Reset this!

This was supposed to be the great reset. As the U.S. economy recovered from the Pandemic Depression, millions of jobs were being created, unemployment was falling, and the balance of power between workers and capitalists would shift toward wage-earners and against their employers.

That, at least, was the promise (or, for capitalists, the fear).

But greedflation has delivered exactly the opposite: workers’ real wages are barely rising while corporate profits are soaring. There’s been no reset at all. That’s exactly what was happening before the coronavirus pandemic hit, and that trend has only continued during the recovery. It should come as no surprise then that the already grotesque levels of inequality in the United States continue to worsen.

And who are the beneficiaries? According to a recent study by the Institute for Policy Studies, it’s the Chief Executive Officers of American corporations who have managed to capture a large share of the resulting surplus.

Especially the CEOs of the largest low-wage employers in the United States. While median worker pay increased by 17 percent last year, CEO compensation rose by 31 percent. The result was that the ratio of CEO to average worker pay rose by 11 percent, to 670 to 1!*

American workers are struggling with rising prices, having risked their lives and livelihoods throughout the pandemic. Now, they’re forced to watch as their corporate employers, who have benefited from federal contracts and used their profits to buyback stocks, reward their CEOs with lucrative contracts and massive bonuses—far exceeding the small amount some workers have been able to claw back.

Who’s at the top? Amazon leads the list. Its new CEO, Andy Jassy, raked in $212.7 million last year, which amounts to 6,474 times the pay of Amazon’s median 2021 worker. Then there’s Estee Lauder’s CEO, Fabrizio Fred, who managed to secure a 258-percent pay increase in 2021—leading to compensation that amounted to 1,965 times that of the average worker. Third on the list was the CEO of Penn National Gaming, Jay Snowden, whose $65.9 million payout was 1,942 times that of the gambler’s typical worker’s wage.

So, how did they manage to capture so much surplus and distribute it to their CEOs? Like the other firms in the study, they all took the low road, paying their employees a pittance (in the low $30,000s for the median worker). And they’ve mostly succeeded in opposing and undermining union-organizing efforts.** But Amazon is the only one of the three to secure large federal contracts (over $10 billion between 1 October 2019 and 1 May 2022), like other low-wage corporations (such as Maximus, at $12.3 billion and TE Connectivity, at $3.3 billion), which means the taxes paid by ordinary Americans and being used to support such an inequitable corporate order.***

The report also highlights the extent of stock buybacks—which serve to inflate the value of a company’s shares and thus the value of executives’ stock-based compensation—among firms where median worker pay did not keep pace with inflation in 2021. Thus, for example, Lowe’s, the home-improvement chain, spent more than $13 billion in purchasing its own stock while median worker compensation fell by 7.6 percent to $22,697. Similarly, both Target and Best Buy increased workers’ pay by less than the rate of inflation but still spent millions of dollars in stock buybacks ($7.2 billion and $3.5 billion, respectively). In each case, a windfall to stock owners—including the CEOs—came at the expense of raises for the employees. For example, if the funds Lowe’s used to buyback its own stock had been divided among the company’s 325,000 employees, each worker would have received a $40,000 bonus.

Clearly, this economic order needs a fundamental reset.

And most Americans agree. According to a recent survey by Just Capital (pdf), more than eight in 10 respondents (83%) agree that the growing gap between CEO compensation and worker pay is a problem in the United States today. Moreover, according to the authors,

The message from the public is clear: responsibility lies with corporate leaders – including chief executives – to address income inequality in America today. Closing the gap requires action at the highest and lowest rungs of the corporate ladder.

The IPS suggests a range of options for doing something about the problem, including giving corporations with narrow pay ratios preferential treatment in government contracting, an excessive CEO pay tax, and a ban on stock buybacks (in addition to a wide variety of CEO pay reforms). If enacted, all such changes would serve to nudge such corporations out of the low road of poor worker pay and high CEO compensation and reduce the now-obscene level of inequality in the U.S. economy.

