The United States in the World: Making Sense of the Past Forty Years (1981-2023)-Part 3

The United States in the World:  Making Sense of the Past Forty Years (1981-2023)-Part 3

— Kim Scipes

 

NOTE TO READER:  This is the third part of a five-part article.  It follows the section on “Globalization,” and is part of explaining essential concepts of this study plus elaborating on how they interact.

 

 

NEO-LIBERAL ECONOMICS[1]

Additionally, there is what is called neo-liberal economics.  This is an effort to try to explain the development particularly of the US economy within a global context.[2]  Often said to be based on the principles of the free market—itself an ideological conceptualization[3]—neo-liberal economics is definitely not free, but is highly developed to benefit the wealthy and powerful of the US Empire; thus, it is intended to further enrich those who are already well off while providing additional economic resources to support the US Empire.  And it serves to rationalize the domestic disembowelment of the US domestic economy, which has already destroyed the economic well-being and security of millions in this country, while making the disenfranchised think that the failure was their’s alone, and not the result of systematic design by the rich and powerful, and that they are unable to resist these larger social processes through their social isolation and feelings of individualism that have been further enhanced by the elites.

It is an analysis of these processes in the post-World War II (post-1945) period.

The US emerged from the global destruction of World War II all-but-unscathed and with the most technologically-advanced economy in the world; besides having the atomic bomb and dropping it twice on Japan, and the strongest naval and air forces in the world, they soon created the CIA (the Central Intelligence Agency) to help them maintain political dominance in the world whenever and whereafter possible.[4]  The US Empire was built on the back of a strong economy—McCoy (2017, In the Shadows of the American Century: The Rise and Decline of US Global Power. Chicago: Haymarket Books) points out that the US produced 50 percent of the world’s production of goods and services in the early 1950s (as much as that produced by all of the other countries in the world, combined)—and this was joined with international financial institutions such as the World Bank, the International Monetary Fund (IMF), and the General Agreement on Tariffs and Trade (GATT), each designed to help protect the global economy from the flaws of unregulated capitalism that led to the Great Depression, a global economy that American economic architects assumed would always be dominated by the United States.

For people in the United States, this led to 26 years of increasing and almost equal real economic growth inside of US society.

The years between 1947 and 1973 are considered the “golden years” of the US society.[5]  The values are presented in 2005 dollars, so that means that inflation has been excluded and that the findings in this chart can be compared with Figure 2 and Figure 5, below:  these are real dollar values, and thus are valid comparisons.

 

Figure 1:  US Family Income, in US dollars, Growth and Distribution, by quintile,

1947-1973, in 2005 Dollars[6]

 

	Lowest 20%	Second 20 %	Third 20%	Fourth 20%	95th Percentile[7]
1947	$11,758	$18,973	$25,728	$36,506	$59,916
1973	$23,144	$38,188	$53,282	$73,275	$114,234
Difference    (26 years)	$11,386 (97%)	$19,215 (101%)	$27,554 (107%)	$36,769 (101%)	$54,318 (91%)

 

Source: US Commerce Department, Bureau of the Census (hereafter, US Census Bureau) at www.census.gov/hhes/www/income/histinc/f01ar.html:  this data is no longer available.  All dollar values converted to 2005 dollars by US Census Bureau, removing inflation and comparing real values.   Differences and percentages calculated by author. Percentages shown in row labeled “Difference” show the dollar difference as a percentage of the first year of the comparison and have been rounded.

 

Data for the first period, 1947-1973, shows there was considerable real economic growth for each quintile.  Over the 26-year period, there was approximately 100 percent real economic growth for the incomes at the top of each quintile, which meant incomes doubled after inflation was removed; thus, there was significant real economic growth in the society.

And importantly, this real economic growth was distributed fairly evenly.  The data in the fourth line (in parentheses) is the percentage relationship between the difference between 1947-1973 real income when compared to the 1947 real income, with 100 percent representing a doubling of real income:  i.e., the difference for the bottom quintile between 1947 and 1973 was an increase of $11,386, which is 97 percent more than $11,758 that the top of the quintile had in 1947.  As can be seen, other quintiles also saw increases of roughly comparable amounts: in ascending order, 101 percent, 107 percent, 101 percent, and 91 percent.  In other words, the rate of growth by quintile was very similar across all five quintiles of the population.

