Global inequality

Topic

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How unequal is the global society that we live in? What evidence existence that there are significant differences in the living standards and life chances of people in different countries? How do modernization and dependency theorists, and other scholars explain the causes of these inequalities?

Answer the questions by addressing all of the material we covered on this subject, including the readings (University of Minnesota, Perrucci and Wysong, and Scanlan). You must address all of these issues in order to get full credit for the essay. You must provide evidence in the form of data and citations from the course material to substantiate your points. Do not wander off into a discussion of your own personal opinions and experiences. You must not substitute an exploration of your own views for an engagement with the material we are studying. Students who do so will receive zero credit for this part of their essay.

Sources

You may not use anything other than the readings, activities, lectures, etc. covered in this course to write your essay. Do not go to About.com, Study.com, Wikipedia, or any other outside source to write your essay. Making use of non-class sources and/or plagiarism of any kind will result in a failing grade of zero and will be reported to the college.

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Length and other expectations

Your essay should be 4-5 pages long. It must be clear, well-written, thorough, and thoughtful. You must use proper grammar and spelling.

Citations

You are required to use formal citations, APA, for this essay. You must indicate the sources from which you are getting the evidence, data, arguments, and quotes you use. To do so, simply put the author(s) last name, year of publication, and page number (if a direct quote) in parentheses at the end of the sentence—e.g. (Lorber, 200, p. 15). If you are drawing on an in-class lecture just put the last name and the date of the lecture—e.g. (Lecture Notes: name of lecture, Oct 16). You must also include a reference page that lists the sources that you used within the paper.

How you will be graded

Spelling, grammar, and typos.

Is the essay well-written from the standpoint of these criteria? Or does it contain many errors and/or appear rushed, sloppy, and slapdash?

Clarity of writing.

Is the essay well-written with clear and comprehensible sentences? Or is the writing awkward, unclear, and/or difficult to comprehend?

Organization

Is the essay well-organized?

Are the arguments and the information presented in a logical manner?

  • Thoroughness and thoughtfulness.
  • Do you address all of the issues included in the essay topic? Or have you failed to address in whole or in part one or more of them?

  • Do you provide relevant evidence and citations to substantiate your points? Or are you making unsubstantiated claims?
  • Accuracy

  • Do you correctly address the topic, demonstrating a solid grasp of the material? Note: If you’re writing is so unclear that I cannot understand what you’re saying and you cannot effectively communicate what you know, you will necessarily lose points for accuracy.
  • Do you present evidence and arguments accurately? Or do you fail to correctly characterize the evidence you use and the positions of the authors you cite?

  • Do you use the concepts correctly?
  • Do you craft the essay in your own words, thereby indicating that you have or are trying to assimilate the material? Or do you just string together a series of statements drawn from class and/or the readings?

