The Plutocrats versus the Precariats: Or the 1% versus the 99%

In February 1987 I visited El Salvador, Nicaragua and Costa Rica with a group from the United Church of Christ Northern California Nevada Conference. In the late 1980’s people from Central America were seeking sanctuary in U.S. churches and our group was sent to the area on a fact finding mission. As part of that visit a few of us met with a leading figure in ARENA, Alianza Republicana Nacionalista (National Republican Alliance). ARENA was founded in 1981 by Roberta D’Aubuisson and Mercedes Gloria Salguero Gross and it controlled the National Assembly until 1985. Alfredo Cristiani, a ARENA leader, was elected to the presidency in 1989. The party  controlled the presidency from 1989 to 2009. 

At the time of my visit ARENA was very pro U.S. Our host told us that ARENA’s struggle was to honour the principles of the American revolution, build a secure state in order to protect foreign investment and to give free reign to the market. At one point he suggested that El Salvador would be better off as a U.S. state.  If you were looking for conservatives who backed the military and were backed by the military, ARENA was the place to go.

The gentleman we met was a member of one of the estimated thirteen families who controlled 80% of El Salvador’s wealth. We met him at a furniture factory owned by his family. We were told to park next to his car in the parking lot. On the back window of his car was one of those small yellow signs, only instead of it saying “Baby on Board” it said “Angry Man on Board.” In our far ranging conversation I distinctly remember him saying at one point: “I keep my labour force healthy enough to work but not healthy enough to rebel.” You can bet there was no workers’ union in his factory.

He made this comment pleasantly enough, assuming that we would both see the wisdom of his strategy and applaud him. It was a striking statement of purpose and reality, and it has stayed with me for all these years. You might say that 1987 was a long time ago and that this particular conversation took place in a “third world” country, so no need to get overly excited. Perhaps.

On February 26, 1997 Alan Greenspan testified before the, U.S. Senate Committee on Banking, Housing, and Urban Affairs. In his testimony, Greenspan said that “benign inflation outcomes” were beneficial for the economy. He also said that benign inflation was a result of “the rate of pay increase [being] markedly less than historical relationships with labour market conditions would have predicted...”And further that the “atypical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity.”

In his Howard Zinn Memorial Lecture[1] Noam Chomsky said of Greenspan’s testimony:

He said a lot of success of this economy was based substantially on what he called “growing worker insecurity.” If working people are insecure, if they’re part of what we now call the “precariat,”[2] living precarious existences, they’re not going to make demands, they’re not going to try to get wages, they won’t get benefits. We can kick ‘em out if we don’t need ‘em. And that’s what’s called a “healthy” economy, technically. And he was very highly praised for this, greatly admired.[3] 

Perhaps not as dramatic as “not healthy enough to rebel,” but similar in tone and intention, if indeed Chomsky’s interpretation of Greenspan’s testimony before Congress is accurate.[4]

In Britain, under the rubric of having a “flexible labour market,” it is hard to deny that worker insecurity is becoming more the norm. By a flexible labour market Britain means a lightly regulated economy, as opposed to the more heavily regulated economies throughout Europe. What it has meant for workers can be characterised by the following:

• Decline in union membership and power;
• Zero-hour contracts (workers are on-call with no fixed hours, are paid only for hours worked, lack full benefits or receive no benefits at all, and often cannot take other jobs);
• Stagnating wages (the majority of people on state benefits actually have a job, or jobs, but still can’t make ends meet);
• A drop in the share of national income taken in wages;
• An increase in household debt; and
• Weak demand.[5]

I have often wondered why management so disrespects workers, and in our now metaphorical language of protest, why the 1% so disrespects the 99%. After all, someone has to make the bricks and someone has to pile bricks on top of each other so the 1% can have their summer homes, not to mention their yachts and private jets. However, the truth is, a poorly paid and insecure workforce is less likely to protest and rebel. Obviously, this is not about respect. It’s about money and politics. As Mark Hanna, Ohio Senator from 1897 to 1901 said: “There are two things that are important in politics. The first is money, and I can’t remember the second.” 

A few months ago the Human and Nature Dynamics (HANDY): Modeling Inequality and Use of Resources in the Collapse or Sustainability of Societies[6] was published, a controversial essay on mathematical models for understanding and predicting the collapse of civilizations. HANDY is a model that calculates the affects of population and resource use on human societies. For my purposes, the following quotes are pertinent:

...humans can accumulate large surpluses (i.e. wealth) and then draw down those resources when production can no longer meet the needs of consumption... Empirically, however, this accumulated surplus is not evenly distributed throughout society, but rather has been controlled by an elite. The mass of population, while producing the wealth, is only allocated a small portion of it by elites, usually at or just above subsistence levels.

It allows for the two features that seem to appear across societies that have collapsed: the stretching of resources due to strain placed on the ecological carrying capacity, and the division of society into Elites (rich) and Commoners (poor).

 ...over exploitation of natural recourses and strong economic stratification – can independently lead to a complete and irreversible collapse of a society.

HANDY studied past civilizations that collapsed, some of which completely disappeared and others that muddled along for some time. The authors, however, go one further and use HANDY to imply possible outcomes for today’s civilization. If HANDY is accurate, things don’t look good. We are both over exploiting natural resources and are witnessing the stratification of our economy, the link between the two not being accidental. Indeed, a study from Princeton University entitled Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens actually claims that the United States is no longer a democracy but is instead an oligarchy. 

So what can be done? Does our economic insecurity, which also means our lack of political power, make it impossible for us to protest or even rebel if necessary? Does the fact that in character and action we are consumers in a consumer dominated capitalistic society make it impossible for us to, for example, boycott for change?

More next week.

Copyright © 2014 Dale Rominger

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[1] You can find the lecture in Chomsky, Noam. Occupy. New York: Penguin Books, 2012, p. 23. Or on AlterNet.
[2] Chomsky distinguishes between the plutocrats, a small minority of the very wealthy who control the economy and government, and the precariat, “people who live a precarious existence at the periphery of society. It’s not the periphery anymore. It’s becoming a very substantial part of the society in the United States, and indeed elsewhere. And this is considered a good thing (Chomsky, Noam. Occupy. New York: Penguin Books, 2012, p. 33).
[3] Chomsky, Noam. Occupy. New York: Penguin Books, 2012, pp. 33-34.
[4] In his testimony Greenspan went on to say: “If heightened job insecurity is the most significant explanation of the break with the past in recent years, then it is important to recognize that, as I indicated in last February's Humphrey-Hawkins testimony, suppressed wage cost growth as a consequence of job insecurity can be carried only so far. At some point, the trade-off of subdued wage growth for job security has to come to an end. In other words, the relatively modest wage gains we have experienced are a temporary rather than a lasting phenomenon because there is a limit to the value of additional job security people are willing to acquire in exchange for lesser increases in living standards. Even if real wages were to remain permanently on a lower upward track than otherwise as a result of the greater sense of insecurity, the rate of change of wages would revert at some point to a normal relationship with inflation. The unknown is when this transition period will end.”
To read the complete testimony click here.
[5] See, for example, Workers have become the prey: now a natural balance needs to be restored.
[6] Safa Motesharrei, Jorge Rivas and Eugenia Kalnay. March 19, 2014. To read the essay click here.