Previously, I had written on inequality in capitalism's golden age and how the two phenomenon that writers on the Left and across the spectrum see as interrelated: the Great Compression of Inequality and the Post-War boom are actually quite separate. Let's start our discussion off by talking about the biggest fat cat cat in American history--John D. Rockefeller. He was the very emblem of the age of the Robber Barons and Post-WWII inequality and his wealth was of a truly mind-boggling scale to the point that its actually hard to get an accurate handle on it. In 2014 Forbes wrote of his legacy thus:
Despite the family’s immense wealth, the Rockefellers no longer stand atop America’s financial hierarchy. At $10 billion, the family ranks 24th on Forbes’ list, a far cry from the heyday of John D. Rockefeller, who became the world’s first billionaire in 1916, a sum equal to $30 billion today, adjusted for inflation. In a sense, this underestimates the oil scion’s wealth. By the time Rockefeller died in 1937, his assets equaled 1.5% of America’s total economic output. To control an equivalent share today would require a net worth of about $340 billion dollars, more than four times that of Bill Gates, currently the world’s richest man.
Woah there! Notice the apparent contradiction as the article states that John's fortune is worth somewhere between 30-340 billion in 2014 dollars depending on how you count it--that's a discrepancy of over ten times! Kevin Phillips (whose work we will get to) backs up Forbes on this account putting Rockefeller's wealth at 11 billion dollars in 1982 dollars which is just shy of 30 billion dollars. Again, the contradiction is simply an apparent one, the US is much richer today then it was then, so the assumption being if Rockefeller was alive today he'd control over 340 billion dollars, but when you get down to brass tacks, his fortune is about on part with China's current richest man Jack Ma. That's all simple enough to easily understand--only the problem is that neither figure is really accurate. Marxist Sam Williams explains the flaw inflation/PPP indexes which are used to track worker's real wages via the purchasing power of fiat money in various commodity baskets that economists have deemed "essential": "For example, workers in Bangladesh don’t need to purchase heavy coats and hats for winter, while workers in Siberia most certainly do. How then can we quantitatively compare the wages of Bangladesh workers with Siberian workers? We can do this only in terms of a universal world money—gold bullion—but not in terms of their real wages." So, I took it upon myself to estimate what Rockefeller's fortune would be in gold terms and using the Smithsonian gives of his peak fortune in 1912, I found that his fortune based on the dollar-price of gold (or more accurately the gold-price of the dollar...) at that time was capable of buying 1,630 tons of gold today--or 60 billion dollars worth. I believe this is the best possible method of an estimate of historical wealth and that since gold is still the money-commodity under capitalism this will continue to hold good as a method of estimation until 1. either capitalism collapses and is replaced by something else 2. a revolution in gold mining causes the value of gold to fall down to the point that its so abundant that it is replaced by a new money commodity. We can say that someone like Bill Gates or some of the other assorted members of the Hateful Eight are wealthy enough that they could buy Rockefeller up at steep cost. We do not have to choose between making the estimate using Rockefeller's share of US output or in terms of real dollars we have a more accurate method and using this we can say that there are men alive wealthier then Rockefeller. It should not be surprising that our estimation diverges from the two traditional estimates put forth by economic historians the time when Rockefeller had the peak of his fortune was a time when the dollar was gold-backed and certain events like the closing of the internal gold redeemability in the 30s, the move off the gold standard in the 70s or even the foundation of the Federal Reserve had not occurred. The money commodity was simply the money commodity in that time; though as Williams explains today's capitalists are still careful to watch the gold-price of the dollar and the price of commodities are quoted in gold.
I noted in my previous article that data on the rich during the social democratic "Golden Years" were hard to come by and I believe that Kevin Phillips work Wealth and Democracy: A Political History of the American Rich helps to bridge that gap. Using data from the 1957 wealth list and Lundberg's work he puts the Mellon Family first as the richest family in America with a net-worth of between $1.6-2.8 billion dollars which on the upper-estimate using an inflation calculator is 24.37 billion and on the lower-estimate is 13 billion; the aforementioned J. Paul Getty was worth about 8.7 billion. As can be seen the Rockefellers' didn't do so bad either as the upper-estimate of the family wealth in real dollars is set at 16.5 billion dollars or just shy of half of their founding Patriarch's original fortune in inflation-adjusted terms; using the upper-estimate of the Rockefeller fortune in gold-terms it comes out to be near 69 billion dollars making the family richer then John D. was himself.
Performing the gold-worth estimate of the Mellon Family's wealth is fairly easy since the dollar was fixed legally at 35 dollars at the time--and in fact, 1957 was one of the years that gold traded at slightly over the 35 dollar cover. The upper-estimate would buy 80,000,000 ounces of gold and at going prices that much gold would translate into $102, 393, 600,000 dollars, or better said, more then the holdings of Mr. Rockefeller. J. Getty's fortune gold-value fortune would be $36.56 billion in today's currency which greatly exceeds the mere inflation-adjusted estimate. So, no matter how you measure it, America in the 1950s was a tycoon's paradise, which suggests that there was never a time in the 20th century where America wasn't ruled by obscenely rich billionaires. Type the lowest wealth estimate (100 mil.) into an inflation calculator and you'll see that the resulting figure is pretty damn close to a billion; in gold terms its more like 3.6 billion. We can see plainly that all or near-all of the men who appear on this list would've been billionaires if their wealth was translated into today's money and so we can say with certainty that although it may have been estimated that there were two billionaires in 1976 (just two!) and 13 in 1982 that in fact there were 25 billionaires just on the 1957 Fortune list. The 1968 upper-estimate of the Mellon family wealth is 25.3 billion dollars using an inflation calculator--the gold value was still greater at 117 billion; 68 was the year when the gold-value of the dollar began to divulge significantly from its legal definition setting the stage for the dumping of gold and the major inflation that followed. On a somewhat related note Richard Mellon Scaife of the Mellon clan who was a major-funder of right-wing thing-tanks and movements in the US poured much of his family's wealth into tax-free "charitable" foundations that were really only right-wing mouthpieces.
If the Depression and WWII reduced wealth and income inequality (and the wealth of empirical data presented by Walter Scheidel would affirm that it did) then we can see that capitalism recovered and started its old thieves game of making the rich richer almost immediately after as we can see using the 1957 list which was compiled only 12 years later. Of course, things weren't all roses for the rich as Dumenil and Levy persuasively argue that neoliberalism was the answer to policies and structural crises of that time that they found harmed their interests too much. But then again we shouldn't exaggerate how much their interests were harmed either, as a good portion of them found the Keynesian compromise totally in their favor and amenable for a time. But I'm certainly not the only one who believes the decline in inequality was overstated as contemporary observers and some historians have also observed:
The New Deal Origins of the Post-War Tycoons
Aside from the legacy wealth appearing on the '57, '68, and 1982 lists one of the most dramatic shifts was the appearance of new money mainly hailing from the Southwestern and Southern States hailed in contemporary sociology as "the sunbelt". Phillips again:
Phillips pithily dubs this influx of oil wealth which manifests itself dramatically on the 1982 richest as "the Petroleum Club of the United States" and little wonder then oil is dominant on the rich-list as this field was perhaps the New Deal's biggest beneficiary and the slow-cutting of high-war taxes occurred later and took longer to take effect. US Treasurer Morgenthau had declared during WWII that his intention was to "move the financial center of the world from London and Wall Street to the U.S. Treasury" and indeed this was in-line with the New Deal re-orientation of power that Phillips describes:
FDR: Ruling Class Capitalist President
We will not here deal with the accusation that FDR was some sort of secret communist, or, as the less extreme wings of the American Right hold was merely a typical liberal useful idiot who willfully ignored or did not fight the communist threat hard enough--that will be handled in another post refuting the extreme right perspective on the Cold War. For now we can use Roosevelt's pre-war domestic policy as guiding-point in ascertaining the real class alliances of Roosevelt as Alan Nasser highlights for us in a brilliant analysis of New Deal economic policy:
As can be seen the War was a real shot in the arm for capitalism and the tie-in of stock prices to military campaigns is reminiscent of the behavior of the German stock market during WWII (euphoric in the early stages in a state of collapse after Stalingrad) it tells us quite a bit about the behavior of capitalist societies at work though most economists excerpt major conflicts out of their economic analysis and prefer neat periodization (pre-war, inter-war, post-war etc.) but it turns out that less changes about the base and fundamentals of capitalist society during this most extreme form of crisis then is typically thought. In fact, war is rarely thought of as an economic crisis but is only a social or political crisis but for the workers who experience it, the governments who must balance budgets, the businesses who are forcefully cut out of markets, face war rationing, or are expropriated by the enemy it is an economic crisis. Different in nature but no less profound in its consequences and much like a major depression--war itself can set the stage for economic renewal. No wonder then that radical political economists Sweezy and Baran held that the United States economy had not truly exited from the crisis of the Depression but in fact that crisis had been displaced and manifested itself in the tendency towards stagnation and other various crises at work today. Put through an inflation calculator the 185 billion spent in WWII comes out at 4.5 trillion dollars--already the cost of the War on Terror has exceeded that at 4.79 trillion dollars. Let us continue with our method of estimating the gold-cost of that sum which would be $6.7 trillion and the remaining deficit would be $1.6 trillion in gold terms. What is the point of listing the conventional method of historical estimate alongside a gold-value estimate? To high-light the disparity between historical estimates of such economic costs that tend to be rose-tinted with hind-sight and the reality. The gold-value of the 17 billion dollars invested directly by the US government into defense related industry is a gold value of 621 billion dollars--the US government sell-off of these investments is then a give-away comparable to the first wave of bank bailouts under George Bush. In spite of the fixing of the dollar at 35 an ounce the close of the 40s saw the dollar-price of gold shoot up to 42 dollars an ounce an early sign that the market did not believe the US government had the gold collateral to value the dollar at what they claimed the value was, this of course stabilized for a time. But it seems to have been a little-noticed prelude to the momentous crisis that would grip the world decades later.
(Un)Controlled Chaos: American Super-Imperialism and the World Ablaze
The United States did not follow the traditional European template in its ascent to world power but in fact had to marshall new and frightening weapons to make its way in the world. From its manipulation and harsh creditor positions vis-a-vis its allies in WWI using state-finance capital earned the US government the derisive name among Europeans of "Uncle Shylock" particularly interesting was the way that it played both sides of the creditor relationship demanding prompt repayment of its state-loans by its allies while private Wall Street creditors lent like mad to Germany who in turn used that money to pay reparations to the Entente powers. With the onset of the Great Depression (which was caused by classic overproduction and low-profitability and not merely the debt/inequality issues as many presume) the US government expanded its powers as the world banker in order to do for Wall Street and Big Business what it couldn't do itself via tax payer expense. The extreme use of state-finance capital in building American hegemony is what prompted Michael Hudson to dub the American way of imperial power super-imperialism. The financial exploitation of rival imperialist nations and allies by the United States also inspired Hudson's coining of the term--America was an Empire that ate other Empires even that of its "friends". To be sure, it can't be said that America's rise to power was fundamentally at odds with the Leninist theory of imperialism only that it utilized state-power to a greater degree then its European rivals had and squeezed those rivals in part because those rivals had control over most the world's colonies. Even in nominally independent neocolonial regions like those of Latin America and parts of the Middle East the US was in a neck and neck competition with the British Empire with Great Britain actually retaining a greater market share of industrial goods in the Latin American market then the US in the 1930s. Hudson tells the intricate story of how the lend-lease program and Bretton Woods shook down the British and other European Empires while even breaking into the Soviet market doing a burst of high-velocity trade with Russia that hadn't been seen since American sugar-runners monopolized the Russian market in the Napoleonic Wars and wouldn't be seen again. Refugee capital in the form of refugee capital/bullion from the Old World flowed into the veins of the American body further concentrating the immense pile of gold that been built up on the North American continent now essentially under the control of the US government with the state-seizure/heavy regulation of gold bullion and the irredeemability of the dollar domestically.
