However, in analyzing the role of mutual funds and pension funds one discovers that these funds have a direct effect on the labor market of today. As more and more people put their money, and their hopes for a financially independent retirement, into the world’s stock markets through mutual funds and pensions funds, the managers of these funds put ever-increasing monetary pressures on businesses to become more efficient in order to bring in higher returns for the stockholders. This raises questions about the methods used by companies to improve their efficiency, and who within companies benefit most from such changes?
Finally, how are young people who want to be successful preparing themselves for an economic future defined by turbocharged capitalism?î Some young people in the United States and elsewhere are already working to be successful in the competitive economy of the future which will increasingly provide great rewards for the winners, and a tougher and tougher go of things for the losers. There will be less opportunity and fewer safety blankets for the losers. Turbocharged capitalism rewards those with the skills, education and backgrounds that allow people to cope with change and seize opportunities that are presented to them, while those who are slow, unprepared or unknowledgable will become increasingly confused and frightened by the change hurtling past them.
Hope for social tranquillity in the future lies in either 1) preparing enough young people to be successful in the increasingly competitive global economy that a large middle-class can be maintained, or 2) developing economic arrangements, which would have to be of a transnational nature, that somehow protect the millions who feel they are loosing out in the changing economy. Politicians argue passionately for the first option, but it looks that in most of the economically advanced nations more and more people are falling behind the curve in terms of acquisition of highly marketable skills. Businesses respond by hiring foreign nationals, and many working class people who see fewer opportunities for themselves and their children feel hopeless because the dream for economic success and security appears to have been taken away from them by sources they don’t understand. They’re playing by the old rules which no longer apply, and no one has really explained the new rules to them. The result is inequality in wealth, opportunity, hopes and dreams, and increasing fear.
The reality of widening disparities (in income and wealth) is no longer hypothesis. It is simply a fact. (Paul Krugman)
One indicator of the American economy that has come under great scrutiny by the media and among policymakers is the issue of stagnating wages for some, and rapidly expanding wealth for others. One can argue about how well or badly the economy is doing, but it’s quite clear that average wages have been stagnating or declining for quite a while, and that economic growth in the past two decades has been concentrated among the well-off. (E.J. Dionne Jr., The Washington Post. (4/23/96)
The American Labor Secretary Robert Reich argues that from about 1947 to the mid-1970’s there was a small group of very rich people, and a small group of poor people in the United States, while most Americans were solidly middle-class. Reich wrote in The Work of Nations – picture a symmetrical wave that’s highest in the middle and then gradually slopes down and out on both ends until merging with the horizon. Through the 1950’s and 1960’s, the distribution of income in the United States was coming to resemble just this sort of wave. Most Americans were bunching up in the middle of the wave. (Reich, p. 197) Reich argues that until the mid-1970’s there were not great differences in wealth and wages among most Americans. The reason for this relative equality was that in post-World War II America there was a social contract between American corporations and American labor. The agreement was an unwritten social contract, codified in part by strong labor unions…under which managers and workers pledged their loyalty to one another. (The New York Times, 3/3/96) This social contract was inscribed on the first-page of AT&T’s 1947 employee’s manual. The manual read: the company endeavors to take care of its employees throughout their working careers, and beyond. In return, it naturally expects employees to be genuinely concerned with the welfare of the business and to feel personally responsible for its reputation and continuing success. (Dale Russakoff and Steven Pearlstein, The Washington Post (5/19/96) p. A20)
However, since the late 1970’sand early 1980’s Americans are no longer in the same economic boat (nor, for that matter, are the citizens of other nations in the same boat). (Reich, p. 7-8) The implicit social compact that used to bind corporations with their workers has come undone. Thirty years ago, a company that earned a healthy profit could offer its employees secure jobs with rising wages and benefits. (Reich, The Financial Times)
Today, a company often times earns a tidy profit and rewards its employees by making them redundant. There have been many well-publicized examples of this in the past few years. One example was reported in the business section of the International Herald Tribune with the headline MCI to Slash 3,000 Jobs and Recast Share Capital. The paper reported that MCI Communication Corp. said Wednesday it planned to fire as many as 3,000 workers this year and create separate classes of stock to try to boost its image on Wall Street. The company…reported that its second-quarter net income rose 21 percent, to $260 million, as the volume of calls surged 14.6 percent and revenue rose 12 percent, to $3.7 billion. (International Herald Tribune, (8/3/95) p. 10)
In 1990, the percentage of companies that cited business downturnî as the sole cause of layoffs was 43 percent, but by 1995 it was 6 percent. Now layoffs are a strategic maneuver, to be used in both good times and bad. (Harper’sMagazine, p. 37)
Commensurate with record profits for Wall Street has been an increase in the disparities of wealth and wages among Americans. The (Census) bureau reports that the highest-income fifth of all households now has 49.1 percent of all income. That is a record share. The figure has gone up in all but one of the last 20 years. ( Old Versus Young,î The International Herald Tribune, (10/10/95) Lester Thurow has written that the facts are clear. Income and wealth inequalities are rising everywhere. Real wages are falling for a large majority. A lumpen proletariat unwanted by the productive economy is growing. (Thurow, p. 313) In terms of wages, adjusted for inflation, the median wage is nearly 3 percent below what it was in 1979. (L. Uchitelle and N.R. Kleinfield, The New York Times, (3/3/96) Ronald Blackwell, the chief economist of the Amalgamated Clothing and Textile Workers Union UNITE, argues that if you look at the postwar era, it divides all too neatly into two periods: the years between 1947 and 1973, when family incomes doubled, and the period since, when family incomes have basically stagnated and for 60 percent of families have actually fallen. That’sdespite the fact that today workers are working longer hours than they ever have, the American worker is more productive than ever, and the country is richer than it has ever been. (Ronald Blackwell, Harper’sMagazine (May 1996), p. 36).
For the American middle-class wage earner, since the 1970’s, overall compensation – as measured by their ability to purchase goods and services relative to what they are paid in inflation-adjusted dollars – has stagnated. (Clay Chandler, The Washington Post, (3/10/96) In 1980, the gross hourly earnings of US males close to the top of the earnings distribution exceeded those near the bottom by 4.8 to one, which was far more than in other industrial countries. By 1990, however, the ratio was 5.6 to one (Editorial, The Financial Times (5/20/96) p. 15) In short, most economists would agree that in the United States there is virtually no disagreement that the gap between rich and poor is getting wider. (Steven Pearlstein, The Washington Post, (5/5/96)
