Coronavirus, Capitalism, and the Workers’ Movement

Part 3: How Inequality Kills, and How to Fight It in the Era of Covid-19

By Alejandro Reuss | September/October 2020

This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org


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This article is from the September/October 2020 issue.

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This article is part of a joint series that is being published in Labor Notes and D&S. Find Part 1 of this series, “Not Simply a ‘Natural Disaster,’” here, and Part 2, “How the Coronavirus Crisis Became an Economic Crisis,” here. —Editors



The coronavirus crisis has already resulted in a dramatic decline in overall economic output, market incomes, and consumption. We do not yet know how long the current crisis will last, but hopes for a very quick bounce back have now been dashed by the resurgence of infections and, in some places, the retightening of restrictions. As if any more proof were necessary that this is not just a natural disaster, the failure to implement necessary public health measures quickly enough and maintain them long enough has clearly prolonged and exacerbated the crisis.

Make no mistake, a large decline in average income and consumption can certainly result in catastrophic suffering. Such a disaster, however, is not inevitable. The result depends on policies and institutions, and how these distribute the impacts of the crisis.

Output, Incomes, and Well-Being

Real gross domestic product (GDP) for the second quarter of 2020, according to the first published estimates from the Bureau of Economic Analysis (BEA), declined at an annual rate of more than 30%. (That means that if the same rate of drop-off continued for a full year, output would be only 70% as much as it was the year before.)

These are Great Depression-like figures: the GDP decline from the pre-Depression high in 1929 to the Depression low in 1933 was also about 30%.

Where Did All the Money Go?

The coronavirus crisis has treated us, once again, to giant corporations extracting giveaways in the hundreds of billions of dollars from the public. The airlines have been prominent in the shakedown, with top executives at United Airlines threatening to lay off tens of thousands of workers unless the federal government bailed them out to the tune of tens of billions of dollars. The “stimulus” bill earmarked $25 billion in cash to the airlines, plus loans and loan guarantees totaling a similar amount, with some restrictions on further layoffs. (Even these are temporary, ending in October, and executives have signaled another bloodletting as soon as they expire.) Paying the capitalists to keep workers employed is not taking away their power to fire workers or to shake down the public; it is giving in to the threat.

The four largest airlines—American, Delta, Southwest, and United—totaled about $66 billion in profits over the ten years 2009–2018. FedEx and UPS, the two largest freight companies, totaled about $54 billion over the same period (and got a cash bailout of $4 billion). In 2018 alone, these six companies totaled nearly $20 billion in profits. So how is it that they could turn out their pockets, claiming an inability to keep paying workers without the giveaway from the federal government? In recent decades, large U.S. corporations have increasingly paid out huge amounts of cash to their shareholders, using primarily two mechanisms: the first is dividends, which are profits paid out by a corporation to the shareholders on a per share basis. Corporations are not legally required to pay profits out as dividends; this is something corporate boards choose to do. The second is stock buybacks, which are purchases by the corporation of its own stock back from shareholders. Corporate executives are incentivized to engage in buybacks, since they increasingly receive compensation in the form of stock and stock options, and so benefit directly.

The airline executives are not simply lying that the money is gone. A lot of it is gone: Economist William Lazonick, a longtime critic of stock buybacks, notes that the airlines and freight companies paid out about one-fourth of their profits over the last decade in the form of dividends and over half in the form of buybacks. The stock owners—including the top executives themselves—made away with the loot. Even this, of course, does not necessarily mean that giant corporations are really unable to keep paying workers. They could spend the cash they still have on hand or borrow in private credit markets (the latter trenchantly suggested by economist Robert Reich in a statement opposing corporate bailouts). But why would they?

The federal government is acting as an enabler for the giant corporations, the executives, and the shareholders by handing over billions, just as it did during the Great Recession of 2007–2009. Some of the money came with strings attached, like a moratorium on buybacks. That may sound better than no strings at all, but in effect it means the government is paying the companies not to do it again—at least not right away (since the restrictions are temporary). Is there any wonder that the corporate overlords have learned the lesson they can do whatever they want during the boom time and expect the public to bail them out during the inevitable bust?

