How Capitalism is Failing California
By Rebecca Anshell-Song
March 11, 2010
Last week, on March 4, thousands of students, workers, and community members took part in a national day of action to defend education that was centered in California. Many of us were there and it was an incredibly inspiring sight to see so many people who are new to activism fill the streets and build this movement. The fact is that the stakes are quite high in this struggle because public education and other social services in this state are literally being decimated through draconian budget cuts. These are cuts that will have a profound impact on people’s lives across the state, ranging from a lack of education for some to unemployment, poverty, and homelessness for others.
I do feel it’s important to review what some of these cuts are, even though I’m sure many of us are all too familiar with them already. The governor is proposing this year to completely eliminate IHSS (In Home Support Services), completely eliminate CalWORKS, make $532 million in cuts to Medi-Cal, reduce state employees’ salaries by 5%, eliminate the Healthy Families program (health care for poor children), impose massive cuts to education, and he’s proposing a change in the gas tax system which will siphon more money away from public education. For their part, the school administrations are proposing to take these cuts out entirely on the backs of workers and students, from a 32% fee increase in the UC system, to thousands of layoffs of teachers in the K-12 system. And of course, these cuts are taking place during a recession, a time when working people most desperately need the social services the state provides. According to the California Budget Project, 21.4% of working age Californians were under-employed or unemployed in December 2009. In addition, between 2007 and 2009, the number of people in the state receiving food stamps has increased by 900,000 and the number of people receiving Medi-Cal increased by over 500,000 in the same time period. These increases also took place during times when those programs were being cut and more people were being turned away, so it is clear that the need among working people for critical services is enormous.
But we also need to be clear – for all of the times that politicians implore us to participate in “shared sacrifice,” there is a section of the population that is completely insulated from this crisis. Wealthy Californians, whether from inheritance or because they own and run multi-billion dollar corporations, are making out like bandits while the majority of people scrape by. Between 2000 and 2007, corporate profits in California went up 300%, while the bottom 80% of income earners only saw their income increase an average of 10%. Meanwhile, major corporations continue to rake in massive profits. 4 companies in the 50 top Fortune 500 companies: Chevron, Hewlett-Packard, Safeway, and McKesson (a health care industry giant) are based in California. In 2009, those 4 companies together made over $527 billion in revenue – 4 companies!! It’s clear that these companies could easily pay the $17 billion in cuts to education that have happened over the last several years without even making a dent in their profits.
There are some very straightforward reforms that can decrease the impact of this crisis. If corporate taxes were increased to their 1983 levels, that would add $8.4 billion. If just the new tax breaks for corporations from the last two years were rescinded, that would add $2.6 billion. Changing Proposition 13 so that businesses have to pay property taxes would add $3 billion to the budget. And imagine the changes to the budget that could happen if we had a progressive tax in California, where the richest people pay a higher tax rate than the poor (the opposite of what we have now)!
But even though we can present these partial solutions, it’s important for us to examine how California got to this point in the first place, as well as what is behind the global recession, which is creating similar crises around the world. What I want to put forward is that this is not just mismanagement or lack of understanding on the part of politicians. Instead, this type of crisis is actually inherent in the economic system we live under – in capitalism. We live in a system in which the majority of people are forced to work for wages to survive. But instead of having some control over our labor, instead of making the money that results from the goods or services we produce, the majority of that money goes to a small section of people who own the means of production. In other words, the people who own the businesses and the factories make all of the decisions about how we work, how much we get paid, how many products are produced, how they are sold, etc. For each hour we work, a small portion of what we produce pays our wages, a small part pays for the other costs of running a business, and as big a part as possible goes to profit, which is directly funneled back to the top to the owners – the capitalist class. This process is called “exploitation,” when our labor enriches someone else at our expense. This creates the vast inequality that most of us are acutely aware of (even though we’re trained to believe that it’s normal). In 2003, there were 467 billionaires worldwide with a combined worth of $1.4 trillion. That is roughly equal to the total income of the poorest half of the world’s population. In other words, in that year, 467 people had as much money as 3 billion other people.
But even looking beyond the inherent inequality and the ways this system is frustrating and exploitative for workers on a daily basis, socialists also argue that capitalism is actually driven to cycles of economic crisis, like the recession we are in today. There are many factors that led up to the current crisis, but two of the most important causes, overproduction and credit speculation, are central features of capitalism that Karl Marx identified nearly 150 years ago.
Overproduction is what happens when various companies, all competing for the largest share of the market, produce so much of something that it can no longer be sold at a profit. The thousands of empty houses in brand new developments that dot the Southern California landscape are a perfect example of this. It’s not that there aren’t homeless people or people who desperately need homes, but the drive to build more and more homes leaves a glut of unused products that companies can no longer sell for a profit. The fact that our economy is not planned to meet the needs of people is what allows this absurd situation to occur – where there are too many unsold products alongside just as many people struggling to survive.
