As the depth of the crises resulting from the coronavirus pandemic sink in, millions of the most vulnerable citizens will be facing eviction, hunger and the ravages of illness. America has always been a brutal place for workers and the socially marginalized. Recently enacted economic stimulus and corporate bailouts will demonstrate both the bluntness of the government’s tools and the differentiated class interests they serve. The difference between who they help and who they don’t will be spilling forth as people facing sudden homelessness and hunger aren’t going to just fade away.
Beyond the question of aid from the Federal government, many workers face the prospect of getting sick and dying for simply going up to work. The largest employers, low-wage retailers deemed ‘essential’ through their grocery and hardware business lines, have hundreds of thousands of workers who are only eligible for unemployment benefits if government stay-at-home orders are issued. And with no requirement that employers provide PPE (personal protective equipment), many workers are earning money to pay for their own funerals.
The Federal aid programs are capitalist in the sense that they see the world through a capitalist lens. Unemployment benefits are premised in the idea that only paid labor matters. Since the 1970s, women entering the workforce have added to household income without the work that they were doing— household labor, being considered. The informal economy that sustains the poor exists outside of Social Security numbers, unemployment insurance, and many times the law. It ebbs and flows with the broader economy, growing in times of broad social failure and pitting citizens against the forces of capitalist order.
A virtual chorus of leftish economists has called for maintenance of this order through keeping workers ‘attached’ to their employers. A host of European governments are paying worker’s salaries through their employers so that economies can be restarted quickly once the danger of the pandemic has passed. Left unaddressed in comparisons with the U.S. is that despite four decades of neoliberal reforms, it was never that easy for European companies to fire their workers. ‘At will’ employment, the neoliberal standard, embodies the brutality of American labor relations when compared with Europe.
Labor market ‘flexibility,’ the ability of companies to fire workers quickly at low cost, has long been valued by capitalists who shed workers in recessions to protect profits. The Fordist / Keynesian insight that capitalists are firing their customers was, for a period, mitigated through New Deal programs to support household incomes during economic downturns. Between the end of WWII and the 1970s, unemployment insurance provided an economic bridge during periodic layoffs. As neoliberalism gained traction, state unemployment insurance schemes were systematically underfunded to limit payouts.
The workers for whom maintaining attachment with employers is most feasible are the capitalist functionaries in the PMC (professional managerial class). Together with corporate executives and various and sundry oligarchs, the PMC represents the richest 10% of the U.S. Over the last four decades, its role has been to organize work below it to make it more ‘efficient’ in the capitalist sense of producing more for stagnant or falling wages. The goal of this engineered precarity is to assure that the employer-employee bond exists only to benefit employers.
With respect to Federal stimulus passed to ameliorate the effects of the pandemic, these economists face the challenge that the only group whose interests are guaranteed to be have been represented in congressional deliberations are corporate executives and their agents. From the capitalist perspective, why save jobs now when you can buy desperate labor at half the cost later? This is to make the point that broadening and deepening unemployment benefits is exactly how the capitalist class wants the economic stimulus to be structured.
There are rational reasons for keeping workers attached to employers. The social organization behind capitalist production was decades in the making. Where people live, their shelter, sustenance and support relations can’t be shuttered for six months or a year and survive. To understand the impact of doing so, travel the U.S. to see the devastation that four decades of neoliberalism have wrought. The ultimate logic, as expressed through the structure of the stimulus and bailouts, is to create a tiny island of super-rich amidst a vast wasteland of the cast-aside.
Fear that workers will lose their skills overlooks both the availability of skilled labor overseas and the financial incentives that motivate modern corporate management. Since the 1980s, the role of corporate managers has been to keep ‘their’ organizations from falling apart as financial gamesmanship and eternally rising financial asset prices made them rich. Today, corporate executives and the PMC live in walled ghettoes where the improbable stories and implausible logic that emerge from remoteness and ignorance inform their power.
Not much about America works as claimed. The largest employers follow the Walmart model of low wages, weak worker attachment and the sale of mediocre products from squeezed suppliers at low prices. Through capitalist logic, these weaknesses are strengths. Amazon achieved critical mass as a corporation by starving state and local governments of needed tax revenues that brick and mortar stores were required to collect. This meant in turn that either government services were cut, needed revenues were squeezed from other sources, or some combination of the two.
Deskilling is MBA-speak for the commodification of labor to make it interchangeable and expendable. It is also a conceit of corporate executives who have little hands-on experience with the production processes they oversee. Here is ex-presidential candidate and CEO of Bloomberg Corporation, Michael Bloomberg, confidently explaining farming and metalwork to a roomful of corporate executives. He conspicuously doesn’t know what he is talking about. His broader point is to distinguish between ‘knowledge work’ and unskilled labor. But he has no knowledge of his topic.
