The Social Changes We Need, the Class Obstacle We Face

Article by Richard D. Wolff

"Capitalism’s defining class struggle has always been that between the employer and employee classes. And the victory of the latter ends that dichotomous organization of workplaces (factories, offices, and stores) that grounds and defines capitalism’s class structures and struggles. Indeed, the victory of the employee class could thus finally close the sequence of all those dichotomous class structures (master/slave and lord/serf)."

The inflation that plagues the United States and beyond results from a decision made by employers. Within the larger population, the employer class (under 2-3 percent of that population) controls the prices of goods and services. Each member of that class decides when, where, and how much to raise the prices of what that member sells. The employer class excludes the employee class from participation in its pricing decisions. Employers in banks and most other lending institutions likewise control interest rates: the “prices” charged for lending money. Employers comprise a tiny percentage of the American people while employees form the vast majority. The self-employed are a small minority between employers and employees.

Prices are what employees pay to employers. Wages are what employers pay to employees. Throughout the current U.S. inflation, prices rose considerably more than wages. The inflation thus worked, like so much else in U.S. capitalism, to redistribute wealth from employees to employers. Struggles over price and wage inflations are very much class struggles.

The employer class wields great influence over wages and salaries paid to the employee class. True, the classes have to bargain a bit. But with only about 10 percent of employees unionized in the United States, employers’ wealth and organization give them much more power to set individual wages and salaries than employees can wield through bargaining. Employees can quit individual jobs, but they rarely escape their class position. Most of those who quit will then have to submit to some other employer to survive. Employers, on the other hand, can respond to workers’ demands for higher wages or salaries in multiple ways: They can automate (replace workers with machines), relocate production (to other places where workers accept lower wages), or turn to immigrants or others willing to work for less. Employers can also close down production for a while to teach employees a basic economics lesson. In capitalism, the prevailing power is in the hands of the employer class. The employer class prefers capitalism because capitalism prefers it.

The class of employers wields a kind of dictatorial power. Employers are neither elected to their position by employees nor accountable to them. Small and medium employers are mostly accountable to themselves (and partly to taxation and regulatory departments of governments with regard to some decisions). Corporate employers—boards of directors—are elected not by employees but rather by shareholders. Shareholders do not elect boards of directors democratically (one person, one vote). Rather shareholders have as many votes as they own shares. The richer the shareholder, the more votes they have.

Because the richest Americans own the bulk of the shares (the 10 percent of the richest own 80 percent of all shares), their votes choose the employers. Not surprisingly, over the decades, those with the most wealth have largely joined the employer class. Corporate boards often found it advantageous to add rich shareholders to their boards. Rich shareholders, likewise, often found it useful to join the boards of corporations they owned. The children of corporate directors and major shareholders attend the same schools; often live in the same towns, cities, and neighborhoods; and often intermarry. Employers donate to politicians to make sure that their taxes and government regulation are minimized. “Regulatory capture”—when those ostensibly regulated control the regulators—is the capitalist norm. It has been the way to offset the occasional ability of employees to act collectively through the state to enact pricing regulations and other key enterprise decisions, which are otherwise made exclusively by the employer class. The top politicians and government regulators are drawn, in the main, from the ranks of the top employers. The United States has normalized and routinized these class formations and differentiations for a long time.

In the century after the U.S. Civil War, the employer class congratulated itself for the rise of the U.S. economy and empire against the accumulating difficulties of the British Empire. The remarkable upswing of white Americans’ standard of living led the employer class to claim not only that its profits caused “prosperity for all” but also that capitalism was the best possible economic system and American capitalism its greatest expression. Employers and their ideologues invented the notion of “American exceptionalism,” based on a particular interpretation of Adam Smith’s work. That interpretation’s logic held that because the U.S. facilitated the highest profit maximization for each employer, the economy was able to achieve the greatest wealth and growth, as if led by an invisible hand to that happy outcome. By the time Milton Friedman repeated that interpretation, U.S. capitalism was peaking. The beginning of its decline moved the employer class into a new and increasingly uncomfortable social position.

