July 19, 2022
By Stephen Gowans
Microsoft president Brad Smith warns that US companies are facing a new era of growing wage pressure, owing to declining population growth and fewer people entering the workforce.
To most people, upward pressure on wages is not a problem. But to Smith it’s a concern. More for labor means less for capital. And for the Microsoft president and other top corporate executives whose job it is to maximize returns to investors and shareholders, i.e., capitalists, growing labor bargaining power—the outcome of weak population growth—is definitely a problem.
Smith’s concern may have been aroused by the work of economists Charles Goodhart and Manoj Pradhan, who touched off the alarm in their 2020 book The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival.
Goodhart and Pradhan argue that the integration into the global capitalist economy of low wage labor from the highly populous China, vastly expanded the available global labor force, undercutting labor bargaining power in the developed world, and with it the wages, benefits, working conditions, and the economic security of Western labor.
The effective labor supply for capitalist exploitation more than doubled from 1991 to 2018, the years during which China opened its doors and invited foreign investors to exploit the country’s vast, disciplined, and cheap work force. Along with the reincorporation of Eastern Europe into the capitalist economy, the baby boomer demographic wave, and rising participation of women in the labor force, these developments provided what the two economists call an enormous “positive” supply shock to the available labor force in the world’s capitalist trading system.
The supply shock definitely turned out to be favorable to the interests of the world’s captains of industry and sultans of finance, since the result was a weakening in the bargaining power of the Western labor force and a steady decline in private sector union membership with consequent benefits for capital in growing profits and CEO compensation.
“The gainers from all this have been those with capital,” note Goodhart and Pradhan, along with workers in China and Eastern Europe. Workers in North America, Western Europe, and Japan have suffered.
But the tide has turned. With the capitalist integration of China and Eastern Europe now complete, and population growth waning, Goodhart and Pradhan warn business leaders and their representatives in government that labor bargaining power is about to grow stronger.
They recommend the following measures to scotch the profit-limiting trend:
- Accelerate automation;
- Increase the age of retirement;
- Outsource jobs to Africa and India (the last great pools of cheap labor);
- Maintain aggressive immigration targets.
Neither Microsoft president Brad Smith, nor economists Goodhart and Pradhan, can abide the idea of labor increasing its bargaining power. Capital will do everything in its means to reverse the trend. More for labor means less for capital, and in a capitalist economy—that is, a society that takes its name from the class its serves, capitalists—less for capital is intolerable.
This ought to raise a question for those of us who rely for our living on employment income: Why tolerate a system that—in deploring better wages and working conditions—is so clearly against our interests?
Goodhart and Pradhan argue that the far right comes closest to acknowledging the reality that capital has used the outsourcing of jobs to China and Vietnam, and aggressive immigration targets, as weapons to undermine the bargaining power of Western labor.
As a consequence, the far right has been able to successfully vie with the left for the working class vote, since the left tends to shun analyses which might be construed as criticism of immigration and therefore misconstrued as racism, while eschewing criticism of China’s and Vietnam’s integration into the global capitalist economy out of a sense of solidarity with the developing world.
As they put it:
“One might have expected the voting support of those who have lost out relatively during the last three decades to go to left-wing parties in their own countries. After all, these parties were usually founded to foster the interests, and to look after the welfare, within the political scene of the working classes. Yet this has not generally happened in Europe and North America…Instead, the support of those left behind has gone in Europe mainly to radical populist right-wing parties. Why has this been so? One answer is attitudes toward immigration. Left wing political parties are idealists that support the unity of humanity…Moreover, the left-wing parties usually have a large base of immigrants. Thus, it is unlikely that left-wing parties will support tight controls on immigration.”
By contrast, the “right-wing populist position on immigration is far more consonant with the views of those who have been deleteriously affected by globalization than the inclusive position of left-wing parties.”
These analyses, as incendiary as they may appear, only show that:
- Capitalism must be understood as a worldwide system and not analyzed in isolation, within national boundaries;
- Capital pits labor in one part of the world against labor in another;
- Solidarity across national borders, rather than solipsistic struggles within, is the effective counter-response to capital’s strategy of divide and conquer.
Unfortunately, what is construed nowadays as proletarian internationalism amounts to support for capitalist exploitation of low-wage labor in countries that call themselves Communist, rather than the joint struggle of labor across national boundaries against the proletariat’s common enemy, the bourgeoisie. Solidarity with China and Vietnam is not internationalism, and nor is support for aggressive immigration targets, where the purpose of the targets is to increase the supply of labor in order to hold down or decrease its price. Indeed, much of what passes for the far left these days is, with the exception of a few communist parties, a left interested in the boutique issues of multipolarity and Russia’s and China’s inter-imperialist struggles with the United States, rather than the state of the working class globally.
The left does indeed support the unity of humanity and equality of all people. But supporting policies intended to intensify competition for jobs is not support for the unity of humanity—it’s support for the disunity of the proletariat and the growing strength of the bourgeoisie. The better alternative is support for industrialization, cooperative development, and full employment everywhere—a world economy for, of, and by the proletariat, free from exploitation, rather than a global capitalist economy which compels workers in country A to compete with (and often fight against) workers in country B.
So long as labor remains reconciled to the capitalist system, one which fundamentally depends on labor’s exploitation, it will forever be the victim of a strategy of divide and conquer.