The past 15 years have witnessed dramatic changes to the face of capitalism, and these changes have had great implications on the way most people live and raise their children. This paper is a review of many of these changes and trends.
Former communist countries throughout East-Central Europe have discarded communism and have been working in fits and starts to enter the global economy. Countries throughout Latin America have increasingly freed state-owned monopolies for private ownership and the rigors of international competition. Even countries like China and Vietnam are moving towards capitalism. Additionally, the economically advanced countries of North America, Europe and Japan are increasingly deregulating industries and globalizing business operations. Edward Luttwak, Senior Fellow at the Center for Strategic and International Studies, writes that nowadays there is only one economic orthodoxy, taught and proclaimed by almost all academic economics, happily celebrated by Wall Street and corporate managers, and fully accepted by Democrats and Republicans as well as the mainstream parties of Europe. This is the faith that turbo-charged capitalism (accelerated change fueled by global free trade and domestic deregulation)is the only way to run an economy. (Edward Luttwak, The Washington Post, 3/10/96)
The 21st Century Learning Initiative is concerned about, and interested in attempting to understand, the changing nature of employment because the primary responsibility of educational systems has traditionally been, in Western-style democracies, to prepare young people for becoming productive members of their societies. Schools have attempted to do this by equipping students with the skills necessary to participate effectively in the economy, and by providing them with the analytical and cognitive skills necessary for fully participating in a democracy. As the dramatic changes in the nature of global capitalism over the past 15 years have shown, the speed at which change and opportunities occur calls for increasing numbers of young people who are able to take control of their own destinies, and make economic opportunities for themselves. The future is bright for entrepreneurs, but increasingly bleak for those who think they can get by doing what they are told and following orders. It has become a worn-out cliché , but the world of a job for life is history for most. Many in the United States understand this, and it is becoming increasingly apparent to Europeans as well that hire and fire is the economic credo of the future. Hire and fire sounds harsh, so it is increasingly coming under the heading of labor market flexibility.
The drive for efficiency reigns supreme, and the search for a stable career is quickly becoming the search for marketable skills. School teachers should be advised that instead of asking students what they want to be when they grow up they should ask what type of skills they want to possess when they grow up? This new emerging economic world requires new ways of thinking, and preparing young people for the future of work and participatory democracy.
The United States is leading the charge in developing lean and mean companies that can compete and dominate global markets, and in fact exports were responsible for one-third of the overall growth in the US economy from 1985 to 1994. (NAM White Paper, p. 7) The American economy leads all G-7 countries in terms of jobs created, economic growth rates, and productivity. Optimists say glowingly about the American economy that between 1976 and 1993, US corporations did 42,621 merger and acquisition deals worth about $3.1 trillion. Telecom, tires, tobacco, and technology were all heavily restructured, and the result was $899 billion in shareholder gains and the creation of whole new industries in cable television, fiber optics, communications, cellular telephones, pharmaceuticals, computer chips, software…During the same time that all this new wealth was created, the stock market doubled in real terms and has now more than tripled in real terms. (Gilder, Harper’s Magazine (May 1996) p. 40) Overall the economy is booming. We’ve got a $6-trillion-a-year economy, the stock market’s at an all-time high, and corporate profitability is at a thirty-year high. (Blackwell, Harper’s Magazine (May 1996) p. 41) In addition to this impressive litany of economic achievements the US economy has been a job creating juggernaut with the addition of 8.4 million new jobs since 1992. Since 1978, the US economy has created roughly twice as many jobs as all of Europe has; and total employment has increased almost 60 percent since 1970. More than 40 million net new jobs have been created in these 25 year, allowing absorption of millions of men and women(baby-boomers and others(into the workforce. (NAM White Paper, p. 2)
Recent headlines have heralded Reforms Keep US at Top of League
The United States is at the top in terms of the world’s most competitive countries. The United States has achieved this top ranking by lowering government spending and keeping taxes relatively low, while concurrently its private sector has undergone savage downsizing to remain competitive. (The Economist. (June 1, 1996) p. 76) Competitive economies, the World Economic Forum argues, are those with open markets, lean government spending, low taxes, flexible labor markets, an effective judiciary and stable political systems. The WEF reported that the European Union is slipping behind many parts of the world in economic competitiveness because it is weighed down by a costly social welfare system. (Frances Williams, The Financial Times. (5/30/96) p. 5). The Germans rank 22nd on the list and many argue that the main problem is that doing business in Germany is just too expensive. When a company hires a German worker, it has to pay non-wage benefits that equal 85 percent of salary…And hiring a German is a lifetime commitment. It’s almost impossible to fire one. (James K. Glassman, The Washington Post, 5/28/96, p. A11)
