[BillTottenWeblog] Plutonomy and the Precariat

On the history of the US economy in decline

by Noam Chomsky

Le Monde diplomatique (May 18 2012)

The Occupy movement has been an extremely exciting development. Unprecedented, in fact. There's never
been anything like it that I can think of. If the bonds and associations it has established can be sustained
through a long, dark period ahead - because victory won't come quickly - it could prove a significant
moment in American history.

The fact that the Occupy movement is unprecedented is quite appropriate. After all, it's an unprecedented
era and has been so since the 1970s, which marked a major turning point in American history. For centuries,
since the country began, it had been a developing society, and not always in very pretty ways. That's
another story, but the general progress was toward wealth, industrialization, development, and hope.
There was a pretty constant expectation that it was going to go on like this. That was true even in very dark times.

I'm just old enough to remember the Great Depression. After the first few years, by the mid-1930s - although
the situation was objectively much harsher than it is today - nevertheless, the spirit was quite
different. There was a sense that "we're gonna get out of it", even among unemployed people, including a
lot of my relatives, a sense that "it will get better".

There was militant labor union organizing going on, especially from the CIO (Congress of Industrial
Organizations). It was getting to the point of sit-down strikes, which are frightening to the business
world - you could see it in the business press at the time - because a sit-down strike is just a step before
taking over the factory and running it yourself. The idea of worker takeovers is something which is,
incidentally, very much on the agenda today, and we should keep it in mind. Also New Deal legislation was
beginning to come in as a result of popular pressure. Despite the hard times, there was a sense that,
somehow, "we're gonna get out of it".

It's quite different now. For many people in the United States, there's a pervasive sense of hopelessness,
sometimes despair. I think it's quite new in American history. And it has an objective basis.

On the working class

In the 1930s, unemployed working people could anticipate that their jobs would come back. If you're a
worker in manufacturing today - the current level of unemployment there is approximately like the
Depression - and current tendencies persist, those jobs aren't going to come back.

The change took place in the 1970s. There are a lot of reasons for it. One of the underlying factors,
discussed mainly by economic historian Robert Brenner, was the falling rate of profit in manufacturing.
There were other factors. It led to major changes in the economy - a reversal of several hundred years of
progress towards industrialization and development that turned into a process of
de-industrialization and de-development. Of course, manufacturing production continued overseas
very profitably, but it's no good for the work force.

Along with that came a significant shift of the economy from productive enterprise - producing things
people need or could use - to financial manipulation. The financialization of the economy really took off
at that time.

On banks

Before the 1970s, banks were banks. They did what banks were supposed to do in a state capitalist economy:
they took unused funds from your bank account, for example, and transferred them to some potentially
useful purpose like helping a family buy a home or send a kid to college. That changed dramatically in the
1970s. Until then, there had been no financial crises since the Great Depression. The 1950s and 1960s had
been a period of enormous growth, the highest in American history, maybe in economic history.

And it was egalitarian. The lowest quintile did about as well as the highest quintile. Lots of people moved
into reasonable lifestyles - what's called the "middle class" here, the "working class" in other
countries - but it was real. And the 1960s accelerated it. The activism of those years, after a pretty
dismal decade, really civilized the country in lots of ways that are permanent.

When the 1970s came along, there were sudden and sharp changes: de-industrialization, the off-shoring of
production, and the shift to financial institutions, which grew enormously. I should say that, in the
1950s and 1960s, there was also the development of what several decades later became the high-tech
economy: computers, the Internet, the IT Revolution developed substantially in the state sector.

The developments that took place during the 1970s set off a vicious cycle. It led to the concentration of
wealth increasingly in the hands of the financial sector. This doesn't benefit the economy - it probably
harms it and society - but it did lead to a tremendous concentration of wealth.

On politics and money

Concentration of wealth yields concentration of political power. And concentration of political power
gives rise to legislation that increases and accelerates the cycle. The legislation, essentially
bipartisan, drives new fiscal policies and tax changes, as well as the rules of corporate governance and
deregulation. Alongside this began a sharp rise in the costs of elections, which drove the political
parties even deeper into the pockets of the corporate sector.

The parties dissolved in many ways. It used to be that if a person in Congress hoped for a position such as a
committee chair, he or she got it mainly through seniority and service. Within a couple of years, they
started having to put money into the party coffers in order to get ahead, a topic studied mainly by Tom
Ferguson. That just drove the whole system even deeper into the pockets of the corporate sector
(increasingly the financial sector).