The value of all the stock of the four major airlines at their share prices (in business lingo, their “market capitalization”) at the time of the bailouts was less than $50 billion. For the billions that the government paid in bailouts, it could have instead bought controlling interests in all of the airlines and sacked the management. That might have taught them a different lesson.

Sources: Igor Derysh, “Top US Airlines Plan Thousands of Layoffs When CARES Act Ban Expires,” Salon, July 19, 2020 (salon.com); Fortune 500, Fortune; Fortune 500, CNN Money; William Lazonick, “CEOs Gorged on Buybacks for Years. Now They Want Bailouts,” Barron’s, March 26, 2020 (barrons.com); Robert Reich, “No industry—not airlines, not hotels, not cruise ships—should be bailed out ...” (twitter.com).

Employee compensation (wages and benefits) declined at an annual rate of more than 20% in the second quarter, about the same decline as personal income of all kinds, excluding government transfer payments. Total personal income actually increased in the second quarter, but that was entirely due to a spike in government transfers, which were double in April what they were in March, and remained unusually high in May and June. With market incomes (not including transfers) plummeting, people understandably cut their spending dramatically. Real personal consumption expenditures dropped by nearly 25%.

A decline in output on the scale of the Great Depression is no small thing, but we need to understand that in and of itself it would not be nearly enough to reduce all of us to poverty or starvation. Today, such a decrease would reduce annual per capita GDP from about $58,000 to about $40,000—to around the level of late 1995. That was the highest level recorded up until that point in U.S. history, and is in the same general ballpark of the current per capita GDP of France or the United Kingdom (both in the low $40,000s). An average income of one-third less than in the United States today does not necessarily represent a catastrophe.

One might respond, reasonably enough, that having a lower average output, income, or consumption level at some point in the past, or in some other society, is not the same thing as a particular society suffering a decline back to a lower level. Nonetheless, even large declines can be managed without a huge toll in terms of human suffering. Real per capita consumption in the United Kingdom, for example, was about 15% lower during 1940–1945 than it was during the second half of the 1930s. Yet, in measurable ways basic economic well-being of the civilian population did not deteriorate, but actually improved to an unusual degree.

Economist Amartya Sen, whose work on inequality was discussed in Part 1 of this series, has noted that the two decades of greatest increase in life expectancy in the United Kingdom were, not coincidentally, the decades of the two world wars. During both, the government took steps—such as rationing food and other essentials—to ensure minimum adequate levels of nutrition and other basic capabilities. “Each war situation produced much greater sharing of means of survival,” Sen concludes, “including sharing of health care and the limited food supply (through rationing and subsidized nutrition).” In other words, while there was less to go around, what there was got shared more equally. As a result, life expectancy increased by more than six years during each of the war decades, the 1910s and the 1940s, compared to an average of less than three years per decade for the 1900s, 1920s, and 1930s.

The Bleak Prospect of “Business as Usual”

In the United States under “business as usual” policies and institutions, this kind of crisis would exact a very large human toll—primarily because of the ways the impacts would be distributed.

First, the impact would fall much harder on some than others. During the Great Recession of 2007–2009, U.S. per capita GDP fell by about 5% from the pre-recession peak to the recession trough. If everyone’s incomes had fallen proportionally, the human toll would have been much smaller. Instead, some people’s incomes did not decline at all, while the incomes of others (especially those who lost their jobs) declined by much more than 5%. The impact of unemployment, moreover, was distributed very unequally across different groups. The official unemployment rate for white people increased from about 4% before the crisis to a peak of about 9%. For African Americans, it was already higher during the pre-crisis boom, bottoming out at about 8%, and peaked at almost 17% during the crisis.

The current crisis has resulted in tens of millions of workers losing their jobs (and their main source of income). Workers in the hardest-hit sectors, such as leisure and hospitality, have borne the brunt of these job losses. Total nonfarm employment in the U.S. economy, according to the Bureau of Labor Statistics (BLS), declined by almost 15 million between February and June. The decline in leisure and hospitality accounted for one-third of this total, despite the sector accounting for just over one-tenth of pre-crisis nonfarm employment. In June, the “headline” unemployment rate for white people was about 10%, up by about 7 percentage points compared to its pre-crisis low. For African Americans, it was over 15%, up by more than 10 percentage points.

