The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (18 page)

Partially Suspending Procrustean Logic

Of all the contradictions that plague Procrusteanism, one stands out, undermining the central justification of the doctrine. Procrusteanism presents itself as the only way to create prosperity, yet Procrusteanism itself cannot flourish amid prosperity. Prosperity undermines efficiency in a market economy.

Economists call the period in the United States between the end of the Second World War and the late 1960s the “Golden Age.” Several factors contributed to the Golden Age. The rationing of the Second World War combined with wartime prosperity let families build up savings. When the war ended, the economies that competed with the United State for markets were in ruins, and this meant that businesses in the United States enjoyed an unprecedented burst of economic demand.

The war continued something that had begun during the Great Depression. During the 1930s, intense competition forced firms to scrap outmoded plant and equipment. By 1939, U.S. firms had replaced one-half of all the manufacturing equipment that had existed in 1933. Although the total amount of investment during the Depression was relatively small, most of that investment was directed toward modernizing existing plant and equipment rather than adding new capacity. One indication of the effectiveness of this investment was that after the war, U.S. business produced as much output as a decade before with 15 percent less capital and 19 percent less labor.
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This prosperity of the Golden Age set off a surge in employment, severely depleting the pool of unemployed workers. As the discussion of Bill Watson’s experiences in the automobile industry showed, this increase in prosperity blunted many aspects of Procrusteanism.

Workers were not alone in being relieved of competitive pressure. Good times made management complacent and overconfident. Companies with huge backlogs of orders on their books do not have to strain to cut costs. Their objective is just to pump out more goods. And why not reward themselves with larger staffs and fancier quarters? Businesses also allowed their capital stocks to age. As a result, domestic production lost its edge in the world economy. The complacency
of U.S. business leaders stands in sharp contrast to its insistence on discipline for workers.
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This tension between competition and prosperity points to a major contradiction in conventional economic theory. Economists pride themselves in having the intellectual wherewithal to provide advice that can guide the economy into prosperity while avoiding the pitfalls of depressions or recessions; however, the same depressions or recessions are necessary to spur competition. As Joseph Schumpeter, one of the most admired twentieth-century economists, observed regarding these periodic downturns, “Cycles are not like tonsils, separable things that might be treated by themselves, but are, like the beat of the heart, of the essence of the organism that displays them.”
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I should note here that although economists regard Schumpeter as very influential, economists have for the most part merely adopted his catchy phrase “creative destruction” as evidence of market efficiency without paying much attention to some of his more challenging ideas.

The automobile industry illustrates the connections between economic conditions, class struggle, and Procrusteanism. During the early Golden Age, almost two decades before Watson’s employment, labor union power was at its peak. The United Automobile Workers were demanding a say in how production should occur. Fearful of ceding any control to the unions, the big three automobile companies offered generous compensation as an alternative.

When General Motors signed its agreement with the union covering the period between 1948 and 1950,
Fortune
published an article titled “The Treaty of Detroit” that suggested, “GM may have paid a billion for peace. It got a bargain.” According to
Fortune
, “General Motors has regained control over one of the crucial management functions in any line of manufacturing—long-range scheduling of production, model changes, and tool and plant investment.”
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One estimate put the value of the industry’s newfound freedom of planning at $0.15 worth of corporate profit per hour of labor. In retrospect, the industry now gives a less favorable evaluation of its strategy. After taking on the obligation to provide health care and pensions for its workers and retirees, the industry took measures to dump its responsibility.
Less noticed was the most destructive aspect of Detroit’s corporate strategy. Because prosperity allowed Detroit to sell its cars without much effort, the industry did little to modernize either its factories or the technologies of its products. This choice made the industry vulnerable to a wave of imports that would flood the U.S. market.

While not all dimensions of Procrusteanism disappeared during the Golden Age, this period can be characterized as the “loosening of the iron cage.” By the mid-1960s, the memory of the hardships of the Great Depression had receded. Wages were increasing, substantially cutting into profits. Still, however, relatively high wages no longer seemed adequate to compensate for working in a stifling, Procrustean environment. Management still denied workers significant respect, encouraging people such as Bill Watson to mount militant challenges to Procrusteanism.

But Procrusteanism was far from dead. In response to such unruly behavior, business unleashed a counterrevolution that moved the country significantly to the right—so much so that the domestic policies of Richard Nixon were to the left of those of Bill Clinton. This right-wing counterrevolution successfully reestablished the Procrustean discipline. Although the counterrevolution modestly restored profits, it undermined the long-term prospects of the U.S. economy, already weakened by an extended period of weak investment.

The Matthew Effect

People never win even a temporary advantage against the Procrusteans without a difficult struggle. Even when pressures for social protections force the Procrusteans to yield, they will resolutely organize to turn back any reforms, convinced that their personal interests are secondary in their struggle to ensure an efficient economy. So the state of social protections displays an ebb and flow depending on the relative strength of the Procrusteans and the rest of society.

During wartime, when leaders are most in need of the support of the general population, social reforms are easier to win. Similarly, leaders
become more amenable to social reforms after the system breaks down and the credibility of leaders has eroded. For example, in the wake of the Great Depression, the New Deal was intended to shore up support both for the economic system and those whom the public held responsible for the disaster.

