Neo-Liberal Economic Policies in the United States:

Although most discussions of the impact of neo-liberal economic policies focus on the countries of the Global South, these policies have been implemented in the United States as well.  This began in 1982, when the Chairman of the US Federal Reserve, Paul Volcker, launched a vicious attack on inflation in the US money supply: and caused the deepest US recession since the Great Depression of the late 1920s-1930s.

 

However, these neo-liberal policies have been implemented in the US perhaps more carefully than in the Global South.  Instead of imposing these changes "in your face," these policies have been hidden "under" the various and sundry "cultural wars" (around issues such as drugs, abortion, marriages for gays and lesbians, gun control, etc.) that have been used to divert people's attention away from the real issues.  In other words, if Americans can have their attention focused in "other" directions, then both the corporations and their friends in government can enact laws and policies: tax cuts for the rich, for example: that both work for the corporations and the rich, against the economic interests of the large majority of Americans.  Thus, while there is a lot of attention focused on ____________ (gay marriage is the latest), the overwhelmingly large number of people are not aware of the extent to which economic changes are going on in the country; changes, as I detail below, are hurting the overwhelmingly large number of Americans in this country.

 

It is believed that the implementation of these neo-liberal economic policies and the cultural wars are part of a two-part project:  the first part is to improve the economic well-being of the already well-off, as already suggested.    But there is another, a second part that is perhaps even more important.  These laws and policies are also being used to attack our unions and other organizations that can mobilize people to fight back.  In other words, the corporations, their friends in government and the elite in general, are using these policies to attack the American public, in an effort to prevent re-emergence of the collective solidarity among the American people that we saw in the late 1960s-early 1970s, of which the internal breakdown of discipline within the US military, in Viet Nam and around the world, was probably the most crucial.[1]  Let me put it this way:  the "cultural wars" are being waged to divert our attention away from the improving economic well-being of the already well-off, and to keep us from noticing that these same policies are also disemboweling our organizations, so that even when we wake up, when we recognize the systematic attack on our economic well-being, we will be unable to fight back:  the longer we wait to see this, the weaker the position we will be in from which to fight back.

 

In other words, the elite saw the upsurge of the "60s" as being a threat to the established social order, both internationally and in the United States itself, and they don't want that to happen again.  This fear of "the left" is perhaps even greater today, because it is an internal challenge to their efforts to keep dominating the world, their Empire.  The elites thought they had achieved "nirvana" with the fall of the Soviet Union, which had previously created its own empire to challenge that of the US, and US elites were ecstatic, believing that they could now dominate the world without any problem.  Yet the US Empire is being challenged to a greater and greater extent outside of and external to the US:  think of the deer-in-headlights reaction to the recent Chinese missile test where they destroyed one of their old satellites in space (which was the Chinese way of saying, "YOUR satellites, upon which the US military is dependent, are not safe"); think of the massive media reaction to developments in Venezuela under Hugo Chavez; the resistance in Iraq; or the challenge by Iran, etc., etc.  And both the Republicans and Democrats want to maintain the US Empire: and they are worried that they can no longer dominate the rest of the world like they thought they could as recently as early 2003.

 

In the face of these external challenges: making the Empire's domination less stable: the elites are not wanting people from within the US to join with people around the world to challenge their efforts to dominate the rest of the world, too.  They do not want people in the US to question this domination: they want us to remain asleep, to allow them to be able to maneuver unhindered.  But what we find, when we look, is that they are destroying the economic well-being, the social security, on which our country prides itself.  And this crazed desire to dominate the world threatens the well-being (socially, culturally, politically, and economically) of all of us.  This threat to the people in the US is different than even those in the other "advanced" capitalist countries.  Obviously, Americans can continue to "do nothing" against this threat: but doing nothing has some pretty extreme social consequences than need to be considered.  Conscious political decisions have been made that produced social results that make the US experience: at the center of a global social order based on an "advanced" capitalist economy: considerably if not qualitatively different from experiences in other more economically-developed countries.

 

So, what has been the impact of these policies on workers in the US?

 

To answer this question, this paper focuses on several interrelated issues:  (1) it discusses the current economic situation for workers; (2) it provides a historical overview of US society since World War II; (3) reports the results of US Government economic policies; and (4) comes to a conclusion about the foreseeable future, but also argues the need for qualitative social change.

 

 

 

1)  The Current Situation for Workers and Growing Economic Inequality

 

Steven Greenhouse of The New York Times published a piece on September 4, 2006, writing about entry-level workers, young people who were just entering the job market.  Mr. Greenhouse noted changes in the US economy; in fact, there have been substantial changes since early 2000, when the economy last created many jobs.

