This topic was suggested by Gloria Stevenson

POINT

September 2, 2012
When Capitalists Cared
By HEDRICK SMITH
Washington

IN the rancorous debate over how to get the sluggish economy moving, we have forgotten the wisdom of Henry Ford. In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day.

Not only was it a matter of social justice, Ford wrote, but paying high wages was also smart business. When wages are low, uncertainty dogs the marketplace and growth is weak. But when pay is high and steady, Ford asserted, business is more secure because workers earn enough to become good customers. They can afford to buy Model Ts.

This is not to suggest that Ford single-handedly created the American middle class. But he was one of the first business leaders to articulate what economists call “the virtuous circle of growth”: well-paid workers generating consumer demand that in turn promotes business expansion and hiring. Other executives bought his logic, and just as important, strong unions fought for rising pay and good benefits in contracts like the 1950 “Treaty of Detroit” between General Motors and the United Auto Workers.

Riding the dynamics of the virtuous circle, America enjoyed its best period of sustained growth in the decades after World War II, from 1945 to 1973, even though income tax rates were far higher than today. It created not only unprecedented middle-class prosperity but also far greater economic equality than today.

The chief executives of the long postwar boom believed that business success and workers’ well-being ran in tandem.

Frank W. Abrams, chairman of Standard Oil of New Jersey, voiced the corporate mantra of “stakeholder capitalism”: the need to balance the interests of all the stakeholders in the corporate family. “The job of management,” he wrote, “is to maintain an equitable and working balance among the claims of the various directly affected interest groups,” which he defined as “stockholders, employees, customers and the public at large.”

Earl S. Willis, a manager of employee benefits at General Electric, declared that “the employee who can plan his economic future with reasonable certainty is an employer’s most productive asset.”

From 1948 to 1973, the productivity of all nonfarm workers nearly doubled, as did average hourly compensation. But things changed dramatically starting in the late 1970s. Although productivity increased by 80.1 percent from 1973 to 2011, average wages rose only 4.2 percent and hourly compensation (wages plus benefits) rose only 10 percent over that time, according to government data analyzed by the Economic Policy Institute.

At the same time, corporate profits were booming. In 2006, the year before the Great Recession began, corporate profits garnered the largest share of national income since 1942, while the share going to wages and salaries sank to the lowest level since 1929. In the recession’s aftermath, corporate profits have bounced back while middle-class incomes have stagnated.

Today the prevailing cut-to-the-bone business ethos means that a company like Caterpillar demands a wage freeze and lower health benefits from its workers, while posting record profits.

Globalization, including the rise of Asia, and technological innovation can’t explain all or even most of today’s gaping inequality; if they did, we would see in other advanced economies the same hyperconcentration of wealth and the same stagnation of middle-class wages as in the United States. But we don’t.

In Germany, still a manufacturing and export powerhouse, average hourly pay has risen five times faster since 1985 than in the United States. The secret of Germany’s success, says Klaus Kleinfeld, who ran the German electrical giant Siemens before taking over the American aluminum company Alcoa in 2008, is “the social contract: the willingness of business, labor and political leaders to put aside some of their differences and make agreements in the national interest.”

In short, German leaders have practiced stakeholder capitalism and followed the century-old wisdom of Henry Ford, while American business and political leaders have dismantled the dynamics of the “virtuous circle” in pursuit of downsizing, offshoring and short-term profit and big dividends for their investors.

Today, we are all paying the price for this shift. As Ford recognized, if average Americans do not have secure jobs with steady and rising pay, the economy will be sluggish. Since the early 1990s, we have been mired three times in “jobless recoveries.” It’s time for America’s business elites to step beyond political rhetoric about protecting wealthy “job creators” and grasp Ford’s insight: Give the middle class a better share of the nation’s economic gains, and the economy will grow faster. Our history shows that.

Hedrick Smith, a former correspondent and Washington bureau chief of The New York Times, is the author of “Who Stole the American Dream?”

COUNTERPOINT

To the Editor:

Hedrick Smith is correct that America’s corporate leaders care less about middle-class wages than previously. But to make Henry Ford the symbol of a lost golden age is perverse.

Ford created the $5-a-day wage because he needed to reduce a yearly staff turnover of more than 200 percent (Foxconn has increased its wages in China fivefold since 2010 for similar reasons).