By the mid-1960s, however, the World War II war-torn countries of France, Germany, Japan, and the United Kingdom had recovered to such an extent that their corporations were able to compete with those of the United States in Europe and Japan. By the 1970s, some of these corporations were competing with US corporations inside the United States.  And by the 1980s, foreign corporations were increasingly investing in productive facilities inside the US, enhancing their competitive situation against US firms.

Ronald W. Cox points out that these changes resulted in “the falling rates of profit faced by US-based corporations during the late 1960s and early 1970s,” which extended throughout the 1970s into the mid-1980s.[8]  He focuses on “an examination of the measures taken by US corporations in response to lower profit rates,” which “include both market-based restructuring aimed at lowering input costs, combined with political organization aimed at shifting US state policy in a neoliberal direction,” results he and Cathy Skidmore-Hess had reported in 1999.

Cox explains in some detail:

For US corporations, the traditional approach to maintaining profit rates has been to use oligopolistic market power and position to raise prices.  This strategy could only be used by firms whose market share in a given industry was at a level of concentration that made it cost prohibitive for new firms to effectively enter the market and to compete at lower prices.  The most globally competitive US-based corporations in automobiles, steel, chemicals, and machine tools enjoyed such an advantage over their competitors through the immediate post-World War II period.  This enabled these firms to effectively capture the most dynamic, value-added segments of the US market against domestic and foreign competitors for the first two decades after World War II.  However, by the mid-1960s, there were visible cracks in the oligopolistic structures that allowed those firms to dominate the US market.

Rising competition from Japanese and German exporters, followed by market penetration from the newly industrializing countries of Asia, weakened the hold that US-based oligopolies had on the domestic market.  The ability of US oligopolistic firms in key industries to raise prices to maintain profitability was undercut by the influx of greater foreign competition.  Furthermore, foreign firms that retooled after World War II had a built-in advantage over their US counterparts: they adopted newer technologies that made them more competitive and had a lower time horizon of “sunken” costs compared to their US competitors.  US firms, having developed their productive assets during the 1930s, had higher pension and medical care obligations than their foreign counterparts—a reflection of both the high levels of privatization of these costs in the US compared to Europe and the lengthier time horizon for US firms in being obligated to these costs.  During the first two decades of the post-World War II period, the most globally competitive US firms could use their status as “early industrializers” to establish oligopolies that dominated the US market in all of the leading sectors of manufacturing.  That strategy was becoming untenable with the rise of increased global competition.

US corporations had to look to other strategies in an attempt to overcome the declining rate of profit.  A convergence of events in the late 1970s and early 1980s led corporations to restructure their operations through merger and acquisition strategies that involved buying out, or merging with, competitor firms, and subsequently shedding assets in a restructuring process designed to focus business operations around a core set of activities.  This involved a reorganization of the corporation around global supply chains in which the highest valued-added profits accrued to corporations at the top of the chain.  From the mid-1980s to the present, there has been a greater concentration of market share controlled by the corporations at the top of the value-added chain of production, especially in ‘the high-technology and/or strongly branded segments of the global markets….’  This process has coexisted with an increasingly complex global production system of small and medium-sized producers and suppliers that completes with each other to satisfy the terms of production that are increasingly being established by the ‘system integrators’ at the top of the supply chain (Cox, 2012: 15-16).[9]

 

The unfettered world that the US economy had operated within after World War II was changing: no longer under control of the United States, it was shifting from a centralized system dominated by one country to a decentralized one that was much more competitive. By the 1980s, increasing competition was also coming from corporations from some of the so-called developing countries. These trends have only continued to develop.  And, in fact, what we have subsequently seen is both competition against and collaboration with competing firms of other countries, including companies from formerly colonized nations.

Production in the US had stagnated in the 1970s, and this was joined with increasing monetary inflation. The US was clearly losing its economic advantages to competing countries.

The Business Roundtable—a grouping of Chief Executive Officers (CEOs) of leading US corporations—was formed in 1972 to begin offering “solutions” in response to the economic lethargy they saw developing.[10]  Basically, they decided that they could no longer tolerate trade unions that limited their managerial control on shop floors, and developed strategies to remove that problem.

