Rising inequality following the 2020 crisis of overproduction
Mushrooming inequality has the capitalist class spooked, for they fear the consequences.
Twelve years after the overproduction crisis of 2008, a crisis from which the fragile economy never fully recovered, we have found ourselves in the middle of another, even more profound crisis. This is increasing inequality to levels that are causing alarm to the ruling class, and fuelling workers’ dissatisfaction with the existing relations of production.
Long before the coronavirus pandemic hit, it was clear to all who cared to look, that the global economy was once again in decline. Serious economic commentators had, after all, been pointing to the warning signs since January 2016, and, after months of tumultuous stock market gyrations, their warnings reached a crescendo last December.
“At the end of last year [2019], the IMF issued a striking warning: as much as $19tn of business debt in eight countries led by the US – or 40 percent of the total – could be vulnerable if there were a ‘material slowdown’ in the economy, a scenario that, if anything, now seems tame.”
The crash finally hit just as Covid-19 began to spread around the world, and the lockdown measures then imposed had the effect of pushing the frail economy with full force off the cliff edge, on which it had been teetering for so long.
Unemployment figures skyrocketed, with numbers in Britain and the USA reaching altitudes not seen since record keeping began. The UK Office for Budget Responsibility (OBR) estimates that 3.4 million people will find themselves without work this year, with the Institute for Public Policy Research (IPPR) thinktank further estimating that an extra 620,000 people aged 18-24, on top of the 410,000 already jobless in the first quarter of 2020, will be unemployed. (Guaranteeing the right start by Harry Quilter-Pinner, Sarah Webster and Henry Parkes, IPPR, July 2020)
Keen to absolve the capitalist mode of production, most commentators prefer instead to blame the virus, conveniently forgetting not only the years of dire warnings that preceded this latest crash, but also the roughly ten-year periodic crisis cycle that has characterised the economic life of capitalist society for the last 170 years. “Investors can,” one Mark Vandevelde informs us in his piece on corporate debt, “legitimately claim that they have been confounded by a once-in-a-century event.” – again!
He goes on: “More than 3,000 US companies filed for bankruptcy between January and late June. The fate of millions of livelihoods – and America’s future economic productivity – therefore depends on whether over-indebted businesses can extricate themselves from danger before they are forced to prioritise their own survival.” (The leveraging of America: how companies became addicted to debt by Mark Vandevelde, Financial Times, 10 July 2020)
The majority of such businesses, however, stand little to no chance of ‘extricating themselves from danger’; they will be stripped down by the vultures of finance capital and bled dry.
The focal point of most bourgeois-aligned pundits is very often the so-called ‘middle class’, a nebulous concept “by which is meant people in the middle of the income distribution”, according to Financial Times commentator Martin Wolf, CBE. Of course, with such massive inequality in wealth, those who find themselves ‘in the middle’ [generally taken to be the mean, rather than modal average income] are actually relatively wealthy individuals, reasonably few in number; furthermore, as we know, class is not defined by a person’s level of income but by their relation to the means of production.
Thus when people talk about the ‘middle class’ they may mean the owners of small and medium-sized businesses, or they may mean wage workers (proletarians) who can command relatively good salaries and enjoy a relatively pleasant standard of living because of their superior educational attainment and the intellectual skills flowing from it. Often, these two categories are conflated, but it should always be remembered that one controls means of production and may well make money out of exploiting wage labour, while the other does not.
Wolf asserts that a “necessary condition for the stability of any constitutional democracy is a thriving middle class … In its absence, the state risks turning into a plutocracy, a demagogy, or a tyranny,” and goes on to issue the warning that with “the hollowing out of the middle class, even established western democracies are now in danger”.
He is partially correct, in so far as a decimated ‘middle class’ of small and medium-sized proprietors, thrown into fits of hysterics and desperation by the loss of the businesses on which they depend for their livelihood, may well be inclined in large numbers to throw their weight behind a fascist party whose sole reason for existence would be to bring the workers to their knees, thus helping capitalism to keep going.
