Financial manipulation and inequality keep rising: Capitalism working as intended

Many well-meaning people lament that our economic system is “not working.” But that isn’t true if we apply some historical context. What has capitalism wrought since its earliest days?

Capitalism is a totalizing system built on slavery, colonialism, imperialism, plunder, deeply uneven power relations and exploitation. It remains a system where “might makes right” is the “rule of law.” The “innocence” of early capitalism is a fantastical myth purporting the existence of an earlier, innocent capitalism not yet befouled by anti-social behavior and violence or by greed.

Such an innocent capitalism has never existed, and couldn’t. Horrific, state-directed violence in massive doses enabled capitalism to slowly establish itself, then methodically expand from its northwestern European beginnings. It is not for nothing that Karl Marx famously wrote, “If money … ‘comes into the world with a congenital blood-stain on one cheek,’ capital comes dripping from head to foot, from every pore, with blood and dirt.”

Mass movements can, and have, temporarily ameliorate the deep inequality. But always temporarily, as we can’t stay in the streets forever. Corporate globalization and the pervasive political apparatus that nurtures, sustains and expands it are ever intensifying. The holders and managers of multi-national capital accrue ever more power and wealth, which begets still more power and wealth, raising inequality to absurd levels.

Anti-austerity march in Dublin (photo by William Murphy from Dublin)

The object of capitalism is for capitalists to accumulate more. A macabre race: How could any human being spend billions, tens of billions, of dollars/euros/pounds? Why would an economic system that results in such mind-boggling inequality be further rigged to increase inequality? Could we soon see the world’s first trillionaire?

This is the backdrop for the latest series of reports highlighting the madness of capitalist inequality. Let’s take a quick look while we try to put those reports in some kind of context.

Trillions for speculators, crumbs for you

At the same time that wages are stagnant, living standards are falling, inflation is hurting purchasing power and labor laws are under attack, the corporations of North America, Europe and Japan handed out an astounding US$2.75 trillion (€2.63 trillion) to shareholders in 2021. At the same time, the average pay of U.S. chief executive officers is now approaching 700 times the median pay of their employees.

That massive largesse (although even “largesse” seems inadequate) for shareholders came in two forms: $1.5 trillion in dividends paid and $1.25 trillion in stock buybacks. Simultaneous with those payouts for speculators, which have fully rebounded from the temporary declines of 2020 due to the Covid-19 pandemic, companies are sitting on more cash than ever. Non-financial companies in the S&P 500 Index held US$1.3 trillion in cash and cash equivalents in the third quarter of 2021, compared to $909 billion at the beginning of 2020. So, yes, they can afford to give employees a raise.

Keep this in mind when financiers scream for more austerity and bigger corporate profits, and corporate executives claim they have no choice but to cut costs by eliminating jobs, holding down wages and shipping jobs to low-wage, weak-regulation havens.

And indications so far this year show that 2022 is likely to top 2021’s records for dividends and stock buybacks. Reuters, citing Goldman Sachs, estimates that “S&P 500 companies in 2022 will spend $1 trillion buying up their own shares.” Those giant corporations spent a record $882 billion buying back their stock in 2021, and combined with the dividends handed out, S&P 500 corporations ladled out almost $1.4 trillion last year. (The S&P 500 is a stock market index that comprises 500 of the largest companies listed on U.S. stock exchanges.)

Indeed, life is good if you are a financial speculator. Or parasite, to be more blunt about it.

Financiers as whip and parasite

What is the point of a company using its profits to buy its own stock? To artificially boost how profits are reported. In short, a buyback is when a corporation buys its own stock from its shareholders at a premium to the current price. Speculators love buybacks because it means profits for them. Corporate executives love them because, with fewer shares outstanding following a buyback program, their company’s “earnings per share” number will rise for the same net income, making them look good in the eyes of the financial industry. Remaining shareholders love buybacks because the profits will now be shared among fewer shareholders.

There is a downside to this financial manipulation. You have likely already guessed who loses: Employees. They’ll have to suffer through pay freezes, work speedups and layoffs because the money shoveled into executive pay and financial industry profits has to come from somewhere. This is an unvarnished example of class warfare. A quite one-sided war.

The financial industry, and especially Wall Street, is both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). The financial industry is a “whip” because its institutions (firms that trade stocks, bonds, currencies, derivatives and other instruments on financial markets) bid up or drive down prices, and do so strictly according to their own short-term interests. The financial industry is also a “parasite” because its ownership of those securities enables it to skim off massive amounts of money as its share of the profits. People in the financial industry don’t make tangible products; they trade, buy and sell stocks, bonds, derivatives and other securities, continually inventing new instruments to profit off virtually every aspect of commercial activity.

(Artwork by Susana Anaya)

In the looking-glass world of finance, the biggest drivers of this insatiable process are “shareholder activists.” These so-called “activists” aren’t activists in any customary sense. In ordinary language, an activist is someone who advocates and organizes for social advancement. But in finance-speak, an “activist” is a shareholder who has bought stock in a company for the purpose of demanding the maximum possible short-term profit, regardless of cost to others or to the company itself. “Shareholder activists” are ultra-rich speculators who are particularly aggressive in demanding that profits be handed over to them and jobs be eliminated to extract more for themselves.

Financiers and industrialists fight over the money that workers produce — profits ultimately derive from the capitalist paying the employee much less than the value of what the employee produces — but they agree they should have all of it. You and your co-workers don’t get anything more than crumbs, even though it’s the work of you and your fellow employees who create the money that is converted into gargantuan corporate profits, multi-million salaries for top executives and towering piles of money funneled into speculator pockets. The financial industry does not create money or profit. It confiscates it. That confiscation is embodied in the massive amount of stock buybacks and dividends reported above — massive not only in the raw numbers, but in the very high percentage of overall net income directed into those buybacks and dividends.

If you consume all today, what will there be tomorrow?

How high a percentage? In some years more than 100 percent! For example, in 2015 and 2016, the companies comprising the S&P 500 paid out more money in dividends and stock buybacks than the total of their net income. In 2018, following sharp increases in U.S. corporate profit levels thanks to the Trump administration’s corporate tax cuts, stock buybacks and dividends again exceeded profits. Those years are not aberrations — for the 10-year period of 2009 to 2018, such payouts totaled more than 90 percent of net income for S&P 500 corporations.

These massive payouts to financial speculators aren’t good for employees but are also not good for the long-term health of the corporations handing out the money, something frequently discussed within industry circles. For example, the Harvard Business Review, hardly hostile to business, in a January 2020 article titled “Why Stock Buybacks Are Dangerous for the Economy,” wrote:

“When companies do these buybacks, they deprive themselves of the liquidity that might help them cope when sales and profits decline in an economic downturn. … Taking on debt to finance buybacks, however, is bad management, given that no revenue-generating investments are made that can allow the company to pay off the debt. Stock buybacks made as open-market repurchases make no contribution to the productive capabilities of the firm. Indeed, these distributions to shareholders, which generally come on top of dividends, disrupt the growth dynamic that links the productivity and pay of the labor force. The results are increased income inequity, employment instability, and anemic productivity.”

The Roosevelt Institution, a U.S. think tank that although liberal is far removed from hostility to capitalist institutions, also laments the runaway nature of these massive payouts of stock buybacks and dividends. The organization noted that these payouts are a choice. (Stock buybacks were illegal before neoliberalism took hold at the dawn of the 1980s). A Roosevelt Institute paper, “Regulating Stock Buybacks: The $6.3 Trillion Question,” had this to say:

“Total spending by all publicly traded companies on stock buybacks between 2010–2019 totaled $6.3 trillion, according to their 10-K and 10-Q public filings. Shareholder payments––stock buybacks plus dividends––have on average totaled 100 percent of nonfinancial corporations’ corporate profits over the last decade. Corporate stock is largely owned by wealthy households; the top 10 percent of US households by wealth own 85 percent of corporate equity. To allow this level of buyback activity is a clear policy choice: The Securities and Exchange Commission (SEC) has encouraged stock-price manipulation through SEC Rule 10b-18, which essentially lets companies conduct buybacks in any amount, despite purported limits, as it does not enforce its rules nor does it collect real-time data on stock buyback activity.”

With Canadian and European Union regulators lifting temporary restrictions on banks buying back stock and paying dividends in 2021, it is inevitable that we will see more of these. The European Central Bank, the anti-democratic institution that is the most powerful entity within the EU, called its lifting of restrictions “a vote of confidence in the sector’s resilience to the fallout from the coronavirus pandemic” while Canada’s “six largest banks could return a combined C$47 billion ([US]$38 billion) in cash to shareholders and still exceed regulators’ capital requirements.”

An altered version of a Depression-era image. (Image by Mike Licht, NotionsCapital.com)

Even Forbes magazine, the self-described “capitalist tool,” admits that dividend payouts are “immense.” And this is a global phenomenon. “In 2021, dividends from UK, Europe and Australian markets grew the fastest compared with 2020, thanks to a recovery in the mining and banking sectors,” Forbes reports. Oil and gas companies are also joining the party — the seven biggest energy companies, including BP, Shell, ExxonMobil and Chevron, will spend as much as US$41 billion (€39.2 billion) in stock buybacks this year, according to the Financial Times.

No wonder regulatory officials are bullish on banks. The central banks of five of the world’s biggest economies have spent about US$10 trillion since 2020 on “quantitative easing,” the technical name for central banks intervening in financial markets by creating vast sums of money specifically to be injected into them and thereby inflating stock-market bubbles. This artificial propping up of financial markets is done through central banks buying their own government’s debt and also buying corporate bonds and mortgage-backed securities. As of February 2022, the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada spent a composite US$9.94 trillion (€8.76 trillion) from the beginning of the Covid-19 pandemic on quantitative easing. And that is not the only program in which central banks showered banks with limitless largesse.

Do executives really work 700 times harder than you do?

Not unrelated to the massive amounts of money siphoned to financiers is the extraordinarily bloated pay of top executives, exemplified by chief executive officer pay. A report just published by the Institute for Policy Studies reveals that the average gap between chief executive officer pay and median worker pay in the U.S. is now 670-to-1 at 300 large corporations studied. Forty-nine of those companies had CEO-to-worker ratios higher than 1,000-to-1. The Institute’s study found that “CEO pay at these 300 firms increased by $2.5 million to an average of $10.6 million, while median worker pay increased by only $3,556 to an average of $23,968,” compared to one year earlier. Worse still, of the more than 100 companies at which employee pay increased below the rate of inflation (and thus a net cut in pay), two-thirds of them spent money on buying back their stock.

How extreme does this inequality get? Here are merely two examples. The Institute’s study reports, “With the $13 billion Lowes alone spent on share repurchases, the company could have given each of its 325,000 employees a $40,000 raise. Instead, its median pay fell 7.6 percent to $22,697.” A previous Institute for Policy Studies report determined that had a proposed law, the Tax Excessive CEO Pay Act, been in effect, Wal-Mart “would’ve owed an extra $1 billion in federal taxes, enough to cover the cost of 13,502 clean energy jobs for a year.” Wal-Mart’s CEO-to-worker pay ratio is more than 1,000-to-1.