With the end of WWII it turned out that the US essentially held all the cards (or most of them at least...) as a world hungry for both money and commodities to kickstart the capitalist machine needed what the US had--gold, but the US was reluctant to trade that hard-won metal for anything other then a slip of paper that guaranteed ownership of the physical metal. Having the largest in-tact industrial base and the economy effected least negatively among the war participants it easily could call the shots in trade and negotiation. But big business still needed a financier and that guy, at least to start with, was Uncle Sam who bent the currency exchange regulations, international monetary policy agreements, and international import-export banks and new world financial institutions for managing intra-state debt like (IMF, World Bank etc.) to American advantage. American disadvantages such as high-costs of labor that had previously impeded its expansion on the world market suddenly became advantages as the American worker became the world consumer of last resort and American industry seemingly paid no penalty for the "sin" of failing to compete with the all-too familiar industrial race to the bottom thanks to the financial wizardry of men like Morgenthau and the controversial Harry Dexter White. Keynes wanted a new international financial institution that would liberalize credit to the real economy but instead the Americans presented a straight-jacket that they put over non-American governments and finance. Two ways to skin a cat--international private finance capital was just as much diminished out of the deal that came out of Bretton Woods. Approximately 12 billion dollars out of the US state coffers was poured into the Marshall Plan system to reinvigorate a decaying, bleeding, and wounded European capitalist system. If we measure via the gold-value of that sum then we come up with a real value of 438 billion dollars if we use the typical measure of inflation then its more like 130 billion dollars. Some 2% of US GNP is estimated to have went into the Marshall plan but few actually protested this state of affairs one notable complaint came from Henry Cabot Lodge: "“There is a small, bloated, selfish class of people whose assets have been spread all over the place...people of moderate means in this country are being taxed to support a foreign aid program which the well-to-do people abroad are not helping to support." (Shaxton Treasure Islands: Dirty Money, Tax Havens, and the Men Who Stole Your Cash) Shaxton notes that a 1947 US government analysis found that the European ruling class was actually not completely broke but held assets approximating $4.3 billion which translates to a gold value of 148 billion and would conservatively using an inflation index be about 52 billion in 2017. In fact, Shaxton is reading the wrong-way this would indicate that the paper reflects the American creditor position that it has continually stressed since World War I that all debts are payable--in fact, it was very popular for American senators to bang-on about how Britain could sell its museum pieces to pay its debts if it had to in the interwar period. Roosevelt himself was well-known for telling European governments they could nationalize their assets, monetize them, and give that surplus over to the US-- such was his "socialism"! Shaxton is correct in that observers at the time noticed more money (both legitimate and hot) flowing in the US direction then what they lent out and that is not unusual in the creditor-debtor relationship, nor is it unusual considering the practical US industrial monopoly over the world market but it does not suggest that Europe had a greater ability to pay then what they did.
But it does underscore some key facts which is that the wealth of the rich in Europe was not tapped to bring about the renewal of European prosperity but in fact the US taxpayer provided this. And while US business benefited handsomely from European money flowing out of Europe as a result of its monopoly position and the policies of its government, neither Washington, nor the elite of Europe was keen to stop that flow. It was to the American advantage to leave European markets unregulated to let the European elites indulge in such moral hazard at domestic taxpayer expense, after-all, as any good banker or loan shark knows its much easier to skin a debtor when the surface terms are generous. It was in the interest of the US to allow Europe to stay as liberal as it chose to be and let the American state would be of one-mind but this would set the stage for the fall of international financial regulation. Lest we think that the US government was driven by some sort of anti-bank animus and was somehow militantly opposed to private finance capital we should keep in mind that the transfer-payments that occurred via the state, especially if we keep in mind its real gold value, were of such an order of magnitude that no private financier could do it, nor would they be willing to take the risk. Even Rockefeller at his height couldn't finance a Marshall Plan and its doubtful that J.P. Morgan or the Rothschild family at their height could do it either. American finance needed the American state to back it abroad for the same reason that American industry needed it--it was too weak on its own. Fast-forward 70 years later and London is still the capital of world finance, not Wall Street, despite the popular belief of the average American citizen to the contrary. Thus we can say that the governmental support for American big business and finance was essential for American capitalism to thrive and to hold the position of world dominance. Had state-support been lacking we would not be talking about American leadership of the world or the "free world" today...
As for Europe and Japan themselves I'm still studying the holdings of the elite there and it seems to be that it is less-frequently or deeply studied then that of the United States, at least the freely available literature in English. Men like Agnelli ("Italy's uncrowned King") would control a larger portion of Italian GDP then Rockefeller ever did in the United States and yet these men like these who supported fascism were restored to power in Western Europe including the prominent Nazi industrialist Krupp. Scheidel estimates that typically between 60-90% of great European fortunes were destroyed by WWII which was part of what made "The Great Compression" a world-wide phenomenon but still we can see that even by the US government's admission there was still some remainder of those great fortunes left. The picture is clear the rich were back in the saddle in Europe, diminished and humiliated, perhaps, but buoyed by fresh divisions of American money.
The Saturday-Night Super-Power Hustle and the London banking Disco
The treason of Nikita Khrushchev to the cause of socialism and the Post-War rise of international finance actually have a surprising commonality. In 1957, the Moscow Narody bank deposited a few hundred thousand dollars in London and slowly it began to pour in kicking off the rise of the Eurodollar and Eurobond market. This trickle slowly became a flood till the point that it became the largest pool of mobile capital in the world and the go-to for the laundering of criminal money--it became the new normal rather then being the strange semi-illicit outlier. Shaxton describes what he calls the creation of the British spider-web following the joint-US-Soviet diplomatic response to the Anglo-French-Israeli occupation of the Suez Canal that sharply drove home the message that the old days of conventional European-colonialist imperialism were over. Following on the heels of de-colonization not long after the UK turned what remained of its Empire into a network of financial tendrils stretching across the world but rooted firmly in London. As the oldest capitalist power and the one that had experienced the most dramatic decline in power in the new arrangement of world power UK growth was slower then that of the US and its European contemporaries, partly as the result of its relative decline and partly by design. Ironically enough, for a nation that was among the most egalitarian European capitalist nations post-war it would be the black hole of the City of London that would serve as the playground for the rich in a world where capital experienced or felt it had experienced immense damage to its power and prestige. A London capitalist bragged of The City in 1970 that it was :
As can be seen the pre-WWII income-share of the financial sector had returned by the 1960s meaning that the long-dreamt of Euthanasia of the Rentier and the fall of the financial aristocracy had failed to come to pass in just over 20 years the financial parasite resumed his former throne in spite of a quite spirited campaign and byzantine array of laws and regulations directed against him. Some graphings of this share that I have unfortunately unable to find show this share peaking in the twenties and not recovering until the 60s which would mesh quite well with the data provided by Scheidel and others showing that the Depression was a major force of leveling in the US because it hit her harder then any other developed country in terms of proportion.
Vietnam had bankrupted the United States by the early 70s and the only thing left for Richard Nixon to do was to remove the gold standard completely which had reached the point of mere legal fiction by the late 60s. The recessions of the 70s were mostly blamed on the "oil shock" thesis but as Williams points out:
Excursion Past the Event Horizon: The Oligarchy Nursed back to health
As noted in the previous article in 1988 there were 66 billionaires in the United States even as the inflation-adjusted value of the minimum wage raced towards its lowest point in history post-1950--it was a classic case of working class immiseration resulting in huge fortunes. We noted previously that all of the 25 men/families on the 1957 list would've been billionaires given the gold-value of their fortunes; in 1987 America's officially richest man according to Forbes was Forrest E. Mars who was worth $12.5 billion a fortune that in gold terms was equal to $39 billion dollars that while a super-fortune like that of the Mellon family wasn't known to exist high double-digit fortunes typical of the era of the Robber barons still did. In the year after the dissolution of the Soviet Union the Walton Family held the top-spot on America's wealth list with $25.3 billion which translates into a gold value fortune of $97.2 billion dollars--making them richer then Rockefeller and rivals of the Mellons at their height. Today the Walton Family retains their claim to the title of America's richest family with collective holdings of 130 billion dollars as of 2016. At the end of the millennium Bill Gates fortune topped an unprecedented $101 billion landmark in 1999 and MSN estimates this to be 144 billion in 2017 dollars but actually it is much more then that as the dollar in the 90s had reached a dollar-to-gold exchange rate not seen since the 1970s meaning the real value of these fortunes during the Silicon Valley bubble also increased making the resulting gold-value of Gates Fortune $445.3 billion dollars. Turns out that despite this notable dry run that Gates may become the first dollar-trillionaire in history if things keep looking up for him--much like John D. Rockefeller he's reached a point where no matter how much money he gives away (or feigns giving away) that he can't stay poor he keeps making too much off what's left. Based on our estimates for a brief time Gates succeeded in crowning himself the richest man in known history beating out historical estimates of Rockefeller, Carnegie (309 billion), and William the Conqueror (200 billion). In 2001 the United States had cracked the 200 billionaire but how much was the money of the 272 billionaires of the United States worth? The deflationary trend of the dollar of the 1990s had continued into the early years of the New Millennium therefore one billion dollars in 2001 currency comes out to be a value of $4.6 billion dollars in gold terms and so it seems that based on that billionaires weren't only just more numerous in the 1990s and the New Millennium but wealthier in real terms then their 1980s and post-2002/2008 counter-parts. As of 2016 there are 540 billionaires and certainly a large part of this growth can be explained by the near-five times inflation of the dollar against gold but it seems that the double-digit billion dollar fortunes are becoming common-place but even if the average billionaire is not as wealthy as in the past it seems that the average citizen has not benefited at all from the relative devaluation but in fact they have used that opportunity to grab up more and more of society's resources essentially making their gains the outcome of their ruthless dominance over a zero-sum or near-zero sum game. This is where odd facts like 93% of income gains going to the top 1% in the 21st century start to make a certain amount of intuitive sense, the rich grabbed more of the share of the new wealth created precisely because their prior gains have been subject to major devaluation in both market losses during recessions and real-value terms. But we should be cautious about seeing the ruling oligarchy as worse or wealthier then they've ever been in fact we've shown some solid evidence that in real terms things are the same as they ever were. No gains in social equality like what occurred in the 1930s and the 1970s because there was no pressure coming from the working class at home or globally to keep the wealth from monopolizing the gains resulting from the recovery and likewise we have shown that to a certain extent these 20th century declines were overstated. The future of the American working class and to a certain extent the entire world depends on how effectively they can mobilize against the robber barons who've been robbing them blind since the 19th century and who, contrary to social democratic mythology, never stopped robbing them on an industrial scale.
Addendum: the Impact of Inflation on the Working Class & the Known Unknowns
If the Depression and WWII reduced wealth and income inequality (and the wealth of empirical data presented by Walter Scheidel would affirm that it did) then we can see that capitalism recovered and started its old thieves game of making the rich richer almost immediately after as we can see using the 1957 list which was compiled only 12 years later. Of course, things weren't all roses for the rich as Dumenil and Levy persuasively argue that neoliberalism was the answer to policies and structural crises of that time that they found harmed their interests too much. But then again we shouldn't exaggerate how much their interests were harmed either, as a good portion of them found the Keynesian compromise totally in their favor and amenable for a time. But I'm certainly not the only one who believes the decline in inequality was overstated as contemporary observers and some historians have also observed:
Behind the democratic thrust that came with the sudden mass prosperity and the reinvigoration of the 1920s middle class suburban consumer culture cut short by the Great Depression was the exact time of elite "conspicuous consumption" that one would associate with today's late capitalism:More was afoot, though, than met the untutored eye. In the face of wartime and postwar income tax rates, many wealthy Americans either postponed their realization of income or arranged its shift into 1) tax-free vehicles (expense accounts or municipal bonds) or 2) capital gains, which were taxed at a much lower rate. Business expense accounts, notorious during the war, flourished enough in peacetime for novelist John O’Hara to christen “the new expense account society.” As for municipal bond interest, which entirely avoided federal taxes, by 1957 the amount going to the top 5 percent totaled almost $600 million.
