Letter from the United States: Inequality worsens, workers lose again

Saturday, August 9, 2014
Image: Occupy Wall Street.

Many commentators have written about the growing divide in the United States between capitalists and workers (and other producers) ― although they eschew the terms “capitalists” and “workers”.

They prefer to talk about levels of income and wealth abstracted from the role different classes play in the production process.

Nevertheless, their figures give an insight into the real growing disparity between the two main classes under the capitalist system, which was first brought to national attention by the Occupy movement in 2011.

In the anemic recovery after the Great Recession, the gap between the richest and the rest grew. In 2009 to 2010, the top 1%’s income rose 11.6%, while income for the remaining 99% rose by only 0.2%.

This disparity has only grown since. In 2012, the income of the top 1% rose nearly 20%. For the 99%, it rose by 1%.

By 2012, the top 1% received a fifth of the national income, breaking the previous record set in 1928. For the bottom 80%, it was a little more than 11%, while the rest went to the 19% of small businessmen, managers, professionals, etc.

The disparity exists within the top 1%, too. In 2009, income reported for tax purposes revealed that the bottom half of the 1% received between US$340,000 to $500,000 extra. The top 0.1% received more than $5 million more.

These are from the self-reported incomes the rich admit to. It is no secret they lie.

If the real figures were readily available, the very rich would show incomes of hundreds of millions annually, according to the more honest economists.

While this trend has worsened since the Great Recession, it is part of a longer-term growth in inequality between the two classes, which began in the 1970s.

A 2011 study by the Congressional Budget Office analysed tax forms for declared income differences between 1979 and 2007. These two years both preceded a recession, so give a better picture of the longer-term trends.

The report found that real average household income after taxes grew by 62% on average for all classes in this period.

But the income of households in the top 1% grew by 275%, compared to 65% for the next 19%, just under 40% for the next 60%, and 18% for the bottom fifth of the population.

From 1947 to 1973, real median family income kept pace with the growth in labour productivity. Then it began to fall behind and stagnated between 1999 and 2011.

The lion’s share of productivity growth went to the capitalists and their managers, upper level professionals, etc. The share received by the low and middle income households declined.

If we look at wealth owned, the gap is also widening. In 1983, the bottom 80% of the population owned 18.7% of total wealth. By 2010, that had fallen to 11.1%.

In terms of ownership of financial wealth in the same perion (stocks and bonds, all types of other holdings like money market funds, savings of various types, insurance plans and so forth), the share of the bottom 80% went from 8.7% to 4.7%.

All these figures come from official sources. The rich have all kinds of ways to hide their real wealth, including in off-shore accounts and investments.

Also, many of these figures are averages, which obscure the reality because of the great disparity of income and wealth under capitalism.

An example: If 1000 workers who make on average $50,000 a year each, are averaged in with 10 capitalists who “earn” $1 million each, the new average income jumps to about $60,000.

If we average these 1000 workers with one capitalist who takes in $100 million, the average jumps to $149.9 million.

Some are median figures (50% above and 50% below) which give a better picture, but still not the reality of workers wages and wealth, which cluster below the median.

I am in the bottom 80% who owned 4.7% of total financial wealth in 2010. My financial wealth consists of pension funds and savings. My pension funds own stocks and bonds.

But I have zero control over how those savings are invested. The big financial capitalists control them, and invest them to further increase their wealth. Thus the very wealthy at the top, a tiny fraction of the 1%, control far more wealth than they nominally own.

Well over a century ago, Karl Marx showed that the gap between the capitalists and the workers grows over time. Capital becomes ever more concentrated. Wages cannot keep pace with the accumulation of capital.

This process is the fundamental cause of the rising gap between the rich and the rest of us. But a countervailing trend is when workers fight back by collectively organising in trade unions and political parties.

In the international capitalist long-term boom period after World War II, in part fueled by the rebuilding of Europe and Japan, with relatively shallow recessions and bigger expansions, workers made gains, especially in the US.

In the US, this development masked the growing internal weakness of the unions through increasing bureaucratisation. In this period, the class-collaborationist policies of the union bureaucracy could still yield gains for the workers.

There were strikes, of course, and important ones, but by and large the bureaucracy was able to win gains through bargaining with the capitalists, without much struggle. The capitalists could afford it.

When the long expansion began to end by 1970, international capitalist competition once again intensified. The ruling class and its government set out on a process to attack the gains workers had won in previous struggles, in terms of wages, benefits and the social wage.

In this new situation, the class collaborationist policies of the bureaucracy could not stand up to the ruling class offensive. There were rank and file rebellions in the 1970s against these policies, but these struggles were ultimately unsuccessful.

By the 1980s, the bureaucracy's policy in practice, and more and more openly stated, was concessions to capitalist demands.

Subordinating themselves to the capitalist Democratic Party, the union “leaders” were also unable to fight against the rising use of the capitalist state to weaken unions.

As a consequence, the long-term trend since 1970 is the growing gap between the two main classes. It has gotten worse in the aftermath of the Great Recession.

It will only be turned around when a new militancy takes hold in the working class, and a counter-offensive is launched.

There are some signs in the new struggles of the lowest paid in fast food and Walmart, in movements to raise the minimum wage, and the Chicago teachers’ strike, but these are still just indications of the potential for a badly needed, much deeper struggle.

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From GLW issue 1020