This cycle resulted in a tremendous concentration of wealth, mainly in the top tenth of one percent of the
population. Meanwhile, it opened a period of stagnation or even decline for the majority of the
population. People got by, but by artificial means such as longer working hours, high rates of borrowing
and debt, and reliance on asset inflation like the recent housing bubble. Pretty soon those working hours
were much higher in the United States than in other industrial countries like Japan and various places in
Europe. So there was a period of stagnation and decline for the majority alongside a period of sharp
concentration of wealth. The political system began to dissolve.

There has always been a gap between public policy and public will, but it just grew astronomically. You can
see it right now, in fact. Take a look at the big topic in Washington that everyone concentrates on: the
deficit. For the public, correctly, the deficit is not regarded as much of an issue. And it isn't really
much of an issue. The issue is joblessness. There's a deficit commission but no joblessness commission.
As far as the deficit is concerned, the public has opinions. Take a look at the polls. The public
overwhelmingly supports higher taxes on the wealthy, which have declined sharply in this period of
stagnation and decline, and the preservation of limited social benefits.

The outcome of the deficit commission is probably going to be the opposite. The Occupy movements could
provide a mass base for trying to avert what amounts to a dagger pointed at the heart of the country.

Plutonomy and the precariat

For the general population, the 99% in the imagery of the Occupy movement, it's been pretty harsh - and it
could get worse. This could be a period of irreversible decline. For the one percent and even less - the 0.1%
- it's just fine. They are richer than ever, more powerful than ever, controlling the political system,
disregarding the public. And if it can continue, as far as they're concerned, sure, why not?

Take, for example, Citigroup. For decades, Citigroup has been one of the most corrupt of the major
investment banking corporations, repeatedly bailed out by the taxpayer, starting in the early Reagan
years and now once again. I won't run through the corruption, but it's pretty astonishing.

In 2005, Citigroup came out with a brochure for investors called "Plutonomy: Buying Luxury, Explaining
Global Imbalances". It urged investors to put money into a "plutonomy index". The brochure says, "The
World is dividing into two blocs - the Plutonomy and the rest".

Plutonomy refers to the rich, those who buy luxury goods and so on, and that's where the action is. They
claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them
adrift. We don't really care about them. We don't really need them. They have to be around to provide a
powerful state, which will protect us and bail us out when we get into trouble, but other than that they
essentially have no function. These days they're sometimes called the "precariat" - people who live a
precarious existence at the periphery of society. Only it's not the periphery anymore. It's becoming a
very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing.

So, for example, Fed Chairman Alan Greenspan, at the time when he was still "Saint Alan" - hailed by the
economics profession as one of the greatest economists of all time (this was before the crash for which he
was substantially responsible) - was testifying to Congress in the Clinton years, and he explained the
wonders of the great economy that he was supervising. He said a lot of its success was based substantially
on what he called "growing worker insecurity". If working people are insecure, if they're part of the
precariat, living precarious existences, they're not going to make demands, they're not going to try to
get better wages, they won't get improved benefits. We can kick 'em out, if we don't need 'em. And that's
what's called a "healthy" economy, technically speaking. And he wa
 s highly praised for this, greatly admired.

So the world is now indeed splitting into a plutonomy and a precariat - in the imagery of the Occupy movement,
the one percent and the 99%. Not literal numbers, but the right picture. Now, the plutonomy is where the
action is and it could continue like this.

If it does, the historic reversal that began in the 1970s could become irreversible. That's where we're
heading. And the Occupy movement is the first real, major, popular reaction that could avert this. But
it's going to be necessary to face the fact that it's a long, hard struggle. You don't win victories
tomorrow. You have to form the structures that will be sustained, that will go on through hard times and can
win major victories. And there are a lot of things that can be done.

Toward worker takeover

I mentioned before that, in the 1930s, one of the most effective actions was the sit-down strike. And the
reason is simple: that's just a step before the takeover of an industry.

Through the 1970s, as the decline was setting in, there were some important events that took place. In 1977,
U.S. Steel decided to close one of its major facilities in Youngstown, Ohio. Instead of just walking away,
the workforce and the community decided to get together and buy it from the company, hand it over to the work
force, and turn it into a worker-run, worker-managed facility. They didn't win. But with enough popular
support, they could have won. It's a topic that Gar Alperovitz and Staughton Lynd, the lawyer for the
workers and community, have discussed in detail.