    The Global Economy and
    the Privileged Class
    ROBERT PERRUCCI
    EARL WYSONG
    security, preservation, and well-being. However, I
    feel strongly that we must look forward to hope and
    faith in our country and its people. Deep inside I
    want to believe that tough times won’t last, but
    tough people do. This will mean a lot of sacrifice,
    determination, and change in those people affected
    by losing one’s job.” Less hopeful views are
    revealed in the following remarks:
    Allowing the defenders of privilege to
    monopolize the term “globalization” for
    their own vision too easily allows them to
    portray themselves as agents of an impersonal process and to paint advocates of
    global justice as narrow specialists or
    naive opponents of technological
    progress.
    –Salih Booker and William Minter,
    Nation, July 9, 2001
    We are down to rock bottom and will
    probably have to sell the house to live or
    exist until I find a job here or somewhere
    else. I have been everywhere looking in
    Cass, White, and Carroll counties. We
    have had no help except when the electric
    company was going to shut off the utilities in March and the Trustee [County
    Welfare] paid that $141. My sister-in-law
    helps us sometimes with money she’s
    saved back or with food she canned last
    summer. The factories have the young.
    I’ve been to all the factories. (Personal
    interviews with RCA workers.)
    n 2001, record layoffs led to the worst U.S. job
    market since the recession of 1990–91. In the
    period from January to June, 2001, U.S. companies
    announced 652,510 layoffs. From manufacturing to
    high-tech, workers lost jobs at the fastest rate in
    years. Although the 2001 job cuts were dramatic,
    they were merely the latest chapter in what has been
    a long story for U.S. workers. Twenty years earlier
    we followed 850 workers through what has since
    become an all-too-familiar pattern for millions of
    workers.
    I
    On December 1, 1982, an RCA television cabinet-making factory in Monticello, Indiana closed
    its doors and shut down production. Monticello, a
    town of five thousand people in White County (population twenty-three thousand), had been the home
    of RCA since 1946. The closing displaced 850
    workers who were members of Local 3154 of The
    United Brotherhood of Carpenters and Joiners.
    Officials at RCA cited the high manufacturing costs
    and foreign competition as key factors leading to
    the closing.
    Whether the personal response to the closing
    was faith, fear, or anger, the common objective
    experience of the displaced workers was that they
    had been “dumped” from the “middle class.” These
    displaced factory workers viewed themselves as
    middle class because of their wages and their
    lifestyles (home ownership, cars, vacations). Most
    had worked at RCA for two decades or more. They
    had good wages, health care benefits, and a pension
    program. They owned their homes (with mortgages), cars, recreational vehicles, boats, and all the
    household appliances associated with middle-class
    membership. All the trappings of the American
    Dream were threatened as their seemingly stable
    jobs and secure incomes disappeared. In the space
    Reactions of displaced workers from RCA
    were varied, with most expressing either a general
    sense of despair or a feeling of confidence that they
    would survive. One worker was hopeful, stating:
    “Losing one’s job is a serious jolt to your attitude of
    “The Global Economy and the Privileged Class” by Perrucci, Robert and Wysong, Earl. Reprinted from The New Class Society:
    Goodbye American Dream?, (2003), by permission of Roman and Littlefield Publishers, Inc.
    1
    2 The Global Economy and the Privileged Class
    of a few months these workers and their families
    joined the growing new working class—the 80
    percent of Americans without stable resources for
    living.
    The severity of this jolt to their sense of wellbeing and their “downward slide” is also revealed in
    the bleak picture displaced workers have of their
    future and the futures of their children: “I’m afraid
    it will be years before I get up the courage to buy a
    car, appliance, or anything on a long-term note,
    regardless of how good the pay is in a new job”; “I
    have a National Honor Society daughter with one
    more year of high school. If she can’t get aid there’s
    no way she can go to college.” (Personal interviews
    with RCA workers.)
    The experiences of the 850 RCA workers from
    Monticello, Indiana, were part of a national wave of
    plant closings that swept across the land two
    decades ago. According to a study commissioned by
    the U.S. Congress, between the late 1970s and mid1980s more than 11 million workers lost jobs
    because of plant shutdowns, relocation of facilities
    to other countries, or layoffs. Most of these displaced workers were in manufacturing. Subsequent
    displaced worker surveys commissioned by the
    Bureau of Labor Statistics estimated that between
    1986 and 1991 another 12 million workers were displaced, but now they were predominantly from the
    service sector (about 7.9 million).1 When these displaced workers found new jobs, it was often in
    industry sectors where wages were significantly
    lower than what they had earned and jobs were
    often part-time and lacked health insurance and
    other benefits.
    Beginning in the mid-1970s and continuing to
    the present, the American class structure was being
    reshaped from the layer-cakelike “middle-class”
    society into the double-diamond structure. The first
    step in this reshaping was a privileged-class-led
    attack on higher-wage unionized workers, eliminating their jobs in the auto industries, steel mills, rubber plants, and textile mills. The reshaping continued through the late 1980s to the mid-1990s, when
    the strategy was expanded to include not only plant
    closings and relocations, but “restructuring and
    downsizing” strategies as well, often directed at
    eliminating white-collar jobs.
    The rush to downsize in some of America’s
    largest and most prestigious corporations became so
    widespread in the 1990s that a new occupation was
    needed to handle the casualties. The “outplacement
    professional” was created to put the best corporate
    face on a decision to downsize, that is, to terminate
    large numbers of employees—as many as ten thousand. The job of these new public relations types is
    to get the general public to accept downsizing as the
    normal way of life for corporations that have to survive in the competitive global economy. Their job is
    also to assist the downsized middle managers to
    manage their anger and to get on with their lives.
    The Human Resources Development Handbook of the American Management Association provides the operating philosophy for the outplacement
    professional: “Unnecessary personnel must be separated from the company if the organization is to
    continue as a viable business entity. To do otherwise
    in today’s globally competitive world would be
    totally unjustified and might well be a threat to the
    company’s future survival.”2
    The privileged 20 percent of the population are
    hard at work telling the other 80 percent about the
    harsh realities of the changing global economy.
    “Lifetime employment” is out. The goal is “lifetime
    employability,” which workers try to attain by accumulating skills and being dedicated and committed
    employees. Even Japan’s highly touted commitment
    to lifetime employment (in some firms) is apparently unraveling, as reported in a prominent feature
    article in the New York Times.3 It should be no surprise that an elite media organization like the Times,
    whose upper-level employees belong to the privileged class, should join in disseminating the myth of
    the global economy as the “hidden hand” behind the
    downsizing of America. The casualties of plant
    closings and downsizings are encouraged to see
    their plight as part of the “natural laws” of economics.
    This enormous transformation of the U.S.
    economy over a thirty-year period has been
    described by political leaders and media as the
    inevitable and therefore normal workings of the
    emerging global economy. Some, like former president Reagan, even applauded the changes as a historic opportunity to revitalize the economy. In a
    1985 report to Congress, he stated, “The progression of an economy such as America’s from the
    agricultural to manufacturing to services is a natural
    change. The move from an industrial society toward
    a postindustrial service economy has been one of
    the greatest changes to affect the developed world
    since the Industrial Revolution.”4
    A contrasting view posits that the transformation of the U.S. economy is not the result of natural
    economic laws or the “hidden hand” of global eco-
    The Global Economy and the Privileged Class 3
    nomic markets but, rather, the result of calculated
    actions by multinational corporations to expand
    their profits and power. When corporations decide
    to close plants and move them overseas where they
    can find cheap labor and fewer government regulations, they do so to enhance profits and not simply
    as a response to the demands of global competition.
    In many cases, the U.S. multinationals themselves
    are the global competition that puts pressure on
    other U.S. workers to work harder, faster, and for
    lower wages and fewer benefits.
    THE GLOBAL ECONOMY
    AND CLASS STRUCTURE
    Markets, which in mainstream ideology
    are as natural as gravity, have frequently
    been created and deepened through coercive state action—ranging from enclosures (the privatization of common lands)
    in Britain hundreds of years ago to
    NAFTA’s eviction of Mexican peasants
    from their land today.
    –Doug Henwood, In These Times,
    September 30, 1996
    Discussion about the new global economy by
    mainstream media reporters and business leaders
    generally focuses on three topics. First is the
    appearance of many new producers of quality goods
    in parts of the world that are normally viewed as
    less developed. Advances in computer-based production systems have allowed many countries in
    Southeast Asia and Latin America to produce goods
    that compete with those of more advanced industrial economies in Western Europe and North
    America. Second is the development of telecommunications systems that permit rapid economic transactions around the globe and coordination of economic activities in locations separated by thousands
    of miles. The combination of advances in computerbased production and telecommunications makes it
    possible for large firms, especially multinationals,
    to decentralize their production and locate facilities
    around the globe. Third is the existence of an international division of labor that makes it possible for
    corporations to employ engineers, technicians, or
    production from anywhere in the world. This gives
    corporations great flexibility when negotiating with
    their domestic workforce over wages and benefits.
    These changes in how we produce things and who
    produces them have resulted in expanded imports
    and exports and an enlarged role for trade in the
    world economy. Leading this expansion has been
    increased foreign investments around the world by
    the richer nations. It is estimated that two-thirds of
    international financial transactions have taken place
    within and between Europe, the United States, and
    Japan.5