Not even extraordinarily ruthless Wal-Mart, the entity most responsible for production being moved to China to take advantage of low wages, is immune from pressure imposed by financial speculators. In 2015, Wal-Mart’s stock price was bid down by speculators for the “crime” of raising its minimum wage to the lordly sum of $9 an hour. Shed no tears for the cut-throat retailer, however, as it receives billions of dollars per year in subsidies and dodges at least $1 billion in taxes annually.

Battle in Seattle photo by Steve Kaiser, Seattle

Having worked our way through the latest set of awful numbers demonstrating the severity of inequality, you can be forgiven if you ask yourself “What else is new?” Inequality is an inescapable feature of capitalism. A severely anti-democratic way of organizing an economy and society. Who would intentionally design such a system? Could you imagine, in a world with egalitarian distribution with sufficient resources for all, if somebody came along and said, “I’ve got a better idea. Let’s give a few people thousands of times more than everybody else and give those lucky few overwhelming political power so that they tilt the system even more in their favor.” Such a person, in such a society, would surely be deemed insane. Yet this is widely accepted as the best system that exists or can ever exist. A system that is destroying the livability of Earth while making life more precarious for billions.

Capitalism is a system that was founded on violence, was built on violence and sustains itself on violence. That force takes many forms. Horrific, state-directed violence in massive doses enabled capitalism to slowly establish itself, then methodically expand from its northwestern European beginnings. English feudal lords began throwing peasants off their land in the 16th century, a process put in motion, in part, by continuing peasant resistance. The rise of Flemish wool manufacturing — wool had become a desirable luxury item — and a corresponding rise in the price of wool in England induced the wholesale removal of peasants from the land. Lords wanted to transform arable land into sheep meadows, and began razing peasant cottages to clear the land. Peasants could either become beggars, risking draconian punishment (up to death) for doing so, or become laborers in the new factories at pitifully low wages and enduring inhuman conditions and working hours.

A process of intensifying exploitation enabled early factory owners to accumulate capital, thereby allowing them to expand and amass fortunes at the expense of their workforces; they were also able to drive artisans out of business, forcing artisans to sell off or abandon the ownership of their means of production and become wage laborers. As the Industrial Revolution took hold, the introduction of machinery was a tool for factory owners to bring workers under control — technological innovation required fewer employees be kept on and deskilled many of the remaining workers by automating processes.

The routine use of armies, private militias and police in violently putting down any attempt by working people to defend or organize themselves, and especially harsh, often lethal, measures against strikes, helped keep capitalists in the saddle. As markets at home became saturated, the endless growth required by capitalism induced industrialists to expand to new markets, encouraged all the way by financiers, and thereby expanding the reach of capitalism and subsuming more of the world under its hegemony as processes of dispossession and resource extraction accelerated.

Violence, including through military invasions and sanctions, remains a crucial means of maintaining capitalism and of keeping the leading powers of the Global North at the top of the pyramid. Other forms of force are readily used, however. The most important use of force is via financial markets. Financial power has always been a powerful lever used by the capitalist center as the apex of the financial system has moved over the centuries from Venice to Amsterdam to London to New York, with each move to a city contained within a militarily more powerful country able to project power over larger areas. Total control of the global financial system enables the United States to impose its will on other countries, even on its Global North allies, a concentrated force used to attack challenges to capitalism and to keep itself at the system’s center.

The task of transcending this is immense, but nonetheless it is the task that must be accomplished. Greed is a human characteristic but if we go to the roots, the problem is a system that facilitates and celebrates greed. Cooperation, after all, is a human characteristic as well, one that could be facilitated and celebrated in a different world.

There’s no money? Then how can there be $10 trillion for financiers in two years?

Noting that there is always money to be thrown at the finance industry but little for social needs is by now about as startling as noting the Sun rose in the east this morning. But what is eye-opening is the truly gargantuan amounts of money handed out to benefit the wealthy.

We’re not talking billions here. We are talking trillions.

For example, the amount of money created by the central banks of five of the world’s biggest economies for the purpose of artificially propping up financial markets since the beginning of the Covid-19 pandemic totals US$9.94 trillion (or, if you prefer, €8.76 trillion). And that total represents only one program of the many used by the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada.

That is on top of the US$9.36 trillion (or €8.3 trillion at the early 2020 exchange rate) that was spent on propping up financial markets in the years following the 2008 global economic collapse.

So we’re talking approximately US$19.3 trillion (€17.1 trillion) in the span of 14 years for five central banks’ “quantitative easing” programs, the technical name for intervening in financial markets by creating vast sums of money specifically to be injected into them and thereby inflating stock-market bubbles. And that total doesn’t include various other programs that also come with price tags, nor the similar programs of other central banks, including those of Australia, Sweden and Switzerland. As just one example, the Paycheck Protection Program initiated by the U.S. Congress in 2020 sent most of its money into the grasping hands of business owners and shareholders rather than workers earning a paycheck.

Given these repeated massive subsidies, why are we supposed to believe that the capitalist economic system “works”? And why do working people always have to pay for financiers’ ever more imaginative speculations?

“Greed” (Nicholas Kwok)

Imagine all the public good that could have been done with even a fraction of that money. Fixing infrastructure, proper funding of social programs, upgrading health coverage, adequately funding hospitals, canceling student debt, strengthening education systems and more — all of this could have been done.

For example, the consultancy firm Aecom estimates that Britain’s infrastructure needs are underfunded by a total less than what the Bank of England spent on its quantitative-easing scheme for the past two years. Parallel to that, the U.S. could wipe out all student debt, fix all schools, rebuild aging water and sewer systems, clean up contaminated industrial sites and repair dams for less than what the Federal Reserve spent on quantitative easing since the pandemic began. As for Canada, one estimate is that the country needs to spend an additional C$60 billion per year on technologies that would enable Canada to meet its carbon neutral targets by mid-century — a total that is a fraction of what the Bank of Canada has thrown at the financial industry.

Spending big to inflate a stock-market bubble

What is quantitative easing and why does it matter? Quantitative easing is the technical name for central banks buying their own government’s debt in massive amounts and, generally in lesser amounts, corporate bonds. In the case of the Federal Reserve, it also buys mortgage-backed securities as part of its QE programs.

The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because of the resulting distortion in demand for them, enabling bond sellers to offer lower interest rates and making them less appealing to speculators. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money also goes into real estate speculation, forcing up the price of housing. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments. And the strategy of governments to lower the value of their currencies — a widespread tactic in the years following the 2008 collapse — can’t succeed everywhere because if someone’s currency devalues, someone else’s concurrently rises in value.

In other words, these programs, along with most everything else central banks in capitalist countries do, are to benefit the wealthy, at the expense of everybody else. Although we wouldn’t reasonably expect capitalist government agencies to act differently, central banks are particularly one-sided in their policies, which they can do because they are “independent” of their governments. Thus they openly serve the wealthy without democratic control.

A trillion here, a trillion there but not for you

Figuring out what central banks are up to and how much money they are creating for financiers is difficult because they don’t provide totals; at best there are monthly targets for spending and, even then, targets are not listed for all programs. And some, such as the Bank of Canada, are particularly reluctant to share money figures. Most often, banks’ websites and press releases proudly list the many programs designed to benefit financiers but without putting price tags on them. Thus the figures below may not be precisely accurate, but they are in the ballpark. To the biggest financial corporations, what’s a hundred billion more or less?

Having provided the caveats, my best calculations of what some of the world’s most prominent central banks have spent on quantitative easing are as follows (figures in U.S. dollars):

  • U.S. Federal Reserve $4.04 trillion
  • European Central Bank $3.4 trillion
  • Bank of Japan $1.6 trillion
  • Bank of England $600 billion
  • Bank of Canada $300 billion

That’s a total of US$9.94 trillion. Imagine the height of the stack of bills that such a sum would reach — maybe it would be so high that orbiting spacecraft would ram into it, scattering the money across wide areas. At least that way, more people might benefit.

The European Central Bank in Frankfurt (photo by DXR)

The above of course are not the only central banks to join the party. The Reserve Bank of Australia has spent an estimated A$320 billion in the past two years, although, according to Reuters, it is “considering how and when to wind up its A$4 billion ($2.84 billion) in weekly bond buying given the economic pick up.” Sweden’s Riksbank and the Swiss National Bank also indulge in quantitative easing; Switzerland’s central bank has done so much of it that it owns assets valued at more than the country’s gross domestic product. Similar to Australia’s, central banks, the Bank of Japan excepted, also are indicating they’d like to wind down their latest QE programs, but doing so is a delicate operation given that speculators have become drunk on the spending and cutting off the money could lead to sudden downturns in stock prices, in turn triggering disruptions in the economy.

Nothing like free money to make the party fun. But, on a less humorous note, how is it that deficit scolds and ideologues of austerity, who never miss an opportunity to shoot down legislation intended to give working people assistance, are silent about these gargantuan piles of money thrown at financial markets? The later version of the Build Back Better plan pushed by President Joe Biden, originally estimated to cost about $3.5 trillion before being reduced to less than $2 trillion, would have cost less than half of what was spent on quantitative easing. And, however flawed, would have provided vastly better relief.

And remember, the nearly $10 trillion and counting in two years of QE programs are only a portion of the money rained on business and the wealthy who benefit from these policies.

One sure outcome of all this is that inequality will increase, as exemplified by the dramatic increases in the wealth of billionaires. A report published last month by Oxfam, appropriately titled “Inequality Kills,” found that the wealth of the world’s 10 richest people has doubled since the pandemic began while “99% of humanity are worse off because of COVID-19,” a situation Oxfam calls “economic violence.” The wealth of the world’s 2,755 billionaires has increased by $5 trillion in less than a year — from $8.6 trillion in March 2021 to $13.8 trillion in January 2022.

And although increasing inequality is nothing new, the pace is accelerating. The Oxfam report states:

“This is the biggest annual increase in billionaire wealth since records began. It is taking place on every continent. It is enabled by skyrocketing stock market prices, a boom in unregulated entities, a surge in monopoly power, and privatization, alongside the erosion of individual corporate tax rates and regulations, and workers’ rights and wages—all aided by the weaponization of racism.”

Unlimited money for U.S. financiers, a little money for workers

In addition to quantitative easing, the Federal Reserve has instituted nine lending programs; three of these are “unlimited” and the other six authorized for $2.9 trillion. (This is all in addition to the $4 trillion spent on QE.) Of this additional $2.9 trillion, just $500 billion is earmarked for revenue-strapped state and local governments; the remainder are for businesses, including those in the financial industry. About $450 billion per day for several weeks during spring 2020 was dedicated to dollar swaps with other central banks — an agreement between two central banks to exchange currencies, most often to enable central banks to provide foreign currencies to domestic commercial banks.

Is there anyone who actually knows how much money the Federal Reserve is spending to keep capitalism running?

And even when money is supposed to go to working people, it mostly doesn’t go to them. A prime example of this not terribly surprising phenomenon is the U.S. Paycheck Protection Program (PPP). Multiple studies over the past year have shown that most PPP money flowed upward, regardless of what the intentions of Congress members who designed the program may have been.

The New York Stock Exchange (photo by Elisa Rolle)

The most recent and likely most comprehensive of these studies, a National Bureau of Economic Research “working paper” issued in January 2022 by 10 authors led by David Autor of the Massachusetts Institute of Technology, found the PPP to be “highly regressive.” About three-quarters of PPP money wound up in the hands of the top 20 percent of households. The paper estimates that 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs. The majority of the funds flowed to business owners and shareholders. The study focused on 2020 results; the paper’s authors believe that 2021 loans did not boost employment, a result that implies the share of PPP money going to workers would actually reduce the 23 to 34 percent estimate.