The rise and triumph of the corporate neo-liberal agenda did not simply happen because of ‘market forces’ or globalization. The most powerful corporations in the US—many of them the most powerful in the world—organized to make it happen; they developed their own consensus and mobilized their vast resources and network to make it happen. They were determined to counter the surge in labor militancy and reverse the wage gains that took place in the 1960s and peaked during the last phase of the Vietnam War in 1969-71. The corporate offensive was not only aimed at constraining workers’ militancy and reducing wage gains, it was also a response to the challenges that seemed to be posed by the various protest movements of the 1960s, movements that appeared threatening to the status quo and had resonances among young and Black workers (emphasis in original) (Richard Roman and Edur Velasco Arregui, 2013: 7).[11]

 

These strategies included actions on multiple levels. They challenged trade unions on shop floors, but they went much further than that. They decided that they would “outsource” labor-intensive production to countries that had low labor costs, especially to those that had the means to control labor, and which would compete to get investment for their countries. They would work with the International Monetary Fund (IMF) and World Bank to get them to provide infrastructure investments for these countries to support any new foreign investment. They would upgrade technology in US factories, replacing workers with newly designed machines with “labor-saving” aspects. They would work with “leading” intellectuals to develop an understanding of the changes needed that was conveyable to the public—hence, the propagation of what became known as “neo-liberal” economics. They would support politicians and judges who would support their program. And they would support and fund politicians who would advance these ideas as part of their electoral campaign, especially at the national level.

The philosophy of neo-liberal economics was key to this strategy. Basically, it argued that the well-being of US corporations was central to the well-being of the US economy, that the US economy is central to the well-being of the United States Empire, and that key to the well-being of US corporations was to eradicate any restrictions on US corporations, no matter how deleterious doing so was to US society.[12]  This meant allowing US corporations unfettered control over their work forces, marginalizing if not destroying trade unions in their factories and other operations. It meant undermining strikes by allowing “replacement workers” (scabs) and ensuring their job “rights” after strikes ended. It meant allowing contractual workers and part-time workers to replace full-time workers. It meant undercutting health and safety protections, workers’ compensation schemes (for those hurt on the job), and any other restrictions that might limit production and productivity. And it meant prohibiting any regulations/ restrictions on corporate decisions as to where, and under what conditions, they could invest or disinvest from communities.

As I wrote in 1984, “This offensive [cutting production costs of corporations] has taken many approaches. It includes ‘rationalization” (getting rid of surplus and/or old plants), modernization, concessions, and bankruptcy. Oftentimes, an attack will combine several of these approaches.”

I further explained,

The point of mentioning these different industry and company approaches is to show many different ways workers are under attack. Each one of these attacks is ultimately an assault against unions. The important goal is to destroy worker resistance on the shop floor. Every company wants to be able to force workers to do what the company wants, when the company wants, how the company wants. They see unions as institutionalized forms of resistance, and if a union is standing up for its members at all, they want to subjugate and crush it (Scipes, 1984: 20-21).

 

Yet, neo-liberal economics went beyond “liberating” the particular corporations from the “oppression” of treating their workers respectfully: it meant restructuring the entire social order. As Francis Fox Piven notes, neo-liberal economic politics were a set of policies carried out, in the name of individualism and unfettered markets, for

the deregulation of corporations, and particularly financial institutions; the rollback of public services and benefit programs; curbing labor unions; ‘free trade’ policies that would pry open foreign markets; and whenever possible, the replacement of public programs with private markets (Piven, 2006: 17).[13]

 

It also included tax cuts for corporations and the wealthy, as well as cuts in environmental programs.

