Jack Rasmus

This past Friday, May 30, 2014, the US government released its revised estimates for the first quarter 2014 US Gross Domestic Product. The initial April estimate of GDP for the first quarter showed the US economy stagnating, at only a 0.1% growth rate. Last week’s revised data showed, however, a significant further downward revision of first quarter GDP to a negative -1.0% growth, i.e. a contraction.

Politicians and analysts had initially forecast in April a slowing of GDP growth to around 1.2%. They then adjusted that in May to a slight -0.5% contraction of growth for the first quarter. But the -1.0% GDP revision last week was twice as bad as their consensus estimates. Despite their missed forecasts, which initially explained that ‘bad weather’ was the cause behind the GDP decline, forecasters continue to insist that the -1.0% GDP contraction was due to bad weather during January-March 2014.

From Bad Metaphors to Bad Forecasting

When economists, pundits, and politicians can’t explain real causes—or wish to avoid bringing them to public light—they blame the weather. But weather metaphors are an excuse, not an explanation. If the bad weather were the cause of last week’s revised -1.0% GDP decline, then forecasters’ estimate of only a -0.5% drop in GDP would still leave a remaining -0.5% decline to be explained. But no explanation has been put forward to explain the additional -0.5% contraction. How the economy can go from a 4% growth rate in the third quarter 2013 to a -1.0% barely three months later, a swing of 5% in a matter of a few months, has not been explained—except of course to blame it on ‘the weather’.

While weather might have been perhaps a minor factor in some east coast regions of the country, it was certainly not a factor nationwide. The bad weather metaphor approach to economic explanation also fails to explain why luxury retail sales, at Tiffany’s and other high end retailers, expanded at double digit rates throughout the bad weather months. Apparently the rich aren’t as deterred by weather from spending while middle Americas are. Buying milk at the grocery store is somehow postponed by bad weather, but buying diamonds and baubles at the jewelry store is not. Nor does ‘bad weather’ in January-February explain why a number of key economic indicators continued to decline in March and even April, when ‘bad weather’ was not a factor. Somehow bad weather deterred home sales more than usual this past winter, even though home sales were declining well before, and have continued to do so after March 2014. Or ‘bad weather’ advocates argue that industrial production slowed in the winter because of the weather, when one would suspect bad weather would boost energy utilities’ output and industrial production during such weather. So much for bad weather forecasting.

A Non-Weather Explanation of Recent GDP

As far back as last November 2013 this writer was forewarning that the 4% growth rate of third quarter 2013 did not represent any real future growth trend; it was not indicative of any kind of sustained economic recovery. (see my ‘Economic False Positives: US GDP & Jobs Reports’, Counterpunch, November 11, 2013).

The growth in the third quarter was comprised in large part of business inventory investment bouncing back from low first half 2013 levels, on the one hand, and driven further at the same time by businesses moving up into the quarter inventory spending that would have otherwise occurred in early 2014. This latter shift occurred because businesses were anticipating—in retrospect incorrectly—that consumer retail spending would surge in the holiday season in the fourth quarter.

For example, after contributing only .18 to GDP in the first half of 2013, inventories surged to .71 contribution to the third quarter 2013 total GDP gain. That’s almost three-fourths of the third quarter’s 4% GDP gain in July-September 2013. But the year end 2013 consumer sales surge businesses anticipated, and stocked up for, never happened. Overall retail sales grew only 0.2% in December. Given no consumer response to the prior inventory buildup during the holidays, the contribution of inventories to fourth quarter GDP dropped to virtually zero. Not surprising, business inventory spending thereafter contracted even more sharply in January-March 2014 once again.

But the January-March 2014 decline of -1.0% was due not only to slowing of business inventory investment. It was due even more to the slowing global economy and its related effect on US net exports. Both US exports and business equipment investment also contracted sharply from the last quarter of 2013. An economic explanation for the -1.0% GDP fall would thus have to account for why both business inventory and business equipment investment declined and why exports weakened. It would also have to take into account that consumer spending in the January-March period was itself due largely to a one time factor—i.e. a big increase in health care services spending as the Affordable Care Act took effect. Without this health care spending effect (which will not be a factor in the second quarter 2014), the -1.0% GDP decline would have been even worse.
The point is that none of these factors—the business inventory, business equipment, exports slowdown, or healthcare spending due to ACA—were particularly sensitive to ‘weather’, good or bad. What that in turn means is that forecasters’ ‘weather argument’, i.e. that good weather during April-June will mean a GDP ‘snap back’ growth of 3-4% once again (see the lead business page article, The New York Times, of May 30, 2014), is as absurd a prediction as the same forecasters’ original ‘bad weather’ argument was erroneous.

A non-weather metaphor explanation of the -1.0% GDP is: businesses overestimated households’ consumption recovery in the face of the latter’s continuing disposable income decline last year, a decline that has been occurring for five years now every year. Businesses overstocked inventory in late summer 2013 in anticipation of a holiday season retail sales surge that never occurred. They then responded by quickly reducing investment, both on inventory and business equipment. (This is a pattern, by the way, that has been evident at least three times in the US economy since 2009).

Simultaneous with the business inventory and equipment pull back, the global economy continued to slow over the winter, with particular problems emerging in China, Europe and Emerging Market economies. These negative factors were temporarily dampened by consumer spending on healthcare in the first quarter 2014, on the ACA sign ups in particular. However, other areas of consumer spending slowed, as did residential construction and state-local government spending.

Going into the second quarter 2014, the consumer factor is weakened; the US dollar is rising in value and thereby threatening exports further, and business inventory and equipment spending will continue to slow until it becomes more clear that consumers are really spending again. The latter is not likely, however, given continued real disposable income decline for average consumer households, now in its fifth consecutive year.
Meanwhile, and state-local government spending may be expected to continue to slow as well, continuing their trend of the first quarter, and no housing recovery is in sight after its slowing.

Without the ACA healthcare spending in the first quarter it is certain the -1.0% GDP decline would have been much greater. But that -1.0% was an overestimation for other reasons as well.

1st Quarter GDP Even Worse Than -1.0%

First, included in it is the overestimation of GDP growth due to the redefinition of GDP that occurred last summer 2013.

A number of progressive economists have been pointing out that real investment in equipment has been in a long run declining trend in the US for at least since 2000. That means a declining contribution of investment to GDP over the longer term. This decline was recently ‘upward adjusted’ in part by US government in 2013 by redefining what constitutes investment.

As described in a previous article (‘Economic Recovery by Statistical Manipulation’, Counterpunch, July 31, 2013), effective beginning last year (and retroactively to prior years) the US now counts as business investment certain categories of what were once considered business ‘expenses’ and not investment. In addition to counting expenses as investment, businesses can also now put an arbitrary price on the value of certain ‘intangibles’, like copyrights, trademarks, patents and other such items, and now consider them business investment as well. In this manner, business investment appears larger than it actually is, and the long term trend decline is offset to some extent. Every GDP estimate therefore now has, all things equal, a higher business investment contribution to GDP than before.

It was recently estimated by the business periodical, The Financial Times, March 12, 2014, that this redefinition adds about 3.6% to US GDP. On a $17 trillion US economy that amounts to about $600 billion a year. That’s not any actual new activity added to US growth, just an increase in growth by redefining it. Without this redefinition, the first quarter 2014 GDP decline of -1.0% would no doubt have experienced an even greater decline, to roughly around -1.3%.

Global Rush to Redefine GDP

The US changes in GDP represent just one of many such redefinitions designed to boost lagging GDP numbers in a number of countries in the past year. At one extreme is Nigeria’s recent redefinition, which effectively doubled its GDP to $510 billion annually overnight, making it the largest economy in Africa. China’s methods for estimating its GDP have for years been viewed with some doubt. Most economists consider that around 1 to 1.5% of China’s GDP represents an overestimation for various reasons of definition and data gathering difficulties. A number of other developing markets have similar problems with their GDP definitions.

Other redefinitions and changes have been occurring in the European Union, including east Europe, the Baltics, and even Austria. Most recently, however, are the economies of Italy and the United Kingdom, where economic recovery has been lagging for more than five years and where official double dip recessions and GDP growth rates of less than 1% have been the norm for most of the years.