The paper calculates that for every $1 in wages saved by the PPP, $3.13 went somewhere else. To put it another way, the cost of saving a job for a year was $170,000 to $257,000, three to five times the average compensation for affected jobs. “This program was highly, highly regressive,” Dr. Autor told The New York Times.

Three papers published earlier came to similar conclusions. A study by Michael Dalton, a research economist for the Bureau of Labor Statistics, that was issued in November 2021, found that “a range of $20,000 to $34,000 of PPP spent per employee-month retained, with about 24% of the PPP money going towards wage retention in the baseline model.” To put it another way, $4.13 were spent for each $1 of wages saved. Finding still worse results, a separate National Bureau of Economic Research working paper, with Raj Chetty as lead author, found that so little of PPP spending flowed to businesses most affected by the pandemic that employment at small businesses increased by only 2%, “implying a cost of $377,000 per job saved.” Finally, a paper published by Amanda Fischer, then the Policy Director at the Washington Center for Equitable Growth, concluded that PPP funding did not have a statistically significant impact on preventing avoidable layoffs among employees and that PPP money was not geographically directed at the worst-hit areas, further reducing effectiveness.

Class warfare in action, pandemic style. A little bit for working people, lots for those who already have more. The PPP did provide benefits, including saving jobs, and surely played a role in the unprecedented reversal of the high unemployment rate of 2020, but at a price far higher than necessary — no help for working people without more going to the wealthy.

Class warfare in Europe

In addition to its quantitative easing, the European Central Bank is increasing borrowing limits and easing borrowing rules for banks; it is also reducing required capital holdings for banks. The ECB has upped its QE spending to €40 billion per month and will reduce that to €20 billion by October 2022. A December 2021 announcement implied it intends to eventually end the program altogether, “shortly before it starts raising the key ECB interest rates.”

Remember all the finger-pointing and scapegoating of Greeks when the ECB and the European Commission imposed punishing austerity on Greece? There was no money and people had to be punished. Yet there are virtually unlimited funds to benefit financial speculators. These disparate responses aren’t completely inconsistent — Greeks had to be punished because the ECB and European Commission, leading institutions of the European Union, were determined that big banks, particularly French and German banks, had to be repaid in full, no matter the cost to working people or the Greek economy — the ECB even cut off Greek banks from routine financial flows in 2015 to enforce their diktats.

Britons recently received a fresh lesson in who the Bank of England serves when the bank’s governor, Andrew Bailey, declared that employees should not be given raises. It was sufficiently embarrassing that this open class-warfare statement, the sort of policy that is supposed to be kept behind closed doors, was said in public that the British government actually issued a rebuke. Noting that British household disposable incomes are expected to fall by 2 percent this year and that inflation-adjusted pay remains below the pre-2008 financial crisis peak, The Guardian reported:

“The governor of the Bank of England has come under fire from unions and earned a rebuke from 10 Downing Street for suggesting workers should not ask for big pay rises to help control inflation. Andrew Bailey said he wanted to see ‘quite clear restraint’ in the annual wage-bargaining process between staff and their employers to help prevent an upward spiral taking hold. However, his comments drew a furious response from union leaders, as households face the worst hit to their living standards in three decades as soaring energy prices cause inflation to outstrip wage growth. … Bailey was paid £575,538, including pension, in his first year as the Bank’s governor from March 2020, more than 18 times the UK average for a full-time employee.”

The average full-time employee is not who the Bank of England, or any other central bank in the capitalist world, has in mind when setting policy. What this episode nicely illustrates is that profits increase when wages are held down. Profit, it can’t be said too often, comes from paying employees only a small fraction of the value of what they produce. The drive by the corporations of the advanced capitalist countries to move production to low-wage, low-regulation havens around the world, continually in search of the next stop on a race to the bottom, is why so-called “free trade” agreements contain ever more extreme rules to benefit multi-national capital.

Class warfare in Canada and Japan

Getting precise figures on what the Bank of Canada is up to is impossible as it is particularly coy in announcing money figures. Bloomberg, for example, could only say that “hundreds of billions of dollars” has been spent in the bank’s QE program. My calculation on what the bank may have spent on quantitative easing is based on the C$376 billion differential on the amount of assets held by the bank between the end of 2019 and on February 2, 2022.

Like the other central banks, the Bank of Canada has several other programs to benefit the financial industry. In the first weeks of the Covid-19 pandemic, it announced multiple programs. The bank implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The bank was not forthcoming about the total cost of these programs at the time; it committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds.

The amount of “direct aid to households and firms” was only a small fraction of what was committed to helping the financial industry. No different, of course, than the response of other central banks.

Ottawa from the McKenzie Bridge (photo by Siqbal)

The Bank of Japan, which had never ended the quantitative easing it began after the 2008 economic collapse, has committed to unlimited government bond buying. In a September 2021 announcement in which it committed to buying ¥20 trillion worth of corporate bonds, the central bank said it “will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero percent.” So large has the bank’s purchases been that it owns assets worth almost 130 percent of Japan’s gross domestic product. The bank doubled the pace of its bond purchases at the beginning of the pandemic.

Since March 2020, the benchmark index of the Tokyo Stock Exchange, the Nikkei 225, has increased 51 percent. In contrast, Japanese wages are “about at the same level as two decades ago,” The New York Times reports. Wages actually fell by around one percent in both 2020 and 2021, Reuters reports, with wage declines accelerating at the end of 2021. Working people have not done well from the world’s longest experiment in quantitative easing.

Circling back to the (admittedly rhetorical) questions asked in the opening paragraphs of this article, it depends on what is meant by “works.” If we mean by that word, as most people likely would, that an economic system functions for the benefit of all, then the scope of money required to keep it functioning forces a conclusion that it does not work in any meaningful sense. If, however, we mean “works” in the meaning given that word by financiers, industrialists and those who serve them and/or interpenetrate with them, most certainly including central bank officials, then all is well because it facilitates the accumulation of capital. Working people around the world pay to maintain financiers and industrialists in their accustomed wealth and power because that is how capitalism is supposed to work. How else would absurd “theories” like trickle down still be implemented after 40 years of failing to do what they are publicly advertised to do?

Another reminder that capitalist markets are simply the aggregate interests of the most powerful financiers and industrialists, and those interests are diametrically opposed to the interests of the vast majority of humanity. It cannot be otherwise.

If you work in the U.S., you don’t know how bad you have it

It’s no secret that United Statesians are more ignorant of the world beyond their national borders than the peoples of other countries. That ignorance serves a purpose. How can you keep screaming “We’re Number One” and believing you have it better than the rest of the world if you are in possession of accurate information?

For example, most United Statesians remain blithely unaware that they have among the worst health care outcomes of any advanced capitalist country while paying by far the most money. A Commonwealth Fund report, for example, found that the U.S. “placed last among 16 high-income, industrialized nations when it comes to deaths that could potentially have been prevented by timely access to effective health care.” As one of the few countries on Earth without a national health care system, health care is a commodity for those who can afford it, not a right as it is almost anyplace else.

The U.S. also has one of the highest rates of inequality as measured by the Gini coefficient; among the countries of Europe only Bulgaria has worse inequality. The United States has the widest gap between pay and productivity gains among advanced capitalist countries and U.S. corporations haul in gigantic sums of money, sometimes millions of dollars per employee, but pay their employees minuscule percentages of their haul. Declining lifespans in the U.S. are considered a “silver lining” in corporate boardrooms because pension costs are lower. And thus it comes as no surprise that the Covid-19 pandemic has widened inequality still further, with the world’s industrialists and financiers adding literally trillions of dollars to their accumulated wealth during 2020.

That was a long introduction to yet more bad news. Not only are wages stagnant and living standards decaying, but working people in the U.S. are working longer hours. A study published in the peer-reviewed journal Socio-Economic Review found that, among 18 European and North American countries, the percentage of employees in the U.S. working at least 50 hours per week is the highest, at about 18 percent for the period 1990 to 2010. The paper, “Extreme work hours in Western Europe and North America: diverging trends since the 1970s” by Anna S. Burger, found that total rising — about 15 percent worked such hours for the period 1970-1989, a time frame in which the U.S. also had the highest rate.

(Author: CIPHR Connect)

Nonetheless, it is not only in the U.S. that more people are forced to work at least 50 hours per week. The study examined Canada, Switzerland and 15 members of the European Union (including Britain, then a member) and in only one country, France, did the percentage of people working excessive hours decline from 1970-1989 to 1990-2010. France, Sweden and Switzerland had the lowest rates, each less than 5 percent. Canada was second to the U.S. at 17 percent and also showed the largest jump, from about 6 percent in 1970-1989.

Work more or else

European Union law is supposed to prohibit working more than 48 hours per week, but the study by Dr. Burger noted that several countries have adopted opt-out clauses. Working beyond 48 hours, even with the exemptions, requires the employee consent. But given the one-sidedness of working relations, an employee could find it difficult to refuse consent. Dr. Burger wrote:

“[T]he choice whether to work long hours is not entirely, or even mainly, left to the preference of the individual but is guided by policy and collective socio-economic institutions. Contrary to conventional wisdom, the most relevant work time tendencies of the past decades are shaped by liberalizing trends in labour market policies, industrial relations arrangements and labour market structures not only in the Anglo-Saxon world but also on most parts of Continental Europe, rather than by regime-conform developments.” [page 3]

Some of the people working excessive hours are high-paid professionals such as lawyers or investment bankers. But low-wage workers are increasingly forced to work long hours because they can’t survive otherwise.

“At the bottom of the skills scale, an increasing number of workers are becoming labour market outsiders who are in atypical, or precarious, employment or unemployment. … The practice of very long hours is particularly wide-spread among outsiders for two reasons. First, due to a lack of regulatory protection and high replaceability, outsiders are in a vulnerable position vis-à-vis their employers. Not complying with an employer’s request for overtime might result in an outsider’s immediate dismissal and replacement. Secondly, in many cases, outsiders consent to, sometimes even initiate, working very long hours in order for their income to reach subsistence level. In today’s increasingly unequal economies, an ever-larger number of low-skilled workers must compensate for their relatively low hourly pay by allocating more time to work. While this decision is formally voluntary, in substance it is not because the choice is strongly shaped by the restrictive political economy environment.” [page 8]

Working conditions in the EU are deteriorating, but employees in the U.S. have less protection and more meager unemployment benefits. The pressure to work long hours is more intense there than in Europe, and employers often find it more profitable to squeeze extra hours out of employees rather than hire someone to lighten workloads. Another product of the extreme individualist ideology U.S. capitalism fosters.

And although overall working hours have actually declined over the past half-century, the rate of that decline has been far slower in the U.S. than in the European Union. A paper by Robert J. Gordon and Hassan Sayed, “The Industry Anatomy of the Transatlantic Productivity Growth Slowdown,” found that for the period 1950 to 2015, there was a decline of 37 percent in average employee working hours for the 10 largest EU countries (a drop from 2,250 hours to 1,560 hours) as compared to a decline of only 12 percent for U.S. employees (2,020 hours to 1,780 hours). So much for John Maynard Keynes’ famous prediction that we’d be working 15 hours a week in the future.

