The New Class War

by Michael Lind

  Weimar Republic? No. Banana republic? Maybe.

  CHAPTER SEVEN

  The Workerless Paradise: The Inadequacy of Neoliberal Reform

  NOT ALL MEMBERS OF embattled Western overclasses have interpreted populist political insurrections against the establishment parties as proof of Russian conspiracies or the revival of fascism. Some members of the transatlantic elite recognize that some, if not all, populist voter grievances are legitimate. The alternative to simply dismissing populist voters as gullible dupes hypnotized by homegrown Hitlers or Muscovite masterminds is co-optation—attempts to rescue as much of the technocratic neoliberal order as possible, by making selective reforms of trade, immigration, tax, or wage policies to win the support of alienated voters and deprive populist demagogues of their constituents.

  In some cases this might work. Danish Social Democrats, for example, have reversed their political decline by adopting a more restrictive immigration policy, winning back voters motivated by that issue who had cast protest votes for populist parties.1 In other cases, ameliorative new social insurance programs might reduce some of the insecurity many workers feel in the unfriendly new economy created by neoliberalism.

  But the willingness of Western elites to refrain from imposing their deeply held left-libertarian values on their fellow citizens or to pay higher taxes to bribe the masses below them is undoubtedly limited. And if redistribution of income or assets were not accompanied by redistribution of power, the feelings of powerlessness that drive much working-class anger would remain.

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  THE IMPLICIT THEORY of technocratic neoliberalism is that the US and other Western societies at this point are essentially classless societies in which the only significant barriers involve race and gender. The people at the top got there purely as a result of their own efforts, on the basis of their superior intellectual or academic skills. Many of these corporate managers, financiers, lawyers, accountants, engineers, foundation program officers, media elites, and academics do pretty much the same kind of work that people in their professions did half a century ago, adjusted for differences in technology and industrial organization. But we are supposed to believe that they are not just old-fashioned managers and professionals, but members of a new “creative class” and “digital elite,” the “thinkpreneurs” and “thought leaders” of the “knowledge economy” who live in “brain hubs” (to use only a few of the flattering terms in the lexicon of overclass self-idolatry).

  From the assumption that a nearly meritocratic “knowledge economy” has replaced class-stratified, bureaucratic managerial capitalism follow two kinds of policies. The first are class-neutral, race- or gender-based policies to remove barriers to the advancement of racial minorities and women, including native white women. The second are policies that include skills training or retraining for unsuccessful native white men.

  Class-neutral, race-based policies in the United States include affirmative action in hiring, government set-asides for specified groups in contracting, and gerrymandering of congressional districts to create majority-minority districts likely to elect a member of a racial minority as a representative. In most cases the beneficiaries of these policies tend to be members of the affluent elite within a particular racial or ethnic group. For technocratic neoliberalism, the goal is to ensure that there is the proper racial and gender balance within the overclass, the balance that presumably would result from a perfect meritocracy. If pure meritocracy does not yet exist, then a simulacrum will be created. But as the British socialist thinker Ralph Miliband put it, “access to positions of power by members of the subordinate classes does not change the fact of domination; it only changes the personnel.”2

  The assumption that contemporary North America and Europe already have near-classless societies, to be made perfectly classless by a few low-cost policy interventions, also compels neoliberals to attribute the problems of the native white Western working class not to the class system but rather to personal shortcomings, which a number of unfortunate individuals are alleged to share.

  The most important personal shortcoming is alleged to be a lack of adequate job skills. The theory of skill-biased technological change (SBTC) was popular during the bubble years before the Great Recession. SBTC theory explained rising inequality by asserting that the “left-behind” members of the working class had inferior and outmoded skills not needed by the “creative class” or the “digital elite” in the new “global knowledge economy.”

  The premise has been that US corporations like Apple did not offshore production to China to take advantage of low-wage, unfree workers and state subsidies of various kinds. No, it is often implied, the poor Chinese workers migrating from rural areas to make iPhones in sweatshop factories in southern China in degrading conditions for a pittance had superior STEM (Science, Technology, Engineering, and Math) skills unmatched among ignorant American or European workers. Provide these “left-behind” workers in the West with appropriate skills (“human capital” in the pseudoeconomic jargon of neoliberalism) and their earnings will increase.

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  ON THE BASIS of SBTC theory, school curricula in the US and elsewhere have been reconfigured to focus on STEM skills. For a generation, the conventional wisdom has held that the “jobs of the future” are “knowledge economy” jobs like software coding. But is this really true?

  The Bureau of Labor Statistics (BLS) of the US Department of Commerce has provided estimates for US job growth between 2016 and 2026. When the fastest-growing occupations are examined, the knowledge economy thesis does indeed appear to be partly true: “statisticians,” “software developers, applications,” and “mathematicians” are seventh, ninth, and tenth in the list, respectively, although these are outranked by solar photovoltaic installers, wind turbine service technicians (construction and maintenance jobs), and home health and personal care aides.