Yet, with all these economic accomplishments there are numerous policymakers, academics, political pundits, journalists and regular working stiffs in the United States who feel that it is becoming a lot more difficult for the average worker to make ends meet and live the quality of life they expect from hard work. Labor economists are arguing that this is the first recovery in the postwar period in which wages are still falling in the fifth year of the recovery. And that wage data is important because what’s going on here is a redistribution of income from employees to employers, from people who work for a living to people who own….America is coming apart at the seams, because it is getting more difficult to make a living in America by hard work. (Blackwell, Harper’s Magazine. (May 1996) p. 41)
Stephen Roach recently wrote in The Financial Times that surging profits, sustained low inflation, improved competitiveness, and a record run in the stock market are all unmistakable byproducts of spectacular improvements in business efficiency. But it is increasingly apparent to me that these are the result of plant closures, job cuts, and other forms of downsizing. (The Financial Times (5/14/96) p. 12) It is the methods for increased economic efficiency that are causing pain and anxiety among many American workers. The New York Times described the current economic situation for the average American worker as a mid-passage between two economic eras: the old era of making things and job security, and a new one of service and technology, takeovers, layoffs and job insecurity. (The New York Times, (3/6/96) For many, this seems to be the age of anxiety. According to a recent article in The Chicago Tribune, there is an increased sense of fear among many workers. This is the fear of failing – the fear of downsizing, of stagnant wages…the average worker struggles with a new economy that he really doesn’t understand. (R.C. Longworth, The Chicago Tribune, (3/14/96)
The struggle for the American worker goes beyond the workplace and extends into the home and community. Economic forces are changing the way people view families. Young couples, who are educated and relatively well-off financially, are having fewer children and waiting longer for the one or two that they do have. More and more young couples are operating under the premise that, economically speaking, children have become an economic liability and they compete with ‘other’ goods and services that limited purchasing power can provide…The flood of options has induced a growing number of women to join the workforce in order to enlarge their purchasing power and take advantage of the increasing (economic) opportunities. (Christian Lutz, Societies in Transition. p. 102) The result of these economically induced changes is that fewer children are being born to those who can afford them.
In contrast, those with less education and opportunity are still having children, but they are discovering that providing for them is increasingly difficult, and governments are deciding to provide fewer and fewer resources for their citizens’ children. The popular slogan in the United States is if you have a child you better as hell be able to pay for it because the government isn’t going to. In the United States, according to a report released last month by the Department of Health and Human Services, the percentage of children in “extreme poverty’ (with a family income less than half the official poverty level) has doubled since 1975: it now stands at 10 percent, or 6.3 million children. The ranks of the merely poor include 1 in every 5 children in the US. (Elizabeth Gleick, Time. (6/3/96) p. 32). The United States has experienced constant and increasing poverty since about 1970; by conventional (normative) measures, some 35 million people are currently below the poverty threshold, a figure which represents about 14 percent of the population. What is striking about the US situation is that almost 60 percent of poor families have at least one member working – but against the background of falling relative wages, especially for low-skilled jobs, they do not earn enough to keep themselves above the poverty line. (Barrie Stevens and Wolfgang Michalski, Societies in Transition. p. 18)
As a result of these economic changes a range of measures suggest that children today are living in an increasingly mean and uncertain world, according to a newly published compilation of data collected by Child Trends for the US Department of Health and Human Services. (Richard Morin, The Washington Post (6/2/96) p. C5)
This paper shares the argument that wages have stagnated for the majority of American workers, and that there is an increasing disparity among America’s citizens in terms of income and wealth. (The economic trends causing disparities in wealth among Americans and Brits, are manifested in other European countries in the form of unemployment.) When addressing this issue it is important to look at the role of foreign competition and technology. These two forces have received the most attention in terms of what have been the leading agents causing wages to decline in the United States and increasing unemployment in Europe.
In addition to Blackwell’s view that there has been a redistribution of wealth from employees to employers,î this paper will argue that a greater transfer of wealth in the United States has actually been from workers to retirees in the form of payroll taxes. This raises the questions, 1) how are payroll taxes influencing the apparent disparities in incomes and wealth, and 2) what (based on demographics and the needs of the pension system) will the future payroll tax burden be on employees? When looking at the issue of government guaranteed benefits for the elderly it becomes necessary, because of the fact that government guaranteed pension funds face serious financial shortages in the not-to-distant future, to look at the role of pension funds and mutual funds in providing income for retirees and future retirees.