The right-wing forces that opposed governmental intervention in the economy (unless it benefited them or their corporate sponsors)—whether opposing the social programs of the 1960s (often for racist reasons), or because of economic philosophy—coalesced in the presidential campaign and, beginning in January 1981, in the administration of Ronald Reagan. These people took an ideological approach that any governmental intervention in the economy was deleterious to economic growth and societal well-being: Reagan parsed it, saying “Government isn’t the solution; it’s the problem.”[14]

I argue, however, there was more than profit maximization that was driving this adoption of neo-liberal economics:  the elites were feeling the increasingly successful economic competition from other countries as a direct threat to their ability to support and maintain the US Empire, and so they began transferring economic resources away from the United States and its people toward supporting the US Empire and particularly the US military.[15]

In 1980, and again in 1982, the economy contracted. In 1982, the ideologues under Reagan convinced him of the necessity to wring inflation out of the economy, and the government did not intervene to “restimulate” the economy: although interest rates reached 21 percent, which were economically devastating, Reagan did not launch new social programs or increase funding for established ones. Unemployment exploded, reaching the highest levels since the Great Depression.

At the same time, Reagan attacked the labor movement, the one force—despite its many limitations—that had provided economic advancement for millions of Americans.[16] When the air traffic controllers’ union (PATCO—Professional Air Traffic Controllers Organization) struck in 1981, Reagan brought in military air traffic controllers to break the strike. (One of the great errors made by the national-level leaders of the labor movement, having disastrous effects, was refusing to shut down the entire airline industry, which was still heavily unionized, to stop Reagan’s union busing.) The Federal government’s union busting, and other right-wing legislative and court decisions that attacked the labor movement, unleashed business’ ability to increase productivity at the direct expense of workers—particularly by moving labor-intensive jobs to low wage countries like Mexico and China (destroying jobs in the US) and by investing in capital-intensive machinery that was also designed to eradicate jobs.[17]

Yet Reagan, despite the mythology that has been created around him, ended up hurting the economy in a long-term manner that has rarely been acknowledged. He engaged in massive deficit spending, only this spending was not to help the American people in general; it was to help the richest Americans, the US military and the arms industry: Reagan began spending hundreds of billions of dollars each year on the war department—I refuse to call it “defense”—and he did it by doubling the national debt in eight years: when he came into office in 1981, the US national debt—from 1789 under George Washington to the end of Jimmy Carter’s administration—was at $ .909 trillion dollars; when Reagan left, eight years later, it was $2.7 trillion.[18]  (It has continued rising since then under both Democratic and Republican presidents, and as of October 2022,  it is over $31 trillion (Alan Rappeport and Jim Tankersley, 2022, “US Debt Surpasses $31 Trillion.” New York Times, October 5: B-1 and B-3.  On-line at https://www.nytimes.com/2022/10/04/business/national-debt.html.).[19] 

In other words, the US economy has done as well as it has over the past 40+ years—although never as well for regular people as it did between 1947-73—because the US government has been writing “hot checks” to pay for its expenditures. At some point in time, that debt will have to be repaid—and it’s not going to be pretty.[20]

To return to our story: along with the attacks on unions, unfunded wars, etc., the philosophy of neo-liberal economics collapsed our dominant societal values into one thing: profitability. If something enhances the potential of increased profitability of business, it is good; if it does not—no matter how important anything else is—it is bad. If regulations on food or air/water quality or worker/food safety cost corporations money, they are bad and should be immediately disbanded, no matter how beneficial they are to people, the environment or to our general social order. It is this “philosophy” that the US government has been pushing around the world, and it has hurt billions of people, including tens of millions within the United States.

What this has meant for labor is that anything that has limited business’ power in the workplace—unions themselves, strikes, any type of health and safety regulations, etc.—has been attacked by corporations. Additionally, through legislative and/or court decisions, actions that have limited workers’ collective power—protecting strike breakers, contract labor, and efforts to destroy unions through privatizing public services, etc.—have been supported. Again, anything that hinders or reduces profitability, no matter how much of a social good it provides—is bad: that is the philosophy and impact of neo-liberal economics.