Mr. Smith also commends “other executives [who] bought his logic” for cooperating with unions. Ford employed a brutal union-busting operation and was the last big automaker to recognize a union.

Unlike German leaders who have endeavored to preserve jobs in today’s bad economy, in 1931 Ford laid off 75,000 people, leading to the Ford Hunger March in 1932. Dearborn, Mich., police and Ford security opened fire on unarmed marchers, shooting dozens and killing five.

Labor terms may be bad today, but I am glad Henry Ford is not around to improve them.

NOAH McCORMACK
Cambridge, Mass., Sept. 3, 2012

 

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By RACHAEL BOOTHROYD, venezuelanalysis.com

MUD’s secret policy blueprint makes clear the profoundly reactionary class nature of the opposition program.

An internal document has been leaked to Venezuelan press revealing the economic policy of Venezuela’s political opposition, the Roundtable of Democratic Unity (MUD), should they win the presidential elections in October. The plan includes the deregulation of banks, opening up the economy to private investment and the reduction of state funding for public services and communal council projects.

MUD candidate Henrique Capriles Radonski is standing against two-time incumbent President Hugo Chavez, with voting set for 7 October.

Referring to the current global financial crisis, the MUD document states that it would be unable to maintain the current social spending levels of the Chavez administration and predicts a decrease in the demand for oil from countries such as China and the USA – Venezuela’s largest trading partner.

The opposition document states that based on current spending levels, the government’s public sector deficit as a proportion of GDP (gross domestic product) will be 8% in 2013. The document classifies this figure as potentially dangerous in the event of a global economic downturn and states that the MUD would aim to reduce this figure to 3-4%.

In order to respond to the “crisis” caused by a potential decrease in the global demand for oil, the opposition says that it would take “concrete steps to decrease, in the medium and long term, the heavy load of goods and services” provided by the current government in a bid to reduce its social spending budget and in turn the public deficit.

Other steps to decrease the government budget for social spending would include the decentralisation of the provision of social services to municipal governments, who the MUD argues would make services “more efficient”.

The government’s social missions, including the Barrio Adentro health program and the children’s educational centers knows as “Simoncitos,” would also be transferred over to municipal government. Health and education missions, including the maintenance of school and hospital infrastructure and the provision of food, would be opened up to “private initiative”.

Charges for some of these services would also be implemented in a “controlled” manner, an action that the opposition argues would allow the new government to reduce the financial burden on the state.

This process of decentralisation would reverse actions carried out by the Chavez government to put the administration of services under the control of central government. The government argues that it has done this in order to minimise the possibility of corruption and to ensure that access to health and education is universal, regardless of geographical location or local government politics.

Ex-governor of Anzoátegui state, David de Lima, was one of those who received a copy of the document.

In comments to Venezuelan television on Wednesday, the political independent said “there are two discourses [in the Capriles campaign], there is the economic discourse that’s used to get votes, and the real one, that aims to place the economic policy of the country back in the hands of the  two or three sectors that always controlled it”.

Other areas that would be affected by the opposition’s proposed cutbacks are food, housing and transport. The document states that a governing MUD administration would put an end to current government subsidies on housing built as part of the Great Housing Mission, although those already receiving the subsidised housing benefit would not be affected by the measures.

Subsidised food sold through the government´s MERCAL scheme would be provided and delivered by private companies, whilst funding available to communal councils for the construction and renovation of housing would also be “gradually reduced”.

Overall, the opposition states that it would aim to decrease the amount of government food subsidies by 60% over the next 3 years or potentially sooner.

Equally, subsidised transport would be eliminated. The price of travel on the Metro in Caracas, Valencia, the Ferrocaril del Tuy and Maracaibo would be raised by 5% every 4 months, at least until the service is able to meet its running costs. According to the document, the same policy would also be applied to other forms of transport such as buses, where children under 4 and adults over 65 can currently travel for free.

Current government policies, such as universal access to social security, would be rolled back. Social security for old age pensioners, currently pegged to the national minimum wage and tending to increase each year, would be frozen from 2013.

Likewise, the new government would retract the current government policy which allows old age pensioners to access social security regardless of whether they have paid their social security contributions in full.