Given how common this view is among the executive class— no one challenged Mr. Bloomberg on it, it is unsurprising that enhancing and extending unemployment benefits was favored over maintaining worker attachment. Almost anyone can be trained to dig a hole and drop a seed in it—his explanation of agriculture, in about fifteen minutes. Likewise, almost anyone can be placed in front of a metal press and taught to press the ‘on’ button— his explanation of metalworking. So, why not let the economy crash and afterwards hire unskilled labor at the prevailing wage to run the machines?
As the coronavirus pandemic is in the process of demonstrating, the U.S. hasn’t been run by wise and competent leaders, be they corporate executives or elected representatives, in living memory. Ivy league technocrat Barack Obama led the reorganization of both the healthcare and financial sectors. Both are currently failing due to faulty design, not the skill and dedication of their workers. And those paying attention wouldn’t let Joe Biden make change for a dollar, drive a car or feed their dog. He may soon be joining Michael Bloomberg in deciding how we live.
The issue of worker attachment is the clever branch of a larger debate over ‘liquidationism.’ First, by funding unemployment benefits rather than keeping workers attached to their employers, the bonds of employment are dissolved, or liquidated, goes the theory. Second, stimulus that goes to sustaining corporations keeps them from being liquidated— divided up into pieces, in the bankruptcy process. Finally, liquidation is the fire sale of ‘distressed’ assets that in theory exacerbated the Great Depression.
Not to be flippant, but the entire point of folding finance capitalism into neoliberalism was to end worker attachment to specific employers; to carve corporations up into their constituent pieces to be sold through investment banking (asset stripping); and to create zombie corporations that exist solely through bailouts. The objection appears to be that the Federal government shouldn’t be facilitating this process, meaning leave liquidation to the ‘private’ market.
Bailing out financial institutions, which the Federal Reserve is in the process of doing, keeps the mechanisms and means of predatory finance alive. And bailing out corporations maintains the value of the constituent pieces to be stripped by bankers. Treasury Secretary Steve Mnuchin made more than one fortune as a pirate capitalist. So again, the complaint seems to be that the Federal government is stepping on private toes by floating banks and corporate valuations through bailouts.
In 2009, the decision was made to sacrifice mortgage borrowers to increase bank profits. The picture was muddied by fees, systematic document fraud and perverse incentives, but the choice was to either give banks bailouts to cover bad loans or to pay mortgage balances to keep borrowers in their homes and to cover bad loans. The Obama administration decided that paying mortgage balances would sully the moral character of undeserving homeowners (‘moral hazard’), but that bailing out miscreant bankers was a strike for capitalism.
With regard to a potential fire sale of assets, at the outset of the Great Depression there was no Federally guaranteed deposit insurance, meaning that when banks went under, they took all of the savings of their depositors with them. This created a vicious cycle where insolvent banks created payments crises that made for more insolvent banks, etc. It also resulted in a large number of banks being liquidated in waves that produced a deflationary spiral.
Today, the FDIC (Federal Deposit Insurance Corporation) is tasked with winding down insolvent banks. This means that it sells bank assets into orderly markets. It doesn’t dump them in fire sales. Around 2009 this was a point of some contention between the then head of the FDIC, Sheila Bair, and the Obama administration. Ms. Bair thought it best to liquidate insolvent banks while the Obama administration wanted to place them on Federally funded life support in perpetuity while allowing them to pay exorbitant bonuses to miscreant bankers.
Related, in 1998, (Ayn) Randian ‘genius’ and Fed Chair Alan Greenspan organized a privately funded bailout of LTCM (Long Term Capital Management) when its excessive leverage threatened to bring down Wall Street. After 2008 the Treasury Department and Federal Reserve stepped into this role of saving errant hedge and private equity funds. While a few hedge funds were initially allowed to go belly up, Federal Reserve Chair Ben Bernanke quickly stepped in to create the bailout culture that permeates Wall Street today.
With the grip that finance has on American political economy, there is little possibility of public financial liquidation. The most likely scenario is private liquidation where predatory financiers loot pension funds, bailed out corporations and government coffers. Given the power that predatory finance has been given to destroy the economy in normal times, a functioning society would shut Wall Street down in an orderly fashion and turn what remains into a heavily regulated public banking utility.
Reflexive defense of the status quo by an erstwhile left is ironic in the American context. Capitalists, oligarchs and most of the political class don’t appear to see their lots tied to it. An alternative explanation of the focus on unemployment benefits versus keeping workers attached comes through the flow of payments. Income pays the rent; the rent pays the landlord’s mortgage and the mortgage payment keeps the bank solvent. As long as owners and bankers are happy, the ultimate plight of workers is an afterthought.
Finally: Job Guarantee. Job Guarantee. Job Guarantee. And Job Guarantee.
For those with an interest, Milton Freidman wrote a bit about liquidation and the Great Depression as part of his Monetary History of the United States. Charles Kindleberger’s The World in Depression provides an international take with emphasis on how the charter and structure of the Federal Reserve left banks outside of Wall Street to their own devices. There is no need to take Wall Street propaganda at face value when more likely stories can be found.