Second, the impact would fall much harder on those at the bottom than those at the top. Even if everyone’s incomes were to fall proportionately, high-wealth individuals could continue to live in luxury. The moderately affluent might have to sacrifice some luxuries but not any real necessities. Those who scrape by now, however, would face real hardship. For those already going without major necessities in life, the result would be disastrous. Some people live, in effect, far away from the cliff’s edge, and can bear a decline in their incomes without too much difficulty. Many live, however, dangerously close to the precipice—not just during crises but under the “normal” conditions of U.S. capitalism.

In a recent study by the U.S. Federal Reserve, for example, about 40% of those surveyed said they would not be able to pay for an unexpected $400 expense from savings or by using a line of credit that they could pay off in less than a month. Most said that, instead, they would have to borrow (especially from high-interest sources like credit cards or payday loans) and repay over time, or would not be able to pay the expense at all. That gives us a good sense of how many people would be hit very hard as a result of even a small decline in income. The consequences of a large and protracted fall in income would be far worse. For example, a recent study by the consulting firm Stout Risius Ross estimates, based on U.S. Census Bureau survey data, that over 40% of US. renter households will be unable to pay their full rent in the coming months. The analysis concludes that “there could be at least 2 million eviction filings in August and another 2 million filings in September nationwide.” Not everyone who is short on their rent faces an eviction filing and not all eviction filings result in actual evictions. This analysis, however, gives us a sense of both the magnitude and the seriousness of the danger.

A Battery of Demands

Specific demands that would shift the burdens of the crisis from workers to capitalists, if taken up by the workers’ movement, would bring it into a collision course with the owning class and the ruling elite. That is not something to be avoided. The purpose of a program of demands should not be to determine the path of least resistance to ameliorate current conditions, but to clarify the necessity of workers’ collective organization and confrontation with the capitalists. This means formulating demands that are both responsive to the urgent problems facing workers today and that lay bare how the capitalists’ wealth and power stand in the way of humane solutions.

Job-security guarantees. U.S. capitalists have an extraordinary degree of latitude to fire or lay off workers, even compared to other high-income capitalist countries. This is always bad for workers, since employers’ threat to fire is the foundation of their power over workers. During the current crisis, bailouts have come with some restrictions on layoffs, but these have been weak and temporary. Workers whose employers do not take bailout money, moreover, are just as deserving of job security. The workers’ movement should fight for policies that, instead of paying employers not to lay off workers, would directly restrict all employers’ power to fire workers.

Guaranteed annual wage. The employers want workers to be disposable. They want to be able to profit from workers’ labor during boom periods and then to get rid of them during recessions. That is their way of avoiding the costs of a crisis, and instead to inflict these costs on the workers. A guaranteed annual wage, even if employers do not want as much labor during a downturn, would mean that they (rather than the workers) would bear the costs of cutting back output and work hours. The U.S. labor movement can pull this demand from its own past, as it was proposed by major unions in the 1950s.

Direct government benefits. Workers do not have to be left without incomes when they are unemployed. Nor do governments have to pay money to employers for workers’ incomes to be protected. Governments can obviously make payments directly to workers. These can take the form of social insurance payments, like unemployment benefits, which depend on meeting some condition for eligibility. The workers’ movement should fight for permanent expansions of such benefits, which would reduce workers’ costs of job loss even after the end of a crisis. (The employers would prefer that, if benefits are increased at all, these increases be temporary—so as to maintain workers’ economic vulnerability.) A universal basic income (UBI) program, proposals for which predate the current crisis, would be preferable to conditional unemployment insurance. Universal programs generally garner broader political support, making them less vulnerable to future attacks.

Direct public employment. Proposals for the government to function as an “employer of last resort”—stepping in with public employment when private employers are laying workers off—predate the current crisis. The massive layoffs during the current crisis have led to new calls for large-scale public jobs programs. Some have emphasized employing the unemployed to jumpstart production of short-supply essential goods and services (rather than relying on price spikes to induce private investment). Others have proposed employing workers for public-goods projects—such as environmental improvements—which are typically undersupplied.

