In "Showdown for Nonviolence," an article written by Dr. Martin Luther King, Jr. that appeared after his assassination in 1968, he called for a large national demonstration that would begin in several states and move towards Washington, D.C.. It would, he said,
"...dramatize the whole economic problem of the poor...[even if] this action may take on disruptive dimensions...We need an economic bill of rights. This would guarantee a job to all people who want to work and are able to work. It would also guarantee an income for all who are not able to work. "
When King was writing this article, the American economy was far different from what it is today. We were in the era of expansion that followed World War II and lasted until the late 1970s. There was wealth that could be spread around and a power structure that was willing to spread it, within limits. That was the period when the squeaky wheel got the grease--an assumption shared by every effective leader within the popular movement. When enough people protested, there was a War on Poverty. King could call for a guaranteed annual income with confidence. In a speech to the Southern Christian Leadership Conference in 1967 titled, "Where Do We Go From Here?", he said:
"The assistant director of the Office of Economic Opportunity declared that the long-range costs of adequately implementing programs to fight poverty, ignorance and slums will reach one trillion dollars. He was not awed or dismayed by the prospect but instead pointed out that the growth of the gross national product during the same period makes this expenditure comfortably possible. It is, he said, as simple as this: 'The poor can stop being poor if the rich are willing to become even richer at a slower rate.'"
King could have the confidence that the stewards of the American economy were basically doing a good job in creating wealth and building our productive capacity. The only question was what share African Americans and all poor people could have of this wealth.
This was also the period when the saying, "What's good for General Motors is good for the USA" had a ring of truth to it. GM paid decent wages and its companies were continually hiring. An auto worker could hold the same job for 30 years and retire with a decent pension and benefits. A lot of African Americans entered the middle class through autoworker jobs. GM paid its taxes. Flint prospered. It had a decent product and used new technology effectively. Of course, inequalities and injustices did go along with this social contract, and GM, like a lot of American corporations, was wealthy and fat. But there was a closer connection between GM and other big corporations and their search for
profits, and the development of productive capacity and the community's economic stability.
This same connection wasn't extended into the international arena. The opposite was the case. U.S. companies, with the assistance of our government, had enormous access to the wealth, markets, and productive resources of other countries under terms imposed by us and backed by the use of our military might. This was a major reason our domestic economy continued to grow and prosper and our social contract was so generous, even periodically rewarding a social movement focused on redistribution of wealth.
The emergence of the microchip and new electronic information technology began to transform social, economic, and political relations in the 1960s. It has offered new possibilities for development on a par with the advent of the plow, the steam engine, and electricity. It offers incredible potential to revolutionize production as well as to provide access to information and ideas in virtually every corner of the world. Its promise of accelerating human development is enormous. Scientific inquiry can sort and store information in seconds that would have required months with traditional technologies.
On the other hand, the power of this new technology to reverse human development is equally available. A Low Road development strategy could use it to minimize the role of human labor in production and drive people out of jobs. The opportunity to shift capital from one speculative investment to the other at a mind-boggling scale is almost unlimited.
Access to information and ideas includes the ability of those who sell products that degrade or damage the human condition to penetrate homes and communities with reactionary and demeaning concepts--whether or not the community or home is ready. On the other hand, access to all information is becoming universal, as is the ability to communicate in real time across borders. A combined use of satellite and computer technology will soon give every village in the world access to an almost unlimited supply of information--leapfrogging the need for books or traditional electrification. Large multinational companies benefit, as do labor and social movements eager for international contact. And the demands of the production and use of the technology require an excellent educational infrastructure and collaborative production methods.
It depends on what values and priorities guide technology's use and development. In all aspects of society, this new technology has become a powerful force and context for change--positive and negative.
The world never stays the same. American international dominance and the corresponding benefit to the American people began to shift in the context of a complex mix of factors. Beginning with the Korean conflict and punctuated by the American defeat in Vietnam, a growing challenge to American companies coincided with the emergence of new knowledge and communication technologies and with the increasing strength of the international business community. The results for our economy were:
In this context, the commitment of the business community to the social contract began to change. First, it became increasingly difficult to maintain the old rates of profit in the new global economy. Many new competitors rose to the challenges offered by capitalist competition and became more innovative and creative than their sleepy and stumbling American counterparts, who had been lulled by decades of their own dominance and confidence. The Japanese, the Brazilians, the Germans and others made enormous headway in challenging our traditional strength in certain market sectors. The battle in the marketplace intensified and the casualties--particularly in the U.S.--began to increase.
New developments in productive capacity, particularly in Third World countries, and flexibility and speed offered by new technologies and expanded information then created opportunities for flight and international investment that had not been possible in earlier decades. New capital investment shifted to the Third World, particularly from Japan and those U.S. industries competing with Japanese firms.
In the late 1970s and early 1980s, those of us in labor and community organizations began to notice these changes at home. In response to shifts in the international economy, American companies began to sell the store rather than rise to the challenges of competition the way that "free market" ideologues had promised that they would. Instead of making a better product or producing in more efficient ways, companies shifted production to areas of low-cost non-union labor--the South, Mexico, or Asia.
Business Week published an alarming exposé titled "The Hollow Corporation."15 Rather than make a product, managers learned how to gamble with a company's assets to make money. Those who owned and managed America's productive capacity--the factories that made communities like Flint MI, or the Chicago neighborhood of Austin the best communities in the country--began to abandon companies, industry sectors, and entire industrial communities. We were eventually surrounded by stacks of bones all around us--up and down streets that had been busy and prosperous for years.