Speculation in the stock market is another obvious cause of this crisis. We know now that an enormous bubble was created by investors trading various types of debt for a quick profit. The banking system, increasingly unregulated over the last 40 years, provided more and more credit, leading to incredibly inflated markets and leaving the economy ripe for a crash. In addition, in times of recession, capitalists automatically begin to slash wages and benefits because it’s the expense that they have the most control over. The truly sick thing is that, even though this crisis occurred because of the gambles of the super-rich and the government’s lack of regulation or intervention, the majority of working people are the ones who have to pay the price by losing their jobs, their homes, and their dignity.
Of course, this crisis is not limited to California or the United States; this is a global economic crisis that has consequences around the world. Greece is currently reeling from this recession and the EU is preparing to impose austerity measures that will primarily punish the working-class in that country to “balance the budget.” How did Greece end up where it is? One factor is that Goldman Sachs helped Greece to hide its massive debt by packaging debt into securities that were counted as assets, the same deceitful financial reporting that led many companies in the U.S. to bankruptcy. Goldman Sachs then proceeded to put bets on Greece defaulting – in other words, if Greece does have to be bailed out by the E.U., Goldman Sachs will make even more profits because they bet on the failure of the Greek economy. Frankly, this is yet another example of how allowing a small number of profiteers to make decisions that guide the global economy is a disaster waiting to happen.
One question that activists may begin to ask when looking at this is: How did world governments allow this to happen? Why didn’t California politicians step in, or the federal government? The truth is that the U.S. government is primarily oriented to protect capitalism and protect the wealthy. We can see this manifested practically in many ways: the unwillingness of the state politicians to demand that the rich and corporations pay taxes to alleviate the crisis; the failing health care reform effort at the federal level in which both sides have done nothing to actually challenge the healthcare industry; and the bipartisan support for the war on terror, based on a broad agreement that U.S. companies need to have a foothold in strategic parts of the Middle East, regardless of the cost to human life. Quite contrary to what we are made to believe about our political system, it is a system designed to protect those who have at the expense of those who don’t. There is a very honest quote from Woodrow Wilson around the turn of the century that exemplifies this. He said:
Suppose you go to Washington and try to get at your government. You will always find that while you are politely listened to, the men really consulted are the men who have the big stake – the big bankers, the big manufacturers, and the big masters of commerce…The masters of the government of the United States are the combined capitalists and manufacturers of the United States.
However, there is a fault line in capitalism – people fight back against their conditions. When mass struggle does take place, it ultimately forces the system to adapt and reform itself or risk being overthrown. In fact, all of the most significant advances for civil rights and human rights in U.S. history have occurred because there was a struggle. Public education itself was not a guarantee until it was fought for, both in its inception and through the desegregation struggles of the ‘50s and ‘60s. In fact, capitalism benefits in some ways from having a less-educated portion of the population who are thus forced in most cases to take low-paying jobs with little protections. But where these demands have been backed up by significant action on the part of working people, they have been won.
The working-class has unique power in the system we live in because all of us who work for wages actually make the system run. Without us, there are no schools, there are no products to sell, there is no oil, no communication, and perhaps most importantly, no profit. The working class is the motor force of society and when it acts together, the basic functions of society can be vastly disrupted. This is what Karl Marx meant in his very famous quote where he said capitalism creates its own gravediggers. But we shouldn’t kid ourselves; this type of struggle is a large task. Even the fantastic protests we saw last week are not yet powerful enough to force change. We need to build struggle akin to the sit-down strikes of the 1930s.
In 1936, workers at a General Motors plant in Cleveland occupied their factory. In Detroit, 60,000 workers occupied 8 Chrysler plants. In 1937, there were 477 sit-down strikes involving more than half a million workers. For us to wield that type of power today, we need organization and ongoing struggle. This is just the beginning, but we do have the power to fundamentally transform the system, both to demand reforms now and to eventually run society for ourselves.
I just want to finish by briefly talking about the type of society I believe is an alternative to capitalism, that is…socialism. As I mentioned, the working-class is the class that makes the world economy run. From that basis, I believe that the working-class can also make the decisions, in fact more rational decisions, about how the economy should be run. A socialist society would start by using the vast resources of the rich to meet the needs of the world population. If there is a need for more food, agricultural workers could find ways to increase production; if there is demand for more living space, construction teams can create it. Rather than working for a small team of bosses who make all of the decisions about how and what to produce, working people are more than capable of finding the best ways democratically to meet the needs of production and negotiate work on their own terms. I believe that this is a society worth fighting for, and I hope that some of you will join us in that fight.
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