Making employment public, of course, does not magically make it safe. If there were no way for workers to work safely, under the current circumstances, paying the workers’ wages without requiring them to work would be the equivalent of paying unemployment insurance. Some kinds of work, however, might be safe—if done remotely, with physical distancing on a work site, or with special protective equipment.

Workers’ control of production. Like public employment, cooperative enterprise reduces workers’ dependence on capitalist employers for jobs and wages. In self-managed worker cooperatives, the workers work for themselves rather than for a capitalist employer. They do not have to split the revenues with an individual owner or a group of shareholders. They do not have to obey the commands of an owner or managers that the owner hires. Worker-owned cooperatives, however, are rare in the United States, even compared to some other high-income capitalist countries.

Workers’ struggles for control of the production process—ranging from resistance to intensified managerial control all the way to calls for workers’ collective ownership of all industries—were prominent in the United States in the late 19th and early 20th centuries. In the post-World War II era, though, such demands largely dropped off the labor agenda. U.S. unions recognized a wide realm of “management prerogatives” in the capitalist workplace and calls for workers’ ownership and control of production largely disappeared from U.S. labor politics. A revival of demands for workers’ control would require a major change of direction in the U.S. labor movement.

These kinds of proposals, if taken up by the workers’ movement, will certainly provoke a swift and negative response from business leaders, politicians, and mainstream media figures. Opponents will argue that such measures, if adopted, can only undermine the economy and “hurt those they are intended to help.” The correct response is not to offer reassurances that, if crafted correctly or kept sufficiently modest in scale, this program would be compatible with the smooth functioning of the capitalist economy.

Each of these demands, in one way or another, is aimed at reducing workers’ economic vulnerability and therefore the employers’ power over them. Leading business and political figures are admitting, even as we speak, that workers have to be kept vulnerable and desperate to force them back to work, that they have to be forced back to work to maintain capitalist profits, and that profits are the one thing that cannot be sacrificed in a capitalist economy. We need not offer any argument to the contrary. We should, instead, thank them for their frank acknowledgment of just how predatory this system is and why it must be replaced.

Sources: Rand Wilson, “‘Just Cause’ and the Attack on Job Security,” Dollars & Sense, September/October 2014 (dollarsandsense.org); Art Preis, Labor’s Giant Step (Pathfinder Press, 1972); Ryan A. Dodd, “A New WPA?” Dollars & Sense, March/April 2008 (dollarsandsense.org); David Roberts, “30 million Americans are unemployed. Here’s how to employ them,” Interview with Pavlina Tcherneva, Vox, May 4, 2020 (vox.com); Angela Glover Blackwell and Darrick Hamilton, “Will We Face Depression-Era Job Losses? Let’s Not Find Out: Congress should enact a federal jobs guarantee,” New York Times, May 9, 2020 (nytimes.com); Cassandra Robertson and Holly Wood, “Coronavirus is draining America’s public infrastructure. A federal jobs policy would protect its workers,” The Guardian, April 6, 2020 (theguardian.com); Rina Saeed Khan, “As a ‘green stimulus’ Pakistan sets virus-idled to work planting trees,” Reuters, April 28, 2020 (reuters.com); Geoffrey Schneider and Charles Sackrey (with Janet Knoedler), Introduction to Political Economy, 8th ed. (Economic Affairs Bureau, 2016); David Montgomery, Workers’ Control in America (Cambridge University Press, 1979); Nelson Lichtenstein, State of the Union: A Century of American Labor (Princeton University Press, 2002).

Economic policy during the coronavirus crisis, it is important to recognize, has not stuck entirely to “business as usual.” The initial response to the crisis included a large (but temporary) expansion of unemployment insurance—including a $600-per-week federal enhancement of normal benefits. The unemployment insurance system leaves millions of workers unprotected in normal times and has continued to do so despite the enhancement. (See Alejandro Reuss, Unemployment Insurance: A ‘Safety Net’ With Holes.) Moreover, the enhancement, passed in May as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act was temporary—set to expire in July—for reasons that are both atrocious and completely understandable. Capitalist employers do not want these increases to workers’ economic security to become the “new normal.” They understand very well that higher income for people who lose their jobs (known as “replacement income”) reduces the cost of job-loss for workers; and a lower cost of job-loss means greater bargaining power for workers against their employers.