    The changes just noted are often used as evidence of a “new global economy” out there constraining the actions of all corporations to be competitive if they hope to survive. One concrete
    indicator of this global economy out there is the rising level of international trade between the United
    States and other nations. In the 1960s, the United
    States was the dominant exporter of goods and services, while the imports of foreign products played a
    small part in the U.S. economy. Throughout the
    1970s foreign imports claimed an increasing share,
    and by 1981 the United States “was importing
    almost 26 percent of its cars, 25 percent of its steel,
    60 percent of its televisions, tape recorders, radios,
    and phonographs, 43 percent of its calculators, 27
    percent of its metal-forming machine tools, 35 percent of its textile machinery, and 53 percent of its
    numerically controlled machine tools.”6 Imports
    from developing nations went from $3.6 billion in
    1970 to $30 billion in 1980.
    Throughout the 1980s, the United States
    became a debtor nation in terms of the balance
    between what we exported to the rest of the world
    and what we import. By 2000, the U.S. trade deficit
    indicated that the import of goods and services
    exceeded exports by $370 billion. This is the largest
    deficit since the previous high in 1987 of $153.4 billion. But what do these trade figures tell us? On the
    surface, they appear to be a function of the operation of the global economy, because the figures indicate that we have an $81.3 billion deficit with
    Japan, $83.8 billion with China, and $24.9 billion
    with Mexico.7 It appears that Japanese, Chinese,
    and Mexican companies are doing a better job of
    producing goods than the United States and thus we
    import products rather than producing them ourselves. But is this the correct conclusion? The
    answer lies in how you count imports and exports.
    Trade deficit figures are based on balance of
    payment statistics, which tally the dollar value of
    U.S. exports to other countries and the dollar value
    of foreign exports to the United States; if the dollar
    value of Chinese exports to the United States
    exceeds the dollar value of U.S. exports to China,
    the United States has a trade deficit with China.
    4 The Global Economy and the Privileged Class
    This would appear to mean that Chinese companies
    are producing the goods being exported to the
    United States. But that is not necessarily the case.
    According to the procedures followed in calculating
    trade deficits, “the U.S. balance of payments statistics are intended to capture the total amount of
    transactions between U.S. residents and residents of
    the rest of the world.”8 If “resident” simply identifies the geographical location of the source of an
    import, then some unknown portion of the $49.7
    billion U.S. trade deficit with China could be from
    U.S.-owned firms that are producing goods in China
    and exporting them to the United States. Those U.S.
    firms are residents of China, and their exports are
    counted as Chinese exports to the United States.
    Thus, the global economy that is out there forcing U.S. firms to keep wages low so we can be more
    competitive might actually be made up of U.S.
    firms that have located production plants in countries other than in the United States. Such actions
    may be of great benefit to the U.S. multinational
    firms that produce goods around the world and
    export them to the U.S. market. Such actions may
    also benefit U.S. consumers, who pay less for goods
    produced in low-wage areas. But what about the
    U.S. worker in a manufacturing plant whose wages
    have not increased in twenty years because of the
    need to compete with “foreign companies”? What
    about the worker who may never get a job in manufacturing because U.S. firms have been opening
    plants in other countries rather than in the United
    States? As the comic strip character Pogo put it:
    “We have met the enemy and it is us.”
    American multinational corporations’ foreign
    investments have changed the emphasis in the economy from manufacturing to service. This shift has
    changed the occupational structure by eliminating
    high-wage manufacturing jobs and creating a twotiered system of service jobs. There have been big
    winners and big losers in this social and economic
    transformation. The losers have been the three out
    of four Americans who work for wages—wages that
    have been declining since 1973; these American
    workers constitute the new working class. The big
    winners have been the privileged classes, for whom
    jobs and incomes have expanded at the same time
    that everyone else was in decline. Corporate executives, managers, scientists, engineers, doctors, corporate lawyers, accountants, computer programmers, financial consultants, health care
    professionals, and media professionals have all registered substantial gains in income and wealth in the
    last thirty years. And the changes that have pro-
    duced the “big losers” and “big winners” have been
    facilitated by the legislative actions of the federal
    government and elected officials of both political
    parties, whose incomes, pensions, health care, and
    associated “perks” have also grown handsomely in
    the past two decades.
    This chapter demonstrates that the privileged
    classes have benefited at the expense of the working
    classes. The profits of corporations and stockholders have expanded because fewer workers produce
    more goods and services for lower wages. The profits of corporations are distributed to executives,
    managers, and professionals in higher salaries and
    benefits because they are able either to extract more
    work from workers while paying them less, or to
    justify inequality by providing distracting entertainment for the less fortunate, or control them if necessary. The privileged class is able to maintain its
    position of advantage because its members control
    the jobs and incomes of other Americans. They also
    control the mass media and education, which are the
    instruments of ideological domination. If all of this
    is not enough, they also control the means of violence (military, national guard, police, and the
    investigative and security apparatus) that are used to
    deal with large-scale dissent.
    CREATING THE GLOBAL
    ECONOMY: THE PATH TO
    CORPORATE PROFITS
    We have entered the era of Empire, a
    “supranational” center consisting of networks of transnational corporations and
    advanced capitalist nations led by the one
    remaining superpower, the United States.
    –Michael Hardt and Antonio Negri,
    Empire, 2000
    When World War II ended in 1945, all but one
    of the industrial nations involved had experienced
    widespread destruction of their industrial system
    and the infrastructure that is necessary for a healthy
    economy to provide sufficient food, shelter, and
    clothing for its people. Although all nations that participated in the war suffered terrible human losses,
    the United States alone emerged with its economic
    system stronger than it was at the start of the war.
    For nearly thirty years following World War II,
    the United States dominated the world economy
    through its control of three-fourths of the world’s
    The Global Economy and the Privileged Class 5
    invested capital and two-thirds of its industrial
    capacity. At the close of the war, there was concern
    in the United States that the high levels of production, profits, and employment stimulated by war
    mobilization could not be sustained. The specter of
    a return to the stagnation and unemployment experienced only a decade earlier during the Great
    Depression led to the search for a new economic
    and political system that would maintain the economic, military, and political dominance of the
    United States.
    The postwar geopolitical-economic policy of
    the United States was designed to provide extensive
    foreign assistance to stimulate the recovery of
    Western Europe. This policy would stimulate U.S.
    investment in Europe and provide the capital for
    countries to buy U.S. agricultural and industrial
    products. The policy was also designed to “fight”
    the creation of socialist governments and socialist
    policies in Western Europe, governments that might
    not be sympathetic to U.S. capital, trade, and influence. The foreign assistance policy known as the
    Marshall Plan was instituted to provide $22 billion
    in aid over a four-year period and to bring together
    European nations into a global economic system
    dominated by the United States.9
    This system was the basis for U.S. growth and
    prosperity during the 1950s, the 1960s, and the
    early 1970s. By the mid-1970s, steady improvements in the war-torn economies of Western Europe
    and Asia had produced important shifts in the balance of economic power among industrialized
    nations. The U.S. gross national product was now
    less than twice that of the Soviet Union (in 1950 it
    was more than three times), less than four times that
    of Germany (down from nine times in 1950), and
    less than three times that of Japan (twelve times in
    1950). With many nations joining the United States
    in the production of the world’s goods, the U.S. rate
    of growth slowed. As England, France, Germany,
    and Japan produced goods for domestic consumption, there was less need to import agricultural and
    industrial products from the United States.
    The profits of U.S. corporations from the
    domestic economy were in a steady decline through
    the late 1960s and into the 1970s. In the early 1960s
    the annual rate of return on investment was 15.5
    percent. In the late 1960s it was 12.7 percent. In the
    early 1970s it was 10 percent, and after 1975 it
    slipped below 10 percent, where it remained.
    The privileged classes in the United States
    were concerned about declining profits. This affect-
    ed their accumulation of wealth from stocks, bonds,
    dividends, and other investments. It affected corporate, managerial, and professional salaries indirectly, through the high rate of inflation that eroded the
    purchasing power of consumption capital (i.e.,
    salaries) and the real value of investment capital
    (i.e., value of stocks, bonds, etc.). To account for the
    U.S. decline, business leaders and the national
    media listed the usual suspects.
    The leading “explanation” was that U.S. products could not compete in the global economy
    because of the power of organized labor. This power
    was reflected in the high labor costs that made products less competitive and in cost-of-living adjustments that increased wages at the rate of inflation
    (which was sometimes at double digits). Union control of work rules also made it difficult for management to adopt new innovations to increase productivity and reduce dependence on labor.
    Next on the list was the American worker, who
    was claimed to have embraced a declining work
    ethic, resulting in products of lower quality and
    higher cost. U.S. workers were portrayed as too
    content and secure and thus unwilling to compete
    with the ambitious workers of the rapidly developing economies.
    The third suspect was the wide array of new
    regulations on business that had been adopted by
    the federal government to protect workers and the
    environment. Corporate executives complained
    about the increased cost of doing business that came
    from meeting the workplace standards of the
    Occupational Safety and Health Administration