Yet something else has happened in the United States in addition to adopting neo-liberal economics. The social upsurge during the 1960s-early 1970s—including the Civil Rights/Black Power movements, the women’s movement, the LGBT (lesbian, gay, bisexual, and transgender) movement, the environmental movement, the anti-Vietnam War movement, and especially the anti-Vietnam War movement inside the US military—scared the crap out of the ruling elites. They decided that they would do whatever they could do to ensure that collectivity, and especially collective action, would never again raise its ugly head in this social order.[21]

To accomplish this, they have been creating a culture of individualism to undercut any aspirations of collectivity. Basically, as long as you and your loved ones are ok, you do not have to worry about the well-being of anyone else in the country—and, in fact, they told people that caring about others would undermine their individual interests. They created what I called the “I’ve got mine, screw you, Jack” culture and society. And this “screw you, Jack” ideology has been very successful: despite growing income inequality in the United States—that is more extreme than some of the poorest nations on the planet (e.g., Bangladesh, Cambodia, Laos, Mozambique, Uganda, and Vietnam; see Part 4)—there was no nationwide discussion of this income inequality from about 1973 until the Occupy Wall Street movement that emerged in the Fall of 2011, almost 40 years.[22]

So, starting probably in about 1978, but specifically with the election of Ronald Reagan in 1980, right-wing ideologues (including their allies in the mainstream media, such as the founders of FOX and the rest) have deceived the country into believing that anything that hinders business’ potential for enhanced profitability is bad, and that all forms of collectivity are self-defeating. Thus, Reagan not only moved the Republican Party to the far right, but he got the Democratic Party to move to the right as well: arguably, no subsequent US presidential administration has passed as liberal a domestic program as Richard Nixon’s between 1969-73.[23]

We can get some idea of the impact of all of this on ordinary Americans when we look at economic growth between 1973-2001, and especially when we compare the data in Figure 1 (1947-73), above:

 

Figure 2:  US Family Income, in US dollars, Growth and Distribution, by quintile,

1973-2001, in 2005 Dollars

 

	Lowest 20%	Second 20 %	Third 20%	Fourth 20%	95th Percentile[24]
1973	$23,144	$38,188	$53,282	$73,275	$114,234
2001	$26,467	$45,355	$68,925	$103,828	$180,973
Difference (28 years)	$3,323 (14%)	$7,167 (19%)	$15,643 (29%)	$30,553 (42%)	$66,739 (58%)

 

Source: US Commerce Department, Bureau of the Census (hereafter, US Census Bureau) at www.census.gov/hhes/www/income/histinc/f01ar.html; this data is no longer available. All dollar values converted to 2005 dollars by US Census Bureau, removing inflation and comparing real values.   Differences and percentages calculated by author. Percentages shown in row labeled “Difference” show the dollar difference as a percentage of the first year of the comparison and have been rounded.

 

 

When looking at the figures for 1973-2001, something vastly different from the 1947-73 figures (Figure 1) can be observed.  What can be seen?  First, economic growth has slowed considerably:  the highest rate of growth for any quintile was that of 58 percent for those who topped the fifth quintile, and this was far below the “lagger” of 91 percent of the earlier period.

Second, of what growth there was, it was distributed extremely unequally.  And the growth rates for those in lower quintiles were generally lower than for those above them; the impact was regressive, not progressive:  for the bottom quintile, their real income grew only 14 percent over the 1973-2001 period; for the second quintile, 19 percent; for the third, 29 percent; for the fourth, 42 percent; and for the 80-95 percent, 58 percent:  loosely speaking, the rich are getting richer, and the poor poorer.

Why the change?  I think three things in particular.  First, as industrialized countries recovered from World War II, corporations based in these countries could again compete with those from the US—first in their own home countries, and then through importing into the US, and then ultimately when they invested in the United States.  Think of Toyota:  they began importing into the US in the early 1970s, and with their investments here in the early ‘80s and forward, they now are the second largest domestic US auto producer.

The second cause was the restructuring of the US economy which, based on the work of Ronald W. Cox, was discussed above, moving from oligopolistic control to commanding global supply chains.  On the corporate management level, they obviously made decisions to do this restructuring.  Big business organizations worked very hard to find and elect politicians who would pass laws/make policies that would allow them to restructure and implement the projects they sought.  They supported Supreme Court candidates who would accept such changes and allow these changes to be institutionalized.  And they would work with foreign governments that would allow them into their countries, and especially where governmental leaders were willing to keep a tight rein on any workers’ movement that might emerge.  And the biggest prize was opening China to foreign transnational investment.

