly greater concourse of workpeople… No one made greater outcry over “impossibilities” (of the Factory Acts) than our friends the earthenware manufacturers. In 1964, however, they were brought under the act, and within sixteen months every “impossibility” had vanished… In spite of every prophesy, the cost-price of earthenware did not rise, but the quantity produced did.”

Indeed, the legislation of the Factory Acts pushed capital to evolve and increase the productivity of labor, to make up for limits in working hours and other regulations. Now if we look at 20th century capitalism in the United States, a similar process becomes clear. Starting with the New Deal, the government began to pass pro-labor legislation, such as the Wagner Act, and unions became increasingly powerful.  At perhaps labor’s peak power in the United States, from 1948 to 1973, wage increases more or less matched productivity increases (hourly compensation went up by 91.3%). But in response to labor’s growing power, capital evolved, as it did when the Factory Acts were enacted in Victorian England. Technology made outsourcing cost-effective, and even more importantly, automation made once middle class jobs obsolete. And those jobs are not coming back, regardless of how low wages are or how protectionist we become.

Technology has begun to increase so rapidly, that it is now destroying jobs faster than it creates them. An interesting example of this comes with the “big three” automakers back in 1990 (GM, Ford, Chrysler) compared to the big three tech companies of today. In 1990, the automakers brought in about $36 billion in revenue and employed over one million workers,  while today, Apple, Facebook, and Google bring in more than one trillion (1000 billion) dollars in revenue, yet employee only 137,000 workers. Furthermore, in a 2013 Oxford study, it was found that up to 47% of American jobs are at risk of being computerized within the next two decades. Great for the capitalists who own the companies, not so great for the workers who rely on wages to survive.

It is not that wages are too high — that is an absurd declaration, considering wages have stagnated for decades and that high wages are good for a consumerist economy — but that the inherent process of creative destruction is weakening wage earners to a point where they will be lucky to have a job within the next few decades. Historically, creative destruction (described by Joseph Schumpeter as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one) has created new industries that create new jobs, but today’s new industries are simply not producing the jobs needed.

Sooner or later, there will come a time when the economic relations of capitalism, where a small number of “capitalists” own the majority of capital, while the majority of people must rely on selling their labor power to survive, will have to be questioned. It seems clear that labor gains can only be temporary as long as the majority of people remain ownerless. As revealed by Thomas Piketty’s data-filled book on inequality, Capital in the Twenty-First Century, the vast inequality that we have today is not an anomaly of capitalism, but inherent — indeed, the New Deal and post-War eras, when workers saw their wages increase equally with productivity, were the anomalies. Or in other words, the middle class is an anomaly.

True, there are reforms that could help. A basic universal income, for one, may be a necessary policy in the future if technology continues to kill jobs faster than it creates them. If every single person had a basic wage, they would not have to worry about being unemployed at a time when machines are taking over, and could pursue work he or she actually enjoys doing without worrying about subsistence (plus, capitalists need consumers, and machines are not consumers). Ultimately, worker ownership and economic democratization may provide solutions to the inherent problems of our economic system.

It is easy for men like Bush and Trump to say that wages are too high and that workers must work longer hours, as neither of them have had to work as wage earners in their life, or worry about losing their jobs or running out of unemployment insurance. The economy is rigged in favor of the capitalists and against the wage earners, and with the technological revolution, certain questions about the system are becoming inevitable.

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Conor Lynch is a writer and journalist living in New York City. His work has appeared on Salon, Alternet, The Hill, and CounterPunch. 

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