“Low-Wage Capitalism” Author Speaks at Malcolm X Library
Goldstein Offers Marxist Analysis of the Current Economic Crisis
by MARK GABRISH CONLAN
Copyright © 2009 by Mark Gabrish Conlan for Zenger’s Newsmagazine • All rights reserved
When Fred Goldstein, economic analyst and contributing editor to the Workers’ World newspaper, began his presentation on the current economic crisis at the Malcolm X Library on April 18, he waxed nostalgic about the library’s namesake. “I had the great pleasure of seeing Malcolm X many times,” he recalled. “I lived on 125th and Lenox in New York City, near where he used to address crowds at the Hotel Theresa.” But Goldstein, who was there to promote his new book Low-Wage Capitalism — or, to give its full and rather awkward title, Colossus with Feet of Clay: Low-Wage Capitalism: What the New Globalized, High-Tech Imperialism Means for the Class Struggle in the U.S. — was all business when he spoke about the current situation as a classic Marxist “crisis of overproduction,” brought on because today’s capitalists have been too successful at driving down wages and working conditions worldwide.
“The book is about the globalization of capital, a wide restructuring of world capital over the last 30 — and especially the last 10 — years,” Goldstein explained. “It’s had a profound effect on workers all over the world, especially in the United States. Since China and India opened themselves up to capitalism, the worldwide working class available for multinational corporations to exploit doubled in 20 years, from 1.5 billion to 3 billion people, mostly in low-wage countries.” This, Goldstein said, was one of the two factors driving the current economic crisis; the other, he added, was “the simultaneous technological revolution with computers, the Internet, satellites, software, supertankers, containerization [the ability to ship freight worldwide without local workers having to load and unload it whenever it’s transferred from one ship to another] and jumbo jets.”
What this did, Goldstein said, was “make it possible to break up capitalist production, place different parts of it all over the world, and play the workers of the world against each other.” Before globalization and high-tech, he argued, capitalist economies had colonized the less-developed world primarily to suck out its natural resources for use as raw materials to produce goods in advanced countries — and they used the native workers primarily on plantations, mines, harbors and other low-tech workplaces. “The technological revolution and the spread of capitalism worldwide have changed that,” Goldstein said. “for the first time, a worker in Detroit competes directly with a worker in Thailand for the same job. These low-wage workers are pitted against the workers in high-wage countries, and this is bringing down the wages of all workers, worldwide.”
Goldstein cited the oft-quoted but little-appreciated statistic that real wages of American workers have been going down steadily since the early 1970’s (except for a brief uptick in 1999 and 2000 driven by the high-tech boom) — and said it was because their expenses were rising while their incomes were falling that so many of them went into debt even before the current collapse. “Before the crisis, American workers were up to their noses in debt from credit cards, mortgage loans, auto loans and student loans,” he explained. “Now, workers are out on the streets in tent cities because there are no reserves left for anybody.”
Most of the media coverage of the current crisis describes it as having its roots in the housing market, which became wildly inflated during the late-2000’s “bubble, and on the ability of financial institutions to package ordinary housing loans into so-called “mortgage-backed securities” and speculate on them until they lost all connection to the underlying value of the loans which backed them. The crisis, Goldstein said, “is being described as greed, speculation, gambling, excessive deregulation. It’s described as fundamentally a financial crisis, a crisis of credit. All these things are true. There is unlimited greed on Wall Street, speculation, deregulation and a credit crisis.”
But, Goldstein argued, those factors are merely symptoms of the real cause: global capital’s new-found success in doing what capital has always done — drive down workers’ wages to the bare minimum needed to survive — and thereby eliminating working people’s ability to buy the products they produce. In the 19th century Karl Marx coined the phrase “crisis of overproduction” to describe the situation in which capitalists have forced down wages so much that they can’t sell anything because no one, except the capitalists themselves, has any money to buy more than the barest necessities of life. That, Goldstein argued, was the cause of the great financial panics of Marx’s time, the worldwide Great Depression of the 1930’s, and the crisis of today.
“Capitalism is based on profit,” Goldstein said. “Nothing gets provided unless some boss makes a profit. That is the lever, the starting point, of all production. Every corporation competes to make as much profit as possible. They try to get as many markets as they can, and they try to get labor costs as low as possible. As workers, we ‘own’ only one thing: our ability to work at something. We have to sell that to an employer. There’s a vast number of employers and millions of workers, and we have to find someone to sell our labor power to. They pay us just enough to survive, while the corporations get richer and richer because they get our unpaid labor. They own what we create, they sell it, and they keep all the money except what they pay us.”
The problem for the capitalists, Goldstein explained, is that though the only reason they set up businesses and hire workers to produce goods or services is to make a profit, they don’t know until they actually market the products whether or not anyone will buy them. “Capitalism has an infinite capability to expand production,” he said, “but the capacity of all of us workers to consume either stays the same or goes down. So this always ends in a crisis. These crises have been going on since 1825. The 1929 Crash was one instance in which the crisis became so severe that capitalism collapsed worldwide. We are in a similar situation.”
The roots of the current crisis, Goldstein argued, actually came in the later part of the 1990’s, during the so-called “high-tech bubble.” “The Internet and fiber-optic cables had been perfected, and new technology companies were being created every two to three weeks,” Goldstein explained. “At the end of the Clinton administration the whole thing collapsed, and [then-Federal Reserve chair] Alan Greenspan tried to stimulate the economy with lower interest rates.” What happened next was a “recovery” for the capitalists but not the workers, Goldstein explained; “In the first 27 months of the capitalist ‘recovery,’ 600,000 jobs were lost.”
