Sie sind auf Seite 1von 40

DOLLARS

Trump’s Xenophobic Speech

March | April
PAGE 6

2017
DAPL’s Bad Economics

&SENSE
PAGE 7

The Wages of Whiteness

U.S.U.S.
& CAN:
PAGE 9

& CAN:
The Economics of Whitelash

$4.50
$4.50
REAL WORLD ECONOMICS PAGE 12

COSTS OF
EMPIRE • Globalization and the End of the Labor Aristocracy
• Military Spending in the Swampland
• The Global Industrial Working Class
• U.S. Military Spending, Arms Industry, and Wars
• Is It Oil? The Issue Revisited
DOLLARS < From the Editors

&SENSE
REAL WORLD ECONOMICS
Costs of Empire
A t one time or another, almost the entire world has been colonized by one European pow-
or another European power. By the early 20th century, the British empire alone ruled near-
Dollars & Sense magazine explains the workings of ly one fourth of the world’s people. The map of the world, however, is no longer a mosaic of
the U.S. and international economies and provides
left perspectives on current economic affairs. It is
European colonial possessions. Most of the Americas became formally independent in the
edited and produced by a collective of economists, late 18th or early 19th centuries; most of Asia and Africa, in the mid to late 20th century.
journalists, and activists who are committed to social Formal colonial empires—characterized by the direct political and military control of the co-
justice and economic democracy.
lonial powers—gave way to informal empire over much of the world. Britain became the
the d&s collective dominant power in South America in the 19th century without recolonizing the entire region.
Betsy Aron, Nancy Banks, Autumn Beaudoin, The United States supplanted Britain and Spain as the dominant power in Central America
Sarah Cannon, Nina Eichacker, Peter Kolozi,
John Miller, Jawied Nawabi, Kevin O’Connell, and the Caribbean in the late 19th and early 20th centuries, with only some former colonies of
Alejandro Reuss, Dan Schneider, Zoe Sherman, European powers becoming formal colonies of the United States. By mid 20th century, the
Bryan Snyder, Chris Sturr, De’En Tarkpor
William Whitham, Jeanne Winner
United States had eclipsed Britain as the dominant power in the capitalist world.
The United States ruled its informal empire through a combination of military, political,
staff
and economic power. It plied local elites with promises of a cut of the riches extracted from
editors Alejandro Reuss, Chris Sturr
business and circulation manager De’En Tarkpor the “open veins,” to use the words of Uruguayan essayist Eduardo Galeano, of the dominat-
ed lands and peoples. It maintained a system of client governments reliable in their sup-
work study
Mary Rikka Guillen
pression of revolutionary political movements and maintenance of profitable conditions for
U.S. companies. And it asserted the right to intervene militarily in other countries—first
the d&s board
within its “sphere of influence” (or, even more demeaningly, “backyard”) of Latin America,
Gerald Friedman, John Miller,
Steven Pressman, Alejandro Reuss, and then across the world.
Abby Scher, Chris Sturr, De’En Tarkpor In her article “Globalization and the End of the Labor Aristocracy,” economist Jayati
associates Ghosh argues that imperialism has not disappeared, but changed shape. The direct military
Aziza Agia, Randy Albelda, Teresa Amott, conquest and control of economic territory by the great powers has given way (at least
Sam Baker, Marc ­Baldwin, Rose Batt, some of the time) to control through multilateral agreements and international institutions.
Rebecca Bauen, Phineas ­Baxandall,
Marc Breslow, Chuck Collins, James Cypher,
Economic territory may still mean the seizure of land, mines, or oil fields—but it also may
Laurie Dougherty, Laura Dresser, Janice Fine, mean privatization of public assets and services, or the extension of intellectual property
Ellen Frank, Tami J. Friedman, Sue Helper, Thea rights to new realms. Where the “labor aristocracy” of the imperialist countries once shared
Lee, David Levy, Arthur M ­ acEwan, Mieke
Meurs, Marc Miller, Ellen Mutari, in the bounty of empire, the new incarnation of empire as “globalization” has helped grind
Amy Offner, Laura Orlando, Robert Pollin, away the incomes and status they once enjoyed.
Smriti Rao, Adria Scharf, Susan Schacht,
Chris Tilly, Ramaa Vasudevan,
Lest anyone think that the old hallmarks of dollar-gunboat diplomacy are now ancient
Thad Williamson history, Arthur MacEwan revisits a perennial question of U.S. foreign policy—“Is It Oil?”
design
MacEwan earlier addressed the question in the May/June 2003 issue of Dollars & Sense, in
layout Chris Sturr the wake of the U.S. invasion of Iraq (beginning the Second Iraq War). Today, he looks at the
front cover design Chris Sturr outcomes of the war in terms of control of Iraq’s oil reserves (especially timely given
printing   Boyertown Publishing Trump’s statement, when speaking to the CIA in late January, that the U.S. should have kept
Dollars & Sense (USPS 120-730) is pub­lished bimonthly Iraq’s oil and “maybe we’ll have another chance”). MacEwan emphasizes—contrary to “con-
by the Economic Affairs Bureau, Inc., 89 South Street,
LL02, Boston, MA 02111, a non-profit corporation.
ventional wisdom,” even among progressive critics of U.S. foreign policy—that the primary
ISSN: 0012-5245. 617-447-2177. Fax: 617-447-2179. concern is not securing oil resources essential to American’s energy-hungry lifestyles, but
E-mail: dollars@dollarsandsense.org. Periodical postage
paid at Boston, MA, and additional mailing offices. rather securing control of those resources and profit for giant U.S.-based oil interests.
Speaking of profits for giant companies, James M. Cypher trains his sights on the corpora-
For subscription information, contact Dollars & Sense, 89
South Street, LL02, Boston, MA 02111. To subscribe, tions that profit directly from the United States’ gargantuan military spending. What Cypher
go to: www.dollarsandsense.org/subscriptions.Please calls the “Industrial-Military-Congressional Juggernaut” doles out defense dollars to a vast
allow 4–6 weeks for delivery.
complex of arms contractors and subcontractors—one nestled inside the next, like matryosh-
POSTMASTER: Send address changes to Dollars &
Sense, 89 South Street, LL02, Boston, MA 02111. All
ka dolls. Profits multiply as the markup on the inputs produced by a subcontractor become
articles copyrighted. Dollars & Sense is indexed in part of the costs of the contractor at the next level up—and to which it applies its own mark-
Sociological Abstracts, PAIS Bulletin, Alternative Press
Index, and The Left Index. Subscriptions: 1 year, $24.95; up. One arms system, meanwhile, may beget additional supporting systems—and additional
2 years, $39.95; institutions, $45/year; Canada, $33/ profits. The profiteering only stands to get more brazen, Cypher argues, under a Trump ad-
year; other foreign, $49/year (airmail), plus $20 for
institutions. Back issues available for $5.00 prepaid, or ministration that seems to be aiming for “more bucks for more and bigger bangs.”
on microfilm from UMI, 300 N. Zeeb Road, Ann Immanuel Ness shows us the opposite side of the equation. As capitalism penetrates
Arbor, MI 48106.
every corner of the world, it not only extracts profit but also expands the realm of capitalist
www.dollarsandsense.org relations of production—and with it the growth of the working class. While “first world”
workers have suffered mightily under conditions of deindustrialization, and are still strug-
gling to rebuild their capacity for struggle, “third world” workers are suffering under condi-
tions of subordinate industrialization and are, in various places, rising up with new
strength—as the formation of industrial unions and eruption of strike waves testifies.
An empire may have an impressive head of gold—but mind what its feet are made of. D&S

2  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


DOLLARS
&SENSE
REAL WORLD ECONOMICS

NUMBER 329 | MARCH/APRIL 2017


CON TENT S

TH E R E GUL AR S

4 the short run

5 two cents
page 9 page 12

6 comment
Reflections on a Xenophobic Speech

7 comment
FEATUR ES DAPL Doesn’t Make Economic Sense

15 Globalization and the End of the Labor Aristocracy 9 making sense
J AY AT I G H O S H
Trump and the Wages of Whiteness

25 Military Spending in the Swampland 12 up against the wall street journal


What Now, What Next? The Economics of Whitelash
JAMES M. CYPHER
36 economy in numbers
31 The Global Industrial Working Class U.S. Military Spending, Arms Industry,
A N I N T E RV I E W WITH IMMANUEL NESS
and Wars

37 in review
Katherine J. Cramer, The Politics of
Resentment

38 ask dr. dollar


Is It Oil? The Issue Revisited

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  3


< The Short Run
By Autumn Beaudoin and Alejandro Reuss

Bully Pulpit Well, if that’s Abbott’s new stance, and in this sense the new regulation
Who would have thought that Texas’ he can get busy making phone calls to achieved its aim. “It has been success-
Republican governor, Greg Abbott, (former) contributors. According to ful at reducing acid rain pretty signifi-
whose campaigns have been bank- followthemoney.org, his top nine do- cantly and at improving air quality
rolled by big oil and financial donors, nors—six from the oil/gas industry from power plants,” Hendryx states in
would get his hackles up about corpo- and three from finance/insurance/ the interview, “There’s no question
rate involvement in politics? real estate—each gave $400,000 or about that.”
Well, it seems that, on February 14 at more to his last campaign (totaling However, decades later, we can
least, Abbott put catering to anti-trans over $4.5 million). It will take a little also see long-term negative effects.
prejudice ahead of ingratiating himself longer to contact the 80 business do- The cap on sulfur emissions led coal
to big-money interests, according to nors that gave at least $100,000 each companies to seek lower-sulfur coal,
reports in The Guardian (“Texas gover- (totaling over $16 million). found near the surface of mountains
nor warns NFL is ‘walking on thin ice’ No, we don’t really expect Abbott to in central Appalachia. The method
with bathroom bill threat,” Feb. 16, tell them off. He prefers the combination they used to get at that coal was
2017) and other news outlets. A of kissing up and punching down. – AR mountaintop removal. While “less
dangerous than underground min-
ing” for mine workers, more than 30
published studies, Hendryx argues,
show that mountaintop removal has
terrible health effects for people in
the towns surrounding the surface
mines. The air near mountaintop
removal sites has very small parti-
cles that lead to lung cancer, a prev-
alent cause of death in these areas.
Further, the nearby communities are
made up of middle- and lower-
income families in blue-collar min-
ing jobs. A seemingly positive policy
to improve air-quality in cities has
apparently had the unintended con-
sequence of benefiting relatively
wealthy urban communities at the
expense of poor rural communities.
Freakonomics’ market-friendly
National Football League (NFL) Dubner argues that “almost any regula-
spokesperson had indicated that the Coal and Class tion or piece of legislation will have
state’s proposed “bathroom bill”—re- In 1990, then-president George H.W. some unintended consequences.
quiring transgender people to use the Bush promoted an amendment to the Environmental regulation seems partic-
bathroom corresponding to the gender Clean Air Act, aiming to lower rain ularly susceptible.” But instead of con-
listed on their birth certificates—could acidity and reduce air pollution in U.S. cluding that lower-income communi-
cost the state the chance to host the cities. In an interview with ties in rural Appalachia would have
Super Bowl in future years. Abbott re- Freakonomics’s Stephen Dubner, been better off with less environmental
sponded with a rant on Fox News. “The Indiana University public-health profes- regulation, maybe we should conclude
NFL needs to concentrate on playing sor Michael Hendryx explains how he they would have benefited from more.
football and get the heck out of politics has spent the last decade identifying When one regulation closes a door for
.... We don’t care what the NFL thinks the unintended consequences of these corporations, they usually open a win-
and certainly what their political poli- amendments for poor communities. dow. The window of mountaintop-
cies are—because they are not a politi- The Clean Air Act Amendments of removal, with all its negative environ-
cal arm of the state of Texas or the 1990 were intended to improve air mental and public-health effects,
United States of America.” quality with a cap on sulfur emissions, should be slammed shut. – AB D&S

4  l  DOLLARS & SENSE  l MARCH/APRIL 2017


<Two Cents
$.02
Obscure “Neoliberalism” Jacobin, and (as far back as 1990) The
American Prospect), and it is now in
widespread use by activists around the
world. Dollars & Sense authors have
been using (and carefully defining)
the term “neoliberalism” for years now
(most recently in David Kotz’s two-part The origins of the
piece on the crisis of neoliberalism,
November/December 2015 and term “neoliberalism”
January/February 2016). We do try to
explain the term whenever we use it. are academic,
Sasha Breger Bush (“National
Neoliberalism,” January/February 2017) but non-academic
makes a careful argument that Trump’s
economic policies do not signal an end
publications have
to so-called “free-market” economics,
but do signal the end to globalism.
been using it more
To the editors: She’s proposing that, if Trump gets his and more, and
Your new issue showed up the other way, we will be entering a changed eco-
day with the word “neoliberalism” in nomic regime—“national neoliberal- the term is now in
bold type on the cover. The continuing ism.” It’s a bold and thought-provoking
use of this term is not helpful. When I analysis and we wanted to use her new widespread use
first saw this word a few years ago, I term on the cover.
wondered how the word “liberal” and You suggest calling neoliberalism by activists around
“neoliberal” were connected? Then, I “free-market religion” (which reminds
remembered the little I know about us of the widely used “free-market fun-
the world.
19th-century political philosophy. Oh, damentalism,” or of D&S author Bill
it’s that liberalism that is new! Black’s term “theoclassical economics”).
Really, outside of academic Those work when “neoliberalism”
circles no one knows what this refers to “free-market” ideology. But
word means. Most in my circle find “neoliberalism” also refers to a set of
it off-putting, obscure, or boring. economic policies and institutions
I prefer to refer to this ideology as that result from the long-term imple-
“free market religion.” “Free market” is a mentation of this ideology. You’re
widely used term and “religion” gets right that the ideology is BS, and the
across the fact that this is a counter- resulting economic set-up is not really
factual pile of BS. characterized by free markets. (As
››

If you don’t like my term, come up Breger Bush shows, it’s more about
with something better. Please stop corporate capture of government to Protesters in Quebec,
using “neoliberalism.” promote ruling-class interests at the denouncing Premier Jean
—Mark Orton (via the D&S blog) Charest and his party as
expense of everyone else.) But the
“les néolibérals,” July 22,
system itself is very real and we need 2012.
The editors respond: a non-pejorative name for it.
This is something that we struggle You are surely right that the term Credit: Brian Lapuz,
with, but we have decided that it “neoliberalism” is off-putting to some CC BY 2.0 license.
makes sense to call the current form of people, and that’s why we’ve strug-
capitalism by the name that left econo- gled with whether to use it. But we
mists have tended to use, which is think the value of getting people fa-
“neoliberalism.” The term’s origins are miliar with the name that left econo-
academic, but non-academic publica- mists use for the current version (and
tions have been using it more and more era) of capitalism outweighs the
(for example, The Guardian, Salon, downsides of using it. D&S

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  5


< Comment
$
Reflections on a Xenophobic Speech
tions, rather than Muslim terrorists. To
this we must add that most acts of ter-
ror carried out by Muslim terrorists
have been the acts of individuals legal-
ly in the United States. 
Now let’s get to the cynicism.
Trump carefully crafted the xenopho-
bia, playing up the alleged threat that
immigrants from the global South con-
stitute for African Americans. It was no
accident that Trump used examples of
alleged criminal activities by immi-
grants against African Americans.
Just as the Trump administration is
working overtime to split up organized
President Trump addressing Congress on Feb.28, 2017. labor, Trump’s address to Congress
Credit: Office of the Speaker of the House (public domain).
sought to create a wedge between
African Americans and immigrants
BY BILL FLETCHER, JR. from the global South. Trump por-
Trump’s address to trayed such immigrants not only as our

A nticipating and sitting through


President Trump’s February 28 ad-
dress to Congress was arduous, to say
Congress sought to
competitors, but even as a threat to
our very existence. This was smooth
and well-choreographed, but it flies in
the least. There are so many things create a wedge between the face of the facts and, as such, was
that can be said about the speech, not utterly demagogic.
African Americans and
the least being how many false- Immigrants are not the ones closing
hoods were mouthed by Trump. I wish immigrants from the down factories and other workplaces.
that I could say that was the most dis- They are not the major sources of
turbing part, but it was not. global South. crime and violence in African American
Trump’s address was the most xe- communities. The immigrants that
nophobic speech by a U.S. president First things first. At no point did Trump wishes us to focus upon are
that I can remember. (Bill Clinton’s Trump mention the Russian mafia. This those from the global South, many of
1995 State of the Union might be the is remarkable because they constitute whom are coming to these shores as a
runner-up.) If you took Trump serious- the most feared criminal organization in direct result of the economic, political,
ly, barbarians are approaching the the United States, an organization that and military policies (and actions) of
gates and it’s everyone for themselves. has carried out multiple killings in the the United States. This contrasts with
I actually wish that we could afford to country. In listening to Trump, one the reasons Europeans, for instance,
make fun of him and his rhetoric, but would have the impression that all come here. The fact that Trump never
there was a deadly seriousness to what crime originates south of the Rio seems to get around to mentioning
he was pushing. Grande. It is also remarkable because European immigrants is not a memory
It was not just that Trump went af- crime carried out by immigrants, wheth- lapse, but rather a calculated misdirec-
ter immigrants from the global South er documented or undocumented, does tion effort: Focusing attention on im-
as the alleged sources of crime. Nor not constitute the major source of crime migrants from the global South as our
was it that he reiterated the canard and violence in the United States. alleged enemies, and away from the
that terrorism in the United States is A second point is that President multinational corporations and the
mainly perpetrated by people coming Trump plays fast and loose with the capitalists who run them.
from outside the country. It was the facts when it comes to discussing ter- Hopefully we are not foolish
cynical manipulation of the relation- rorism. The major source of terrorism enough to be played. D&S
ship between African Americans and in the United States since September
immigrants from the global South that 11, 2001, has been right-wing, white B I L L F L E T C H E R , J R . is the former
really caught my attention. supremacist individuals and organiza- President of TransAfrica Forum.

