Steel Mill, Pueblo Colorado. Carol M. Highsmith Archive, Library of Congress.
Some will win, some will lose
Some were born to sing the blues
Oh, the movie never ends
It goes on and on, and on, and on –Journey
In the days immediately following the Trump presidential win, due in large part to strong results in the Rust Belt, a lot of ink got spilled about Democratic hubris in having embraced neoliberal globalization and the new economy’s winners, while ignoring the plight of the white working class and poor rural whites in the nation’s heartland.
Democrats, so the story went, in taking these voters for granted, had assumed that they had “nowhere else to go” –and because of the numbers of unionized workers and minorities, these Rust Belt states (especially Wisconsin, Pennsylvania and Michigan) could thus be counted on to be a “blue wall,” allowing Democrats to concentrate on swing states, like Florida and North Carolina.
Liberals on their couches watching Trump make “America First” promises about bringing back well-paying factory jobs (sorry, good paying jobs) and blaming Democrats, were incredulous. I myself participated in numerous conversations that asked the following rhetorical questions: How can Obama and the Democrats get the blame for getting onboard with economic transformations that were at the heart of the conservative agenda since Ronald Reagan? Democrats–who had detailed plans and policies for creating paths to prosperity and for strengthening the safety net–are to blame? Anyhow, wasn’t unemployment pretty low in the Midwest? Hadn’t the factory jobs dried up thirty years ago?
As time has gone by, and the essence of Trumpism has revealed itself (it’s as thoroughly racist, misogynist, and xenophobic as was advertised) liberals have deepened their resistance to the notion that the 2016 election loss somehow turned on working-class economic insecurity. On May 9th, 2017, PRRI and The Atlantic released a remarkable study on white working-class motivations in voting for Donald Trump. The study is notable for many things, among them the appearance of a sort of a “smoking gun” confirming Democrats’ suspicions. As the accompanying article in The Atlantic makes clear, the data shows that financially insecure voters in the white working class actually preferred Hillary Clinton, and the best indicator of support for Trump turned out to be what they call “cultural anxiety” in the face of an increasingly multicultural America.
It turns out that there is in fact an important economic determinant in the Rust Belt working-class pivot to Trump, something other than economic insecurity.
The focus of this piece, however, arises out of another set of data points found within the PRRI study, something easily missed if one is prepared to dismiss these voters because of their apparent comfort level with ethno-nationalism and authoritarianism, etc. Per the PRRI report, it turns out that there is in fact an important economic determinant in the Rust Belt working-class pivot to Trump, something other than economic insecurity. That something is identified in the study as “economic fatalism” and in my view it’s implications need to be carefully considered when center and left political strategists consider what to do in the face of white working class “cultural anxiety.”
If progressives are going to get somewhere with these people (again, not the ideologically committed racists and xenophobes) then we have to start by taking seriously their sense of grievance, and how it gives rise to the white working class culture of resentment–which here gets the label of “cultural anxiety” or “cultural displacement.” Let me also be clear that I am aware that there is a mature academic (cultural anthropological) literature that critiques constructions of “whiteness/white privilege” and has particular ways of talking about race, class, and gender in the formation of cultural and political identities. I will have to save my position on theorizing “identity politics/politics of difference” for another day. The quarry that I am hunting here is found instead at the intersection of white working class economic fatalism and a set of hostile attitudes toward all the putative “winners” in the new economy, whether they be those who have prospered under globalization or those who have been included in the set of what are considered “unfairly” protected classes.
What if it turned out that the sense of grievance that most white working class voters apparently feel–and for which they demand recognition–has more to do in the end with economic fatalism in the face of transformations of global capital from WWII to the present than it does with deep-seated hostility toward coastal elites, foreigners, immigrants, and protected minorities? If this turned out to be the case, then the challenge associated with reaching this class of voters would be to develop a new politics of recognition capable of talking about global neoliberal capitalism in ways that connected with these voters.
Who Are You, Who, Who? I Really Wanna Know
Before turning to an exploration of the basis and meaning of economic fatalism, as different from economic anxiety, it’s useful to tarry a moment with the PRRI report on the American white working class to recall some key facts and figures.