The latest developments include an extension of the federal enhancement to unemployment benefits, but at only half of the previous level. Officials in the current administration and members of Congress made their reasons for opposing extended benefits quite clear—workers’ desperation has to be increased to force them back to work. But cutting the benefits will surely push millions of people to the precipice, and many off the edge altogether. It will indeed force many, primarily those who are most vulnerable economically, back to work—at risk to their health. For some of those workers, and for other members of their families and communities, it will be at the cost of their lives. That is what a turn back toward “business as usual” means.

Three “Links” of Economic Subordination—and How to Break Them

To minimize the human toll of a crisis like this one, involving a large decline in overall income, economic institutions would have to ensure that those at the top bear the brunt of the impact and those at the bottom do not bear any. If we are to go beyond a partial and temporary amelioration of conditions, we need to break the links that maintain workers’ economic insecurity and subordination, which are fundamental to the capitalist system.

De-linking Income from Employment

In the United States and other capitalist countries, most people’s market incomes come overwhelmingly from wage and salary employment. (Property incomes—like profits, rents, dividends, and interest—are a substantial part of total income, but are highly concentrated at the top.) In the United States, where health insurance and pensions are tied to employment to a greater extent than in other high-income countries, workers depend on their jobs for the essentials of life to an especially great extent.

Besides market incomes, many people also receive government transfers. Social Security, Medicare and Medicaid, unemployment insurance (UI), federal student grants, nutrition assistance (SNAP), and farm subsidies are all examples of transfer programs. Some of these, like Social Security and UI, are “cash transfers” that allow recipients to spend the money on whatever they choose.

Proposals for the creation or expansion of cash transfer programs—such as a universal basic income (UBI)—had been prominent in U.S. political debates even before the coronavirus crisis.

The crisis itself has resulted in the temporary expansion of some transfer programs, especially unemployment insurance (increased benefits, extended time, and expanded eligibility). The $1,200 federal “stimulus” payments are also cash transfers. They went out to a much broader swath of the U.S. population than unemployment insurance payments, but only on a one-time basis. In contrast, a UBI program would establish some level of minimum monthly cash payments, with very broad eligibility, and on a permanent basis.

During most recessions, some businesses reap windfall profits, and the current crisis is no exception. In general, however, recessions are not good for profits in the short run, because collapsing demand means reduced sales and profits. More money in consumers’ pockets, conversely, can mean more spending and therefore higher sales and profits for businesses. One might think, then, that business owners and managers would support income support policies—if only for reasons of their own bottom line. Yet even in the midst of this profound crisis, with tens of millions unemployed, business organizations have dug their heels in against these expanded unemployment benefits.

Business owners’ opposition to increased income supports, however, is not irrational. They are merely forgoing some profits in the short term to guard their power and profits in the long term. As the great 20th-century Polish economist Michal Kalecki argued, the foundation of employers’ power over workers is their ability to deprive workers of their incomes. Any source of income other than labor, therefore, undermines employers’ control over workers. “The fundamentals of capitalist ethics,” Kalecki observes, “require that ‘you shall earn your bread in sweat’—unless you happen to have private means.” In other words, it’s alright for business owners and landlords to get their incomes from property, but the rest of us have to work for it.

De-linking Access to Basic Goods from Income

Access to goods and services do not have to depend on one’s ability to pay for them, whether from market incomes (such as wages and salaries) or cash transfers.

Some transfers, such as SNAP, Medicare, and Medicaid are “in-kind transfers” that provide end recipients with particular kinds of goods and services. The government pays private enterprises to provide goods and services to the program beneficiaries. For example, SNAP benefits can only be used for food and other approved items. Medicare and Medicaid pay health care providers to deliver approved care to covered individuals.

As for cash transfers, there have been significant campaigns for the expansion of education and health programs in the United States in recent years. Proposals for free higher education would involve expanded federal government payments to educational institutions, both private and public (in the latter case, generally state-level institutions, so involving payments from the federal government to the states). Proposals for a “single-payer” health insurance system would dramatically expand federal government payments to private hospitals, medical practices, and pharmaceutical companies.