6  l  DOLLARS & SENSE  l MARCH/APRIL 2017


< Comment
$
DAPL Doesn’t Make Economic Sense
The Dakota Access Pipeline imposes huge environmental and health
costs, creates few jobs, and generates little government revenue.
B Y M A R K PA U L the pipeline. The
Standing Rock and Beyond NoDAPL March on Washington, D.C., December 8, 2016.
Standing Rock Sioux Credit: Rob87438, CC BY 4.0 license

I n late January, Donald Trump signed


an executive order to advance ap-
proval of the Keystone and Dakota
have vowed to take le-
gal action against
the decision.
Access oil pipelines. This should come While the pipeline
as no surprise, as Trump continues to was originally sched-
fill his administration with climate- uled to cross the
change deniers, ranging from the neg- Missouri River closer to
ligent choice of former Texas governor Bismarck, N.D., authori-
Rick Perry as energy secretary to ties decided there was
Oklahoma attorney general Scott too much risk associat-
Pruitt as the new head of the ed with locating the pipeline near the across the country), finding the “logic”
Environmental Protection Agency. capital’s drinking water. They decided of dumping on the poor and racial
Pruitt, a man who stated last year that instead to follow the same rationale and ethnic minorities persists.
“scientists continue to disagree” on used by Lawrence Summers, then the We do not accept this logic, nor
humans’ role in climate change may chief economist of the World Bank, should any branch of the U.S. govern-
very well take the “Protection” out of elucidated in an infamous memo stat- ment. As the Federal Water and
the EPA, despite a majority of ing “the economic logic of dumping a Pollution Control Act makes clear, water
Americans—including a majority of load of toxic waste in the lowest-wage quality should “protect the public
Republicans—wanting the EPA’s pow- country is impeccable and we should health. ” Period. Clean water and clean air
er to be maintained or strengthened. face up to that.” A similar logic holds should not be something Americans
As environmental economists, my for the low-wage counties and towns need to purchase; rather, they should be
colleague Anders Fremstad and I were in the United States. The link between rights guaranteed to all. The Water
concerned. We crunched the numbers environmental quality and economic Protectors at Standing Rock know that
on the Dakota Access Pipeline (DAPL). inequality is clear—corporations pol- and are fighting to ensure their right to
The verdict? Annual emissions associ- lute on the poor, the weak, and the clean water, a right already enshrined in
ated with the oil pumped through the vulnerable; in other words, those with law, is protected.
pipeline will impose a $4.6 billion bur- the least resources to stand up for their
den on current and future generations. right to a clean and safe environment. The Numbers
First and foremost, the debate about In 1994, President Bill Clinton The Dakota Access Pipeline is a bad
DAPL should be about tribal rights and signed Executive Order 12898, which deal for America, and should be resist-
the right to clean water. Under the ordered federal agencies to identify ed. Our findings indicate that the bur-
Obama administration, that seemed to and rectify “disproportionately high den of pollution associated with oil
carry some clout. Caving to pressure and adverse human health or envi- passing through the pipeline amounts
from protesters and an unprecedented ronmental effects of its programs, to $4.6 billion a year—a number none
gathering of more than a hundred policies, and activities on minority of us should accept. This was arrived at
tribes, Obama did indeed halt the populations and low-income popula- using conservative estimates, and
DAPL, if only for a time. Under Trump tions.” Despite this landmark victory, numbers provided by Energy Transfer
and his crony- capitalism mentality, the pollution patterns and health dispari- Partners and the EPA.
fight over the pipeline appears to be ties associated with exposure to envi- According to Energy Transfer Partners
about corporate profits over tribal ronmental hazards by race, ethnicity, (the company responsible for DAPL), the
rights. Following Trump’s executive or- and income remain prevalent. pipeline will transport 570,000 barrels of
der to advance the pipeline, the Army Researchers at the Political Economy Bakken oil a day once the project is fully
Corps of Engineers has been ordered to Research Institute (PERI) released a operational. As it turns out, a barrel of oil
approve the final easement to allow report identifying the Toxic 100 (top is not a barrel of oil. Oil from the Bakken
Energy Transfer Partners to complete corporate air and water polluters oil fields, which is where the pipeline

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  7


< Comment

originates is substantially dirtier than mono-nitrogen oxides, and air toxins its while socializing losses. Trump is
average—containing almost a quarter released during the burning of fossil bringing the same logic to the table,
more CO2 per barrel. fuels, are necessary to take into ac- socializing costs associated with pollu-
The CO2 content of the oil matters count. The benefits of GHG-abatement tion—and not counting them—while
tremendously. After all, it’s the leading policies will vary across carbon emis- privatizing profits from the pipelines.
greenhouse gas (GHG) contributing to sions sources due to the presence of Sure, there will be some tax revenue
global warming—the largest test we such co-pollutants. The U.S. National associated with the pipeline, an esti-
have collectively faced as a species. To Academy of Sciences has calculated mated $56 million annually in state and
think about this in economic terms, we that premature deaths attributed to local revenues divided between four
need to take a few more steps. While co-pollutant emissions from fossil fuel states, but that pales in comparison to
Energy Transfer Partners hired its own combustion impose a cost of $120 bil- the $4.6 billion in annual burden. The
economics firm to provide an economic lion a year in the United States, while economics don’t add up, but let us be
impact study of the pipeline, they left economists Brandon Taylor and James clear—the economics shouldn’t neces-
out crucial information. Substantial neg- Boyce find that the co-pollutants result sarily come first. People should have a
ative externalities from burning the fos- in the deaths of thousands per year. right to clean water and respect of their
sil fuels transported by the pipeline are OK, how about the jobs? Trump after ancestral lands. D&S
not priced into the analysis. While the all has vowed to bring back jobs—“a lot
private profits of the pipeline certainly M A R K P A U L is a postdoctoral associ-
look good, we are concerned about the
greater social costs associated with the
Putting Americans ate at the Samuel DuBois Cook Center
on Social Equity at Duke University. He
pipeline, particularly pollution. back to work holds a Ph.D. in economics from the
To calculate the cost, we need to University of Massachusetts Amherst.
think about the cost of CO2 emissions. through the fossil
The EPA and other federal agencies S O U R C E S : Brandon M. Taylor and James K. Boyce,
use the social cost of carbon (SCC) to fuel industry simply “Air Pollution Co-Benefits Associated with the Health
Climate and Family Security Act of 2014,” Political
estimate the climate benefits and costs
of rulemaking. The EPA’s estimate of doesn’t make sense. Economy Research Institute, November 2015 (peri.
umass.edu); “The Social Costs of Carbon,”
the SCC for 2015 is $36 (in 2007 dol- Environmental Protection Agency, 2017 (epa.gov);
lars). The SCC is an estimate of the eco- of jobs.” Not so fast. According to Energy “Federal Actions To Address Environmental Justice in
nomic damages associated with a Transfer Partners’ own estimates, the Minority Populations and Low-Income Populations,”
Federal Register, February 16, 1994; Harvey Siegelman,
small (one metric ton) increase in CO2 Dakota Access Pipeline will employ just
Mike Lipsman, and Dan Otto, “An Assessment of the
emissions in a given year (i.e., the dam- 40-50 permanent workers along the en- Economic and Fiscal Impacts of the Dakota Access
age caused by an additional ton of tire route. Surely those jobs matter for Pipeline in North Dakota, South Dakota, Iowa, and
carbon dioxide emissions). Applying the folks that get them. They’ll likely be Illinois,” Strategic Economics Group, Nov. 12, 2014
the SCC to the oil transferred via the well-paying jobs with benefits—the (economicsgroup.com); James K. Boyce, “Not Just for
Future Generations,” Dollars & Sense, March/ April 2016
pipeline provides the estimated $4.6 types of jobs the economy needs. But
(dollarsandsense.org); Ipsos Public Affairs, “Ipsos Poll
billion (2016 dollars) in annual burden with 7.5 million Americans currently un- Conducted for Reuters,” Ipsos, Jan. 17, 2017 (ipsos-na.
from pollution associated with the employed, and millions more underem- com); Mark Paul and Anders Fremstad, “The Dakota
pipeline. But won’t that simply be a ployed, this won’t make a dent. The pol- Access Pipeline imposes huge environmental and
burden on future generations? No. lution associated with the pipeline and health costs, creates a few jobs, and generates little
government revenue,” Duke University, Feb. 1, 2017
The case for climate policy is fre- the risk of contaminated drinking water,
(socialequity.duke.edu); National Research Council,
quently made on the grounds of the on the other hand, will. Putting “Hidden Costs of Energy: Unpriced Consequences of
impacts of the current generation’s ac- Americans back to work through the Energy Production and Use,” National Academies Press,
tions on future generations (or “inter- fossil fuel industry simply doesn’t make October 2009 (econ.umd.edu); Robert Pollin, Greening
generational equity”); but the impacts sense. According to research by econo- the Global Economy, MIT Press, 2015; “Standing Rock
tribe says it will take legal action against Dakota pipe-
of some people’s actions on other peo- mist Robert Pollin of the Political
line decision,” Reuters, Jan. 31, 2017 (reuters.com); “Let
ple of the same generation (or “intra- Economy Research Institute, investing in them eat pollution,” The Economist, Feb. 8, 1992 (econo-
generational equity”) is also critical. The a green-energy economy provides three mist.com); “Toxic 100 Air Polluters Index (2016 Report,
immediate net benefits from climate times more jobs than if the money were Based on 2014 Data),” Political Economy Research
policy for people living in polluted com- invested in the fossil fuel economy. Want Institute, 2016 (peri.umass.edu); “Dakota Access, LLC
Crude Oil Pipeline Project Iowa Informational Meetings,”
munities must be taken into consider- jobs? How about a green New Deal?
Energy Transfer Partners November 18, 2014 (energy-
ation. Harmful co-pollutants, such as The financial crisis and ensuing transfer.com); “Unemployment Level” FRED Economic
particulate matter, sulfur dioxide, banking bailouts ensured private prof- Data, January 2017 (fred.stlouisfed.org).

8  l  DOLLARS & SENSE  l MARCH/APRIL 2017


< Making Sense

Trump and the Wages of Whiteness


BY ZOE SHERMAN Terrie Frankel & Fred Shinn at a Trump
rally in Prescott Valley, Ariz.,

F rom the very beginning, life in the


United States has been structured
by racial differentiation and hierarchy,
Oct. 4, 2016.
Credit: public domain.

a pattern that was deeply entrenched


in the European settler colonies of
North America even before indepen-
dence. This differentiation has been
structured to the advantage of those
deemed white, though the boundaries
of who counts as white (and thereby
gets some or all of the benefits of
whiteness) has changed many times.
We can think about the benefits that
accrue to those deemed white, bene-
fits we can refer to as “wages of white-
ness,” as being of three basic types.
1. Let’s start with the least familiar
use of the term “wage”: Early in the
20th century, W.E.B. Du Bois introduced or not they are employed. This social workers by holding wages down for
the idea that there is a “psychological wage can include public infrastructure, other, excluded workers in the low-
wage” of whiteness. His insight was schools, and amenities like parks. It can status positions they are considered fit
this: Human beings do not react well also include benefit payments to indi- to fill. At the same time that the rela-
to being at the bottom of the social viduals or households; in the United tively privileged workers get a higher
hierarchy. In a social setting structured States, these benefit payments take wage by excluding nonwhites from
by racism, whites can derive a psycho- forms such as the Supplemental consideration for those jobs, they also
logical benefit from looking down on Nutrition Assistance Program (SNAP), get to feel good about their position
blacks. However far a white person tax credits for mortgage interest pay- in the social hierarchy. Some may ex-
may be from the elites, there will at ments or educational expenses, and plicitly understand the benefit of their
least be someone below. Section 8 housing vouchers. Social social position in terms of racial pride
2. There are also the more familiar wages have been unequally distribut- at being white. Others may be un-
money wages for work: go to work, do ed, just as psychological and employ- aware of the ways that race tipped the
what the boss tells you to do, and get ment wages have been. scales in their favor, or actively deny
paid. Most white people, like most that the scales are tipped, and so feel
people of all races in the contempo- The Three Wages good about their career accomplish-
rary United States, earn their livelihood and How They Interact ments as the just rewards of their hard
primarily this way. White workers are These three wages interact in really work and skill. In either case, we can
disproportionately represented in the complicated ways. For example, think understand such workers to be receiv-
highest-paid occupations and dispro- about the money wage and the psy- ing a psychological wage bundled
portionately absent from the lowest- chological wage. Sometimes the racial with their higher than average pay.
paid. In addition, white people are restrictions on job placements may Economists Randy Albelda and Robert
paid more on average than people of strengthen white workers’ bargaining Drago, in their book Unlevel Playing
other races when working in the same power. If implicit social pressures or Fields: Understanding Wage Inequality
occupations. And white workers are explicit legal segregation prevent em- and Discrimination (published by
only about half as likely as black work- ployers from considering black or oth- Dollars & Sense), call this pattern the
ers to be unemployed and thereby end er nonwhite workers, the pool of po- “job competition effect.” So the job
up without any money wages at all. tential workers is smaller and so competition effect transfers income
3. Lastly, there is a social wage. The workers may be more successful in from nonwhite workers to white work-
term “social wage” refers to public sup- demanding higher wages. Employers ers while also paying a psychological
port for people regardless of whether may pay those higher wages for white wage of whiteness.

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  9


< Making Sense

Other times, the structures of racial tion is constructed to clean up the tox-
inequality, through what Albelda and ins where white people live and dump
Drago call the “class struggle effect,” them where black and brown people
transfer income from all workers, in- live. (See Klara Zwickl, James K.
cluding white workers, to the owners Boyce, and Michael Ash, “Mapping
of capital. Racism hides the real shared Environmental Injustice” (November/
interests of workers across racial lines December 2015).) So the social wage—
Workers divided along and stands in the way of solidarity. all that public support for housing and
racial lines are less able Workers divided along racial lines are schooling and so on—came bundled
less able to organize collective actions with a psychological wage captured
to organize collective such as union organizing drives and through racial exclusivity. And we’ve
actions such as union strikes. (Du Bois considered this the seen how fiercely that psychological
more important implication of the psy- wage has been defended when there
organizing drives chological wage of whiteness.) Since are efforts to unbundle it from the so-
racial division weakens the position of cial wage. Efforts at school and residen-
and strikes. Du Bois workers as a class, all workers are paid tial integration have often been met
considered this the more less than they might otherwise—to with extraordinary levels of violence.
the benefit of employers. White work-
important implication of ers derive some compensation for the Erosion of the Three Wages
the psychological wage lost money wages (forgone because of What makes a wage worth some-
racial division) in the form of a psycho- thing? The wages of labor paid in
of whiteness. logical wage (created by racial divi- money are worth something because
sion). Nonwhite workers, meanwhile, we are all confident that the money
get attacked on both fronts. In most will be accepted elsewhere as pay-
times and places both things, job com- ment for purchases. One of the fights
petition effects and class struggle ef- of the early 20th century was
fects, are happening at once. eliminating company towns and pay-
Or consider the social wage and the ment in company scrip, ensuring that
psychological wage. Social Security payment to workers would be made in
was designed at its inception to cover a form that would be accepted else-
occupations performed by white peo- where. Social wages paid in money or
ple. The major jobs disproportionately vouchers are, similarly, worth some-
done by black people, domestic work thing because they can be exchanged
and agricultural work, were excluded as needed—e.g., the mortgage inter-
from the system when it was estab- est tax credit is money a recipient can
lished in the 1930s. U.S. housing policy then spend on anything, SNAP bene-
was very deliberately crafted to subsi- fits are accepted as payment for food
dize the housing of white people living at the supermarket. Other social wag-
in homogenously white neighbor- es are worth something because they
hoods. Not only were the federal mort- directly provide something of use—
gage guarantees that supported the the neighborhood park directly en-
construction of developments such as hances the neighbors’ quality of life.
››

Levittown, N.Y., not available to black Just as money can only be worth
W.E.B. Du Bois,
homebuyers, they were not even avail- something to you if you are confident
circa 1911.
National Portrait able to white homebuyers who chose that other people will recognize your
Gallery, to buy in proximity to black neighbors. money as having worth, whiteness
Washington, D.C. Public schools were originally designed can only be worth something if it is
to educate white children pretty much widely recognized by others as being
Credit: Addison N.
exclusively, and the combination of worth something. What system of cir-
Scurlock, public
domain. residential segregation and local culation validates that coin in which
school funding keeps access to quality the psychological wage is paid?
education highly unequal to the pres- Neoliberalism has given us stagnat-
ent. Environmental protection/sanita- ing money wages, it has demolished