  

Median incomes for families with one parent age 25-34 fell 5.9% between 2000-2005.  It had jumped 12% during the late '90s.  (The median annual income for these families today is $48,405.)

 

Between 2000-2005, entry-level wages for male college graduates fell by 7.3% (to $19.72/hr).

 

Entry-level wages for female college graduates fell by 3.5% (to $17.08).

 

Entry-level wages for male high school graduates fell by 3.3% (to $10.93)

 

Entry-level wages for female high school graduates fell by 4.9% (to $9.08)

  

Yet, the percentage drop in wages hides the growing gap between college and high school graduates.  Today, college grads earn 45% more than high school graduates, where the gap had "only" been 23% in 1979:  the gap has doubled in 26 years.[2] 

 

A 2004 story in Business Week found that 24 percent: one of every four: of all working Americans received wages below the poverty line.[3]  In January 2004, 23.5 million Americans received free food from food pantries.  "The surge for food demand is fueled by several forces: job losses, expired unemployment benefits, soaring health-care and housing costs, and the inability of many people to find jobs that match the income and benefits of the jobs they had."  And 43 million people were living in low-income families with children.[4] 

 

A 2006 story in Business Week found that US job growth between 2001-2006 was really based on one industry:  health care.  Over this five-year period, the health-care sector has added 1.7 million jobs, while the rest of the private sector has been stagnant.  Michael Mandel, the economics editor of the magazine, writes:

  

... information technology, the great electronic promise of the 1990s, has turned into one of the greatest job-growth disappointments of all time.  Despite the splashy success of companies such as Google and Yahoo!, businesses at the core of the information economy: software, semi-conductors, telecom, and the whole range of Web companies: have lost more than 1.1 million jobs in the past five years.  These businesses employ fewer Americans today than they did in 1998, when the Internet frenzy kicked into high gear.[5]

  

In fact, "take away health-care hiring in the US, and quicker than you can say cardiac bypass, the US unemployment rate would be 1 to 2 percentage points higher."[6] 

 

There has been extensive job loss in manufacturing.  Over 3.4 million manufacturing jobs have been lost since 1998, and 2.9 million have been lost since 2001.  Additionally, over 40,000 manufacturing firms have closed since 1999, and 90% have been medium and large shops.  In labor-import intensive industries, 25 percent of laid-off workers remain unemployed after six months, two-thirds of them who do find new jobs earn less than on their old job, and one-quarter of those who find new jobs "suffer wage losses of more than 30 percent."[7] 

 

The AFL-CIO details the American job loss by manufacturing sector in the 2001-05 period:

 

Computer and electronics:  543,000 workers or 29.2 percent

 

Semiconductor and electronic components: 260,100 or 36.7 percent

 

Electrical equipment and appliances:  152,500 or 26 percent

 

Vehicle parts: 153,400 or 18.6 percent

 

Machinery: 289,400 or 19.9 percent

 

Fabricated metal products: 235,200 or 13.3 percent

 

Primary metals:  144,800 or 23.5 percent

 

Transportation equipment: 246,300 or 12.1 percent

 

Furniture products: 58,500 or 13.4 percent

 

Textile mills: 158,500 or 43.1 percent

 

Apparel 220,000 or 46.6 percent

 

Leather products: 24,700 or 38.3 percent

 

Printing: 159,300 or 19.9 percent

 

Paper products: 122,600 or 20.4 percent

 

Plastics and rubber products: 141,400 or 15 percent

 

Chemicals: 94,900 or 9.7 percent

 

Aerospace: 46,900 or 9.1 percent

 

Textiles and apparel declined by 870,000 jobs 1994-2006, a decline of 65.4 percent.[8] 

  

As of June 2006, there were only 14.259 million manufacturing workers, down from 19.426 million at the high point in 1979.  This means that only 9.86 % of all US employment was in manufacturing: down from 21.6 % in 1979.[9]  The number of production workers in this country at the end of 2005 was 9.378 million.[10]  This was only slightly above the 9.306 million production workers in 1983, and was considerably below the 11.463 million as recently as 2000.[11]  As Daniel Altman puts it, this is "the biggest long-term trend in the economy:  the decline of manufacturing."  He notes that employment in the durable goods (e.g., cars and cable TV boxes) category of manufacturing has declined from 19% of all employment in 1965 to 8% in 2005.[12]  And at the end of 2005, only 13% of all manufacturing workers were in unions.[13] 

 