Sometimes, conflicts among elite groups allow people to win some protections, as in the case of the controversy surrounding Robert Blincoe and the use of child labor, when two competing groups pretended to display their social conscience by self-righteously pointing to the all-too-real abuses of the other.

Similar divisions broke out before the Civil War in the United States when defenders of slavery expressed hypocritical outrage about the poor conditions of workers in Northern factories.
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In this case, however, the accusations by the slave owners were so patently self-serving that they never gained traction. White factory workers were not about to clamor to improve their lot by demanding to be enslaved.

The most important force in spurring social reforms is ordinary people’s success in organizing themselves to redress injustices. The external conditions just described may offer openings that permit better organization, but in the end the people themselves are responsible for shaping their own destiny in the face of the powerful forces arrayed against them.

Again, these victories are not eternal. For example, political and business leaders turned back much of the New Deal in the decades following the election of Ronald Reagan. This successful counterrevolution was a masterful exercise in Procrusteanism: social protections disappeared.

All the while this counterrevolution made grand promises to the general population. The reforms would soon create a more efficient economy, provide good jobs, and thereby eventually make prosperity accessible to everybody. Nothing of the kind happened. Instead, even more fruits of the counterrevolution fell into the laps of the already affluent.

The sociologist Robert Merton once wrote about the Matthew Effect, alluding to the biblical passage, “For to everyone who has will
more be given, and he will have abundance but from him who has not even what he has will be taken away.”
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In this case, biblical prophecy proved far more accurate than the political promises of the Procrusteans.

Control in a Procrustean State

While the Procrusteans exercise more and more control over society, they proudly portray themselves as stout defenders of liberty. They starkly pose two alternatives for humanity: individual liberty or state control. Milton Friedman went so far as to declare, “The free market is the only mechanism that has ever been discovered for achieving participatory democracy.”
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Underlying this market-based liberty is the power of the state—the same despotic state that the Procrusteans presumably abhor—but this state—the ideal state of the Procrusteans—is dedicated to the preservation of private property and ensuring that all citizens conform to the laws of the market.

Prosperity, presumably the primary objective of a market economy, threatens to undermine working-class discipline, as the experience of the Golden Age suggests. This contradiction between prosperity and discipline is nothing new. Consider the dire warnings expressed in an editorial of the
Commercial and Financial Chronicle
on August 3, 1929, just a couple of months before the stock market crash. Among the danger signs that the editorial listed were:

The luxurious diversification of diet advantageous to dairy men … and fruit growers …;luxurious dressing … more silk and rayon …;free spending for radios, travel, amusements and sports; … the frills of education to thousands for whom places might better be reserved at the bench or counter or on the farm.
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In contrast, the miserable conditions of workers during depressions could be a cause for celebration among the Procrusteans—at
least those Procrusteans who did not depend upon them as customers. For example, in December 1859, the
Chicago Press and Tribune
blamed drunkenness and laziness for 90 percent of pauperism. The only remedy was “a little wholesome hunger and a salutary fit of chattering by reason of excessive cold.”
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Although Procrusteans appreciate when workers feel the sting of market discipline, they expect generous favors for themselves, including tax cuts, subsidies, and bailouts when their business falters. In short, although both discipline and accountability must be stringent for those who occupy the bottom rungs of society, they are unnecessary for those at the top.

True liberty is unimaginable for the Procrusteans who pride themselves as realistic students of human psychology. According to this realism, nonmarket routes to an improved society are unthinkable. People are too self-interested. Only the discipline of the marketplace can function effectively.

The Procrusteans regard any effort by the state to defend citizens from negative consequences of business activity as a violation of natural liberty. Government action that interferes with business is doubly reprehensible because it makes people less dependent on business, either as consumers or as potential workers.

The liberty that the Procrusteans propose is a particular kind of liberty. The French novelist Anatole France summed up the nature of this sort of liberty in an unforgettable passage:

Our citizenship is another occasion for pride! For the poor it consists in supporting and maintaining the rich in their power and their idleness. At this task they must labour in the face of the majestic equality of the laws, which forbids rich and poor alike to sleep under the bridges, to beg in the streets, and to steal their bread.
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Pre-Procrustean Realpolitik

This short chapter shifts focus from conditions in the United States to address the scourge of Procrusteanism that is sweeping across the world. The rhetoric of international Procrusteanism, unlike its domestic version, pays little attention to the need to impose working-class discipline. Instead, international Procrusteanism focuses on the need to discipline governments so that they discipline the workforce.

International Procrusteanism represents more than just the intensification of world trade. Often described as globalization or neoliberalism, it represents a new phase in capitalist governance. International Procrusteanism allows dominant nations to avoid the expenses and responsibilities of colonial administration, in effect, contracting the job out to compliant governments. This new system has been far more effective in extracting value from these impoverished nations.

In this scheme, the brute strength of colonial imperialism recedes into the background, although the great powers stand ready to deploy force at a moment’s notice when a government displays either excessive independence or weakness in administering discipline. This less overt form of
imperialism helps to maintain the pleasant fiction that voluntary agreements allow everybody to benefit from opening up the world to free trade.

Mainstream economic theory teaches that international trade should be unquestionably welcomed. The likelihood of a small country having adequate mineral as well as food, energy, and manufacturing resources within its confines is very small. Such countries need some trade in order to develop, but development is not a high priority or even a welcome outcome for their powerful trading “partners.”