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editorial by Sid Shniad
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Date: Thu, 28 Sep 1995 14:55:28 -0700 (PDT)
From: D Shniad
WITHOUT STRONG GOVERNMENT INTERVENTION WE FACE A BLEAK FUTURE "...The very nature of work, of institutions, of society, and even of capitalism itself, are mutating...the utopia promised by science and technology has turned into a nightmare for the 'common man'. Poverty, unemployment, pollution, overpopulation, mass migration, global plagues, etc., have left us with a world full of frightened people....The future is inequality...western societies are already witnessing the emergence of a rapidly expanding underclass." -- From Winners and Losers in the Information Age, by Ian Angell, Professor of Information Systems, London School of Economics
Professor Angell captures the growing sense that something is radically wrong in our society. After describing the problem, however, he doesn't lay out a plan to alleviate the suffering of society's victims. On the contrary -- this professor believes there is little that society can do in the face of these developments. Despite the list of horrors that he recites, Angell believes that our most important social decisions should nonetheless be left in the hands of the "free market". It isn't surprising that these views are popping up everywhere. Universities and the press have stopped playing their traditional roles as social critics. Over the past ten or twenty years, we have witnessed an unprecedented series of corporate media mergers, combined with vastly increased corporate funding to cash-strapped universities. As a result, these institutions -- which traditionally served as more or less independent sources of information for society -- have effectively come under corporate control. So it's no wonder that we now hear endless propaganda from professors, columnists and announcers, all repeating the view that government should renounce any attempt to regulate the private sector; that because of globalization and free trade, economic activity is no longer susceptible to social control; and that government cannot play an active role in influencing economic outcomes even it wants to. The message corporate wouldn't be so outrageous if a de-regulated and privatized economy yielded positive results. But there is little doubt that the results have been a social disaster. WHO BENEFITS? It's not surprising that the corporate sector likes what's happening and defends it at every opportunity. Globalization, free trade, de- regulation and privatization is having the desired effects: profits are rising and wages are declining. The Washington, D.C.-based Economic Policy Institute (EPI) recently released a report called Profits Up, Wages Down by economists Dean Baker and Lawrence Mishel, showing that profits are increasing and wages are decreasing across the American economy. In the 1990s, income has been redistributed from labour to owners of capital as profitability, the economic return to capital, has reached historically high levels. The increasing wage inequality that began in the 1980s and persisted throughout the 1990s has forced middle- and low- wage earners wages to accept reductions in their real wages, as earnings failed to keep up with inflation. Specifically, Baker and Mishel show that: -- After-tax profit rates in 1994 were the highest in 25 years. Profit rates have increased even further in 1995. -- In the 1990s, increased profitability has not resulted in growing investment or increased productivity. -- During the "recovery" that began in 1991 and continues today, inflation-adjusted hourly wages of the vast majority of the workforce have stagnated. For the bottom 80% of men and the bottom 70% of women, real hourly wages have declined. --Education and training doesn't help much. Men with four years of college as well as those without college degrees and women with less than a college degree are also seeing their real wages decline. -- The average male worker has seen his or her hourly wage decline 1% per year over the 1989-94 period, continuing the downward trend that began in the 1979-89 business cycle. The wage of the average female worker also declined over the 1993-95 period, in contrast to the modest 0.5% annual growth that was experienced over the entire 1979-93 period. -- Increased profitability in the 1990s is the result of cost restructuring. This has increased the economic return to capital, but has not led to greater efficiency. If profit rates in the 1990s had remained at their 1952-79 average, wages in the U.S. in 1994 would have been $120 billion -- 4.0% higher for all workers and 6.1% higher for workers without a college education. -- Higher after-tax profit rates are due in part to lower tax rates on capital. If the tax rate on capital had remained at its 1952-79 average, government revenue would have been $40 billion higher in 1994 -- an amount equal to 25% of the 1994 fiscal deficit in the States.