Capital gains grew like Topsy during the 1950s, with about half flowing to the top 1 percent. In 1955, U.S. News and World Report noticed that “in the past five years, (stock) options have produced a whole new crop of millionaires.” Corporations that retained rather than distributed their profits, in turn, allowed shareholders to look for capital gains (taxed at 25 percent) in lieu of dividends (often taxed at or near the top rate of 91 percent). During the 1923–29 period, according to economic historian Gabriel Kolko, corporations had retained only 27 percent of their net profits.Putting the capital gains and municipal bond interest into the income share of the top 1 percent would, by Kolko’s estimate, have added several percentage points, canceling about one-third of the decline officially reported.
This does not, on balance, rebut the democratic thrust or credentials of the quarter century that began in 1933. Rich citizens were forced into evasions of a sort they would not have imagined a decade or a generation earlier. (Phillips Ibid.)
And that was in the wholesome middle class boom of the 1950s that followed freshly off the Great Compression in the 60s both the economics and culture began to send stronger signals about what was really going off that ran counter to the contemporary intellectual zeitgeist:Consumption was edging back into its pre-1929 pattern of keeping up with the Dow-Joneses. In 1955, B. Altman’s in Manhattan caused a flurry by quickly selling out of mink-trimmed beer-can openers. General Motors bestirred itself to offer—for $13,074 (the annual salary of a mid-range business executive)—a new Cadillac Eldorado Brougham, which included on its dashboard a tissue-box, vanity case, lipstick, and four gold-finished drinking cups. That same year, Fortune concluded that “rich Americans have begun to build big houses again,” and in 1958, Business Week quoted a fashionable designer saying, “The rich have been hiding for twenty years. They are coming out of their holes. They are having a ball.” (Ibid.)
Phillips sees the 60s and not 70s or 80s as the starting point of a new growth in American inequality, which is very similar to the argument and position I put forth in the pervious article:That same year the Democrats inaugurated a new, young president, John F. Kennedy, whose father was one of their new rich. His wife Jacqueline was a debutante from another wealthy family. All of a sudden America had a multimillionaire president with a whole string of fashionable connections—Newport, Hyannisport, and Palm Beach—closer to the F. Scott Fitzgerald aura of the twenties than the middle-class ethos of the Great Compression. Indeed, the sixties began to display many symptoms of the twenties: youthful iconoclasm, the sexual revolution, “newness” terminology, short skirts, substance abuse, exciting technology, merger mania, and new “conglomerates” put together by “go-go” financiers. And in the background was another stock market boom in which the Dow-Jones Industrial Average hurtled toward a mark that ten or fifteen years earlier had been unthinkable: One Thousand. (Ibid.)
But while we're on the subject we should be careful and ask ourselves when did the "middle class" boom really begin in the Post-War era?Indeed, looking back at the economic revolution of the postwar quarter century, it came in the unprecedented gains and well-being of the average American family, not in any bold new industrial contours. But this legacy began to blur in the sixties when the three middle quintiles stopped dominating the gains in real family income. Momentum was shifting to the two top quintiles, and by the 1990s the reemerging edge of the top quintile alone over the combined middle three would be a metaphor for the abandonment of postwar commitments to the middle class. The hints of the late sixties became the acute problems of the seventies. (Ibid.)
Wartime taxes on the rich were close to punitive. The bite on family heads earning the average $40 to $50 a week was not. After the deprivations of the thirties, wartime rationing, not taxes or lack of money, was what limited public buying. Purchases of expensive clothing and jewelry soared. Used cars were at a premium. And despite food rationing, the number of supermarkets climbed from 4,900 in 1939 to 16,000 in 1944.
At war’s end, Americans were rolling in cash. Average weekly pay had been boosted from $24.20 in 1940 to $44.39 in 1945, not just by high wage rates but by huge overtime and the earnings of 6.5 million women, mostly middle-aged and married, new to the workforce. (Ibid.)We have our answer here then. It began as a result of the War and continued with the healthy and rapid development of American capitalism we might even say that it the most rapid and substantial increases in the general level of the economic welfare came during the War. This is in agreement with historian Studs Terkel who argued that the economic benefits of WWII was the prime reason why the civilian population perceived it as the "Good War" though undoubtedly the sheer barbarity of the Axis powers was enough to make anyone who participated in it feel righteous. It's notable that the minimum wage in WWII was technically quite low in comparison to the post-1950 minimum wage but this only demonstrates that worker's power and compensation isn't really about the law but the bargaining power that workers hold in their confrontation with the capitalist class. As WWII receded and even Korea came to its end, unsurprisingly, the bargaining power of American workers slowly began to recede (but not all at once) and as emergency Depression/War-time economic measures gave way to business-as-usual its unsurprising that we see already in the 50s growing numbers of millionaires and growing re-concentration of wealth. High-income taxes had proven to be a small-barrier to capital accumulation as taxes on capital gains and assets were far looser and besides as Phillips points out: "Tax avoidance was on the rise, abetted by ever more loopholes in the Internal Revenue Code." In other words, 91% wasn't what the rich were really paying anyway, which shouldn't come as much of a surprise as several economists have pointed out there's a difference between the real tax rate and nominal one--and sometimes there's quite a big difference. As the US economy ran into increasing trouble in the post-war years (such as the 1948-49, 1953, and 1957-61 recessions) it shouldn't come as a shock that the elite increasingly offered pro-elite policies as the prescription to the disease. The first to do so was Kennedy who brought down the income tax on the top 1% from 91% to 70% and this was merely an echo of the post-WWI Republican policy that aimed to bring down the high taxes on the elite introduced in WWI and bring a return to "normalcy". The Reagan Tax Cuts can be considered an intensification of the Kennedy Cuts on steroids and Trump now promises not only more of the same but the deepest cuts yet.
The New Deal Origins of the Post-War Tycoons
Aside from the legacy wealth appearing on the '57, '68, and 1982 lists one of the most dramatic shifts was the appearance of new money mainly hailing from the Southwestern and Southern States hailed in contemporary sociology as "the sunbelt". Phillips again:
Others, however, not a few of them Democrats or Roosevelt backers in 1936, had newer entrepreneurial origins. The oil operators, fresh from the East Texas fields, tended to operate through small private companies, flipping them around like cards in a deck.
In addition to the older petroleum geology underlying the Rockefeller, Mellon, and Whitney fortunes, new pools of crude—Texan and Californian, for the most part and still close to the derricks and oil fields—were added with Getty, Hunt, Richardson, Abercrombie, Blaustein, Keck, Mecom, and Murchison. Sun Belt wealth also came of economic age with Hughes (aerospace, movies), Bechtel (construction), and Blakley (transportation).
The oil industry leaned Democratic during the New Deal years, partly because so many operators came from one-party Texas, but more tangibly because Democratic Washington enlarged and protected the oil depletion allowance. The New Deal’s single biggest tax break for industry, this petroleum sector version of a depreciation write-off allowed the new oil fortunes to sidestep the sharp scythe of that era’s income tax. The Sun Belt aerospace, construction, and airline fortunes also traded on governmental connections, beginning with their reliance on New Deal and war-spurred regional growth. (Ibid.)The New Deal and the Roosevelt administration in some ways attacked the old centers of wealth and power and to some degree it was completely necessary to woe the Southern and Southwestern capitalists if Roosevelt had a chance in hell of passing his New Deal agenda. Phillips is completely right that some commentators go way too far in posing the conflict as being one between East-Coasters versus Cowboys but its quite clear the new wealth and new billionaires who arose out of Post-War boom were largely nouveau-riche and Western in origin.
Phillips pithily dubs this influx of oil wealth which manifests itself dramatically on the 1982 richest as "the Petroleum Club of the United States" and little wonder then oil is dominant on the rich-list as this field was perhaps the New Deal's biggest beneficiary and the slow-cutting of high-war taxes occurred later and took longer to take effect. US Treasurer Morgenthau had declared during WWII that his intention was to "move the financial center of the world from London and Wall Street to the U.S. Treasury" and indeed this was in-line with the New Deal re-orientation of power that Phillips describes:
Its core, mirroring the pre-1932 inner councils of the 1920s Democratic Party, was capitalist: the Democratic minority of commercial and investment bankers (mostly southern, western, or Jewish) at odds with the Morgan axis, plus dozens of southern and western cotton, oil, mining, and tobacco moguls along with top executives and businessmen from antitariff industries such as farm machinery, agribusiness, and copper. Other enlistees included entrepreneurs in retailing, communications, housing, and construction, who saw their fortunes linked to Keynesian stimulus and middle-class growth, as well as corporate leaders in emerging technology (from aviation to General Electric and International Business Machines). In sectional terms, the new winners were the South and the big cities, both of which benefited from government spending and much-increased influence in Washington. Labor unions, in turn, rode New Deal favor to membership gains and higher wages for workers.Few of the emerging Democratic capitalists appeared in top national wealth ranks before the 1940s and 1950s...The wealth realignment hinted at in 1936 is now obvious. No Morgan nor any major New York banker allied to the House of Morgan appears in the top twenty-five. The two self-made financial operators who do, Joseph P. Kennedy and Clarence Dillon, both supported FDR in 1936...(Ibid.)But ironically enough the New Deal Democrats were vanquished by themselves by the Monster they conjured as the new capitalists from the Southwestern and Southern states leaned heavily to the right buoyed by the living memory of relatively recent conquest, ethnically cleansing, and a contemporary social system that legalized and culturally sanctified segregation. Adam Curtis wrote an excellent piece on right-wing Texas oil billionaire H.L. Hunt (who appears on all the wealth lists) and his right-wing Media Empire that proceeded that of Fox Media Billionaire Rupert Murdoch:
It didn't matter that these men were largely the prime capitalist beneficiaries of New Deal America once they had gotten their wealth and power they would keep pushing for more. Ironically enough, these men would be the ones who fought the hardest to undo the social democratic Keynesian "compromise" as its often called. Olmsted's book Right Out of California: The 1930s and the Big Business Roots of Modern Conservatism details the right-wing reaction led politically by ex-President Herbert Hoover and a coterie of agro-business conglomerates against the militant migrant workers movement during the Depression. Of course, it was not enough that the LAPD was widely-known to execute communists and radicals in a manner fitting of Mussolini's squadristi but the fact that the migrant workers believed they were included in the new tolerance for labor and minimum wage measures passed by Roosevelt created a vociferous reaction among Californian capitalists. In fact, the migrant workers had not been included in the New Deal (agricultural workers in general had been excluded) but the Agribusiness companies and bosses mobilized to fight against the struggle of agricultural workers for basic human rights amidst the more relaxed atmosphere and never forgot this grudge. So, its not a complete surprise at all that not only did some of America and the World's richest men in the country come out of California long-before the true boom of Silicon Valley but some of the fiercest right-wing politicians and ideologues (such as McCarthy, Nixon, Reagan etc.) hailed from this state. The New Deal Democrats died but the state-support for Agribusiness and US "Agrarian imperialism" as it came to be called continued to flourish until it became the multi-trillion dollar industry that it is today. Increasingly, the country continued its right-ward shift economically if not always culturally and the men who fed upon Roosevelt were reborn as convinced Hooverites.Hunt was part of a group of extreme right-wing oil men in Texas who had enormous influence because of their wealth. There is a brilliant book written about this group - The Big Rich by Bryan Burrough. Burrough describes how they had first risen up in the 1930s because they loathed President Roosevelt - "a nigger-loving communist", as one oil man called him. They were convinced that Roosevelt's New Deal was really run by Jews and communists - or "social vermin" as they politely put it.A Texas congressman called Sam Rayburn summed up this group of right-wing oil men. "All they do is hate" - he said. (Curtis)
FDR: Ruling Class Capitalist President
We will not here deal with the accusation that FDR was some sort of secret communist, or, as the less extreme wings of the American Right hold was merely a typical liberal useful idiot who willfully ignored or did not fight the communist threat hard enough--that will be handled in another post refuting the extreme right perspective on the Cold War. For now we can use Roosevelt's pre-war domestic policy as guiding-point in ascertaining the real class alliances of Roosevelt as Alan Nasser highlights for us in a brilliant analysis of New Deal economic policy:
Commenting on the final legislation, historian William E. Leuchtenburg observes that “[T]he law was an astonishingly inept and conservative piece of legislation. In no other welfare system in the world did the state shirk all responsibility for old-age indigency and insist that funds be taken out of the current earnings of workers." ...As radical redistribution gained popularity, the administration became defensive, putting forward unconvincing arguments scoffed by conservatives and liberals alike. Roosevelt contended that the payroll tax would be “fair” to employees by virtue of the requirment that the employer too pay a tax into the same fund, demonstrating that the tax was not regressive Mainstream economists of the time dismissed the argument, and for good reason. Orthodox theory taught that employers would pay workers only the money value of their marginal revenue product, the value of their contribution to the last unit of output produced. If the employer was required to pay a tax based on the worker’s wage, which would return to the worker in the form of old age insurance, then that tax was equivalent to a wage increase. The rational response of capitalist employers would be either to offer lower wages to offset the employer tax, or to raise prices, or both.This was obvious even to administration members who defended Roosevelt’s payroll tax. The conservative Treasury Secretary Henry A. Morgenthau and the more liberal Labor Secretary Frances Perkins conceded that the working class would be saddled with the entire burden of financing Social Security. In a press conference Roosevelt himself confessed that he understood this: “[O]bviously in 9,999 cases out of 10,000” the employer share of payroll taxes “will be passed on in the cost of goods sold.” (11) They were right. It is now generally accepted that the employer tax is offset by a reduced wage level.Was there a silver lining? Would all the money that the workers paid out in the form of this veiled recessive tax go towards providing for their old age? It turns out the answer is no:
Roosevelt and his fiscally conservative Treasury Secretary Henry Morgenthau were in accord that the contributory system had the double economic advantage of linking social benefits to work and ameliorating some of government’s financial problems. Morgenthau anticipated that Social Security taxes could be lent to the Treasury to finance New Deal deficits (much as Lyndon Johnson in 1967 concealed deficits by creating the “unified budget,” counting Social Security surpluses as part of the government’s general operating budget), reducing government’s borrowing needs. Funding Social Security out of general revenues would not have permitted this gambit. (Ibid.)What would it be spent it on then? It turns out that it would go towards funding the expansion of the US government's newfound role as intergovernmental world banker, towards sustaining the give-aways for big business made during the New Deal period, as well as funding Roosevelt's soon-to-be invented military-industrial complex as Michael Doliner shows:
Perhaps the biggest beneficiary of the war economy created by Roosevelt was the tech industry but it would take a while before the Silicon oligarchs exploded to power and prominence. The tech industry actually experienced something like a boom and then a cataclysmic bust in its fortunes in which much like the popping of the 90s tech bubble these companies became textbook examples of the kinds of stock sober and prudent businessmen would do well to avoid:One such revelation is the tale of the origin of the military-industrial complex. For this did not exist before Roosevelt. In 1938 Roosevelt had been in office for six years during which his primary concern was the Depression. The New Deal, which actually consisted of three waves of programs, had failed. By 1938 “manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.” The Depression was growing deeper again after all the New Deal programs. The unemployment rate had climbed back up to 19% and was rising. 11 million Americans were unemployed. Roosevelt was out of tricks to save capitalism and he was eying an unprecedented third term in 1940. The natives were restless. Flynn reveals this conversation, attributed to Cordell Hull, then Secretary of State:In January, 1938, I talked with one of the President’s most in-intimate advisers. I asked him if the President knew we were in a Depression. He said that of course he did. I asked what the President proposed to do. He answered: “Resume spending.” I then suggested he would find difficulty in getting objects on which the federal government could spend. He said he knew that. What, then, I asked, will the President spend on? He laughed and replied in a single word: “Battleships.” I asked why. He said: “You know we are going to have a war.” And when I asked whom we were going to fight he said “Japan” and when I asked where and what about, he said “in South America.” “Well,” I said, “you are moving logically there. If your only hope is spending and the only thing you have to spend on is national defense, then you have got to have an enemy to defend against and a war in prospect. (The Roosevelt Myth p 174)
Regarding the economic policy in America's War economy historian Jacques Pauwels writes:Among the very rich, the holdings of the automotive Fords, chemical duPonts, petroleum Rockefellers, and diversified Mellons survived, especially where tied up in trusts. But because of the stock market collapse and consumer retrenchment, new technologies like radio, aviation, movies, and telephones failed to launch the usual new great fortunes. Joseph P. Kennedy, whose new fortune included the RKO theater chain, was the principal exception. Eldridge Johnson of Victor Phonograph was a lesser one.Technology stocks epitomized the collapse as they did the bubble. The Radio Corporation of America (RCA), one of the decade’s most-traded stocks, became a symbol of its excesses. Selling at $2.50 a share in 1921, it went to 85 in 1928 and then 549 in 1929 before crashing to peanuts in 1932. General Motors plummeted from 73 in 1929 to a paltry 8 in July 1932. Ryan Aeronautic, another favorite of speculators, surged from 69 to 289 during 1928 and then crash-dived in 1929. American Telephone and Telegraph sank from 304 to 72. Shares in Samuel Insull’s ill-fated personal utility holding company went from $7.54 each in early 1929 to $150 by August and then to bankruptcy three years later. (Phillips Ibid.)
It cannot be denied that in America the Great Depression only ended during, and because of, the Second World War. (Even the greatest admirers of President Roosevelt admit that his much-publicized New Deal policies brought little or no relief.) Economic demand rose spectacularly when the war which had started in Europe, and in which the USA itself was not an active participant before 1942, allowed American industry to produce unlimited amounts of war equipment. Between 1940 and 1945, the American state would spend no less than 185 billion dollar on such equipment, and the military expenditures’ share of the GNP thus rose between 1939 and 1945 from an insignificant 1,5 per cent to approximately 40 per cent. In addition, American industry also supplied gargantuan amounts of equipment to the British and even the Soviets via Lend-Lease. (In Germany, meanwhile, the subsidiaries of American corporations such as Ford, GM, and ITT produced all sorts of planes and tanks and other martial toys for the Nazi’s, also after Pearl Harbor, but that is a different story.) The key problem of the Great Depression – the disequilibrium between supply and demand – was thus resolved because the state “primed the pump” of economic demand by means of huge orders of a military nature.Between 1942 and 1945, writes the historian Stuart D. Brandes, the net profits of America’s 2,000 biggest firms were more than 40 per cent higher than during the period 1936-1939. Such a “profit boom” was possible, he explains, because the state ordered billions of dollars of military equipment, failed to institute price controls, and taxed profits little if at all. This largesse benefited the American business world in general, but in particular that relatively restricted elite of big corporations known as “big business” or “corporate America.” During the war, a total of less than 60 firms obtained 75 per cent of all lucrative military and other state orders. The big corporations – Ford, IBM, etc. – revealed themselves to be the “war hogs,” writes Brandes, that gormandized at the plentiful trough of the state’s military expenditures. IBM, for example, increased its annual sales between 1940 and 1945 from 46 to 140 million dollar thanks to war-related orders, and its profits skyrocketed accordingly.But in the mad race to lift war production it turned out that America's corporations weren't quite up to the task and so the state resorted to literal state-capitalism and while socializing the costs and basis of war production was quite pleased to keep the traditional capitalist method of private expropriation of profit:
America’s big corporations exploited their Fordist expertise to the fullest in order to boost production, but even that was not sufficient to meet the wartime needs of the American state. Much more equipment was needed, and in order to produce it, America needed new factories and even more efficient technology. These new assets were duly stamped out of the ground, and on account of this the total value of all productive facilities of the nation increased between 1939 and 1945 from 40 to 66 billion dollar. However, it was not the private sector that undertook all these new investments; on account of its disagreeable experiences with overproduction during the thirties, America’s businesspeople found this task too risky. So the state did the job by investing 17 billion dollar in more than 2,000 defense-related projects. In return for a nominal fee, privately owned corporations were permitted to rent these brand-new factories in order to produce…and to make money by selling the output back to the state. Moreover, when the war was over and Washington decided to divest itself of these investments, the nation’s big corporations purchased them for half, and in many cases only one third, of the real value. How did America finance the war, how did Washington pay the lofty bills presented by GM, ITT, and the other corporate suppliers of war equipment? The answer is: partly by means of taxation – about 45 per cent -, but much more through loans – approximately 55 per cent. On account of this, the public debt increased dramatically, namely, from 3 billion dollar in 1939 to no less than 45 billion dollar in 1945. In theory, this debt should have been reduced, or wiped out altogether, by levying taxes on the huge profits pocketed during the war by America’s big corporations, but the reality was different. As already noted, the American state failed to meaningfully tax corporate America’s windfall profits, allowed the public debt to mushroom, and paid its bills, and the interest on its loans, with its general revenues, that is, by means of the income generated by direct and indirect taxes. Particularly on account of the regressive Revenue Act introduced in October 1942, these taxes were paid increasingly by workers and other low-income Americans, rather than by the super-rich and the corporations of which the latter were the owners, major shareholders, and/or top managers. “The burden of financing the war,” observes the American historian Sean Dennis Cashman, “[was] sloughed firmly upon the shoulders of the poorer members of society. (Pauwels Ibid.)Phillips notes the controversy of expense accounts and other forms of war-profiteering during war time:
The diaries and letters of military officers from wealthy families contain pleased comments—brief asides from the race across France in the summer of 1944 or island-hopping in the Pacific—on the welcome upward movement of their stocks. The Dow-Jones Industrial Average’s leap in nominal dollars from 93 in April 1942 to almost 200 by the end of 1945 nearly twinned the Dow’s early bull run from late 1924 to late 1927, save that rising prices weakened the parallel. People living off dividends alone lost ground, but sales of stock were yielding handsome capital gains. (Ibid.)
As can be seen the War was a real shot in the arm for capitalism and the tie-in of stock prices to military campaigns is reminiscent of the behavior of the German stock market during WWII (euphoric in the early stages in a state of collapse after Stalingrad) it tells us quite a bit about the behavior of capitalist societies at work though most economists excerpt major conflicts out of their economic analysis and prefer neat periodization (pre-war, inter-war, post-war etc.) but it turns out that less changes about the base and fundamentals of capitalist society during this most extreme form of crisis then is typically thought. In fact, war is rarely thought of as an economic crisis but is only a social or political crisis but for the workers who experience it, the governments who must balance budgets, the businesses who are forcefully cut out of markets, face war rationing, or are expropriated by the enemy it is an economic crisis. Different in nature but no less profound in its consequences and much like a major depression--war itself can set the stage for economic renewal. No wonder then that radical political economists Sweezy and Baran held that the United States economy had not truly exited from the crisis of the Depression but in fact that crisis had been displaced and manifested itself in the tendency towards stagnation and other various crises at work today. Put through an inflation calculator the 185 billion spent in WWII comes out at 4.5 trillion dollars--already the cost of the War on Terror has exceeded that at 4.79 trillion dollars. Let us continue with our method of estimating the gold-cost of that sum which would be $6.7 trillion and the remaining deficit would be $1.6 trillion in gold terms. What is the point of listing the conventional method of historical estimate alongside a gold-value estimate? To high-light the disparity between historical estimates of such economic costs that tend to be rose-tinted with hind-sight and the reality. The gold-value of the 17 billion dollars invested directly by the US government into defense related industry is a gold value of 621 billion dollars--the US government sell-off of these investments is then a give-away comparable to the first wave of bank bailouts under George Bush. In spite of the fixing of the dollar at 35 an ounce the close of the 40s saw the dollar-price of gold shoot up to 42 dollars an ounce an early sign that the market did not believe the US government had the gold collateral to value the dollar at what they claimed the value was, this of course stabilized for a time. But it seems to have been a little-noticed prelude to the momentous crisis that would grip the world decades later.