After a long-range and extensive campaign among politicians and the American public by the largest transnational business organizations,

China’s accession to the WTO [World Trade Organization] followed a little more than a year later.  It was a tremendous accomplishment for the interests of transnational capital, as US and EU policymakers negotiated concessions that far exceeded those of previous less developed country (LDC) members (Breslin, 2000).  These concessions would allow US transnational firms to deepen their profitability by allowing them greater access to the China market and by enabling them to integrate China into their global supply chains.  In short, China’s accession to WTO was a watershed for transnational capital, particularly for high-tech firms that were the most poised to incorporate China into already existing networks of transnational accumulation (emphasis added) (Cox and Lee, 2012: 36).

 

And as these transnational corporations integrated China into their global supply chains, they downsized and/or closed their US production facilities, wiping out millions of jobs in the United States.[25]

Third cause for the change has been the deterioration of the American labor movement:  from 35.3 percent of the non-agricultural workforce in unions in 1954, to only 12.0 percent of all American workers in unions in 2006—and only 7.4 percent of all private industry workers are unionized, which is less than in 1930![26] 

This decline in unionization has a number of reasons.  Part of this deterioration has been the result of government policies—everything from the crushing of the air traffic controllers when they went on strike by the Reagan Administration in 1981, to reform of labor law, to reactionary appointments to the National Labor Relations Board, which oversees administration of labor law.  Certainly, a key government policy, signed by Democratic President Bill Clinton, has been the North American Free Trade Act or NAFTA.  One analyst came straight to the point:

 

Since … [NAFTA] was signed in 1993, the rise in the US trade deficit with Canada and Mexico through 2002 has caused the displacement of production that supported 879,280 US jobs.  Most of these lost jobs were high-wage positions in manufacturing industries.  The loss of these jobs is just the most visible tip of NAFTA’s impact on the US economy.  In fact, NAFTA has also contributed to rising income inequality, suppressed real wages for production workers, weakened workers’ collective bargaining powers and ability to organize unions, and reduced fringe benefits (Scott, 2003, “The High Price of ‘Free’ Trade:  NAFTA’s Failure Has Cost the United States Jobs Across the Nation.” Washington, DC:  Economic Policy Institute, “Briefing Paper # 147, November 17: 1.  On-line at https://www.epi.org/content/cfm/briefingpapers_bp147).

 

These attacks by elected officials have been joined by the effects due to the restructuring of the economy, especially by the largest transnational corporations.  There has been an overall shift from manufacturing to services. 

However, within manufacturing, which has long been a union stronghold, there has been significant job loss:  between July 2000 and January 2004, the US lost three million manufacturing jobs, or 17.5 percent, and 5.2 million since the historical peak in 1979, so that “Employment in manufacturing [in January 2004] was its lowest since July 1950” (CBO, 2004, “What Accounts for the Decline in Manufacturing Employment?” Washington, DC: Congressional Budget Office, Economic and Budget Issue Brief, February 18.  No longer available on-line.)

The job loss across the manufacturing sector was widespread and deep:

The AFL-CIO details the American job loss by the manufacturing sector in the 2001-05 period:

Computers and electronics: 543,000 workers or 29.2 per cent

Semiconductor and electronic components: 260,100 or 36.7 per cent

Electrical equipment and appliances: 152,500 or 26 per cent

Vehicle parts: 153,400 or 18.6 per cent

Machinery: 289,400 or 19.9 per cent

Fabricated metal products: 235,200 or 13.3 per cent

Primary metals: 144,800 or 23.5 per cent

Transportation equipment: 246,300 or 12.1 per cent

Furniture products: 58,500 or 13.4 per cent

Textile mills: 158,500 or 43.6 per cent

Apparel 220,000 or 46.6 per cent

Leather products: 24,700 or 38.3 per cent

Printing: 159,300 or 19.9 per cent

Paper products: 122,600 or 20.4 per cent

Plastics and rubber products: 141,400 or 15 per cent

Chemicals: 94,900 or 9.7 per cent

Aerospace: 46,900 or 9.1 per cent

Textiles and apparel declined by 870,000 jobs 1994-2006, a decline of 65.5 per cent (Source: AFL-CIO, 2006: 2.  “China Trade:  Deficits, Jobs, Investment and Exploitation.”  On-line at http://www.afl-cio.org/issues/jobseconomy/globaleconomy.upload/china_learnfacts.pdf.  No longer available, cited in Scipes, 2009: 16-17).