10  l  DOLLARS & SENSE  l MARCH/APRIL 2017


social wages … and the neoliberal era ened as a prerequisite for positions of abundant blue-collar employment;
has also seen the devaluation of the authority. Some of those working to Clinton promised to ease the transition
psychological wage of whiteness. weaken whiteness as a prerequisite to a newly configured future employ-
Perhaps neoliberalism’s intensely indi- for authority integrated their calls for ment landscape. Trump (sometimes)
vidualistic ideology lessened the value racial justice with calls for economic promised social wages (to the worthy);
of group identification. Perhaps it is democracy. Others working to weak- Clinton promised higher social wages
just coincidental that anti-racist move- en whiteness as prerequisite for au- more broadly. Trump promised to buff
ments achieved some of their aims at thority linked their racial aims with the psychological coin of whiteness to
the same time that neoliberalism was neoliberal economic policy; this char- a high gleam; Clinton promised to con-
undercutting other social justice aims. acterizes the mainstream of the tinue to devalue it. For a majority of
Probably a combination of several Democratic Party in recent years. And white voters, Trump’s promises were
things yielded this result. the racial prerequisite has indeed the more credible and/or compelling
For most of U.S. history, being white been weakened. For eight years, we of the options. It appears that for some
was a prerequisite for recognition as a had a black president. Trump voters, the promise to inflate
full citizen and for occupying a posi- Once whiteness was no longer a the value of whiteness was Trump’s
tion of authority. But it wasn’t a guar- near-guarantee nor an inviolable pre- chief attraction. For many others, sure-
antee. Most people with European an- requisite for full citizenship, the psy- ly, his overt white supremacism was
cestry survived conditions of material chological coin of whiteness lost some concerning, but not a deal-breaker.
poverty and political disempower- of its shine. The exchange rate for con- That is something I can, at some
ment, from the indentured servitude verting the coin of whiteness into level, understand, but cannot forgive.
of the 18th century to the company money wages and social wages weak- Trump will necessarily fail on his
towns of the early 20th century. Many, ened. Whiteness was subject to ideo- promises regarding jobs and social
including Irish immigrants in the mid logical attack, less widely accepted as wages, but he is already making good
and late 19th century, and southern a coin with its own intrinsic value. Just on his promise to back the coin of
and eastern European immigrants in to be clear, I am not at all asserting whiteness with the full faith and cred-
the late 19th and early 20th centuries, that we have somehow approximated it of the U.S. government. He has ap-
were not even considered white. In the a post-racial anything. The coin of pointed unabashed white suprema-
middle of the 20th century something whiteness was and is still worth some- cists to positions of power and among
extraordinary happened: White racial thing, just not exactly what it used to his first actions as president was the
identity became much more inclusive be worth. As the gap between elites executive order banning immigration
of everyone seen as having exclusively (still disproportionately white, but no from seven predominantly Muslim
European ancestry, and it became longer universally white) and others countries. From the moment the elec-
something much closer to a guarantee widens, many white people feel they tion results were in, Trump’s Electoral
of full citizenship and economic secu- have been discarded, and they are not College win encouraged, enabled,
rity. Whiteness also remained a prereq- wrong. Some of what elites of both and legitimated levels of hostility and
uisite for full citizenship and an entry major political parties said about poor physical violence over and above
requirement for positions of authority. whites this past election season was as what the government itself performs:
But in the last forty years, both of foul as what they say about poor verifiable reports of hate crimes im-
those things changed: with the with- blacks. Indeed, they said pretty much mediately spiked. This hostility and
ering of the post-World War II middle the same things about both groups: violence assault the dignity and fun-
class, whiteness is no longer enough useless, drug-addicted, breeders. This damentally limit the basic freedom of
to put the odds of full citizenship and is not new, since their ancestors sure movement of everyone else, especial-
economic security so decisively in a weren’t deemed “white” when they ly those whose appearance is read as
white person’s favor. In a vicious twist, first got to the U.S. (See Friedman, anything other than white. D&S
the chief architects and spokespeople “Nativism: As American as (Rotten)
of neoliberalism made racist appeals Apple Pie” (September/October 2016). Z O E S H E R M A N is an assistant pro-
to attract white voters and also dis- fessor of economics at Merrimack
mantled the relatively privileged posi- Trump and the Three Wages College and a member of the Dollars &
tions of white, male workers. Think During the presidential election cam- Sense collective.
here of Reagan’s “welfare queen” rhet- paign, Trump promised to bring back
S O U R C E S : W.E.B. Du Bois, Black Reconstruction
oric in combination with the breaking jobs; so did Clinton. They did not make in America (Harcourt, Brace, and Co., 1935); David R.
of the air traffic controllers’ strike. exactly the same jobs promise. Trump Roediger, The Wages of Whiteness: Race and the
Meanwhile, whiteness has been weak- promised a return to a mythical past of Making of the American Working Class (Verso, 1991).

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  11


< Up Against the Wall Street Journal

The Economics of Whitelash


Race, Gender, Income, and Education in the Presidential Election
BY JOHN MILLER
“White Voters Delivered a Payoff: One
factor among a multitude that led to Repu
blican

D
Donald Trump’s surprise win,” by Laur
onald Trump’s election victory a Meckler, Wall Street Journal, Nov.
9, 2016
was “a whitelash against a chang-
“Donald Trump’s Victory Was Built
ing country,” Van Jones, black activist on Unique Coalition of White Voters,”
Nicholas Confessore and Nate Cohen, by
and former Obama administration New York Times, Nov. 9, 2016.
green jobs czar, told a CNN election-
“‘Forgotten’ white vote powers Trum
night audience. p to victory: Campaign unleashed prev
seen level of vitriol in US politics,” iously un-
His analysis was hardly unusual. The by Shawn Donna, Financial Times,
Nov. 9, 2016.
headlines of leading newspapers
made much the same point the next
morning. They attributed Trump’s vic- But it’s not possible to use exit-poll
tory in large part to “white voters,” “a data to tease out who voted for A Profile of Trump’s Supporters
coalition of unique white voters,” or a Trump in a way that gets at the inter- A Gallup telephone survey of 125,000
“forgotten white vote.” section of race and income. For in- adults conducted from July 8, 2015,
But the story of the presidential elec- stance, a majority of lower-income through October 11, 2016, tells us
tion is far more complex than these voters (with incomes less than much more about who supported
headlines suggest. To begin with, the $50,000) favored Clinton, not Trump. Donald Trump than what can be gar-
popular vote went to Clinton, not Edison Research doesn’t separate nered from exit-poll data. Using data
Trump. Nor should the election results these numbers by race. Surely minori- from that survey, Gallup economists
be read as a rebellion of the economic ties, the majority of whom live in Jonathan Rothwell and Pablo Diego-
dispossessed, for Trump supporters households with incomes less than Rosell isolate the factors that would
were on average better off, not worse $50,000, cast many of those Clinton lead someone to view Trump favorably.
off, than those who opposed him. votes. Nonetheless, this seems to fly Rothwell and Diego-Rosell found
Perhaps the most significant factor in the face of attempts to attribute “mixed evidence” that economic dis-
characterizing those who voted for Trump’s victory to support from the tress had motivated Trump’s support,
Trump was that they were people who economically insecure. and concluded, “Trump’s popularity
saw their relative positions in society What’s more, Trump’s percentage of cannot be neatly linked to economic
declining or under threat of declining. the white vote was no higher than hardship.”
What best explains the “whitelash” Romney’s had been in 2012. To begin with, by standard eco-
of November 8 is the changing eco- Admittedly, Trump did much better nomic measures Trump supporters
nomic fortunes of white men without among low-income voters and whites are doing better than those who op-
a college degree relative to women without a college degree than Romney posed him. The average (or mean)
and to minorities, and eroding race had. Washington Post Wonkblog au- household income of Trump support-
and gender privilege. thor Jeff Guo estimated that for the ers was $81,898—about $2,600 above
counties of nine “rustbelt” states the national average—compared
Who Voted for Whom? (Illinois, Indiana, Iowa, Kentucky, with $77,046 for those who didn’t
Most every television network and ma- Michigan, Ohio, Pennsylvania, West support him—about $2,200 below
jor newspaper provided an instant anal- Virginia, and Wisconsin) each 10% the national average. Trump support-
ysis of the presidential election based increase in the population of non- ers were less likely to be unemployed
on exit-poll data collected by Edison college educated whites correlated to and less likely to be employed part-
Research. From those data come the a 3-percentage-point increase in time than those who opposed Trump.
voting patterns we are all undoubtedly Trump’s winning margin. Finally, while In addition, Trump’s support was
familiar with by now: whites, men, and Clinton carried union households, higher than Clinton’s among skilled
those without a college degree voted Trump ate into the Democrats’ advan- blue-collar workers (in jobs such as
for Trump by large margins; white men tage among them, reducing it from 18 construction, installation, mainte-
and whites without a college degree, by percentage points in 2012 to eight nance and repair, and transportation)
even larger margins. percentage points in this election. that tend to pay better than service

12  l  DOLLARS & SENSE  l MARCH/APRIL 2017


W $J
jobs. Business owners and managers were less likely to be in professional compares the economic position of
were more likely to favor Trump than occupations but still commanded white men without a college degree
Clinton. Finally, and surprisingly, higher incomes. For this economist, in 1960 with where they stand in to-
Rothwell and Diego-Rosell found no the source of Trump supporters’ labor day’s economy.
evidence that Trump supporters were market “rents”—their ability to earn The 1960s U.S. economy differed
more exposed to competition from more than what their skill set would from today’s in some fundamental
immigrants and foreign workers than predict—was most likely race and gen- ways. One in four workers was em-
those who opposed Trump. der privilege. As he sees it, social capi- ployed in manufacturing, compared to
Nonetheless, Trump’s supporters tal rooted in race and gender privilege less than one in ten workers today. Far
face important disadvantages. Just is what the typical Trump supporter—a fewer women worked outside the
over one-quarter of Trump’s support- relatively privileged male high-school home. While more than one-third of
ers had a bachelor’s degree, while just graduate—stands to lose from the dis- today’s workers have graduated from
over one-third of those who didn’t fa- ruption of the social order. college, less than 10% of workers had a
vor Trump held a bachelor’s degree. college degree in 1960. Today, even
And more professionals favored By standard economic white cultural icons hold less privi-
Clinton than favored Trump. leged positions than in the past. A
On top of that, Trump supporters
measures, Trump John Wayne imitator hawked beer in
had worse health outcomes (measured supporters are doing commercials during last year’s Super
by higher mortality rates and greater Bowl, but Beyoncé starred in the half-
disability rates) and lower social mobil-
better than those who time show.
ity (measured by income rank at age opposed him. The In the United States of the 1960s,
30 of individuals raised at the 25th per- Rose argues, white male economic
centile of the national distribution of
average (or mean) privilege was at its zenith, and that
income) than Clinton supporters did in household income of privilege extended to white men with-
their study. out a college degree. In 1960 white
Trump’s support came dispropor-
Trump supporters was men held 87% of managerial and pro-
tionately from counties with low about $2,600 above fessional jobs. And the majority of
population and fewer college gradu- those jobs, some 55%, went to white
ates. His supporters live in zipcodes
the national average. men without a college degree.
that are disproportionately white, Trump supporters were White men working in factories
and in neighborhoods (census also enjoyed considerable economic
tracts) with lower levels of racial and
also less likely to be privilege. As Rose documents, in
ethnic diversity than the neighbor- unemployed and less 1960, the average white male factory
hoods of Clinton supporters. worker with a high school diploma
Rothwell and Diego-Rosell worry
likely to be employed earned more than the average
that Trump supporters’ limited inter- part-time than those African-American man or a white
actions with blacks, Asians, woman with a bachelor’s degree
Hispanics, and college graduates
who opposed Trump. working in a managerial or profes-
“may contribute to prejudicial ste- sional job. That more than two of five
reotypes, political and cultural mis- This analysis is correct as far as it manufacturing workers were union
understandings, and a general fear goes. But the typical Trump supporter members as opposed to fewer than
of not belonging.” has already seen much of their labor one in ten today added to the wage
market rents evaporate with the premium of factory workers in 1960.
Labor Market Rents and changing fortunes of white men, Factory work was also a source of
Changing Economic Fortunes women, and minorities. It is not just good jobs for African-American men
An economist I know posted a the prospect of losing privilege but without a college degree. But at the
Facebook comment about the Gallup the privileges already lost that fueled same time, race and gender—or the
findings immediately after the elec- the “whitelash.” lack of white male privilege—is a
tion, saying he was struck by the in- In his recent paper, Urban Institute compelling explanation of the low
congruity that Trump supporters had economist Stephen Rose throws pay of highly educated women and
fewer educational credentials and those losses into sharp relief. Rose nonwhites.

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  13


< Up Against the Wall Street Journal

By 2014 much had changed. White by political intervention. If you are look-
men no longer held the majority of ing for an underlying economic reason
those managerial and professional jobs for the “whitelash” of November 8, the
and just 15% of those jobs went to non- relative decline of these white men and
Today even white college educated Whites. White women the prospect of being left no better off
held 29% of those jobs, and minorities than others with the same years of edu-
cultural icons hold held another 25%. And by 2014 over a cation has much to recommend it.
third of employees (35.2%) worked in
less privileged managerial and professional jobs, more What Did Their Votes Get Them?
than double the 16.1% in 1960. Over Even if the Trump administration follows
positions than in the that period, the share of skilled blue- through on the nationalist rhetoric of his
past. A John Wayne collar and factory jobs dropped from
36.1% to just 16.5% of jobs. On top
campaign, delivering the promised pro-
tectionist trade policies and deporting
imitator hawked of that, the earnings of a white male
factory worker with a high school diplo-
immigrant workers will do little to im-
prove the lot of white men without a
beer in commercials ma no longer exceeded those of an college degree. Neither will Trump’s poli-
African-American man or a white wom- cies restore the social mobility that will
during last year’s an in a managerial or professional job enable their children to get the good
with a college degree. As of 2014, their jobs his supporters no longer hold, or
Super Bowl, but earnings were less than three-fifths of counteract their stagnant wages.
the earnings of white women and What will make white men without
Beyoncé starred in African American men who had gradu- a college education, and most workers,
the halftime show. ated from college and who worked in
managerial or professional jobs.
better off? Universal health care, af-
fordable higher education, more ful-
In absolute terms, white men re- some Social Security benefits, and full-
main better off than their parents and employment policies that will push up
grandparents had been. Many more their wages—the very policies advo-
now have college degrees, although cated by the Sanders campaign.
most still do not. What’s more, in 1960, Collective action in the workplace and
60% of white men without a college beyond—uniting people across lines
degree had also not finished high of race, nationality, ethnicity, and gen-
school. By 2014 that number was der, rather than restoring gender and
down to just 8%. In addition, the share race privilege—holds the promise to
of white men in manual and low-skill make that happen. D&S
sales and service jobs declined.
Moreover, white men—including J O H N M I L L E R is a professor of eco-
white men without college degrees— nomics at Wheaton College and a mem-
still earn more and have better jobs ber of the Dollars & Sense collective.
than African Americans, Hispanic men,
S O U R C E S : Jonathan Rothwell and Pablo Diego-
and white women with the same level
Rosell, “Explaining Nationalist Political Views: The Case
of education. of Donald Trump,” Gallup, Draft Working Paper, Nov. 2,
But that’s cold comfort for white
››

2016; Jonathan Rothwell, “Economic Hardship and

Beyoncé Giselle
men without a college degree. They no Favorable Views of Trump,” Gallup, July 22, 2016; Jeff

Knowles-Carter longer hold the privileged positions Guo, “Yes, working class whites really did make Trump
win. No, it wasn’t simply economic anxiety,”
performs at the that similarly educated white men held
Washington Post, Nov. 11, 2016; Max Ehrenfreund and
Super Bowl 50 in the past. College-educated white Jeff Guo, “A massive new study debunks a widespread
halftime show, women, African Americans, and theory for Donald Trump’s success,” The Washington
Feb. 7, 2016.
Hispanics of both genders now hold Post, Wonkblog, Aug. 12, 2016; Skye Gould and

Credit: Arne Papp, many good jobs that had been held by Rebecca Harrington, “7 charts show who propelled
Trump to victory,” Business Insider, Nov. 10, 2016; James
CC BY 2.0 white men with a college degree in the
Kwak, “The Baseline Scenario,” Narratives, Nov. 10, 2016;
past. Moreover, many people see this Stephen J. Rose, Bentley University, “The Economics of
change as having been brought about White Male Working Class Anger,” Nov. 10, 2016.