THE SAME THING IS HAPPENING IN CANADA The problem of increasing economic polarization and growing misery isn't limited to the States. The same things is happening here in Canada. We have been in an economic "recovery" since 1992. As in the States, however, this recovery has been very one-sided. Corporate profits have soared, but unemployment has remained high while wage increases have barely kept up with inflation. The recovery has seen business and corporate profits zoom. Corporate profits swallowed 44.8% of the increase in national income between 1992 and the first quarter of 1995. (Over the past 20 years, corporate profits averaged about 10% of total national income.) In this period, the increase in profits was much larger than the total increase in wages and salaries. People like Professor Angell argue that increases in profits lead to increases in investment. But this has certainly not been the case for the past several years. Since 1992, profits as a proportion of GDP have increased by nearly 32%. In the same period, investment has increased by about 5%. Instead of being used to increase productive capacity, profits have gone into huge dividend increases for shareholders. Dividends paid out to foreign shareholders jumped from $1 billion in 1992 to more than $12 billion on an annualized basis in the first quarter of 1995. In 1992, unemployment averaged 11.3% nationally. Over the first half of 1995, the rate had decreased somewhat, averaging 9.6%, but coming in at 9.8% in July. This is a far cry from the rates of unemployment that prevailed in this country during most of the postwar era. There is little prospect that things will change for the better. According to a recent report from the International Monetary Fund, Canada's "natural" rate of unemployment is 8.75%. The IMF suggests that if Canada's unemployment rate drops more than 1% below its current level, inflation would increase, requiring the Bank of Canada to raise the country's interest rates, choking off economic growth and raising the unemployment rate again. Clearly our universities, our media pundits and institutions like the IMF are not concerned with the fact that high unemployment and declining real wages are having a devastating effect. According to a Statistics Canada report released in mid-September, the country's rich are getting richer and the poor are getting poorer. Canadian families' real incomes, adjusted for inflation, have been declining steadily since 1990. According to Bob Glossop, of the Vanier Institute of the Family the situation is serious. "Even families with two wage earners are having an increasingly hard time to make ends meet. All are feeling increasingly financially insecure," Glossop explains. For single-parent families, it's even worse. "You have an appalling rate of poverty among single-parent families that is in excess of 60 percent at this point with devastating consequences for the long-term prospects for their children, educationally, healthwise and so on," Glossop says. "In addition, you've now seen across various provinces, particularly Ontario, the decision to cut back significantly on social assistance and welfare benefits available to these people. It means that these lone-parent families, which have been struggling in poverty for the past ten years, are going to be really hitting the wall very soon. The prospects are pretty bleak," he concludes. THE END OF WORK Thirty-five million people are out of work in the countries which comprise the Organization for Economic Co-operation and Development. Free trade, privatization, de-regulation and other factors have clearly contributed to the mess the world is in. But there is an additional factor at work, as well: computerization is bringing fundamental changes to the workplace. In recent months, considerable attention has been focused on The End of Work, a new book by American researcher Jeremy Rifkin. In this work, Rifkin describes how the application of computer technology is destroying jobs in every sector of the economy. It is his view that if current trends continue, blue collar manufacturing jobs will be totally eliminated by the year 2020. Rifkin believes that society is on the verge of a radically new and different era. In the past, when new technologies destroyed jobs in the farm sector, the negative effect on jobs was counteracted by the expansion of employment in the manufacturing sector. Later, when new technologies caused the decline of employment in manufacturing, this was offset by sharp growth in the service sector. Now, however, the same technologies that have been applied in agriculture and manufacturing are being applied to services. But there is no new sector waiting in the wings to provide employment for the folks who are being displaced. In light of Rifkin's thesis, is it any wonder that the unemployment rate remains so high in a time of economic "recovery"? Despite the deepening economic and social crisis the world is experiencing today and despite the high level of corporate profits, businesses are using re-engineering and computerization to downsize their operations and lay off thousands of employees. The goal is to increase profits even further. Full time jobs are becoming a thing of the past. Those jobs that are being created are of a part time and temporary nature. And employers are forcing employees who are already overworked to work unprecedented amounts of overtime. This, instead of creating new jobs to help reduce unemployment. Something has got to give. Either we buy into the view expressed by Professor Angell and others that society can only continue in a downward social spiral. Or we begin insisting that corporations share the benefits generated by the application of these new technologies with the rest of society. LET'S GET MOVING Greedy, powerful corporations will not suddenly turn over a new leaf. To achieve the kind of changes that are needed will require the active involvement of governments. Despite the corporate views that prevail in the media and the universities, governments can influence the behaviour of even the biggest corporations. What is lacking is the political will to exert this influence. This is where unions, community groups and other popular sector organizations come in. We face two tasks: first, to come up with sound social alternatives to these disastrous corporate policies; and second, to work with sympathetic governments, encouraging them to use their power to make these alternatives a reality. We know from our own experience that this approach can work. Three years ago, the CRTC approved the introduction of long distance competition. The TWU didn't buy the idea that disaster would inevitably follow as it has in the American telecommunications sector. Consulting with industry experts and a range of social organizations and doing our own research, we designed an alternate strategy to head off the slash and burn scenario that is tearing apart the telecommunications industry in the U.S. Then we worked long and hard with the provincial government in Victoria to bring our plan to life. The accompanying story on the pending provincial Telecommunications Accord explains where we're at right now. It should be emphasized that the TWU isn't alone in calling for government to play an active role in shaping the economy of the future. Canadian Labour Congress Executive Vice President Jean Claude Parrot was the lone labour member on the federal government's Information Highway Advisory Council. When Parrot realized that the corporate/free market perspective would dominate the Council's final report, he filed a Minority Report detailing what government should be doing to counteract the negative effects of what is happening in the de-regulated telecommunications sector. What Parrot is advocating is essential to the future of the labour movement. By generating their own alternatives and enlisting the help of enlightened governments, unions and other organizations in the social sector can begin repairing the damage that has been done by free trade, globalization, privatization, de-regulation and the corporate misuse of computer technologies. It's time to get on with the job. There is too much suffering already. If the assault from the corporate sector continues unchallenged, the nightmare can only get worse. ```
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