The American Dream of upward mobility is dead, thanks to the neoliberal ministrations of capital and government. But a new dream could rise from the mess left by globalization, off-shoring and austerity.
May 10, 2013
The continuation of the economic crisis of 2008 up to the present has driven home a social trend that has been evident since the late 1970s, the decline of what is usually called “the middle class” and the accompanying American Dream.
As Richard Wolff has pointed out in Capitalism Hits the Fan: The Global Economic Meltdown and What to do About it, this upward mobility was a reality for most citizens of the United States for several generations, from 1820 to 1970. For 150 years, real wages rose. In the quarter century from 1947 to 1973, average real wages rose an astounding 75 percent. But that shared prosperity came to a halt in the mid ’70s. In the next 25 years, from 1979 to 2005, wages and benefits rose less than 4 percent. The sustained rise in standards of living had been made possible by a conjunction of historical circumstances, circumstances that began to reach exhaustion by the mid 1970s.
In recent decades, the economy has grown, and there was a gain in total wealth. But where did it go? From 1983 to 2008, total GDP grew from $6.1 trillion to $13.2 trillion in constant 2005 dollars. The unequal distribution of the total wealth gain during this period is revealing. The wealthiest 5 percent of American households captured 81.7 percent of the gain. The bottom 60 percent of households not only failed to share in the overall increase, they suffered a 7.5 percent loss. Some of what the top 1 percent gained came directly from that bottom 60 percent.
Between 2001 and 2008, entry level wages declined 7 percent for college graduates and 4 percent for high school graduates. Entry into middle-level incomes is becoming more difficult.
With the offshoring of manufacturing, the industrial regions of the northeast and the Great Lakes were transformed into a Rust Belt. United States manufacturing employment peaked in 1979 at almost 20 million and fell under neoliberalism to about 11.5 million in 2010. Today, 80 percent of the world’s industrial workforce is now in the global South. Most of it used to be in the United States. This is in no small measure the result of corporate policies over the last 30 years - policies encouraged by our political leaders - to offshore those low-skilled industrial jobs that used to be the entry point to the middle “class” for many. As less-skilled industrial jobs were offshored, at first, in the ’90s, we were told by Robert Reich, labor secretary in the first Clinton administration, that to remain competitive in the global economy, US workers needed to upgrade their skills. We were told the new economy would be the new road to the American Dream. We are still being told that. But offshoring of jobs has not been limited to low-skilled assembly line work. Corporate capital has discovered that any job that can be done by computers can be done anywhere in the world and consequently will be done wherever the cheapest workers with the requisite knowledge can be found. So the knowledge-economy jobs are now also being offshored to countries like India. The knowledge workers there will work for far less than in the United States. And many of our college graduates today are saddled with heavy debt and unable to find work.
As a result of corporate policies and public policies purchased by corporations, there has been wage stagnation for the past 30 years, even as worker productivity rose sharply. This is shown clearly in the above graph. Capital took the bulk of productivity gains (shown by the upper pink line) over the 1993-2006 period by holding wages down (shown by the lower blue line). But then with the 2008 financial crisis, median family income declined further, by nearly 10 percent. Overall, as incomes have declined, corporate profits have soared.
For a while, wealth appeared to increase for average citizens because of inflating real estate values. But the financial crisis of 2008 wiped out that fictitious wealth. Median family wealth in 2010 was the same as it had been 20 years earlier.
It is corporate capital’s unquenchable thirst for profit and political leaders’ easy purchasability under capitalism that is destroying what was once called ‘the American dream’ (of upward mobility). Political leaders, Democrats and Republicans alike, embrace Charles Wilson’s adage that “what’s good for General Motors is good for America.”
Corporate-led neoliberal globalization has transformed nation-states into what I call globalized states, that is, states that serve the interests of transnational capital above the interests of national populations. This has resulted in a limitation of sovereignty and of the possibility for democratically-shaped national policies. Increasingly, the countries’ fates depend more on powerful transnational corporations rather than on their own people.
Support for neoliberalism bipartisan
In the United States, there has long been bipartisan consensus behind globalization and the neoliberal policies that promote it. Both parties have long embraced basic public policies that undermine the economic security of millions of working people. Both parties favor no-strings Wall Street bailouts, expanded unregulated trade, weakened unions and fiscal austerity as an economic priority, with its concomitant shredding of social programs. There may be some difference in degree on these issues, but both parties are in basic agreement.
One-third of all working families are now poor; their annual income, for a family of four, is below the $45,622 poverty threshold - an income insufficient to meet basic needs.
This bipartisan consensus is illustrated by Senate approval this last year of free-trade agreements with Colombia, Panama and South Korea. While all politicians were calling for more jobs, they approved a free-trade agreement that they knew would destroy jobs. This was evident in the fact that approval of the free-trade agreement was accompanied by extended unemployment benefits for displaced workers. They just can’t help themselves when an opportunity arises to favor transnational corporations. And now the Obama administration is set to expand this folly even further with the Trans-Pacific Partnership.