All expropriated land and property would be returned to their previous owners within a maximum of 2 years.

Energy, Oil and Mining Policy

Whilst there are few details relating to the opposition’s proposed oil and mining policy, the document states that the MUD would create a new framework for these areas which would no longer be based on a “nationalist ideology”. The subsidised provision of electricity would also be cut and opened up to the private sector, and electricity rates would be raised.

At the end of the document, the MUD states that it will release a separate document outlining its new oil policy.

Banking and Price Controls

The document, titled First Ideas of Economic Actions to Take by the National Unity Government (2013), strongly criticises the current government for its “excessive regulation” of banks and interest rates, as well as a policy which requires banks to designate a certain amount of their profits to social programs.

The opposition argue that current regulation, which states that 25% of a bank’s profits must go towards agricultural projects, 15% towards housing, 3% to micro-businesses, 10% towards manufacturing activities and 2.5% towards investment in national tourism, adversely affects the profitability of banks and their ability to allocate credit to “profitable activities”.

MUD policy recommends the immediate establishment of a “Committee for Banking Sector Reform” in order to begin the process of eliminating the banks’ obligatory social contributions, with the possible exception of regulations on mortgages, which would be made more flexible.

The government’s price control measures, implemented in 2011 in order to combat the adverse effects of inflation and hoarding are described as “absurd” in the document, which states that the measures produce “fear and anxiety in the productive private sector”. All price control mechanisms would be eliminated within a year.

Finally, the plan says that it would consider using the power of presidential decree in order to “dismantle the socialised and collectivised state model that has been created by the so-called revolution”.

Private bankers and members of Venezuela’s business association, FEDECAMARAS, will be invited to the next MUD meeting to discuss the party’s potential economic policy further.

The document can be read in full in Spanish here

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The most ambitious, cynical, and deleterious propaganda operation in history

William T. Hathaway

This litany has been repeated by corporate-controlled media and politicians for years now, pumping fear into us. It is used to justify a massive ongoing war that has killed hundreds of thousands of our fellow human beings and almost bankrupted the USA.

But is it really true? Who started this war? When did it begin? The history of this conflict reveals a different story than the one continually beamed at us. The Romans were the first Westerners to try to dominate and plunder the Middle East; the Christian crusaders followed, then nineteenth-century imperialists. From the Arabs’ perspective, the barbarians keep descending on them from the north, and they keep throwing them out. In the past hundred years the attacks have intensified as new treasure has been discovered: vast reserves of black, liquid gold under the desert sands.

During World War One, the British persuaded the Arabs to fight on their side by promising them independence. Thousands of them died in battle for the Brits because of this promise of freedom. But after the victory Britain refused to leave. It maintained control by installing puppet kings — Faisal in Iraq and Ibn Saud in Saudi Arabia — to rule in its interest.

After World War Two, Britain and the USA pressured the United Nations into confiscating Arab land to form the state of Israel, making the Arabs pay for the crimes of the Germans. In addition to providing a nation for the Jews, Israel would be a forward base for Western economic and military power in the Middle East. To the Arabs it was another European invasion of their territory.

In the early 1950s, the USA and Britain overthrew the government of Iran because it tried to nationalize its oil industry, which was under Western control. We installed the Shah as dictator, and he promptly gave the oil back to us. Then he began a twenty-five year reign of terror against his own people. His secret police jailed, tortured, or killed hundreds of thousands of Iranians who opposed him. Since they knew he was kept in power only by American military aid, they began hating the USA. They finally ousted the Shah, but then the CIA started subverting the new government, trying to bring it down. At that point the Iranians fought back by holding US Embassy officials hostage, which was a mild response, considering what we had done to their country.

In the mid 1950s, Egypt decided to nationalize the Suez Canal and use the income from it to help their people out of poverty. They were willing to pay its British and French owners the full market value for their shares, but Western governments and Israel responded violently, invading and bombing Egypt into submission.

Countries have the right to nationalize their resources as long as they pay a fair compensation, so what Iran and Egypt wanted to do was legal. The Western response, though, was illegal aggression in violation of international law and the United Nations charter. It roused in its victims a deep resolve for revenge.