    (OSHA) or the air and water pollution standards of
    the Environmental Protection Agency (EPA).
    The explanations business leaders put forth for
    declining profits, selfish unions, lazy workers, and
    government regulations were said to make
    American products less competitive in the global
    economy. They provided the rationale for an attack
    on unions and on workers’ wages and helped to justify massive plant closings and capital flight to lowwage areas. They also served to put the government
    on the defensive for its failure to be sensitive to the
    “excessive” costs that federal regulations impose on
    business.
    What was rarely discussed in the business
    pages of the New York Times or the Wall Street
    Journal was the failure of corporate management in
    major U.S. firms to respond to the increasing com-
    6 The Global Economy and the Privileged Class
    petition to the once U.S.-dominated production of
    autos, steel, textiles, and electronics. In the early
    1960s, imports of foreign products played a small
    part in the American economy, but by 1980 things
    had changed. In the early 1960s, imports accounted
    for less than 10 percent of the U.S. market, but by
    1980 more than 70 percent of all the goods produced in the United States were actively competing
    with foreign-made goods.10
    American corporations failed to follow the
    well-established management approach to the loss
    of market share, competitive advantage, and profits.
    Instead of pursuing long-term solutions, like investing in more efficient technology, new plants,
    research and development, and new markets, corporate executives chose to follow short-term strategies
    that would make the bottom line of profits the primary goal. The way was open for increased foreign
    investment, mergers, and downsizing.
    WHEN YOUR DOG BITES YOU
    With industrial jobs shrinking in the
    United States, and so much of what we
    buy, from clothing to electronics to automobiles, now made abroad, a common
    perception is that “globalized” production
    is a primary cause of falling living standards for American workers.
    –Richard B. DuBoff, Dollars and Sense,
    September-October 1997
    While corporate profits from the domestic U.S.
    economy were declining steadily from the mid1970s, investment by U.S. corporations abroad
    showed continued growth. The share of corporate
    profits from direct foreign investment increased
    through the 1970s, as did the amount of U.S. direct
    investment abroad. In 1970, direct investment by
    U.S. firms abroad was $75 billion, and it rose to
    $167 billion in 1978. In the 1980–85 period it
    remained below $400 billion, but thereafter
    increased gradually each year, reaching $716 billion
    in 1994. The 100 largest U.S. multinational corporations reported foreign revenue in 1994 that ranged
    from 30 to 70 percent of their total revenue: IBM
    had 62 percent of total revenue from foreign
    sources; Eastman Kodak 52 percent; ColgatePalmolive 68 percent; and Johnson and Johnson,
    Coca Cola, Pepsi, and Procter and Gamble each 50
    percent.11
    American multinational corporations sought to
    maintain their profit margins by increasing investments in affiliates abroad. This strategy may have
    kept stockholders happy, and maintained the price
    of corporate stocks on Wall Street, but it would
    result in deindustrialization—the use of corporate
    capital for foreign investments, mergers, and acquisitions rather than for investment in domestic operations.12 Instead of investing in the U.S. auto, steel,
    and textile industries, companies were closing
    plants at an unprecedented rate and using the capital to open production facilities in other countries.
    By 1994, U.S. companies employed 5.4 million
    people abroad, more than 4 million of whom
    worked in manufacturing.13 Thus, millions of U.S.
    manufacturing workers who were displaced in the
    1980s by plant closings saw their jobs shifted to foreign production facilities. Although most criticism
    of U.S. investment abroad is reserved for low-wage
    countries like Mexico and Thailand, the biggest
    share of manufacturing investment abroad is in
    Germany and Japan—hardly low-wage countries.
    The United States has large trade deficits with Japan
    and Western Europe, where the hourly wages in
    manufacturing are 15–25 percent higher than in the
    United States.14 This fact challenges the argument
    made by multinational corporations that if they did
    not shift production abroad, they would probably
    lose the sale of that product.
    The movement of U.S. production facilities to
    foreign countries in the 1980s and 1990s was not
    simply the result of a search for another home
    where they could once again be productive and
    competitive. It appeared as if RCA closed its plant
    in Monticello, Indiana, because its high-wage workers made it impossible to compete with televisions
    being produced in Southeast Asia. Saddened by
    having to leave its home in Indiana of thirty-five
    years, RCA would have to search for another home
    where, it was hoped, the company could stay at least
    another thirty-five years, if not longer. Not likely:
    Plants did not close in the 1980s to find other
    homes; the closures were the first step in the creation of the homeless and stateless multinational
    corporation—an entity without ties to place, or allegiances to people, communities, or nations.
    Thus, the rash of plant closings in the 1970s
    and 1980s began as apparent responses to economic crises of declining profits and increased global
    competition. As such, they appeared to be rational
    management decisions to protect stockholder
    investments and the future of individual firms.
    Although things may have started in this way, it
    The Global Economy and the Privileged Class 7
    soon became apparent that what was being created
    was the spatially decentered firm: a company that
    could produce a product with components manufactured in a half-dozen different plants around the
    globe and then assembled at a single location for
    distribution and sale. Although spatially decentered,
    the new transnational firm was also centralized in
    its decision making, allowing it to coordinate decisions about international investment. The new firm
    and its global production system were made possible by significant advances in computer-assisted
    design and manufacturing that made it unnecessary
    to produce a product at a single location. They were
    also made possible by advances in telecommunications that enabled management at corporate headquarters to coordinate research, development,
    design, manufacturing, and sales decisions at various sites scattered around the world.
    The homeless and stateless multinational firm
    is able to move its product as quickly as it can spot
    a competitive advantage associated with low wages,
    cheaper raw materials, advantageous monetary
    exchange rates, more sympathetic governments, or
    proximity to markets. This encourages foreign
    investment because it expands the options of corporations in their choice of where to locate, and it
    makes them less vulnerable to pressure from workers regarding wages and benefits.
    The advantages of the multinational firm and
    foreign investments are also a product of the U.S.
    tax code. In addition to providing the largest firms
    with numerous ways to delay, defer, and avoid
    taxes, corporate profits made on overseas investments are taxed at a much lower rate than profits
    from domestic operations. Thus, as foreign investments by U.S. firms increased over the last two
    decades, the share of total taxes paid by corporations declined. In the 1960s, corporations in the
    United States paid about 25 percent of all federal
    income taxes, and in 1991 it was down to 9.2 percent. A 1993 study by the General Accounting
    Office reported that more than 40 percent of corporations with assets of more than $250 million either
    paid no income tax or paid less than $100,000.15
    Another study of 250 of the nation’s largest corporations reported that in 1998, twenty-four of the corporations received tax rebates totaling $1.3 billion,
    despite reporting U.S. profits before taxes of $12.0
    billion. A total of forty-one corporations paid less
    than zero federal income tax in at least one year
    from 1996 to 1998, despite reporting a total of $25.8
    billion in pretax profits.16 In testimony before the
    Committee on the Budget of the U.S. House of
    Representatives, Ralph Nader reported that in fiscal
    year 1999 corporations received $76 billion in tax
    exclusions, exemptions, deductions, credits, and so
    forth, and that the estimates for the years
    2000–2004 will reach $394 billion in corporate tax
    subsidies.17
    CREATING THE NEW
    WORKING CLASS
    They call this “global competitiveness,”
    but that’s globaloney. Call it by its real
    name: Class War.
    –Jim Hightower, Dollars and Sense,
    November-December 1997
    When the large multinational firm closes its
    U.S. facilities and invests in other firms abroad or
    opens new facilities abroad, the major losers are the
    production workers who have been displaced and
    the communities with lower tax revenues and
    increased costs stemming from expanded efforts to
    attract new businesses. But this does not mean that
    the firms are losers, for they are growing and
    expanding operations elsewhere. This growth creates the need for new employees in finance, management, computer operations, information systems, and clerical work. The total picture is one of
    shrinking production plants and expanding corporate headquarters; shrinking blue-collar employee
    rolls and two-tiered expansion of high-wage professional-managerial and low-wage clerical positions.
    Having been extraordinarily successful in closing U.S. plants, shifting investment and production
    abroad, and cutting both labor and labor costs (both
    the number of production workers and their wagebenefit packages), major corporations now turned
    their attention to saving money by cutting whitecollar employees. In the 1990s, there were no longer
    headlines about “plant closings,” “capital flight,” or
    “deindustrialization.” The new strategy was “downsizing,” “rightsizing,” “reengineering,” or how to
    get the same amount of work done with fewer middle managers and clerical workers.
    When Sears, Roebuck and Company
    announced that it could cut 50,000 jobs in the 1990s
    (while still employing 300,000 people) its stock
    climbed 4 percent on the New York Stock
    Exchange. The day Xerox announced a planned cut
    of 10,000 employees, its stock climbed 7 percent.
    8 The Global Economy and the Privileged Class
    Eliminating jobs was suddenly linked with cutting
    corporate waste and increasing profits. Hardly a
    month could pass without an announcement by a
    major corporation of its downsizing plan. Tenneco
    Incorporated would cut 11,000 of its 29,000
    employees. Delta Airlines would eliminate 18,800
    jobs, Eastman Kodak would keep pace by eliminating 16,800 employees, and AT&T announced
    40,000 downsized jobs, bringing its total of job cuts
    since 1986 to 125,000. Not to be outdone, IBM cut
    180,000 jobs between 1987 and 1994. The practice
    continues into the new century; as reported in the
    New York Times (July 13, 2001), Motorola, Inc.,
    announced on July 12, 2001, that it would cut
    30,000 jobs in 2001. On that same day, although it
    reported an operating loss in the second quarter of
