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Topic
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.
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?
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?
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 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.