(Un)Controlled Chaos: American Super-Imperialism and the World Ablaze
The United States did not follow the traditional European template in its ascent to world power but in fact had to marshall new and frightening weapons to make its way in the world. From its manipulation and harsh creditor positions vis-a-vis its allies in WWI using state-finance capital earned the US government the derisive name among Europeans of "Uncle Shylock" particularly interesting was the way that it played both sides of the creditor relationship demanding prompt repayment of its state-loans by its allies while private Wall Street creditors lent like mad to Germany who in turn used that money to pay reparations to the Entente powers. With the onset of the Great Depression (which was caused by classic overproduction and low-profitability and not merely the debt/inequality issues as many presume) the US government expanded its powers as the world banker in order to do for Wall Street and Big Business what it couldn't do itself via tax payer expense. The extreme use of state-finance capital in building American hegemony is what prompted Michael Hudson to dub the American way of imperial power super-imperialism. The financial exploitation of rival imperialist nations and allies by the United States also inspired Hudson's coining of the term--America was an Empire that ate other Empires even that of its "friends". To be sure, it can't be said that America's rise to power was fundamentally at odds with the Leninist theory of imperialism only that it utilized state-power to a greater degree then its European rivals had and squeezed those rivals in part because those rivals had control over most the world's colonies. Even in nominally independent neocolonial regions like those of Latin America and parts of the Middle East the US was in a neck and neck competition with the British Empire with Great Britain actually retaining a greater market share of industrial goods in the Latin American market then the US in the 1930s. Hudson tells the intricate story of how the lend-lease program and Bretton Woods shook down the British and other European Empires while even breaking into the Soviet market doing a burst of high-velocity trade with Russia that hadn't been seen since American sugar-runners monopolized the Russian market in the Napoleonic Wars and wouldn't be seen again. Refugee capital in the form of refugee capital/bullion from the Old World flowed into the veins of the American body further concentrating the immense pile of gold that been built up on the North American continent now essentially under the control of the US government with the state-seizure/heavy regulation of gold bullion and the irredeemability of the dollar domestically.
With the end of WWII it turned out that the US essentially held all the cards (or most of them at least...) as a world hungry for both money and commodities to kickstart the capitalist machine needed what the US had--gold, but the US was reluctant to trade that hard-won metal for anything other then a slip of paper that guaranteed ownership of the physical metal. Having the largest in-tact industrial base and the economy effected least negatively among the war participants it easily could call the shots in trade and negotiation. But big business still needed a financier and that guy, at least to start with, was Uncle Sam who bent the currency exchange regulations, international monetary policy agreements, and international import-export banks and new world financial institutions for managing intra-state debt like (IMF, World Bank etc.) to American advantage. American disadvantages such as high-costs of labor that had previously impeded its expansion on the world market suddenly became advantages as the American worker became the world consumer of last resort and American industry seemingly paid no penalty for the "sin" of failing to compete with the all-too familiar industrial race to the bottom thanks to the financial wizardry of men like Morgenthau and the controversial Harry Dexter White. Keynes wanted a new international financial institution that would liberalize credit to the real economy but instead the Americans presented a straight-jacket that they put over non-American governments and finance. Two ways to skin a cat--international private finance capital was just as much diminished out of the deal that came out of Bretton Woods. Approximately 12 billion dollars out of the US state coffers was poured into the Marshall Plan system to reinvigorate a decaying, bleeding, and wounded European capitalist system. If we measure via the gold-value of that sum then we come up with a real value of 438 billion dollars if we use the typical measure of inflation then its more like 130 billion dollars. Some 2% of US GNP is estimated to have went into the Marshall plan but few actually protested this state of affairs one notable complaint came from Henry Cabot Lodge: "“There is a small, bloated, selfish class of people whose assets have been spread all over the place...people of moderate means in this country are being taxed to support a foreign aid program which the well-to-do people abroad are not helping to support." (Shaxton Treasure Islands: Dirty Money, Tax Havens, and the Men Who Stole Your Cash) Shaxton notes that a 1947 US government analysis found that the European ruling class was actually not completely broke but held assets approximating $4.3 billion which translates to a gold value of 148 billion and would conservatively using an inflation index be about 52 billion in 2017. In fact, Shaxton is reading the wrong-way this would indicate that the paper reflects the American creditor position that it has continually stressed since World War I that all debts are payable--in fact, it was very popular for American senators to bang-on about how Britain could sell its museum pieces to pay its debts if it had to in the interwar period. Roosevelt himself was well-known for telling European governments they could nationalize their assets, monetize them, and give that surplus over to the US-- such was his "socialism"! Shaxton is correct in that observers at the time noticed more money (both legitimate and hot) flowing in the US direction then what they lent out and that is not unusual in the creditor-debtor relationship, nor is it unusual considering the practical US industrial monopoly over the world market but it does not suggest that Europe had a greater ability to pay then what they did.
But it does underscore some key facts which is that the wealth of the rich in Europe was not tapped to bring about the renewal of European prosperity but in fact the US taxpayer provided this. And while US business benefited handsomely from European money flowing out of Europe as a result of its monopoly position and the policies of its government, neither Washington, nor the elite of Europe was keen to stop that flow. It was to the American advantage to leave European markets unregulated to let the European elites indulge in such moral hazard at domestic taxpayer expense, after-all, as any good banker or loan shark knows its much easier to skin a debtor when the surface terms are generous. It was in the interest of the US to allow Europe to stay as liberal as it chose to be and let the American state would be of one-mind but this would set the stage for the fall of international financial regulation. Lest we think that the US government was driven by some sort of anti-bank animus and was somehow militantly opposed to private finance capital we should keep in mind that the transfer-payments that occurred via the state, especially if we keep in mind its real gold value, were of such an order of magnitude that no private financier could do it, nor would they be willing to take the risk. Even Rockefeller at his height couldn't finance a Marshall Plan and its doubtful that J.P. Morgan or the Rothschild family at their height could do it either. American finance needed the American state to back it abroad for the same reason that American industry needed it--it was too weak on its own. Fast-forward 70 years later and London is still the capital of world finance, not Wall Street, despite the popular belief of the average American citizen to the contrary. Thus we can say that the governmental support for American big business and finance was essential for American capitalism to thrive and to hold the position of world dominance. Had state-support been lacking we would not be talking about American leadership of the world or the "free world" today...
As for Europe and Japan themselves I'm still studying the holdings of the elite there and it seems to be that it is less-frequently or deeply studied then that of the United States, at least the freely available literature in English. Men like Agnelli ("Italy's uncrowned King") would control a larger portion of Italian GDP then Rockefeller ever did in the United States and yet these men like these who supported fascism were restored to power in Western Europe including the prominent Nazi industrialist Krupp. Scheidel estimates that typically between 60-90% of great European fortunes were destroyed by WWII which was part of what made "The Great Compression" a world-wide phenomenon but still we can see that even by the US government's admission there was still some remainder of those great fortunes left. The picture is clear the rich were back in the saddle in Europe, diminished and humiliated, perhaps, but buoyed by fresh divisions of American money.
The Saturday-Night Super-Power Hustle and the London banking Disco
The treason of Nikita Khrushchev to the cause of socialism and the Post-War rise of international finance actually have a surprising commonality. In 1957, the Moscow Narody bank deposited a few hundred thousand dollars in London and slowly it began to pour in kicking off the rise of the Eurodollar and Eurobond market. This trickle slowly became a flood till the point that it became the largest pool of mobile capital in the world and the go-to for the laundering of criminal money--it became the new normal rather then being the strange semi-illicit outlier. Shaxton describes what he calls the creation of the British spider-web following the joint-US-Soviet diplomatic response to the Anglo-French-Israeli occupation of the Suez Canal that sharply drove home the message that the old days of conventional European-colonialist imperialism were over. Following on the heels of de-colonization not long after the UK turned what remained of its Empire into a network of financial tendrils stretching across the world but rooted firmly in London. As the oldest capitalist power and the one that had experienced the most dramatic decline in power in the new arrangement of world power UK growth was slower then that of the US and its European contemporaries, partly as the result of its relative decline and partly by design. Ironically enough, for a nation that was among the most egalitarian European capitalist nations post-war it would be the black hole of the City of London that would serve as the playground for the rich in a world where capital experienced or felt it had experienced immense damage to its power and prestige. A London capitalist bragged of The City in 1970 that it was :
...a banking bazaar unrivalled in history. The Moscow Narodny Bank, whether it is appropriate Bolshevik doctrine or not, sits almost cheek by jowl with the Bank of China, and rubs elbows with the capitalist banking institutions of the West. There are about three times the number of American commercial banks in the City as there are in New York. The City of London beats Baghdad as a bazaar by a country mile. (Shaxton Ibid.)The survival of the British Empire alongside the strong post-war growth of Western Europe and Japan was a sign that the Wall Street-Washington designed capitalist world order was slipping out of America's fingertips. Just two years earlier the London gold pool where America's capitalist rivals had concentrated their gold reserves to help hold up the dollar collapsed due to the impossibility of sustaining the US trade deficit and French intransigence towards both the dollar and the Vietnam War which was the primary cause of the American deficit. Soon the US would abandon the gold cover radically devaluing the dollar (particularly German and Japanese central banks/investors who traded their gold for dollars) and magnifying the role of international finance in resolving currency issues caused by the collapse of Bretton Woods.
As can be seen the pre-WWII income-share of the financial sector had returned by the 1960s meaning that the long-dreamt of Euthanasia of the Rentier and the fall of the financial aristocracy had failed to come to pass in just over 20 years the financial parasite resumed his former throne in spite of a quite spirited campaign and byzantine array of laws and regulations directed against him. Some graphings of this share that I have unfortunately unable to find show this share peaking in the twenties and not recovering until the 60s which would mesh quite well with the data provided by Scheidel and others showing that the Depression was a major force of leveling in the US because it hit her harder then any other developed country in terms of proportion.
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| Source: Phillips |
This graph gives us an intriguing answer to a burning question which is the question of why income inequality receded at certain points during the "Golden Age" of 20th century capitalism in the US? In her book Dark Money: The Hidden History of the Billionaires Who Fund the Radical Right Jane Meyer points out that in the early 70s income inequality was at its lowest point in US history and that this was the result of a generations of fairly high-socially progressive income and other taxes. But this begs the question doesn't it? Why wasn't income inequality at its lowest point when said progressive taxes were at their highest in the 1950s? We should turn our attention to the overlooked crises of the late 60s and the early 70s for the answer as can be seen the share of the wealth if not always the total mass itself had a tendency to fall during economic crisis.