U.S. working people work 220 hours per year more than do EU workers — that’s five and a half weeks of extra work!

That sobering comparison is no surprise when we make a comparison of mandatory paid days off. Among the 42 countries that are members of the OECD and/or the European Union, there is only one country with zero paid days of vacation or holidays under the law — the United States. Seven countries require workers be guaranteed 25 or more vacation days per year. Another 25 mandate at least 20 days. Each of those countries also mandate anywhere from eight to 15 paid holidays. Among the 42 countries surveyed, 34 legally require 28 or more days, led by Austria and Malta (38 each) and another half-dozen requiring 36. Turkey, with 12 days of mandatory paid time off, is next worst to the zero of the U.S.

Working conditions are not getting better

The pandemic may be making the above conditions worse. Working at home has led to a working day of two and a half hours longer for employees in the United States, Canada and Britain, according to a report by a business technology company, NordVPN Teams. The company, CNN reported, examined data sent via servers to calculate employee working hours. There were “no significant drop of business [virtual private network] usage at lunch time indicating potential short lunch breaks while working remotely.”

Other surveys have reached similar conclusions. A report by the U.S. staffing firm Robert Half said nearly 70 percent of professionals who work remotely because of the pandemic work on the weekends and 45 percent say they regularly work more hours during the week than they did before the pandemic. For front-line workers not able to work at home, stress and mental health difficulties have increased sharply, with problems particularly acute in the U.S. due to its inability to provide coherent responses to Covid-19 and the chaos triggered by extreme right operatives who created the “Tea Party” organizing the anti-science and anti-intellectual spectacles opposing measures designed to combat the Covid-19 pandemic.

Where does all this lead? To health problems and shorter lifespans. A study conducted by researchers at the World Health Organization and the International Labour Organization reported that excessive working hours led to 745,000 deaths from stroke and ischemic heart disease in 2016, a 29 per cent increase from 2000. The study found that, in 2016, “398,000 people died from stroke and 347,000 from heart disease as a result of having worked at least 55 hours a week. Between 2000 and 2016, the number of deaths from heart disease due to working long hours increased by 42%, and from stroke by 19%.”

Austerity and economic dislocation have taken their toll around the world, but the already existing harshness of life in the United States on top of austerity and dislocation takes a particular toll there. Nearly half a million excess deaths occurred in the U.S. from 1999 to 2015 from drug and alcohol poisonings, suicide, and chronic liver diseases and cirrhosis. A paper published in the peer-reviewed scientific journal PNAS found this increase in the death rate was limited to the U.S. among advanced capitalist countries.

We’re perhaps taken in more bad news than we can reasonably digest. It’s understandable to not wish to take in too much bad news at once. For readers with knowledge of the world, none of the statistics presented above make for a surprise. It is thus tempting to ask: Would the particularly toxic brand of nationalism practiced by millions of United Statesians continue as virulently were the above statistics widely known? Sadly, perhaps it would. If we were to summarize the discourse of U.S. nationalists, it would be: “We’re number one! We can kill more foreigners in less time than any other country! USA! USA!” Is being able to cheerlead for the world’s biggest military really worth working so many hours for such dismal results?

Never let a crisis go to waste: The pandemic brings more inequality

Heeding that time-honored advice to never let a crisis go to waste, the world’s industrialists and financiers have taken full advantage of the Covid-19 pandemic to accumulate more wealth. And although you already know that large numbers of people have been thrown out of work and/or are at risk of losing their home, you might not have realized how obscene the increase in inequality has become.

Not surprisingly, given that capitalism is a system with a stranglehold on almost every place on Earth, the rise in inequality is a global phenomenon. Unfortunately, capitalists have usually understood their class interests better than do the world’s working people.

When we discuss the increase in wealth the world’s richest are enjoying, we are talking literally about trillions of dollars. 

We’ll start our survey with a report issued by one of the world’s biggest banks, UBS, and Big Four accounting firm PricewaterhouseCoopers. The authors of the report, “Riding the storm: Market turbulence accelerates diverging fortunes,” can hardly contain their enthusiasm at how successful their clients have been during the pandemic. UBS and PwC “have unique insights into” billionaires’ “changing fortunes and needs” and in the report breathlessly extol “a time of exceptional, Schumpeterian creative destruction” by “billionaires [who] live in turbulent but trailblazing times.” As you can already surmise by the tone-deaf writing, the report is intended as a celebration of vast wealth inequality and is written in a style that comes as close to that of Hollywood celebrity publicists as you are likely to find produced by bankers and accountants.

(Artwork by Susana Anaya)
(Artwork by Susana Anaya)

The report says “Some 209 billionaires have publicly committed a total of USD 7.2 billion” in donations, written within a passage told in solemn tones intended to make us gasp in awe at the selflessness of the international bourgeoisie. Yet we soon enough read that the wealth of the world’s billionaires totaled US$10.2 trillion in July 2020. For those of you scoring at home, that $7.2 billion in proposed donations represents 0.07 percent of their wealth. The average working person donates a significantly bigger portion of their income.

In just three months, from April to July 2020, the world’s billionaires added $2.2 trillion to their wealth! Technology billionaires did particularly well during the pandemic, the UBS/PwC report says, due in large part to the surge in technology stock prices. During the first seven months of 2020 alone, technology and health industry billionaires saw their wealth increase by about $150 billion. Yes, never let a crisis go to waste.

The number of the world’s billionaires, the report tells us, is 2,189. To put these numbers in some kind of perspective, there are exactly two countries in the world (the United States and China) that have a bigger gross domestic product than the wealth of those 2,189 billionaires. Or, to put it another way, their wealth is greater than the economic output of Japan, Germany and Britain, the countries with the world’s third, fourth and fifth largest GDPs and which have a combined population of 277 million.

Is there really no money for social programs?

As might be expected, billionaires in the center of the world capitalist system are no laggards among those accumulating wealth at the expense of everyone else. An Institute for Policy Studies study, “U.S. Billionaire Wealth Surges Past $1 Trillion Since Beginning of Pandemic — Total Grows to $4 Trillion,” reports the collective wealth of the 651 billionaires in the United States has increased by over $1 trillion “since roughly the beginning of the COVID-19 pandemic to a total of $4 trillion at market close on Monday, December 7, 2020. Combined, just the top 10 billionaires are now worth more than $1 trillion.” Those gains are more than the $900 billion pandemic relief package that passed Congress this week, a package held up for months by Republicans fretting over the cost. 

Wall Street has been amply taken care of in the current economic crisis, as it was in the wake of the 2008 collapse, and industrialists also have had massive amounts of subsidies and tax cuts thrown their way. For working people, crumbs. The Federal Reserve, the U.S. central bank, committed US$5.3 trillion to corporations on its own initiative in the first weeks of the pandemic, and most of the $2.5 trillion offered in last spring’s two congressional stimulus packages (the CARES Act of March 27 and the supplement of April 24) went to big business. (There was nothing unique about that as Britain, the European Union and Canada pushed through similar programs.)

The Institute for Policy Studies report notes that the $1 trillion gain by U.S. billionaires since mid-March is: 

  • More than it would cost to send a stimulus check of $3,000 to every one of the roughly 330 million people in the United States. A family of four would receive $12,000.
  • Double the two-year estimated budget gap of all state and local governments, which is forecast to be at least $500 billion. By June, state and local governments had already laid off 1.5 million workers and public services—especially education—faced steep budget cuts.
  • Only slightly less than total federal spending on Medicare ($644 billion in 2019) and Medicaid ($389 billion in fiscal year 2019), which together serve 120 million Americans.
  • Nearly four times the $267 billion total in stimulus payments made to 159 million people earlier in 2020.

During the same period, about 70 million lost employment, 12 million workers lost their health insurance due to losing their jobs, 26 million did not have enough food to eat just during a two-week period in November and 98,000 businesses closed. The Economic Policy Institute predicts that if federal aid is not forthcoming, as many as 5.3 million public-sector jobs—including those of teachers, public safety employees and health care workers—will be lost by the end of 2021.

An excuse to ramp up privatization in Canada

The pandemic is being used as an opportunity in Canada to advance corporate goals of privatization. Health care workers in Alberta walked off their jobs in a wildcat strike in November to protest Alberta Health Services’ announcement that it would be laying off 11,000 public positions so those jobs could be filled by private contractors. The Canadian news site Rabble reports:

“Alberta leads Canadian provinces and territories in its pursuit of privatization, and its October announcement that it was laying off up to 11,000 hospital workers has led to worker resistance and criticism from the province’s doctors. (One Calgary physician even set up a grassroots political organization against health-care privatization). Affected workers include those working in housekeeping, food services, laundry and laboratories. The Alberta government claims that these roles are not being eliminated, but instead transferred from public positions to ones filled by private contractors. … This past summer, Alberta Bill 30 was also criticized as opening the door to further privatization of health care. The Health Statutes Amendment Act was an omnibus bill that passed at the end of July.”

Alberta legislators also pushed through a bill that weakens rules and requirements for charter schools to operate and allowed for home schooling to go on unsupervised by public school boards. (Charter schools are designed to weaken teachers’ unions and hand schools to corporations for profit, while the supposed improvements in student outcome are mostly mythological.) Not to be outdone, Manitoba’s provincial government seeks to privatize child care, long-term care homes and liquor sales, and intends to cut public service jobs by 25 percent, Rabble reported.

Jobs losses and insecurity around the world

A University College London report, “Financial inequalities widen due to Covid-19,” called by the authors the “UK’s largest study into how adults are feeling about the lockdown,” found that more than two-thirds of Britons surveyed have suffered deteriorating finances. The report said, “Almost half (47%) of those who were finding things ‘very difficult’ financially before lockdown are now reporting things are ‘much worse’, with a further 23% saying things are ‘worse’. This figure has increased significantly from July, when 57% of the same group reported being financially worse off than before the pandemic.” The report quoted an educational leader, Cheryl Lloyd, as summarizing the situation as follows: “This report shows that the financial impact of the Covid-19 crisis is not being felt equally across the UK. This threatens to further widen existing inequalities as the pandemic continues.”

Conditions are no better across the Channel in the European Union, with disparate impacts on jobs widening inequality on the continent. The Brussels think tank Bruegel reports that, across the EU, “8% of workers educated to lower secondary level or below lost their jobs between the last quarter of 2019 and the second quarter of 2020. Over the same period, the number of jobs for workers with university degrees increased by 3%. Jobs for employees with middle-level qualifications declined by 5%. This picture of differences between low-educated and tertiary-educated workers can be seen in all EU countries and the United Kingdom.”

Those at more risk of losing their jobs are also at more risk of contracting Covid-19. “Sectors more exposed to the pandemic, including restaurants, travel, entertainment and personal services have unsurprisingly suffered more,” Bruegel reports. “But the ability to telework has greatly influenced labour market outcomes. About 70% of those who completed university studies are able to work from home, compared to about 15% of those who have not completed secondary school. Two-thirds of professionals and 85% of managers can work from home, in contrast to close to zero for workers in transportation, installation, construction and agriculture.”

