Response to Kliman: Time to Move On

by Sam Gindin

It’s time to move on from the sterile argument that labour has been doing well. Capital is winning, our side is losing, and our task now is to figure out why.

First published: 30 May, 2014 | Category: Activism, Corporate power, Economy, Labour movement

In an article published earlier this year by Jacobin, the Canadian political economist Sam Gindin described the 2008 economic collapse as ‘a primarily financial crisis’. Writing for New Left Project, Andrew Kliman rejected that analysis, arguing that the crisis was rooted in long term capitalist stagnation.  Sam Gindin responded that on the contrary the 2008 financial crisis capped off one of the most dynamic eras for capital in American history.  Kliman replied with an in-depth examination of Gindin’s data.  Here Gindin responds, urging recognition of labour’s defeat at the hands of capital, so that we can begin to think about how to reverse it. 

Andrew Kliman and I have two main empirical differences. The first concerns the outcome of the crisis of the 1970s. I claim that neoliberalism successfully restructured US  capitalism and in the process imposed a profound defeat on the American working class. Kliman denies this. Second, because we disagree on the state of the US economy going into the crisis we also disagree on how it might emerge from it. I suggested that the US may very well come out of this with a return to stable if not impressive growth. Kliman sees unending stagnation since if, as he thinks, the crisis was caused by over accumulation of the capital stock, then no recovery is possible until very much more capital is devalued. 

The evidence Kliman presents as most telling on the earlier crisis is that profits during the neoliberal period never recovered to the levels reached during the so-called ‘golden age’ of capitalism in the 1950s and 60s. I don’t dispute this but question the use of that period as the definitive benchmark for measuring capitalist success. Those post war years were historically unique and during that period profits started very high and fell steadily. By the mid- to late-1960s that trend became a matter of growing concern among American elites. It took a good deal of stumbling, from the end of the 60s into the early 80s, before a coherent approach emerged and then some time for the Volcker-induced restructuring to bear fruit. In the quarter century between the early 1980s and the present crisis – a period as long or longer than the golden age itself – profit rates and profits as a share of GDP each stopped falling and started to climb. Kliman obscures this unambiguous upward turn by turning from that upward trend to the average after-tax profit rate for 1982-2003 as a whole (arbitrarily excluding the further rise in profits after 2003 and before the financial meltdown). The period has quite generally been viewed by capital as a great success, and the economic restructuring that was then carried out has reproduced the material base for the American empire.  

That recovery of profits came at great cost to the US working class. Indeed, the weakening of unions and the lowering of working class expectations were conditions for capital’s success. Yet even as conventional wisdom increasingly acknowledges rising inequality within capitalism – including in the pages of the Economist and the Financial Times – Kliman refuses to recognise this historic defeat. Though he does now concede that the most organised section of the working class, the ‘male and white workers of working age who worked in union shops with seniority contracts’, took ‘a big hit’ over the past three decades, he insists that this was offset by gains elsewhere. 

The impact on the working class of the restructuring since the early 1980s was of course uneven, but finding sectors with sufficient gains to offset the defeats is not all that easy. It didn’t occur for young workers in the service sector, where unions failed to make significant breakthroughs. Nor for black workers who suffered as much or more from the decline of unionized jobs than white workers did. Wages did however rise significantly among women in the 1982-2007 period, as Kliman rightly points out. This was especially so in the unionized public sector where unions are now under aggressive attack. In the private sector, however, the average increase in real hourly wages for men and women combined was only 1/10th of 1% per year (there was no increase at all if you exclude the 1997-98 boom), and even if adding in benefit costs might modify this somewhat, the overall bleak trend remains.[1] 

Such data on hourly wages does not impress Kliman, who focuses instead on household income. This is fair enough when presented with nuances, but Kliman’s main argument,  based on an academic study written to counter the growing consensus on the fact of rising inequality, is bold and unqualified.[2] Rejecting the notion that the balance of class forces shifted under neoliberalism, Kliman argues that 

[w]hen income is defined in a comprehensive manner, each of the bottom three quintiles (20% groups) of U.S. households experienced a rise in [real] income of more than 30% between 1979 and 2007, and inequality went into reverse after 1989. 

An immediate objection here is that rises in household income may not reflect higher payment for work as much as more household members working longer hours (what Marxists have tended to see as an increase in exploitation rather than an indicator of working class strength). Kliman’s graph conceals this both by scaling the graph so that hours of work are difficult to read and, more importantly, by shifting its starting point to 1970 rather than being consistent and using the 1979 base. Because working hours fell during the 70s, this visually distorts the increase in hours between 1979 and 2007. The reality is that in the decades after the 1970s men worked much more overtime and women moved from part-time to full-time work, increasing their average annual hours by 20%.[3] (The higher wages of women referred to above were due in part to this shift from lower-paid part-time work to better-paid full-time work).