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| CEO Pay |
In fact, it seems whatever decline in income inequality that occurred was fairly brief because by about 1978 or so the CEO pay ratio had risen to about 34.9:1 so it seems likely that the crisis of the late 60s and early 70s was a true crisis of capital and income inequality fell because business was effected to the point that even the executives had to cut back. Marginal tax rates on personal income were still quite high too which may have disincentized the growth of executive pay as a response to crisis as happened in the Great Depression but once the panic was over it seems that began to take a similar path. Those who were hurt the worst by the 70s recession as Dumenil and Levy persuasively argue were in the top .01% specifically those who lived off the wealth of their stocks, bonds, etc. and while the Volcker shock may have restored to the big capitalists what they had lost the executive managerial class continued to bolster their power in the board room. Kuczynsky giving a run-down of the development of this phenomenon in the Great Depression describes it thus:
What is the meaning of this relative development of salaries and dividends? There are various reasons for it. The most important is the big employers come to rely more and more on salaries in contrast to former times when they relied mainly on income from dividends. By cutting down on dividends, they are able to increase the accumulation of capital, strengthen the financial reserves of their companies and thus to increase their wealth and means of production. By paying themselves salaries and frequently increasing them, they guarantee themselves a luxurious standard of living. By cutting down on dividends they skin the small shareholders (who are not at the same time directors) and are able to keep the money for themselves, that is for the purpose of increasing their means of production (A Short History of Labour Conditions In Germany Under Fascism 23-24)We see here a major cause of the growth in the managerial pay resulting in the 80s battle between "activist shareholders" and those executives who insulated their companies via "poison pill" strategies of loading themselves up with debt and pushing for company mergers themselves. We can conclude that the crises of the 70s led to an increasing payouts to CEOs before the Reagan shocks (doubtlessly this accelerated its development) for the reasons outlined by Kuczynsky. While this was a growth in 1% income as we've seen the real inequality in the United States was and still is inequality of wealth, of assets, and the capitalist leadership of the US designed the American tax code deliberately to preserve elite wealth and power. For some reason though Western democracies and bourgeois economists have always been more concerned with income inequity then that of wealth and perhaps the reason for that is that if income inequality is too extreme it makes a mockery of the principle of equality of opportunity whereas the freedom to accumulate assets is the principle of capital. The main place where New Dealers dealt with the problem of wealth inequity and capital accumulation was the problem of inheritance which also makes a mockery of the idea of equal opportunity within the market economy but as we can see from the lists the power of blue-blood families was well preserved in spite of this. But if we look at the Du Pont family's wealth in gold-terms we find that the 1982 estimate would translate into $28.6 billion dollars today whereas put through an inflation calculator their wealth in that year would stand at about $25.3 billion. That means that however you calculate it the fall in the value of the dollar was both dramatic and real and we point out based on our previous calculations that in gold terms the Mellon family was extremely rich in 1957 and even richer in 1968. 1980 was even worse for the real value of the asset portfolios of the elites with the price of an ounce of gold standing at $594 then if we do the same calculation the Du Pont family wealth would only be worth $21 billion today. No wonder the Volcker Shock was promptly put into action bringing interest rates up to an unprecedented 20%--citizens, farmers, and the developing countries be damned the holdings of the elite had to be preserved. The theory put forth by Dumenil and Levy that neoliberalism was a program put forth to restore elite power is even more dramatic when the dollar is measured in gold-terms as the mere $2.8 billion of the Mellon family translated into $117 billion dollars and while the Du Pont family's nominal dollar fortune is 3.5 times the Mellon family 1968 estimate in gold-value terms it was worth almost five times less!
Vietnam had bankrupted the United States by the early 70s and the only thing left for Richard Nixon to do was to remove the gold standard completely which had reached the point of mere legal fiction by the late 60s. The recessions of the 70s were mostly blamed on the "oil shock" thesis but as Williams points out:
The Keynesian economists claimed that the Arab oil boycott of late 1973 and early 1974 followed by the sharp rise in the price of oil carried out by the “OPEC cartel” had caused prices in general to soar. This inflation, in turn, reduced real purchasing power, which led to the severe recession of 1974-75. Indeed, the capitalist media and most economists of the time described the recession of 1974-75 as “oil-induced.”The Keynesians economists overlooked the fact that the global oil industry had long been dominated by the “seven sisters” international oil cartel, which OPEC was now challenging. (1) Why was the oil cartel of the oil-producing oppressed nations inflationary, while the oil cartel of the big oil corporations owned by American and European capitalists was not?
A good question, elsewhere Williams argues that the it was actually the devaluation of the dollar that caused the price inflation of oil and not a supply issue. In fact, rising oil prices were not such a bad thing for the US as it was one of the world's largest oil suppliers and had de facto political and economic control over one of the other great supplier's--Iran. Likewise, the other super-power in the Soviet Union was one of the other largest oil&gas suppliers and it was precisely at this time that talks of a new détente came. America was not self-sufficient in oil but unlike the vast majority of its industrialized "partners" in Western Europe and Japan it did have vast domestic production and production capacity. Long-lines at gas stations filled the streets in America and the real spending power of the average worker was harmed but unlike in Europe and Japan the threat that the factories and modern capitalism would grind to a halt wasn't a real one. Much about the "oil shock" resembled a self-inflicted gun-shot wound as wikipedia notes: "Because oil was priced in dollars, oil producers' real income decreased. In September 1971, OPEC issued a joint communiqué stating that, from then on, they would price oil in terms of a fixed amount of gold." The OPEC producers did not in fact adjust to changing market conditions until the Yom Kippur War gave the pretext to do so in 1973 and while the US unilaterally abolished the gold standard altogether the US government insisted the dollar was worth 42 dollars to a troy ounce--this fiction was not completely done away with until 1976. It's also notable to point out that: "Inflation would have surged, save that the government simultaneously imposed wage and price controls...Economically, once they were removed in 1973, inflation broke free again, reaching 6 percent again that year, 11 percent in 1974...” (Phillips) this indeed would support Williams contention because it appears that the only thing stabilizing things in midst of this crisis was the implementation of price-controls.
But even if we were to permit the notion that it was a supply issue was everything what it seemed to be? Nixon in fact had known the Yom Kippur War would happen and that the Israelis would be the victor and that they weren't in real danger and that the Arabs would erect an oil boycott in response. John Perkins who was involved in what he calls an economic revolution in Saudi Arabia had helped design much of Saudi infrastructure and its growth path--Saudi Arabia may have been embargoing the US and the West at the time but its built its cities during the embargo using the cash inflow to buy from American companies and contractors it placed its money in American banks. Three of the other OPEC members Venezuela, Ecuador, and Indonesia were also not just good American allies but in fact unilaterally controlled puppet states.
But even if we were to permit the notion that it was a supply issue was everything what it seemed to be? Nixon in fact had known the Yom Kippur War would happen and that the Israelis would be the victor and that they weren't in real danger and that the Arabs would erect an oil boycott in response. John Perkins who was involved in what he calls an economic revolution in Saudi Arabia had helped design much of Saudi infrastructure and its growth path--Saudi Arabia may have been embargoing the US and the West at the time but its built its cities during the embargo using the cash inflow to buy from American companies and contractors it placed its money in American banks. Three of the other OPEC members Venezuela, Ecuador, and Indonesia were also not just good American allies but in fact unilaterally controlled puppet states.
One of the go-betweens in the Super-Power game at the time was oil-tycoon Armand Hammer who was head of Occidental Petroleum and a go-between for 7 US presidents and Soviet officials and ironically enough a major contributor to the Republican Party including Richard Nixon's controversial CREEP campaign. He was something of an odd-ball among a coterie of radically right-wing billionaires who concentrated in Texas and California--Armand had made his fortune trading with the Soviets under Lenin and it appears that he was one of the few American capitalists that had his trading privileges preserved under Stalin (though apparently they were anything but close) and he also had close relations with the Soviet revisionists. But Armand's continued prominence in an America swinging both economically and culturally to the Right had less to do with the mere size of his known fortune or an imagined communist conspiracy inside the government then it had to do with the principle that the American Establishment including the Right was operating on. To state it simply what they were primarily worried about was not so much the ideology of the other super-power or that it might rebel too stringently against the American-centered world order but about the actions and movements of workers and oppressed nation at home and under its own dominion. Which is ironically why Nixon was successful in bringing the United States, Soviet Union, and China to the negotiating table even after decades of wars fought in Asia and elsewhere in the name of anti-communism costing millions of lives. The 1970s reaction to the the increasing radicalization of workers and youth in the 1960s wasn't so much fought against the Soviet or Chinese threat as it was against the threat to the existing class system at home spurred by pressures building up from within.
According to CIA agent John Stockwell the open hot conflicts and verbal-antipathies issued by leaders and the press on both sides of the Cold War concealed an underlying collaboration between the two super-powers:
Blum comments on the mutually-reinforcing logic of US imperialism and Soviet social-imperialism at the time "Proponents of 'fighting fire with fire' come perilously close at times to arguing
that if the KGB, for example, had a hand in the overthrow of the Czechoslovak
government in 1968, it is OK for the CIA to have a hand in the overthrow of the Chilean
government in 1973. It's as if the destruction of democracy by the KGB deposits funds
in a bank account from which the CIA is then justified in making withdrawals." (Ibid. 11) The history of the Cold War shows that there was more at work then a mere ideological battle between Western capitalism and Eastern socialism but as we now know the facts about the overthrow/assasination of numerous leaders in the Third World (such as Lumumba, Mossadegh, Sukarno, Allende, etc.) who weren't so much communists or Soviet puppets as much as they were nationalists and/or democrats who felt stifled by the new "post-colonial" order and rebelled against the American yoke. But lest we be tempted to toe-dip into some conspiracies about how the United States is secretly run by communists or international Jewry/Masons or whatever narrative used by the extreme right at the moment we would do well to keep in mind Michael Parenti's point that the consistent point of US foreign policy has been to support right-wing (except in the case of the Axis Powers that threatened its rise to world hegemony) governments and movements abroad and those socialist governments that the United States supported (e.g. Yugoslavia, the Khmer Rogue) are truly the exceptions that prove the rule. According to CIA agent John Stockwell the open hot conflicts and verbal-antipathies issued by leaders and the press on both sides of the Cold War concealed an underlying collaboration between the two super-powers:
Actually, at least in more routine operations, case officers most fear the US ambassador and his staff, then restrictive headquarters cables, then curious, gossipy neighbors in the local community, as potential threats to operations. Next would come the local police, then the press. Last of all is the KGB—in my twelve years of case officering I never saw or heard of a situation in which the KGB attacked or obstructed a CIA operation...It isn't done [murder of rival spies]. If a CIA case officer has a flat tire in the dark of night on a lonely road, he will not hesitate to accept a ride from a KGB officer—likely the two would detour to some bar for a drink together. In fact CIA and KGB officers entertain each other frequently in their homes. The CIA's files are full of mention of such relationships in almost every African station. (Blum, William. Killing Hope: US military and CIA operations since WWII pg.10-11)
Previous to the oil crisis the European and Japanese "miracle economies" were threatening to outpace the United States; Japan in particular was racking up double-digit economic growth leading to fears that the United States would be eclipsed by Japan by the end of the 70s. America's principle rival, the Soviet Union was growing quite rapidly with a post-war average of 5-6% prior to 1970 (Allen, Robert C. From Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution pg.10) but funnily enough both super-powers were facing economic difficulties and allies that were either stirring against their hegemony or outpacing them in the realm of economics. To return to Perkins, Saudi Arabia had pushed for the boycott and in a sense could be considered a geopolitical "enemy" of US interests and yet it had replaced Japan's spot as the miracle economy reaching double digit rates and depositing the billions in Wall Street banks. The flood of Gulf State oil money with seemingly nowhere to go but the US was another incremental factor in the deregulation of finance--this was a fact grasped by the 1976 movie Network as violently propounded by Arthur Jensen: "You think you merely stopped a business deal. That is not the case. The Arabs have taken billions of dollars out of this country, and now they must put it back!" The Gulf State role in the radical transformation of international finance is also a point of analysis that scholar David Harvey brings out in his works. The fact that many Arab states sell and price oil exclusively in dollars has been a factor that has kept many nations using the dollar; the alliance forged by FDR and Saudi Arabia was another great service the late president did for American capitalism as it was known by the OSS at the time that its oil wealth and ease of extraction potentially made it the world's greatest prize.