To begin with, the white working class (without college degree, in non-salaried jobs) make up about 33% of the adult population. More than half (57%) of the white working class live in households earning less than $50,000 per year, and 39% make less than $30,000. About 40% of white working-class adults live in their original hometown. They are found in differing concentrations by region. In the Midwest, they are 43% of the population. In the Northeast 30%, the South 31% and in the West, 26%. Presently, only 14% of the white working class are in unions, with the highest concentration of union membership in the Northeast (24%).
Politically, only 51% of white working-class Americans identify as Republican nationally. Another 34% are Democrats or lean Democratic. Southern white working-class Americans are 58% Republican. Interestingly, there is an age gap as well as regional differences. Where the youth vote tends Democratic nationally, white working-class youth are more Republican than their elders (57%).
As previously mentioned, the balance of the PRRI report is concerned with worldview, attitudes, and outlook. Two thirds think things have continuously deteriorated since the 1950s (presumably because these were grand times for working class whites, even if not for anybody else). Almost 70% think that America is losing its culture/identity, and that our way of life needs to be protected from foreign influences. Half say that they feel like a stranger in their own country, and 60% believe immigrants threaten American culture. More than half think that discrimination against whites is as big a problem as discrimination against African-Americans and other minorities. Additionally, white working-class people score higher on authoritarianism scales, especially white working-class women as it turns out. Nearly half of the white working class think we need a strong leader who will “break the rules.”
Economic Fatalism and the Sense of Grievance
Returning to our main theme, we recall that per the PRRI study (as well as others) the white working class did not elect Trump because of immediate economic insecurity, but rather because of their fears about immigrants and cultural displacement. Some have been quick to point to this as de facto evidence that terms like “cultural anxiety” and “American preservationist” are really euphemisms for “racism” and “ethno-nationalist.” While I don’t entirely disagree, I am of the ilk who thinks that simply writing off the entire white working class as so many irredeemable, committed racists is not helpful, and to some extent rests on a misunderstanding. I believe we can begin to get to the bottom of it by exploring this odd notion of “economic fatalism” that also emerges in the PRRI study.
If we understand the underlying basis and significance of economic fatalism more fully, it might be possible to begin to see how to break up the culture of resentment toward out groups that has emerged as the dominant class consciousness of the white working class.
In the Executive Summary, the PRRI study says that the model they developed identifies five significant, independent predictors of support for Trump: Republican party identification, fears about cultural displacement, support for deporting illegal immigrants, economic hardship (as a predictor of support for Clinton) and economic fatalism. What is economic fatalism?
Economic fatalism is the belief that things are not going to get better, that economic mobility is a mirage, that college is a risky investment, and the system is “rigged” against ordinary people. In the PRRI study, only 16% of white working-class voters think that Trump understands the problems facing their community very well, with 26% saying somewhat well. Only 34% of the under thirty crowd thinks that Trump understands their challenges. In addition, only 32% of white working-class voters say they think that life will improve under Trump, and 54% think that getting a college education is actually a risky gamble.
Despite Trumpian rhetoric about creating good paying jobs, new factory jobs, offers of protectionism, etc., white working-class Americans’ pivot to Trump did not stem from a shared 1970s view of the Rust Belt’s economic woes (Trump alone appears to be hopelessly stuck in the late 70s). But if we recognize that their sense of grievance does in fact stem from their economic fatalism, a number of things start to make more sense.
First, it explains a trans-generational grievance. Yes, the factories were shuttered in the late 70s and 80s. But the white working class of today still live in the same towns, and the communities remember the jobs and buying power of yesteryear. It also provides an economic basis for resentment toward the new economy’s “winners,” the coastal elites, the managers of the knowledge economy, etc. Further, it also goes some distance to explain the vast resentment toward immigrants and historically under-represented or otherwise protected classes, anyone who is perceived to have received “handouts” or special treatment (African-Americans, Latinos, women, etc.).