 

This is due to shifting to global supply chains at the highest levels (such as computers and other information technology-related products along with automobiles), combined with general outsourcing of labor-intensive production overseas (such as garments, shoes) and, more importantly, technological displacement as new technology has enabled greater production at higher quality with fewer workers in capital-intensive production such as steel (see Fisher, 2004, “Why Are We Losing Manufacturing Jobs?”  On-line at file:///Users/kimscipes/Downloads/ec%2020040701%20why%20are%20we%20losing%20manufacturing%20jobs%20pdfl; no longer available).

There are multiple “causes” given for these changes in manufacturing in addition to the above.  Some analysts have blamed burgeoning trade deficits for the rise: “… an increasing share of domestic demand for manufacturing output is satisfied by foreign rather than domestic producers” (Bivens, 2004, “Shifting Blame for Manufacturing Job Loss:  Effects of Rising Trade Deficit Shouldn’t be Ignored.” Economic Policy Institute Briefing Paper. On-line at https://files.epi.org/page/-/old/briefingpapers/149/bp149.pdf).  Others have even attributed it to changes in consumer preferences (Schweitzer and Zaman, 2006).  Whatever the reason, of the 50 states, only five (Nevada, North Dakota, Oregon, Utah, and Wyoming) did not see any job loss in manufacturing between 1993-2003, yet 37 lost between 5.6 and 35.9 percent of their manufacturing jobs during this period (Public Policy Institute, 2004, . “Manufacturing Employment.”  On-line at www.ppinys.org/reports/jtf2004/mfgemploy.htm; no longer available.)

However, part of the credit for deterioration of the labor movement must be given to the labor movement itself:  the leadership has been simply unable to confront these changes and, at the same time, they have consistently worked against any independent action by rank-and-file members.[27]

However, it must be asked: are the changes in the economy presented herein merely statistical manipulations, or is this indicating something real? 

This point can be illustrated another way:  by using CAGR, the Compound Annual Growth Rate, a tool commonly used in the financial world.  This is a single number that is computed, based on compounded amounts, across a range of years, to come up with an average number to represent the rate of increase or decrease each year across the entire period.  This looks pretty complex, but it is based on the same idea as compound interest used in our savings accounts:  you put in $10 today and (this is obviously not a real example) because you get ten percent interest, so you have $11 the next year.  Well, the following year, interest is not computed off the original $10, but is computed on the $11.  So, by the third year, from your $10, you now have $12.10.  Etc.  And this is what is meant by the Compound Annual Growth Rate:  this is compound growth averaged by year across a designated period.

Based on the numbers presented above in Figure 1, the author calculated the Compound Annual Growth Rate by quintiles (Figure 3). The annual growth rate has been calculated for the first period, 1947-1973, the years known as the “golden years” of US society.  What has happened since then?  Compare results from the 1947-73 period to the annual growth rate across the second period, 1973-2001, again calculated by the author.

 

 

 

Figure 3:  Annual average percentage of family income growth, by quintile,

1947-1973 compared to 1973-2001

 

Population by quintiles	1947-1973	1973-2001
95th Percentile	2.51%	1.66%
Fourth quintile	2.72%	1.25%
Third quintile	2.84%	.92%
Second quintile	2.73%	.62%
Lowest quintile	2.64%	.48%

 

Source: Calculated by author from gather provided by the US Census Bureau at www.census.gov/hhes/www/income/histinc/f01ar.html.  (Page no longer available.)

 

What we can see here is that while everyone’s income was growing at about the same rate in the first period—between 2.51 and 2.84 percent annually—by the second period, not only had growth slowed down across the board, but it grew by very different rates:  what we see here, again, is that the rich are getting richer, and the poor poorer.

If these figures are correct, a change over time in the percentage of income received by each quintile should be observable. Ideally, if society were egalitarian, each 20 percent of the population would get 20 percent of the income in any one year.  In reality, it differs.  To understand Figure 4, below, one must not only look at the percentage of income held by a quintile across the chart, comparing selected year by selected year, but one needs to look to see whether a quintile’s share of income is moving toward or away from the ideal 20 percent.