Governments can also directly provide goods and services, operating publicly owned facilities and directly employing providers. In the United States and most other countries, free public elementary and secondary education are familiar examples of directly provided goods and services. In some capitalist countries, hospitals and clinics are publicly owned, and health care workers are public employees. (This kind of system is often known as a “national health service,” in contrast to a “single-payer” system of public insurance with private provision.)

The coronavirus crisis has made some of the failings of the U.S. medical system—the unequal access to care, reliance on employment for health coverage, etc.—even more obvious than they were before. This has, not surprisingly, intensified calls for a single-payer or “Medicare for All” system. While there is no significant call for moving in the direction of a national health service in the United States at this time, the crisis has provoked moves in other countries towards direct government operation of hospitals. The governments of both Spain and Ireland, for example, announced that they would take over private hospitals and clinics and operate them free of charge to patients.

In part, private business interests oppose direct government provision of goods and services, especially if provided for free or at subsidized prices, because it competes with their sales. (Kalecki recognized this as well.) The health care sector, for example, is rife with vested interests—medical practices, hospital chains, pharmaceutical companies, insurance companies, etc.—that profit enormously from the status quo. Even an expansion of public insurance would directly threaten the private insurance companies (and might indirectly threaten other business interests through cost containment on medical services and pharmaceuticals). A national health service system would directly threaten both for-profit insurance and health care providers. Free public higher education would face business opposition for the same kinds of reasons. There would likely be a push back, for example, from private colleges and universities. The biggest opposition, however, would come from private banks that profit from tuition loans. The last thing they would want is for higher education to be free.

On the other hand, one might expect businesses in other sectors to support public provision of some kinds of goods. For examples, businesses might benefit from an educated and healthy workforce. In addition, employee health insurance is a large business expense, which employers would presumably want to get off their dime. (A public system could help them do that, provided that any taxes they paid to finance it were less than their current expenses under the employment-based system.)

Overall, however, big employers in the United States have opposed single-payer health insurance, a national health service, etc. Much like expanded cash transfers, such reforms would make workers less dependent on employment for the necessities of life, and so would reduce employers’ power over workers. Moreover, business owners have fought very hard politically over the last half century to convince us that private enterprise and markets are good, while government intervention is bad. They surely do not want us to get the idea that, in important ways, public provision could be better than private for-profit production.

De-linking Employment and Wages from Capitalist Profits

During recessions, the standard responses of governments are focused on restoring conditions of capitalist profitability. Demand-boosting policies, for example, aim to make it profitable for employers to ramp up production and hire back workers. That may be better than remaining mired in recession and mass unemployment, as might be the case without such policies. It leaves intact, however, the central rule of a capitalist economy: that the fates of millions depend on the profits of a few. Bailouts to private businesses obey the same logic. Today, we are witnessing the absurd spectacle of government giving billions of dollars to private companies—some of which have openly threatened that, if they did not get bailed out, they would lay off tens of thousands of workers—so that they will then pay that money out in wages and benefits. As if the lords have to be paid for the peasants to get their pittance.

Blast from the Past: 20th-Century Revolutionary Thought and 21st-Century Challenges

The thoughts of leading revolutionary socialists of the early 20th century remain searingly relevant, more than a century later. This sidebar focuses on the ideas of two revolutionary socialists and Marxist theorists, Rosa Luxemburg (1871–1919) and Leon Trotsky (1879–1940), that have shaped the analysis in the larger article. In part, their ideas remain vital because they were steadfast in their view of capitalism as a system of domination and exploitation, and in their commitment to its abolition. They did not aim, as an end goal, at creating a more humane version of this system or ameliorating the suffering under it, but at eliminating it root and branch. They were fundamentally optimistic that it would be possible to build a new kind of socialist society out of the ashes of the old. In part, the vitality of their thought owes to significant parallels between the challenges they faced—during the crashing end of the last great era of capitalist globalization—and those we face today.