In addition, over the past two years, 2004-05, "the real hourly and weekly wages of US manufacturing workers have fallen 3 percent and 2.2 percent respectively."[14] 

 

The minimum wage level has been unchanged for the past nine years.  The US minimum wage has remained at $5.15 an hour since September 1, 1997.  Since the last increase, the cost of living has risen 26 percent.  After adjusting for inflation, this is the lowest level of the minimum wage since 1955.  At the same time, the minimum wage is only 31 percent of the average pay of non-supervisory workers in the private sector, which is the lowest share since World War II.[15]

 

In addition to the drop in wages at all levels, fewer new workers get health care benefits with their jobs:[16]  in 2005, 64% of all college grads got health coverage in entry-level jobs, where 71% had gotten it in 2000: a 7% drop in just five years.  Over a longer term, we can see what's happened to high school grads:  in 1979, two-thirds of all high school graduates got health care coverage in entry-level jobs, while only one-third do today.[17]  It must be kept in mind that only about 28% of the US workforce are college graduates: most of the work force only has a high school degree, although a growing percentage of them have some college, but not college degrees.

 

Because things have gotten so bad, many young adults have gotten discouraged and given up.  The unemployment rate is 4.4% for ages 25-34, but 8.2% for workers 20-24.[18]  

 

Yet things are actually worse than that.  In the US, unemployment rates are artificially low.  If a person gets laid off and gets unemployment benefits: which fewer and fewer workers even get: they get a check for six months.  If they have not gotten a job by the end of six months: and it is taking longer and longer to get a job: then they loose their unemployment benefits.  And if they give up looking for work, which many do, they are no longer counted as unemployed:  one doesn't even count in the statistics!  

 

A report from April 2004 provides details. According to the then-head of the US Federal Reserve System, Alan Greenspan, "the average duration of unemployment increased from twelve weeks in September 2000 to twenty weeks in March [2004]."[19]  In March 2004, 354,000 jobs workers had exhausted their unemployment benefits, and were unable to get any additional federal unemployment assistance:  Shapiro notes, "In no other month on record, with data available back to 1971, have there been so many 'exhaustees'."[20]

 

Additionally, although it's rarely reported, unemployment rates vary by racial grouping.  No matter what the unemployment rate is, it really only reflects the rate of whites who are unemployed because about 73% of the workforce is white.  However, since 1954, the unemployment rate of African-Americans has always been more than twice that of whites, and Latinos are about 1 1/2 times that of whites.  So, for example, if the overall rate is 5%, then it's at least 10% for African-Americans and 7.5% for Latinos.

 

However, most of the developments presented above: other than the racial affects of unemployment: have been relatively recent.  What about longer term?  Paul Krugman, writing in The New York Times, pointed out these longer term affects: non-supervisory workers make less in real wages today (2006) than they made in 1973!  So, after inflation is taken out, non-supervisory workers are making less today in real terms that their contemporaries made 33 years ago.[21]  Figures provided by Stephen Franklin: obtained from the US Bureau of Statistics, and presented in 1982 dollars: show that a production worker in January 1973 earned $9.08 an hour: and $8.19 an hour in December 2005.[22]  Workers in 2005 also had less long-term job security, fewer benefits, less stable pensions (when they have them), and rising health care costs.[23]

 

In short, the economic situation for "average Americans" is getting worse.  A front-page story in the Chicago Tribune talks about a worker who six years ago was making $29 an hour, working at a nuclear power plant.  He got laid off, and now makes $12.24 an hour, working on the bottom tier of a two-tiered unionized factory owned by Caterpillar, the multinational earth moving equipment producer, which is less than half of his old wages.  The article pointed out, "Glued to a bare bones budget, he saved for weeks to buy a five-pack of $7 T-shirts."[24] 

 

A report by Workers Independent News (WIN) stated that while a majority of metropolitan areas have regained the 2.6 million jobs lost during the first two years of the Bush Administration, "the new jobs on average pay $9,000 less than the jobs replaced," a 21 percent decline from $43,629 to $34,378.    However, WIN says that "99 out of the 361 metro areas will not recover jobs before 2007 and could be waiting until 2015 before they reach full recovery."[25] 

 

At the same time, Americans are going deeper and deeper into debt.  In 2004, total US household debt was $10.276 trillion, with home mortgage debt being $7.568 trillion and non-mortgage debt $2.141 trillion.[26]  By 2006, non-mortgage debt had reached $2.160 trillion, "that averages $7,250 for every person in the country, children included.[27]  Over a longer period of time, US household debt grew from $6.4 trillion at the end of 1999 to $11 trillion at the end of the third quarter of 2005, a 72 percent increase according to the US Federal Reserve.[28] 

 

Three polls from mid-2006 found "deep pessimism among American workers, with most saying that wages were not keeping pace with inflation, and that workers were worse off in many ways than a generation ago."[29]  And, you might notice, nothing has been said about increasing gas prices, lower home values, etc.  The economic situation for most working people is not looking pretty. 