As reported in the global Financial Times just last week, for example, both the UK and Italy are adding income from prostitution and from drug dealing to their GDP estimates. Britain estimates that prostitution services will add $17 billion to its GDP. That and other changes concerning drug dealing and other previously unaccounted for services will boost the UK GDP by 5%, according to the Financial Times of May 30, 2014.

Prostitution, Drug Dealing, and Future GDP Growth

Exactly how one would estimate the price of prostitution and gather the data on price and volume of activity for such critical services will no doubt prove interesting. Will UK statisticians go out and survey their 60,000 estimated prostitutes and drug dealers, as to how much they charge their ‘Johns’ and how much the dealers are ‘marking up’ their smuggled shipments of cocaine and heroin into the UK from offshore? Not likely. What they’ll probably do is simply ‘throw a statistical dart’ at the wall and cherry pick a price and volume of activity that suits them.

But that’s not all that different from a good many methods now for estimating GDP. For example, a good part of the Rent component in US GDP involves the assumption that homeowners pay themselves rent, which is then rolled up into GDP estimates. Another assumes that quality improvements in smartphones are going up so fast that prices are actually going down. You didn’t actually pay $800 for that iphone 5, in other words. Despite the charge on your credit card, it was really much less. And change your business logo, says it’s worth whatever you think, add it to your investment costs, and get a government investment tax credit for it while you’re at it.

Going forward, in the case of the UK and its newly accounted for prostitution drug dealing services, there will be the additional question of estimating how much the ‘prices’ for these services have actually risen every year in order to adjust to real GDP. Perhaps the bureaucrats will do a survey phone call instead of a direct interview? For certain the drug dealers will be glad to speak to a government official. Then there’s also the problem of quality changes affecting price for a prostitute’s ‘trick’ or a drug dealer’s ‘bag’ of goods. What constitutes a quality change, and therefore a reduction in inflation and subsequently a rise in real GDP? No doubt some bureaucrat in charge will simply ‘guestimate’ price, quality, and amount of activity to get to a real number to plug into UK GDP growth.

One can only speculate how much recently lost economic growth might be restored to the US economy, should the US in turn copy the UK by including prostitution and drug dealing. No doubt hundreds of billions, perhaps a trillion, might be added to US GDP growth estimates. That’s even greater than including research & development expenses as ‘investment’. The possibilities for further growth are limitless. The US could restructure college education curricula to reflect these new occupational opportunities of the future. After all, ‘contingent’ labor is the new dominant labor market trend in the US. Adding curricula for these new GDP services couldn’t be any more obscene than training students for finance and how to create new forms of financial securities that end up in bankrupting cities and school districts, and destroying grandma’s 401k.

The US economy has been rapidly replacing real jobs in goods producing industries with service jobs for decades now. Only 12% of the economy now comprises goods production and less than 8% construction. Service jobs have been replacing higher paid goods producing jobs for decades, followed in recent y ears by even lower paying service jobs replacing service jobs, as part time & temp service jobs with no benefits are becoming the new norm. At least prostitution and drug dealing pay well, one can set one’s own hours of work, and there’s enough income left maybe even to buy an Obama’s health insurance plan.

Jack Rasmus is the author of the book, ‘Obama’s Economy: Recovery for the Few’, Pluto Press, 2012, and ‘Epic Recession: Prelude to Global Depression, Pluto, 2010. He hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network. His blog is jackrasmus.com, his website http://www.kyklosproductions.com, and twitter handle @drjackrasmus.

PLEASE NOTE: THE CORRECTED LINK TO THIS INTERVIEW BELOW:

As USA data will soon show a third economic ‘relapse’ since 2011, in the form of negative GDP growth for the 1st quarter of 2014, Europe’s economy continues even more fragile, according to Dr. Rasmus in the interview. Listen to his assessment of why Europe is even weaker than the USA economy today and will continue to remain so. Access the Russia Radio interview of May 27, 2014 at:

The Corrected Link for this interview is:

http://voiceofrussia.com/us/2014_05_28/Big-Bailout-Absence-Left-Europe-in-Chronic-Recession-Analyst-0992/

Alternative Visions Radio Show
May 24th, 2014

By Dr. Jack Rasmus

Jack Rasmus explains how Europe’s ‘stop-go’ recovery and its version of an ‘Epic recession’ (i.e. short, shallow recoveries followed by economic relapses and double dip recessions) is proving worse than the USA’s experience with ‘stop-go’ recovery since 2009. While the USA’s economy has slowed to zero or less on three different occasions since 2009 (in 2011, 2012, and now 2014), Europe’s economy experienced an even worse bona fide double dip recession, even weaker recoveries between, and now appears headed to another slowdown after only a year of a paltry 0.2% GDP growth.

As Depression conditions continue in Southern Europe and the Euro periphery economies, Northern Europe economies (France, Netherlands, Finland, etc.) are also beginning to experience declining real investment, falling exports, and slowing household consumption as well. Meanwhile, governments continue ‘austerity’ policies, struggle with a continuing fragile banking system and government debt, and continue to ‘talk down’ the crisis. Jack explains the role of European Central Bank monetary policies in Europe behind Europe’s current drift toward deflation and economic stagnation, which are the ultimate source of its continuing fiscal austerity policies.

The role of emerging markets’ capital flows to Europe, western global investors and shadow banks chasing risky corporate junk bond ‘yield’ and Eurozone periphery government bonds as key elements to today’s emerging ‘3rd phase’ of the crisis. Jack also explains the effects of changing China and Japan policies on Europe, the Ukraine crisis effect on Europe, and why the drift toward deflation Eurozone-wide will continue.

Dr. Rasmus concludes with an explanation of why the United Kingdom is experiencing an artificial recovery based on an induced property bubble in London and south England, with Cameron policies echoing George Bush-Alan Greenspan USA policies of 2002-03, in both cases (US and UK) representing a desperate attempt to engineer a short term unstable recovery before an upcoming national election that will inevitably collapse afterward with serious economic consequences.’

Listen to the 56 min. radio show at either of the following urls:

http://www.alternativevisions.podbean.com

http://prn.fm/alternative-visions-europes-continuing-epic-recession-052414/

At the Alameda Public Affairs Forum, Green Shadow Cabinet Federal Reserve Chair, Dr. Jack Rasmus, reviews the major trends and forces driving the US and global economy today: the Slowing of the China economy and growing shadow bank instability, Emerging Markets’ volatility, currency decline, capital flight and slowdown, the Eurozone’s stagnant drift toward deflation, the failure of Japan’s new Abenomics policies to generate sustained real economic recovery, and the USA’s continuing ‘stop-go’ economic recovery. Jack explains how global problems of real investment, real job creation, and policymakers’ preoccupation with monetary solutions will mean growing tendency toward global economic slowdown at best, and rising potential for new global recession.

Listen to the 1-hour audio presentation at:

Much has been written over the past year about the growing income inequality in America, and how the wealthiest 1% households have accrued 95% of all the national income gains in the US economy since the June 2009 so-called economic ‘recovery’ officially began.

Liberal economists like Paul Krugman, Robert Reich, James Galbraith and others have writing numerous books and countless newspaper columns on the subject over the past year. They have finally discovered in recent years the sad fact of accelerating income inequality in America, a developing trend that has been in progress for decades, at least since the early 1980s. Actually, theirs has been less a ‘discovery’ than a re-reporting of work on the subject done by others.

While liberal economists have been reporting on income inequality, they have yet to explain why and how the growing concentration of income, and consequently wealth, in the hands of the 1% has been occurring and, indeed, why that inequality has been accelerating now after more than three decades. As the data conclusively show, the 95% of all income growth accruing to the wealthiest 1% households since 2009,noted above, represents an acceleration, from 65% of all income gains accruing to the 1% during the Bush years, 2001-08, and 45% during the Clinton years, 1993-2000.

While no doubt of value in itself, it is one thing to to cite data that shows the irrefutable trend of income and wealth concentration; it is another to explain how and why that concentration has occurred and who is responsible for it—a responsibility that lies not with mystical categories like ‘the market’ or ‘globalization’ but with real individuals and policymakers in both business and government for the past 30 years.