But giving employees a say in how those corporations are managed and operated would do even more to change the balance of power, within those firms and the entire economy, between workers and capitalists. The workers would then be able to participate in deciding how much surplus there would be and how it would be utilized—not only for their benefit but for the society as a whole.**** Employees would then become or participate in choosing the corporate leaders, including chief executives, who could actually go a long way toward solving the problem of inequality in America today.

That, in my view, is a reset of the U.S. economy worth imagining and enacting.

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*Forty-nine of the 300 firms analyzed by the Economic Policy Institute had ratios above 1000-1. And, in 106 companies in their sample, median worker did not keep pace with the 4.7 percent average U.S. inflation rate in 2021.

**Amazon has spent millions of dollars in fighting union campaigns and, to date, have lost only one battle, in a Staten Island warehouse. (That’s in the United States. Some Amazon warehouses in Europe are unionized, with strikes being most frequent in Germany, Italy, Poland, France and Spain.) None of Estee Lauder’s U.S. workers have union representation, and less than 20 percent of Penn’s employees are unionized.

***Of the 300 companies in the IPS study, 119 — 40 percent — received federal contracts, totaling $37.2 billion. Their average CEO-worker pay ratio was 571-to-1 in 2021.

****Even Thomas Piketty now defends the idea of workplace democracy or co-determination, since workers “sometimes, they are more serious and committed long-run investors than many of the short-term financial investors that we see. And so getting them to be involved in defining the long-run investment strategy of the company can be good.”

Age of capital

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for Chapter 1, Marxian Economics Today. The next six (here, here, here, here, here, and here) are for Chapter 2, Marxian Economics Versus Mainstream Economics. This post (following on three previous ones, here, here, and here) is for Chapter 3, Toward a Critique of Political Economy.

The necessary disclosure: these are merely drafts of sections of the book, some rougher or more preliminary than others. I expect them all to be extensively revised and rewritten when I prepare the final book manuscript.

Capitalism

As we’ve seen in previous sections, we have to understand three major theoretical and political currents—classical political economy, Hegel’s philosophy, and utopian socialism—in order to understand the path Marx traversed in his writings prior to working on Capital. We also have to keep in mind the larger context, the development of capitalism in the nineteenth century.

It was during the “age of capital,” as the illustrious British historian Eric Hobsbawm aptly called it, that Marx formulated his critique of political economy. By the time he landed in London (in 1849), where (after leaving Germany and spending short periods in first Paris and then Brussels) he would remain based for the rest of his life, England had become the epicenter of capitalism.

Today, we think of capitalism as encompassing the entire world.* That certainly wasn’t the case in the first half of the nineteenth century, when most economic and social life around the globe was organized along decidedly noncapitalist lines. In England, however, by the end of the first Industrial Revolution, capitalism was well established, especially in the burgeoning cities (such as London, Liverpool, Manchester, and Birmingham). More or more, both consumer goods and producer goods (from textiles to machinery) were being produced in capitalist factories. In other words, they had become capitalist commodities, created by laborers who received a wage working for the capitalists who owned the mills and workshops.**

Elsewhere, the transition to capitalism, while less advanced than in England, was also taking place and leaving its mark on the existing social order. For example, the conditions and consequences of capitalism were quite evident in France and Belgium, much more so than in Germany; while the United States, as it slid toward civil war, was also creating a hothouse for capitalist industry, especially in the northeast. In all those places, enormous fortunes (accumulated through local and global trade, owning large estates, lending money, putting slaves to work, and so on) were utilized to purchase the ability to labor of workers (many of them former feudal serfs, self-sufficient farmers, artisans, and slaves) as well new technologies and machinery (from the power loom and cotton gin through steam power and iron-making to new modes of transportation, such as canals and railroads).

The age of capital was nothing less than a project for remaking the world, in every dimension. It was a revolution in industrial production that, as Engels wrote in his classic study of The Condition of the Working Class in England, was changing the whole of civil society—from politics and culture to class structure and the organization of work.