 

In fact, bankruptcy filings totaled 2.043 million in 2005, up 31.6 percent from 2004,[30] before gas prices went through the ceiling and housing prices began falling in mid-2006.  Yet in 1998, writers for the Chicago Tribune had written, "... the number of personal bankruptcy filings skyrocketed 19.5 percent last year, to an all-time high of 1,335,053, compared with 1,117,470 in 1996."[31] 

 

And at the same time, there were 37 million Americans in poverty in 2005, one of out every eight.  Again, the rates vary by racial grouping:  while 12.6 percent of all Americans were in poverty, the poverty rate for whites was 8.3 percent; for African Americans, 24.9 percent were in poverty, as were 21.8 percent of all Latinos.  (What is rarely acknowledged, however, is that 65 percent of all people in poverty in the US are white.)  And 17.6 percent of all children were in poverty.[32]

 

What about the "other half"?  This time, Paul Krugman gives details from a report by two Northwestern University professors, Ian Dew-Becker and Robert Gordon, titled "Where Did the Productivity Growth Go?"  Krugman writes:

  

Between 1973 and 2001, the wage and salary income of Americans at the 90^th percentile of the income distribution rose only 34 percent, or about 1 percent per year.

 

But income at the 99^th percentile rose 87 percent; income at the 99.9^th percentile rose 181 percent; and income at the 99.99^th percentile rose 497 percent.  No, that's not a misprint.

 

Just to give you a sense of who we're talking about:  the nonpartisan Tax Policy Center estimates that this year, the 99^th percentile will correspond to an income of $402,306, and the 99.9^th percentile to an income of $1,672,726.  The Center doesn't give a number for the 99.99^th percentile, but it's probably well over $6 million a year.[33] 

  

But how can we understand what is going on?  We need to put take a historical approach to understand the significance of the changes reported above.

 

 (2)  A Historical Look at the US Social Order Since World War II

 

When considering the US situation, it makes most sense to look at "recent" US developments, those since World War II.  Just after the War, in 1947, the US population was about 6% of the world's total.  Nonetheless, this 6% produced about 48% of all goods and services in the world!  With Europe and Japan devastated, the US was the only industrialized economy that had not been laid waste.  Everybody needed what the US produced: and this country produced the goods, and sent them around the world.

 

At the same time, the US economy was not only the most productive, but the rise of the industrial union movement in the 1930s and '40s: the CIO (Congress of Industrial Organizations): meant that workers had some power to demand a share of the wealth produced.  In 1946, just after the war, the US had the largest strike wave in its history:  116,000,000 production days were lost in early 1946, as industry-wide strikes in auto, steel, meat packing, and electrical industry took place across the country and Canada, along with smaller strikes in individual firms.  Not only that, but there were general strikes that year in Oakland, California and Stamford, Connecticut.  Workers had been held back during the war, but they demonstrated their power immediately thereafter.  Industry knew that if it wanted the production it could sell, it had to agree to cut the workers in on the deal.

 

It was this combination: devastated economic markets around the world, the world's most developed industrial economy, and a militant union movement: that combined to create what is now known as the "great American middle class."[34]

 

To understand the economic impact of these factors, changes in income distribution in US society must be examined.  The best way to illuminate this is to assemble family data on income or wealth: income data is more available, so that will be used; arrange it from the smallest amount to the largest; and then to divide the population into fifths, or quintiles. In other words, arrange every family's annual income from the lowest to the highest, and divide the total number of family incomes into quintiles or by 20 percents (i.e., fifths).  Then compare changes in the top incomes for each quintile.  By doing so, one can then observe changes in income distribution over specified time periods.

 

The years between 1947 and 1973 are considered the "golden years" of the US society.[35] The values are presented in 2001 dollars, so that means that inflation has been taken out:  these are real dollars, and that means these are valid comparisons.

 

 

Figure 1:  US Family Income, in US Dollars, Growth and Distribution,

 

By top income of quintile, 1947-1973 compared to 1973-2001

 

 

	Lowest 20%	Second 20%	Third 20%	Fourth 20%	95th Percentile[36]
1947	$10,662