With American corporations awash in cash, why are they not hiring?
The answer has several components. First, companies have engaged in cost-cutting measures, including the layoff of workers, that have increased profit margins. The problem with this is that the layoffs perpetuate the unemployment because those who are out of work are no longer consumers, reducing demand. Second, the corporations are playing chicken with the America workers. They won’t start hiring until the workers accept lower wages and fewer, if any, benefits. The corporations are in the driver’s seat because of surplus labor engendered by the recession.
It wasn’t always so. After the Second World War America emerged as the world’s only economic super power. Fueled by the defense industry that went into high gear after the war because of the Cold War the economy boomed with workers finding good paying jobs. Those making decent money at the defense plants had the cash to buy cars, creating more jobs in Detroit among the unchallenged Big Three automakers. The powerful unions, such as the UAW, negotiated new contracts with ever-increasing pay and benefits and if they didn’t get what they wanted, they went on strike. This was no longer a radical union movement. Samuel Gompers and his successors ousted the radicals and developed what Gompers described as the objective or organized labor “more.” And more was what they got. Steel workers, autoworkers, miners and others moved into the middle class, enjoying new homes, appliances and automobiles. There was no outside competition and life was good. America, not the Soviet Union, became a workers’ paradise, with the wealthiest Americans paying taxes at a ninety percent rate, which created a more egalitarian society.
But when the European nations and Japan recovered from the war and began to assert their economic muscle, American business found itself less able to compete because of the high pay and lavish benefits of the American workers. Foreign cars that were cheaper than their American counterparts flooded the market. As market share shrank, the American car makers could not make adjustments because of the contracts that bound them to an ever higher pay scale and benefits like health care, which became ever more expensive.
With The Great Recession and the collapse of the American auto industries and other manufacturers, a new day dawned. Foreign car companies opened non-union plants in America, paying lower wages than the Big Three with no benefits. The workers were responsible for their own health insurance. The use of TARP money to rescue the auto industry led to major compromises by the unions, with reduced wages and with health care covered by a union fund.
But other businesses that were never in bad shape saw the opportunity to become leaner and meaner to be better able to compete in the global market. When they weren’t shipping jobs overseas, they were cutting back on jobs in America. Their argument was that they were obligated to do so because of their responsibility to their shareholders to produce profits. Their position was strengthened by the influx of immigrants prepared to work for less. Not for nothing did Reagan grant amnesty to twelve million illegal aliens. Corporate America was on its way to do what Eisenhower said was impossible. They were breaking the backs of the unions.
Today, allied with the radical right, the Republican Party is engaged in a process to turn back the clock to pre-New Deal America when there was no Fair Employment Practices Act or National Labor Relations Act. Their unified goal is a union-free America with capitalism triumphant. With Communism defeated, the class war was over and the capitalists had won. Capitalism had almost sunk itself in the financial meltdown but because of its political power, it not only survived but also prospered thanks to the bailouts paid for by the taxpayers who have not benefited at all.
America is now radical-free. The liberals are in dire straits and the move to the right is gaining, not losing momentum by virtue of a brilliant propaganda machine that has scared the American public into believing they are on the road to the serfdom of socialism. The fear generated by the campaign against health care reform was unprecedented in American history, with the American Establishment covertly behind the Tea Party movement. For example, C. Boyden Gray III, George H.W.Bush’s counsel and a scion of a blueblood family, became a founder of Freedom Works, the Republican-run organization that has funded the Tea Party in America. Gray is also part of the Western Imperium foreign policy Establishment, also no accident. America’s Western European allies, including Britain, are in the process of dismantling the Welfare State that had been used as a way to defeat Communism. The wealthiest in these societies, including America, are in great shape, getting tax cuts here while Congress cuts benefits to those less well off. With a defeated and disheartened populace, there is no danger of social unrest. This is the new normal. Perhaps it is only all those out-of-work law school graduates who might conspire to upend this new normal as a way to get rid of their enormous debt. Lawyers are often the revolutionaries–John Adams, Thomas Jefferson, Lenin, Castro. Somewhere, they are plotting the next revolution.