  However, many of these fast-growing jobs are growing rapidly from tiny bases (the list also includes “bicycle repairers”). What about occupations with the greatest absolute number of job openings? Here the only STEM job category among the top ten is “software developers, applications” at number four, paying $101,790 a year. The other categories with the most openings in the US are personal care aides; combined food preparation and serving workers, including fast food; registered nurses; home health aides; janitors and cleaners, except maids and housekeeping cleaners; general and operations managers; laborers and freight, stock, and material movers; medical assistants; and waiters and waitresses.

  Among these non-STEM jobs, only two pay relatively well—general and operations managers ($100,410) and registered nurses ($70,000). These happen to be the only two that require college degrees, according to the BLS. None of the other jobs with the greatest absolute growth in the US pay more than the annual salary of a medical assistant ($32,480).3

  If the “new economy” or “knowledge economy” primarily rewarded education, rather than ownership of assets, then we would expect the greatest increase in incomes to have occurred among the top 30 percent with at least a bachelor’s degree. Instead, the gains from growth have been concentrated among those with income from capital—investors and managers with stock options.4

  In one study, in sixteen Western democracies labor productivity grew far more rapidly than average real wages and fringe benefits, but most income growth went to profits of owners and shareholders.5 Another study of thirteen advanced capitalist countries found that the growth in real wages, which had been 4 percent in the 1970s, was less than 1 percent between 1980 and 2005, while the wage share of income declined from 78 percent to 63 percent, with the rest going to income from profits, interest, dividends, and rents.6 The big money is not in “human capital” but in plain old-fashioned capital. The new economy is really a new version of the old economy—the managerial capitalist economy, not some mythical, immaterial “knowledge ec
onomy.”

  To be sure, nations with large pools of engineers and scientists are likely to do better than those without them. Even so, there are relatively few “knowledge economy” jobs as a share of the total. And the well-paid and prestigious ones that are not offshored in the future or given to foreign indentured servants like H-1B guest workers in the US who are willing to work for lower wages than natives will be highly prized, in competitions that the affluent offspring of overclass families are likely to win. The greatest payoffs as a rule will continue to go to investors, bankers, and CEOs, not engineers or scientists.

  For working-class Americans and Europeans, the jobs of the future are mostly low-wage jobs, many of them in health care. In most of these jobs, the low wages are caused not by a lack of university education, which is not needed, nor by a lack of vocational skills, but by a lack of bargaining power on the part of workers.

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  ALONG WITH GREATER access to higher education, geographic relocation is another neoliberal panacea. In addition to telling working-class citizens they need to learn to code, the purveyors of the conventional wisdom sometimes tell them they need to move to the San Francisco Bay Area or other high-tech hubs where many software coders are found.

  Influenced by “Why Do Cities Matter?”—a 2015 study by the economists Chang-Tai Hsieh and Enrico Moretti—many business journalists and pundits have argued that the US could be more productive if land-use restrictions allowed more workers to move to cities such as San Francisco, San Jose, New York, Boston, and Seattle. The grain of truth in this notion is that agglomeration effects help certain cities dominate particular industries and professions.

  Lost in the hype, however, has been the important qualification of Hsieh and Moretti: “The assumption of inter-industry mobility is clearly false in the short run.”7 In other words, neither personal nor national productivity will necessarily be raised if a roboticist moves to Wall Street or a stockbroker moves to Silicon Valley. Meanwhile, a janitor or home health aide who moves from a small town to either New York City or the Bay Area to practice the same trade could be worse off because of the higher cost of living.

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  SO MUCH FOR the neoliberal establishment panaceas of higher education, retraining, and geographic mobility. Somewhat bolder proposals to help the working class, which also avoid any heretical questioning of the labor market effects of deunionization, offshoring, and mass immigration, include more redistribution of income in the form of cash transfers or tax breaks and more opportunities for working-class citizens to start their own businesses.

  Redistributionist proposals range from expanding tax subsidies to wage earners, like America’s earned income tax credit (EITC), to the old but periodically revived idea of a universal basic income (UBI), which would allow all citizens to live at a minimally adequate level without working. While some minor forms of enhanced redistribution to mollify discontented voters will undoubtedly be tried in many Western countries, proposals for massive cash transfers are doomed for a number of reasons.

  Purchasing political acquiescence from workers who have stagnant or declining incomes with substantial amounts of cash requires an economically dynamic sector of the economy to make the bribes affordable. In some versions, radical redistributionism posits the permanent existence of high intellectual-property rents flowing from the rest of the world to tech tycoons, along with global financial rents flowing to money managers. These rents, it is assumed, will be so high and sustainable that the tycoons and money managers will gladly share them with the rest of the population in the nation-states in which they happen to reside.

  At the local level, something like this system has long existed in tech centers like San Francisco and financial entrepôts like New York and London. Local rentier interests are coddled by governments in return for their contribution to revenues. But while it may work in a few hub cities, the policy cannot be scaled up to the level of the ordinary nation-state, much less a continental nation-state like the United States, with a third of a billion inhabitants.