It was a partial victory because, even though they lost, it set off other efforts. And now, throughout Ohio,
and in other places, there's a scattering of hundreds, maybe thousands, of sometimes not-so-small
worker/community-owned industries that could become worker-managed. And that's the basis for a real
revolution. That's how it takes place.

In one of the suburbs of Boston, about a year ago, something similar happened. A multinational decided to
close down a profitable, functioning facility carrying out some high-tech manufacturing. Evidently,
it just wasn't profitable enough for them. The workforce and the union offered to buy it, take it over, and
run it themselves. The multinational decided to close it down instead, probably for reasons of
class-consciousness. I don't think they want things like this to happen. If there had been enough popular
support, if there had been something like the Occupy movement that could have gotten involved, they might
have succeeded.

And there are other things going on like that. In fact, some of them are major. Not long ago, President Barack
Obama took over the auto industry, which was basically owned by the public. And there were a number of
things that could have been done. One was what was done: reconstitute it so that it could be handed back to
the ownership, or very similar ownership, and continue on its traditional path.

The other possibility was to hand it over to the workforce - which owned it anyway - turn it into a
worker-owned, worker-managed major industrial system that's a big part of the economy, and have it
produce things that people need. And there's a lot that we need.

We all know or should know that the United States is extremely backward globally in high-speed
transportation, and it's very serious. It not only affects people's lives, but the economy. In that
regard, here's a personal story. I happened to be giving talks in France a couple of months ago and had to
take a train from Avignon in southern France to Charles De Gaulle Airport in Paris, the same distance as
from Washington, DC, to Boston. It took two hours. I don't know if you've ever taken the train from
Washington to Boston, but it's operating at about the same speed it was sixty years ago when my wife and I
first took it. It's a scandal.

It could be done here as it's been done in Europe. They had the capacity to do it, the skilled work force. It
would have taken a little popular support, but it could have made a major change in the economy.

Just to make it more surreal, while this option was being avoided, the Obama administration was sending its
transportation secretary to Spain to get contracts for developing high-speed rail for the United
States, which could have been done right in the rust belt, which is being closed down. There are no economic
reasons why this can't happen. These are class reasons, and reflect the lack of popular political
mobilization. Things like this continue.

Climate change and nuclear weapons

I've kept to domestic issues, but there are two dangerous developments in the international arena, which
are a kind of shadow that hangs over everything we've discussed. There are, for the first time in human
history, real threats to the decent survival of the species.

One has been hanging around since 1945. It's kind of a miracle that we've escaped it. That's the threat of
nuclear war and nuclear weapons. Though it isn't being much discussed, that threat is, in fact, being
escalated by the policies of this administration and its allies. And something has to be done about that or
we're in real trouble.

The other, of course, is environmental catastrophe. Practically every country in the world is taking at
least halting steps towards trying to do something about it. The United States is also taking steps,
mainly to accelerate the threat. It is the only major country that is not only not doing something
constructive to protect the environment, it's not even climbing on the train. In some ways, it's pulling
it backwards.

And this is connected to a huge propaganda system, proudly and openly declared by the business world, to try
to convince people that climate change is just a liberal hoax. "Why pay attention to these scientists?"

We're really regressing back to the dark ages. It's not a joke. And if that's happening in the most powerful,
richest country in history, then this catastrophe isn't going to be averted - and in a generation or two,
everything else we're talking about won't matter. Something has to be done about it very soon in a
dedicated, sustained way.

It's not going to be easy to proceed. There are going to be barriers, difficulties, hardships, failures.
It's inevitable. But unless the spirit of the last year, here and elsewhere in the country and around the
globe, continues to grow and becomes a major force in the social and political world, the chances for a
decent future are not very high.

This article was first published in TomDispatch, 8 may 2012: http://www.tomdispatch.com/post/175539/tomgram%3A_noam_chomsky%2C_a_rebellious_world_or_a_new_dark_age/

More by Noam Chomsky: http://mondediplo.com/_Noam-Chomsky_

Noam Chomsky is Institute Professor Emeritus in the MIT Department of Linguistics and Philosophy. A
TomDispatch regular, he is the author of numerous best-selling political works, most recently, Hopes
and Prospects (2010), Making the Future (2011), and Occupy (2012), published by Zuccotti Park Press,
from which this speech, given last October, is excerpted and adapted. His web site is www.chomsky.info.

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