The Emmanuel Saez Connection

The discovery of inequality was initially given its major boost more than a decade ago in the then pioneering work of Emmanual Saez, a French economist transplanted more than a decade ago to the University of California, Berkeley. Saez back in 2002 was the first to begin reporting the facts about growing income inequality in the U.S. since the early 1980s, based on previously unavailable data from the Internal Revenue Service. Prior to Saez’s work, other official sources of government data from the Bureau of Labor Statistics, Commerce Dept., Federal Reserve and Congressional Budget Office were, and still remain, notoriously limited and incomplete with regard to accurately estimating capital incomes. Of course, with regard to Krugman and others, better late than never to have ‘discovered’ inequality. But Saez is the real economist hero—not Krugman, Reich & company—having revealed for more than a decade now the more accurate (although in some ways still limited) facts about growing income inequality in America.

While having made a major contribution by more accurately describing the true dimensions of income inequality, Saez’s work has been weaker on identifying the fundamental causes of that growing income and wealth inequality. A professor of Public Finance (i.e. government spending and fiscal policy in general), Saez has focused his explanation of the causes mostly on the growing inequities of the tax system in the USA and other capitalist economies. To a lesser extent, he has also focused on the trend of senior executive pay in business, pointing out that in the last decade alone CEOs and senior corporate management have roughly doubled their share of total corporate profits—a not insignificant shift of income when ‘senior’ management is defined typically as the top half dozen to a dozen managers in a typical corporation.
But Executive Pay trends represent more an internal transfer of potential capital income’s rising share from stockholders and bondholders of a corporation to active CEO and senior management.

What’s of more interest is how the overall share of incomes from Capital in general is rising at the expense of workers’ earned incomes, i.e. wages and salary incomes—and especially the sub-category of hourly wages and weekly earnings for the roughly 110 million production and non-supervisory workers in the U.S.

By addressing the role of the restructuring of the tax system that has been occurring for three decades in the US, shifting in favor of corporations and their wealthy 1% stock & bond holders in turn, Saez addresses an important element in the general explanation of growing income inequality. But in so doing, he omits the even more fundamental origins of income and wealthy inequality. The tax system changes are but one of a ‘three legged stool’ of income inequality forces at work. The tax system changes ensure that income generated at its source flows through the corporation to the owners of capital without being seriously diverted, or siphoned off, by the State and the tax system for other purposes. The ‘tax connection’ is thus strategic for understanding the income inequality trend, but it is not the whole story. It is more an enabling force than a fundamental causative force of income inequality.
Changing the tax system may therefore slow the process of income concentration, but does not address the origins of the problem at its source. The tax system is but one of three important elements of the income trend issue. For Saez to focus on it almost exclusively, providing an important contribution to understanding the trend, is not yet to provide a more complete explanation and understanding of the problem.

Thomas Picketty’s New Book

Working with Saez at the beginning of his work a decade ago on income and wealth concentration in the 20th century, Saez’s economics partner has been his collaborator, another French economist, Thomas Picketty, who recently published a major book called, Capital in the 21st Century. The book is getting a lot of traction and promotion from other liberal economists, like Krugman, from the liberal news media, as well as from the US business press, the latter of which is more interested in trying to debunk Picketty’s data.

The title of the book is somewhat misleading. The Picketty book is less about the changing nature and processes of global Capitalist Reproduction in its various forms in the 21st century—a work that is long overdue but not yet written. The book is more about the consequences of those changes; specifically the accelerating of capital incomes and the concentration of wealth accruing to capital owners. PIcketty’s book is best understood as a deeper and more historical representation of Saez’s work on in come inequality that proceeded it. We are still talking about the appearances of inequality; not its essentially origins.

In the book Picketty reveals that the wealthiest households, composed of those whose incomes are earned almost exclusively consisting of returns from capital, have in recent decades been increasing their wealth steadily at 5%-8% on average over the long term every year. And that’s been the case, whether in good economic times or bad. Moreover, the half dozen or so recessions in the US since 1980, including the recent ‘great’ one that began in 2007, seem to have had little long run impact on the accelerating concentration of income and wealth to the top 1% households. In stark contrast, Picketty’s book argues working families—recipients of what is called ‘earned incomes’ from wages and salaries—have barely maintained their incomes and standard of living during the best of times, while experience a reduction in income during recessions and not so good times.

What the income inequality trends revealed by both Saez and Picketty suggest, therefore, is not just that the wealthiest are accruing ever more percentage of the national income and wealth for themselves, but that the remaining bottom 80% working class households are stagnating at best, or actually declining in terms of real wages, real earnings, and real disposable income. The income inequality in America now means not only that the rich are getting richer; but that the middle and below are simultaneously getting poorer over the longer term.
What the Saez-Picketty work together suggests is that Income inequality is a two-headed monster. It occurs when the rich get richer in absolute (capital income) terms, as well as when middle class and below households experience a decline in their (earned wage & salary) incomes; or when both occur simultaneously which of course has been the case in the past three decades at least. However, while identifying wage stagnation or decline, neither Picketty or Saez offer much explanation as to why or how this decline has been occurring. It is one thing to identify wage stagnation and decline; it is another to explain why and how it is occurring—and accelerating of late.

So how are the wealthiest 1% households becoming not merely ‘very rich’ but ‘super-rich’ and ‘mega-rich’? What are the fundamental causes behind the trend? How is their income being generated at the source—thereafter ensuring it is ‘passed through’ by an ever-generous treatment of corporate and personal capital incomes by a restructuring tax system?

The Dual Origins of Rising Capital Incomes

Their accelerating income and wealth is generated, in increasing part, from the manipulation of global financial assets and speculative financial trading, on the one hand. That is, from returns on capital from global stock & bond trading, foreign exchange speculation, interest, real estate, commodity futures, structured finance and derivatives in myriad proliferating forms, rents, and so forth—to mention just a short list. This is just ‘money making money’ and doesn’t involve shifting income from workers by reducing their real wages, cutting their health care and retirement benefits, stealing all their productivity gains, and the many other ways their corporations shift income from the working class to themselves.

This second of the twofold process, i.e. reducing of labor costs across the board, are therefore a second major way in which income has been growing for the wealthiest 1%. Income and wealth is not only generated from financial speculation, but from the transfer of income from workers through the conduit of their corporations to them in the form of capital gains, dividends, interest and rent. One of the hallmarks of the past decade globally is that Corporate ‘profit margins’ (i.e. profits from reducing operating costs) are at consistent, record annual levels. Corporate income taxes are then in turn reduced by governments to increase the ‘pass through’ of these growing corporate net income gains to their major stockholders, the wealthy 1% households who are almost exclusively ‘investor’ households and not earners of wages & salaries. Governments then further reduce their personal income taxes as well, in order to ensure they can keep an ever growing percentage of the profits that their corporations pass through to them.

As both Saez and Picketty have understood, Capitalist tax systems are central to both of the more basic processes of income creation noted above. Tax cuts on corporate and personal investor income taxes both result in more income accruing to the wealthiest 1%. But the underlying processes are different. One involves the increase in transfer of share of national income from workers to owners of capital; the other involves owners of capital manipulating the financial system and financial asset prices for gain. One involves increasing the exploitation of labor, and the other involves the manipulation of asset prices and exchange.

Both Saez and Picketty focus on the tax system as central to the growing concentration of income in favor of the wealthiest 1%. However, neither examine the more fundamental processes at play—i.e. the growing relative weight of financial speculation in global Capitalism or the simultaneous growing intensification of labor exploitation and income transfer between classes that is occurring in the U.S. and globally as well.

Saez and Picketty’s lesser economist colleagues—the Krugmans, Reichs, et. al.—provide little explanation of the strategically central fundamental processes (financial speculation income generation & earned income transfer from workers to owners of capital), focusing only empirically and sporadically on ‘this or that’ surface manifestation of the problem: noting a problem of real minimum wage decline here, a particular corporate tax cut there, rising cost (and shift) of health services today, coming crisis in retirement incomes tomorrow, and so on. That is, an eclectic empiricism with no theoretical foundation, and therefore no real analysis and therefore no possibility of effective solutions for ending the growing concentration of incomes in the end.