Then as now, the captains of industry and supporters of capitalism were confident about their project. It promised to create general prosperity and to universalize the bourgeois individual guided solely by self-interest and rational calculation. And, in many ways, it succeeded. The development of capitalism created gigantic factories, titanic temples of industrial production, and colossal cities, occupied by an escalating number of native and immigrant workers. Traditional ways of life and meaning were cast aside and new habits acquired, with an eye (at least among the middle and upper classes) to accumulate individual wealth and extol the virtues of free and expanding markets.

But, by the same token (and no different from today), the new capitalist order was itself fragile—subject to fits and starts and periodic downturns, and characterized by obscene levels of inequality and widespread misery. The bulk of the population experienced a decline in their living standards, with wages that didn’t keep pace with the prices of necessary consumer goods, plus poor sanitation, inadequate housing, and precarious access to clean water. Moreover, their jobs and skills were threatened by the combination of technological change, embodied in the new factory machinery, and the more detailed divisions of labor that could be instituted once they were collected to labor in one place. In many instances, workers became mere appendages of the machines they once managed. That meant more profits for their employers but, in relative terms, less for their wages.

It should come as no surprise, then, that the capitalist project was contested wherever it took hold. Many readers will have heard of the Luddites, a radical faction of English textile workers that attempted to destroy factory machinery as a form of protest. To be clear, they were not hostile to machinery per se, but were angry with manufacturers who introduced the machines in what they called “a fraudulent and deceitful manner” to get around standard labor practices. This period also saw the resurgence of other labor organizations, especially trade unions (such as Robert Owen’s short-lived Grand National Consolidated Trades Union) and the demand for more democracy (a working-class suffrage movement led by the Chartists)—which, in their growing influence, led to the repeal of laws that had made any sort of strike action illegal.

The development of capitalism led to even more widespread political upheavals, culminating in 1848, during what Hobsbawm refers to as the “springtime of the peoples.” That year was painted with the colors of revolution across continental Europe (except England and Russia) and beyond. Government after government was overthrown and, in the end, over 50 countries—from Sweden to Colombia—were affected. The revolutions were informed by diverse ideologies, including various forms of liberal democracy and socialism, their banners carried by the new social classes created by capitalism, including members of the grand bourgeoisie, their intellectuals, and the middle classes to the masses of rural landless laborers, urban artisans, and industrial workers. In the end, while the revolutions eventually failed and the old regimes restored started in 1849 (Marx argued, in various speeches and newspaper articles, the revolutions were betrayed by many of the liberal intellectuals, who sought an accommodation with the monarchs and governments on their own terms), it was clear that all that was considered solid was melting into thin air.***

It was in the maelstrom of this age of capital—of the widening and deepening of capitalism and of the revolutionary upheavals it provoked—that Marx pursued his “ruthless criticism of everything existing.”

In the next section, we look at some of his best-known texts of that period, prior to the writing of Capital.

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*That’s certainly how mainstream economists and many others think of capitalism, as characterizing the entire economy in pretty much all places around the globe. As we will see in a later chapter, what they forget or overlook is that many parts of contemporary society, in rich and poor countries alike, include various forms of noncapitalism. Consider for the moment one prominent example: how many households, where of course a great deal of labor is performed on a daily basis, are based on a capitalist mode of production?

**As we will see later in this book, not every commodity is a capitalist commodity. Goods and services can be bought and sold in markets without the existence of capitalism. It all depends on how they are produced. Thus, there can be communist commodities, slave commodities, feudal commodities, and so forth. The mistake mainstream economists make is to presume that markets are synonymous with capitalism.

***This is a paraphrase from one of the most famous texts of 1848, The Manifesto of the Communist Party, which Marx and Engels were commissioned to write by the Commiunist League and originally published in London just as the revolutions of 1848 began to erupt:”All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.” We will discuss the Communist Manifesto in more detail in chapter 9.

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