    eleven cents per share, Motorola stock rose by 16
    percent.
    Even the upscale, more prestigious banking
    industry joined in the rush to become “lean and
    mean.” A total of ten bank mergers announced in
    1995 would result in 32,400 jobs lost because of the
    new “efficiencies” that come with mergers. Even
    banks that were already successful in introducing
    “efficiencies” were not immune to continued pressure for more. Between 1985 and 1995, Chase
    Manhattan’s assets grew by 38 percent (from $87.7
    billion to $121.2 billion), and its workforce was
    reduced 28 percent, from 44,450 to 33,500 employees. Yet when Chase was “swallowed” by Chemical
    Banking Corporation in a merger, both banks
    announced further reductions totaling 12,000 people.
    Job loss in the 1990s appeared to hit hardest at
    those who were better educated (some college or
    more) and better paid ($40,000 or more). Job loss
    aimed at production workers in the 1980s was
    “explained” by the pressures of global competition
    and the opportunities to produce in areas with
    lower-wage workers. The “explanation” for the
    1990s downsizing was either new technology or
    redesign of the organization. Some middle managers and supervisors were replaced by new computer systems that provide surveillance of clerical
    workers and data entry jobs. These same computer
    systems also eliminate the need for many middle
    managers responsible for collecting, processing,
    and analyzing data used by upper-level decision
    makers.
    Redesign of organizations was achieved by
    eliminating middle levels within an organization
    and shifting work both upward and downward, The
    downward shift of work is often accompanied by
    new corporate plans to “empower” lower-level
    workers with new forms of participation and opportunities for career development. All of this redesign
    reduced administrative costs and increased the
    workload for continuing employees.
    Investors, who may have been tentative about
    the potential of profiting from the deindustrialization of the 1980s because it eroded the country’s
    role as a manufacturing power, were apparently
    delighted by downsizing. During the 1990s and
    continuing beyond 2000, the stock market skyrocketed from below 3,000 points on the Dow Jones
    Industrial Average to 10,478 in mid-July 2001—an
    increase of almost 250 percent. The big institutional investors apparently anticipate that increasing
    profits would follow the broadly based actions of
    cutting the workforce.
    Downsizing is often viewed by corporations as
    a rational response to the demands of competition
    and thereby a way to better serve their investors and
    ultimately their own employees. Alan Downs, in his
    book Corporate Executions, challenges four prevailing myths that justify the publicly announced
    layoffs of millions of workers.18 First, downsizing
    firms do not necessarily wind up with a smaller
    workforce. Often, downsizing is followed by the
    hiring of new workers. Second, Downs questions
    the belief that downsized workers are often the least
    productive because their expertise is obsolete:
    According to his findings, increased productivity
    does not necessarily follow downsizing. Third, jobs
    lost to downsizing are not replaced with higherskill, better-paying jobs. Fourth, the claim that companies become more profitable after downsizing,
    and that workers thereby benefit, is only half true—
    many companies that downsize do report higher
    corporate profits and, as discussed earlier, often
    achieve higher valuations of their corporate stock.
    But there is no evidence that these profits are being
    passed along to employees in the form of higher
    wages and benefits.
    After challenging these four myths, Downs
    concludes that the “ugly truth” of downsizing is that
    it is an expression of corporate self-interest to lower
    wages and increase profits. This view is shared by
    David Gordon, who documents the growth of executive, administrative, and managerial positions and
    compensation during the period when “downsizing”
    was at its highest.19 Gordon describes bureaucratic
    “bloat” as part of a corporate strategy to reduce the
    wages of production workers and increase and
    The Global Economy and the Privileged Class 9
    intensify the level of managerial supervision. Slow
    wage growth production workers and top-heavy
    corporate bureaucracies reinforce each other, and
    the combination produces a massive shift of money
    out of wages and into executive compensation and
    profits. This “wage squeeze” occurred not only in
    manufacturing (because of global competition) but
    also in mining, construction, transportation, and
    retail trade.20 Although it is to be expected that foreign competition will have an impact on wages in
    manufacturing, it should not affect the nontrade sector to the same extent. Thus, the “wage squeeze”
    since the mid-1970s that increased income and
    wealth inequality in the United States is probably
    the result of a general assault on workers’ wages and
    benefits rather than a response to global competition.
    them in the “comfort class.” They are essential for
    the firm, regardless of how well it might be doing
    from the standpoint of profits and growth; they are
    simply needed for the firm’s continuity. Being in the
    core is not the same as being in a particular occupational group. A firm may employ many engineers
    and scientists, only some of whom might be considered to be in the core. Skilled blue-collar workers
    may also be in the core. Core employees have the
    greatest job security with their employing organizations; they also have skills and experiences that can
    be “traded” in the external labor market if their firm
    should experience an unforeseen financial crisis.
    Finally, core employees enjoy their protected positions precisely because there are other employees
    just like them who are considered temporary.
    The impact of these corporate decisions on the
    working class was hidden from public view by the
    steady growth of new jobs in the latter part of the
    1990s, and by the relatively low rate of unemployment. In his second term in office, President Clinton
    made frequent mention of the high rate of job creation (without mentioning that they were primarily
    low-wage service jobs) and the historically low
    unemployment rate. Unfortunately, the official rate
    of unemployment can hide the real facts about the
    nation’s economic health. For example, an unemployment rate of 4.2 percent in 1999 excludes parttime workers who want full-time work, and discouraged workers who have given up looking. If these
    workers are added to the unemployed we have an
    “underemployment rate” of 7.5 percent, or about
    10.5 million workers. The official unemployment
    rate also hides the fact that unemployment for Black
    Americans was 8.0 percent in 1999, or that in urban
    areas there were pockets of unemployment that
    approached 25 percent.21
    Temporary Workers
    Thus, the result of more than a decade of plant
    closings and shifting investment abroad, and less
    than a decade of downsizing America’s largest corporations, has been the creation of a protected privileged class and a working class with very different
    conditions of employment and job security. The
    three major segments of the working class are
    core workers, temporary workers, and contingent
    workers.
    Core Workers
    Core workers are employees possessing the
    skills, knowledge, or experience that are essential to
    the operation of the firm. Their income levels place
    The employment of temporary workers is
    linked to the economic ups and downs that a firm
    faces. When sales are increasing, product demand is
    high, and profits match those of comparable firms,
    the employment of temporary workers is secure.
    When inventories increase, or sales decline sharply,
    production is cut back, and temporary employees
    are laid off or fired. The temporary workers’ relationship to the firm is a day-to-day matter. There is
    no tacit commitment to these employees about
    job security and no sense that they “belong to the
    family.”
    A good example of the role of temporary workers is revealed in the so-called transplants—the
    Japanese auto firms like Toyota, Nissan, and Honda
    that have located assembly plants in Kentucky,
    Ohio, Michigan, Illinois, Indiana, and Tennessee.
    Each of these firms employs between two thousand
    and three thousand American workers in their
    plants, and they have made explicit no-layoff commitments to workers in return for high work expectations (also as a way to discourage unionization).
    However, in a typical plant employing 2,000 production workers, the no-layoff commitment was
    made to 1,200 hires at start-up time; the other 800
    hires were classified as temporary. Thus, when there
    is a need to cut production because of weak sales or
    excessive inventory, the layoffs come from the pool
    of temporary workers rather than from the core
    workers. Sometimes these temporary workers are
    not even directly employed by the firm but are hired
    through temporary help agencies like Manpower.
    Employment through temporary help agencies doubled between 1982 and 1989, and doubled again
    10 The Global Economy and the Privileged Class
    between 1989 and 1999.22 These temporary workers are actually contingent workers.
    Contingent Workers
    Workers in nonstandard employment arrangements (part time, temporary, independent contractors) are often described as contingent workers.
    Some of these workers, as noted earlier, are employees of an agency that contract with a firm for their
    services. About one in four persons in the labor
    force is a contingent worker, that is, a temporary or
    part-time worker.23 These workers can be clerktypists, secretaries, engineers, computer specialists,
    lawyers, or managers. They are paid by the temp
    agency and do not have access to a company’s benefit package of retirement or insurance programs.
    Many of the professionals and specialists who work
    for large firms via temp firms are often the same
    persons who were downsized by those same companies. The following experience of a downsized
    worker is an ironic example of how the contingent
    workforce is created.
    John Kelley, 48, had worked for Pacific
    Telesis for 23 years when the company
    fired him in a downsizing last December.
    Two weeks later, a company that contracts
    out engineers to PacTel offered him a
    freelance job.
    “Who would I work for?” Kelley asked.
    “Edna Rogers,” answered the caller.
    Kelley burst out laughing. Rogers was the
    supervisor who had just fired him, “That
    was my job,” he explained. “You’re trying
    to replace me with myself.”24
    These three groups of workers fit into the bottom part of the double-diamond class structure
    described and it is only the core workers who have
    even the slightest chance to make it into the privileged class. Core workers with potential to move up
    generally have the credentials, skills, or social capital to have long-term job security, or to start their
    own business, and therefore the possibility of having substantial consumption capital (a good salary)
    and capital for investment purposes. Let us now
    consider how the privileged class holds on to its
    advantaged position in the double-diamond class
    structure.
    CARE AND FEEDING OF THE
    PRIVILEGED CLASS
    The federal government of 1997 is a very