Explaining—Not Reporting—Income Inequality

What is necessary to explain fully the growing income-wealth inequality trends is a threefold task:
First, it is necessary to explain the processes by which the rate of increase in workers’ compensation (wages & benefits) is being reduced on a class-wide basis—that is, for both the employed, unemployed, and underemployed—and especially for the ‘core’ 110 million non-supervisory & production workers in the US.
The unemployed experience a total wage cut. That needs to be factored into the overall average for wage reduction for the working class as a whole. Unfortunately, current government statistics report wages and compensation only for those still employed, which underestimates the total wage reduction since the unemployed total loss of wage income is not included. Moreover, that official data reports wages only for those who are full time employed. It thus underestimates the overall wage reduction for the class as a whole for those millions of workers in recent years that have been forced from full time into part time and temp jobs. The growth in underemployed part time and temp jobs represents a further reduction in the overall working class wage and benefit estimation, since on average these ‘contingent’ jobs pay 50%-55% of the average full time job.
It is important also to consider the roughly 110 million non-supervisory workers’ wages and compensation.

Government data reporting on ‘wages and compensation’ in general include salaries and benefits for CEOs and senior managers, whose ‘wage’ and salary increases may be significant and thus ‘bias upward’ the total average for wages and benefits in general. The trend in income inequality in favor of the top 1% is consequently worse than reported, when the trend compares the 1% to the roughly ‘bottom 80%’ of households in the US where the ‘non-supervisory’ 110 million reside.

The preceding adjustments that more accurately estimate wages and compensation on a class-wide basis that includes the unemployed, underemployed, and excludes CEOs and senior management, are only the beginning of the necessary task, however.

To obtain a more accurate summary of wage and income reduction for workers today, still further estimation adjustments are necessary. It is necessary to adjust not only for current nominal wage cuts and reductions that may have occurred, but also for deferred wages previously paid in the form of workers’ pensions and healthcare contributions that are reclaimed and taken back. When defined benefit pensions are converted to 401ks personal pensions by a company, or when a company declares bankruptcy and turns over its pension to the government’s Pension Benefit Guaranty Corp, to restructure, pension benefits are reduced. Pension payments are reduced. In effect, the company takes back in part the worker contributions that were previously paid into the pension fund. The same occurs when prior worker contributions to a health insurance fund are offset when a company increases the share of monthly premiums workers’ must pay for employer provided health insurance coverage, or when the coverage provided by that insurance is reduced. The result is an increase in payment by the worker for both cases. But estimating reductions in nominal and deferred wages is still not the entire story.

There is the reduction of future wages yet to be paid. Future wages are reduced by means of issuance of credit and debt to workers. The interest paid on that debt currently and over the life of the loan represents a reduction in future wages not yet paid.

There is also a fourth category of wage that must be calculated in order to accurately estimate the overall reduction in workers’ income and inequality. That is the ‘social wage’. That is the contribution to social security and medicare paid by workers in the payroll tax. It too is a form of wage that is deferred. Workers pay into the social security fund in expectation of a claim on that payment when retired. A reduction in social security monthly benefits and/or a rise in co-pays by retirees for Physician or Prescription drug coverage represents a reclaiming of part of the social wage previous paid.

All the above forms of wages are further reduced by inflation, so that adjustments for the real wage paid to workers are necessary as well. This leads to what inflation index is used to adjust wages and benefits in their nominal form to their real, purchasing power form. US government inflation indices have been ‘smoothed out’ over recent decades by introducing statistical estimation techniques that reduce the volatility of price inflation. The different techniques are too numerous (and boringly arcane) to recount here. But they add up to the effect of underestimating the true inflation in the typical goods and services bought by the ‘bottom 80%’ households and the 110 million nonsupervisory core working class. That means that true inflation is higher, and therefore real wages are actually lower than reported by the government.

What all the above in effect means is that working class incomes in the US have actually slowed, and fallen in many cases, even more than has been reported. Were that more accurate wage and compensation reduction been used to track the growing income inequality in the US, that inequality would be significantly greater than even reported today—whether by the government or by the Saez-Picketty studies as well.

Explaining inequality—not just reporting it—requires an analysis of how these various ‘forms of wages’ have been reduced in recent decades and especially since 2009. That deeper analysis leads to explanations of trends of destruction of unions and thus the higher union wage, the growing trend of outright ‘wage theft’ by businesses, the avoidance of paying overtime pay by reclassifying millions of workers as ‘exempt’ instead of hourly paid, the atrophying of the real minimum wage, the wage reduction effects of free trade, the shift to contingent labor, and all the reasons why the total unemployed (in and out of the labor force) are rising steadily and are chronically longer term jobless. Add to this the analyses of the many government policies introduced in recent years and decades that reduce the deferred, social, and future wage and underestimate the real wage.

The Three-Legged Stool

But explaining true scope and magnitude of wage reduction is still just one of the three legs of the income inequality stool—in this case the declining income side of the coin of inequality. The other two legs are how more income is generated and claimed by the wealthiest households, especially the 1%, and how changes in the tax system are enabling an ever-greater pass through of income from the corporations of the wealthiest households to their personal bank accounts. To explain the ‘other (non-wage) side of inequality therefore requires a second set of explanations and analyses: i.e. how and why corporate profits have consistently risen in recent decades, accelerating especially in the past decade, and how that historic rise has been ‘passed through’ at increasing rates, from the corporation to its major owners and investors—i.e. the wealthiest 1% households.

Explaining the accelerating rise in corporate profits in turn requires two directions of analysis.

First, it requires an analysis of profits that are being generated increasingly by means of manipulation of financial asset prices by investors, by creating new forms of money and credit, and recycling money capital to create still more money capital where nothing is actually being produced except for money capital. This is the realm of finance capital, growing in relative weight and role in the 21st century. This is the realm of the now $71 trillion in investible assets held by global shadow banks—hedge funds, private equity firms, investment banks, asset management funds, etc. It is the realm of the growing numbers of ‘ultra- and very-high net worth’ individual investors who invest tens of millions each annually in highly liquid global markets through these institutions–in the proliferating forms of financial instruments in which they speculate and trade.

But profits are created not only by financial speculation, although the trend is toward a more rapid growth of profits from financial speculation relative to total profits growth. The other, more traditional source of profits generation is, of course, profits from making goods and providing non-financial services. Here profits grow by either selling more goods, raising prices of the goods sold, or reducing costs of producing those goods—especially labor costs. Since the June 2009 recession, the data show profits from production quickly escalated to record levels in the US, exceeding the historic high pre-recession 2007 levels. But this profits escalation has not primarily resulted from selling more output or at higher prices. Today’s record pre-tax corporate profits are primarily the outcome of the growth of ‘profit margins’; that is, profits generated from reduction of operating costs, in particular labor costs and therefore by raising productivity and/or reducing wages and compensation. The record profits growth for goods and services producing corporations is therefore not the consequence of raising prices or selling significantly more product. It is the result of cost-reduction—which means largely wage and benefits cost containment or reduction. Explaining the income inequality trend must therefore focus the rise in profit margins for companies that produce goods and services, as well as profits from financial speculation. Moreover, the multiple connections between profits from finance capital and profits from real production by non-finance capital requires analysis and explanation.

But profits represent income accruing to the institution of the corporation. Income inequality is typically a measurement of relative income shares between upper and mid-lower households. How the income of corporations gets transferred to the former, wealthiest households, is consequently a critical element in the overall explanation and analysis of income inequality as a trend. That is where and analysis of the third leg of the ‘three legged stool’ of inequality is required—i.e. the restructured tax system of recent decades.