 

Figure 4:  Percentage of family income distribution by quintile,

1947, 1973, and 2001, as measured in 2005 Dollars[28]

 

Population by quintiles	1947	1973	2001
Top fifth (lower limit of top 5 percent, or 95th Percentile)– $184,500	43.0%	41.1%	47.7%
Second fifth–$103,100	23.1%	24.0%	22.9%
Third fifth–$68,304	17.0%	17.5%	15.4%
Fourth fifth–$45,021	11.9%	11.9%	9.7%
Bottom fifth–$25,616	5.0%	5.5%	4.2%

 

 

 

 

.

Source: U.S. Census Bureau at www.census.gov/hhes/www/income/histinc/f02ar.html :  no longer available

 

Unfortunately, much of the data available publicly ended in 2001.  However, in the summer of 2007, after years of not releasing data any later than 2001, the Census Bureau released income data up to 2005.  It allows us to examine what has taken place regarding family income inequality during the first four years of the George W. Bush Administration.

 

Figure 5: US Family Income, in US dollars, Growth and Distribution, by quintile,

2001-2005, 2005 Dollars

 

	Lowest 20%	Second 20%	Middle 20%	Fourth 20%	Lowest level of top 5%
2001	$26,467	$45,855	$68,925	$103,828	$180,973
2005	$25,616	$45,021	$68,304	$103,100	$184,500
Difference (4 years)	-$851 (-3.2%)	-$834 (-1.8%)	-$621 (-.01%)	-$728 (-.007%)	$3,527 (1.94%)

 

Source:  US Census Bureau at www.census.gov/hhes/www/income/histinc/f01ar.html:  no longer available.  (These values are from their 2005 dollar values and were calculated by the Census Bureau.)  Differences and percentages calculated by author, and percentages rounded.

 

Thus, what we’ve seen under the first four years of the Bush Administration is that for at most Americans, their economic situation has worsened:  not only has overall economic growth for any quintile slowed to a minuscule 1.94 percent at the most, but that the bottom 80 percent actually lost income; losing money (an absolute loss), rather than growing a little but falling further behind the top quintile (a relative loss).  Further, the decrease across the bottom four quintiles has been suffered disproportionately by those in the lowest 40 percent of society.

This can perhaps be seen more clearly by examining CAGR rates by period.

We can now add the results of the 2001-2005 period share of income by quintile to our earlier chart:

 

 

 

Figure 6:  Percentage of annual average income growth per year by percentile, 1947-2005

 

Population by quintiles	1947-1973	1973-2001	2001-2005
Top 95 percentile	2.51%	1.66%	.48%
Fourth fifth	2.72%	1.25%	-.18%
Third fifth	2.84%	.92%	-.23%
Second fifth	2.73%	.62%	-.46%
Bottom fifth	2.64%	.48%	-.81%

 

Source:  Calculated by author from data gathered from the US Department of the Census www.census.gov/hhes/www/income/histinc/f01ar.html:  no longer available.

 

As can be seen below, the percentage of family income at each of the four bottom quintiles is less in 2005 than in 1947; the only place there has been improvement over this 58-year period is at the 95^th percentile (and above).

 

Figure 7:  Percentage of family income distribution by quintile,

1947, 1973, 2001, and 2005

 

Population by quintiles	1947	1973	2001	2005
Top fifth (lower limit of top 5percent, or 95th Percentile)– $184,500	43.0%	41.1%	47.7%	48.1%
Second fifth–$103,100	23.1%	24.0%	22.9%	22.9%
Third fifth–$68,304	17.0%	17.5%	15.4%	15.3%
Fourth fifth–$45,021	11.9%	11.9%	9.7%	9.6%
Bottom fifth–$25,616	5.0%	5.5%	4.2%	4.0%

 

Source: U.S. Census Bureau at www.census.gov/hhes/www/income/histinc/f02ar.html:  no longer available.

 

What has been presented so far, regarding changes in income distribution, has been at the group level within the US social order; in this case, quintile by quintile.  It is time now to see how this has affected society overall.  This will be addressed in Part 4.