14  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


COSTS OF
EMPIRE
Globalization and
the End of the Labor Aristocracy
B Y J AY AT I G H O S H

T W E N T Y- F I R S T C E N T U RY I M P E R I A L I S M H A S C H A N G E D I T S F O R M .
In the 19th century and the first half of the 20th century, it was explicitly related to colonial control;
in the second half of the 20th century it relied on a combination of geopolitical and economic control deriv-
ing also from the clear dominance of the United States as the global hegemon and leader of the capitalist
world (dealing with the potential threat from the Communist world). It now relies more and more on an
international legal and regulatory architecture—fortified by various multilateral and bilateral agreements—
to establish the power of capital over labor. This has involved a “grand bargain,” no less potent for being
implicit, between different segments of capital. Capitalist firms in the developing world gained some mar-
ket access (typically intermediated by multinational capital) and, in return, large capital in highly devel-
oped countries got much greater protection and monopoly power, through tighter enforcement of intel-
lectual property rights and greater investment protections.
These measures dramatically increased the bargaining power of capital relative to labor, globally and
in every country. In the high-income countries, this eliminated the “labor aristocracy” first theorised by
the German Marxist theorist Karl Kautsky in the early 20th century. The concept of the labor aristocracy
derived from the idea that the developed capitalist countries, or the “core” of global capitalism, could
extract superprofits from impoverished workers in the less developed “periphery.” These surpluses could
be used to reward workers in the core, relative to those in the periphery, and thereby achieve greater
social and political stability in the core countries. This enabled northern capitalism to look like a win-
win economic system for capital and labor (in the United States, labor relations between the late 1940s
and the 1970s, for example, were widely termed a “capital-labor accord”). Today, the increased bargain-
ing power of capital and the elimination of the labor aristocracy has delegitimated the capitalist system
in the rich countries of the global North. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  15
THE END OF THE LABOR ARISTOCRACY Instead, the United States looks significantly
weaker both economically and politically, and
Increasing inequality, the decline in workers’ there is less willingness on the part of other coun-
incomes, the decline or absence of social protec- tries (including former and current allies, as well as
tions, the rise of material insecurity, and a grow- those that may eventually become rival powers) to
ing alienation from government have come to accept its writ unconditionally. On the other hand,
characterise societies in both developed and the imperial overreach that was so evident in the
developing worlds. These sources of grievance Gulf Wars and sundry other interventions, in the
have found political expression in a series of Middle East and around the world, continues
unexpected electoral outcomes (including the despite the decreasing returns from such interven-
“Brexit” vote in the UK and the election of tions. This continued through the Obama presi-
Trump in the United States). The decline of the dency, and it is still an open question whether the
labor aristocracy—really, its near collapse—has Trump presidency will lead to a dramatic reduction
massive implications, as it undermines the social of this overreach (“isolationism”) or merely a
contract that made global capitalism so success- change in its direction.
The latter point is important, because there is
The slogans that recently resonated with the little domestic political appetite in the United
States for such imperial adventures, due to the
U.S. electorate, such as that of “making high costs in terms of both government spending
and the loss of lives of U.S. soldiers. The slogans
America great again” were somewhat self- that recently resonated with the U.S. electorate,
such as that of “making America great again” were
contradictory—looking towards an imagined in that sense somewhat self-contradictory—look-
past in which the American Dream could be ing towards an imagined past in which the
American Dream could be fulfilled relatively eas-
fulfilled relatively easily (at least for some), ily (at least for some), without recognising that
this was predicated upon the country’s global
without recognising that this was predicated hegemony and far-flung empire.
The global context of imperialism is a complex
upon the country’s global hegemony one, in which the contours shift constantly.
Recent political changes in various countries of
and far-flung empire.
the North have meant that global strategic alli-
ances are also much more fluid than at any time
over the past half century. The most talked-about
current examples are the changing attitude of the
ful in the previous era. It was the very foundation Trump administration towards the United States’
of political stability and social cohesion within traditional enemy, Russia, and the complicated
advanced capitalist countries, which is now international politics emerging in Europe, with
breaking down, and will continue to break down the Brexit vote and the emergence of right-wing
without a drastic restructuring of the social and political forces in a number of other European
economic order. The political response to this countries. But it is also evident in other parts of
decline has been expressed primarily in the rise of the world, notably in China, where traditional
right-wing, xenophobic, sectarian, and reaction- friends and foes are no longer so easily demar-
ary political tendencies. cated. Yet there is another sense in which the fun-
damentals of the imperialist process have not
21st Century Imperialism changed, even as the forms in which they are
The early 21st century has been a weird time for expressed are altered.
imperialism. On the one hand, the phase of “hyper- Defining imperialism broadly, as Lenin did—
imperialism”—with the United States as the sole as the complex intermingling of economic and
capitalist superpower, free to use almost the entire political interests, related to the efforts of large
world as its happy hunting ground—is over. capital to control economic territory—it’s clear

16  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


that imperialism has not really declined at all. penetration today are 1) basic amenities and
Rather, it has changed in form over the past half social services (earlier seen as the sole preserve of
century, especially when we embrace a more public provision) and 2) the generation and dis-
expansive notion of what constitutes “economic tribution of knowledge.
territory.” Economic territory includes the more A major feature of our times is the privatiza-
obvious forms such as land and natural resources, tion of areas that, until recently, were generally
as well as labor. These are all still hugely con- accepted as public responsibilities. Basic ameni-
tested: The wars for oil in the Middle East, the ties like electricity, water, and transportation
continuing attempts at land grabs in Africa, and infrastructure, and social services like health, san-
the struggle over the fruits of extraction of natural itation, and education all fall into this category.
resources in parts of Latin America and Asia all Of course, the fact that these were seen as public
testify to this. duties does not mean that they were always ful-
But the struggle over economic territory also filled. Indeed, expanding public provision and
encompasses the search for and effort to control access to high-quality public infrastructure and
new markets—defined by both physical location social services has only come about historically as
and type of economic process. Understanding ter- the result of prolonged mass struggles. And issues
ritory in this way helps us understand how impe- of inequality in access have always existed.
rialism is still very much alive and kicking, even Nevertheless, the fact that provision is no longer
though some of the more classic features (such as necessarily in the public domain, and that private
direct colonial control and annexations) are less provision is increasingly seen as the norm, has
in evidence. opened up huge new markets for potentially
One of the key aspects of recent capitalist profit-making activity. This has been a crucial
dynamism has been its ability to create new forms way of maintaining demand, given the saturation
of economic territory, bring them within the of markets in many mature economies, and the
realm of capitalist economic relations, and there- inadequate growth of markets in poorer societies.
fore also subject them to imperialist control. Two Opening up such markets has occurred
forms of economic territory that are increasingly through a combination of inadequate public pro-
subject to capitalist organization and imperialist vision and changes in economic policy to ››

Poorer than Our Parents?


A recent report from the McKinsey Global Institute, “Poorer than Their Parents? Flat or falling incomes in advanced
economies” (July 2016) shows how the past decade has brought significantly worse economic outcomes for many
people in the developed world.

Falling Incomes.
In 25 advanced economies, 65-70% of households (540-580 million people) “were in segments of the income distribu-
tion whose real incomes were flat or had fallen” between 2005 and 2014. By contrast, between 1993 and 2005, “less
than 2 percent, or fewer than ten million people, experienced this phenomenon.”
In Italy, a whopping 97% of the population had stagnant or declining market incomes between 2005 and 2014. The
equivalent figures were 81% for the United States and 70% for the United Kingdom.
The worst affected were “young people with low educational attainment and women, single mothers in particular.”
Today’s younger generation in the advanced countries is “literally at risk of ending up poorer than their parents,” and in
any case already faces much more insecure working conditions.

Shifting Income Shares


The McKinsey report noted that “from 1970 to 2014, with the exception of a spike during the 1973–74 oil crisis, the aver-
age wage share fell by 5 percentage points in the six countries studied in depth” (United States, United Kingdom, France,
Italy, the Netherlands and Sweden); in the “most extreme case, the United Kingdom, by 13 percentage points.” ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  17
THE END OF THE LABOR ARISTOCRACY production, set high prices, or demand high roy-
alties. Similarly, control over seed patents, over-
encourage private investment. The expansion of whelmingly held by multinational agribusinesses,
the global bottled water industry, for example, is has enabled monopoly control over crucial tech-
partly a result of the failure of adequate public nologies for food cultivation across the world,
delivery of potable water. Meanwhile, global even in the poorest societies. The cases of medi-
institutions—including formal organizations cine and food are comparatively well known and
such as the World Bank, the International highly controversial, but much the same is true
Monetary Fund (IMF), and the World Trade for industrial technologies, as well as knowledge
Organization (WTO), as well as more informal for mitigating and adapting to adverse environ-
bodies such as the World Economic Forum— mental changes (themselves resulting from the
have actively encouraged private investment in production systems created by global capitalism).
formerly public sectors. This is a more compli- It’s not just that national and international insti-
cated expression of the imperialistic drive for con- tutional structures that should provide checks and
trol over economic territory than the direct balances to the privatization of knowledge are
annexation of geographic territory, but that does more fragile and less effective than they used to be.
not make it any less consequential. Rather, it’s that they are actively working in the
Another new form of economic territory, opposite direction. The numerous “trade agree-
increasingly subject to imperialist penetration, ments” that have been signed across the world in
relates to knowledge generation and dissemina- recent years have been much less about trade liber-
tion. The privatization of knowledge and its con- alization—already so extensive that there is little
centration in fewer and fewer hands—especially scope for further opening up in most sectors—and
through the creation and enforcement of new much more about protecting investment and
“intellectual property rights”—have become sig- strengthening monopolies generated by intellec-
nificant barriers to technology transfer and social tual property rights.
recognition of traditional knowledge. This is evi-
dent in the case of access to medicines, even essen- International Economic Agreements
tial and life-saving drugs. Patents reward multina- The past two decades have witnessed an explosion
tional companies, allowing them to monopolize in the treaties, agreements, and other mechanisms

These declines occurred “despite rising productivity, suggesting a disconnect between productivity and incomes.”
Productivity gains were either grabbed by employers or passed on in the form of lower prices to maintain competitiveness.
Declining wage shares are widely seen as results of globalization and technological changes, but state policies and
institutional relations in the labor market matter. According to the McKinsey report. “Swedish labor policies such as con-
tracts that protect both wage rates and hours worked” resulted in ordinary workers receiving a larger share of income.
Countries that have encouraged the growth of part-time and temporary contracts experienced bigger declines in
wage shares. According to European Union data, more than 40% of EU workers between 15 and 25 years have insecure
and low-paying contracts. The proportion is more than half for the 18 countries in the Eurozone, 58% in France, and
65% in Spain.
The other side of the coin is the rising profit shares in many of these rich countries. In the United States, for exam-
ple, “after-tax profits of U.S. firms measured as a share of the national income even exceeded the 10.1 percent level last
reached in 1929.”

Policy Matters
Government tax and transfer policies can change the final disposable income of households. Across the 25 countries
studied in the McKinsey report, only 20-25% of the population experienced flat or falling disposable incomes.
In the United States, government taxes and transfers turned a “decline in market incomes for 81 percent of all income
segments … into an increase in disposable income for nearly all households.”

18  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


whereby global capital imposes it rules upon gov- practices like local content specifications, designed
ernments and their citizenries. Unlike the condi- to increase linkages between foreign investors and
tions imposed on developing countries by the IMF local manufacturers. The Agreement on Trade-
and the World Bank, these rules apply even to Related Intellectual Property Rights (TRIPS) not
countries that are not debtor-supplicants to inter- only allows for the concentration and privatization
national financial institutions. They require all of knowledge as noted above, but also restricts
countries to restrict their policies, though these reverse engineering and other forms of imitative
restrictions are especially damaging to the pros- innovation that have historically been used for
pects of autonomous economic development in industrialization. It has forced the extension of pat-
the “periphery” of the world capitalist economy. ent rights in many countries, allowing the patent-
ing of life forms. Under this new property regime,
The Multilateral Trading System a large and powerful multinational company can,
In terms of the multilateral trading system, the for example, sue a poor small farmer in a develop-
Uruguay Round of the General Agreement on ing country for setting aside part of the harvest as
Tariffs and Trade (signed off in 1994) moved to a seed for the coming year, on the grounds that this
single-tier system of rights and obligations, under violates the company’s patent rights. The
which developing countries have to fully imple- Agreement on Subsidies and Countervailing
ment all rules and commitments. This was a quid Measures (SCM) prohibits subsidies that depend
pro quo for access to developed-country markets in upon the use of domestic over imported goods, or
agriculture, textiles, and clothing—sectors that that are conditional on export performance.
had previously been highly protected. This has Ongoing negotiations in the World Trade
constrained the possibilities for autonomous devel- Organisation on Non Agricultural Market Access
opment in the peripheral countries, reducing the (NAMA) are currently proceeding on the basis of
policy choices open to them and denying them much deeper tariff cuts in developing countries,
some of the most important instruments that had which will further deprive them of a crucial policy
been used by countries of the current capitalist instrument to support their infant industries.
“core” in their own industrialization. The Agreement on Agriculture (1995) contained
For example, the Agreement on Trade-Related fine print that effectively allowed the developed
Investment Measures (TRIMS) does not allow countries to continue the massive subsidization and ››

Government policies to intervene in labor markets also make a difference. In Sweden, the government “intervened to
preserve jobs, market incomes fell or were flat for only 20 percent, while disposable income advanced for almost everyone.”
In most of the countries examined in the study, government policies were not sufficient to prevent stagnant or de-
clining incomes for a significant proportion of the population.

Effects on Attitudes
The deteriorating material reality is reflected in popular perceptions. A 2015 survey of British, French, and U.S. citizens
confirmed this, as approximately 40% “felt that their economic positions had deteriorated.”
The people who felt worse-off, and those who did not expect the situation to improve for the next generation, “ex-
pressed negative opinions about trade and immigration.”
More than half of this group agreed with the statement, “The influx of foreign goods and services is leading to do-
mestic job losses.” They were twice as likely as other respondents to agree with the statement, “Legal immigrants are
ruining the culture and cohesiveness in our society.”
The survey also found that “those who were not advancing and not hopeful about the future” were, in France, more
likely to support political parties such as the far-right Front National and, in Britain, to support Brexit.
Note: The report is based on a study of income distribution data from 25 developed countries; a detailed dataset with more information on 350,000 people from France,
Italy and the United States and the UK; and a survey of 6,000 people from France, the United Kingdom and the United States that also checked for perceptions about
the evolution of their incomes.
Source: McKinsey Global Institute, “Poorer than Their Parents? Flat or falling incomes in advanced economies,” July 2016 (mckinsey.com).

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  19


THE END OF THE LABOR ARISTOCRACY that go beyond current WTO rules). They often
require reductions of actually applied tariffs, rather
protection of their own agriculture sectors (and agri- than of “bound” maximum tariff rates: Countries
business interests), but prevented developing coun- are forced to reduce tariffs from whatever level they
tries from doing even a small fraction of this. Most happen to be at the moment, even if this is already
developing countries are allowed only subsidies of below the upper limit. They demand more deregu-
10% or less, while most developed countries only lation of trade in services. They require more strin-
have to reduce certain agricultural subsidies, while gent enforcement of intellectual property rights
maintaining and even increasing some others. and reduce exemptions. For example, they allow
Developing countries (like India) that attempt to compulsory licensing of medicines for generic
provide some protection to farmers and to ensure (lower-cost) production only in emergencies. They
food security are coming up against constraints also prohibit parallel imports (purchases of needed
imposed by the agreement. All subsidies, even in medicines from countries with cheaper production
developing countries, are measured in relation to because they have used compulsory licensing).
1986-88 prices, not current prices, so even low sub- These agreements extend intellectual property
sidies run afoul of the 10% limit. Instead of recog- rights to areas like life forms, extend exclusive
nising the ridiculous nature of this clause, the devel- rights to test data, and make intellectual property
oped countries are resisting any change and have rights provisions more detailed and prescriptive.
They forbid technology-transfer and knowledge-
Unlike the conditions imposed on developing transfer requirements, as well as conditions on the
nationality of senior personnel, as conditions for
countries by the IMF and the World Bank, the access to a country’s markets. They also enter into
a range of areas that the WTO still leaves open to
new rules imposed by global capital apply individual countries’ policy choices, such as anti-
trust policy, rules on investment and capital move-
even to countries that are not debtor- ment, government procurement, environmental
standards, and even labor mobility. Further, unlike
supplicants to international financial
the WTO, most regional trade agreements do not
institutions. They require all countries to provide exceptions to countries in cases of serious
balance-of-payments problems or other external
restrict their policies financial difficulties.
In addition, there are more than 4,000 bilateral
investment treaties (BITs) in force in the world.
These are all about protecting and promoting pri-
only agreed to provide a “Peace Clause”—applying vate investment of all types, and effectively privileg-
only to certain countries and only for a limited ing the rights of investors over the rights of citizens
period, preventing any case being brought to the in the host country. There is typically a very broad,
dispute settlement panel of the WTO until the mat- asset-based definition of investment that includes
ter is finally resolved. foreign direct investment (FDI), some types of
investment in stocks, purchases of real estate, and
Regional and Bilateral Trade Agreements even intellectual property rights. There is also a very
However, if the WTO has constricted the “pol- strong and expansive view on what constitutes
icy space” for developing countries, the many “expropriation” of assets for which investors can
regional trade agreements of the past two decades demand compensation. It is not only outright
have been even worse. There are nearly 400 such nationalization of assets that can be interpreted as
agreements in force, and they have become more expropriation, but also all sorts of government regu-
comprehensive over the past twenty years. Most of lation (even for environmental or labor protection)
these agreements, especially North-South agree- as well as taxes. So for example, in Mexico, compa-
ments, tend to be “WTO-plus” (augmenting pro- nies that have polluted municipal water supplies—
visions already covered by the multilateral trading and therefore been ordered to stop production until
regime) or “WTO-extra” (containing provisions they can prevent such pollution—have successfully