How corporate income, generated from the first and second fundamental processes above, gets ‘passed through’ the corporation at increasing rates and volumes to the individual owners of capital is therefore the third level of explanation. This work has been the focus of Saez, Picketty and others. The tax system is a critical, strategic enabling factor in the growing income inequality trend in the US and globally. But it does not explain the origins of the inequality. Enabling and originating is not the same thing, although the former may be essential for the latter.
Here too, a dual analysis and explanation is required. How the tax system has been restructured in favor of capital incomes—i.e. capital gains, dividends, interest, rent and other payments to the wealthy and investors is a necessary focus of analysis, as is how corporate taxes have been reduced as well. Reducing corporate taxes allows corporations to keep more income to potentially ‘pass through’ to their investors. Reducing taxation on capital incomes after having been distributed by the corporation results in still more income gains by the wealthiest households in turn. Conversely, how the restructured tax system has in recent years raised the total tax burden and share (federal, state, and local) on the working class is a second essential focus of the general effect of the tax system on income inequality.

Saez, Picketty and a few others have contributed significantly to the analysis of the role of the tax system changes in recent years and decades to the growing income inequality trends in the US. Their work should be commended. Krugman and other notable liberal economists have publicized their work, especially of late. But none of them have focused in any significant detail on the fundamental origins of income inequality—i.e. in the process of production, in the growth of credit, debt, and speculative finance, or how the working class is not only no longer sharing in the income generation but is increasingly having to give back income it previously earned to the forces of Capital as well.

Jack Rasmus, May 2014

Jack is the author of the recent books, ‘Epic Recession: Prelude to Global Recession’ and ‘Obama’s Economy: Recovery for the Few’, published by Pluto Press, 2010 and 2012 respectively. He hosts the weekly radio show, ‘Alternative Visions’, on the Progressive Radio Network. His website is: http://www.kyklosproductions.com, blog: jackrasmus.com, and twitter handle, @drjackrasmus.

Alternative Visions – Restructuring American Unions As Solution to the Crisis: Some Specific Proposals – 05/10/14

May 10th, 2014 by progressiveradionetwork

Jack Rasmus welcomes back labor historian, Staughton Lynd, to discuss specific ideas how American unions might evolve their current organizational structure to better confront the growing crisis of American workers and their unions in the 21st century. Jack and Staughton agree it’s time for solutions, not just talking about dimensions of today’s crisis in union strategy—whether political, industrial, bargaining, organizing—i.e. strategies that that are now failing across the board for American workers today. Both agree that some new form of local union organization is needed that strengthens local unions to confront the massive legal web that has grown over decades favoring employers, government, and national union leaders. Stronger local unions must somehow be developed, both argue, that organizationally integrate the community. Jack and Lynd discuss what a new kind of local union might look like organizationally, how it might include local community groups as equal members, how it might develop regionally, as well as evolve at a national level in the form of a ‘National Workers Legislative Congress’. Jack explains how organizational restructuring is not new to the history of labor, but has occurred repeatedly in the past as Corporate power and Capital has evolve rendering the old union strategies and organizations ineffective. Jack argues a new structure, based on ‘local mobilization-solidarity committees’, can also complement and expand Union Labor’s current structure, not necessarily replace it. Both agree some kind of new organizational evolution of labor, starting at the local union level, is necessary to deal with the current crisis of American labor today. (See Jack’s article ‘Reorganizing the AFL-CIO: An Initial Proposal’, also on this blog immediately preceding this entry).

Listen to this show at:

http://alternativevisions.podbean.com/e/alternative-visions-restructuring-american-unions-as-solution-to-the-crisis-some-specific-proposals-051014/

Or at: http://prn.fm/alternative-visions-restructuring-american-unions-solution-crisis-specific-proposals-051014/

As part of the recent series of interviews on the crisis of American unions and workers today, hosted by Dr. Rasmus, on the radio show, Alternative Visions, on the Progressive Radio Network, Dr. Rasmus reproduces below the article-except below, ‘Restructuring the AFL-CIO, that concluded his 2005 book, THE WAR AT HOME: THE CORPORATE OFFENSIVE FROM RONALD REAGAN TO GEORGE W. BUSH (available on this blog and website, http://www.kyklosproductions.com) Watch for updated articles on this theme in ‘Z’ magazine by the author this summer.

RESTRUCTURING THE AFL-CIO FOR THE 21ST CENTURY

The central organizational question facing the AFL-CIO and its affiliated unions today is how to achieve the organizational restructuring necessary to refocus Labor priorities at the point of production (e.g. organizing, bargaining coordination, strike support, boycotts, corporate campaigns, defense of community struggles, etc.) more effectively once again, while healing the split in the AFL-CIO in the process. Expressed another way the question becomes: how to achieve a more effective division of labor between political action (which the AFL-CIO does well) and coordinated Labor action at the point of production (which the AFL-CIO does poorly).

It was previously noted that current proposals for change in the AFL-CIO by its reform group led by the SEIU, UNITE-HERE, Teamsters and others are primarily organizational in character. Moreover, they focus largely on organizational changes ‘from the top down’. But the crisis faced by the AFL-CIO and its unions today is more than a matter of organizational structure. It is just a much a matter of membership mobilization. Changing the AFL-CIO’S present organizational structure from the top may be necessary but it is not sufficient.

A fundamental change how organized Labor operates at a local grass roots level is just as necessary as a change in how it operates at the top. A growth in absolute levels of union membership is critically necessary but still not sufficient. A change in the form and character of union membership activity at the local level is just as critical. Indeed, it is highly likely that significant membership growth cannot be achieved without the latter. But organization can play a role in helping achieve both.

Growing Numerical Membership by 10 Million

A central objective of Labor must be the restoration of union member¬ship over the next decade to levels at least equal to the late 1970s. That means to around at least 20% of the workforce. That further means the AFL-CIO unions as a group will need to nearly double their current membership, adding more than 10 million employed members over the coming decade — one million new members a year — and do so at a time during which corporations are accelerating the exporting and off-shoring of jobs at an even greater pace than before. How then to add 1 million more members a year for the next ten years when Labor has been losing 300,000 members on average every year?

That kind of union membership growth requires a new land of focus on organizing and a new kind of structure for organizing never before undertaken in the history of American Labor. It also requires a commitment of resources and development of new approaches to membership growth radically different than unions have followed in the past fifty years.

Trying to reform current Labor Laws to make minor corrections in NLRB processes will make little, if any, difference. Nor will minor adjustments to how Labor has conducted organizing drives in the past. Nor will a token increase in the commitment of resources make any difference. The scope of organizing needed to bring in that many new members and to restore union bargaining density levels once again will re¬quire a new kind of mobilization of workers, organized and unorganized, at the grass roots local level. It will require a new kind of role and participation of community interests and activists in that organizing; a new kind of partnership between Unions, the unorganized, and community organizations; and, not least, a new local structure to enable and facilitate that mobilization. Only a radical transformation of the organizing process itself at die local level can take Labor from its current net loss of 300,000 members a year to a net annual gain of 1 mil¬lion a year. And that new process will require a fundamental restructuring of the AFL-CIO and its unions, from “below’ as well as ‘at the top’.

Creating An Effective Membership Base

Organizing 1 million new union members a year requires creating a new layer, a critical mass of union members at die local grass roots level who are available and willing to participate in organizing as well as in inter-union and union-community solidarity actions in general. That means a new kind of effective membership: a cross-union membership
core that is mobilized to participate in new forms of solidarity activity involving multiple unions and union-community support activities. Effective membership means members that are active and committed beyond more than just their immediate workplace group. Creating that kind of active membership will in turn will require the creation of new kinds of ‘centers of solidarity activity’ for membership involvement, in addition to and apart from the typical and limited steward roles at the workplace or the miscellaneous organizational projects in local unions that most members find boring at best. Current AFL-CIO projects launched from Washington, D.C., from the ‘top down’, are largely ineffective when it comes to mobilizing local union members. What used to be called ‘COPE, HOPE, and DOPE* projects are not what is meant by new ‘centers of solidarity activity’,

What is envisioned here is a new organizational structure that will enable and facilitate new forms of activity — within and between unions, between unions and community organizations, and between the unionized and the unorganized. A structure and activities that will mobilize union members, friends, and allies at the local level. That will create a new critical mass necessary for non-institutional approaches to organizing (i.e. outside the NLRB) that will be required in order to organize 1 million new members a year. Without both a new structure and a new kind of mobilized membership at the local level, successful organizing drives at Wal-Mart and similar companies will not be possible. Nor will growth anywhere near 1 million a year be remotely attainable.
To briefly recap the key points of the preceding paragraphs: Top down changes in organizational structure and a repositioning of financial resources can assist or inhibit growth in union numbers and density. Organizational restructuring at the higher levels of the AFL-CIO is thus necessary. But that kind of change alone is not sufficient for organizing a million new members a year. Structural change must be comprehensive, at the top of the AFL-CIO and down to the local level. Changes in the organizational structure of the AFL-CIO that do not extend down to the grass roots level will not produce results. New structures at the local grass roots level are just as necessary to achieve success in organizing 1 million new members as organizational structure change at the top. Those changes at the grass roots level are also central to creating new centers of solidarity activity and a new kind of mobilized effective member¬ship But once again the fundamental question remains, how to do all that given a divided House of Labor?