According to standard (capitalist) economic theory, that’s not supposed to happen — a “recovery” is supposed to lead to more hiring and higher wages, not massive layoffs — “so Greenspan took some measures,” Goldstein said. “He lowered bank interest rates from 5.5 to 1 percent. He didn’t lower credit card, mortgage loan, auto loan or student loan rates. In February 2004 Greenspan made a public announcement that adjustable-rate mortgages are good for you, but he said this when interest rates were at rock bottom and were bound to go up. He was trying to deal with the crisis that was brewing because capitalism wasn’t coming back fast enough.”
Greenspan’s artificially low interest rates contributed to a boom in housing construction, which is what finally started putting people back to work, Goldstein said; between 800,000 and 1 million construction jobs were created by the boom. By the end of 2007, Goldstein explained, these new workers had built 8.5 million new housing units — “but there were only 6.5 million new households. They were building as fast as they could and trying to take advantage [of the housing boom], so to fix a crisis of overproduction in technology, they created a new one in housing” — and it was in order to move these new housing units at a profit that banks and financial institutions created all those exotic loan instruments and left millions of new home “owners” vulnerable to upward “resets” in their interest rates, income losses, health emergencies or anything else that might make them unable to afford their mortgage payments.
“That’s what made the whole economy come down,” Goldstein said. “All the banks which had made these loans lost because the borrowers couldn’t pay. They tried to bridge the gap by shoving credit cards at people until the average household credit debt was $9,000. The whole thing collapsed, not just housing. The auto industry had been in a race for world markets and they had the capacity to produce 18.5 million cars per year in the U.S., but they could only sell 10 million. That affected productivity throughout the rest of the economy.” Goldstein said a particularly dire sign was a drop in the demand for microchips, the tiny wafers of silicon and other substances that power your computer, cell phone, and just about every other electronic high-tech device. “The microchip industry is important because microchips are in all new electronic devices,” Goldstein commented grimly, “and when that industry shrinks you know capitalism is shrinking.”
Goldstein said that “there’s a lot of discussion as to whether this is the Great Depression or not,” and added that he didn’t think anybody really knew — though the article he had in the April 23 issue of Workers’ World, which was distributed at the meeting, was scornful of liberal economists like New York Times contributor Paul Krugman, who are calling it merely a “recession.” But Goldstein suggested one way in which the current crisis might actually be worse than the Great Depression — because the heavy-duty expansion in military spending for World War II that finally ended the 1930’s Depression is no longer an option, not with the U.S. already spending more on defense than all other countries in the world combined and the U.S. military overextended in protecting capitalism worldwide.
“Right now, the things that have driven U.S. capitalism for 70 years — war, militarism, technology, driving wages down and credit — are all pretty well exhausted,” Goldstein said. “They’ve given money to the banks — and all the banks that have received it have shrunk their lending. Credit isn’t going to do it. The military at the present level of operation, with 1.5 to 2 million Americans under arms, isn’t going to do it. Most of the military production of today is high-tech weaponry that is not a major economic stimulus. And they’ve already driven wages down.”
Goldstein argued that the best we could expect under capitalism is another recovery like the one from the high-tech boom a decade ago — one in which only the capitalists recover while the workers’ income and well-being sink even further down. “They’re talking about a ‘recovery’ as ‘only’ 10 percent unemployment,” he said. “They’re holding job fairs with 300 people competing for five jobs. We’re losing 600,000 jobs a week. It seems like we shouldn’t be waiting for the capitalist economy to come back. We should be preparing for struggle.”
What Goldstein wants to see come out of the current crisis is “a mass movement, like in the 1930’s,” that will unite all the victims of American capitalism and pay particular attention to the struggles of people of color, undocumented immigrants and Queer people. “Racism is growing,” he said. “The police are getting worse. More young Black and Latino people are being put in jail. There are more ICE [U.S. Immigration and Customs Enforcement] raids on undocumented workers. The union rank-and-file has to get rid of its leadership. We have to build unity between working-class organizations and the community.” The big movement Goldstein wants to see will fight against racism, sexism and anti-Queer oppression, and for a single-payer system that will give all Americans access to health care — “but, above all,” he said, “it has to fight for jobs.”
As an example of the sort of struggle Goldstein has in mind, he cited the workers at the Republic Doors and Windows factory in Chicago, who last December responded to the news that their factory was being closed in three days and they were being let go with no severance pay or benefits by seizing the plant. They also organized pickets at the Bank of America, because it was that bank’s refusal to lend money to Republic that had led the company’s owners to decide to close the plant. “Obama himself came to support them,” Goldstein said, “and so did the governor, the city council and organized labor. The workers said they would hold on to the plant until they were given what they wanted, and Bank of America finally paid off.”
Goldstein said the Republic workers got their demands met as “a concession to the fear that this could become contagious, that it could spread to Detroit, and it got them off the front pages. This has to spread. The idea that workers are entitled to jobs has to spread. This has to become a movement. In New York we have a ‘Bail Out the People’ movement to encourage people to start to unite — workers and unemployed, documented and undocumented. We have to unite. We have to defend Black workers against racial profiling and Latino workers against raids. We are coming to the end of a long night of political reaction, where workers have been pushed back so much that now they’re going to push forward. … We have to use this next period to prepare, not to wait for Obama or the capitalist economy to come back on its own. All the movements need to come back together, because there’s no other way out of this.”
