US inequality gap hits record high

 by Richard Mellor
Afscme local 444, retired

The inequality gap in the US reached a record high in 2012 according to a recent BBC report.

According to the report, the top 1% of US earners received 19.3% of household income surpassing the previous record set in 1927.  Overall, the pre tax incomes of the top 1% rose 19.3% in 2012 compared to a 1% increase for the rest of us, with the top 10% of all households taking almost half of the national income.

USA Today reported yesterday that according to an AP study, four out of five US adults, “..struggle with joblessness, near poverty, or reliance on welfare for at least part of their lives…”  The situation among white workers is deteriorating as well as they face increased economic insecurity, and pessimism among this group is at its highest in 25 years with 63% of whites regarding the economic situation as “poor”. More than 19 million whites fall below the US poverty line of $23,021 the report claims, that’s 41% of the country’s poor.  This is double the number of blacks for obvious reasons as there are more of them. 

Percentage wise the poverty rate among blacks is much higher: “By race, nonwhites still have a higher risk of being economically insecure, at 90 percent.”, the report states,  “But compared with the official poverty rate, some of the biggest jumps under the newer measure are among whites, with more than 76% enduring periods of joblessness, life on welfare or near-poverty.”

"Poverty is no longer an issue of 'them', it's an issue of 'us'," says Mark Rank, one of the authors of the study. This is of great concern to the ruling class as we outnumber them and it is their ability to provide a significant portion of the population with higher living standards (whites) and opportunity that helps them maintain dominance of economic and political life.  Nationalism, racism, sexism (women still earn 77 cents to a man’s dollar) and other divide and rule tactics are less effective the more people fall by the wayside as capitalism sinks deeper in to crisis.

This is far from the optimistic, I’ll say Jubilant, tone after the collapse of the evil Soviet empire in 1989 when the Wall Street Journal announced that “We Won” and that finally history had come to understand how the world really works. Full Spectrum Dominance was the mantra as US capital was now free to travel the globe, to go where it wanted and when, unhindered by unions, nation states or resistance movements, protected as it is by US military might.

But 95% of all income gains in the last three years have gone to the richest 1% of Americans the BBC report states and this also contributes to the anger and hatred of the rich that exists beneath the surface of US society. The predatory wars on behalf of US corporations have to be financed and the unelected rulers of society ensure that it is workers and the middle class that pay, which is why we see the declining living standards described here.

The US bosses are well aware of the dangers that increased poverty across broader sections of the US population brings.  They are very concerned about social unrest which has led to increased domestic repression and the beefing up of state security forces as I pointed out in an earlier piece.  The situation will worsen and the years ahead will see some serious and protracted battles domestically as Americans are forced to fight back.  A cursory glance at US history and our labor history will remind us of the violent nature of the US state apparatus and the 1% will reveal just how ruthless they are as the working class offensive takes shape.

Despite the shifting of the industrial working class from the US and Europe to Asia and the huge movements against global capitalism that have arisen in Latin America, global capitalism cannot be cast in to the history books without the US working class settling accounts with the US ruling class, the most powerful and heavily armed of the global bourgeois.

The power of the US mass media is a force to be reckoned with as it penetrates every aspect of our lives.  It’s aim is to confuse, to lie to present the world not as it really is but as they would like it.  They sow division in order to weaken and prevent the unity of the working class.  The use of mindless media and sports without end is aimed to numb the mind, “I wish my co-workers could get as fired up about what’s happening at work as they do about sports.”, a young worker said to me recently.  There are a lot of sideshows, but in the last analysis, consciousness has a material base, objective reality reigns, and the traditions of the American working class will emerge with force as workers see no alternative but to fight.  Workers know it means a fight and we always seek the line of least resistance but the bosses won’t let up. 

On a final note, Peter Phillips and Brady Osborne, two Sonoma State University professors, have an interesting piece about the global capitalist class and its composition, the Transnational Capitalist Class. They point out that a “group of 161 individuals represents the financial core of the world’s transnational capitalist class. They collectively manage $23.91 trillion in funds and operate in nearly every country in the world.”

It is worth a read and is at Michel Chossudovsky’s site the Centre for Research on Globalization

Buffet and Lemann: two peas in pod

Jorge Lemann: won't eat what he produces

by Richard Mellor GED

Afscme local 444, retired

In a previous piece I commented on New York City’s mayor, Michael Bloomberg, having a certain worldview.  He believes that the city’s services and no doubt the existence of the city itself, is made possible through the financial generosity and sacrifice of billionaires like him.  In response to the accusation that NYC has become two cities, one for the rich and one for the poor under his governance, Bloomberg denies it and says, “if to some extent it is, it's one group paying for services for the other."  This reflects two separate and distinct views of the world based on class.