Luxemburg and Trotsky belonged to a theoretical tradition, following Karl Marx and Friedrich Engels, that recognized the revolutionary and transformative impact of capitalism during the era of its ascendancy. They recognized the monstrosity of the ways that capitalism had wrought this transformation, but they did not look nostalgically back to the pre-capitalist past. Rather, they saw capitalism as a system of exploitation and domination that was delivering humanity to the brink of abolishing exploitation and domination. That would require, however, the overthrow of capitalism itself. Indeed, they believed, the decay and crisis of capitalism threatened the collapse and retrogression of society (think in terms of a nightmare scenario of economic depression, dictatorship, world war, ecological collapse, etc.)—unless successful revolutions reconstituted society on a new basis. In one of her best-known political writings, known as “The Junius Pamphlet” (1915), Luxemburg famously borrowed a phrase from earlier Marxist thinkers to describe the dilemma facing humanity: “socialism or barbarism.”

Like other Marxists, Luxemburg and Trotsky saw the working class as playing a key role in the revolutionary reconstitution of society. This was not only because they saw the condition of wage workers under capitalism as one of subordination and exploitation, but because workers occupied a strategic position in capitalist society. Indispensable to capitalist production, they could bring the system to a grinding halt. In “The Mass Strike” (1906), Luxemburg emphasized the transformative potential of mass strikes, not only in disrupting capitalist business as usual, but as the crucibles in which workers’ collective identity and capacity for collective action would be formed. A program of demands should aim, above all, at inspiring this kind of collective action in confrontation with the capitalists, since this is indispensable to building the working class’s fighting capacity. Luxemburg’s view on mass strikes should not be misunderstood, however, as just advocating a mass mobilization strategy for extracting bread-and-butter improvements from the capitalists. She argued, above all, for the politicization of the class struggle—for using workers’ collective power to press not only economic demands but also a broader political program. She did not see trade unions alone as equal to the task of social revolution and she was adamant about the need for working-class political-party organization.

It is a big task to rebuild the class consciousness and fighting spirit that Luxemburg saw emerging from mass struggles. If this is to happen, it will involve many partial struggles, at the workplace and political levels, with immediate aims of defending what has been won in the past or to win some new improvement of conditions. Class consciousness and worker militancy, moreover, are not the same thing as revolutionary consciousness. Trotsky saw it as a key task for revolutionaries to propose demands that both had immediate appeal and that targeted the foundations of capitalist domination. He describes this approach, above all, in the political program “The Transitional Program for Socialist Revolution.” Trotsky’s aim was not to identify the most readily “winnable” objectives, nor to craft demands that could be comfortably integrated with capitalism in the long run, nor to develop a program that would gradually replace capitalism with something different. The objective, rather, was to use immediate struggles to clarify the fundamental incompatibility of the capitalist system with solutions to the burning problems of the time, and the urgent necessity of social revolution.

Sources: Karl Marx and Friedrich Engels, “The Communist Manifesto” (“The Manifesto of the Communist Party”); Rosa Luxemburg, “The Mass Strike” (“The Mass Strike, the Political Party, and the Trade Unions”); Rosa Luxemburg, “The Junius Pamphlet” (“The Crisis of Social Democracy”); Leon Trotsky, “The Transitional Program for Socialist Revolution” (“The Death Agony of Capitalism and the Tasks of the Fourth International”) (all available at marxists.org).

In the United States, we hear the relentless drumbeat that only private business can create jobs and wealth. This is nonsense. As it is, government at all levels accounts for almost 15% of all wage and salary employment in the United States. During crisis periods, public employment has been used, in the United States and other countries, as a way to get unemployed people back to work on socially useful projects without waiting for the resumption of private investment and hiring. The Works Progress Administration (WPA) and other Depression-era programs are well-known examples.

Public enterprise is preferable in some ways to private. Public enterprises need not charge the maximum price that the market will bear, cover the full costs of production, or even charge users at all. This means that the goods and services they produce need not be rationed, as they are under capitalist business as usual, according to ability to pay. Moreover, decisions about what kinds of goods and services public enterprises produce are made politically. Public enterprises do not have to produce whatever maximizes the private benefit to the enterprise (what is most profitable); they can produce goods and services that are not profitable, but that result in public benefits not captured by the enterprise.