The Congressional Budget Office has incorporated, in its own review of inequality between 1979 and 2007, the methodology of the academic study Kliman cites. Household incomes did rise over the period but, even after transfer payments (welfare, pensions, unemployment insurance, etc.) have been added in and after taxes have been deducted, the widening of inequality over the course of the neoliberal period remains profound. The CBO summarises the data as follows: 

For the 1 per cent of the population with the highest income, average real after-tax household income grew by 275 per cent between 1979 and 2007.  For others in the 20 per cent of the population with the highest income (those in the 81st through 99th percentiles), average real after-tax household income grew by 65 per cent over that period, much faster than it did for the remaining 80 per cent of the population.[4]

In terms of shares of income (again, including transfers and taxes), the bottom 80% of households saw their share shrink from 54.5% in 1979 to 35.6%  in 2007 while the top 5% saw their share increase from an already unequal 21.2% in 1979 to 31.6% in 2007.[5] 

Kliman’s suggestion that incorporating transfer payments and tax adjustments would strengthen his case is belied by the not-surprising reality that this was not a propitious period for supporting social programs for the poor or levying taxes on the rich. As the CBO study puts it: 

The equalising effect of transfers declined over the 1979-2007 period primarily because the distribution of transfers became less progressive. The equalising effect of federal taxes also declined over the period, in part because the amount of federal taxes shrank as a share of market income and in part because of changes in the progressivity of the federal tax system.[6]

Kliman’s conclusion rests entirely on a further statistical adjustment: the inclusion of Medicaid and Medicare expenditures in the data. This is a complex issue but, simplifying a bit, what the researchers from both the CBO and the academic study on which Kliman relies did was to treat the costs of the health insurance received as income. Since Medicaid goes primarily to the poor and Medicare is based on age, and since the increase in the numbers on Medicaid and Medicare have grown faster than the general population, and above all since the cost of health care has increased very much more than the general rate of inflation – for all these reasons, treating these health services as private income has a very profound effect on calculations of income distribution. 

There is no denying the importance of these public programs for those with lower incomes and the aged, but if they are to be incorporated within one’s measurement of inequality then so too must other social programs: How are school dollars allocated across schools? How do higher debt loads affect access to university? What infrastructure is being built and in what neighbourhoods? And so on. And in any case, who can miss the irony in declaring one of the most unequal health care systems in the developed world in terms of access, especially prior to the recent reforms, a great equaliser? It should further be noted that by Kliman’s methodology, whether the quality of health care remains the same or falls if the costs rise, that rise is treated as an increase in working class income. For Kliman, moreover, this would in turn imply a decrease in profits. But what is  actually going on isn’t a class redistribution of income so much as a redistribution among corporations. Whether the issue is Medicare, Medicaid or private health insurance, though workers do benefit from these programs, the rising premiums paid by individuals and corporations and  especially the increased tax dollars paid out by the state contribute mightily to the profits of the private health insurance industry. 

Finally, a brief response on where we are at today. Because Kliman understands the crisis as a crisis of overaccumulation, he sees no way out in the absence of a much more massive destruction of capital than has so far occurred - that is, until we have another profound crisis. He does suggest the possibility of a long, slow correction to the excess capacity, but it is hard to imagine any economic growth at all if more capital must be destroyed than added. My own view is less definitive. Another breakdown is always possible in the near term, but it is more likely to come about from developments abroad and their impact on the US financial system. As for the likelihood of a modest and relatively stable recovery, the very weakness of the labour movement provides the American state and American capitalism with the time and political space to regroup and again stumble through and develop creative solutions to its problems. This breathing room is extended by the fact that profits are high, corporate coffers are stuffed with ready cash, American banks are generally in good shape, and consumers have paid off some of  their debt and seem ready to borrow again. Escaping this crisis would, however, only get workers back to their defeated pre-crisis condition. 

It’s time to move on from the sterile argument that labour has been doing well. Capital is winning, our side is losing, and we need to turn to why labour’s response to the crisis was so timid, why to this day it remains so ineffective, and what it would mean to address its revival. 

Sam Gindin is the former Research Director of the Canadian Autoworkers Union and Packer Visiting Chair in Social Justice at York University. He is the co-author, with Leo Panitch, of The Making of Global Capitalism: The Political Economy of American Empire (Verso, 2012). 

[1] Federal Reserve Economic Data,

[2] The study is: Armour, Philip, Richard V. Burkhauser, and Jeff Larrimore. 2013. "Deconstructing Income and Income Inequality Measures: A Crosswalk from Market Income to Comprehensive Income." American Economic Review, 103(3), May 2013.

[3] Economic Policy Institute, ‘Trends in U.S. work hours and wages over 1979–2007’, January 2013.

[4] Congressional Budget Office, ‘Trends in the Distribution of Household Income, 1979-2007’, pub no. 4031, Congress of the United States, October 2011.

[5] Ibid., Table C-1, p. 48.

[6] Ibid., p. 20.

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