In Chicago, once-healthy companies that had been a foundation for a healthy economy disappeared. Sunbeam had moved south looking for low-cost labor. Leaf Confectionery was purchased and then closed by a Finnish conglomerate that changed its production strategy. Playskool operated profitably in Chicago until it was bought by Hasbro, which borrowed City money at below-market rates and then moved to a site in Rhode Island where it could make more money. Stewart Warner was purchased and closed by British Tire and Rubber which then made a killing in the Chicago real estate market. And Schwinn Bicycle was closed by Eddie Schwinn, who found it cheaper to sub-contract the production of bicycles off-shore. This move cost Chicago's West Side 1,500 jobs at a time that other American companies were developing new domestic bike markets and expanding domestic production.
Corporate actions, in short, began to destroy the productive capacity that had made a healthy economy possible. As companies downsized, closed, or moved away on such a massive scale, we witnessed cannibalization. Without jobs, people began to lose the skills and discipline essential for work. Normally in industry, a structure allows the passing of skills and perspectives from the older generation to the younger generation. That learning cycle was smashed, destroying critical information necessary for rebuilding the local economy. As income declined, so did tax revenues and the local infrastructure that was supported by public dollars. Adding insult to injury, the companies frequently blamed the community or the people who worked for them for their problems, when facts frequently demonstrated that the company's values and narrow priorities were the source of the slide.
U.S. Steel
The corporate symbol of the late 1970s became U.S. Steel. It dramatically cut productive capacity against the advice of its own think tank, the Iron and Steel Institute. The steel industry was the most profitable in the world. In 1979, it was generally making a 7% return. At the same time, its Japanese counterparts were comfortable with a much lower rate of return combined with a long-term horizon. In those days an investor could make a 14% return in the money market. U.S. Steel CEO David Roderick, summed it up when he said, "We are in the business to make money, not steel."
The corporation invested its capital into the oil industry and shopping markets, changed its name, and blamed its company's problems on "greedy" steelworkers. During the decades when it dominated the international steel market, U.S. Steel had refused to re-invest an adequate percentage of profits into the industry or even into the new technologies that it had invented. Meanwhile Japanese, Brazilians, British and Germans steelmakers embraced those technologies and methods of production and made tremendous gains in market share in the industry. The result: the loss of hundreds of thousands of jobs and the destruction of vital steel communities.
US Steel changed its name to its stock market symbol "USX" and became the symbol of the emerging Low Road strategy in contrast to what was in part the historic High Road strategy of GM. The change in symbol also reflected the dramatic change in U.S. Steel commitment to the traditional social contract with the domestic economy, to domestic productive capacity, and to the employees and communities that had made its success possible. Roderick's actions were not required by the market in order for his business to survive or even thrive. His actions reflected his values, priorities and narrow self-interest, and his view of what would maximize shareholder return.
Influential sections of the business community have increasingly abandoned the obligations of stewardship for our economy that undergirded the social contract of the 20th century. Rather than working to increase the productive capacity of key industries and the standard of living, they pursued strategies that led to the destruction of productive capacity as well as a dramatic decline in the standard of living for the average worker and a skewed distribution of wealth. As described in the New York Times, America's production in the non-farm business sector rose by more than 2% a year, on average, for a full century--from the 1870s until the early 1970s. That average was pulled up by the "golden age" after World War II, since 1973, the average has been only about 1%.16
Coinciding with this shift was a well-documented offensive by some major companies and their political allies against labor, an attack on the social wage and safety net, and the greater allocation of wealth from the poor and middle class to the upper 20%. This was most recently punctuated by the "reform" (really repeal) of welfare. Unchallenged by the passive conventional strategies of government and the community development industry, the anarchy inherent in our economy expanded. Relatively straightforward problems went unaddressed--succession of ownership in small firms, vocational education and training, maintenance of the physical infrastructure, and maintaining a safe and stable environment. The shredding of the urban economic and industrial infrastructure continued.
If people of color and women were on the margins during the dynamic and expansion period of the American economy, they suffered in a dramatically disproportionate way in the general shift to the Low Road. While the President, Alan Greenspan, and the major media outlets sing the praises of the "Dream Economy," we have zones occupied by people of color in both urban and rural areas that have the social and economic characteristics of some of the poorest countries in the developing world: soaring unemployment rates, cruel infant mortality rates, hunger and homelessness, and all the forms of social pathology that accompany extreme poverty.
While Mayor Daley is praised for his school reform efforts in Chicago, barely 100 African American students graduated from Robeson High School out of nearly 500 incoming freshmen. Only 30 years after the modern Civil Rights Movement, we see a consistent attack on affirmative action, while African American participation in elite schools such as the University of California/Berkeley declines dramatically. And we have the policies of mass incarceration of Black and Latino youth that have put the United States in a league of its own.
In every aspect of society and the economy, race remains an indicator of inequality, discrimination, and oppression. This is equally true for women who remain in the lowest-wage service and retail jobs and who face special suffering in the repeal of the social safety net that was called "Welfare Reform".
The generally accepted assumption is that the economy should serve and promote the development of people and their communities. While this seemed to be the case for the first three quarters of the twentieth century, it has clearly not been so during the last 25 years. The traditional social contract and paradigm of development that preserved economic power and initiative in exchange for a share of the wealth is no longer viable. We now have both a continued decline in real wages and a deterioration of our social institutions, as well as a dramatic decline in our productive capacity.
Our communities, our countries, and our world face deterioration in all aspects of life for the majority of people. There is growing damage to our physical environment. There is increasing economic, social, and political instability. This change in the commitment of a powerful segment of the private sector requires a fundamental change in the social relations of production and the paradigm of development.