On the other hand, public enterprises in capitalist societies often exhibit many of the same evils as private enterprises. Labor conditions are not universally better for public-sector workers than for private-sector workers (this depends on many factors, including the legal and institutional conditions for labor organization). Nor are public enterprises usually democratic workplaces. In capitalist and non-capitalist societies, they can be as hierarchical and authoritarian as capitalist enterprises. Thinking about alternatives to the capitalist workplace, then, we need to look not only at the question of private versus public ownership, but also at the issue of hierarchical versus democratic control of the workplace and economy as a whole.

The Upshot

The current crisis, as argued in earlier installments of this series, has exposed systemic failings of the capitalist system. A labor agenda for the crisis should aim not only at reducing the immediate pain, content to leave the underlying structure basically intact. Unless we tackle the systemic causes, we will just face the same problems over and over again. Consider this question: A decade ago, the United States was in the depths of the Great Recession. Millions were unemployed and millions more were forced to involuntarily work part time. Some emergency policies were passed (like expanded unemployment insurance, a federal infrastructure spending program, and so on), and some of those reduced the immediate pain. But was there any change to the underlying structures of the U.S. economy, so we would not face the same kind of disaster again?

There is clearly widespread disaffection, in the United States, with current conditions and the current power structure, which creates all sorts of possibilities—good and bad. The U.S. workers’ movement faces daunting challenges. Forty years of almost continuous labor movement defeat and retreat have created deep pessimism and passivity. Generations of workers have never experienced anything else. The vast majority of U.S. workers have never been labor union members, been involved in a unionization campaign, gone on strike, or taken part in any other significant labor collective action. Frustration with the status quo is clearly very high, but this does not automatically generate movement in positive directions. Reactionary political movements have captured and channeled a great deal of this discontent into racist and nativist scapegoating politics. These movements tap into profound toxic currents in U.S. history and politics, centuries old and uneradicated even by the great upheavals of the 1860s and 1960s.

The ongoing crisis of U.S. and world capitalism—predating but exacerbated by the coronavirus crisis—also creates openings for radical politics based on principles of democracy, equality, and solidarity. In the United States, the labor responses have included mass mobilizations—including 25 large strikes (1,000 or more workers) last year, more than any other year in the last couple of decades. (To keep this in proper perspective, that is still less than one-tenth of the 1947–1979 average.) New currents have emerged in the labor movement, embracing a broader vision of social change beyond traditional collective bargaining (such as teachers’ unions that have become standard bearers for public education, opponents of school closures or privatizations, champions of humanistic education against the school as a “human capital” factory, etc.). Movements for economic reform—including objectives like a higher minimum wage, universal public health insurance, and a universal basic income—represent a promising escalation of class-struggle objectives to the political level. Movements against white supremacy and state violence have given rise to massive protests, profoundly changing a political environment in which racism has been on the offensive. Movements against sexual violence have laid bare the power imbalances, in the capitalist workplace and society as a whole, that foster abuse and impunity.

There is probably greater openness in the United States to “socialist” politics than at any time since the second Red Scare of the late 1940s. The leading “democratic socialist” figures and organizations, however, basically advocate reforms to the capitalist system, along the lines of European social democracy, rather than its replacement. Moreover, they have largely flowed into one of the two dominant capitalist parties. There is little movement for the creation of a labor-based political party or parties in the United States, despite the enormous importance of such parties in the achievement of social democratic reforms in other countries. Revolutionary socialist organizations remain small and have little influence. There is relatively little organizational and theoretical continuity between the radical politics of today and that of previous generations.

As noted above, there are some hopeful developments, but we should not underestimate the magnitude of the challenge. The crisis of world capitalism is profound—comparable to that of the 1910s–1930s—and the stakes are extremely high. It is in times like these that people actively fight over what direction society will take out of the impasse, and to a great extent what shape it will take for a lengthy period to follow. The workers’ movement and other popular movements in the United States will have to mobilize much greater forces—and fast—to be prepared for the showdowns to come.

is an economist and historian and former co-editor of Dollars & Sense.

Anytime someone proposes major changes in society, the next question to ask is what else would have to change for that vision to become a reality. The kinds of structural changes discussed here would require a huge shift in the balance of power between workers and employers. The next installment of this series will address how such a sea change could happen.
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