How convenient. President Obama calls a meeting of US banking titans in mid-December and three of them—Goldman Sachs’ Lloyd Blankfein, Morgan Stanley’s John Mack, and Richard Parsons of Citigroup—are fogged in at JFK and unable to meet the president in person. The fog wasn’t thick enough, however, to prevent the “too big to fail” banks run to repay the billions of bailout dollars American taxpayers loaned them. (Joseph Stiglitz recently countered this moniker with “too big to live.”) Repayment before the new year will not only free the financial giants of the government regulatory chains attached to the bailout, but also allow the traditional year-end tribute payout to their top executives—sums unfathomable to most Americans. Having one of its most profitable years in its 140-year history, Goldman Sachs has put aside a record $16.7 billion toward this money bath—not to be paid in cash, but instead in shares of Goldman stock that cannot be sold for five years, not to mention taken away if the executive screws up.
Is this self-regulation? Or scraps fed to hungry American workers who wonder just what does one person do to deserve the $67.5 million bonus Goldman’s Blankfein received in 2007? (Blankfein passed on his 2008 bonus.)
Such shocking perversions are not limited to the purview of the financial sector, but pervade corporate America, where the real wage for average workers has not risen since the 1970s, according to Rick Wolff, emeritus professor of economics at the University of Massachusetts, Amherst. In his latest book, Capitalism Hits the Fan: The Economic Meltdown and What to Do About It (Olive Branch Press, 2009), Wolff provides historical context for today’s economic crisis and outlines the historical debate liberals and conservatives have fueled since FDR’s New Deal. Conservatives insist that the private market not be interfered with and liberals demand government intervention to provide jobs, incomes, healthcare, and subsidized housing. One side winning triggers the other to work to derail the victory. Nothing substantial changes because the framed rhetoric of the debate is popularized via a media owned by the extremely wealthy. Any quest for alternatives is stifled. Yet the economic disasters continue to occur, people continue to suffer; the rich are getting richer and the poor poorer, with American workers believing their suffering is due to some personal failing, like not working hard enough or not having the right degree.
Nothing could be further from the truth, claims Wolff, because in fact, the odds against the survival of the working class have been gradually growing ever longer. And may grow even larger if the latest assessment on economist Nouriel Roubini’s website—www.roubini.com—proves to be correct. Analyst Mikka Pineda recently wrote that current events eerily resemble the psychological and economic backdrop of the mid-1930s when recovery was thought to have begun and premature retraction of economic stimulus pushed the US back into recession.
Senior Editor Lorna Tychostup talks with Wolff about the decline of real wages for the working class, tax injustice, and an alternative to the way America does business.
Lorna Tychostup: You begin Capitalism Hits the Fan by stating that the crucial shift in the capitalist system occurred in the 1970s, when the average real wages of US workers permanently stalled after 150 years of steady increases. How did this happen?
Rick Wolff: The American dream states the US is magical and special. If you work hard, you will do well, better than your parents. You can promise your kids delivery of a higher standard of living than you have. For the last 150 years most people measured goodness, success, and achievement in terms of consumption—rather than, say, relationships with other people. What you could afford, buy, and display became emblems of what was good about the US and your successful participation in it. So when the real wage stopped increasing in the `70s, you had a psychic trauma made all the worse because it was not discussed or debated. People hoped this trauma wouldn’t last but it did.
Since there was no discussion that this was a social problem, Americans viewed it as a personal problem. “I didn’t work hard enough, didn’t get enough degrees at the right schools, didn’t apply myself. Everyone else is succeeding. I’m not, so it’s me.” Americans responded by working more hours, particularly women. In the 1970s, 40 percent of adult women were in the paid labor force. Today it is twice that. There was a dramatic shift as families sent out more people to work more hours to compensate for stagnated real wages. This did not work. The women who went out to paid work required another set of clothes, a second family car—the net income gained from extra work disappointed and so US families turned to borrowing money like no working class has done in world history.