People like Bloomberg, Warren Buffet and their colleagues, are ruthless thugs really.  You cannot accumulate $27 or $45 billion dollars without being so, excepting a lottery win. They believe they are where they are because they are special; because they are smarter than those who get up and work for a wage all of our lives.  How can they not be smarter, they’re rich and don’t work.

Every ruling class justifies its rule this way and each member of the ruling class accepts that they are where they are through their hard work and diligence.  For the rest of us, just get off your butts and be prepared to take the risks.

But like all ruling classes, they are where they are through their control of the forces of production in society, something that overwhelmingly comes to them through family ties. Functioning as owners of society’s productive forces and wealth is a set up that their state, or what most workers call government, keeps in place through violence, and coercion.  Just look at that photo of the heavily armed police at that peaceful WalMart protest.  What are the police there to protect?  They are not there to ensure that the workers demands are met, that they get a better deal than starvation wages from the owners of WalMart who do no work yet posses more wealth than 90 million Americans. The police are there to defend the Walton family’s wealth.

These people have nothing in common with workers.  They may be Americans in name like us, or British, Japanese or South African.  On days like today, remembering the victims of the attack on the World Trade Center in 2001, they call for national unity; we are all together they claim. But they have a different view of the world.  This difference is greater than any religious, racial or national differences workers have between each other. Despite all the weaknesses and horrific things workers can resort to as society degenerates or as non-owners, we are far more collective creatures by nature of our daily existence in capitalist society.

I was reading in Bloomberg’s magazine, Business Week, about one of the 1%’s heroes.  Not Gates or Buffet, one of their heroes from abroad, a Brazilian.  His name is Jorge, Paulo Lemann; he’s also Swiss. Lemann is a coupon clipper that runs an outfit called 3G Capital. Lemann and his partners have been on a bit of a buying spree and now own H.J Heinz , Burger King, and Anheuser-Busch.  Burger King was once owned by another bunch of coupon clippers in a club called Cerberus that had the imbecile Dan Quayle on its board; the connection to established political families is a plus in the business world.

Lemann’s 3G and Buffet’s Berkshire Hathaway have equal stakes in Heinz despite Buffet putting up three times as much cash according to BW.  So Buffet trusts this guy. Not only that, Buffet refers to him as, “classy” and admits that Heinz will be, “Lemann’s show” according to BW. Buffet recognizes ruthlessness when he sees it.

Lemann has already proved to Buffet how “classy”he is firing 600 of Heinz’s office

Buffet with one of his employees

staff in the US and Canada, about 350 of them in Pittsburgh PA. And when they bought Burger King from Goldman Sachs, Bain Capital of Mitt Romney fame and a couple other coupon clipping outfits Lemann was even classier, ridding the firm of 28,000 employees, or putting it in business lexicon, shoving “…28,000 employees off Burger King’s balance sheet.”

Lemann brought in a former railroad executive to run Burger King, the man knew nothing about fast food, but that doesn’t matter as the food is not the object of this exercise. Whatever form of production the owners of capital choose to engage in, it is not the finished product as an object of consumption or use that they’re after, it is the surplus value contained in the commodity and realized in its exchange that matters. “What’s important is not knowing hamburgers, it’s knowing how to lead a company” says a former colleague; “It’s the kind of intelligence that transcends any specific business segment”. It’s about profits. 

Could Marx have been any clearer when he wrote:
“A schoolmaster is a productive laborer when, in addition to belaboring the heads of his scholars, he works like a horse to enrich the school proprietor. That the latter has laid out his capital in a teaching factory, instead of in a sausage factory, does not alter the relation.”

Yep, Jorge is a real hero.  He surfs, (30 foot waves says BW) plays tennis even playing in a Wimbledon event.  In fact, Jorge admits that it wasn’t the things he learned at Harvard that gave him, “…a certain confidence when it came to taking risks.” It was that 30-foot wave he surfed in Copacabana. It all comes down to be prepared to take risks, take a chance.  If you’re bold enough to take a chance you can become rich and famous like Jorge and others like him.  The more than $30 million his dad left him wasn’t what got Trump started of course, and that Lemann’s Swiss father was a dairy entrepreneur didn’t give him a certain confidence, a willingness to take a risk someone without that sort of backing might pass on. When you fail, as George W. Bush did in most of his ventures, the moneyed interests, family or friends are there to rescue you.  Who won’t take risks with that backing? They’re not risks at all.

