Class Warfare Blog

September 26, 2019

In the Beginning . . .

Filed under: History,Politics — Steve Ruis @ 8:31 am
Tags: , ,

No, not that beginning, the beginning of this current iteration of the Class War, silly!

There have been many prior iterations of class wars, but the focus of this blog is on the one currently going on in the U.S. (There are others going concurrently, but they have different parameters.)

Some Background
This class war has its roots in World War 2. We were still climbing out of the Great Depression (a feature of capitalism, so you just have to take it on faith that our version of capitalism is the bestest, mostest of all economic systems). The mobilization for WW2 expunged the last remains of the depression, but that depression was still in the minds of our leaders.

Of all of the major participants in WW2, our country was the only major country which didn’t get bombed back to the nineteenth century. Russia, England, France, German, Japan, and Italy featured mostly smoking ruins as industrial areas. So, economically, we were poised for good times. Then, when you realize that we lost far, far fewer men than other countries (Russia still sees a demographic hole from their WW2 losses) we also had more able-bodied workers available post war. Happy days were, indeed, here again.

And Then . . .
So, for Americans the post-war period was boom time in Levittown for quite a while. But, of course, things couldn’t continue to go that way forever. The other countries would recover. So, from 1959-1969 manufacturing corporations (remember them?) averaged a fantastic 24.6 percent profit. But, over the next decade (the 1970’s) their average profit margins would “fall” to 15.5%.

Now, if you were offering a stock portfolio right now with a built-in 15-16% profit margin, do you think you would get an “takers?” You bet your bippy you would! You’d have people lined up to sign up to buy shares in that fund.

So, what was on the minds of corporation executives, movers and shakers, of that time. Obviously they did not want profits to slide further. It was clear that there was foreign competition where they was little to none post-war. It didn’t take a genius to see what was happening was coming. But many U.S. corporations had gotten fat and lazy over the period and they needed to get a better game on. (Think about the cars being produced, telecommunications (such as they were), etc. We were soon to be left in the dust because of all of the bad habits we had picked up.)

What To Do, What To Do . . .
So, what were these business people to do? Should they seek out union leaders and enroll them in partnerships? Should they call up W. Edwards Deming and consider his ideas for producing goods? Should they modernize their production processes? They did none of these things as a major directional effort. Instead they decide a class war was a good idea.

This was launched/amplified by two major contributions. One was the infamous Powell Memo. (If you are unaware of the Powell Memo, Google it up and read it. It is a war plan.) Ronald Reagan passed out copies of this memo to his cabinet members at his first cabinet meeting, although by then the memo had already had a considerable impact. Lewis Powell, the author, was rewarded with a Supreme Court seat. Not bad for a former corporate lawyer for the tobacco industry. As a consequence of the Powell memo, between 1968 and 1978 there was a fivefold increase in the number of corporate public affairs offices in Washington, D.C. In 1971, only 175 corporate lobbyists were registered as representing corporations. By 1982, that number was 2500. Do realize that just prior to this point, engaging in politics was considered a distasteful practice by most CEOs.

Then there was the economic foundation laid for the Theory of Maximizing Shareholder Value, with increasing the value of a corporation’s stock being the only true purpose for the existence of a corporation. Before this ridiculous assertion, corporations had multiple raisons d’être. Sears Roebuck, for example listed three major stakeholders in their corporation: “the customer, the employee, and the stockholder.” The holders of stock were considered to be last, not because they were not important, but because the value of their investment in the company was dependent upon there being satisfied customers, which could only be created by satisfied employees.

This was considered “normal” in business circles in the 1960’s, for example. Labor unions were looked upon with something less than disdain, some were even considered to be an asset to the corporations their workers served.

The rather bogus argument made for “shareholder value” being the only valid goal of a corporation grew by leaps and bounds because the plutocrats decided that the way for this to grow was to ensure that CEO’s were compensated with stocks. That would result in CEO’s paying attention to their stock listings above and beyond anything else. This was “sold” as giving the CEO a stake in the game, so he would serve the interests of “the company” better. (Right. Look of the Law of Unintended Consequences and then consider the Law of Intended Consequences.) What this did was it tied the remuneration of the CEO to that of the shareholders to the exclusion of everything else.

All of this fueled the financialization of the American economy, which elevated an activity that produces nothing tangible to the most important part of our economy! Recent studies have shown that the stock market, and all of the other aspects of the financial sector, is a negative drag on the economy. Surprise! Producing nothing and extracting rents from “the system” have no positive benefit to the country. Who would have thought?

Consequences of this “decision” to wage a class war rather than deal directly with the shortcomings of American corporations are many and important. For one, our manufacturing sector has been sliding lower and lower for decades as we export more and more manufacturing jobs to cheaper wage countries. We are still a major manufacturing country, but we have fallen far, indeed.

Then we have decimated the middle class of Americans over and over, which has created a lessening of demand for the goods and services it could have been clamoring for, if it had the disposable income. The middle class has shrunk and shrunk, not in its “size” as that is adjusted with the population, but primarily by the attributes one could claim for being in that segment of the economy. Middle class wages have been stagnant for over forty years, yet the costs of housing, health care, and a college education have skyrocketed. Conservatives boast that a new, large LED flat panel TV set is far cheaper than a CRT tube TV set of forty years ago, so the poor and middle class have “nicer things” than they did before. These arguments are true, but they are almost irrelevant. Families have less disposable income now than they did in the 1950’s, even with a second major wage earner being added to the family since then. (Elizabeth Warren pointed this out in a book written in 2003 “The Two Income Trap.”) Conservatives had been adroit at making huge tax transfers onto lesser earners. While Ronald Reagan got a large tax decrease for the wealthy, but the decrease the middle class folks got was offset by an increase in Social Security taxes. President Trump has continued the GOP parade by giving large permanent tax cuts to the wealthy and corporations and small, temporary tax cuts to the middle class. Democrats and Republicans alike have contributed with similar efforts in between those two events. Since both major parties have their hands in corporate pockets, they have been serving their interests rather than “the people’s” for quite some time.

But Where Does It All end?
So, that’s how it began and we are left to figure out how it will end. Right now the monied elites have won the Class War and can choose to just sit on their position for quote a long time. Soon, all of this will become “normal” to those born in this century. I do not see the plutocrats doing only this, as they seem to continue to try to press their advantage, as they see it. This tendency to step on the necks of the defeated may just be enough of overplaying their hand that the backlash, and there is always a pendulum swing coming back, will be more vigorous that they figure.

We can only hope.


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