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Sharon Smith

Letter from the US

Recovery for the rich

(November 1994)

From Socialist Review, No. 180, November 1994.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

‘America has the most unequal distribution of income of any industrialised nation in the world. We cannot have a prosperous or stable society if these trends continue’

The richest industrial society in the world is also the most unequal. That is the conclusion of the latest census survey of the US population, issued in October. The report shows that the dramatic growth of inequality which characterised the Reagan era has actually accelerated in the 1990s. Today the gap between the richest and the poorest people in the US has reached record levels, with the wealthiest fifth of the households earning 48.2 percent of the nation’s income, and the poorest fifth earning just 3.6 percent. Between 1989 and 1993 the typical US household lost $2,344 in annual income, a drop of 7.4 percent.

Last year’s post recession economy was quite lucrative for the rich. The US economy officially entered its second year of recovery, with a growth rate of 3 percent. And per capita income rose last year by 1.8 percent. But it was pocketed entirely by the rich and then some. Forbes magazine recently published its annual list of the 400 richest Americans, who as a group are worth a record $349 billion – nearly 21 percent more than the US military budget.

But only the rich are making gains in this economic recovery. Last year 1.3 million more people fell into poverty, which is measured as those with incomes below $14,763 for a family of four. Today 39.3 million people – 15.1 percent of the US population – live in poverty, the most since 1961. And the number of people without health insurance also rose sharply last year by 1.1 million, bringing the total number to 39.7 million – 10 million of them children.

As he reported the census results last month, Clinton’s Labour Secretary Robert Reich stated soberly, ‘America has the most unequal distribution of income of any industrialised nation in the world. We cannot have a prosperous or stable society if these trends continue.’ But Reich’s concern for the poor hasn’t extended to policy making. If Reich wants to help raise the living standards of the millions of working poor in the US, he could start by raising the federal minimum wage. Four million workers earn the minimum wage of $4.25 per hour, which adds up to an annual income of only $8,500 – far below the poverty line. Although both Reich and Clinton have claimed they want to raise the minimum wage, they have announced no plans to do so.

The economy has continued to improve throughout 1994. Industrial production is up nearly 6 percent from a year ago, while unemployment has dropped below 6 percent for the first time since 1990. But the bosses seem determined to keep wage costs down. As the Washington Post recently observed:

‘The low wage sector is the fastest growing part of the US labour force. It is a risky and often cruel world where good workers bounce from employment to unemployment, to welfare and back ... worrying about health insurance, child care and the employee pension they may never get.’

Of the 4.5 million new jobs created since the recovery began, one in five is temporary. And of the 3 million new jobs created in the last year, a staggering 2.9 million are part time, according to the Labour Research Association. Rather than hire more full time workers, many manufacturing employers are forcing their workers to put in huge amounts of overtime. Overtime rates are at their highest since the weapons building frenzy of the Second World War according to Labour Department statistics.

Throughout the 1980s workers were told that they had to sacrifice wages and benefits to prevent companies from shutting down. But now that US labour costs are lower than either Japan or Europe, the employers are still demanding wage and benefit cuts. The level of bitterness felt by workers has been reflected in numerous opinion polls leading up to the November elections, causing the mainstream press to report, as the New York Times did recently, on the ‘sullen, surly’ mood of the electorate, whose anger at the political system grows ‘ever deeper’. A Time/CNN poll taken in September asked the question, ‘How much of the time can you trust the government to do what’s right?’ Only 19 percent answered, ‘always or most of the time’, compared with 76 percent 30 years ago in 1964. In the same survey, 86 percent said the wealthy have too much influence in government.

In September, 53 percent of those responding to a Times Mirror opinion poll showed their disgust with both the Democrats and the Republicans, saying there should be a third major political party in the United States. Media pundits expect millions of people to express their anger at the existing political parties by staying home on election day. Most predict the lowest voter turnout in 70 years in the November elections, based upon the low turnout in the first round primary elections held earlier this year. In some states the turnout was ludicrously low. The lowest voter turnout was in New Jersey, where just 6.3 percent of eligible voters bothered to vote, followed by Connecticut at 11.5 percent, and Texas at 12.1 percent. A Massachusetts autoworker, Oliver Dinsmore, summed up the feelings of millions of workers when he told a New York Times reporter recently, ‘I’m sick of the whole system’.

The strong economy and low unemployment have also led increasing numbers of workers to take strike action during 1994. And recently two autoworkers’ strikes against General Motors won quick victories – in Anderson, Indiana in August, and Flint, Michigan in October. Both plants make parts needed for assembly, and work stoppages there crippled GM assembly plants elsewhere. Both strikes lasted only three days; both won the workers’ central demands. And, perhaps most importantly, both strikes made national headlines.

A high level corporate executive recently complained, ‘We are seeing the end of the docile decade’. One time Republican Party strategist Kevin Phillips takes that prediction a step further in his new book, Arrogant Capital: Washington, Wall Street, and the Frustration of American Politics, when he argues:

‘The 1990s should be a revolutionary decade, perhaps the most notable in 200 years. Serious national revolutions are usually about politics, government, privilege, unresponsiveness and anger. This is exactly what is simmering – and periodically boiling – in the US of the 1990s.’

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