So called conservatives, even before being co-opted by neocon right-wing reactionaries, were fond of dredging up the laissez faire argument in opposition to “big government” intervention in the economy, albeit they entirely misrepresented Adam Smith’s position—and apply it only with regard to government regulation of business, while fully championing corporate welfare. The subsequent failure of historians and economists, and intellectuals on the left to set the record straight—to place The Wealth of Nations into the context of a worker’s manifesto—tacitly allowed this misrepresentation to prevail. The consequences have been dire, and a new age of what can be called neomercantilism is undoing the economic progress of two centuries of capitalist enterprise to the benefit of the wealth of the United States.
BusinessDictionary.com posits that laissez faire is: “One of the guiding principles of capitalism, this doctrine claims that an economic system should be free from government intervention or moderation, and be driven only by the market forces. Centered on the belief (termed invisible hand by the 18th century Scottish economist Adam Smith) that human beings are naturally motivated by self-interest and, when they are not interfered-with in their economic activities, a balanced system of production and exchange based on mutual benefit emerges.”
Smith’s criticism of government intervention in the economy was entirely directed at policies that favored the prevalent mercantilist theory of his time. In addition to protectionist policies that sought a “favorable balance of trade,” his criticisms were leveled against policies that favored “corporations” over labor, especially the freedom of labor to seek the highest wage rate for its contribution to capital. He advocated, instead, not just fair compensation for labor, but “liberal” compensation that would provide the basis for the accrual of national wealth.
His theory has since become known as the “law of supply and demand.” According to that principle, demand can only be stimulated when labor has more income than needed for survival, what we now term discretionary income that can be used to consume “the luxuries” of life. In turn, that consumption (demand for goods) would create an opportunity for expansion of production and greater profits for ownership. Business growth leading to economies of scale and greater competition would then lead to lower unit prices, thus stimulating greater demand, while always contributing to greater profit for ownership, as innovation replaced monopoly to the advantage of the business best equipped to compete. Since innovation was generally the inventiveness of labor, and labor should be free to seek its highest reward, that business best suited to prevail in the market would also be the one that paid its labor the highest wage.
Policies that support Smith’s simple model of prosperity—one with centuries of validation—can be found nowhere in today’s reactionary Republican ideology. Instead, they adhere to their centuries of mercantilist resistance to sound economic and fiscal policy, and the past three decades of erzatz economic theory which has led to the devastation of the World economy, a declining middle class, more widespread impoverishment and a telescopic widening of the income gap. They have continually thrust a greater portion of the tax burden off on the middle class especially, while providing hundreds of billions in tax shelters and subsidies for corporations that reap enormous profits aside from the subsidies.
From the first historical example of judicial suppression of labor organizations in the United States in Commonwealth v. Pullis, in which organizers of a labor strike were found guilty of conspiracy in 1806, the courts, state governors and presidents have largely acted as agents of ownership to suppress labor. The favoritism for ownership, and suppression of labor, often bloody and violent, is documented in part in “Robber Barons and Rebels,” chapter 11 of Howard Zinn’s A People’s History of the United States.
Albeit labor unrest became increasingly violent through the 19th Century, thus often requiring intervention by the authorities, the violence used to suppress labor was often premeditated, and included everything from assassination of labor organizers to mass murder at the hands of state militias (National Guard). The first minor victory for labor, the 1893 Safety Appliance Act, a worker safety measure that outlawed the link and pin coupler used by railroads, was followed in 1898 by the Erdman Act. The Act, which provided for mediation and voluntary arbitration, and made it a criminal offense for railroads to dismiss employees or to discriminate against prospective employees because of their union membership or activity was soon stripped of its force when portions of it were declared unconstitutional by the United States Supreme Court.
The violence perpetrated by labor can thus be attributed to frustration over having neither legal recourse nor means to hold out over extended periods without income, as Smith had predicated in Wealth. The first break in the long tradition of favoritism for ownership came during the Coal strike of 1902, when President Theodore Roosevelt imposed the first mediated agreement of its kind in which the federal government intervened as a neutral arbitrator.
Over the ensuing decades before WW II, events in labor unrest included the infamous “Ludlow Massacre,” in which company “guards,” engaged by John D. Rockefeller, Jr. and other mine operators and sworn into the State Militia just for the occasion, attacked a union tent camp with machine guns, then set it afire, killing five men, two women and 12 children. In 1915, Joe Hill, an internationally known labor organizer, was arrested, convicted on trumped up murder charges, and executed despite worldwide protests and two attempts by President Woodrow Wilson to intervene, and the Supreme Court upheld “yellow dog” contracts, which forbid membership in labor unions.
While winning further concessions, albeit minor, suppression of labor with the full cooperation of government continued until the administrations of President Franklin D. Roosevelt and Harry S. Truman, each of whom intervened in labor disputes largely to the greater advantage of labor into the 1950s. The intervening Taft-Hartley Act, which stripped labor of its most potent strategies, most notably sympathy strikes by unrelated unions in solidarity with an aggrieved union, following an upsurge of labor unrest following WW II, lead Truman to state prior to his veto being overridden by a conservative Congress:
The bill taken as a whole would reverse the basic direction of our national labor policy, inject the Government into private economic affairs on an unprecedented scale, and conflict with important principles of our democratic society. Its provisions would cause more strikes, not fewer. It would contribute neither to industrial peace nor to economic stability and progress. It would be a dangerous stride in the direction of a totally managed economy. It contains seeds of discord which would plague this Nation for years to come.