Both types of ‘middle class’ – those owning businesses as well as privileged educated wage workers – are characterised by their vacillating political viewpoint. In good times, they can easily be won over to the side of the capitalists, with whom they even identify, and the majority are only too happy to support the capitalist system and to assist in maintaining it. But in times of crisis, when their businesses go bankrupt, their life’s work is destroyed in an instant and they are hurled unceremoniously into the ranks of the workers, and as those who were privileged lose that privilege, their objective class interests may cause them to lean towards the side of the working class.
“Policy,” continues our sagacious commentator, “should aim at creating and sustaining a vigorous middle class while ensuring a safety net for everybody.” His ‘safety net’ presumably means just-above-starvation-level benefits that enable the masses to live just enough of a life not to be thrown into open rebellion against the capitalist system. (Democracy will fail if we don’t think as citizens by Martin Wolf, Financial Times, 6 July 2020)
The idea of a growing and ever more impoverished working class, whose members are keenly aware that they have “nothing to lose but their chains”, as Marx succinctly put it, makes the ruling class deeply uneasy: “Let the ruling class tremble!” as the closing lines of the Communist Manifesto declared back in 1848.
The notion of ‘key workers’ has become commonplace during the pandemic. Suddenly, society has become uncomfortably aware of the necessity for the working class to keep society afloat.
One might, if one were a touch naive, think that these workers would be the recipients of a well-earned pay rise in light of what is now universally recognised to be the essential nature of their work.
In fact, for a fleeting moment, some did. Jeff Bezos, ever the philanthropist, dug deep into his cyclopean pockets and shelled out a whopping $2 an hour bonus to workers at Amazon’s delivery centres in the US. That was in March. By June, however, the pay rise had been taken away again.
But workers didn’t go away empty handed! A few weeks before the removal of the so-called ‘hero pay’, the company handed out T-shirts, probably the only new item of clothing many of Amazon’s warehouse workers will get this year.
Sticking for the moment with the detested online retailer-come-tech behemoth, we will recall that “Amazon instituted a $15 minimum hourly wage across the US in 2018 – double the $7.25 federal minimum,” so far so reasonable. “But warehouse workers make less in real terms than their factory predecessors: in 2018, the average transportation and warehousing employee in Will County, a former manufacturing hub in the Chicago suburbs, earned $43,000, according to the US Bureau of Labor Statistics. That matches the average annual wage for a manufacturing employee – in 1998.”
Thus we find the vast majority of workers’ wages have in reality not just stagnated, but actually reduced over the past two decades.
The picture only gets bleaker. “Agency staff, who make up a significant percentage of the warehouse workforce, earn just $28,000 a year on average.”
As if that weren’t bad enough, “even this salary is at the high end of what the Brookings Institution classifies as ‘low-wage’ in the US, a group that encompasses 44 percent of US workers, or 53 million Americans, who earn median hourly wages of $10.22, or about $18,000 a year. In the UK, similarly, last year there were 4.2 million people on ‘low pay’ – making less than two-thirds of median hourly earnings of £13.21.”
Over the last 20 years in Britain, the use of zero-hour contracts has rocketed. Today, 20.3 percent of workers, one in five, in health and social work – ‘key workers’ by anyone’s standards – are on zero-hour contracts, along with 15 percent of those employed in the transport industry and 22.9 percent of those working in accommodation and food services.
As for a pay rise, dream on. “In the UK, one in three employees in the bottom earnings quintile have lost jobs, been furloughed or had their hours and pay cut – more than twice the rate among the highest-paid quintile. Those on zero-hours contracts, which do not offer guaranteed shifts, were twice as likely to have been furloughed as people with more secure work, according to the Resolution Foundation, an independent UK thinktank.”
Ever the opportunist, Chukka Umunna, formerly of Labour party and now LibDem infamy, is quoted in the article cited above proclaiming that the crisis is “not a shared experience … If you are a person of colour in the US or the UK, this disproportionately impacts on you.” (Lockdown heroes: will they ever get a raise? by Andrew Edgecliffe-Johnson, Claire Bushey, Bethan Staton and Anna Gross, Financial Times, 7 July 2020)
While attempting to show how he cares for the plight of the disadvantaged and downtrodden, flashing his ‘woke’ credentials, he nevertheless makes sure to stir up some feelings of guilt and racial tension within the working class, thus doing his duty to the ruling class by holding aloft the banner of divide and conquer.