Roosevelt and Stalin had formed an agreement that in the post-war world they would like to see European Empires should be de-colonized--in the case of Roosevelt it was the desire of American business to break into lucrative markets, in the case of Stalin it was likely communist ideology and a desire to see that the Soviet Union would never be dependent exclusively on the West for trade. The Cold War dashed the hopes for peaceful relations and large-scale trade between the two nations and as Hudson shows once the US was firmly in the saddle in Europe it deliberately pursued an economic policy to attempt to isolate the Soviet bloc from Europe and the world economically; Operation Gladio can be thought of the political-military edge of that program in Europe. The American tycoons had only permitted Hoover and Roosevelt to be so liberal in building trade relations with the Soviets when: 1.when America's world economic dominance was comparatively weak and Hoover felt that permitting American business to get in on Lenin's NEP and trade concessions would "turn" the Russians 2. when Roosevelt could convince the American oligarchs that a Soviet-American alliance against both the Axis powers and the European Empires was beneficiary, in this endeavor he not only had a fair degree of popular support but was backed by a rising counter-elite in the American bourgeoisie. Even when the United States elite came to understand the meaning of Khrushchev's speech and the economic direction the Soviets were heading the fact that this was a much nation with a much larger treasure trove of natural resources, a larger workforce, a larger industrial base, advanced state-of-the-art technology, that was well-off by global standards (just below West Germany in terms of wages in 1960) etc. that this nation was a mortal threat to their interests. Hoxha recalled that Khrushchev used to brag about the "successes" of his strategy by pointing out that certain American capitalists thought that Khrushchev was more dangerous then Stalin because he wanted to break into American spheres of interest and compete against them economically. But there was also the fact that the Soviet Union refused to be slaves to American creditors as punishment for the "aid" provided to them during the war and a fairly modest post-war recovery package they accepted prior to the break in relations which stuck in the craw of the Washington establishment. Hudson describes the terms of the 1970s American-Soviet détente and what drove it:
This was a curious turn to the Cold War, which was supposed to guarantee peace within the West and pose the threat of military hostility only vis-a-vis the Communist countries. Peace with the latter was being cemented by the new policy of détente. Indeed, the more America began to lose its hold on its non-communist allies, the closer America and the Soviet Union drew together, precisely to threaten Europe and Asia with what Henry Kissinger called a new condominium, that is, joint imperialism of America and Russia against their respective satellites ( Super-Imperialism: The Origins and Fundamentals of American World Dominance p.375)
The kinds of business deals that drove this alliance that were those that benefited the New Deal-elite: oil & gas, agribusiness, technology etc. Hudson describes America's position as being similar to that of Germany which suffering economic duress and national decline made a blitz move that shocked the rest of the West by signing trade deals with the Soviet Union during the Weimar Republic years. In a decade of stagflation and other economic troubles the deals with the Soviets put serious money on the table tens of billions in trade agreements alone. However, Hudson fails to note that Europe had been more open to doing trade with the USSR as demonstrated by De Gaulle's opposition to the Cold War, his early recognition of the PRC (1962), and his opposition to Britain's entrance into the EU on the grounds that it was an agent of the United States and took a hardline stance on the Cold War. Red Gas: Russia and the Origins of European Energy Dependence by
In many ways, the cosmopolitan unified world capitalist order that the American oligarchy had been trying to build since Roosevelt already existed as the world passed through the 1970s and into the 1980s as an article in the Albanian press relates:
But it was not the order as originally intended under the complete control of American capital and the American oligarchy this would have to wait another decade and would still never be totally achieved exactly because of the reasons Lenin described. The desire to split the socialist camp and draw its members into its orbit never faded and led to what seemed to be on the face of things absurd contradictions the United States for instance provided $1.83 billion dollars to aid to Yugoslavia in the years of 1949-1960 alone which comes to a gold value of $66.9 billion while the United States was banging on about communism and persecuting its own citizens during McCarthyism they were funding the "communist" leader Josip Tito generously thanks to his anti-Soviet outbursts and promoting Yugoslavia as the "ideal" communist state while overlooking his crimes and the short-coming of the market socialist model. In 1960 the US offered Most-Favored Nation status to Poland and would offer the same recognition to Ceaușescu's Romania and Deng's China for the exact reason that these two regimes were uniquely anti-Soviet members of the nominally socialist camp. The US was supporting East bloc nations that were already taking anti-communist, pro-capitalist terms but the tension with the USSR was not maintained because of fear that they still clung too tightly to Leninist ideology but because the USSR was the only power capable of truly challenging American near-term dominance. This could not easily be explained to ordinary citizens so a steady stream of hard-right wing/conspiratorial anti-communist black propaganda was maintained to convince the citizenry they were enlisted in a life or death ideological struggle; when the leaders made deals with "the enemy" the liberal wing of the establishment was keen to raise the threat of nuclear annihilation or some third even more dangerous force and thus collusion became patriotism. That the dispute was not a truly ideological as one can surmise from Bockman's visit to East bloc Hungary as an economics student in 1988:
IN FALL 1988, I ARRIVED IN BUDAPEST, Hungary as an exchange student through the University of California’s Education Abroad Pro- gram. I fell into a situation that I did not understand but that would send my life in a new direction. rough the year, at the Karl Marx University of Economics, we exchange students studied with Hungarian scholars, who provided us new ways to understand the world, even in such courses as American literature. We took part in large protests, visits to Roma vil- lages, evenings in underground punk clubs, panicked discussions with our Education Abroad Program directors, and the general social life of young college students, who happened to arrive in a place of historic change. The language of our professors, who talked positively about markets, democracy, and freedom, surprised me. e American right wing had done so much to politicize these words and done such evil in Central America and elsewhere in their name. Our professors in the Karl Marx University of Economics sounded like Reagan robots. After returning to the United States and entering graduate school, I found myself drawn to trying to understand what I had experienced. What was socialism? What was capitalism? What had happened in 1989? This book is my current answer to these questions. (Markets In The Name of Socialism: The Left-Wing Origins of Neoliberalism p.vii)Numerous statements exist to this effect though there is no need to present them all here; one thing that is true is that the Cold War in the post-Stalin era can only be called ideological in the sense that the American capitalists were radically right-wing and anti-worker, perhaps unusually so even by Western standards--but for reasons having to do with American historical-economic development wages in the United States have been very high in comparison with its developed counter-parts. As America passed into the 1980s it was jettisoning much of the theoretical egalitarian thrust of Keynesian economics in favor of neoliberalism; some have even called the American approach under Reagan "reactionary Keynesianism" but America's capital crises were so severe for the rich to maintain their place of prominence more extreme income and wealth inequality had to be accepted--and not just accepted, the state had to actively aid in bringing it about. And as the socialist camp moved to to open capitalism and to the right it seemed they were fundamentally unable to mount any kind of political or ideological challenge to world capitalism; at the same time the decolonization/Third World movement had sputtered out and with it some concept of a Third Way left-wing populist challenge to the establishment--the American working class was rather easily divided and crushed making the final years of the Cold War some of the most economically painful years for the working class in the second half of the 20th century.
Excursion Past the Event Horizon: The Oligarchy Nursed back to health
As noted in the previous article in 1988 there were 66 billionaires in the United States even as the inflation-adjusted value of the minimum wage raced towards its lowest point in history post-1950--it was a classic case of working class immiseration resulting in huge fortunes. We noted previously that all of the 25 men/families on the 1957 list would've been billionaires given the gold-value of their fortunes; in 1987 America's officially richest man according to Forbes was Forrest E. Mars who was worth $12.5 billion a fortune that in gold terms was equal to $39 billion dollars that while a super-fortune like that of the Mellon family wasn't known to exist high double-digit fortunes typical of the era of the Robber barons still did. In the year after the dissolution of the Soviet Union the Walton Family held the top-spot on America's wealth list with $25.3 billion which translates into a gold value fortune of $97.2 billion dollars--making them richer then Rockefeller and rivals of the Mellons at their height. Today the Walton Family retains their claim to the title of America's richest family with collective holdings of 130 billion dollars as of 2016. At the end of the millennium Bill Gates fortune topped an unprecedented $101 billion landmark in 1999 and MSN estimates this to be 144 billion in 2017 dollars but actually it is much more then that as the dollar in the 90s had reached a dollar-to-gold exchange rate not seen since the 1970s meaning the real value of these fortunes during the Silicon Valley bubble also increased making the resulting gold-value of Gates Fortune $445.3 billion dollars. Turns out that despite this notable dry run that Gates may become the first dollar-trillionaire in history if things keep looking up for him--much like John D. Rockefeller he's reached a point where no matter how much money he gives away (or feigns giving away) that he can't stay poor he keeps making too much off what's left. Based on our estimates for a brief time Gates succeeded in crowning himself the richest man in known history beating out historical estimates of Rockefeller, Carnegie (309 billion), and William the Conqueror (200 billion). In 2001 the United States had cracked the 200 billionaire but how much was the money of the 272 billionaires of the United States worth? The deflationary trend of the dollar of the 1990s had continued into the early years of the New Millennium therefore one billion dollars in 2001 currency comes out to be a value of $4.6 billion dollars in gold terms and so it seems that based on that billionaires weren't only just more numerous in the 1990s and the New Millennium but wealthier in real terms then their 1980s and post-2002/2008 counter-parts. As of 2016 there are 540 billionaires and certainly a large part of this growth can be explained by the near-five times inflation of the dollar against gold but it seems that the double-digit billion dollar fortunes are becoming common-place but even if the average billionaire is not as wealthy as in the past it seems that the average citizen has not benefited at all from the relative devaluation but in fact they have used that opportunity to grab up more and more of society's resources essentially making their gains the outcome of their ruthless dominance over a zero-sum or near-zero sum game. This is where odd facts like 93% of income gains going to the top 1% in the 21st century start to make a certain amount of intuitive sense, the rich grabbed more of the share of the new wealth created precisely because their prior gains have been subject to major devaluation in both market losses during recessions and real-value terms. But we should be cautious about seeing the ruling oligarchy as worse or wealthier then they've ever been in fact we've shown some solid evidence that in real terms things are the same as they ever were. No gains in social equality like what occurred in the 1930s and the 1970s because there was no pressure coming from the working class at home or globally to keep the wealth from monopolizing the gains resulting from the recovery and likewise we have shown that to a certain extent these 20th century declines were overstated. The future of the American working class and to a certain extent the entire world depends on how effectively they can mobilize against the robber barons who've been robbing them blind since the 19th century and who, contrary to social democratic mythology, never stopped robbing them on an industrial scale.
Addendum: the Impact of Inflation on the Working Class & the Known Unknowns
In my previous post, I did some analysis on the value of American wages based on the inflation-adjusted value of the minimum wage but that prompted another question: what if we calculated an hourly-wage in terms of gold-value? Based on my calculations the hourly-wage of a minimum wage worker in 1956 ($1.00) was not $8.99 but instead is an equivalent value of $36.50 in today's terms which is much higher then the minimum-wage for workers in Australia and Luxembourg (both around $11.50). This can and should be explained. Commodities produced during the 1950s incorporate processes that used far-less labor then industrial and agriculture processes today so that we can say that in gold-terms (as Williams points out) commodity prices still fall over-time as Marx pointed out especially during recessions and depressions which typically put radical deflationary pressure on commodity prices. One method of guarding against this ruinous deflation was to form monopolies, cartels etc. to check the problem of price competition and this helps explain why price-inflation has been the main trend of commodity prices during the 20th century even when the reign of the gold-standard was unquestioned and economic orthodoxy was in favor of deflationary or stationary monetary policy that was to the benefit of bankers and other rentiers. But no matter how cartelized the industrial playing-field nothing could stop price-competition completely or keep ruinous crisis at bay; it should be noted too that monopoly is also a counter-tendency against the tendency of the rate of profit to fall which did begin a secular decline through the late 19th century.