And, as would be expected, conditions in the developing world are still worse. India has experienced a 26 percent decline in industrial employment, according to an India Today report. The broadcaster said:

“Ever since India went under a strict lockdown on March 25, millions of the country’s poorest workers were immediately rendered jobless and left without any income. An unresolved migrant crisis is the biggest example of the plight India’s poor are facing at the moment. Even the country’s vast middle class population encountered a sharp loss of income during the pandemic due to a wave of job losses and pay cuts. … A recent report by the Centre For Monitoring Indian Economy (CMIE) indicates that [21 million] salaried jobs were lost in the first five months of the pandemic, indicating that income levels among middle class households have fallen sharply.”

At the same time Indians across the country were undergoing difficulties, Mukesh Ambani, one of the world’s richest persons, saw his wealth increase by $30.5 billion. Another Indian billionaire, Cyrus Poonawala, added $5.6 billion to his wealth this year, India Today reported.

Even capitalists’ spokespeople profess concern

Inequality has become so extreme that even some of the staunchest upholders of the capitalism that creates this inequality profess to be concerned. (Or perhaps they are worried about people rising up to do something about it and thus advocate a little softening, at least for now.) In November, the Brookings Institution was moved to issue a report, “Windfall profits and deadly risks: How the biggest retail companies are compensating essential workers during the Covid-19 pandemic,” that discussed the big increases in profits enjoyed by giant retailers while their workforce sees only crumbs. Brookings reported:

“We find that while top retail companies’ profits have soared during the pandemic, pay for their frontline workers—in most cases—has not. In total, the top retail companies in our analysis earned on average an extra $16.9 billion in profit this year compared to last—a stunning 39% increase—while stock prices are up an average of 33%. And with few exceptions, frontline retail workers have seen little of this windfall. The 13 companies we studied raised pay for their frontline workers by an average of just $1.11 per hour since the pandemic began—a 10% increase on top of wages that are often too low to meet a family’s basic needs. On average, it has been 133 days since the retail workers in our analysis last received any hazard pay.”

For top executives and speculators who hold large numbers of shares, however, the year of the pandemic has been a bonanza. The Brookings report further stated:

“Many of the least generous companies were the most financially successful, posting huge profits. Amazon and Walmart combined earned an extra $10.9 billion in profit compared to last year, an increase of 53% and 45%, respectively. Their workers, on the other hand, have received below-average COVID-19-related compensation: an extra $1,369 ($0.95 per hour) and $900 ($0.63 per hour), respectively, over the eight-plus months of the pandemic—representing just 6% pay bumps for full-time workers that earn starting wages. Meanwhile, Amazon and Walmart’s stock prices are up 65% and 41% since the start of the pandemic, adding more than $70 billion to the wealth of Jeff Bezos, Amazon’s CEO, and $45 billion to the Walton family—the country’s richest family, who own more than half of Walmart’s shares.”

Wal-Mart spent $500 million on new stock buybacks during the third quarter of 2020 while offering no new hazard pay bonuses for its employees, the Brookings report said. Another big chain, Kroger, announced $1.2 billion in new stock buybacks, causing the stock price to rise (which is the intention), at the same time its grocery workers were given no hazard pay for six months while earning an average wage of $10 per hour. Kroger’s profits during the first six months of the pandemic, meanwhile, totaled $2 billion.

Wal-Mart is a company that pays its employees so little that they skip meals and organize food drives; receives so many government subsidies that the public pays about $1 million per store in the United States; and is estimated to avoid $1 billion per year in U.S. taxes through its use of tax loopholes. Meanwhile, the Walton family collects billions of dollars every year from dividends just for being born in the right family.

Amazon is notorious for the brutal inhuman conditions in its distribution centers and for not paying taxes. Amazon’s owner, Jeff Bezos, is one of the world’s richest people yet he organized a nationwide sweepstakes to see what cities or states would give him the biggest subsidies when he announced Amazon would create a second headquarters.

The International Monetary Fund likely isn’t having second thoughts or feeling remorse about its decades of imposing harsh austerity on developing countries, but has weighed in on the rise of inequality — whether from genuine concern or, much more likely, as a public relations gesture. (IMF papers purporting to reconsider neoliberalism are always much less than they appear.) Because lower-income people are less likely to be able to work from home during the pandemic, and thus more likely to have lost their job, the IMF said “the estimated effect from COVID-19 on the income distribution is much larger than that of past pandemics.”

Loss of work and specter of hunger hit developing world hard

Whatever the motivations of the world’s capitalist think tanks and financial institutions may be in discussing global inequality in the wake of the Covid-19 pandemic, there is no question that working people everywhere are suffering. As early as late April, the International Labour Organization issued a report, “As job losses escalate, nearly half of global workforce at risk of losing livelihoods,” predicting that half of the world’s working people are in danger of disaster. The ILO said:

“The continued sharp decline in working hours globally due to the Covid-19 outbreak means that 1.6 billion workers in the informal economy — that is nearly half of the global workforce — stand in immediate danger of having their livelihoods destroyed. … The first month of the crisis is estimated to have resulted in a drop of 60 per cent in the income of informal workers globally. This translates into a drop of 81 per cent in Africa and the Americas, 21.6 per cent in Asia and the Pacific, and 70 per cent in Europe and Central Asia. Without alternative income sources, these workers and their families will have no means to survive.”

Large numbers of the world’s peoples were already in a highly precarious condition. An estimate by John Bellamy Foster and Robert W. McChesney is that there are 2.4 billion people in their prime working ages (25-54) who are unemployed, vulnerably employed or economically inactive, compared to 1.4 billion actively employed. In other words, there are far more people in the “reserve army of labor” who are precariously or not at all employed than those with jobs, and far from all those 1.4 billion who are employed have secure work. 

Striking fast food workers were joined by university workers, students, janitors, retail workers and airport workers in an April 2018 action in Minneapolis. (photo by Fibonacci Blue)

And with loss of livelihood comes the specter of hunger. The United Nations World Food Programme, also in late April, predicted that the pandemic “will double number of people facing food crises unless swift action is taken.” The agency said, “The number of people facing acute food insecurity stands to rise to 265 million in 2020, up by 130 million from the 135 million in 2019, as a result of the economic impact of COVID-19.”

Nor does the developing world have the health care infrastructure necessary to handle the number of people falling sick from Covid-19. The United Nations Development Programme noted that developed countries have 55 hospital beds, more than 30 doctors and 81 nurses for every 10,000 people, but for the same number of people in a less developed country there are seven beds, 2.5 doctors and six nurses.

Pandemic widens education disparities

The lack of infrastructure to provide education is also acute. Because of school closures and the divide in distance learning, an estimated “86 per cent of primary school-age children in low human development countries are currently not getting an education, compared to just 20 per cent in countries with very high human development,” according to the UN Development Programme. “With schools closed, UNDP estimates that effective out of school rates could regress to levels not seen since the 1980s — the largest reversal ever … and threatening the hard work and progress of the past 30 years.”

Similar conclusions were reported by the Institute for Policy Studies’ Inequalilty.org project. In a September report, the project found that just 6 percent of children in eastern and southern Africa have access to the Internet. In Kenya, schools have been closed for six months. And that has further consequences. “One likely impact of Covid-19 is a rise in teen pregnancies, as adolescent girls are left without the safety net that schools provided,” the report said. “This gendered menace deprives young girls of the opportunity to further their education and attain their career goals. It also exposes them and their children to major health risks. According to the World Health Organization, ‘pregnancy and childbirth complications are the leading cause of death among girls aged 15–19 years globally.’ ”

The pandemic has also widened inequality in education in the developed world. VoxEU, which calls itself a provider of commentary by “leading economists,” reports that the disruption to higher education caused by the switch to online classes is much larger for lower-income students because “lower-income students were more likely to have been financially impacted by COVID-19 and were more worried about the direct health risks from the virus.” VoxEU found that “Lower-income students are 50% more likely than their more affluent peers to expect a delayed graduation due to COVID-19, a gap which disappears once accounting for the differential financial burdens or health risks imposed by COVID-19.”

Pandemic places greater burden on women 

Concomitant with the various inequality aggravations, it’s no surprise that women are being hit harder than men.

Alison Andrew, a senior research economist at the Institute for Fiscal Studies in London, said: “Mothers are more likely than fathers to have moved out of paid work since the start of lockdown. They have reduced their working hours more than fathers even if they are still working and they experience more interruptions while they work from home than fathers, particularly due to caring for children. Together these factors mean that mothers now are only doing a third of the uninterrupted paid-work hours that fathers are. A risk is that the lockdown leads to a further increase in the gender wage gap.”

The Institute, in its report on British fallout from the pandemic, “Parents, especially mothers, paying heavy price for lockdown,” found the following:

  • Mothers are 23% more likely than fathers to have lost their jobs (temporarily or permanently) during the current crisis. Of those who were in paid work prior to the lockdown, mothers are 47% more likely than fathers to have permanently lost their job or quit, and they are 14% more likely to have been furloughed. In all, among those working in February 2020, mothers are now 9 percentage points less likely to still be in paid work than fathers.
  • Mothers who are still doing paid work have reduced their paid working hours substantially and by more than fathers. Prior to the crisis, working mothers did paid work in 6.3 hours of a weekday on average; this has fallen by over one-fifth to 4.9 hours. Working fathers’ hours have also fallen, but by proportionally less, from 8.6 hours before the crisis to 7.2 hours now. 
  • Mothers are also far more likely to be interrupted during paid working hours than fathers. Almost half (47%) of mothers’ hours spent doing paid work are split between that and other activities such as childcare, compared to 30% of fathers’ paid working hours. Where focused work time is important for performance, gender differences in interruptions and multitasking risk further increasing the gender wage gap among parents.
  • In families where the father has lost his job while the mother kept hers, men and women still split housework and childcare responsibilities fairly equally. In all other types of households, mothers spend substantially more time on domestic responsibilities.

Such disparate impact means women are again falling further behind men in earnings. “Analysis of those that did produce data suggests it will take almost 200 years to close the gap,” says Dr. Wanda Wyporska, the executive director of the Equality Trust. “Undoubtedly women are bearing the brunt of this, as they did in austerity when 86% of cuts fell on women. There is a cumulative effect which consistently pushes progress back.” The general secretary of the British Trades Union Council, Frances O’Grady, said, “[O]nly one in 10 lower earners are able to work from home, and 69% of low earners are women; it is not a panacea. …Working women have led the fight against coronavirus, but millions of them are stuck in low paid and insecure jobs. We need a reckoning on how we value and reward women’s work.”

Women’s March of January 21, 2017, in Chicago (photo by Jonathan Eyler-Werve)

Then there is the specter of violence from male partners. María Noel Vaeza, United Nations Women Regional Director for the Americas and the Caribbean, in a November report, said:

“While lockdowns and stay-at-home orders may be crucial in limiting and preventing the spread of COVID-19, they also have a devastating impact on women and girls living with the risk of gender-based violence, as many of the factors that trigger or perpetuate violence against women and girls are compounded by preventive confinement measures. Emerging global data has shown an increase in calls to [violence against women and girls] helplines. … Stay-at-home measures are compounding perpetrators’ use of mechanisms of power and control to isolate victims of [violence]. Unemployment, economic instability and stress may lead offenders to feel a loss of that power, which in turn may exacerbate the frequency and severity of their abusive behaviour. At the same time, the crisis is generating additional barriers for women and girls’ access to essential life-saving services such as counselling and justice resources, and legal advice; sexual health and other crucial medical assistance; and the provision of refuge.”