20  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


claimed damages for the associated losses. Other Structures of Global Production and Trade
companies have won cases under BITs when govern- It is often argued that the rise of new powers—
ments have imposed higher taxes on their profits. especially China, but also India, Brazil and oth-
Both bilateral and, increasingly, regional agree- ers—means that the concept of “imperialism” is no
ments are subject to dispute settlement mecha- longer valid. Yet the imperialist phase of capitalism
nisms, both between states and between an inves- has always been characterised by the emergence of
tor and a state, that are highly arbitrary, opaque to “new kids on the block,” some of which have gone
public scrutiny, and generally pro-investor in their on to become neighborhood bullies. At the time
judgments. Since they are legally based on “equal” when Lenin wrote his famous pamphlet
treatment of legal persons with no primacy for Imperialism: The Highest Stage of Capitalism, a
human rights, they have become known for their century ago, the emergence of the United States as
pro-investor bias. This is partly due to the incen- the dominant global power was far from evident.
tive structure for arbitrators, since there is a lucra- Lenin’s claim that, during the imperialist phase of
tive “revolving door” for legal experts between serv- capitalism, “the territorial division of the whole
ing as arbitrators and as legal advisors for world among the biggest capitalist powers is com-
corporations. And it is partly because the system is pleted” is the weakest link in his argument, and
designed to provide additional guarantees to inves- one which was belied almost immediately. The
tors, rather than making them respect host coun- United States, which was then only a minor player
tries’ laws and regulations. compared to the major European powers, emerged
Similarly, the rules governing international to dominate the world scene from the second half
finance and debt work in ways that reinforce the of the 20th century on. The rise of Japan in the sec-
unequal global power relations between large capi- ond half of the 20th century by no means signified
tal and people across the world. Nowhere is this a weakening of imperialist power generally; it
more evident than in the legal structures govern- merely necessitated a more complicated assessment
ing sovereign (national government) debt. The of such power.
lack of any coherent system to deal with debt The recent emergence of China is being inter-
default and to enable the restructuring of sover- preted as a sign that the global economic landscape
eign debt has led to situations in which countries is completely transformed. It is true that the grow-
and their populations are bled dry over years and ing weight of China in world trade and investment
even decades. “Austerity” measures that reduce has had major effects: China has become the biggest
public spending on social essentials are forced source of manufactured-goods imports for most
upon unwilling societies. Developing countries countries, changed the terms of trade and volume of
have known this for some time, but some devel- exports for many primary-product (agricultural and
oped countries (such as crisis-ridden economies of mineral raw materials) producing countries, and
the European periphery, like Greece and Spain) brought more countries into manufacturing value
are now experiencing the same. chains. It is true, also, that Chinese capital has
Countries that somehow manage to restructure become a significant player in the ongoing struggle
debt or that unilaterally decide to renege on some for control over economic territory across the world.
patently unfair debt taken on in the past are pun- Yet there are dangers of exaggerating its current
ished. Under the systems governing international significance. Even now, China accounts for less
debt, entire national populations lack even the mini- than 9% of global output (constant 2005 U.S. dol-
mum conditions of debt workout that are routinely lars, nominal exchange rates); its per capita GDP is
accorded to individual and corporate debtors within less than half (around 45%) of the global average,
national legal systems. Here, too, legal proceedings and still just fraction of the average for the econo-
tend to be biased towards investors and show little mies of the imperialist core. In relative terms,
recognition of the minimum rights of the citizenry China remains a “poor” country. Many of the
in affected countries. (Take, for example, the travails hyperbolic mainstream analyses and predictions
that the government of Argentina currently faces in with respect to China are eerily similar to the pre-
U.S. courts, in lawsuits brought by financial “vul- dictions for Japan in the 1970s, as an emerging
ture funds.”) This is another way in which contem- giant soon to take over the role of global economic
porary imperialism is expressed. leadership from the United States. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  21
THE END OF THE LABOR ARISTOCRACY tasks that could be geographically separated—have
been critical to this process. Together, they made
A similar point can be made even more forcefully possible the emergence of global value chains, which
for other nations that have been ecstatically described are typically dominated by large multinational cor-
as “emerging economies,” supposedly proving that porations, but involve networks of both competing
forces of imperialism are no hindrance to the rise of and cooperating firms. The giant corporations are
developing countries. Taken together, however, the not necessarily in direct control of all operations.
“BRICS” nations (Brazil, Russia, India, China, and Indeed, the ability to transfer direct control over
South Africa) account for less than 15% of world production—as well as the associated risks—to
GDP, even though their share of global population lower ends of the value chain is an important ele-
is just under 50%. Announcing these countries as ment in increasing their profitability. This adds a
new global powers is very premature, especially greater intensity to the exploitation that can be
when global institutional structures are still very unleashed by such global firms, because they are less
much tilted in favor of the established powers. dependent upon workers and resources in any one
All this does not mean that there have been no location, can use competition between suppliers to
changes in global economic and political power: push down their prices and conditions of produc-
there have been and will continue to be significant tion, and are less burdened by national regulations
and even transformative changes. However, these that might reduce their market power.
changes in the relative positions of different coun- This transformation has therefore given rise to
tries on the economic and geopolitical ladder do not what has been called the “Smiling Curve” of exchange
mean that the basic imperialistic tendencies that values and profits. Value added and profits are con-
drive the global system have disappeared—indeed, centrated in the pre-production (such as product
they may even become more intense as the struggle design) and post-production (marketing and brand-
for economic territory becomes more acute. ing) phases of a value chain. These now provide
This is particularly evident in the global spread of immense economic rents to the global corporations
multinational corporations and their new methods that dominate them, due to the intellectual property
of functioning, particularly with the geographic dis- monopolies these corporations enjoy. The case of
integration of production. Technological changes— Apple phones is now well known: the actual produc-
advances in shipping and container technology that ers in China (both companies and workers) earn only
dramatically reduced transport times and costs, as about one-tenth of the final price of the good; the rest
well as the information technology revolution that is taken by Apple for product design, marketing, and
enabled the breakdown of production into specific distribution. The producers of coffee beans across the

THE PPP PROBLEM

T he newly emerging economies are often thought to be more significant than they are, in part, because many analy-
ses compare incomes across different countries based not on nominal exchange rates, but rather on purchasing
power parity (PPP) exchange rates. PPP exchange rates seek to establish the relative purchasing power of each curren-
cy in terms of prices of a common basket of commodities.
The results, however, can be quite dubious, as they are based on the price of a basket of representative consump-
tion goods in the United States, which may not be so relevant to consumption elsewhere—especially not the poor in
the developing world. The basket of goods is unchanging over time, even though consumption patterns tend to shift
with technological change and evolving preferences. PPP exchange rates are also notoriously imperfect because of the
infrequency and unsystematic nature of the price surveys that are used to derive them.
In general, the countries where the PPP exchange rate is much higher than the nominal exchange rate are low-in-
come countries with low average wages. It is precisely because a significant section of the workforce receives very low
compensation that goods and services are available more cheaply than in countries where the majority of workers re-
ceives higher wages. Using PPP-modified GDP data may miss the point, by treating the poverty of the majority of wage
earners in an economy as an economic advantage.

22  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


“Smiling Curve” of Exchange Values and Profits. employment and wages in
China is as a break from that
pattern and an example of
some benefits of global inte-
gration, at least for a subset
of working people in the
developing world. The bene-
ficiaries, however, remain a
minority of the workers in
the global South. In other
Value added and profits are concentrated in the pre-production (such as product countries generally seen as
design) and post-production (marketing and branding) phases of a value chain. “success stories” of globaliza-
Source: Organization for Economic Cooperation and Development, “Interconnected tion, like India, the economic
Economies Benefiting from Global Value Chains,” May 28, 2013 (oecd.org). realities for most people are
much bleaker.
developing world earn a tiny percentage of the price The more obvious—and potent—change that
of coffee, in contrast to the high profits of a multina- has resulted from this phase of global imperialism has
tional chain like Starbucks. Small farmers and labor- been the decline of the labor aristocracy in the North.
ers growing cocoa beans earn next to nothing, com- The opening of trade, and with it a global supply of
pared to the leading sellers of chocolate, all of which labor, meant that imperialist-country capital was no
are Northern companies. The economic rents associ- longer as interested in maintaining a social contract
ated with the pre- and post-production phases have with workers in the “home” country. Instead, it
been growing in recent years. Meanwhile, the pro- could use its greater bargaining power to push for
duction phase, from which workers and small pro- ever-greater shares of national income everywhere it
ducers mainly derive their incomes, is exposed to cut- operated. This was further intensified by the greater
throat competition between different production sites
across the world, thanks to trade and investment lib-
The increase in the supply of the “global” labor
eralization. Therefore, incomes generated in this stage force and the growth of the power of
of the value chain are kept low.
The overall result is twofold. First, this has corporations to capture rents have meant a
resulted in an increase in the supply of the “global”
labor force (workers and small producers who are dramatic increase in the bargaining power of
directly engaged in production of goods and ser-
vices). Second, the power of corporations to capture capital relative to labor, which in turn has
rents—from control of knowledge, from oligopolis-
resulted in declining wage shares (as a
tic/monopolistic market structures, or from the
power of finance capital over state policy—has percentage of national income) in both
greatly increased. Overall, this has meant a dramatic
increase in the bargaining power of capital relative to developed and developing countries.
labor, which in turn has resulted in declining wage
shares (as a percentage of national income) in both
developed and developing countries. power of mobile finance capital, which was also able
to increase its share of income as well. In the advanced
Implications for Workers economies at the core of global capitalism, this pro-
These processes imply worsening material condi- cess (which began in the United States in the 1990s)
tions, for most workers, in both the periphery was greatly intensified during the global boom of the
and the core. Imperialism has generally weakened 2000s, when median workers’ wages stagnated and
the capacity for autonomous development in the even declined in the global North, even as per capita
global South, and worsened economic conditions incomes soared. The increase in incomes, therefore,
for workers and small producers there, so that is was captured by stockholders, corporate executives,
not altogether surprising. The growth of financial rentiers, etc. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  23
THE END OF THE LABOR ARISTOCRACY barely noticeable. Even this lacklustre performance
has been highly differentiated, with Germany
The political fallout of this has now become emerging as the clear winner from the formation of
glaringly evident. Increasing inequality, stagnant the Eurozone. Even large economies like France,
real incomes of working people, and the increasing Italy, and Spain experienced deteriorating per capita
material fragility of daily life have all contributed incomes relative to Germany from 2009 onwards.
to a deep dissatisfaction among ordinary people in This, combined with fears of German domination,
the rich countries. While even the poor among probably added to the resentment of the EU that is
them are still far better off than the vast majority of now being expressed in both right-wing and left-
people in the developing world, their own percep- wing movements across Europe. The union’s mis-
tions are quite different, and they increasingly see guided emphasis on neoliberal policies and fiscal
themselves as the victims of globalization. austerity packages has also contributed to the persis-
Decades of neoliberal economic policies have tence of high rates of unemployment, which are
hollowed out communities in depressed areas and higher than they were more than a decade ago. The
eliminated any attractive employment opportuni- “new normal” therefore shows little improvement
ties for youth. Ironically, in the United States this from the period just after the Great Recession—the
favored the political rise of Donald Trump, who is capitalist world economy may no longer be teetering
himself emblematic of the plutocracy. on the edge of a cliff, but that is because it has
instead sunk into a mire.
It is sad but not entirely surprising that the It is sad but not entirely surprising that the glo-
globalization of the workforce has not created a balization of the workforce has not created a greater
sense of international solidarity, but rather under-
greater sense of international solidarity, but mined it. Quite obviously, progressive solutions can-
not be found within the existing dominant eco-
rather undermined it. Quite obviously, nomic paradigm. But reversions to past ideals of
socialism may not be all that effective either. Rather,
progressive solutions cannot be found within this new situation requires new and more relevant
the existing dominant economic paradigm. economic models of socialism to be developed, if
they are to capture the popular imagination.
Such models must transcend the traditional
socialist paradigm’s emphasis on centralized gov-
Similar tendencies are also clearly evident in ernment control over an undifferentiated mass of
Europe. Rising anti-EU sentiment has been wrongly workers. They must incorporate more explicit
attributed only to policies allowing in more emphasis on the rights and concerns of women,
migrants. The hostile response to immigration is ethnic minorities, tribal communities, and other
part of a broader dissatisfaction related to the design marginalised groups, as well as recognition of eco-
and operation of the EU. For years now, it has been logical constraints and the social necessity to
clear that the EU has failed as an economic project. respect nature. The fundamental premises of the
This stems from the very design of the economic socialist project, however, remain as valid as ever:
integration—flawed, for example, in the enforce- The unequal, exploitative and oppressive nature of
ment of monetary integration without banking capitalism; the capacity of human beings to change
union or a fiscal federation that would have helped society and thereby alter their own futures; and the
deal with imbalances between EU countries—as necessity of collective organisation to do so. D&S
well as from the particular neoliberal economic poli-
cies that it has forced its members to pursue. J AYAT I G H O S H is professor of economics at
This has been especially evident in the adoption the Centre for Economic Studies and Planning at
of austerity policies across the member countries, Jawaharlal Nehru University, New Delhi, India.
remarkably even among those that do not have large N O T E : Parts of this article appeared in “The Creation of the New
current-account or fiscal deficits. As a result, growth Imperialism: The Institutional Architecture,” Monthly Review, July 2015.
in the EU has been sclerotic at best since 2004, and
even the so-called “recovery” after 2012 has been

24  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


Military Spending in the Swampland
What Now, What Next?
BY JAMES M. CYPHER

O N S E P T E M B E R 1 1 , 1 9 4 1 , T H E U . S . WA R D E PA RT M E N T C O M M E N C E D
construction of its new headquarters, the Pentagon: With each of its five sides running the length of
three football fields, encompassing 4 million square feet of work space, it remains even today the world’s

››
largest office building. Placing it where President Roosevelt wanted meant that the edifice would be con- U.S. Geological
structed on the Potomac River’s flood plain, largely over a swamp in an area known as Hell’s Bottom, Survey
requiring the sinking of 41,192 pilings—approximately one piling for each person to be housed in the topographical
map covering the
Pentagon—to keep the giant, fortified edifice from sliding into the swamp. area around the
President Trump has repeatedly boasted of his intentions to drain the Pentagon swamp—as one commen- Pentagon in
tator put it, “taking down the Military-Industrial Complex one tweet at a time”—emphasizing the need to Virginia, soon
alter the long-known propensity of the U.S. Department of Defense (DoD) for coddling military contractors after the road
network was built.
and facilitating the cozy, “revolving door” employment opportunities provided for high-ranking retired mili- Mapped 1913-
tary officials. During the 2016 presidential campaign, he committed his administration “to conducting a full 1915, revised
audit of the Pentagon” to eliminate duplicate personnel and to uncover profligate contracting procedures. 1941-1942, edition
of 1945. Public
But is there reason to expect that the increasingly secret, increasingly remote, increasingly unanalyzed domain.
National Security State—the Pentagon’s “State within the State”—will experience a major reconfiguration?
This is the deeply embedded State which exercises its “relative autonomy” through the coordination of the
National Security Council (NSC), the chairman of the Joint Chiefs of Staff, and the 17 intelligence agencies
which define and project global U.S. military power. The Trump administration will operate the NSC in an
unprecedented manner, with the President’s top political advisor, “alt-right” militarist Stephen Bannon, as a
voting member of the key Principals Committee of the Council. The Principals Committee exercises sweep-
ing powers over the nature and scope of U.S. foreign policy decisions by framing and recommending strata-
gems to the President. That the Industrial-Military-Congressional Juggernaut (IMCJ)—which constitutes the
institutional base on which the National Security State was erected—

COSTS OF could be slowed or redirected by the incoming presidential administra-

EMPIRE
tion defies credibility. If anything, there is every reason to anticipate that
in the Pentagon’s lucrative and murky wetlands, wherein the giant
“prime” military contractors and their subcontractors dwell, the swamp
will increase in depth and opacity. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  25
M I L I TA R Y S P E N D I N G More broadly, the Pentagon’s Command,
Control, Communications, Computers, Intelligence,
Plumbing the Depths Surveillance and Reconnaissance (C4ISR) programs
Like so many of the details surrounding the IMCJ, have historically overrun their scheduled costs by
the annual total number of contracting firms cannot 67%, space programs by 89%, and drone programs
be accurately determined. The fact that a single by 109%. Meanwhile, the Lockheed Corporation
“multiple awards” contract—issued by the Navy on has spread F-35 production activities through 35
June 20, 2016—went to 608 firms indicates that a U.S. states, claiming that the vast project now main-
very large number of U.S. corporations are directly tains, directly and indirectly, 146,000 jobs. Even if
tied to the IMCJ. The total number of U.S. corpo- the administration cuts back a bit on the rate of price
rations feeding at the Pentagon trough—directly or increases for the planes, this will be no more than a
indirectly—is unknown, because the DoD does not Presidential showman tactic—the small sums saved
track the thousands of subcontractor firms. The will be redirected toward other programs.
Defense Contract Management Agency stated that
in 2014 they were supervising over 20,000 direct (or The Secret $100 billion B-21 Raider
“prime”) contractors, meaning that the total num- More important at this juncture, in terms of public
ber of firms involved could easily be around 60,000. policy, are the contractors’ current marketing tac-
Notably, there are military contractor “enclaves,” tics. Combined with the military doctrines and
such as San Diego, Calif., where $45 billion in mili- strategic policies pursued by the National Security
tary spending in 2016 functioned, according to State, they set the present and future course of the
economist Lynn Reaser, as the “most important and Pentagon steamroller. For one example, there is the
largest economic catalyst,” accounting for 20% of case of the forthcoming B-21 Raider, a follow-on
the regional economy. Yet a review of the daily con- contract to the B-2 stealth bomber.
tracts issued by the DoD clearly demonstrates that The stealthy, drone-toting, missile-laden, long-
contracts were spread across almost all of the United range B-21 Raider nuclear bomber project was
States in 2016. quietly announced by the Pentagon on October
In the 1970s and early 1980s, a steady stream of 27, 2015: Virginia-based Northrop Grumman
research focused on how the IMCJ functioned, and Corporation received the “prime” contract award—
for whom. In the post-9/11 era of constant war, crit- with an estimated full-development price of $100
ical scrutiny of the IMCJ (save the occasional reveal- billion (including all support systems) according to
ing broadside) has waned. A culture increasingly the Senate Arms Services Committee chairman.
marked by militarism—the glorification of or Meanwhile, the anticipated delivery date (rumored
unconscious deference to all things military—has to be 2025), as well as the quantity (thought to be
created a new ideological climate wherein an analyt- 100, but maybe 150), both remain unknown to
ical critique of U.S. military power projection and U.S. citizens.
the economic and structural role of the National More than a year later, little if anything is known
Security State is most unwelcome. Even when it regarding this fantastic artifact except that steps
does occur, it is largely overlooked. toward development and production had been initi-
However, once in a while some outsized travesty ated by several subcontractors, including Janiki
perpetuated by the IMCJ briefly draws critical Industries near Seattle—a location represented by
attention. Over the past 15 years, the $400 billion members of important military-related subcommit-
F-35 fighter plane contract has become the stan- tees in the Senate and House. Likewise, production or
dard reference point used by critical observers, engineering has begun in several other states or con-
including many on the left, to illustrate the IMCJ’s gressional districts represented by powerful members
affinity for cost overruns. In December 2016, of the armed services committees: major subcontrac-
then-president-elect Trump unexpectedly dispar- tors in these states/districts include Orbital ATK
aged the F-35 contract and, in February 2017, he (Ohio), BAE Systems (New Hampshire), Pratt &
wrangled a promise from its contractor, Lockheed Whitney (Connecticut), GKN Aerospace (Missouri),
Martin Corporation, to push the price down from Rockwell Collins (Iowa), and Spirit Aerosystems
an astronomical $102 million per plane to a merely (Kansas). For Northrop Grumman, the B-21 con-
elephantine $94.6 million. tract is particularly attractive because the company