Legitimacy of systems questioned
With the growing downward mobility now being experienced, the social contract is unraveling. The legitimacy of the dominant institutions is being questioned. Public confidence in Congress as well as government is at an all-time low; large banks are viewed (correctly) as criminal; blind faith in market magic has been dispelled - and corporations are even seen as having betrayed the nation. The legitimacy of the system of capitalism is in crisis as sizable percentages now have a positive view of socialism as an alternative, particularly among the young (who have not known the rabid anticommunism of the Cold War era). As the national elections in 2008 and 2012 have shown, the people of the United States are asking for far-reaching changes, more change than the political elite is willing or even able to deliver.
Without new major innovations to offer opportunities for profitable investment, where is all the accumulated capital to go? Here again we have a classic over-accumulation crisis. One fix that has been deployed by the corporate wealthy is to reduce their tax burden, shifting it to the popular classes below. This has been the agenda of their sector of the political elite for decades. That has been combined with the neoliberal offensive against social programs, again at the expense of the popular classes. In effect, the plutocracy has come to understand that growth of their wealth will no longer come mainly from productive investment, but must come out of the hides of those below them. That requires imposing austerity on others so they can continue to prosper.
Thomas B. Edsall, author of The Age of Austerity: How Scarcity Will Remake American Politics, sums up the situation as follows:
Affluent Republicans - the donor and policy base of the conservative movement - are on red alert. They want to protect and enhance their position in a future of diminished resources. What really provokes the ferocity with which the right currently fights for regressive tax and spending policies is a deeply pessimistic vision premised on a future of hard times. This vision has prompted the Republican Party to adopt a preemptive strategy that anticipates the end of growth and the onset of sustained austerity - a strategy to make sure that the size of their slice of the pie doesn’t get smaller as the pie shrinks.
It is in this light that we can understand the death march the Republican Party has set out on. Its survival and that of its patrons is at stake. It leads them to adopt scorched-earth policies that ought to spell certain electoral defeat were it not for their gerrymandering, voter suppression, election rigging and other antidemocratic measures needed to maintain political power within the existing political duopoly. What they are so desperate to protect is not only their own political careers, but the insatiable hunger of capital.
For its part, the Democratic Party is also beholden to the interests of transnational capital, as I pointed out earlier. As Jeff Faux has documented, as early as the Carter administration, the Democratic Party embraced the neoliberal ideology. New Democrat Bill Clinton extended the Reagan-Bush I program of globalization with free trade and deregulation of finance capital. The Obama administration has continued on the same course. The political elite is united on its basic priorities. As Faux remarks, the United States is no longer rich enough to continue to finance America’s three principal national dreams:
1. The dream of the business elite for subsidized, unregulated capitalism.
2. The dream of the political elite for global hegemony.
3. The dream of the people for a steadily rising standard of living.
We can certainly continue to have one out of three, and perhaps even two out of three. But three out of three? No.
It is the dream of the US people that will have to go. That is the reality that no US politician dares to utter. If he did, it might spark popular demands that dreams 1. and 2. be sacrificed instead. The hard truth is that none of the three can be sustained indefinitely. Capitalism is in crisis. The military costs of global hegemony have become more than a debt-burdened state can sustain, as well as more than much of the world will continue to tolerate.
As for rising living standards, even if the dreams of Wall Street and Washington did not trump those of the people, are they really sustainable? With only a small portion of the world’s population, the United States consumes an immensely disproportionate share of the world’s resources. The current rate of use of world resources globally would be sustainable if we had one and one-half planet Earths. But guess what? We have only one. And the rest of the world’s peoples also have dreams of rising standards of living. If all the people in the entire world enjoyed US standards with the same per capita ecological footprint, five Earths would be needed.
My favorite slogan from the Occupy movement was “Wake up from the American Dream. Create a livable American reality.” That is the challenge We the People face in the 21st century. And we have to face it with little help from our political elite and none from capital. We have to do it ourselves. It will take social movements and prolonged struggle. It will take courage and bold experimentation. And for starters, it will take speaking the truth: The American Dream is over. For good or ill, history will move on without it.
Postscript: Besides this dominant American Dream, there is an alternative one in the background. It has its roots in the 18th century Enlightenment and was expressed in the French Revolution with the slogan “Liberty, Equality, Fraternity.” That was the dream of a society in which all could live in community, a society of mutual support among equals, where each individual was free to develop his/her human capacities supported by the community. The basic values of that vision are deeply rooted in the American culture. It can be the basis of an alternative - sustainable - American Dream.
Source (I heavily reduced weaker/less-engaging paragraphs so read the full thing if you’re interested)
Upper photo for sharing