The USA and Britain committed similar atrocities in Iraq, Syria, Lebanon, Libya, Indonesia, and Afghanistan. We overthrew their governments, installed dictators, undermined their economies — all to strengthen our business interests. In every nation where we now have terrorism, we had first assaulted them. America is under attack only because it is on the attack. It’s no wonder they hate us. Imagine how we would feel if a foreign country were doing this to us. We’d be fighting back any way we could.

Since they don’t have our military power, they’re resisting with the only weapons they have: guerrilla warfare. As Mike Davis wrote, “The car bomb is the poor man’s air force.” The rich have Stealth bombers, the poor have Toyota Corollas, both filled with explosives. The bombers are much bigger and kill many more people. Since 9-11 the USA has killed over three hundred thousand — a hundred times more than died in the World Trade Center. The overwhelming majority have been civilians. We are the top terrorist, armed to the teeth with weapons of mass destruction. As Martin Luther King stated with simple eloquence: “The greatest purveyor of violence in the world today is my own government.”

Our politicians and media have created an image of fiendish terrorists who “hate us for our freedom.” But they really hate us for subjugating them. Since we started the aggression, the attacks won’t end until we leave their countries.

Even fanatics like al-Qaeda aren’t really aggressors. They’re fighting a defensive war, trying to force us out. The Western media never publish their demands because they are so reasonable. They basically come down to, “Go home and leave us alone. Pull your soldiers, your CIA agents, your missionaries, your corporations out of Muslim territory. If you do that, we’ll stop attacking you.” Nothing about destroying the West or forcing it to become Islamic. Just that the West should stay in the West.

If people knew this — knew how easy it would be to stop terrorism — they wouldn’t want to fight this war. That’s why the media ignore al-Qaeda’s demands. Western leaders don’t want people to see that the war’s real purpose isn’t to stop terrorism but to control the resources of this region. They actually want the terrorism because that gives them the excuse they need — the threat of an evil enemy.

As Hermann Goering, Hitler’s assistant, declared: “Naturally the common people don’t want war…. But…it is always a simple matter to drag the people along, whether it is a democracy, a fascist dictatorship, or a parliament, or a communist dictatorship…. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”

Goering was right about the democracies that existed both then and now. In these, the people’s influence in politics is regulated to ensure that only pro-capitalist parties have a chance. Corporate financing, winner-take-all elections, ballot-access laws, and slanted media coverage effectively exclude alternatives. Democracy means power is in the hands of the people. But the real power in our society — economic power — remains firmly in the hands of the rich elite, enabling them to control politics — and us — to a large degree.

Capitalism is always at war. The violence, though, is often abstract: forcing us either to accept low-paying, exhausting jobs or starve; denying us adequate health care, education, and economic security; convincing us that human beings are basically isolated, autonomous units seeking self gratification. But when this doesn’t suffice to keep their profits growing, the violence becomes physical, the cannons roar, and the elite rally us to war to defend “our” country and destroy the fiendish enemy. Motivating us to kill and die for them requires a massive propaganda campaign — America is under attack! — which we confront whenever we turn on their media.

Why do they do this? Are they monsters?

No, they’re not. They’re just human beings serving an inhuman system. Capitalism is inherently predatory. It demands aggressive growth. It’s either dominate or go under.

This drive for domination is the root cause of war, and until we eliminate it, we’re going to continue killing one another. Eliminating it requires a global struggle to bring down oligarchic capitalism and replace it with democratic socialism. Political democracy must be expanded and extended into the economic sphere. We, the people of the world, have to take control of the forces that shape our lives. This is the basis for building a society in which we can all fully develop as human beings. Once we achieve this, we’ll have a real chance at lasting peace.

We can do this! It’s no more difficult than other evolutionary challenges humanity has mastered. The best program I’ve found for achieving it is the Socialist Equality Party’s: http://www.wsws.org.

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William T. Hathaway is an adjunct professor of American studies at the University of Oldenburg in Germany. His latest book, Radical Peace: People Refusing War, presents the experiences of war resisters, deserters, and peace activists in the USA, Europe, Iraq, and Afghanistan. Chapters are posted on a page of the publisher’s website at http://media.trineday.com/radicalpeace. He is also the author of Summer Snow, the story of an American warrior in Central Asia who falls in love with a Sufi Muslim and learns from her an alternative to the military mentality. Chapters are available at www.peacewriter.org.

 

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