26  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


will orchestrate the complex web of first-, second-, biotechnology, and nanotechnology. The world’s
and third-tier subcontractors while holding a “cost largest tech company in 2016, Apple, soared because
plus” (instead of a fixed-price or competitive-bid) it “mastered designing and engineering technologies
contract with the Pentagon for the initial develop- that were first developed and funded by the U.S.
ment phase. (See box.)This is business as usual. government and military,” notes Mazzucato. The
Military contracting is essentially a “cost maxi- same has been true for key technologies such as the
mizing” undertaking. The Pentagon is fundamen- satellite, the global positioning system (GPS), artifi-
tally disinterested in controlling procurement and cial intelligence, and robotics.
maintenance costs, since they are a “quality maxi- The estimated value of the B-21 contract is not
mizing” institution with the ability (generally) to overwhelmingly large by the standards of the
pay any price for cutting-edge performance. Fat IMCJ—the giant F-35 fighter aircraft contract is
profits on the initial Pentagon contract are not nec- currently anticipated to ring out at $400 billion.
essarily the major inducement for contractors. With The B-21 may not be exactly “representative,” but
the taxpayers funding all the learning involved in the it is close. Large contracts are routinely granted to
mastery of new engineering, design, and production only a handful of giant military contracting cor-
processes, the “prime” contractor frequently can portations: Northrop Grumman, the number two
count on a big “after-market” for weapons systems military contractor in fiscal year 2014, received
in terms of foreign arms sales and rich licensing $5.76 billion from its direct sales to the Pentagon.
agreements. Potentially even more important are the (The company is also an important subcontractor
long-term benefits arising from the technological in the F-35 program.) While the B-21 bomber will
advancements, sometimes yielding patents and puportedly have an astonishing range of military
innovation breakthroughs. Prohibitive research and capabilities, it is not conceived as a stand-alone
development costs are frequently offloaded onto the project. Rather, it will apparently require an
Pentagon while the contractors reap a cornucopia of “escort” fighter plane, under the Penetrating
technological spinoffs. Counter-Air (PCA) Program. This vaguely
As recently documented by Marianna Mazzucato described “power projection aircraft,” or “sixth
in The Entrepreneurial State and by Linda Weiss in generation” war plane, would have long range
America Inc.? Innovation and Enterprise in the (intercontinental) capabilities and would be highly
National Security State, military/government con- manuverable. As currently conceived, then, the
tracts have been instrumental in covering much of B-21 Raider would come with a “long tail” of
the developmental costs for major technologies giv- accompanying multi-billion dollar “escort” war-
ing rise to the computer, the semiconductor, plane contracts. ››

Profit Pyramiding
“C ost plus” means, in the first instance, that “profit pyramiding” will be rampant: the pyramiding process allows the third
tier contractors to pass their profits through as “costs” to the second tier, while the second tier contractors do the
same, on up to the “prime” contractor on the B-21 (Northrop Grumman). Thus, should the Pentagon agree to a “reasonable”
profit margin of perhaps 5% over cost on widget X, which is an input to widget Y, which is an input to widget Z, Northrop
can then turn around and incorporate all three widgets into its costs (including the subcontractors’ profits at each stage),
finally tacking on its own approved markup of 5%. Ignoring the impact of all-but-inevitable cost overruns, a “modest” ap-
proved profit margin of 5% on the $100 billion contract will not amount to $5 billion, but rather to $15 to 20 billion.
The difference between the acknowledged rate of profit which Northrop Grumman will show and the actual rate
(which will include all that gleaned by the subcontractors) will be obscured by the Pentagon, never to be known by
the U.S. taxpayers—who have long been conditioned to accept the Industry-Pentagon precept that the idea of “war
profiteering” is a crank fantasy. Consider, finally, that “profit”—according to the standard economics textbook explana-
tion—is the “reward” for the risks that successful competing firms must face. By definition, “cost-plus” contract have no
risks; rather, the contractor is rewarded for all so-called “reasonable” cost allowances, however conjured.

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  27


M I L I TA R Y S P E N D I N G decade, excluding the military’s payroll. Even so,
the basic military budget for fiscal year (FY) 2013
Trump and the IMCJ (October 1, 2012-September 31, 2013) was never
These two new, technology-loaded aircraft pro- cut by the mandated amount of $55 billion, as
grams would form the core of the current “modern- fast-shuffle adjustments and accounting subter-
ization” wave for the U.S. Air Force. Prior to fuges brought the programmed reductions down
President Trump’s election, widespread concern was to just over $30 billion. By FY 2014, the Pentagon
voiced throughout the IMCJ as to where sufficient was skating through a loophole befitting its cus-
funds could be found to push these two programs tomary style via a special “war funding” slush fund
forward—along with several others designed for the known as Overseas Contigency Operations (OCO)
various branches of the military/space services. In expenditures. By doing so, the actual “base” mili-
September 2016, only a year after the B-21 program tary budget (for weapons procurement, research
was announced, the Air Force Secretary called and development, maintenance, and operations)
into question the viability of this weapons- plus the OCO budget was reduced by little more
modernization program, declaring that funding for than 0.5% from planned Pentagon spending prior
Air Force personnel needs would have to come first. to the sequester program.
It therefore followed, given what were then consid- Nonetheless, the IMCJ wanted to push military
ered lasting budgetary constraints, that President spending up at a rapid rate to support the vast costs
Obama’s weapons-modernization programs would of modernization—something that basically could
have to be postponed, cut, or abandoned in defer- not be done under the terms of the sequestration
ence to the payroll requirements of the DoD’s nearly deal. (That leaves social programs as the only target
three million military and civilian employees. for deficit hawks’ spending cuts.) Fear of the defi-
cit, and the ever-building government debt that it
There is every reason to anticipate that in caused, had largely put the kibosh on plans to
the Pentagon’s lucrative and murky wetlands, boost military outlays until candidate Trump
emerged at the head of the pack in the election
wherein the giant “prime” military contractors race. Republican congressional leaders will now
implement Trump’s September 2016 call “to fully
and their subcontractors dwell, the swamp eliminate the defense sequester.”
The Obama Administration tried to maintain
will increase in depth and opacity under effective parity in growth between the military and
the new administration. non-military portions of the budget. Now, the mil-
itary’s floodgates are swinging open once again,
providing hundreds of billions of dollars in new
contracts for the IMCJ over the next four years. In
But then November’s presidential-election late January 2017, Trump issued a “Presidential
results changed the equation. Like many before Memorandum—Rebuilding the US Armed
him, Trump apparently wants “more bang for the Forces,” which announced a forthcoming budget
buck” (high weapon capacity at low per unit cost). amendment for military readiness for FY 2017
But, more importantly, he also stands for “more (thereby probably jettsoning the sequestration pro-
bucks for more and bigger bangs” (widescale weap- gram) as well as issuing a carte blanche mandate to
ons modernization programs) which will most the Secretary of Defense, to prepare a “plan of
likely mean the largest surge in military spending action” within 30 days. This plan will be the basis
since President Reagan’s program to “Rearm for the Secretary’s Readiness Review, to be impli-
America.” Under President Trump, the first target mented before FY 2019. The Memorandum also
of the forthcoming arms buildup will be the elimi- authorized a new National Defense Strategy—a
nation of the so-called congressional “sequestra- sweeping document used to define the strategic
tion” program that has largely capped major military goals and priorities of the United States—
increases in military expenditures since 2013. The also to be prepared by the Secretary of Defense.
sequestration program mandated roughly a $500 This was followed by the President’s commitment
billion cut in planned military expenditures over a to “one of the greatest military buildups in U.S.

28  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


history” in late Feburary and the announcement
that the FY 2018 military budget would rise by
more than 9%. Here is a summary of the person-
nel, policies, and programs the Trump
Administration now plan to deploy:
1. A battle-tested, jingoistic, self-confident
array of former generals—exuding more than
a whiff of Prussian military swagger—will
occupy the key leadership positions in the
National Security State, once historically would cost at least $200 billion to build and

››
reserved for civilian leaders: these include the necessitate hundreds of billions to operate.
appointment of Generals James Mattis as Official U.S. Air Force
Operation would likely require establishment Artist Rendering of
Secretary of Defense, H.R. McMaster as the of a new Unified Combat Commander in the Northrop
National Security Advisor, Keith Kellogg as Chief ’s (CINCs) mission area for Space. Grumman B-21
the NSC’s Chief of Staff, and John Kelly to Currently there are six area Combat “Raider”Heavy
Bomber (February
head the Department of Homeland Security, Commands, such as the new U.S. Africa 2016). Public domain.
the third largest cabinet department. Holding Command and the U.S. Central Command
a military history Ph.D. degree from the (covering the Middle East).
University of North Carolina, counterinsur-
3. A massive build-up of ships deployed by
gency expert McMaster (known as the
the U.S. Navy—from 272 to 350—will cost
“Inconoclastic General”) seeks to expunge the
an estimated $120 billion (excluding cost
Vietnam Syndrome. Arising from the U.S.’s
overruns). This is considered the largest single
prolonged (1954-1975) Southeast Asian mili-
expenditure of the anticipated Trump build-
tary debacle, the term encapsulates the pro-
up and would constitute a major national jobs
found reluctance of the U.S. citizenry to send
creation program to revitalize an infrastruc-
military personnel into deadly combat, and to
ture of naval construction shipyards, depots,
only support engagement-at-a-distance by
and auxilary facilities. The Navy is charged
sanctioning a minimal fighting force backed
with sustaining its presence in 18 maritime
by a maximum level of advanced military
regions where, ostensibly, the U.S. has “critical
technologies—such as “network-centric war-
national interests.”
fare” operations. Based on his interpretation
of the Vietnam War and experience in the Iraq 4. An increase of 90,000 active duty mili-
military campaigns, McMaster strongly advo- tary personnel for the U.S. Army will require a
cates prioritizing unfiltered military expertise 20% increase in the Army’s budget, or about
(rather than the views of civilian advisors mes- $118 billion over the next four years, using
merized by “shock and awe” visions of techno- current per soldier costs as the basis of the
cratic warfighting) in the guidance and execu- calculation.
tion of U.S. Grand Strategy—the coordination
5. An increase of 300 fighter aircraft (now
and deployment of all national resources in
including the “escort fighter” plane for the B-21
pursuit of U.S. hegemony via “power
Raider nuclear bomber) over the current base-
projection.”
line of 900. The U.S. Air Force budget would
2. President Obama, upon signing his last have to leap upward, considering that a
(FY 2017) National Defense Authorization “generic” F-35 fighter currently may cost about
Act in December 2016, opened a path to $150 million. Even at half that price, the 300
greatly extend the arms race in space by autho- new aircraft would cost $22.5 billion (once
rizing the Pentagon to begin research, devel- again excluding cost overruns). On top of this
opment, testing, and evaluation (RDTE) for a amount would be the estimated $100 billion to
space-based missile system. A 2012 report by develop the B-21 Raider. And, of course, all
the National Academy of Sciences concluded planes come with massive support costs: operat-
that a minimal space-based weapons system ing costs per hour routinely reach $58,000. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  29
M I L I TA R Y S P E N D I N G Security State are now held by a troika of war-
lords. Living under the sway of “military meta-
Simply summing the costs of the items men- physics,” these “crackpot realists” (to use the ter-
tioned above reveals potential new outlays of minology of sociologist C. Wright Mills) back
$560.5 billion, or over $140 billion per year over a warfighting programs across the Middle East and
four year period. Contract delays and funding North and Central Africa. As Mills noted in
debates might conceivably hold this to a $70 bil- 1958: “In crackpot realism, a highflying moral
lion per year jump in the base (or discretionary) rhetoric is joined with an opportunist crawling
military budget: This would translate into a 13.4% among a great scatter of unfocused fears and
increase over FY 2017—which would be man- demands. … The official expectation of war also
dated through congressional special appropriations enables men to solve the problems of the eco-
at President Trump’s urging. nomic cycles without resort to political policies
Larger annual base budget outlays necesitate that are distastful to many politicians.”
more spending for retirement funds (including Going forward into Trumpland, instead of
health care) as well as for Veterans Affairs. With draining the Pentagon’s swamp the available evi-
interest rates almost sure to rise, and with President dence suggests that U.S. society is headed down
Trump using deficits to finance the forthcoming the military drain as “defense needs” starve out the
arms buildup, the share of the national debt attrib- few skeletal social programs that have survived
utable to national security spending will rise, as decades of neoliberal attack. D&S
will annual interest payments.
J A M E S C Y P H E R is a Dollars & Sense associate
The Bottom Line and a professor of economics in the Doctoral Pro-
For 2017, based on President Obama’s last mili- gram in Development Studies, Universsidad
tary budget, total U.S. military related spending Autónoma de Zacatecas (México).
(including the special warfighting account
known as the Overseas Contingency Opertions
S O U R C E S : C. Wright Mills, The Causes of World War Three (Simon
budget, nuclear bomb building, retirement and and Schuster, 1958); Dan Graizer, “Senators Vote to Keep Bomber
Veterans outlays, International Affairs, Price Secret,” The Defense Monitor, July-August 2016; Dave Majumdar,
Homeland Security, and interest payments “Lockheed Martin, General Dynamics, Northrop Grumman, Boeing
and Raytheon: America’s 5 Top Defense Contractors,” The National
attributable to past military expenditures) will Interest, Nov. 10, 2016 (nationalinterest.org); David Williams, “Presi-
be $1.04 trillion in FY 2017, or more than 5% dent Obama signs defense bill that could spur new space-based
of current GDP, according to the January-March arms race,” Los Angeles Times, Dec. 23, 2016 (latimes.com); Defense
Contract Management Agency, “Director, Defense Contract Manage-
2016 Defense Monitor.
ment Agency,” 2014 (dcma.mil); Linda Weiss, America Inc.? Innovation
But this calculates only the direct effects of and Enterprise in the National Security State (Cornell University Press,
military spending: The indirect or “induced” 2014); Mandy Smithberger, “Pentagon’s 2017 Budget was Mardi Gras
effects of secondary and tertiary rounds of spend- for Defense Contractors,” Defense Monitor, January-March 2016;
Marianna Mazzucato, The Entrepreneurial State (Anthem Press, 2013);
ing, using the calculating methods adopted by the Michael Shear, et.al., “Trump Joining List of Critics of Fighter Jet,” New
San Diego regional economic impact study, sug- York Times, Dec. 13, 2016; Northrup-Grumman Corporation, “An-
gest that, pre-Trumpland, about 8% of U.S. GDP nouncement of Long-range Strike Bomber Contract Award,” Oct. 27,
2015 (northropgrumman.com); San Diego Military Advisory Council,
is dependent in some way on the Pentagon- “Press conference & luncheon attended by Mayor Kevin Faulconer,
financed programs, past or present. Adding in California Governor’s Military Council, military commanders &
direct foreign arms sales of $40 billion per year defense industry leaders,” 2016 (sdmac.org); Sidney Freedberg, “Bow
Wave Time Bomb: B-21, Ohio Replacement Costs Likely To Grow,”
(which would not exist without the comparative
Breaking Defense, Aug. 4, 2016 (breakingdefense.com); Steve Vogel,
adavantage created by Pentagon largesse) would “The Battle of Arlington: How the Pentagon Got Built,” Washington
modestly raise these estimates. Post, April 26, 1999 (washingtonpost.com); U.S. Department of
President Trump’s administration could easily Defense, “Contracts Press Operations Release No: CR-124-16” (de-
fense.gov); President Trump, “Presidential Memorandum-Rebuilding
push up total military spending (including all U.S. Armed Forces” (whitehouse.gov); H.R. McMaster, “Kicking the
direct and indirect effects) by 1 or 2% of GDP, Vietnam Syndrome,” Hoover Daily Report, Feb. 17, 2003 (hoover.
excluding warfighting scenarios. Unfortunately, org).H.R. McMaster, “The Human Element: When Gadgetry Becomes
Strategy,” World Affairs, Winter 2009 (worldaffairsjournal.org).
new high-cost warfighting scenarios are extremely
likely: The leadership positions of the National

30  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


The Global Industrial Working Class
A N I N T E RV I EW WITH IMMANUEL NESS

I mmanuel Ness is a professor of political science at Brooklyn


College the City University of New York and the author of
Southern Insurgency: The Coming of the Global Working
Class (Pluto Press, 2015). In November 2016, he spoke with
D&S co-editor Alejandro Reuss about the present and future of
the world’s industrial working class. News of its death, Ness
argues, is greatly exaggerated—in fact, it is bigger than ever—and
he expects larger and more political struggles to come. – Eds.