Pointing out that economic fatalism is in fact a kind of economic determinant for the pivot to Trump (as opposed to discounting economic causes in favor of purely cultural ones) is not intended as some sort of an excuse for overt racism and ethno-nationalism and authoritarianism. But if we understand the underlying basis and significance of economic fatalism more fully, it might be possible to begin to see how to break up the culture of pervasive resentment toward out groups that has seemingly emerged as the dominant class consciousness of the white working class.
The Deindustrialization of America
The remaining sections of this post are an attempt to understand the basis and meaning of the economic fatalism of the white working class in and through a set of transformations in corporate capital management practices since the late 1970s. Perhaps this is a rather odd strategy; normally, the thing to do at this point in the narrative would be to start talking about workers, the labor movement, and all the ways that corporations, aided by government, have undermined communities. However, the emergence of something we must point to and identify as “white working class consciousness” belies the fact that traditional notions of class interest have broken down to the point that new narratives need to be sought after. It is easier to talk about people we resent, or dislike, or fear, for whatever reason, than it is to talk about transformations of global capitalism and its effects on our lives and communities. To begin this process for myself, I choose to start with the story of the de-industrialization of America as a consequence of changes in the global financial management system. In so doing, my intention is to suggest that once we are clear about the real conditions underlying white working class economic fatalism, a range of strategies for political action (other than lashing out at foreigners, immigrants, refugees, and protected minorities) might very well begin to suggest themselves.
In “The Deindustrialization of America” (1982), Barry Bluestone and Bennett Harrison take great pains to show that the apparent loss of the American industrial base that was occurring at the time actually had its basis in explicit capital management strategies US corporations were enacting in the face of an economic crisis of the 1970s, and additionally, that this crisis had its roots in American global post-war economic hegemony.
In so doing, they challenged a number of dominant interpretations that were in the ascendancy at the time, and which are very much still with us today.
Class struggle did not come to an end, but as Bluestone and Harrison say, it became negotiated class struggle.
First there was what we might refer to as the Schumpeterian optimist faction: Joseph Schumpeter was a Harvard economist active until his early death in 1950, who promulgated the notion that through innovation and entrepreneurship, capitalism should be understood as an evolutionary force, such that all the egg breaking was actually in the service of making omelets—where there was apparent disruption, because capital was withdrawing from some area of economic concern, this was to the good, because this creative destruction was necessary in order for capital and labor to move into new, high productivity areas.
In contrast, Bluestone and Harrison insisted that the deleterious consequences of disinvestment decisions could not be so easily dismissed. They pointed to the loss of 38 million jobs in the 1970s, half of which came from the Sun Belt, as well as the long-term implications of capital flight.
Then there were the Neocons, the so-called supply-siders, who insisted that the twin evils of moral decay (blaming the workers) and big government (high taxes, social welfare programs, and regulation) were to blame for the demise of the American industrial economy. In reply, Bluestone and Harrison pointed to what they referred to as “deindustrialization” by which they meant a widespread, systematic disinvestment in the nation’s basic productive capacity.
The essential problem with the US economy, they insisted, was not a moral crisis, nor was it big government—the problem with the US economy was traceable to decisions about the management and movement of capital itself as the solution to an economic crisis.
US Post-War Hegemony and Accelerated Capital Mobility
As Bluestone and Harrison tell it, the story of the 70s economic crisis begins in the immediate post-WWII era. The end of the war marks a reboot with respect to the basic economic phenomena: the struggle for market share, the conflict between employers and workers over wages and profit, and the role of governments in mediating these. With the close of the war, the US had half the useable global economic capability and the only really functioning military; it was inevitable that the US would become both banker and creditor to both allies and former enemies.
The basic pattern that would hold until 1970 was set with Bretton Woods. Because foreign countries were made to buy dollars to keep their currency valuation within prescribed limits, European currencies were made available for the purchase of foreign assets. The price for stability was financing to allow US interests to take over foreign industries.