Racial disparities widened by pandemic

No roundup of Covid-19 inequalities would be complete without discussion of racial disparities. The impact of the pandemic’s effect on the economy, because it impacts lower-income working people most severely, has fallen heavily on People of Color. A Center for American Progress report authored by Dania Francis and Christian E. Weller demonstrates the severity of the disparities:

“African Americans have experienced particularly large job losses in a labor market characterized by persistent racism and inequality. … Estimates based on census data show that 54.8 percent of Black workers said that they had lost incomes due to a job loss or cut in hours from late April to early June, compared with 45.8 percent of white workers. The labor market pain has created housing instability for Black families to a much larger degree than was the case for white families. Estimates based on census data show that more than one-third of African Americans who experienced job-related income losses said that they either didn’t pay their mortgage or deferred their mortgage, compared with only 16.9 percent for white families with earnings losses. Among renters, 38.3 percent of Black families with income losses didn’t pay or deferred their rent, compared with 23.1 percent of white families in a similar situation.”

Compounding this financial distress is that, with schools going to remote learning, a lack of resources impacts the education of African-American children. The Center for American Progress report said:

“The lack of reliable internet or an electronic device for remote learning also correlates with fewer hours per week of teaching time. … Unreliable internet access and a lack of consistent access to electronic devices reduces families’ time teaching children by two to three hours among Black families but only by one to two hours among white families. … While the short- and long-term impacts of coronavirus-related school closures and job losses on children’s educational outcomes cannot be measured yet, it is already clear that there are differential effects by race on access to educational resources as a result of the pandemic. In particular, the persistent and large Black-white wealth gap directly and immediately feeds into persistent educational gaps.”

Higher poverty rates also increases the mortality rate from Covid-19. Writing in City Limits, Bijan Kimiagar and Jack Mullan report:

“The pandemic has entrenched extreme inequalities in New York City. Insecurities surrounding employment, health, education and basic safety are affecting many New Yorkers today, but they are disproportionately experienced in communities with the lowest incomes. The sheer rate of COVID-related deaths is more than two times higher in zip codes with very high poverty rates (where 272 out of every 100,000 residents have died) than in zip codes with low poverty rates (125 out of 100,000). New Yorkers with the lowest incomes are feeling the impact of the pandemic on all sides—living in fear of eviction, struggling to put food on the table, and having trouble getting devices to support remote learning for their children.”

For industrialists, financiers and their publicists, the year 2020 might be a time of “exceptional creative destruction,” but for the overwhelming majority of humanity who do the actual work that is converted into the fabulous wealth of those at the top, it’s just plain old destruction. Capitalism as usual.

Class warfare intensifies as labor rights violated around the world

As bad as conditions have traditionally been for labor worldwide, 2020 has seen conditions deteriorate even more. As in past years, there is not a single country on Earth that fully protects workers’ rights. And although every country continues to violate labor rights, the extent of those violations grows, continuing a sad pattern of class warfare.

The International Trade Union Confederation has issued its annual Global Rights Index, and only 12 countries managed to be listed in the Index’s top ranking, the countries that are merely “sporadic” violators of rights. But those countries are hardly paradises (this is capitalism, after all). One of those dozen, the Netherlands, had no less than seven of its corporations listed among companies violating workers’ rights. Those were not necessarily isolated instances. The report said, “In the Netherlands, unions observed an increasing trend to shift from sectoral agreements to company agreements with the intent of minimising labour costs in return for employability. Companies often used the competitiveness and employability argument with their employees to incite them to accept lower conditions of work at the enterprise level. In addition, companies, including Ryanair, Transavia, Jumbo Supermarkets, Gall & Gall, Action and Lidl supermarkets, tended to circumvent collective bargaining with representative unions.”

If that represents the “best” of conditions for working people, the world is a mighty unfair place. Which it obviously is, given the ever more intense pressure bearing down on working people as the neoliberal era continues to make capitalism ever more miserable for those whose work produces the profits swelling the pockets of industrialists and financiers.

As in past years, the Global Rights Index report divides the world’s countries into five categories with increasing levels of rights violations. They are as follows:

  • 1. Sporadic violations of rights: 12 countries including Germany, Ireland, Norway and Uruguay (green on map above).
  • 2. Repeated violations of rights: 26 countries including Canada, France, Japan and New Zealand (yellow on map).
  • 3. Regular violations of rights: 24 countries including Argentina, Australia, Britain and South Africa (light orange on map).
  • 4. Systematic violations of rights: 41 countries including Chile, Mexico, Nigeria and the United States (dark orange on map).
  • 5. No guarantee of rights: 32 countries including Brazil, China, Colombia and Turkey (red on map).
  • 5+ No guarantee of rights due to breakdown of the rule of law: 9 countries including Libya and Syria (dark red on map).

Hypocritical finger-wagging

Consistent with past years of the Global Rights Index, the United States, which loves to hold itself up as an exemplar of democracy and civil rights, is among the lowest-ranking countries — the U.S. has consistently had a ranking of 4 for “systemic” violations. The International Trade Union Confederation, in supplemental materials discussing U.S. violations, noted that the National Labor Relations Board has made a series of anti-union rulings, including allowing retaliation against striking Wal-Mart workers, while U.S. law permits anti-union discrimination, restricts workers’ rights to form unions of their own choosing, and places severe barriers against union organizing. 

The United Kingdom, second only to the U.S. in regular scolding of other countries, is ranked in the middle of the pack, same as a year ago. The report’s discussion of Britain reported “the number of people employed on a stand-by basis, ‘zero-hour contracts,’ at between 200,000 to 250,000 which demonstrates the prevalence of underemployment in the UK. Under these contracts employees have to be available for work but are not guaranteed a minimum number of hours. These contracts create income insecurity for workers and also undermine family life.” Additionally, the report noted multiple barriers to British union organizing.

Canada, although ranked higher than Britain or the U.S., is no paradise despite the image its governments like to project. The report noted that in Canada there are many categories of workers, ranging from domestics to professionals, barred from organizing, and there are severe legal restrictions limiting the right to strike.

A Wal-Mart protester is led away during a Black Friday action in Sacramento, California. (Photo via Making Change at Walmart.)

Globally, the report states that violations of workers’ rights are at a seven-year high. Direct attacks on unions highlight the degradation:

“The trends by governments and employers to restrict the rights of workers through violations of collective bargaining and the right to strike, and excluding workers from unions, have been made worse in 2020 by an increase in the number of countries which impede the registration of unions — denying workers both representation and rights. … A new trend identified in 2020 shows a number of scandals over government surveillance of trade union leaders, in an attempt to instil fear and put pressure on independent unions and their members.”

The global pandemic has only made conditions worse:

“These threats to workers, our economies and democracy were endemic in workplaces and countries before the Covid-19 pandemic disrupted lives and livelihoods. In many countries, the existing repression of unions and the refusal of governments to respect rights and engage in social dialogue has exposed workers to illness and death and left countries unable to fight the pandemic effectively.”

Class warfare goes on and on and on

Some of the sobering statistics gathered by the International Trade Union Confederation tell a grim story:

  • 85 percent of countries violated the right to strike.
  • 80 percent of countries violated the right to collectively bargain.
  • Workers were arrested and detained in 61 countries.
  • Workers experienced violence in 51 countries.

The Confederation, which describes itself as a coalition of “national trade union centres” encompassing 332 affiliated organizations in 163 countries and territories, determines its ratings by checking adherence to a list of 97 standards derived from International Labour Organization conventions. Those 97 standards pertain to civil liberties, the right to establish or join unions, trade union activities, the right to collective bargaining and the right to strike.

The Confederation’s report is one more illustration of the race to the bottom. The International Labour Organization estimates that more than 470 million people worldwide were unemployed, underemployed or “marginally attached to the workforce” in a report issued in January 2020, with 2 billion people (61 percent of the global workforce!) informally employed. That report was issued just before the Covid-19 pandemic took hold, triggering a dramatic economic crash that had been overdue, thanks to the instability of capitalism that regularly causes downturns. Inequality and lower pay are endemic around the world, and the costs of housing, because it is a capitalist commodity, rises far faster than incomes. The continual imposition of austerity on working people contrasts dramatically with the trillions of dollars thrown at financiers and industrialists since the pandemic began.

Capitalism promises nothing but more one-sided class warfare. We’re long past due to try something different.

The political economy of Covid-19

Governments around the world are attempting to prop up a failing capitalist system by — surprise! — throwing money at wealthy individuals and corporations, especially in the financial industry. In other words, in this time of unprecedented crisis and economic difficulty, it’s business as usual.

We were here not much more than a decade ago, although the rise in unemployment has been more dramatic than during the economic collapse of 2008. That global economic crisis was a long time coming but was inevitable for anyone willing to pay attention. During the 1990s stock-market bubble, traders repeatedly said the dramatic price rises could not last, but as long as the consensus view was that the long bull market would continue they were not going to step off the ride. When the bubble did burst, new forms of speculation kept the financial industry’s party going for several more years. Credit was the lubricant for the later round, both inflating a real estate bubble and enabling consumer spending to continue in the face of declining wages, until the speculation became unsustainable.

No more bubbles to inflate, governments representing the world’s four largest economies alone committed US$16.3 trillion in 2008 and 2009 on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus. Those commitments included $11 trillion for the U.S. (where money thrown at capitalists far exceeded the $700 billion in the Troubled Assets Relief Program), $4 trillion for the European Union, $750 billion for Japan and $600 billion for China. Smaller economies did that too. The Reserve Bank of Australia shoveled A$1.8 billion (US$1.5 billion at the then exchange rate) at financiers to shore up its banking system. The Reserve Bank of India did the same, handing out 60 billion rupees (US$1.3 billion).

Cherry blossoms in Washington (photo by Sarah H. from USA)

All that was simply to deal with the immediate crisis of 2008. As stagnation continued, many of the world’s most prominent central banks decided to throw new gigantic sums of money at the financial industry. Specifically, through programs known by the technical name of “quantitative easing.” What that is are central banks buying in massive amounts bonds issued by their own governments, corporate bonds and/or mortgage-backed securities. For all the talk of the world’s governments taking “unprecedented” measures to deal with the dramatic economic crash triggered by the Covid-19 pandemic, most of the money being committed is in the form of new quantitative easing.

An economic song and dance

The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because of the resulting distortion in demand for them, enabling bond sellers to offer lower interest rates. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments.

By any standard, we are indeed talking about massive amounts of money. Just on “quantitative easing” alone, the Federal Reserve, European Central Bank, Bank of England and Bank of Japan spent approximately US$9.36 trillion, or, if you prefer, €8.3 trillion, in the years following the 2008 collapse. Here’s a breakdown:

  • The Federal Reserve spent $4.1 trillion in three QE programs that ended in November 2014.
  • The European Central Bank spent €2.6 trillion on its QE programs, which only concluded at the end of 2018.
  • The Bank of England spent £375 billion on its QE program.
  • The Bank of Japan has spent north of ¥200 trillion; precise figures are not available. Japan’s QE has been so large and long-lasting that the Bank of Japan now owns assets valued at more than the entire country’s economy.