Dollars & Sense: You’ve written that there are more industrial
workers in the world today than ever before. Can you explain
how that growth has occurred and how it has reshaped the
world’s industrial working class in recent decades?
Immanuel Ness: Yes, there are two major factors. The first is
the deindustrialization of the traditional industries in North
America and Western Europe—garment manufacturing, elec-
tronics, automobiles and other heavy industry—and the relo-
cation of those industries in the global South—Africa, South
Asia, and South East Asia, as well as to some extent Latin
America. As a consequence, the latter regions have become
major centers of production and export. And as part of that,
the number of manufacturing workers there has grown
dramatically.
The second factor is that, within industrializing countries
like India, China, Bangladesh, and Indonesia, there has been a
dramatic urbanization forced by the end of productive farm-
ing in rural areas. Many of the working peasants have been
moving into urban centers where there are concentrations of
industry. So while many in North America and Western
Europe would say “the industrial working classes is virtually dead,” I would make the case that there are in
fact more industrial workers on the planet today than anytime in human history.
Roughly speaking, the industrial working class has grown over the last 50 years from somewhere around
200 million to nearly a billion people. Of course, that doesn’t include other workers outside of manufac-
turing. The process has been unrelenting, and is bringing a number of Marxist arguments about capitalist
globalization to fruition: Workers are engaged in very significant industrial struggles in places like New
Delhi, Shenzhen, Cairo, and beyond.
D&S: Can you take us through some of the

COSTS OF
ways that you see labor struggles playing out in

EMPIRE
the global South in this context, especially in the
countries that you focus much of your research
on—China, India, South Africa?

IN: I think one general theme across the coun-


tries of the global south—China, India, South
Africa, Indonesia, Egypt, Brazil, Mexico,
etc.—is that there is an extreme level of ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  31
Also, you have to focus on the labor struggles
GLOBAL INDUSTRIAL WORKING CLASS
themselves as industrialization grows and becomes
contingency. We don’t have, in the global South, formalized. There has been widespread growth in
the traditional “Fordist” factory. Of course, you strike activity. Sociologist Beverly Silver docu-
have some very large industrial installations, but mented these strikes taking place in the 1990s,
workers are cycled in and out of these industries. and continued to do that in her work Forces of
More than ever before, the industrial working class Labor: Workers’ Movements and Globalization since
today is more like the tinker, tailor, and candlestick 1870 (2003).
maker of the past. Workers are typically not guar- This level of industrial militancy is seen in fac-
anteed jobs for very long periods of time. Their tories in China, for instance, where workers have
value as workers largely takes place over a five- or gone on mass strikes. Thousands of strikes take
ten-year period and then they become expendable. place in China every year. It has more strikes,
They come in and out of industry on a regular without question, than anywhere else in the
basis, so they may actually work one day in a steel world, even with a single union—a state domi-
mill and then the next day as a peddler on the nated union, the All-China Federation of Trade
streets. And this is something that takes place espe- Unions (FTU). The largest strike in the private
cially in the poorest regions of the global South— sector in China took place in the city of Dongguan
in India, Africa, and elsewhere. not too far from Hong Kong, in the Pearl River

Modern Imperialism and Global Industrialization


D&S: You’ve described this transformation in the context of what you call the “unrelenting significance of modern im-
perialism.” Can you describe what you see as the main characteristics of imperialism today and the way that those enter
into your analysis?

IN: There are many different theorists who study global industrialization and capitalist expansion from Immanuel
Wallerstein, to Giovanni Arrighi, to William I. Robinson and others. Robinson has described the current world economic
system as being focused on the expansion of capital through the support of “deterritorialized” nation-states.
I would argue that there are leading imperialist powers—the United States, especially—that engage in economic
forms of imperialism and ensure that it takes place through military expansion and intervention. But the nature of
this form of imperialism is financialization. I think that very clearly, something critical has happened—where finan-
cial institutions have penetrated transnational corporations. At one time, corporations had subsidiaries around the
world, now they are investing, on a global scale, in firms that are contractors. Much of the foreign direct investment
from global financial centers like Wall Street, the City of London, Tokyo, Hong Kong, and Frankfurt are to places like
the Pearl River Delta of China, around Hong Kong, major industrial centers in India, including the Delhi region as
well as Chennai, South Africa, Egypt, Vietnam, and to some extent Brazil and Indonesia. These are major develop-
ments of industrialization.
This capital flows, as the Marxist geographer David Harvey points out, in a molecular fashion, to places where
they are most profitable and where accumulation can take place at the fastest rate. And so, one major feature is that
transnational corporations have become “deterritorialized” in the sense that they really don’t care where they pro-
duce. They’re willing to invest, or to pull out investments and reinvest elsewhere, on the basis of profitability. The
traditional firms, as the writer and activist Naomi Klein has argued, are just logos. They don’t produce much of any-
thing, but they are determining what will be produced and how it will be produced—based on extremely low wag-
es—in Africa, Asia, and Latin America. This is a major factor in understanding modern imperialism, which has a capi-
talist economic form. It is an extension of classical theories of imperialism, from J.A. Hobson to Lenin. There is a form
of financialization that starts from the early 20th century, when German banks were investing in Russia, and now we
have this taking place on a global scale. And in many ways, it is contributing to a politicization of working-class peo-
ple around the world.

32  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


Delta, the manufacturing hub of China outside of lost a lot going on strike for such an extended

››
Hong Kong. There you had 40,000 workers who period, in terms of non-payment of wages. But,
A poster from the
were making athletic shoes for Adidas and other wages have gone up appreciably, over a period that Association of
companies, who went on a strike that lasted about I would say started around 2009 and is continuing Mineworkers and
a month between May and June 2014. That was a to this day. In the platinum sector, this contributed Construction
Union (AMCU) in
very important transformation. to the formation of a major union, the Association South Africa
Many people outside of China would say, of Mineworkers and Construction Union (via Twitter,
“Well, you know, the Chinese workers are com- (AMCU), which went from literally no workers to @_AMCU).
pletely oppressed and they don’t really engage in 1,000 workers and now probably represents well
activity because of the single state union, the over 100,000 workers. And probably growing dra-
FTU.” But in fact, there is a lot of grassroots matically in the years to come.
organizing that’s going on which tangibly One aspect of this is, of course, economism
improves conditions, because in China wages, [labor struggles focused on economic demands
especially minimum wages, are negotiated on a like higher wages], but there are also demands for
municipal level. So, major changes are taking political change. In South Africa, there is a chal-
place in China, which is leading to higher wages, lenge to the Tripartite Alliance government—
improved working conditions, improved health- composed of the African National Congress
care. A lot of people don’t want to admit it, but (ANC), South African Communist Party (SACP),
this is a very important development even within and Congress of South African Trade Unions
a single-party union. (COSATU)—which came into existence in 1994.
Of course, in South Africa, we had the epic It did allow democratic freedoms, but did not at
experience—also in early 2014, the entire period all allow for any kind of redistribution of wealth,
from January to June 2014—where mine workers so whites continued to maintain the vast majority.
in the platinum sector went on strike demanding And perhaps this will lead to a major movement
dramatic increases in wages. Of course, workers in the years to come. ››
MARCH/APRIL 2017  l  DOLLARS & SENSE  l  33
GLOBAL INDUSTRIAL WORKING CLASS turning workers into owners, when in fact it
forces workers to expend even more in working
In India, this is taking place a lot more slowly, for these companies.
but there are interesting formations of unions I think the lesson is that, in the global South,
across different industries and different models the major feature of struggle is spontaneity. For
of unionization that are extremely interesting— instance, in many unions in the global South—in
even though many would argue that the condi- China, India, South Africa, Indonesia, and so
tions of Indian workers are actually worsening in forth—you have a lot of strike activity going on.
the contemporary era. But, no question, workers You have a lot of militancy taking place. And the
are going on strike and are also protesting. real lesson that we can learn is that, for instance,
There’s just a need for a political vehicle for that Uber drivers can go on a strike by not picking up
to take place. passengers for a period of time.
In the global South, these are spontaneous
D&S: Of course, people in the global North are movements and, as a consequence, it’s really
acutely aware of the changes of the composition of important to recognize there’s a need to build
employment away from manufacturing, away from institutional power. These spontaneous move-
industry into services and so forth. Do you see a ments in places like South Africa and India are
possibility of revitalization of labor movements, taking place inside and outside unions—even in
China to some degree, though we don’t know
While many in North America and Western what can happen with respect to the internal
Europe would say “the industrial working classes functioning of the FTU in China. Workers are
willing to form new unions, or switch from one
is virtually dead,” I would make the case that union to another. For instance, you have, in both
South Africa and India, a lot of unions that are
there are in fact more industrial workers on the vying for leadership over the auto sector. The
planet today than anytime in human history. same thing is true with respect to South Africa,
where you have workers who have switched from
the National Union of Mine Workers to the
AMCU in the mining belt. So that, the one lesson
presumably now centered outside of manufactur- would be that you need to take this spontaneous
ing, in the global North? And are there lessons to power and turn it into some kind of mobilization.
be learned by workers and the labor movements in There are lessons that still need to drawn in the
the global North from workers, often struggling global South as well as the North because—while
under highly unfavorable conditions, in the global unions are good—many of them are ossified and
South today? represent, in most cases, older struggles that took
place generations ago.
IN: Well, I’d like to preface this by saying that I
actually think that the major movements of the D&S: Finally, you alluded to some of the strug-
future will take place in the global South, where gles that are taking place today as basically econo-
85% of the working class is situated. In the global mistic in their demands, by which we mean cen-
North we are, in some ways, beneficiaries of the tered on questions like wages, benefits, hours, and
exploitation of global South workers. But there is so forth. You also posed the question of the pos-
no question that the new industries that are being sibilities of broader politicization of labor strug-
formed in services, technology, and so forth are gles. What do you see as the potential for labor
creating high levels of exploitation. This exists, movements to develop a broader political agenda
for instance, in the restaurant and retail sectors, in up to and including questions of challenging—on
telecommunications, where you have call-center a systemic level—imperialism, financialization,
workers in the global North that are highly and capitalism itself?
exploited, and so forth. And certainly with respect
to the rise of “for-hire” transportation. The IN: That’s a very broad question, certainly. I would
growth of companies like Uber is ostensibly go back to the point that unions are forming.

34  l  DOLLARS & SENSE  l  MARCH/APRIL 2017


There’s no shortage of worker militancy. You have seen the fruits of these struggles in any specific
that happening every day. Workers will always place, except for minor examples over the last
rebel, workers will always form their own assem- decade or two. But in fact, we’re now seeing—
blies, engage in struggles even without unions— there’s no question about it—the beginnings of
that’s something that’s always a given. And in fact trade unions and political movements forming
that’s growing as we are seeing a larger industrial around socialism, which could happen maybe in
workforce on a global level. The point would be, I a region or maybe in a country. It would have to
would argue, that there is a great need for the trade be a very large country—I think that’s the only
unions that are interested in organizing to actually way to have that happen. For instance, in South
stand for something other than these kinds of Africa there will be regional struggles of workers
economistic objectives, and that they fight for throughout the mining belt, throughout indus-
political systems that are more equitable, and actu- try, throughout agriculture, and in urban areas
ally have a plan for what that will look like in the as well. So that there are a lot of movements that
years to come. are building formations that have not necessarily
I think that with the failures over the last cen- consolidated as yet, but there’s no question that
tury or so, many argue that socialism is no lon- they will.
ger valid. In fact, I think it is probably more nec- I think that this is something that we need in
essary today than any time in history. And in the global North as well—unions that are in fact
fact many unions, for instance the National anti-capitalist. While there are very few—most
Union of Medical Workers in South Africa, are unions are rooted in economistic policies—I think
engaging in political education. They’re educat- that we should certainly learn to fight against the
ing their workers in Marxism, they’re educating system. I think that the Battle in Seattle [protest
their workers in political struggles, in this case against the World Trade Organization (WTO)]
outside of the electoral domain. They’re educat- that took place in 1999 was a good start, but again
ing their workers and, as a result, workers are it was in some ways spontaneous. Traditional trade
demanding equality with respect to housing, unions, existing ones, are opposed to any kind of
with respect to education, with respect to health- comprehensive policy. We have to recognize that,
care—and these are all very important struggles given the globalization of the entire capitalist
that workers are engaged in. There is growing world, we need to fight in solidarity on an interna-
opposition to policies of free trade, neoliberal- tionalist level, global North-global South, South-
ism, and so forth. Of course, we haven’t really South, and so forth. D&S

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  35


< Economy in Numbers $
U.S. Military Spending, Arms Industry, and Wars
BY THE DOLLARS & SENSE COLLEC TIVE

COSTS OF F or our “Economy in Numbers” in this special Costs of Empire issue, the Dollars & Sense collec-

EMPIRE
tive has compiled statistics on U.S. military bases, defense expenditures, the arms industry,
and recent wars. Avid magazine readers will recognize the style as an homage to “Harper’s Index,”
which Harper’s Magazine has been publishing for over thirty years. So, with a tip of the hat to
Harper’s, here are the facts, by the numbers. D&S

Number of countries in which the United States has military bases: 70


Total number of U.S. military bases abroad: 800
Number of countries with military bases in the United States: 0
U.S. military expenditures as percentage of world total, 2015: 33.6%
Military expenditures of second-highest country (China), as percentage of world total, 2015: 12.1%
Military expenditures of second- through eighth-highest countries (China, Saudi Arabia, Russia, United Kingdom, India,
France, Germany), as percentage of world total, 2015: 34.4%
U.S. military expenditures as percentage of GDP, 2015: 3.3%
U.S. military expenditures as percentage of total federal spending, 2015: 16%
U.S. military expenditures as percentage of discretionary federal spending (excluding mandatory spending, such as Social
Security and Medicare, and payment of interest on federal debt), 2015: 54%
United States per capita military expenditures, 2015: $1,854
United States rank in military expenditures per capita: 5
Countries above the United States in military expenditures per capita, 2015: Israel, Oman, Saudi Arabia, United Arab Emirates
(Note: United Arab Emirates figure not available for 2015. Ranking based on most recent figure (2014).)
U.S.-based companies among the top 100 arms and military services companies worldwide, 2015: 42
(Note: Top 100 list excludes China-based companies due to lack of data;
count of U.S. companies excludes U.S. subsidiaries of non-U.S. companies)
U.S.-based companies among the top 10 arms and military services companies worldwide, 2015: 7, Lockheed Martin Corp.,
Boeing, Raytheon, Northrop Grumman Corp., General Dynamics Corp., United Technologies Corp., L-3 Communications
(Note: Top 100 list from which top 10 was drawn excludes China-based companies due to lack of data; count of U.S. companies
excludes BAE Systems Inc., a U.S. subsidiary of BAE Systems, UK)
United States rank in arms exports, 2016: 1
United States percentage of world arms exports, 2016: 31.8%
U.S. spending on wars in Iraq, Syria, Afghanistan, and Pakistan, and Homeland Security, 2001-2017: $4.8 trillion
(Note: Includes budget requests for 2017.)
U.S. military and contractor war deaths in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001–April 2015),
rounded to nearest 1,000: 14,000
U.S. allied military war deaths in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001–April 2015),
rounded to nearest 1,000: 52,000
Opposition fighter war deaths in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001 - April 2015),
rounded to nearest 1,000: 110,000
Civilian deaths from war-related violence in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001–April 2015),
rounded to nearest 1,000: 191,000-219,000
Total deaths from war-related violence in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001–April 2015),
rounded to nearest 1,000: 367,000-395,000

S O U R C E S : David Vine, “Where in the World Is the U.S. Military,” Politico, July/August 2015 (politico.com); Stockholm International Peace Research Institute (SIPRI),
SIPRI Military Expenditure Database (sipri.org); National Priorities Project (nationalpriorties.org); SIPRI Arms Industry Database (sipri.org); SIPRI Arms Transfers Database
(sipri.org); Neta C. Crawford, “US Budgetary Costs of Wars through 2016: $4.79 Trillion and Counting: Summary of Costs of the US Wars in Iraq, Syria, Afghanistan and
Pakistan and Homeland Security,” Watson Institute, Brown University, September 2016 (watson.brown.edu); Watson Institute, Brown University, “Human Costs of War: Direct
War Death in Afghanistan and Pakistan (Oct. 2001–July 2016) and Iraq (Oct. 2001–April 2015),” August 2016 (watson.brown.edu).