This process, Bluestone and Harrison write, “made American companies globalized, and thus changed the meaning of competition.” We have often heard the story about how the Europeans and the Japanese, with aid from the US government, built economies after the war that were ultimately able to compete with the US. What gets left out, however, is the role played in this by American corporations. In the 50s and 60s, the process of capital concentration and centralization that had been going on across the first half of the 20th century accelerated. American companies continued to acquire their competitors and their suppliers, forming conglomerates. But now they also granted licenses to foreign interests in exchange for royalties, made direct investments in foreign companies, entered into all manner of quid pro quos, becoming wealthy and powerful, and generally worked as a full partner in the creation of their own future competition.
In 1976, Jimmy Carter had named inflation plus unemployment “the misery index.” By 1980, it reached nearly 20%, three times the average in the 1960s. Jimmy lost the election for more reasons than just burned planes in the Iranian desert.
Along with the concentration of capital through conglomeration, there was also an increasing rate of centralization through technological innovations and related new management techniques. Per Bluestone and Harrison, the post-war period was marked by intense urge to merge, fueled by these developments as well as by the personal motivations of top managers who stood to gain via stock options.
The public sector was also part of the equation, with helpful initiatives supposedly designed to promote job creation. On the domestic tax side, these included:
• accelerated depreciation allowances (companies get the benefits of early depreciation, reducing their tax liabilities with what amounts to interest free loans);
• investment tax credits (large firms can defer portions of tax liability almost indefinitely); and
• other deductions and loopholes, including such things as capital gains, carryback provisions, etc.
While on the international side, there were things like:
• the foreign income tax credit (credited against domestic liabilities); deferred taxation (untaxed foreign income made free for investments until repatriation);
• the legal use of holding companies by multi-nationals for maximum tax benefit;
• tariff code incentives (incentivizing the assembly of goods abroad to be imported and sold in the US); and
• other special incentive programs, like the US Export-Import Bank, and later, Free Trade Zones.
Needless to say, all of this was, at least initially, the triumph of American global business and the engine of American prosperity. Zig-zagging a bit across the 30s and 40s, Labor, with the aid of the regulatory state, had won important concessions—an end to child labor, the minimum wage, the eight-hour day, fair labor standards, occupational health and safety, extended unemployment benefits, better workman’s compensation.
During the heyday of American economic power through the 60s, Bluestone and Harrison write, “industry was able to reap healthy profits while affording these concessions.” Capital and Labor had settled into a kind of a cease fire, agreeing to avoid major disruptions at home while expanding abroad, in exchange for union recognition, dues payoff, wage increases, and seniority rights. Class struggle did not come to an end, but as Bluestone and Harrison say, it became negotiated class struggle.
Capital Mobility and the New Managerialism
Bluestone and Harrison point out that even before WWII, the most cash-rich companies were moving beyond vertical/horizontal acquisition strategies to consolidate control over products and markets in totally unrelated fields. With post-war reconstruction receding, the increase in competition led corporate managers and their bankers to focus even more on opportunities to increase their flexibility. The key to this, Bluestone and Harrison rightly point out, was and is cash—the ability to grow, diversify, shift gears, protect against political or labor-related or natural disruptions—all require sufficient liquidity.
No other development, has had more influence on the deindustrialization of America, Bluestone and Harrison remark, than these new forms of capital organization that were developed in the interest of capital mobility. With corporations verticalized and horizontalized into conglomerates, and in possession of new manufacturing, communications, and data management technologies, US companies together with their underwriters go about diversifying their portfolios beyond their original markets, and whole industries become commodities.
Under this overarching regime, the movement of capital takes a diversity of forms: profits are redirected from one operation to another, such that subsidiaries are regularly “milked” as “cash cows.” Beyond mere milking, enterprises are run into the ground so that the depreciation reserves can be used for investments elsewhere. Capital equipment can be relocated domestically or offshored, with some or all of the work outsourced. Factories can be shut down.
The effects of these practices need not be recounted. We all know what follows in their wake. But it took the economic shocks of the early 70s for them to become highly apparent.
Economic Crisis and Capital Mobility
Bluestone and Harrison report that during the 1960s, overall US real economic growth rate averaged 4.1% per year, such that GNP expanded by a whopping 50% over the course of the decade. Under this condition, the average family enjoyed one third more real income by the end of the decade then they did at the beginning.
