The Coronavirus pandemic exposes America the Fragile.
“They are either going to have to pay people or shoot people. One or the other.”
That’s what Corbin Trent said the other night after we had shared some stories we’d heard of desperate small businesses and laid-off workers suffering through the Coronavirus crash. It hit me that few people in the government, the media, or the corporate boardroom quite understand the full implications of shutting down America’s means of making a living. Our national consciousness has still never realized that we’ve become an economically-helpless, fully-proletarianized people. We seem to think that America will somehow get by with a can-do spirit. But we’ve only ever done that by working. And how can we get by with no work while more than two-thirds of Americans can’t even cover a $1,000 emergency expense?
It occurred to me that in the moment of awakening that is coming, that it might be helpful to recount the history of how we got into this embarrassingly vulnerable position as a people, so here it is. Maybe a little history will help us to use this crisis to get ourselves into a better position.
It is pretty much impossible for Americans living today to imagine how poor, by our standards, even middle class and wealthy Americans were at the time of the nation’s founding. Nevertheless, Americans “of the middling sort” in revolutionary America probably felt more prosperous and secure than anyone today except for our “top one percent of the top one percent.” It’s because back then, a large majority of families owned enough land to produce or trade for most of what they needed to live. They controlled their own means of making a living, therefore, in at least one regard, their fate was in their own hands – even in the face of economic collapses, which back then came like clockwork many times in each generation.
Fast forward 250 years, and 99% of Americans do not own their own means of making a living. This would be unthinkable for the revolutionary generation. Everyone who lived back then believed that America was on course for more people to own land or businesses, not less. That is how it went for a while. But in all capitalist societies, there’s a long slow process that gradually converts a land-owning population into a wage-earning population. In America, this process was driven by Wall Street developing a monopoly around America’s farmers that provided them with seed, equipment, and just enough credit with which to hang themselves. The same monopoly bought up crops at harvest time, in a coordinated way that depressed prices. There were boom and bust cycles. In the booms, rail- and steam-powered globalization allowed American farmers to sell to the world, earning more than they had ever dreamed of. In the busts, Wall Street called in debts and took the land. In this way, over a century, the vast majority of land-owning Americans were cast into the cities, landless and penniless. The lucky ones found work in factories working 16- or 18-hour days for subsistence wages--if not them, then their children.
That’s how America transitioned from being the “yeoman” society that Thomas Jefferson envisioned to the “proletariat” society Karl Marx documented. Marx expected a revolution of the proletariat (people who don’t own their own means of making a living) to overthrow capitalism. Instead, workers found that if they showed up to work each day, and occasionally threatened not to, they could negotiate for higher wages and shorter days. The 20th century saw some crazy twists and turns but by the postwar era, a large chunk of Americans, if not quite a majority, felt they were living like kings compared to how their parents and grandparents had lived. America became the first large country where the majority were prosperous. When the world saw that this was possible, it became the primary goal of any well-functioning society to achieve it. (Many other countries that shot for that goal more deliberately and diligently than we did soon achieved much more widespread prosperity for their people.)
There was something about this new arrangement, though, that went unspoken and unnoticed. It was not that a relatively small group of people owned the nation’s means of making a living--that was obvious. As long as wages and profits were both rising, the relationship between owners and workers felt symbiotic. Owners opened their factories and offices to workers, and together they made a living. (In other words, they made almost everything the nation needed, and made additional things to trade for the rest.) The owners would give a portion of what was made--each day, month, year--to the workers, and keep the rest for themselves. (Owners gave that portion to workers usually in the form of money, with which workers bought what they needed in the market.)
The relationship was not unlike that of a cattle rancher and his cattle. Everyone could see this too. The rancher makes the pasture available so that the cattle can live. In the end, the rancher gets something in return, but the cattle have a great time on that pasture right up until then. The development that no one saw at first was this: the rancher’s pasture was drying up.
The problem was that the owners of the economy tended to get greedier and lazier with each generation. The founding industrialists of each new phase of the industrial revolution--the Fords and Carnegies--poured every available dollar into improvements, innovations and expansion. As soon as they died, the next generation started distributing profits to shareholders instead of investing. This was part of the underlying story of the Great Depression. World War II changed everything temporarily because suddenly lazy industrialists were whipped into shape or replaced in a coordinated economic mobilization (more on that in a minute). But as soon as the war was over, the industrialists went back to their lazy ways. Meanwhile, several other upstart countries were having growth spurts, with massive continuous investments in innovation and expansion. Their rising, innovative industries easily outcompeted America’s old, unimproved industries. Our lazy industrialists dealt with this competition by essentially outsourcing production to their competitors. As Donald Trump would say in 2016, “They dismantled your means of making a living and shipped it overseas.” Owners said they had to move production because wages were lower elsewhere. But countries where owners kept innovating found that they could keep wages high by making workers more efficient.
As production was moved overseas, the U.S. economy over time had fewer and fewer spots for workers to make their living. It was a little like the process back in the 1800’s of banks throwing people off their land, but it was so much easier and quicker for owners to throw workers out of their factories.