    different creature from that of, say, 1977
    —more egregiously corrupt and sycophantic toward wealth, more glaringly
    repressive, and even less responsive to the
    needs of low- and middle-income people.
    –Barbara Ehrenreich, Nation,
    November 17, 1997
    Most people who are in the privileged class are
    born there, as the sons, daughters, and relatives of
    highly paid executives, professionals, and business
    owners. Of course, they do not view their “achievements” that way. As one wag once said of former
    President George Bush, “He woke up on second
    base and thought he’d hit a double.” But some
    members of the privileged class have earned their
    places, whether by means of exceptional talent, academic distinctions, or years of hard work in transforming a small business into a major corporation.
    Regardless of how much effort was needed to get
    where they are, however, members of the privileged
    class work very hard to stay where they are.
    Holding on to their wealth, power, and privilege
    requires an organized effort by businessmen, doctors, lawyers, engineers, scientists, and assorted
    political officials. This effort is often cited to convince the nonprivileged 80 percent of Americans
    that the privileged are deserving of their “rewards”
    and that, in general, what people get out of life is in
    direct proportion to what they put in. This effort is
    also used to dominate the political process so that
    governmental policies, and the rules for making
    policy, will protect and advance the interests of the
    privileged class.
    However, before examining the organized
    effort of the privileged class to protect its privilege,
    it is first necessary to examine how members of the
    privileged class convince one another that they are
    deserving. Even sons and daughters from the
    wealthiest families need to develop biographical
    “accounts” or “stories” indicating they are deserving. This may involve accounts of how they worked
    their way up the ladder in the family business, starting as a clerk but quickly revealing a grasp of the
    complexities of the business and obtaining recognition from others of their exceptional talent.
    Even without the biographical accounts used
    by the privileged class to justify exceptional
    The Global Economy and the Privileged Class 11
    rewards, justification for high income is built into
    the structure of the organizations they join. In every
    organization—whether an industrial firm, bank,
    university, movie studio, law firm, or hospital—
    there are multiple and distinct “ladders” that locate
    one’s position in the organization. New employees
    get on one of these ladders based on their educational credentials and work experience. There are ladders for unskilled employees, for skilled workers,
    and for professional and technical people with specialized knowledge. Each ladder has its own distinct
    “floor” and “ceiling” in terms of what can be
    expected regarding salary, benefits, and associated
    perks. In every organization, there is typically only
    one ladder that can put you in the privileged class,
    and this usually involves an advanced technical or
    administrative career line. This career line can start
    at entry levels of $70,000–80,000 annual compensation, with no upper limit beyond what the traffic
    will bear. These are the career ladders leading to
    upper executive positions providing high levels of
    consumption capital and opportunities for investment capital.
    Claiming Turf
    Many young attorneys, business school graduates, scientists, engineers, doctors, economists, and
    other professionals would like to get entry-level
    positions on these upper-level career ladders. In
    fact, there are probably many people who are qualified for entry positions in terms of their educational credentials and work experiences. So how are
    people selected from among the large number of
    qualified applicants for such desirable career opportunities? The answer is simple: Once credential
    qualifications and experience are used to define the
    pool of eligible applicants, the choice of who gets
    the job depends on the applicants’ social capital. We
    defined social capital as the social ties that people
    have with members of their college, fraternity or
    sorority, ethnic group, or religious group. People get
    jobs through their social networks, which provide
    them with information about job openings and with
    references valuable to those doing the hiring.25
    These social networks are usually composed of persons with similar social backgrounds. A recent
    study examined the social backgrounds of persons
    in the highest positions in corporations, the executive branch of the federal government, and the military. Although there is increased diversity among
    leaders today compared with 1950 with respect to
    gender, ethnicity, and race, the “core group continues to be wealthy white Christian males, most of
    whom are still from the upper third of the social ladder. They have been filtered through a handful of
    elite schools of law, business, public policy, and
    international relations.”26
    A good illustration of how social capital works
    is found in a study of 545 top position holders in
    powerful organizations in the United States.27 Ten
    institutional sectors were studied, including Fortune
    500 industrial corporations, Fortune 300 nonindustrial corporations, labor unions, political parties,
    voluntary organizations, mass media, Congress,
    political appointees in the federal government, and
    federal civil servants. Within each sector, fifty top
    position holders were interviewed—persons who
    may be considered “elites in the institutional sectors
    that have broad impact on policy making and political processes in the U.S.”28 Although we have no
    information on the incomes and wealth of the 545
    elites, it is very likely they would fit our definition
    as members of the privileged class.
    Table 3.1 provides some of the findings from
    this study, which identify the ethnic-religious composition of elites and their distribution across different institutional sectors. As can be seen from the
    first line of the table, 43 percent of all the elites in
    the study were WASPs (Protestants with ancestry
    from the British Isles), 19.5 percent were
    Protestants from elsewhere in Europe, 8.5 percent
    were Irish Catholics, 8.7 percent were Catholics
    from elsewhere in Europe, 11.3 percent were Jews,
    and 3.9 percent were minorities (non-Whites and
    Hispanics). The second line indicates the percentage
    of the national population of men born before 1932
    from different ethnic-religious backgrounds. The
    third line indicates the percent of the national population of college-educated men born before 1932 of
    each ethnic background. A comparison of line (1)
    with lines (2) and (3) shows the extent to which
    each ethnic-religious group may be overrepresented
    or underrepresented among the elites. Thus, WASPs
    and Jews are overrepresented among elites relative
    to their composition in the general population. The
    elite representation of other Protestants and Irish
    Catholics is comparable to their representation in
    the national population; and other Catholics and
    minorities are underrepresented among elites.
    More interesting for our purposes are the
    overrepresentation and under-representation of
    elites in different institutional sectors. Overrepresentation would suggest the operation of social ties
    operating to get positions for persons with the same
    ethnic-religious background. White Anglo-Saxon
    12 The Global Economy and the Privileged Class
    TABLE 3.1 Ethnic Representation among Elites
    WASPs
    Other
    Irish
    Protestants Catholics
    Other
    Catholics
    Jews Minorities
    Probably
    WASPs
    1. Overall elite
    2. Men born before 1932
    3. College-educated men
    born before 1932
    4. Institutional sectors
    Business
    43.0
    22.9
    31.0
    19.5
    22.5
    19.8
    8.5
    4.2
    6.0
    8.7
    17.2
    15.5
    11.3
    2.9
    8.9
    3.9
    14.4
    5.2
    5.0
    13.4
    10.3
    57.3
    22.1
    5.3
    6.1
    6.9
    0.0
    2.3
    Labor
    Political parties
    Voluntary organizations
    Mass media
    Congress
    Political appointments
    Civil service
    23.9
    44.0
    32.7
    37.1
    53.4
    39.4
    35.8
    15.2
    18.0
    13.5
    11.3
    19.0
    28.8
    22.6
    37.0
    14.0
    1.9
    4.8
    6.9
    1.5
    9.4
    13.0
    4.0
    7.7
    9.7
    8.6
    13.6
    9.4
    4.3
    8.0
    17.3
    25.8
    3.4
    10.6
    15.1
    2.2
    4.0
    19.2
    0.0
    3.4
    3.0
    3.8
    4.3
    8.0
    7.7
    11.3
    5.2
    3.0
    3.8
    SOURCE: Alba and Moore (1982), table 1.
    Protestants are greatly overrepresented in business
    and in Congress. Irish Catholics are very overrepresented in labor and politics. Jews are sharply overrepresented in mass media, voluntary organizations,
    and federal civil service. This ethnic-religious overrepresentation indicates that social capital may be
    used to get access to career ladders leading to the
    privileged class. Moreover, there appears to be ethnic-religious specialization in the institutional sectors that they “colonize.” People help to get jobs for
    relatives and friends, whether the job is for a
    Mexican immigrant in a Los Angeles sweat shop or
    a young Ivy League graduate in a Wall Street law
    firm. Parents invest their capital in an Ivy League
    education for a son or daughter, who then uses the
    social capital of family or school ties to enter a
    career path into the privileged class.
    Securing Turf
    After obtaining positions on career ladders that
    will make them members of the privileged class, our
    entry-level managers, attorneys, and faculty become
    aware of the very high incomes enjoyed by their
    senior colleagues. One response to these high
    salaries is to feel that they are unjustified and to
    exclaim, “Why should the President of the university make $300,000 a year when some of our professors with twenty years experience are making
    $60,000?” A second response is to recognize that
    the president’s salary is used to justify the $230,000
    salaries of the executive vice presidents, which in
    turn justify the $150,000 salaries of the deans,
    which in turn justify the $120,000 salaries of senior
    professors in selected fields. People in positions of
    power in organizations work together to justify their
    high salaries by creating beliefs about the need to be
    competitive in the market or to risk losing valuable
    people.
    The second response is the typical one for people involved in career ladders that promise access to
    the privileged class. This response might be called
    symbiotic greed, where the parties are locked
    together in a mutually beneficial relationship. As
    the salary of the president rises, so do the salaries of
    all the others who are on the privileged-class career
    ladder. The rub is that only a small proportion of all
    the managers, attorneys, or faculty are on that career
    ladder, even though they may share the same educational credentials and work experience. This is a
    form of misguided self-interest, wherein low-level
    employees support the high salary of their superiors
    because of the belief that they may one day also
    have such a high salary.
    Although it may seem surprising, members of
    the privileged class often feel that their incomes are
    far below what they deserve, or they feel relatively