He is dead wrong. The results of the crisis (erroneously blamed on the pandemic in the quoted piece) may fall unevenly, but they are nevertheless a shared experience for the working class, and we must fight together as one, regardless of ethnicity, to put a stop to the decrepit rule of crisis-riddled capitalism.
The past decade or so has seen a growing interest in the idea of socialism, in the minds of young people especially. In this context we have witnessed the rapid rise, and equally rapid, not to mention disgraceful, fall of politicians such as Jeremy Corbyn here in Britain and Bernie Sanders in the US.
“The financial crisis shaped the views of millennials in ways that are already driving politics on both sides of the Atlantic, including the greater willingness of younger people to refer to themselves as socialists. Millennials elevated Jeremy Corbyn to the leadership of the Labour party and Bernie Sanders to the verge of the Democratic presidential nomination. Coronavirus is likely to sharpen many of these views.” (The Recessionals: why coronavirus is another cruel setback for millennials by David Lee, Financial Times, 9 July 2020)
Later in the above quoted article, one Professor Glaeser unwittingly hit the nail on the head when he was quoted as saying: “there is a palpable mood of discontent among young Americans at the status quo, motivated by both coronavirus and racial injustice, but the long-term impact will depend on whether demonstrators coalesce around realistic policy proposals”.
“The pandemic helps engender anger,” he said, rightfully enough, “but it doesn’t naturally lead towards clear thinking and effective, durable political change.” Rather than the ‘realistic policy proposals’ our professor has in mind, the working masses must build a strong and disciplined working-class organisation – the first vital step in organising themselves to take hold of the reins of production and reorganise society in their own interests.
Back in 2014, oligarch Nick Hanauer, who describes himself as a “proud and unapologetic capitalist”, and who, by his own estimation, is “not the smartest guy you’ve ever met, or the hardest-working”, offered up some pearls of wisdom to his fellow parasites.
To his credit, he displayed in that article some degree of awareness regarding the precarious existence of the financial elite. “I have a message for my fellow filthy rich,” he proclaimed, “for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.”
“What do I see in our future now?” he asked. “I see pitchforks.”
With refreshing candour, Hanauer admitted that his only real concern was for himself and his filthy-rich ilk. In the course of enunciating his pet reformist plan to “help the 99 percent and pre-empt the revolutionaries and crazies, the ones with the pitchforks”, he pointed out that his proposed measures would “be the best thing possible for us rich folks, too. It’s not just that we’ll escape with our lives; it’s that we’ll most certainly get even richer.” (The pitchforks are coming … for us plutocrats by Nick Hanauer, Politico, July 2014)
Hanauer is evidently not alone in feeling the pressure: an open letter issued at the start of the coronavirus pandemic by a group of super-wealthy individuals under the collective name of ‘Millionaires for Humanity’ has now gained nearly 100 signatures. Hailing in the main from North America and Europe, the signatories asked their governments to “raise taxes on people like us. Immediately. Substantially. Permanently.” (Millionaires for Humanity, 2020)
The letter contrasts with the candid tone of Mr Hanauer by opting to feign concern for the rest of humankind. Reading between the lines, however, it is evident that its authors are driven by the same fear that has gripped our entrepreneurial seer.
“Our interconnectedness has never been more clear,” says the letter, “we must rebalance our world before it is too late. There will not be another chance to get this right.” If the super-rich do not act now and try (in vain) to make a more equitable version of capitalism, they sense that their time on earth will soon be up as the rising working class fulfils its historic mission and deposes them.
Despite all this very large talk, their words ring hollow. Being devout believers in the system of capitalism, they have no solutions to the myriad problems it brings in its train.
Indeed, no solution exists within the framework of capitalist production. There can be no future under capitalism in which inequality does not reach ever greater heights and the vast majority of the world’s population are not plunged deeper into abject poverty.
The only solution is to break free from its fetters and forge a new, socialist world guided by the principles of Marxist science.