  It is no coincidence that Reaganism-Clintonism and Thatcherism-Blairism flourished in an era of prolonged asset bubbles. For a time, it is possible for stock market booms and real estate bubbles to fund public services and redistribution while allowing the wealthy to keep most of their gains. But the financial industry is volatile and global innovation rents quickly disappear, as a result of lapsing patents, intellectual property theft, foreign success in indigenous innovation, and the commoditization of former cutting-edge industries.

  Furthermore, there are too many opportunities for evasive tax arbitrage. Which billionaires and firms will consent to be taxed to pay for these massive schemes of national redistribution? The ones who hide their wealth in the Cayman Islands, or others, perhaps, who hide it in Panama or Jersey or Switzerland?

  Can other sources of revenue pay for massive, permanent cash transfers to the working class as well as the poor? A “robot tax” has been endorsed by French socialist Benoît Hamon and American capitalist Bill Gates, to fund a UBI as a solution to the as-yet-nonexistent problem of mass technological unemployment. But if robots were cheap and common enough to cause mass unemployment, the commoditized robot industry might not generate enough profit to support a massively expanded welfare state; you might as well try to pay for a universal basic income with a microwave oven tax. If, on the other hand, robots were scarce and selling for a premium, technological unemployment would not be a problem—and the robot tax perversely would encourage the substitution of low-wage workers for advanced machines, putting the Industrial Revolution into reverse.

  Nor can a few niche advanced manufacturing sectors pay for the massive redistribution from the few to the many required by the redistribution strategy. The incentive to invest to increase productivity in manufacturing and services at home is undermined by neoliberal trade policies that boost profits more easily through the offshoring of high-value-added production and low-value-added activities alike. Even worse, in the nontraded domestic service sector, flooding the low-end labor market with poorly paid and poorly educated immigrants reduces the incentive of service industries to increase their productivity by investing in labor-saving technology or reorganizing their business models to minimize the employment of unskilled labor.

  In short, neoliberal economic strategy itself, because of its bias in favor of business models relying on cheap labor at home and abroad, tends to undermine the domestic productivity growth needed to pay for the massive redistribution that, it is hoped, would align the interests of workers and managerial elites.

  It is no surprise that greatly expanded redistribution is supported by many Silicon Valley investors and executives who hope that more transfer payments may anesthetize the population to the pain of low wages and rising inequality.8 Marx called religion “the opiate of the masses.” In redistribution, the managerial elite has found a new opiate.

  Or maybe not. In the unlikely event that a UBI was adopted by any country, it might create enormous political pressure on the part of many voters to drastically cut even reasonable levels of legal immigration in order to prevent the country from becoming a welfare magnet. In addition, families with one or a few children might denounce families with many children for diluting shares of the national dole. Advocates for the poor might try to increase UBI amounts by means-testing the giveaway, turning the affluent into enemies of the program. Far from ending class war and promoting social justice, in politics a UBI might well incite a Hobbesian war of all against all.

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  RECENTLY A RIVAL approach to reform, antimonopolism, has attracted growing attention and support among American progressives.9 Based on a revival of the long-moribund small-producer republicanism of William Jennings Bryan, Louis Brandeis, and Wright Patman, this school blames inequality and a host of other social ills on increasing “concentr
ation” or “monopoly” and proposes a radical antitrust policy as a panacea. Breaking up large firms into smaller ones, it is claimed, will increase opportunities for Americans to exit the labor market by transitioning from wage earners to small business owners. Those who continue to sell their labor for wages will have their bargaining power increased, and the monopsony wage-setting power of employers reduced, by a government policy of breaking up big employers into a greater number of smaller ones—so it is said.

  Praising small business is certain to be an applause line in most Western democracies, given popular nostalgia for old-fashioned small-town and rural life. But multiplying the number of small firms will not help the wage-earning majority, because small firms pay poorly. In the US, large firms with over five hundred workers in 2007 employed 44 percent of all workers but only 28 percent of low-wage workers. Firms with fewer than ten workers employed only 20 percent of the workforce but 42 percent of low-wage workers.10

  Some of the new antimonopolists have suggested that breaking up big firms can increase the bargaining power of workers. But the idea that janitors will be in a better position to bargain for higher wages if Facebook is broken into three or four or five giant successor firms is implausible, to say the least.

  In the US, firms with more than five hundred employees account for 51.5 percent of all employment.11 To increase worker bargaining power, should each firm with five hundred employees be broken up into two firms of 250 employees, or ten firms of fifty workers? What about one hundred firms of five workers apiece? Compared to more direct prolabor measures like minimum wages, collective bargaining and limits on global labor arbitrage, pulverizing the most productive firms in the economy is a very roundabout and inefficient way to try to raise wages, like burning down a barn to roast a pig in the famous fable by Charles Lamb.12