The graphic accompanying this article represents an initial proposal for restructuring the AFL-CIO to permit a refocusing on both organizing and on other point of production activity in general, to create a new layer of mobilized membership, a new kind of tighter relationship with local community interests, and to do so without abandoning political action or split¬ting the AFL-CIO itself. A further verbal explanation of the graphic follows. The graphic and explanation are not meant as a final proposal, but as a start of further discussion.

The current AFL-CIO would divide into two co-equal structures; an American Council of Unions with a primary mission at the point of production and an American Federation of Unions with a primary mission addressing political action, job training and search, and other traditional administrative activity.

Parallel Co-Equal Structures

The American Federation of Unions would look much like the current AFL-CIO in both tasks and functions, with one important new functional task added. The AFU would focus mainly on those activities the AFL-CIO has tended to do in the past: namely, political action, international affairs, and traditional staff administrative support functions. Added to these traditional functions, however, would be the new mission of developing job training and job search programs for the unorganized.

Job training and search are two critical benefits that can serve to at¬tract unorganized workers to the union movement and develop a sense of loyalty to unions that could be leveraged in numerous ways in subsequent organizing campaigns. The union as the avenue to get-ting jobs was once a powerful benefit provided by organized Labor. Until the late 1940s in many industries jobs could only be gotten through the union hiring hall. The closed shop and hiring hall were the path to work. They were also a critical source of union loyalty and solidarity. That path and source of loyalty and solidarity was consciously eliminated by the corporate elite with the passage of the Taft-Hartley law in 1947. Labor now needs to find new ways and new forms to provide job benefits to workers once again. Developing those forms and ways would be a major mission task of the American Federation of Unions, the AFU.
Parallel to the new AFU would be another totally new structure, a new American Council of Unions, or ACU. There is no need to end the cur-rent AFL-CIO and replace it altogether with a new organization. Let it do what it has been doing as a revitalized AFU. There is a definite need, however, to create a new organization in parallel to the AFU that is able to do those tasks the current AFL-CIO has proved unable or unwilling to undertake; namely tasks at the point of production like organizing co-ordination, strike and bargaining cooperation between unions, imple-mentation of boycotts and corporation campaigns, mobilizing members and organizing local protest actions on behalf of community struggles, effective resolution of union jurisdictional disputes, implementation of mergers between unions, and other actions to bring about greater union density and to help re-establish industry-wide bar¬gaining once again.

The American Council of Unions is not the old Industrial Union Council of the AFL-CIO but something quite different. It will have complete authority to carry out a broadly defined mission at the point of production. The Council would also serve as the primary organizational form for achieving a closer integration of Labor and community solidarity actions at the local level. It would be the workplace action and mobilization arm of the Union movement, in contrast to the political-administrative arm, the American Federation of Unions.

Just as the American Federation of Unions task is to work toward achieving political density, the American Council of Unions’ task is to expand union density by leading and coordinating organizing drives inter-union bargaining and strike activity, and in general mobilizing current union members, the unorganized, and community allies around concrete events and struggles. The AFL-CIO, as structured today is incapable of effectively pursuing both objectives of political and union density at the same time. It tends to opt and fall back to the pursuit of the former at the expense of the latter. The tasks must therefore be divided and the AFL-CIO today restructured into two co-equal parallel bodies to enable the effective pursuit of both tasks. The American Council of Unions mission is to focus on mobilizing workers around workplace and community issues and struggles.

The Council and the Federation would be co-equal in other ways. Both would provide a co-chair for each of the State Federations of Labor This latter organizational structure exists today and would thus continue, but now with additional tasks and under a dual leadership structure. Each State Fed would provide two delegates, one from the American Council of Unions and one from the American Federation of Unions to the new Parliamentary policy body, the American Workers Congress

American Workers Congress

This is a new organizational body. A ‘Parliament of Labor’ that would meet quarterly and set general policy directions. It would have no executive authority whatsoever. That would reside solely with the American Council of Unions and the American Federation of Unions, in areas of their respective distinct missions. The current structure of the AFL-CIO has a fundamental conservative bias that renders it unable to make major strategic or policy changes quickly enough in crises situations. Its many small unions become dependent on a few in the AFL-CIO in leadership roles, who then rely on that highly fragmented support to stay in office for extended periods. Only a major rebellion from time to time by a significant faction of unions is able to unseat the leadership and change policies. This is a very ineffective ‘succession process’ and is harmful to Labor in times of crisis when a more rapid change and response is necessary. In addition, a greater role in the determination of policy needs to come from the field, from below. Even the Democratic Party has a more dispersed policy making body comprised of representatives from the field, its central committee. Labor needs a broad-based policy making body more closely reflecting the voice of its members in ‘the field’. The American Workers Congress idea represents a shift in that direction, toward opening organizational policy making ‘to the field and from below’. State level representatives, two each from each State, would constitute delegates to the American Workers Congress, with the proviso that one representative from each State would come from the new American Council of Unions and one from the American Federation of Unions.
An Interim Federation of Sectoral Unions

The above American Council of Unions will not be successful over the long run, however, if it remains just another lineup of existing unions. The new Council should be organized on a base of merged, new ‘sectoral unions’. At first these sectoral unions could be ‘federated’ organizations, as a preliminary to subsequent formal reorganization of unions along sectoral lines.
Union organization structure has always reflected changes in corporate organization. Early forms of union organization were built along craft lines to organize small and medium companies employing skilled labor. In that context they were effective. But as corporate forms began to expand along industrial lines the craft union concept proved ineffective. It was historically followed therefore by an industrial union concept to accommodate a better approach by workers to dealing with corporations that were large industrial entities themselves. However, now many corporations have outgrown a simple industrial structure and have transformed into global conglomerates integrated across entire sectors of the economy. Union organizational structure must therefore also develop new forms and organizationally adapt once again. Craft unionization proved ineffective in organizing and bargaining with industrial companies during the 1930s (although still remaining an effective organizational form for construction and other work to this day). Now mat experience is repeating itself. Now industrial unions themselves are be¬coming increasingly ineffective as an organizational form for dealing with the new global cross-industry corporations. A sectoral union organizational form needs to evolve out of the shattered base of industrial unions in America today. Just as labor developed industrial unions to deal with the new corporate reality in the past, it must develop new sectoral unions to deal with the new corporate reality of the present. To approach organizing or bargaining in the long run along industrial lines only is like craft unions in the past trying to organize a corporation that was industrial.

Sectoral unions would include, for example, the merging of all unions and members in manufacturing industries into one Manufacturing Union. Steel workers, auto workers, rubber workers, and the like would be aggregated thus into one union organization. In similar fashion, all unions with members in the transport sector would aggregate and form one sectoral Transportation Union. Teamsters, Longshore workers, Railway, Airline, Bus drivers, subway, and all workers involved in some way moving people or freight would be part of such a union. Similarly, all workers involved in some way in delivering health care services would be members of a Health Care sectoral union. While all workers and unions in the Hospitality sector would be in one sectoral union. Labor should bypass the task of trying to rebuild its now shattered industrial unions and move instead to the next evolutionary phase of union organization and create a sector-based form of union organization. These sectoral unions would represent the leadership of the new American Council of Unions, first on a transitional federated basis and then as conditions permitted on a more integrated basis.