    deprived in comparison to those above them in the
    income hierarchy. A recent story in the New York
    Times (“Well-Off but Still Pressed, Doctor Could
    Use Tax Cut”)29 provided thinly veiled support for
    President Bush’s tax cut along with a sympathetic
    story of a surgeon earning $300,000 a year who says
    The Global Economy and the Privileged Class 13
    he does not feel rich. The good doctor, who lives in
    a $667,000 four-bedroom house with a pool, frets
    about his retirement, college tuition, and the anticipated cost of future weddings for his five daughters.
    Moreover, he is pained by the appearance of the
    new high-tech millionaires driving around in
    Porsches. The good doctor’s wife exclaims, “We
    don’t have the luxuries that you would think in this
    bracket,” as she describes shopping at cheaper grocery stores and clipping coupons. The message of
    the article is that there are rich people and super rich
    people, and both would benefit from a tax cut. In
    short, you can never have too much money!
    Now to the organized effort by businessmen,
    doctors, lawyers, and the like to protect the interests
    of the privileged class. This effort is revealed in
    three ways: (1) Members of the privileged class
    hold upper-level positions in all the major institutions of American society. These institutions control
    enormous resources that can be used to shape public awareness, the political process, and the nation’s
    policy agenda. (2) The organizations to which the
    privileged class belong form associations in order to
    hire lobbyists, contribute to political campaigns,
    and shape legislation in their interests. (3) The
    members of the privileged class who are in professional occupations, like medicine and law, are represented by powerful professional associations that
    protect their members against any efforts by other
    groups to encroach on their “turf.” Thus, the
    American Medical Association (AMA) makes sure
    that state legislatures continue to give doctors a
    monopoly over what they do by preventing nurses,
    or pharmacists, or chiropractors, or holistic practitioners from providing certain types of care to
    clients. Similarly, the American Bar Association
    acts to prevent paralegals from competing with
    lawyers in handling wills, estates, or certain types of
    litigation.
    Not every segment of the privileged class is
    unified on all issues. Doctors are not pleased with
    the actions of attorneys when they vigorously pursue malpractice suits against doctors and hospitals.
    The AMA has urged Congress to pass legislation
    limiting the dollar amount of damages that might be
    awarded in malpractice claims. Lawyers resist such
    efforts because they make their living from obtaining 30 percent of the damage awards made to persons suing doctors or hospitals. Similarly, the banking industry and the large industrial corporations
    may differ on whether they would like to see the
    Federal Reserve Board raise or lower interest rates.
    Some sectors of the business community may sup-
    port giving China special trade concessions, while
    others may be opposed.
    Despite the differences and disagreements over
    specific policies by members of the privileged class,
    they are unified in their support for the rules of the
    game as they are currently played: The privileged
    class is unified in its view of how the political
    process should operate. Individuals and organizations should be free to lobby members of Congress
    on matters of interest to them. Individuals and
    organizations should be free to contribute money to
    political action committees and to political parties.
    And above all else, privileged-class members agree
    that business should be able to operate in a free and
    unregulated environment and that the country runs
    just fine with a two-party system.
    Then there are the really big policy issues,
    where the “payoffs” are substantial to almost all
    segments of the privileged class. The North
    American Free Trade Agreement (NAFTA) and the
    General Agreement on Tariffs and Trade (GATT)
    were supported by Presidents Reagan, Bush, and
    Clinton and by a bipartisan majority of both houses
    of Congress. The new President George W. Bush
    took office in 2001 and proceeded to promote the
    so-called Free Trade Area for the Americas (FTAA),
    which would extend NAFTA throughout the
    Western Hemisphere. Taken together, NAFTA and
    FTAA represent the effort of the international privileged class to have countries in the Americas adopt
    economic policies to attract foreign investment,
    encourage “free trade,” and restrict government
    efforts to protect the rights of workers. These agreements promise to advance the global economy and
    the continued pursuit of profits across the globe by
    multinational corporations.
    The privileged class in the United States
    achieved major victories in the 1980s through their
    efforts to reduce government spending on a variety
    of social programs that benefit the working class.
    Using the scare tactics of budget deficits and the
    national debt, the privileged class supported a balanced budget agreement that required the president
    and Congress to reduce spending on welfare, education, Medicare, and Medicaid. In the 1990s, the
    privileged class turned its attention to the global
    economy by devising ways to protect opportunities
    for investment and profit around the globe. The
    main way to achieve this was to make it easy for
    large corporations to circle the globe in search of the
    best opportunities and thereby threaten workers
    everywhere so as to keep their wages and benefit
    14 The Global Economy and the Privileged Class
    demands at low levels. Facing the oft-repeated
    threat that there are “other” workers willing to do
    the same work for less money, the American working class has lived with declining earnings and disappearing health benefits and employer-provided
    pensions. And all this occurred during an eight-year
    economic recovery and a booming stock market!
    During the 1990s, major U.S. and foreign corporations joined forces to lobby Washington policy
    makers to relax federal policies on international
    trade. This included granting most-favored nation
    trading status to China (with whom we have a high
    trade deficit) and passing the North American Free
    Trade Agreement, which eliminated trade barriers
    between the United States, Canada, and Mexico.
    Before the passage of NAFTA, the United States
    had a $1 billion trade surplus with Mexico, but the
    year following NAFTA that surplus had become a
    $16.2 billion deficit.30
    To garner public support for free trade,
    President Clinton frequently pointed out that for
    every $1 billion in goods and services we export to
    other countries, we create 20,000 jobs at home. This
    may be true, but the problem is that it also works in
    reverse: for every $1 billion of goods that we
    import, we lose 20,000 jobs. And, as indicated earlier in this chapter, in 2000 the United States had a
    trade deficit of $370 billion with other countries.
    Despite claims by officials in Canada, Mexico,
    and the United States that NAFTA has been a success, an analysis of the impact of NAFTA seven
    years after its adoption indicates that 766,000 actual and potential jobs have been eliminated in the
    United States “between 1994 and 2000 because of
    the rapid growth in the U.S. export deficit with
    Mexico and Canada.”31 Thus, we lose many more
    jobs than we create with our free-trade policies. But
    free trade is not about jobs; it is about profits for
    corporations and the privileged class.
    Defending Turf
    In February 1998 the New York Times published a two-page open letter to the Congress of the
    United States, entitled “A Time for American
    Leadership on Key Global Issues.”32 The letter
    expresses concern about “a dangerous drift toward
    disengagement from the responsibilities of global
    leadership.” Congress is asked to approve new fasttrack negotiating authority, which would extend
    NAFTA-like agreements to other countries in Latin
    America and around the globe, and to support the
    International Monetary Fund bailout of failed banks
    in Southeast Asia (although it failed to mention the
    benefit to U.S. banks and financial institutions that
    are heavily invested in those economies).
    Signatories to this letter include two former
    presidents (Jimmy Carter and Gerald Ford), 42 former public officials (secretaries of defense, treasury,
    commerce, and state; CIA directors, national security advisers; U.S. senators), and eighty-eight corporate presidents and CEOs (of AT&T, Boeing,
    Amoco, Chase Manhattan Bank, IBM, Time
    Warner, Bank America, etc.). Many of the former
    public officials now work as lobbyists for the U.S.
    and foreign multinationals that “feed at the public
    trough” via tax loopholes and federal subsidies.
    Why would these 132 members of the privileged Class spend $100,000 for this two-page ad in
    the Times? Surely not to influence members of
    Congress. Corporations and the privileged class
    have more effective ways of doing that, such as the
    $3 million in campaign contributions by Philip
    Morris or the $2.5 million that Chiquita Brands
    CEO Carl Linder gave to both political parties from
    1993 to 1996. Perhaps the ad was designed to convince the working class to support fast-track legislation. Probably not. The circulation of the New York
    Times is about 1.6 million, and very few of those
    readers are from the working class. The most likely
    targets of the ad were the nationally scattered members of the privileged class that the elite leaders
    wanted to mobilize at the grass roots. The ad was
    designed to get the millions of privileged doctors,
    lawyers, journalists, managers, scientists, stock brokers, and media executives to mobilize public opinion through the hundreds of professional and business associations that represent their interests. The
    privileged class constitutes 20 percent of the population (about 14 million families), and when mobilized, it can represent a potent political force.
    Opposition to the privileged-class agenda on
    the global economy is fragmented, and operates
    with limited resources. Critics of NAFTA and the
    GATT, like Ralph Nader and Jesse Jackson, can
    hardly stand up to the National Association of
    Manufacturers or the U.S. Chambers of Commerce.
    The opposition to NAFTA and the GATT voiced by
    reactionary populists Ross Perot and Pat Buchanan,
    who appeared to be “traitors” to the interests of the
    privileged class, was dealt with swiftly and sharply
    by the major media. Perot was given the persona of
    a quirky, eccentric millionaire who was trying to
    buy the presidency because he had nothing better to
    The Global Economy and the Privileged Class 15
    do with his time and money. Buchanan was vilified
    as a crypto-racist, anti-Semite, and general allaround loose cannon.
    The attacks on Perot and Buchanan by academics and political commentators on media talk shows
    should not be surprising. Elite universities and the
    major media are controlled by the wealthy and corporate elite who are at the top of the privileged
    class. The major networks of ABC, CBS, NBC,
    Fox, and Turner Broadcasting determine what the
    overwhelming majority of Americans will receive
    as news and entertainment. Two of the major networks are owned by major multinational firms, and