36  l  DOLLARS & SENSE  l MARCH/APRIL 2017


< In Review

What’s the Matter with Wisconsin?


the election of Scott Walker in 2010 and workers. Perhaps that helped make
the unsuccessful recall election against them lightning rods for resentment—
him in 2012. She published her findings and led to support for Governor
in 2016 BT (Before Trump) as The Politics Walker’s cuts in their pay and benefits.
of Resentment. Cramer probed: Why did people who
She quickly identified a perspective complained of the high cost of health
she called “rural consciousness”: Her insurance in rural areas nonetheless
interviewees highly prized a self-suffi- oppose government efforts to expand
cient outdoor lifestyle of low pay, priva- health services? Over and over she
tion, and hard physical labor; they heard something like, “the government
viewed Madison and Milwaukee—“the must be mishandling my hard-earned
M&Ms”—with suspicion and contempt. dollars, because my taxes are going up
City folks, including professionals, gov- and clearly they are not coming back to
ernment employees, and academics— benefit people like me. So why would I
The Politics of Resentment: Rural want an expansion of government?”
these led an easy life sitting behind
Consciousness in Wisconsin and the In the end, Cramer was left with a
desks, for which they were grossly over-
Rise of Scott Walker, by Katherine J. mystery: rural resentment towards cities
paid. “Madison” (the capital) did not lis-
Cramer (U. Chicago Press, 2016) was hardly new. Nor was it new for poli-
ten to rural folks, did not care about
them, and looked down on them; it sim- ticians like Scott Walker to play to that
B Y P O L LY C L E V E L A N D
ply took their tax money and did not resentment. But what made that resent-

K atherine Cramer, professor of politi- return their fair share in services. Just ment so powerful today and so focused
cal science at the University of look at the empty streets and shuttered on government at all levels?
Wisconsin-Madison, thought she was stores of declining small towns! In short, Bitter resentment of government
perfectly suited for her project of inter- rural people, were “deserving”; those might seem plausible in a state like
viewing upstate Wisconsin residents on others were “undeserving.” Louisiana, given its inequality, corrup-
their political views. Wisconsin born and Cramer explored this resentment. tion, and poor public services (see my
bred, she felt deeply connected to her Did rural areas really pay more in taxes review of Arlie Hochschild’s Strangers in
state. So she was quite stunned by the than they got in benefits? In fact, the Their Own Land in the November/
open hostility she encountered. If she opposite—but that was irrelevant, December 2016 issue of Dollars & Sense).
was a professor, the locals demanded, since the locals regarded much govern- But in squeaky-clean Wisconsin? While
how come she was here upstate with ment spending as “waste.” Was it the the British Equality Trust rates Louisiana
her tape recorder, rather than teaching 2008 collapse and Great Recession? No. among the worst states on both in-
her students? Who was teaching her Small towns had been declining for equality and social and health problems,
students in her absence? It often took decades; maybe only a bit more after it rates Wisconsin among the best.
Cramer several visits to gain trust. 2008. Was it an ideological preference Wisconsin boasts excellent schools and
Upstate Wisconsin, north of for low taxes and small government? health services statewide. Until Scott
Milwaukee and Madison, is mostly rural, No. They would gladly pay taxes for Walker, it was a reliably progressive
overwhelmingly white, and accounts for new school computers, but not on sala- Democratic state. What happened?
about half the population of the state. ries for those lazy undeserving school To me, it feels almost like a gather-
From 2007 to 2012, Cramer interviewed teachers! Yes, even local school teach- ing religious movement, a rebellion
some forty different groups, many re- ers were regarded as agents of against evil oppressors sometimes dis-
peatedly. These were people who met “Madison”! Was it racism? Cramer did guised as school teachers, postal clerks,
regularly, around the coffee machine in hear some openly racist remarks—di- and firemen. Is it in some twisted way a
a service station, in the back room of a rected at “lazy” residents of an upstate response to growing national inequal-
café, and so on. There was even a group Native American reservation. Negative ity? There’s at least one small glimmer
that met to play a special Wisconsin dice remarks about “those people in of hope: In the Wisconsin primary of
game, at which Cramer excelled. The Milwaukee” may have meant racial mi- April 5, Bernie Sanders got significantly
interviewees ranged from working class norities, but more often designated the more votes than any other candidate,
loggers in the north, to middle-class despised urban elites, especially gov- including Donald Trump. D&S
small-business owners. Over half were ernment bureaucrats. Cramer did dis-
men, and many were older or retired. cover one striking fact: in upstate com- P O L LY C L E V E L A N D is an adjunct
They appeared to be stable, established munities the pay, benefits, and job professor of economics Columbia
community members, sometimes politi- security of public employees signifi- University’s School of International and
cal leaders. Cramer’s interviews bridged cantly exceeded those of private sector Public Affairs..

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  37


< Ask Dr. Dollar

Is It Oil? The Issue Revisited


important factor. Iraq, then and now, has was nationalized in 1972. They and the

COSTS OF
other oil “majors” based in U.S.-allied

EMPIRE
huge proven oil reserves, not in the
same league as Saudi Arabia, but in countries were not getting a share of
group of oil producing countries just the profits that were generated from
behind the Saudis. It might appear, then, the exploitation of Iraqi oil. Profits from
that the United States wanted access to oil exploitation go not only to the oil
Iraqi oil in order to meet the needs of our companies—ExxonMobil, Shell,
B Y A R T H U R M ACE WA N highly oil-dependent lifestyles in this Chevron, British Petroleum, and the
country. After all, the United States to- other industry “majors”—but also to the

A round the time that the United day, with just over 4% of the world’s companies that supply and operate
States invaded Iraq, 14 years ago, I population, accounts for 20% of the equipment, drill wells, and provide oth-
was in an auditorium at the University world’s annual oil use; China, with er services that bring the oil out of the
of Massachusetts Boston to hear then- around 20% of the world’s population is ground and to consumers around the
Senator John Kerry (D-Mass.) try to jus- a distant second in global oil use, at 13%. world—for example, the U.S. firms
tify the action. As he got into his Even after opening new reserves in re- Halliburton, Emerson, Baker Hughes,
speech, a loud, slow, calm voice came and others. They were also not getting
a share of the Iraqi oil action. (Actually,
from the back of the room: “O – I – L.” Protecting U.S.-based when vice-president-to-be Dick Cheney
Kerry tried to ignore the comment. But,
again and again, “O – I – L.” Kerry simply firms’ right to access was running Halliburton, in the period
before the invasion, the company man-
went on with his prepared speech. The and security around the aged to undertake some operations in
speaker from the back of the room did
not continue long, but he had succeed- world comes at a high Iraq through a subsidiary, in spite of
federal restrictions preventing U.S. firms
ed in determining the tenor of the day. cost, in money and lives. from doing business in Iraq.)
Looking back on U.S. involvement in
Iraq, it appears to have been largely a
failure. Iraq, it turned out, had no cent years, U.S. proven reserves amount After the Troops
“weapons of mass destruction,” but this to only 3% of the world total. In the aftermath of the invasion and
original rationalization for invasion of- Except in extreme circumstances, since most U.S. troops have been with-
fered by the U.S. government was soon however, access to oil is not a major drawn, things have changed. “Prior to
replaced by the goal of “regime change” problem for this county. And it was not the 2003 invasion and occupation of
and the creation of a “democratic Iraq.” in 2003. As I pointed out back then, the Iraq, U.S. and other western oil compa-
The regime was changed, and Iraqi dic- United States bought 284 million bar- nies were all but completely shut out
tator Saddam Hussain was captured rels of oil from Iraq in 2001, about 7% of of Iraq’s oil market,” oil industry analyst
and executed. But it would be very had U.S. imports, even while the two coun- Antonia Juhasz told Al Jazeera in 2012.
to claim that a democratic Iraq either tries were in a virtual state of war. In “But thanks to the invasion and occu-
exists or is in the making—to say noth- 2015, only 30% as much oil came to the pation, the companies are now back
ing of the rise of the so-called Islamic United States from Iraq, amounting to inside Iraq and producing oil there for
State (ISIS) and the general destabiliza- just 2.4% of total U.S. oil imports. the first time since being forced out of
tion in the Middle East, both of which Further, in 2015, while the United States the country in 1973.”
the U.S. invasion of Iraq helped propel. has had extremely hostile relations with From the perspective of U.S. firms,
Yet, perhaps on another scale, the Venezuela, 24% of U.S. oil imports came the picture is mixed. Firms based in
invasion would register as at least a par- from that country’s nationalized oil in- Russia and China have developed oper-
tial success. This is the scale of O – I – L. dustry. It would seem that, in the realm ations in Iraq, and even an Indonesian-
of commerce, bad political relations based firm is involved. Still, ExxonMobil
The Profits from Oil between buyers and sellers are not nec- (see box) has established a significant
At the time of the U.S. invasion, I wrote essarily an obstacle. stake in Iraq, having obtained leases on
an article for Dollars & Sense titled “Is It For the U.S. government, the Iraq oil approximately 900,000 onshore acres
Oil?” (available online at dollarsandsense. problem was not so much access, in the and by the end of 2013 had developed
org). I argued that, while the invasion sense of meeting U.S. oil needs, as the several wells in Iraq’s West Qurna field.
may have had multiple motives, oil—or fact that U.S. firms had been frozen out Exxon also has agreements with the
more precisely, profit from oil—was an of Iraq since the country’s oil industry Kurdistan Regional Government in

38  l  DOLLARS & SENSE  l MARCH/APRIL 2017


$?

northern Iraq to explore for oil. Chevron countries—are engaged in Iraq, they cost. The best estimate of the finan-
holds an 80% stake and is the operator and their U.S. government supporters cial cost to the United States of the
of the Qara Dagh block in the Kurdistan have not gained the full legal rights war in Iraq is $3 trillion. Between the
region of Iraq, but as of mid-2014 the they would desire. In 2007, the U.S. 2003 invasion and early 2017, U.S. mil-
project was still in the exploratory government pressed the Iraqi itary forces suffered 4,505 fatalities in
phase and there was no production. No government to pass the “Iraq the war, and allied forces another 321.
other U.S. oil companies have devel- Hydrocarbons Law.” The law would, And, of course, most of all Iraqi
oped operations in Iraq. The UK- among other things, take the majority deaths: estimates of the number of
headquartered BP (formerly British of Iraqi oil out of the hands of the Iraqi Iraqis killed range between 200,000
Petroleum) and the Netherlands- government and assure the right of and 500,000. D&S
headquartered Shell, however, are also foreign firms to control much of the oil
A R T H U R M A C E W A N is professor
significantly engaged in Iraq. for decades to come. The law, however,
emeritus of economics at UMass-Boston
While data are limited on the opera- has never been enacted, first due to
and a Dollars & Sense Associate.
tions of U.S. and other oil service firms general opposition to a reversal the
in Iraq, they seem to have done well. 1972 nationalization of the industry, S O U R C E S : BP Statistical Review of World Energy,
For example, according to a 2011 New and recently due to continuing dis- June 2016 (bp.com); Al Jazeera, “Western oil firms
remain as US exits Iraq,” Jan. 7, 2012 (Aljazeera.
York Times article: putes between the government in
com); Conor Friedersdorf, “Remembering Why
Baghdad and the government of the Americans Loathe Dick Cheney,” The Atlantic, Aug.
The oil services companies
Halliburton, Baker Hughes, Kurdistan Region. 30, 2011 (theatlantic.com); Paul Ausick, “U.S. Oil
Weatherford International [found- U.S. foreign policy, as I elaborated Companies With the Most Exposure to Iraq,” 24/7
ed in Texas, now incorporated in in the 2003 article, has long been de- Wall St., June 12, 2014 (247wallst.com); Andrew E.
Switzerland] and Schlumberger Kramer, “U.S. Companies Get Slice of Iraq’s Oil Pie,”
signed not simply to protect U.S.-
[based in France] already won New York Times, June 14, 2011 (nytimes.com); Iraq
based firms in their international oper- Daily Journal, “What is ExxonMobil Doing in Iraq?”
lucrative drilling subcontracts and
are likely to bid on many more. ations, but to establish the right of the Jan. 31, 2017 (iraqdailyjournal.com). U.S. Energy
“Iraq is a huge opportunity for firms to access and security anywhere Information, Administration (eia.gov); icasualties.
contractors,” Alex Munton, a around the world. Oil firms have been org; Joseph Stiglitz and Linda Bimes, The Three
Middle East analyst for Wood Trillion Dollar War (Norton, 2008).
especially important in promoting and
Mackenzie, a research and con-
gaining from this right, but firms from
sulting firm based in Edinburgh,
said by telephone. “There will be finance to pharmaceuticals and many Questions about the economy?
an enormous scale of investment.” others have been promoters and ben- Ask Dr. Dollar!
eficiaries of the policy. Submit questions by email (dollars@
The Right to Access Whatever else, as the Iraq and dollarsandsense.org) or U.S. mail (c/o
Dollars & Sense, 89 South St., LL02,
While U.S. oil companies and oil ser- Middle East experience has demon-
Boston, MA 02111).
vice firms—as well as firms from other strated, this right comes at a high

TILLERSON IN IRAQ: IS WHAT’S GOOD FOR EXXONMOBIL GOOD FOR THE U.S.?

E xxonMobil’s presence in Iraq is the work of former CEO Rex Tillerson, now Donald Trump’s pick for U.S. secretary of
state. In 2009, many Iraqi oil fields were opened for development following years of violence. The government was
desperate to increase oil production and revive its war-torn economy.
Iraq sits on more than 143 billion barrels of proven oil reserves, the 5th biggest in the world, and Tillerson was quick to
spot the opportunity. ExxonMobil committed to a $50 billion joint venture to develop a giant oilfield called West Qurna,
located in the south of the country. The venture has been a success—the field produced 377,000 barrels of oil per day in
2015, up by about 150,000 barrels per day since 2010, according to ExxonMobil.
But it hasn’t all been smooth sailing for the company. Two years after the Qurna deal, ExxonMobil found itself in hot
water. Tillerson made a controversial move, signing a deal to explore for oil in the semi-autonomous Kurdistan Region in
northern Iraq. The Iraqi government in Baghdad deems any deals with the Kurdistan Region illegal, and is in a long-run-
ning dispute over how to divide revenue from oil fields under Kurdish control.
The move was also in defiance of U.S. policy at the time. The New Yorker reported in December 2016 that Tillerson didn’t
ask for State Department permission, but called officials after the fact to say: “I had to do what was best for my shareholders.”
S O U R C E S : Iraq Daily Journal, “What is ExxonMobil Doing in Iraq?” Jan. 31, 2017 (iraqdailyjournal.com); Steve Coll, “Rex Tillerson, From a Corporate Oil Sovereign to
the State Department,” The New Yorker, Dec. 11, 2016 (newyorker.com).

MARCH/APRIL 2017  l  DOLLARS & SENSE  l  39


Our Economic Well-Being
A Popular Economics Collective Responds to Questions about the Economy
from a United Methodist Congregation

I n 2014, members of the congregation of the Bay Ridge United Methodist


Church took out a half-page ad in the New York Times, posing a question and a
challenge—how can we explain changes in economic well-being in the United
States, especially the broad differences between the post-World War II era, from
the late 1940s to the early 1970s, compared to the era since the early ‘70s? The
congregation offered an “Economic Well-Being Award” to “an economist, or
group of economists, who identify the factors associated with the stronger
economy in the period from 1946 to 1971, and the factors associated with the
weaker economy in the period from 1972 to 2012.”

This new edited volume is a response to this question from the editorial collective
of Dollars & Sense. (Profiles of the BRUMC congregation and the D&S collective
were the basis of “Church Economics Prize,” the February 13, 2015 episode of the
PBS program “Religion and Ethics Newsweekly” (available at pbs.org).)

It’s absolutely clear that the congregation’s question—why the economy doesn’t
seem to work as well for (at least many) ordinary people as it once did—is
among the most urgent questions in the United States today. In the course of
the 2016 presidential election campaign, the message that the economy had
been “rigged,” serving only a small group of wealthy and powerful people,
resonated with millions. That should not be surprising, after decades of wage
stagnation, rising income inequality, declining job security, and increasing
personal debt.

It’s imperative, first, to come up with answers to the congregation’s question,


diagnosing how the U.S. economy took its current form, and how that differs from
what we would want. We can believe that there are, indeed, very serious problems with the U.S. economy, while
rejecting the idea that immigration, social welfare programs, labor unions, regulation of business, or excessive
taxes on the “job creators” are the sources of the problems.

Second, it’s necessary to come up with solutions—to the multiple problems we confront—that are rooted in a spirit
of solidarity and compassion for each other, across lines of race and ethnicity, nationality and immigration status,
gender and sexuality. As the BRUMC congregation put it in its initial letter, we must strive to promote “civil liberty
and economic justice, for all.” This means that our answers to current grievances must reject the scapegoating of
the marginalized, disenfranchised, and downtrodden, and instead seek solutions consistent with the
admonition, from the gospels, to “love thy neighbor as thyself.”

Pre-order your copy today at dollarsandsense.org/OEWB. DOLLARS


Bulk discounts for church groups, community groups, and unions.
&SENSE
REAL WORLD ECONOMICS

Das könnte Ihnen auch gefallen