Think of all the social needs that could have been fixed for such sums. For example, the British think tank Policy Exchange estimated in 2015 that Britain’s needs for investment in transportation, communication and water infrastructure to be a minimum of £170 billion. That is less than half of what the Bank of England spent on its quantitative-easing scheme. The U.S. could have wiped out all student debt, fixed all the schools, rebuilt aging water and sewer systems, cleaned up contaminated industrial sites and repaired dams — all for $700 billion less than what was spent on quantitative easing.

Given this recent history — by no means an aberration in the history of these capitalist governments — it is no surprise that relief for the economic crash caused by Covid-19 has been largely directed at corporate boardrooms and the bank accounts of the wealthy.

Stimulus packages to deal with pandemic, but who gets stimulated?

The Federal Reserve, like most central banks, is “independent” of the rest of government. The reason given is to avoid “political interference,” but in reality so the elites of financial institutions can continue to do whatever they want without consequence. But as is customary, the Federal Reserve doesn’t act in a vacuum; Congress and the White House are also doing what they can to shovel gigantic sums of money at financiers and industrialists.

So far, Congress has passed two stimulus packages that were signed into law, one in late March and the second in April. A third has been passed by the House of Representatives, but the Senate has shown no inclination to take it up and there is reason to doubt House Democrats are actually serious about this last effort.

The first stimulus is the CARES (Coronavirus Aid, Relief, and Economic Security) Act, worth $2 trillion, which was signed into law on March 27. This is the act that resulted in United Statesians receiving one-time $1,200 checks from the federal government. Considering that the average monthly rent in most cities of the United States is more than that, those checks are tokens that serve to obscure where most of the money went. It wasn’t to households left without work.

The Federal Reserve (photo by Stefan Fussan)

A second stimulus bill was passed and signed into law on April 24 and is worth another $500 billion. Most of the money in this second stimulus bill was earmarked for the Paycheck Protection Program (PPP), a loan program in the CARES Act intended for small businesses that may be forgiven if firms use them to keep workers on payroll; the PPP had run out of money in two weeks. Democrats said they wanted money in this round to go to state governments struggling with suddenly shrinking tax revenue but, as is their custom, immediately capitulated when Republicans said no.

The CARES Act included $250 billion to bolster unemployment insurance, $500 billion in aid for industry and state governments, other monies going directly to specific industries and $350 billion for the PPP. Sounds nice, yes? Appearances and reality, however, diverge.

Before the second, supplemental stimulus package was passed, it had already become apparent that much of the stimulus money was going to Big Business. And that was not all, as yet more tax cuts for large corporations were included in the CARES Act. According to Democracy Now, “A congressional committee reports tax provisions in the coronavirus stimulus passed by Congress last month will overwhelmingly benefit the wealthiest Americans. Four out of five tax filers benefiting from the $70 billion temporary tax loophole are millionaires or billionaires. They’ll receive an average windfall of $1.6 million — dwarfing the $1,200 payments for working Americans.”

Manipulation of Paycheck Protection Program

Meanwhile, much of the PPP money didn’t go to mom-and-pop businesses forced to close due to the Covid-19 pandemic. At least 75 publicly traded companies received funds from the PPP, which is supposed to help small businesses. The Associated Press reports:

“The Paycheck Protection Program was supposed to infuse small businesses, which typically have less access to quick cash and credit, with $349 billion in emergency loans that could help keep workers on the job and bills paid on time. But at least 75 companies that received the aid were publicly traded, the AP found, and some had market values well over $100 million. And 25% of the companies had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question. By combing through thousands of regulatory filings, the AP identified the 75 companies as recipients of a combined $300 million in low-interest, taxpayer-backed loans. Eight companies, or their subsidiaries, received the maximum $10 million possible, including a California software company that settled a Securities and Exchange Commission investigation late last year into accounting errors that overstated its revenue.”

Even the Big Business cheerleaders at the CNBC business news cable channel reported that “Hundreds of millions of dollars of Paycheck Protection Program emergency funding have been claimed by large, publicly traded companies, new research published by Morgan Stanley shows.” This report estimated that at least $243.4 million of the total $349 billion handed out in the PPP as of April 21 — by which time the PPP had already run out of money — went to publicly traded companies.

The above figures might be an underestimate; a later Washington Post report said “hundreds” of publicly traded companies have received a composite of more than $1 billion in PPP funding, although some of that money has been returned under public pressure. Eighty percent of applicants were left with nothing after funding ran out.

Published reports differ in determining the number of inappropriate recipients of PPP money because there is little accountability. One reason for that, beyond the usual wanting to shield favored donors from public scrutiny, might be that several members of Congress have themselves received PPP money. The Trump administration is refusing to provide information; it would not be a surprise to find there is something to hide there as well. Politico reports that “at least four members of Congress have reaped benefits,” and the actual total might be higher. “It’s a bipartisan group of lawmakers who have acknowledged close ties to companies that have received loans from the program — businesses that are either run by their families or employ their spouse as a senior executive,” Politico reports, naming two Democrats (Susie Lee of Nevada and Debbie Mucarsel Powell of Florida) and two Republicans (Roger Williams of Texas and Vicky Hartzler of Missouri).

Tax breaks for the one percent slipped into stimulus

One tax break inserted into the second stimulus bill only applies to companies with revenue of $25 million and another provision lets people in households earning at least $500,000 a year deduct even more of their business losses from stock market profits, The New York Times reports. These deductions will enable the recipients to reduce what they owe in capital gains taxes. Victor Fleischer, a tax law professor at the University of California, Irvine, told the Times, “Many of the tax benefits in the stimulus are ‘just shoveling money to rich people.’ ”

And given the grifters who occupy the White House, it will come as no surprise that there are special benefits for the owners of real estate. One of the goodies stuffed into the stimulus packages will allow people who own their businesses through partnerships or other similar structures to use all of the losses they claim on paper to offset taxes they might otherwise owe from other income, such as stock market profits, eliminating a cap on how much of those losses could be used. These partnerships can be very profitable, but as long as they show a loss on paper the owners can offset taxes. Jesse Drucker of The New York Times, in an interview on National Public Radio’s Fresh Air program, estimates this tax break for the wealthy will cost the government $135 billion — essentially all of which will go to the top one percent.

The Rideau Canal in Ottawa (photo by John Talbot)

This massive tax break is not specifically written for the real estate industry, but that is the industry that is likely to benefit the most as corporate real estate operations are often structured in these ways. Mr. Drucker said:

“In real estate, you can actually have, in the real world, what is quite a profitable business that generates losses on tax returns because real estate developers get to write down the value of their buildings. That turns into a deduction. And the result is that people like Jared Kushner and Donald Trump — to the degree that we have had some insight into their taxes over the last few years, we have seen that they have reported big losses on their tax returns. In many cases, it’s almost certainly the result of some of these favorable provisions that let them write down the value of their buildings. So the point is that any tax law change you make that gives people the ability to make maximum use of their losses is something that could very easily benefit real estate investors because they have so many losses. And in the case of Jared Kushner and Donald Trump, we don’t have to speculate on that. We know that in previous years, they have reported big losses, which would put them in a position to benefit from this.”

Not even the most elementary provisions to put some limits on where the money is going were inserted into these stimulus bills. For example, although there is a clause prohibiting the use of the money for stock buybacks and extra executive pay, it’s followed by another clause allowing Treasury Secretary Steve Mnuchin (the foreclosure king) to waive the prohibition. Nor are there measures to demand that corporate recipients even pay tax. Reuters reports that the PPP has given “millions of dollars in American taxpayer money to a number of firms that have avoided paying U.S. tax.” Twelve companies provided with $104 million in loans use offshore havens to cut their tax bills, seven of which paid no taxes.

Federal Reserve offers trillions of dollars

The Federal Reserve’s contribution to the wealthy goes far beyond the two stimulus bills. By the end of March, the Fed had already committed more than $3 trillion in loans and asset purchases in the wake of a rapidly collapsing economy. This included fresh commitments to a recently announced new quantitative-easing program in which the Fed had pledged to spend $700 billion to buy Treasury and mortgage-backed bonds in addition to multiple loan programs. Although most of this will come from printing money, $450 billion of this came from the $2 trillion CARES Act stimulus passed by Congress.

Following its March 23 announcement, the Fed announced another round of measures on April 9, this time committing $2.3 trillion in new loans and credits for business and local governments. The centerpiece of this round is the “Main Street Lending Program,” which makes it sound like these loans will be earmarked for small businesses, but loans will be offered to corporations with as many as 10,000 workers and revenues of up to $2.5 billion. Not exactly what we have in mind when we think of “Main Street.” The set of measures could inject $6 trillion into the financial system, but that money, if actually spent, seems mostly destined for the pockets of speculators.

With state and local governments dangerously short on revenue due to the economic crisis, and thus putting social programs in jeopardy, what does the White House want to do? The only “solution” demanded by Donald Trump is to cut the payroll tax, the source of money for Social Security. The president claims he wants a “temporary” payroll tax cut, but that has to be seen not only in light of his complete inability to say anything truthful but his and his administration’s stated desire to cut Social Security. Cutting the funding for the retirement program is a good way to undercut it, which has long been the wish of Wall Street. Even if there weren’t nefarious reasons at work, would a temporary payroll tax cut provide a jolt to the economy? Definitely no, says the Center on Budget and Policy Priorities in a May 12 commentary.

“President Trump has said he will not support any additional relief or stimulus measures in response to the human and economic crisis caused by the Covid-19 pandemic unless they include a temporary payroll tax cut,” the Center said. Stimulus packages are only effective “if they quickly deliver resources to people and businesses that most need it and so are most likely to spend rather than save any extra dollars they receive.” But the Trump plan would fail to help either. The Center said:

“Cutting the employee share of payroll taxes gives the most help (in dollar terms) to higher earners, who are less likely to need the help or to spend most or all of the extra money. Compounding the weaknesses of this approach, it does less for those with lower earnings and nothing at all for people who have lost jobs. And cutting employer payroll taxes is an ineffective way to shore up business hiring and investment. Business’ main problem now is lack of customers for their products — both because of social distancing measures and because many customers’ incomes have fallen dramatically as unemployment has risen. Businesses will not hire (or retain) more workers or invest in more equipment than they need to produce the goods and services they can actually sell.”

Already there are signs that the windfall large businesses have received from the Trump administration have been slipped into bank accounts, not into investment. Economist Jack Rasmus has calculated that the loss of income for the tens of millions of United Statesians plunged into unemployment has cost them a composite $1.3 billion in lost wages. Ridiculing the orthodox economic “theory” that the problem with recessions are “sticky wages” — in other words, wages don’t fall fast enough or far enough during downturns — Professor Rasmus notes that businesses are not investing in the wake of the wage reductions. He writes:

“They’re hoarding the $1.74 trillion in Congressional loans and grants bailouts. And hoarding the $650 billion in business tax cuts also in the bailout legislation thus far (which one hears very little about in the media, I might add). … [T]he short term cash deposits by business in just institutional money funds (only one source) has risen from $2.3 trillion before March 1, 2020 to $3.3T today. That’s a $1T rise in cash deposits by businesses, just in institutional money funds. More is being deposited in commercial banks. The long run average of business deposits in commercial banks has been around 5% (6% under Obama and 4.6% under Trump 2016-19) to 15.8% since March 1. Businesses and investors are hoarding their cash and stuffing it in their short term accounts in banks, funds, and who knows where else, on and offshore.”