Labor nonetheless flourished through the boom years of the 1950s and 1960s, elevating unprecedented numbers of unskilled laborers from the margins of poverty into the middle income bracket, the consumer class.
Curiously though, labor dealt itself some of its own most crippling blows in recent history since 1980—and did so primarily over the issue of race. While globalization of commerce and outsourcing have contributed to the diminution of labor union membership as manufacturing moved to off-shore plants to take advantage of cheap labor, historical racial undercurrents in internal labor relations became exacerbated when hiring quotas were introduced during the administration of Richard M. Nixon to assure compliance with the Civil Rights Act of 1964.
Leveraging the racial tensions through reference to the outcry of “reverse discrimination” during the 1970s, Ronald Reagan became the first Republican since Theodore Roosevelt to win the white “blue collar” vote. Dissatisfied by their Unions’ ongoing support primarily for Democratic candidates, these so called “Reagan Democrats” broke ranks with organized labor and have largely remained core Republican voters.
Republican hegemony, especially at the state level, has since launched an all out assault on organized labor as well. From stripping public service sector unions of their collective bargaining rights, while taking pay concessions from the unions, to prohibitions that neutralize the collective bargaining power, the attrition of organized labor due to outsourcing has all but made organized labor impotent. To further neuter organized labor’s ability to stand against workplace abuses and ability to maintain labor’s income on par with the ever increasing cost of living, the reactionary politicians now seek to institute so called “right to work” legislation—which actually translates into no right to organize.
Globalization of the World economy, and the subsequent growth in outsourcing, or off-shoring as some refer to it, may, in the end, prove a much worse assault on the wealth of the nation than undermining organized labor. While the process of reducing organized labor to an all but helpless entity within a much greater workforce undoubtedly reduced the political friction that may have curbed outsourcing, it is doubtful that any conspiracy was afoot with that purpose in mind.
Advocates of outsourcing generally use an array of rhetorical arguments, including saying, “Cheaper imports mean that incomes can be stretched to buy more goods and services.” The argument obviates the fact that the 10.5 million people who lost their jobs in the process will get little satisfaction from the availability of goods at a lower cost. Moreover, there is no evidence that there is any truth to the statement. No evidence is at least provided, while evidence does exist that demonstrates that no cost savings is passed on to the consumer.
Just addressing the claim of passing savings on to the consumer from a rhetorical perspective, suspicion of the claim must certainly arise when the purpose of outsourcing is considered. Article after article, page after page of outsourcing services provider promises lowered costs of production or providing services with the promise of greater capacity for expansion.
While it could be argued that the price level of computers has reduced dramatically over the past decade, the more probable explanation is in the law of supply and demand. Not only are there more competitors in the market today than ten years ago, but ownership has reached a point of market saturation wherein new computers are bought primarily as gifts for college bound students or other occasions, or to replace an older computer that computed its last bit.
If the observation that there has been no reduction of the cost of services from Wells Fargo or Verizon consequent to outsourcing, the Apple iPhone provides a more substantive example of the rhetorical well-wishing of the lower-cost-to-the-consumer argument. Not only is the iPhone an enormously profitable product for Apple, but outsourcing has resulted in no reduction of the cost since it was introduced in 2007.
Aside from the jobs lost to outsourcing, it has also contributed to an expanded global market, where emerging economies with a promise to change the world are changing the world—but not for the greater wealth of the nation, not at least for those whose income is derived from ownership, investment or upper level management in global enterprise. As markets continue to expand globally, these people will continue to thrive, while the American consumer’s share of the consumption diminishes—along with the number of jobs and it’s ability to consume. The simple fact is that the wealthy no longer need the American consumer to grow wealthier. In fact, the American consumer has become an expensive accessory that no longer matches the fashion trend.
Effectively, reactionary neocon ideologues continue to violate the economic principles upon which our nation’s wealth was built, much in the same way that a pedophile who offers candy to a child in order to have their way violates that child’s innocence. Whether it is tax savings or savings at retail stores, “here, tax payer,” they say, “keep more of your hard earned money. All you need do is vote for us.”
All the while, they plot to privatize our societal safety nets for the benefit of their wealthy financiers; they plot to ease the tax burden further on those among the 1% who financed them; they plot to ease the tax burden on themselves as they moved into their lucrative “post-public service” positions as lobbyists and speaking engagements; they plot to weaken all opposition, especially organized labor; they plot and, by all appearances, have done their best to keep unemployment high in order to keep incomes from going up. This emphasis on neomercantilist policy, paralleling that of the 19th Century, has undone the wealth of the United States—though not the wealth of the wealthiest to whose bidding today’s Republican party has dedicated itself.