The 70s, however, turned out altogether different. By 1979, there had been only a 7% gain in real purchasing power across the decade, and all of it had come between 1970 and 1973. In 1976, Jimmy Carter had named inflation plus unemployment (stagflation) “the misery index.” By 1980, it reached nearly 20%, three times the average in the 1960s. Jimmy lost the election for more reasons than just burned planes in the Iranian desert.
With high unemployment, a sluggish domestic economy, and poor competitiveness abroad, corporations might have chosen to meet the challenge in the old way, by simply seeking new markets, increasing their R&D, and their investments in new technology and capital equipment. But many leading companies decided that the economy could no longer be fine-tuned along Keynesian lines, and instead opted to take the road of capital mobility, continuing to diversify, and/or to focus on reducing labor costs and circumventing taxes and regulations, etc. The US corporate management community had decided that it could no longer afford the welfare state.
No other development, has had more influence on the deindustrialization of America, Bluestone and Harrison remark, than these new forms of capital organization that were developed in the interest of capital mobility.
In 1966, the real rate of return for all non-financial corporations was 15.5%. By 1978, it had fallen to 9.7%. The basic options on the table were to identify more profitable uses for capital, cut production costs to restore margins, or drop prices. Naturally, they did all of the above, and they all involved more capital flight. The solution to the crisis was to be more capital mobility—disinvestment and deindustrialization, concessions from organized labor, but also PACS to ensure reductions in corporate taxation with resultant reductions in social services and de-regulation, all in the service of creating a “good business climate.”
By the 80s, it was clear that capital management was the name of the game. In order to attract capital for implementing new strategies to increase mobility and liquidity, the much sought-after flexibility, companies needed to have attractive P/E ratios. Product lines with low market shares and low growth rates, henceforth known as “dogs” should be abandoned. Branches or subsidiaries with high market share but low growth rates in mature industries are the cash cows to be milked. High market share, high growth lines or subsidiaries are “the stars,” which will be allowed to keep their earnings while they continue to ride the high-performance wave.
Capital Mobility and Economic Fatalism
The purpose of recounting part of the story laid out by Bluestone and Harrison has not been to vilify American corporate practices per se, or to suggest that investors don’t have a right to expect a good rate of return for their investments. I have chosen to tell this story of the not too distant past because this trajectory of American capital from WWII to the early 1980s feels manageable to me, something I can get my head around. I confess that I do not understand the present situation of global capitalism under advanced neo-liberal economic conditions. I suspect that very few people do, and not very many of them are in the American white working class, either.
But I think most people realize (white working class included) that simplistic claims that our government has been asleep at the switch, allowing foreigners to take our jobs away, or that the American industrial base went out of business, are just bullshit. The case of the US steel industry in the 1970s is a quite good example. When foreign competition heated up, and US products lost their competitiveness, US steel manufacturers cried loudly that foreign companies were “dumping” excess steel on the US market at discount prices. Most people probably didn’t know that these same foreign steel manufacturers were themselves operating on loans from Citibank and Chase Manhattan. But by the end of the decade, most interested parties had figured out that US steel had used its profits not to reinvest, but to acquire non-steel businesses, like oil and gas, nuclear power plants, and real estate. As Bluestone and Harrison write, “Steel didn’t go out of business in the face of global competition. Steel’s capital left the steel business in order to find more profitable enterprises.”
By now it should be clear that I am far from unsympathetic to the claims of “the white working class” that “the system is rigged” against ordinary working people and their communities. I just think we need to begin by helping people to understand that the protagonist in this story about disinvestment, deindustrialization, and the dislocation of communities is not scapegoated out groups like illegal immigrants. The protagonist in the story of a justified economic fatalism is capital itself.
In the second installment of this post, I look at Michel Foucault’s notion of “neoliberal governmentality” in order to further explain how transformations in capital are at the root of why so many people come to feel like perennial losers, and how this is causing a crisis of our democracy.