One of Labor’s major weaknesses today is the lack of cooperation and coordination between unions at the point of production — i.e. in areas of strike, boycott, and other direct action activity. And the AFL-CIO in its current form has been ineffective doing anything about it. Too many in positions of union leadership are content to remain big fish in shrinking organizational ponds. Union membership and bargaining density cannot be achieved without at some point the merging of unions today into larger, more effective sectoral union organizations.
Local Mobilization Committees

The key to successfully organizing 10 million new union members in the future is what happens at the local level. As noted previously, structural organizational change at the top will not lead to the successful organizing of 10 million new union members. To achieve that level of union growth will require a mobilized effective membership base as well as the broad involvement of community forces and organizations in the organizing process. In turn, to achieve that kind of effective membership and community involvement requires extending union restructuring and re-organization down to the local grass roots level. Thus the key to organizing the 10 million lies fundamentally in the creation of the new American Council of Unions focusing on the workplace and the local community, and in particular with new Local Mobilization Committees reporting to that Council.

The current Central Labor Councils of today’s AFL-CIO at the local level would continue to exist and would report to the new American Federation of Unions. They would continue their work in the area of local politics and in the new task of developing job training, job search and placement services for the unorganized. But alongside the Central Labor Councils locally a separate local organization would take form and would report directly to the Council of American Unions structure. This new organizational form is the Local Mobilization Committee.

The Local Mobilizing Committee would be staffed by two full time paid local organizers. The two LMC co-organizers would have the task of co-ordinating organizing campaigns, boycotts, community protest actions, strike support assistance, corporate campaigns implementation, etc., at the local level under the direction of the regional American Council of Unions. This is the level where the creation of the idea of effective membership would begin, engaging union members as well as community and unorganized workers in common support activities and struggles. Here is where new centers of solidarity activity would develop and emerge, bringing together union members, die unorganized, and members of community groups in joint activities across organizations and respective membership bases. Only out of such real actions and struggles can the idea of a new effective union membership take form. But this kind of cross-union membership itself cannot develop without a formal local structure to enable it or without resources provided to those who may lead it.

It is important as well that the LMCs are bonafied local bodies staffed and supported ‘from below’ and not appointed ‘from above’. The LMCs would also work closely with the local Central Labor Councils and their affiliated unions when mobilizing support for point of production activities for a particular union such as organizing drives, boycotts, strike sup¬port, etc. In turn, the LMCs would provide job training and job search support for the unorganized. The LMC union co-organizer would be elected from among union delegates to the local Central Labor Council. The community co-organizer would be elected according to an appropriate process agreed upon by those organizations and endorsed by the regional ACU. Both co-organizers would be paid by and report to the regional body of the American Council of Unions, which would prioritize and assign their activities, as well as coordinate those activities with other regional ACUs when appropriate (e.g. a nation wide organizing drive at Wal-Mart, mass protests against the destruction of union pension plans, elimination of funding for section 10 public housing, closing of public schools in communities, etc.).

Summary Comments on Organizational Change

The above organizational proposals are only initial suggestions. There are many unanswered and other critical questions not addressed by these proposals. And it is recognized that die proposals themselves raise important new questions requiring further consideration and discussion. But the proposals flow from the fundamental premise that labor, as structured today, has shown over the past quarter century it is not capable of effectively dealing with the current Corporate Offensive. Nor will it be in the period immediately ahead as that Corporate Offensive intensifies further.

The AFL-CIO as structured today does some things well, others poorly, and still others very poorly or not at all. The revitalization of American Labor must be based on a massive new organizing campaign that will have to employ totally new strategies and tactics in order to bring in 10 million new members over the next decade. Organizing via die NLRB or even card checks won’t do it. But new approaches to organizing can only be successful if a real mobilization of the union base occurs and if this mobilization also includes the unorganized and community allies in ways not previously developed. Structural change at the top, as well as down to the local level, are both necessary to facilitate the new organizing and a new mobilization of Labor. Achieving union density in numbers is essential. But density in numbers and density in bargaining units are not necessarily the same thing, and the latter won’t happen without aggregating unions eventually at some point into new sectoral organizations. Nor will union density in any sense result without creating a new structure dedicated to the mission of mobilizing new local forces, union and non-union alike, around concrete conflicts and struggles like organizing drives, boycotts, strike support, corporate campaigns, community demands and protests, and the like.

The road back will of course not be easy. Labor’s historic shock troops in manufacturing have been decimated over the past twenty-five years and face even greater challenges immediately ahead trying to stop even further offshoring and outsourcing. The construction trades unions were ripped apart even earlier, in the 1970s, by the open shop drive led at die time by the Construction Users Business Roundtable (now just Business Roundtable), and then forced into major metropolitan enclaves where once guaranteed prevailing wages are now under at¬tack by corporate-government forces. The manufacturing unions have been shredded by corporate ‘Free Trade’ policies, runaway shops, out-sourcing and offshoring now for a quarter century. The Teamsters union has been driven into a corner by deregulation and the undermining of their once premier National Freight Agreement. Meanwhile, a new assault on the public employee unions’ basic right to bargain for their members and their pension benefits has begun to take shape. At the same time at the political-legislative level, a massive financial commitment and political restructuring by the corporate elite of the Republican Party and a corresponding shift in the leadership of the Democratic Party have enabled the corporate offensive to outflank and overwhelm liberal elements in Congress and within the Democratic Party itself Given these realities, while not abandoning political action, workers and unions must nevertheless return to their roots, their base, as their first priority and rebuild and mobilize anew.

That rebuilding requires a new structure at the top but only if it is based on a new open, democratic structure at the bottom as well. That new structure at all levels should seek to create a new kind of rank and file and new forms of cross-union solidarity activities that generate solidarity not only intra-union but across unions and between unions and community organizations as well. Most importantly, that structure must be willing to release the energy and creativity of the union membership itself without which there is virtually no possibility of organizing 10 million new members, restoring union bargaining and political density, or having the slightest chance that workers may yet check the current Corporate Offensive — an offensive about to intensify still further in the months immediately ahead.

A Concluding Thought

Sitting recently in a local working class truck stop, I had the occasion to order a cheap cup of coffee. It had brewed for too many hours in a pot that probably hadn’t been cleaned out for some time, producing that sharp bitter taste that neither cheap saccharin nor chemical creamer can tame. The coffee was bad. Period. But on the side of the cup were the words of WE.B. Dubois, the great Black thinker and activist of early 20th century America, written sometime back in the 1920s or 1930s no doubt, which said simply: “It is time to stop thinking what you are and to start thinking about what you can become” I drank the coffee slowly, savoring every word with each sip of the brackish brew. And I thought about the words of another many years ago who said to me as a younger man: “The first act of change is not the doing. It’s not even believing you can do it. It’s seeing what you’ve done before it even happens”.

Copyright May 2014

Jack Rasmus, from ‘The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush’, Kyklos Productions LLC, San Ramon, CA, 2006

Today, May 1, 2014, is International Labor Day. It is worth summing up how well American workers—and their unions—have fared over the past year; since the so-called economic recovery began in mid-2009; and for the recent decades preceding.

What’s happened to jobs, wages and incomes, health and retirement security, and other indicators of the quality of life for the more than 100 million non-supervisory wage and salary earners—the core of the working class in America—over the past decade and especially since 2009?

What a summary of the facts tell us is as follows:

*While jobs have been created for managers, supervisors, and highly skilled business and technical professionals since 2009, job levels for the core of the American working class—the category of the more than 100 million ‘Production & Non-Supervisory Workers’—is still 11 million below 2007 pre-recession levels. Manufacturing jobs are still 1.4 million fewer today than in 2007, and Construction jobs 1.3 million fewer.

*The real unemployment rate in the US is approximately 14%, when the ‘hidden unemployed’ are added to the ranks of the officially declared full time unemployed (U-3) and underemployed (U-6) estimates. That’s approximately 22 million still jobless after five years of so-called economic recovery.