    institutional investors control substantial percentages of stock in the networks.
    Is it any wonder, therefore, that efforts to attack
    the status quo are immediately marginalized or coopted? An example of this process was revealed
    during the Republican presidential primary in early
    1996. Pat Buchanan was making his usual bombastic attacks on immigration, NAFTA, and the GATT
    when he suddenly started lobbing some grenades at
    the corporate elite while yelling about “corporate
    greed.” Here are a few samples, from speeches
    made in February of 1996: “When AT&T lops off
    40,000 jobs, the executioner that does it, he’s a big
    hero on the cover of one of these magazines, and
    AT&T stock soars”; “Mr. Dole put the interest of the
    big banks—Citibank, Chase Manhattan, Goldman
    Sachs—ahead of the American People.”33
    When it appeared that Buchanan’s reactionary
    populist attack on the corporate elite was striking a
    responsive chord among people on the campaign
    trail, the New York Times decided to take the
    extraordinary step of publishing a seven-part series,
    called “The Downsizing of America,” which ran
    from March 3 through March 9, 1996. Some might
    call this a major public service by the Times,
    designed to inform Americans about an important
    issue. Others might say it was a clever effort to take
    the issue out of Buchanan’s hands and to shape it
    and frame it in ways that would deflect the criticisms and attacks on the corporate elite. The Times
    series did not point an accusing finger at corporate
    America for the loss of millions of jobs. If anything,
    the series made the reader either feel sorry for
    everyone, including the “guilt-ridden” managers
    who had to fire workers (“Guilt of the Firing
    Squads”), or to blame everyone, including downsized workers. In an extraordinary example of
    blaming the victim, consider the following “explanation” for downsizing. “The conundrum is that
    what companies do to make themselves secure is
    precisely what makes their workers feel insecure.
    And because workers are heavily represented
    among the 38 million Americans who own mutual
    funds, they unwittingly contribute to the very pressure from Wall Street that could take away their
    salaries even as it improves their investment
    income.”34
    The New York Times series did not help its
    readers to understand who benefits from downsizing, but it did help to defuse the issue and to take it
    out of the hands of those who might be critical of
    corporate America. It is an example of the pacification of everyday life.
    Resistance to the Global Economy
    The rules created by NAFTA are imbalanced; they encourage capital mobility by
    extending trinational protection to
    investors while protections for workers
    and the environment are left to national
    governments … One result has been a rise
    in inequality and insecurity among working people.
    –Jeff Faux, Nation, May 28, 2001
    We have tried to provide a glimpse of the
    meaning of the bogeyman global economy. The
    term has been used to threaten workers and unions
    and to convince everyone that they must work harder if they want to keep their jobs. The global economy is presented as if it is out there and beyond the
    control of the corporations, which must continually
    change corporate strategies in order to survive in the
    fiercely competitive global economy. It is probably
    more accurate to view the current global economy
    as an accelerated version of what U.S. financial and
    industrial corporations have been doing since the
    end of World War II—roaming the globe in search
    of profits. The big change is that since the 1980s,
    U.S. firms have found it easier to invest overseas.
    They have used this new opportunity to create new
    international agreements like NAFTA and FTAA
    that attack organized labor and threaten workers to
    keep their wage demands to a minimum. In this
    view, the global economy is composed primarily of
    U.S. companies investing abroad and exporting
    their products to the United States (as the largest
    consumer market in the world) and other countries.
    These multinational corporations have an interest in
    16 The Global Economy and the Privileged Class
    creating the fiction that the global economy is some
    abstract social development driven by “natural laws” of
    economics, when it is actually the product of the
    deliberate actions of 100 or so major corporations.
    There has been growing popular opposition to
    the international accords that are creating the new
    global economy. In December of 1999 the so-called
    Battle in Seattle signaled the growing resistance to
    globalization. Tens of thousands protested against
    the World Trade Organization’s “free trade” agenda
    that would threaten U.S. workers’ jobs and wages,
    and provide little protection against environmental
    damage. Protesters were confronted by police using
    pepper spray and tear gas to prevent disruption of
    the WTO meeting.35 On April 20–22, 2001, the
    Third Summit Meeting of the Americas took place
    in Quebec City, Canada. Heads of state from thirtyfour countries in the Americas (Cuba was excluded)
    assembled for negotiations on the so-called Free
    Trade Agreement for the Americas. Once again, tens
    of thousands demonstrated against this new effort to
    make it easier for international finance capital and
    multinational corporations to control the global
    economy.36
    The resistance that took place in Seattle and
    Quebec City (as well as in Washington, D.C., and
    Davos, Switzerland) reveals the operation of the
    Alternative Power Network. Groups representing
    labor, environmentalists, anti-sweatshop campaigns, and human rights activists came together to
    challenge the international agreements that provide
    few protections for working people throughout the
    Americas. They are calling for trade agreements
    that protect the rights of workers to a living wage,
    regulations on the behavior of multinational corporations and international finance capital, and consideration of environmental protections consistent
    with economic and social development.
    The problem posed by the global economy is
    that it has increased the influence of large corporations over the daily lives of most Americans. This
    influence is revealed in corporate control over job
    growth and job loss, media control of information,
    and the role of big money in the world of national
    politics. At the same time that this growing influence is revealed on a daily basis, it has become
    increasingly clear that the major corporations have
    abandoned any sense of allegiance to, or special
    responsibilities toward, American workers and their
    communities.
    This volatile mix of increasing influence and
    decreasing responsibility has produced the double-
    diamond class structure, where one in five
    Americans is doing very well indeed, enjoying the
    protection that comes with high income, wealth, and
    social contacts. Meanwhile, the remaining four out
    of five Americans are exploited and excluded.
    Endnotes
    of Technology Assessment,
    1. Office
    Technology and Structural Unemployment
    (Washington, D.C.: Congress of the United
    States, 1986); Thomas S. Moore, The
    Disposable Work Force (New York: Aldine
    de Gruyter, 1996).
    2. Joel Bleifuss, “The Terminators,” In These
    Times, March 4, 1996, 12–13.
    3. Sheryl Wu Dunn, “When Lifetime Jobs Die
    Prematurely: Downsizing Comes to Japan,
    Fraying Old Workplace Ties,” New York
    Times, June 12, 1996.
    4. John Miller and Ramon Castellblanch, “Does
    Manufacturing Matter?” Dollars and Sense,
    October 1988.
    5. Noam Chomsky, The Common Good (Monroe,
    Me.: Common Courage Press, 2000).
    6. Robert B. Reich, The Next American
    Frontier (New York: Times Books, 1983).
    7. U.S. Bureau of the Census, Foreign Trade
    Division, Washington, D.C. 20233, 2000.
    8. John Pomery, “Running Deficits with the
    Rest of the World—Part 1,” Focus on
    Economic Issues, Purdue University (Fall
    1987). (Emphasis added.)
    9. For an extended discussion, see Michael
    Stohl and Harry R. Targ, Global Political
    Economy in the 1980s (Cambridge, Mass.:
    Schenkman, 1982).
    10. Reich, Next American Frontier.
    11. “The 100 Largest U.S. Multinationals,”
    Forbes, July 17, 1995, 274–76.
    12. Barry Bluestone and Bennett Harrison, The
    Deindustrialization of America (New York:
    Basic Books, 1982).
    13. Louis Uchitelle, “U.S. Corporations
    Expanding Abroad at a Quicker Pace.” New
    York Times, July 25, 1998.
    14. David M. Gordon, Fat and Mean: The
    Corporate Squeeze of Working Americans
    The Global Economy and the Privileged Class 17
    and the Myth of Managerial Downsizing
    (New York: Free Press, 1996),
    15. Richard J. Barnet and John Cavanagh,
    Global Dreams: Imperial Corporations and
    the New World Order (New York: Simon and
    Schuster, 1994).
    16. Robert S. McIntyre, “Testimony on
    Corporate Welfare,” U.S. House of
    Representatives Committee on the Budget,
    June 30, 1999. On the Internet at http://www.
    ctj.org/html/corpwelf.htm (visited June 25,
    2001).
    17. Ralph Nader, “Testimony on Corporate
    Welfare,” U.S. House of Representatives
    Committee on the Budget, June 30, 1999. On
    the internet at www.nader.org/releases/
    63099.html (visited June 25, 2001).
    18. Alan Downs, Corporate Executions (New
    York: AMACOM, 1995).
    19. See Gordon, Fat and Mean, chap. 2.
    20. Ibid., 191.
    21. Lawrence Mishel, Jared Bernstein, and John
    Schmitt, The State of Working America
    2000–2001 (Ithaca, N.Y.: Cornell University
    Press, 2001), 220; Marc Breslow, “Job Stats:
    Too Good to Be True,” Dollars and Sense,
    September-October 1996, 51.
    22. Mishei et al., op cit., 252.
    23. Chris Tilly, Half a Job: Bad and Good PartTime Jobs in a Changing Labor Market
    (Philadelphia: Temple University Press,
    1996); Kevin D. Henson, Just a Temp
    (Philadelphia: Temple University Press,
    1996).
    24. Ann Monroe, “Getting Rid of the Gray,”
    Mother Jones, July-August 1996, 29.
    25. Mark Granovetter, Getting a Job: A Study of
    Contacts and Careers (Cambridge: Harvard
    University Press, 1974).
    26. Richard L. Zweigenhaft and G. William
    Domhoff, Diversity in the Power Elite: Have
    Women and Minorities Reached the Top?
    (New Haven: Yale University Press, 1998),
    6.
    27. Richard D. Alba and Gwen Moore,
    “Ethnicity in the American Elite,” American
    Sociological Review 47 (June 1982): 373–83.
    28. Ibid., 374.
    29. Jim Yardley, “Well-Off but Still Pressed,
    Doctor Could Use Tax Cut,” New York
    Times, April 7, 2001: 1, A8.
    30. Richard W. Stevenson, “U.S. to Report to
    Congress NAFTA Benefits Are Modest,”
    New York Times, July 11, 1997.
    31. Robert E. Scott, “NAFTA’s Hidden Costs,”
    Economic Policy Institute, Washington,
    D.C., May 21, 2001.
    32. New York Times, February 11, 1998.
    33. Francis X. Clines, “Fueled by Success,
    Buchanan Revels in Rapid-Fire Oratory,”
    New York Times, February 15, 1996.
    34. Louis Uchitelle and N. R. Kleinfield, “On
    Battlefield of Business, Millions of
    Casualties,” New York Times, March 3, 1996.
    35. Jim Phillips, “What Happens After Seattle?”
    Dollars and Sense, January-February 2000,
    15–16, 31–32.
    36. David Moberg, “Tear Down the Walls: The
    Movement Is Becoming More Global,” In
    These Times, May 28, 2000, 11–14.

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