The fall of commodity prices over time due to increased productivity is one way that the exploitation of the working class can go on without either negatively impacting their subsistence level or reducing their consumption levels even if wages stay stagnant or rise slowly or far-less rapidly then the fortunes of the rich. Thus it makes sense that since there was more labor-time embodied in commodities sold at the time that it took more money as embodied in or against the money-commodity to make a living. Therefore, the reader should not think that a worker alive in the 1950s could survive as well as worker making $36.50 a day and likewise certain commodities and services offered today had no real substitute, but merely had the value of a worker's labor time in 1956 held constant that this would be the share of wealth that he took home today. The wealthy in 1957 would've been on a part and even exceed that of today's oligarchs but it is not completely incorrect to say that inequality was lower because the country as a whole was undergoing a wealth explosion from which all social classes were benefiting even if it was hardly proportional or equitable. Today the dollars that people from all classes "earn" are less-valuable, and thus the Mellon family are richer then Gates today, but the rich are appropriating far-more of the new wealth creation then they even had in the past. This perspective also shows that the effect of inflation on the working class has been more radical then most economists assume based on the analysis of the buying power of the dollar against commodity baskets. Former Assistant Reagan Treasurer Paul Craig Roberts has also made a laid-out a persuasive argument that official inflation indexes and measurements have been manipulated to hide the real impact of inflation from ordinary consumers and citizens. The hidden pay-cut that workers have taken to artificially hold up commodity prices in the interest of big industrialists, farmers, and their financiers may have been far-worse over the long-run then the supposed ills it was intended to cure. After all, both the 1980s and the 2000s have seen double-digit unemployment even according to sanitized government measures despite these policies but the pay-cut suffered by workers has been quite radical considering things in gold terms. The 1968 minimum wage of $1.60 would be approximately $58.51--not surprisingly the London Gold pool and the US commitment to the gold standard collapsed not long after that but this was not due to unreasonable demands by workers but profligate government spending on war. How many workers would say "avoiding another great depression" is worth sacrificing a pay-check that large?
Conservative estimates that globalization of production to the Third World has reduced the real cost of many goods probably has some merit to them as during this time most industrial production still took place in the global north and in the US trade constituted just 10% of American GDP. Therefore, goods from the Third World can utilize more backwards production methods then what exists in the developed countries and in many cases still beat the most advanced factories in the global north because there is a higher quantity of unpaid labor-time embodied in them due to lower-wages in the global south. But of course such exploitation cannot explain everything as the implementation of new machinery has had a radical effect on prices since the start of the industrial revolution and advanced nations such as the US adopt deliberate inflationary policy for this reason. It cannot be said that the effect of inflation on the working class is all bad as an increase in the real value of money makes the burden of debt and rents all the greater and currency stability ignores the problem of rising rents in the market and/or the exponential nature of debt. Instead of reforming their banking/rental policy most capitalist countries prefer follow Keynesian doctrine to create a certain amount of inflation to ease this burden which would result in social revolt if left unchecked. Still its interesting to see the lack of critical analysis on how bankers and landlords might adapt to the problem that inflation poses to their bottom-line--notably by raising prices inordinately. So we see today that certain regions of the United States 2-floor houses with a few bedrooms sell for millions of dollars and in the Bay Area plutocratic spending has driven rents far-beyond what even tech workers earning six-figures can hardly spare. The problems that the Keynesian solution to the problems of capitalism pose are severe enough that they make a persuasive argument for abolishing the system outright. At best it can be said Keynesianism has lessened the problems of capitalism but at great costs and despite progressive taxes, transfer payments, inflationary policy, loose credit, state spending etc. inequality has still grown tremendously. The poor of the world are not only not getting richer and it is probable that when the gold-value of the wage of Third World workers is computed that more radical declines then previously anticipated will be found. It doesn't seem plausible that even if the declines in commodity prices brought about by globalization are substantial that it would be substantial enough to justify the radical devaluation of American wages in gold terms via inflation whether intentional or unintentional--after all progress in industry has been quite radical over the past few decades, worker productivity has grown and would likely be much higher if wages in gold terms had stayed constant and high wages incentivize innovation as Marx argued and Robert C. Allen has actually shown to be a major cause of the industrial revolution. So, if it is a choice between the 60s model and the "globalization" model I would say the 60s model is superior which explains some of the worker support for reactionary politicians like Trump.
Still there is the question if American employers really could continue to pay wages in gold-value terms as high as they once did and I think that's doubtful as American capitalism entered its declining phase in the 1960s and profit-rates have fallen and remained fairly low even with these radical wages cuts--though that is not to say there hasn't been countervailing tendencies at work when it comes to the tendency of the rate of profit to fall in recent decades. But the choice made by the American oligarchy from the 1960s onwards is rather clear in that they sacrificed the health, prosperity, and security of "their" working class in order to keep America the world's number one super-power which is receiving serious challenge from China in the 21st century in spite of all that. It has been found that the super-rich store 25% of their wealth in Tax Havens which brings to mind Kolko's estimate of 30% higher-inequality in the 1950s then official estimates due to the various vehicles and methods of tax evasion--this cannot be overlooked since 2/3 of global trade actually passes through tax havens. Likewise, the impact of organized crime and government corruption/black funds cannot be overlooked and has a long history in American life as gangster Meyer Lansky used to brag during the Prohibition "We're bigger then General Motors!" Douglas Valentine's work The CIA as Organized Crime: How Illegal Operations Corrupt America and The World is an excellent look at this phenomenon from both the perspective of organized crime and the crime carried out within the state. It's hard to stress that this is not insignificant to the pattern of inequity. In the revisionist USSR wealth accumulated via organized crime and other illegal activities accounted to approximately 20-25% of personal wealth in the Soviet Union in 1988 coming to about 240 billion roubles. What most Westerners don't know is that the Russian mafia and those in the ruling bureaucracy in the USSR were precisely the same people as organized crime was a nice method for getting around barriers to capital accumulation posed by the Soviet Union's former socialist structure and, contrary to popular belief, things are not different in the United States--it is often the case that organized crime and the government are the same people.
The fall of commodity prices over time due to increased productivity is one way that the exploitation of the working class can go on without either negatively impacting their subsistence level or reducing their consumption levels even if wages stay stagnant or rise slowly or far-less rapidly then the fortunes of the rich. Thus it makes sense that since there was more labor-time embodied in commodities sold at the time that it took more money as embodied in or against the money-commodity to make a living. Therefore, the reader should not think that a worker alive in the 1950s could survive as well as worker making $36.50 a day and likewise certain commodities and services offered today had no real substitute, but merely had the value of a worker's labor time in 1956 held constant that this would be the share of wealth that he took home today. The wealthy in 1957 would've been on a part and even exceed that of today's oligarchs but it is not completely incorrect to say that inequality was lower because the country as a whole was undergoing a wealth explosion from which all social classes were benefiting even if it was hardly proportional or equitable. Today the dollars that people from all classes "earn" are less-valuable, and thus the Mellon family are richer then Gates today, but the rich are appropriating far-more of the new wealth creation then they even had in the past. This perspective also shows that the effect of inflation on the working class has been more radical then most economists assume based on the analysis of the buying power of the dollar against commodity baskets. Former Assistant Reagan Treasurer Paul Craig Roberts has also made a laid-out a persuasive argument that official inflation indexes and measurements have been manipulated to hide the real impact of inflation from ordinary consumers and citizens. The hidden pay-cut that workers have taken to artificially hold up commodity prices in the interest of big industrialists, farmers, and their financiers may have been far-worse over the long-run then the supposed ills it was intended to cure. After all, both the 1980s and the 2000s have seen double-digit unemployment even according to sanitized government measures despite these policies but the pay-cut suffered by workers has been quite radical considering things in gold terms. The 1968 minimum wage of $1.60 would be approximately $58.51--not surprisingly the London Gold pool and the US commitment to the gold standard collapsed not long after that but this was not due to unreasonable demands by workers but profligate government spending on war. How many workers would say "avoiding another great depression" is worth sacrificing a pay-check that large?
Conservative estimates that globalization of production to the Third World has reduced the real cost of many goods probably has some merit to them as during this time most industrial production still took place in the global north and in the US trade constituted just 10% of American GDP. Therefore, goods from the Third World can utilize more backwards production methods then what exists in the developed countries and in many cases still beat the most advanced factories in the global north because there is a higher quantity of unpaid labor-time embodied in them due to lower-wages in the global south. But of course such exploitation cannot explain everything as the implementation of new machinery has had a radical effect on prices since the start of the industrial revolution and advanced nations such as the US adopt deliberate inflationary policy for this reason. It cannot be said that the effect of inflation on the working class is all bad as an increase in the real value of money makes the burden of debt and rents all the greater and currency stability ignores the problem of rising rents in the market and/or the exponential nature of debt. Instead of reforming their banking/rental policy most capitalist countries prefer follow Keynesian doctrine to create a certain amount of inflation to ease this burden which would result in social revolt if left unchecked. Still its interesting to see the lack of critical analysis on how bankers and landlords might adapt to the problem that inflation poses to their bottom-line--notably by raising prices inordinately. So we see today that certain regions of the United States 2-floor houses with a few bedrooms sell for millions of dollars and in the Bay Area plutocratic spending has driven rents far-beyond what even tech workers earning six-figures can hardly spare. The problems that the Keynesian solution to the problems of capitalism pose are severe enough that they make a persuasive argument for abolishing the system outright. At best it can be said Keynesianism has lessened the problems of capitalism but at great costs and despite progressive taxes, transfer payments, inflationary policy, loose credit, state spending etc. inequality has still grown tremendously. The poor of the world are not only not getting richer and it is probable that when the gold-value of the wage of Third World workers is computed that more radical declines then previously anticipated will be found. It doesn't seem plausible that even if the declines in commodity prices brought about by globalization are substantial that it would be substantial enough to justify the radical devaluation of American wages in gold terms via inflation whether intentional or unintentional--after all progress in industry has been quite radical over the past few decades, worker productivity has grown and would likely be much higher if wages in gold terms had stayed constant and high wages incentivize innovation as Marx argued and Robert C. Allen has actually shown to be a major cause of the industrial revolution. So, if it is a choice between the 60s model and the "globalization" model I would say the 60s model is superior which explains some of the worker support for reactionary politicians like Trump.
Still there is the question if American employers really could continue to pay wages in gold-value terms as high as they once did and I think that's doubtful as American capitalism entered its declining phase in the 1960s and profit-rates have fallen and remained fairly low even with these radical wages cuts--though that is not to say there hasn't been countervailing tendencies at work when it comes to the tendency of the rate of profit to fall in recent decades. But the choice made by the American oligarchy from the 1960s onwards is rather clear in that they sacrificed the health, prosperity, and security of "their" working class in order to keep America the world's number one super-power which is receiving serious challenge from China in the 21st century in spite of all that. It has been found that the super-rich store 25% of their wealth in Tax Havens which brings to mind Kolko's estimate of 30% higher-inequality in the 1950s then official estimates due to the various vehicles and methods of tax evasion--this cannot be overlooked since 2/3 of global trade actually passes through tax havens. Likewise, the impact of organized crime and government corruption/black funds cannot be overlooked and has a long history in American life as gangster Meyer Lansky used to brag during the Prohibition "We're bigger then General Motors!" Douglas Valentine's work The CIA as Organized Crime: How Illegal Operations Corrupt America and The World is an excellent look at this phenomenon from both the perspective of organized crime and the crime carried out within the state. It's hard to stress that this is not insignificant to the pattern of inequity. In the revisionist USSR wealth accumulated via organized crime and other illegal activities accounted to approximately 20-25% of personal wealth in the Soviet Union in 1988 coming to about 240 billion roubles. What most Westerners don't know is that the Russian mafia and those in the ruling bureaucracy in the USSR were precisely the same people as organized crime was a nice method for getting around barriers to capital accumulation posed by the Soviet Union's former socialist structure and, contrary to popular belief, things are not different in the United States--it is often the case that organized crime and the government are the same people.