Much of that hoard of cash is likely destined for stock buybacks, dividends, speculation, buying companies and boosting lobbying efforts down the road. U.S. corporations spent more than $1.1 trillion on buying back stock in 2018 and although the pace slacked a bit in 2019, more than $700 billion went toward buybacks. Stock buybacks are completely unproductive spending — they are simply corporations buying their own stock, giving those who sell a premium to the trading price and boosting profits for remaining shareholders because the profits will be shared among fewer people. Speculators love them.

Britain, EU and Canada: Lots for financiers, crumbs for working people

Capitalism is a global system, and thus using a crisis to benefit the wealthy and powerful is hardly limited to the United States, even if it is the center of the global capitalist system and thus at the forefront of propping up its winners. Tax Watch UK, which describes itself as an “investigative think tank,” discovered that among the recipients of loans under the Bank of England’s Covid Corporate Financing Facility are 13 companies with links to tax havens or that “have seen controversy regarding their financial affairs.” Those 13 companies received £4.8 billion, or almost 30 percent of the total. Tax Watch UK reports that among these is Baker Hughes, a subsidiary of General Electric, “which is embroiled in a £1 billion tax dispute over unpaid taxes going back to 2004.”

The British government, headed by the mendacious Boris Johnson, hasn’t been shy about handing out money to business. The Bank of England has committed £200 billion to quantitative easing (bond buying), £330 billion in loan guarantees for business and an unspecified amount for “short-term liquidity” for the government, among other measures. Separately, Whitehall has committed tens of billions of pounds to three separate loan programs, property tax holidays, direct grants for small firms, grants for “innovation” and other items. For working people? A total of £14.7 billion of additional funding to the National Health Service and £7 billion for increased payments under the Universal Credit scheme and other benefits. Overall, quite one-sided toward capital.

City of London expanding (Photo by Will Fox)

Similar to the United States and United Kingdom, the bulk of money committed by the European Union to shore up the economy during the Covid-19 pandemic is for quantitative easing. The EU has committed to pouring €1.35 trillion into buying private- and public-sector securities by June 2021 under its Pandemic Emergency Purchase Program.

The EU will also offer a €540 billion addition to its European Stability Mechanism, an International Monetary Fund-style loan program under which money is loaned to governments under condition that recipients implement severe austerity. (This is the program under which the EU paid off the Greek government’s debt to European banks, meaning that Greece instead owed its debts to EU institutions rather than the banks, doing nothing to lower the debt level but forcing Athens to administer punishing austerity that left Greeks destitute.) And on top of the above, the EU has thrown in another €200 billion for businesses. For working people, nothing more than relative crumbs: €37 billion “to support public investment for hospitals, [small businesses], labor markets, and stressed regions” and €100 billion to protect workers and jobs. Once again, quite one-sided in favor of capital.

Back across the Atlantic, Canada has announced multiple programs, including quantitative easing. The Bank of Canada has implemented several QE programs for buying corporate bonds, federal and provincial government bonds, mortgage bonds and commercial paper (short-term debt issued by corporations), as well as programs to provide credit and “support the stability of the Canadian financial system.” The Bank of Canada is not forthcoming about the total cost of these programs; it has committed to spending C$5.5 billion per week, with no cutoff date, on just two programs, the purchases of federal government bonds and mortgage bonds. A measure of what has been spent so far is indicated in the central bank’s balance sheet, which reveals that total assets held by it increased from $120 billion on March 11 to $498 billion on June 11. So that’s $378 billion with more to come.

What is Canada spending on working people? $116 billion for “direct aid to households and firms” and $4 billion for the health system. So a lot less, and even some of this much smaller amount will be going to businesses.

Although more direct aid for working people is being included this time around — given the crisis of neoliberalism and that the massive subsidies to the same financiers responsible for the crash of the economy in 2008 haven’t been forgotten, political leaders had no choice but to sweeten the pot a little — the overwhelming majority of the money dispensed is going to the financial industry and to large corporations. Again it must be asked: How much more useful would it have been to use this money for practical needs and direct payments to people instead of propping up a bloated and wasteful financial system? More directly, how long can the peoples of the world continue to believe that a system in crisis so frequently and requires such massive bailouts works?

If neoliberalism is crumbling, what will follow?

The biggest problem with the future is that you can’t know what it will be. When Ronald Reagan was elected United States president in 1980, we did not at the time realize a new era of capitalism had begun; that the ascension of Reagan in the U.S. and Margaret Thatcher in Britain a year earlier definitively brought the end of the Keynesian period. Less than a decade earlier Richard Nixon had said, “We’re all Keynesians now.”

The very election of Reagan was a shock — I truly thought that United Statesians would at the last moment recoil at the thought of an extremist who endlessly spouted lies and nonsense getting into the White House. Perhaps I simply overestimated the general public but the 1970s did introduce considerable economic uncertainty, enough for people to vote for a bad actor who told them what they wanted to hear.

And so neoliberalism was born, although the term wasn’t yet in use; back then we usually referred to “Reaganism” and “Thatcherism.” Their policies didn’t go away when their terms in office were up. A new, more vicious era was firmly upon the world. I can’t help but think about the parallels with the past four years. A bad reality television host and con man told United Statesians what they wanted to hear and despite his obvious mendacity, enough bought it so that another candidate who I was sure couldn’t possibly be elected was elevated into the White House.

A garment factory (photo by Fahad Faisal)

One parallel perhaps begets another. The 1970s stagnation of Keynesianism brought something much worse, the neoliberal era of capitalism, alas a much more representative specimen of the global economic system — Keynesianism was an outlier and a product of intense activism that forced significant concessions out of capitalists. Let’s not romanticize the Keynesian era — the benefits to working people were confined to White men with steady jobs and in the U.S. there was plenty of political repression to go around. Not to mention that capitalist exploitation of working people continued unabated; there simply were some extra crumbs given out.

Back to today: Given the crumbing economy, with its low-paid, precarious jobs, unsustainable and onerous student and consumer debt and inability to tackle global warming as features of a global race to the bottom, the ability of industrialists and financiers to keep neoliberalism going is increasingly in question. So if the start of the 1980s was the dawn of a new economic era, will the start of the 2020s be the dawn of another new era? And, if so, of what?

What’s old becomes new again

Post-Industrial Revolution capitalism can be roughly divided into three eras. First, the era of laissez faire, which came under strong pressure in the Great Depression and was ultimately followed by the Keynesianism of the mid-20th century. Laissez faire is an ideology that opposes government interference in economic affairs beyond the minimum necessary for the maintenance of property rights. (That ideology lives on — neoliberal godfather Milton Friedman insisted that the only proper role of government is to enforce contracts and provide for military defense.) The onset of the Great Depression served to discredit laissez faire, opening the space for alternative theories.

Keynesianism, simply put, is the belief that capitalism is unstable and requires government intervention in the economy when private enterprise is unable or unwilling to spend enough to lift it out of a slump. Mid-20th century Keynesianism depended on an industrial base and market expansion. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which capitalism can expand. Because profits were high and there were many new markets to conquer — and because they were fearful of having their system swept away by the dramatic rise in social organizing — capitalists tolerated wage gains after World War II.

Ship-breaking in Chittagong, Bangladesh (photo by Naquib Hossain)

As Keynesianism broke down over the course of the 1970s — or more accurately, as capitalists no long tolerated paying better wages and conceding better working conditions in the face of declining profits in a world of more intensive competition on an international level — industrialists and financiers brought on the era of neoliberalism in an effort to boost profitability. There were no effective counter-forces: The movements of the 1960s had vanished. Reagan and Thatcher were products, not the causes, of the new era. It took time to understand that. And when “the end of history” was proclaimed upon the crumbling of the Soviet Union, the process of smashing working people’s ability to defend themselves was only accelerated.

And here we are today. With ever fewer jobs that provide a living wage, housing and education costs rising far faster than inflation or wages, the ability of capital to effortlessly move production to wherever wages and regulations are the lowest, and a political system wholly captured by the biggest industrialists and financiers, it is no surprise that anger is rising around the world. Neoliberalism has reached its logical conclusion.

So what follows neoliberalism? And how much longer can capitalism survive?

There won’t be any return to Keynesianism, even if it were possible for that to be the cure to what ails the world. The specific circumstances of the mid-20th century no longer exist. We do not have to stretch our imaginations to know what the world’s corporate masters would be willing to do to keep themselves in power and money. Suspending constitutions and implementing outright fascism is possible if industrialists and financiers see no other alternative to keep their party going if conditions deteriorate to the point that large numbers of people begin to withdraw their consent to the formal-democratic version of corporate rule.

The future is unwritten

But even that would a temporary fix. You can’t have infinite growth on a finite planet, nor can you destroy the environment without limit. A collapse in civilization induced by unchecked capitalism is very unlikely to happen suddenly; without a global mass movement intervening, modern industrial civilization is likely to slowly fall apart over decades and thus capitalism, in this scenario, would also linger for decades. Whatever follows in the rubble left behind would not likely be pleasant; much would depend on the ability of our descendants to organize a cooperative economy in an era of scarcity and defeat the inevitable attempts at imposing dictatorial regimes that would offer simplistic solutions to complicated problems.

Technology is not likely to solve all our future problems for ourselves. The Star Trek universe, where decades of nuclear war is followed by the era of plenty for all (how else could Earth and the Federation afford all those starships?) isn’t realistic. Months, never mind decades, of nuclear war would be enough to reduce humanity to a primitive state, assuming humans even survived the wars. And the uses of technology are based on the relations of power. Technology today could be used to reduce the workday and reduce drudge work, for example, but instead it is used to intensify work and surveil employees. Because we live in a drastically unequal society, technology is a tool of those who possess power and capital instead of a being the liberating tool it could be in a better world.

Although we can’t know what the expiration date of capitalism will be, it is likely to be sometime in the current century. If we are in the beginning stages of the end of neoliberalism, that does not mean we are in the beginning stages of the end of capitalism. Given capitalism’s ability to absorb dissent and its elasticity, it is quite conceivable that some new form of capitalism could replace neoliberalism. Given a powerful enough movement coordinating on an international basis, a new version of capitalism could be something better, temporarily. Such a movement aiming at reforms within capitalism would eventually be disappointed — once movements stand down, the hard-won reforms begin to be taken away. An international movement for a better world has no choice but to work toward abolishing capitalism and instituting a system of economic democracy.

The rise of right-wing authoritarians with aspirations to become fascist dictators — people such as Donald Trump, Jair Bolsonaro, Recep Tayyip Erdoğan and Viktor Orbán — does not have to be a harbinger of the future as were Reagan and Thatcher. With enough people around the world organizing, it won’t be.

The world was once run by monarchs who sat on thrones due to divine will — God selected one family to rule in perpetuity. Most of the world’s people once believed that. Today, it would be laughable to promote such an idea. Not long ago in human history, millions of people were held in slavery — a human being could be owned by another human being and have no rights whatsoever. People believed that not only were certain people inferior and properly enslaved but that the economy would collapse without slavery. Today, not even the most vulgar racist would suggest such a thing in public.

Capitalism is not the end of history. It is nothing more than one more system of repression, one more system of organization. It is no more permanent than slavery, feudalism, absolute monarchy or any other system of the past. If this were not so, there would not be so much frenetic activity put into convincing us that “there is no alternative.” We’ll be deciding the next system in the coming years. If we don’t, it’ll be decided for us.