Lemann went to the American School of Rio de Janeiro.  This school is an institution designed to develop and strengthen Brazilian capitalism and its ties to US corporate interests.  Its creation was made possible by funding from the U.S. Department of State, the Ford Foundation, private individuals, corporations, and the American Chamber of Commerce. So Jorge is not just an ordinary guy who pulled himself up by his bootstraps.  He’s not a self made man, there’s no such thing. Everyone has help and people like Lemann have the most help, the most handouts, have all the connections in the right places.

Jorge Lemann places money above all things, not in the same way as workers do, to pay the rent or mortgage or feed the family or for that little extra cash for pleasure.  People like Lemann seek to accumulate capital, live through the profit of capital as opposed to productive labor.  He places the accumulation of money above social needs. This is why Warren Buffet and Sam Walton, the retail outlet’s founder, gave him an audience.  Lemann subscribes to hatchet man Jack Welch’s business philosophy, the 20-70-10 rule on how to deal with employees, “Promote 20 percent…maintain the middle 70, and fire the rest.”  A simple thing really.

Lemann may be a capitalist involved in the production of food and beverages, an important aspect of productive life for human society.  But he doesn’t eat the stuff he produces. He ate a Burger King hamburger once and wasn’t impressed.  “What he liked about Burger King was how it generated cash.”,  He admires the Goldman Sachs model as well, “Innovations that create value are useful” is one of the favorite maxims.  We must be clear that by “value” capitalists mean surplus value, the value created above that paid out for wages, value for which the capitalist gives nothing in return and that is the source of their profits: “People say that the customer comes first and all that”, says Vincent Falconi, a management consultant hired by Lemann when he owned the Brazilian beer company AmBev that provided the seed money for the purchase of AB InBev “but actually it’s cash”

And cash flowed in to InBev which sells one in every five beers in the world according to BW.  But most of it went in to Lemann and his partner’s bank accounts.  This no doubt helped replenish the $6.4 million Lemann and his partners were fined by the Brazilian regulators for crooked dealings at AmBev.

According to Business Week, Heinz is different as there is “less fat to trim”, so “How then, to wring more value from Heinz” is the question Business Week poses. As workers we know about how bosses “squeeze”more value from a company only too well; how they “trim the fat.” We experience it in the unemployment line, longer hours for those that don’t get laid off, less pay, increased pace of work as job cuts mean fewer hands doing more.

So far production, jobs at Heinz are still intact, but “workers are nervous” says one Union official, and so they should be.  This perpetual insecurity and fear is another cause of stress and the by-products of it, poor health, family break ups, drug and alcohol abuse and domestic violence. Waiting to be fired is not freedom. But that’s the market.  The Union official has no alternative to the waiting, or the unemployment that follows “fat trimming”. Fighting back, taking the production of society’s necessities out of the hands of the Jorge Lemann’s of this world is not something they consider.

Maybe I’m being a bit selfish here because writing about this is a sort of catharsis for me. It keeps me on my political toes, reminding me (and hopefully some who read it) of how the world really works and how absurd it is that the production of a social necessity like food is in the hands of private individuals and that production is set in to motion only if profit accrues to the owners of capital like Lemann, the moneylenders and other coupon clippers. It reminds me of who my enemies really are.

Lemann could have, as the quote from Marx stated above, invested his capital in condom production or a mining concern, it matters not to these people.  What matters is the end result, more money coming out of the process than went in.

A friend I talk to about these things worried that to take these important social functions out of the hands of private individuals would mean a bloodbath, that we will deny them life itself.  That is not necessarily so. It has not been workers that initiated violence in the historical struggle for some control over our lives at work and the respect and dignity that comes with it.  It has been the bosses and their government that resorted to violence, who hired gun thugs and entire armies to keep working people down.  The violence against strikers; the black folks who fought to eliminate Jim Crow and the apartheid south, and all Americans who fought for equality was always initiated by the state and its agents.

The Jorge Lemann’s , Warren Buffets and Donald Trumps of this word are all welcome as productive contributors in the society so many activists are fighting to build.  They just aren’t going to continue to live off the labor, poverty and misery of the vast majority of humanity.