Because fewer and fewer workers had a place to participate in making the nation’s living, the law of competition reduced wages. People who could not find good jobs making things of value or providing valuable services, found jobs making things or providing services of little value in workplaces that required little or no investment to set up and maintain.
By the time we got to the 1990’s, America had outsourced such a huge chunk of its means of making a living to other countries, that we had a deep deficit every year between the stuff we consumed vs. the stuff we made. America was going into debt to the rest of the world, and that debt eventually worked its way onto regular Americans’ credit card balances. In countries that still earned their own living, workers were saving up relative fortunes, but in the U.S., they were accumulating great debts.
In the 1800’s, the debt cycle had taken away American’s means of making a living (their land). In the 1900’s, it stripped them of even their pocket change and then forced them into permanent debt peonage. From the 1970’s on, when any financial crisis came, millions of Americans slid from the middle class into poverty. A few made it back eventually, but each time fewer and fewer. In the 2009 crisis, millions of Americans had their homes taken because they couldn’t make their mortgage payments, and just about all the rest of the bottom 80% of income earners were pushed even further to the brink.
Part of what complicates this dynamic is the roughly 20% of income earners in America who have watched their incomes and living standards skyrocket during the past several decades of deindustrialization. They are the decline management class. Though it is much more complex than this on an individual level, the class of professionals who manage money, information, and laws--but not production--are essentially all being paid a premium for their loyalty to this epic long-term project of extraction of every last drop of wealth from the rest of America.
That professional class controls how Americans of all classes tend to understand what’s going on in our society and economy--through the media, education system, government, and management roles. For decades, their primary talking point has been, “Life’s getting better all the time. Just look at the stock market!” Because that message is repeated so frequently and with such confidence by everyone who seems to matter, Americans for whom it does not work assume there must just be something wrong with them. They disappear from the unemployment statistics as “discouraged workers,” they join the disability roles, they string together just enough job fragments to slightly slow their descent into debt. Every year, for decades, just a handful more of those isolated Americans have slipped through the cracks in the floor of the middle class or the working poor into rock bottom poverty.
And now we come to the present crisis. What will happen now when 50 million all hit rock bottom at once? Or 100 million? Ironically for the era of social distancing, the isolation and alienation of American poverty may end with so many falling into it all together as one.
The coronavirus crisis seems to be forcing something that the U.S. economy has never experienced before: an almost total business shutdown. Back in 1776, Americans would have had little problem with this. Land was America’s means of making a living, not business. Business, to the extent that it even existed in a community, played hardly any role in people’s lives. Business was luxury goods for the few, bobbles on the fireplace mantle for the many.
Today, however, the vast majority of Americans have no way to make ends meet without a job. They don’t have any means of making their own living if they can’t find a job. They don’t have money in the bank. They don’t have a store of food. They don’t have gas in the tank. And they have maxed out their credit cards. When “everything” shuts down, they won’t even have friends or relatives to rely on because they will be out of work too. In this modern, low-inventory, “just-in-time” system of global production, it seems fitting that American workers have only a week or two of savings to live from.
What will all these people do when they realize they can’t put food on the table because they have no job and no money? Let’s do a thought experiment. What would you do if you couldn’t afford necessities? If social service agencies, along with hospitals, were overwhelmed? If the police were becoming unreliable because so many were in quarantine or just failing to show up for work once Jack Ma’s masks have run out and they have no protection from the virus? You and me and most people probably would just sit home and get hungry. Not everyone will do that. That’s why a whole lot of people are lining up not just for toilet paper but also for guns. It’s not so unreasonable when you consider that America has experienced civil unrest and the collapse of basic civil authority all over the country in every decade of our history.
What’s the alternative? There is a very simple and obvious alternative with three parts: The government could do as it has done before and work with businesses to invest heavily to adapt to this new challenge of converting over to an economy that can thrive in a time of social distancing. The government needs to make massive loans and grants to businesses, local government and social service agencies to help them adapt to a no-contact world--for example by reorienting everything around a home delivery model. At the same time, a basic income needs to be provided so that people can live and continue to drive the economy as consumers. Finally, all debts and rents must be suspended until the end of the crisis. If we took these steps, there would be much disruption and many unforeseen consequences that would have to be dealt with. But the disruption that will be caused by this crisis if we don’t take these measures will be catastrophic. This week, we released a more detailed proposal for this at New Consensus.
So what will it be, Democrats and Republicans? Of course, our establishment politicians aren’t going to take the actions I’m suggesting. So we just have to hope that the virus won’t hit as hard as the worst-case estimates and that somehow manufacturers will get their asses in gear just in the nick of time and make the protective equipment and other necessities that our healthcare system is running out of. I hope that happens. And then I hope then that a new generation of leaders will rise up who have learned something from this experience--because after this crisis passes, plenty more are waiting for us.
We can't afford to keep the status quo.
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