*The quality of job creation since 2009 has been extremely poor by past historical standards. The US is ‘churning out’ high paying-good benefit jobs for low pay, increasingly part time/temp (contingent) jobs, with few if any benefits. 79% of jobs lost during the recent recession paid more than $14/hr., while 58% of the jobs created since recession were low pay (less than $14 and with a median of only $7.69hr.)

*While 5 million plus jobs have been added since the official ‘end’ of the recession in June 2009, more than 5 million have left the labor force or been unable to find work as new entrants—a 5+million ‘in’ and a 5+ million ‘out’ additional churn. As labor force participation has declined in general (from 66.2% to 62.9% since 2009), and has fallen especially rapidly for age groups 35 and below, previously retired workers are entering the labor force in record numbers as their savings are depleted and retirement benefits are being reduced. The fastest growing age groups entering the labor force are: age 65-69 (64% increase in participation), 70-74 (91%), and >75 (81%).

*The US economy is not only churning out high pay for low pay, and labor force drop-outs for new hires, but is also churning non-union for union jobs, in the process reducing private sector unionization to historic lows not seen since the 19th century.

*Union membership in the private sector has fallen to only 6.7% of the total labor force, or 7.3 million—down roughly 5 million since 1980 despite 45 million more wage workers having entered the labor force. And for the first time in decades, since 2009 union membership in the public sector has also begun falling since 2009, down by more than 2% points.

*The US is experiencing a chronic long-term problem in the 21st century creating jobs sufficient to keep up with the growth of its population, a structural problem in the US economy that clearly pre-dates the onset of the latest recession. Since just 2009, the ratio of employed to the US population has fallen from 63% to 58.7%. The population is growing much faster than the economy can create jobs.

*The US economy has developed a corresponding problem of inability to find jobs for the long term unemployed, whose numbers are growing as a percent of total jobless. The long term jobless as percent of total unemployed remains twice that (36%) of historical average (18%) today, five years into the recovery.

*Income inequality is growing in the US not only because the rich are getting richer, but because the US working class is locked into stagnant wage growth (in best of times) or declining wage growth (in recession or slow growth times) for the past 30 years.

*The real average hourly wage for the 100 million plus full-time employed core working class, adjusted for inflation, has declined despite nearly five years of ‘recovery’, from $8.86/hr. (adjusted in 1982-84 prices as per the US Government estimates) to $8.83/hr.

*But when adjusted for the core working class as a whole—not just full time employed—the decline in core working class income since 2009 has been precipitous—(i.e. when adjusted further for the rise of millions more part time/temp workers, unemployed, for millions of workers leaving the labor force, for millions rise of workers on disability, for millions’ expiration of unemployment benefits, and for workers’ rising share of healthcare benefits costs and reductions of pension benefits). The adjusted decline is at least 15%.

*Per US Government statistics (unadjusted per above), real median household income fell 4.1% under George W. Bush, collapsed by 9.6% since 2008 under Obama, recovering only 3.4% of the overall decline since 2012—i.e. a net loss of more than 10% since 2000.

*The share of wages & salaries of total National Income has declined steadily for 30 years, from 55.6% in 1983 to 52.0% in 2007 just prior to the recession. It has continued to fall during the recession period, 2007-09, as well as during the post-2009 recovery, to 49.1% today.

Concluding Comments

Much has been written over the past year about the growing income inequality in America, and how the wealthiest 1% households, who almost exclusively derive their income from returns on capital (capital gains from stock & bond trading, foreign exchange & derivatives speculation, interest, real estate, rents, etc.), have accrued 95% of all the national income gains in the US economy since the June 2009 so-called economic ‘recovery’ officially began.

Liberal economists like Paul Krugman, Robert Reich, James Galbraith and others have been writing numerous books and countless newspaper columns on the subject of income inequality in general over the past year. They have finally discovered in recent years the sad fact of accelerating income inequality in America, a developing trend that has been in progress for decades, at least since the early 1980s.

But while liberal economists today are finally focusing on why and how the wealthiest 1% are accruing more for themselves, not enough attention has been paid to why and how more than 100 million working class households in America have been doing so poorly—and increasingly so—during recent decades and in particular during the most recent period, 2004-2014. Nor have mainstream commentaries offered much in the way of correcting the historic decline in American working class conditions. How to improve the latter is just as important as taming the runaway capital incomes of the rich and super-rich. But only tepid and conservative proposals are forthcoming thus far from the mainstream economic profession, proposals that are long term and ‘safe’ for the owners of Capital today and do not embarrass their political friends and benefactors.

The condition of the 100 million plus working families in America today, International Labor Day 2014, is as lamentable as the accelerating accrual of income and wealth by the 1% is disgusting. Of course, the two trends are not mutually exclusive but directly related. The rich and very rich are becoming super-rich and mega-rich in large part at the direct expense of the rest.

(Note: A more detailed analysis of these trends is forthcoming in a public article by Dr. Rasmus under the title ‘An American Labor Balance Sheet: 1984-2014’. Look for a copy on his website below in coming weeks).

Dr. Jack Rasmus is author of the 2010 and 2012 books, “Epic Recession: Prelude to Global Depression” and “Obama’s Economy: Recovery for the Few”, Pluto Presss, 2010 and 2012. He hosts the weekly radio show, ‘Alternative Visions’, on the Progressive Radio Network in the USA. His website is http://www.kyklosproductions.com and his blog is jackrasmus.com. His twitter handle is @drjackrasmus.

Listen to this archived radio interview at:

http://www.alternativevisions.podbean.com

or at:

http://prn.fm/alternative-visions-resurging-immigrants-rights-movement-us-0426

SHOW ANNOUNCEMENT:
‘Dr. Jack Rasmus welcomes grass roots immigrants’ rights leaders, Nativo Lopez and David Bacon, to discuss the new resurgence in the immigrants rights movement in the U.S. With deportations under the Obama administration now exceeding 2.5 million since 2008—including half a million of legal US citizens (youth & children or deported parents)—Jack and guests discuss the key demands of the immigrants rights groups today and the resurging activity at the grass roots. Jack asks guests why the Obama administration has not introduced executive orders to defend immigrants, while continuing to hide behind the failure to pass any legislation by Congress. David Bacon explains that while millions are being deported, the administration has increased the numbers of ‘guest workers’ coming into the US to work in agriculture and elsewhere under sub-wage and sub-working conditions and bringing hundreds of thousands of skilled tech workers to the US while deporting record level millions back to Mexico, central America and elsewhere. Jack’s guests explain how free trade agreements, like NAFTA and CAFTA (and soon the TPP) play a key role in driving emigration to the US. Nativo Lopez discusses the key demands of the movement today, and in conclusion raises the question why 22,000 US agents are needed on the border today, developing new procedures for mass roundup and mass incarceration and detention in camps and rapidly expanding the use of drones and other technology. Is the border control strategy in development today perhaps a ‘dress rehearsal’ for something yet to come throughout the US down the road?”

Show Guests Interviewed:

David Bacon is a California writer and photojournalist, documenting the impact of the global economy, migration, and human rights..He was a founder of the Labor Immigrant Organizers Network, and board chair of the Northern California Coalition for Immigrant Rights, and a union organizer for two decades with the UFW and the ILGWU.His books include Illegal People – How Globalization Creates Migration and Criminalizes Immigrants (Beacon Press, 2008), The Children of NAFTA (University of California Press, 2004) and Communities Without Borders (Cornell University Press, 2006). His new book is The Right to Stay Home (Beacon Press, 2013), and is about the social movements seeking alternatives to displacing communities and criminalizing the migrants produced by displacement.

Nativo Lopez is a leader of the immigrants rights organization, Hermandad Mexicana, and has been active in Mexican and Latin American undocumented workers’ rights groups and movements in the southern California area for decades.

The following url accesses my April 23 radio interview explaining why China will experience a ‘hard landing’ economically as it struggles to address shadow banks and speculators, tame asset price bubbles in real estate and forex trading, while keeping its real economy stable. How China’s slowdown impacts emerging markets and Europe regional economies negatively is also explained. China’s economic and financial stability is the key to the near term outlook for the global economy. Listen at:

http://voiceofrussia.com/us/2014_04_23/Analyst-China-Is-The-Global-Economic-Linchpin-1143/