Since the 1970s, U.S. capitalism has delivered stagnant average real wages to the employee class. With productivity rising, that stagnation meant that growing output accrued chiefly to employers as rising profits. This situation would likely have crashed U.S. capitalism (as such situations have often done around the capitalist world) except for the explosion of consumer credit during the same period. The soaring profits enabled by stagnant wages were partly lent back to the employees who borrowed to buy homes and cars, use credit cards, and afford costlier higher education. They were only able to afford all this by carrying ever larger debt loads. Employees’ standard of living could only rise (seeking the “American dream”) on a foundation of rising debt. Employees henceforth produced not only profits for their immediate employers but also interest for the financial employers from whom they borrowed. The United States entered a period of rapidly growing inequality of income and wealth favoring the employer class.

Rising household debts became increasingly costly and anxiety-provoking as stagnant real wages moved them nearer to unsustainability. This eventually led to the credit system collapsing, and the 2008/2009 Great Recession ensued. Beyond its massive economic losses of wealth, the Great Recession saw a policy response of record low interest rates. That rendered minimal the carrying charge for the massive old and new debts. Cheap credit was desperately needed not only to cope with and get beyond the Great Recession but also to soften the impact of U.S. capitalism’s transition from exceptional growth to plateauing on credit to post-2008 decline.

Underlying wage stagnation and deepening inequality led to much greater questioning of capitalism. At first, it could not be spoken as such. Even Occupy Wall Street in 2011 dared not foreground a clear, anti-capitalist position. But Senator Bernie Sanders’s (I-VT) campaigns raised socialism’s profile sharply and quickly. The emerging consciousness was more a matter of anti-capitalism than an endorsement of Bernie’s very moderate socialism. In the last few years, capitalism has returned to the realm of daily acceptable discourse as it had been before the Cold War, albeit more for its critics than its defenders.

Along the way, anti-capitalism has also provoked a shift in the definitions of capitalism. Across the 20th century, capitalism was private property and markets, while socialism and communism were public property and central planning. After the shifts of the 1970s and 1980s—the collapse of the USSR and the above-discussed decline of U.S. capitalism—definitions changed. Capitalism became more closely associated, definitionally, with the employer-employee dichotomous organization of enterprises than with who owned them and whether the distribution of resources and products took place through the market or by plan. Socialism likewise shifted from a macroeconomic focus on the state as an owner and planner to a microeconomics focus instead on a different, democratic organization of enterprises along the lines of worker cooperatives.

These shifts reflected a shifting mass consciousness that looks to hold employers socially responsible for what they do as a class. The environmental movement was particularly important in targeting fossil fuel and other employers for their decisions. The #MeToo movement helped bring greater accountability against sexual misconduct in the workplace and beyond. More and more through to the present, the employer class and its dominance within capitalism have become the target of those seeking progressive social change. For capitalism’s victims and critics, the buck stops not with the political and governmental leaders viewed as puppets, but rather with the employer class viewed now as the puppeteers.

What comes after capitalism—what its critics claim as their goals—are less matters of state versus private property or planning versus markets. Rather it is the democratization of the workplace that critics cite as a crucial element missed by generations of social critics. That democratization of enterprises—their transformation into communities of equals—is understood to be required for a democratic society to exist and persist. Capitalism’s defining class struggle has always been that between the employer and employee classes. And the victory of the latter ends that dichotomous organization of workplaces (factories, offices, and stores) that grounds and defines capitalism’s class structures and struggles. Indeed, the victory of the employee class could thus finally close the sequence of all those dichotomous class structures (master/slave and lord/serf).

This article was produced by Economy for All, a project of the Independent Media Institute.

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  • Pasqual DiGesu
    commented 2023-02-18 07:04:31 -0500
    “Industrialism became life itself. And governments refused to touch it or having touched it with a multitude of half measures, interfering with economic laws, exposed itself as baffled or even worse. Numbers were on the side of labor. If anyone is discussing self government and its success and the sincerity of its claims to success under any form of democracy, let him explain why labor did not and could not dictate the complete regulation and all the equities of industrialism and of the so called class conflict. Capital had the money. Labor, however, had the votes. And yet democracies which made their pretenses with sweet psalms of self-government and pretty poetry as to the power of the franchise, did nothing substantial and much that was frivolous. How is that?” — Richard Washburn Child (The Writing On The Wall, 1929)
  • Richard Wolff
    published this page in Updates 2023-02-13 18:34:40 -0500