The modern world of organization presents us with terms of life that are radically different from those of early America.
Technical skills and industrial arts that might once have been important routes to self-employment and financial independence are today the province of poorly-paid hourly workers and the idle unemployed. Self-employment itself was at one time the hallmark of the middle class, or at least the middle incomes, and the hired hands were either up-and-coming young people or old-timers who would never amount to much.
Today, we in the middle class are mostly the hired help, and independence means a comfortable retirement.
We are employed by, served by, educated by, and governed by large organizations, organizations that are themselves imbued with rights of privacy and property, and that operate with their own procedures, their own rules, and their own agendas. Our lives are defined by our relationships with these organizations, certainly more so than our relationship with creative work.
Ironically, the forebears of today’s Republicans once considered the personal independence of the many as a key part of their world view, casting aspersions not only on the poor but on financiers who profited from the labor of others. In Free Soil, Free Labor, Free Men, Eric Foner points out:
In the free labor outlook, the objective of social mobility was not great wealth, but the middle-class goal of economic independence. For Republicans, ‘free labor’ meant labor with economic choices, with the opportunity to quit the wage-earning class…the successful laborer was one who achieved self-employment, and owned his own capital – a business, farm, or shop.
Or, less prosaically:
His hair is crisp and black and long,
His face is like the tan;
His brow is wet with honest sweat,
He earns whate’er he can,
And looks the whole world in the face,
For he owes not any man.
(The Village Blacksmith, Henry Wadsworth Longfellow)
But if the Republican North won the Civil War against a South it had grown increasingly contemptuous of, not just due to slavery but also the plantation aristocracy’s contempt for honest labor, it lost the ideological war.
When Robert Fulton launched the first successful steamboat on the Hudson River in 1807, it was the beginning of a revolution in transportation. Farmers who once sold to their neighbors could now sell from village to village. Then markets encompassed geographical regions; then, with the railroads, the continent.
The village blacksmith could no longer make a living when the local railroad spur was regularly unloading crates of wire nails and steel farming implements. Once a skilled member of the middle class, he was now a proletarian operating a machine in a factory.
The work of the world was once done by artisans and craftsmen. Today it is done, and necessarily so, by hired hands who do not, and who can not, own the means of their own livelihood.
Today the output of virtually any capitalist enterprise, whether a commercial orange grove or Google, is the result of an organized, collective effort. If the firm is successful, its output has utility and earns revenue. But there is nothing written in stone to say how that revenue will be apportioned among the various contributors. In the case of the orange grove, many of the contributors will receive bare subsistence; in the case of Google, considerably more. The most important difference is, in a word, bargaining power.
Every contributor has some level of bargaining power, ranging from near-zero for the fruit-picker to near-compelling for the very top management of the enterprise. We speak of labor markets and of supply and demand, but that obscures the underlying dynamics of bargaining, and leads to an important confusion: namely, that the market price of labor reflects some value inherent in the work. In fact, there is no such thing, because the work standing on its own is without value.
Obviously, an entrepreneur starts and runs a business in order to make money, and if this could be accomplished without employees, it would be so. No one starts a business in order to provide jobs, any more than to pay rent or taxes. These are just business expenses, to be minimized or eliminated where possible.
And so it is. From automation to shopping locales for the lowest costs, business expenses are relentlessly eliminated.
The Great Depression and the Second World War were nearly existential crises in this country, and the events, as well as the leaders that inspired the people through those years, wrought profound, if temporary, changes in the way things were done.
In the boom that followed the war, the country was industrialized, industry was labor-intensive, and American labor was not cheap. It had bargaining power. Not just because it was heavily unionized, but because, for American firms, there was nowhere else to go. The fact that business firms found themselves sharing with labor a very large portion of their revenues was balanced by the fact they had a growing and affluent middle class to sell to.
But this was temporary. If high labor costs are a sign of economic success, they are also a target. And, like other costs, they are eliminated. A century ago, one critical tool in this effort was immigration. Promoters scoured the Old World for masses of the impoverished who could be loaded onto boats for America. Today, we use low-cost labor where we find it. There is no shortage, and it will likely be a generation or two before one arises.
It is fashionable to talk about structural unemployment. People who take themselves quite seriously hold forth on topics such as obsolescent skills, the irrelevance of higher education, and the enervating effects of social safety nets. But the truth of the matter was stated clearly by a Caterpillar executive during a strike in the 1980s, when he said that American wages needed to be driven down closer to the third world. Once we began seriously importing what the developing world was making, the man had a point.
Globalization was not by itself the cause of the stagnation and nascent decline of the American middle class. It was going to happen anyway. Globalization deferred some of the pain by allowing access to cheaper goods, but the underlying reality of manufacturing, as well as agriculture, is that it’s becoming ever easier to do without people.
The world can arguably make and grow more than it can consume. The coming scarcities will not be in factories or in capital or labor, but in things like water and rare earth minerals used in relatively trace amounts, the micro-nutrients of industry.
Successful business firms have ‘strategic assets’, key advantages that competitors find difficult or impossible to replicate. These give the firm bargaining power. Institutional know-how might be one, but far quicker to attain are entry barriers like licenses and concessions, and monopolies like patents and copyrights.
Successful countries do likewise. Economists teach comparative advantage, but savvy countries ignore the teachings and invest in their own strategic assets. If Japan had listened to American economists as it climbed out of the ashes of World War II, it would have concentrated its energies on growing and exporting rice, an activity it was uncommonly good at. But some saw a different future.
What succeeds for a country is, or can be made to be, good for its people. The fact that industry and agriculture face threats from critical scarcities, climate change, and so forth, means there are opportunities for countries to invest in strategic assets, namely technologies that address the threats. Successful countries will take a page from successful businesses and cultivate internal strategic assets, from which to gain bargaining power in world markets.
And successful societies will be those whose people, the hired help, have a participatory stake in their economic successes. Unsuccessful ones, whose people experience a declining stake, may not last.