The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (8 page)

Yet economists pay virtually no attention to the afflictions of labor, especially when compared with their hysterical warnings about the dangers that moderate inflation might pose for bondholders.

The Public as Collateral Damage

Just as the stress from working conditions can affect the population at large, so too can the toxic exposures that workers face. The hazardous materials that businesses disperse in the workplace add to the toxic soup of potentially lethal pollutants that assault the general population.

The Bhopal tragedy, in which a Union Carbide subsidiary’s pesticide plant released forty tons of methyl isocyanate gas, killing between 2,500 and 5,000 people, was the most dramatic example. The vast majority of the lives taken in this disaster were of people who did not work in the factory. The United States has never experienced anything on this scale, although a similar plant explosion, at the Bayer CropScience Institute plant in West Virginia’s Kanawha Valley, came perilously close to surpassing Bhopal. The plant, which made the same chemicals as the Bhopal plant and was once owned by the same company, had a long history of safety citations. According to a congressional report, an explosion that killed two workers “turned a 2 1/2-ton chemical vessel into a ‘dangerous projectile’ that could have destroyed a nearby tank of deadly methyl isocyanate.”
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When such disasters occur, workers suddenly come to the forefront—not so much as victims, but rather as the culprits who are supposed to bear the ultimate responsibility for the damage. Unmentioned is that the nearly forty-year effort by employers to disempower unions left workers and regulators with less opportunity to effectively push for improvements in workplace safety.

The treatment of airline pilot Chesley B. Sullenberger III is an exceptional case because he got public praise for his efforts. With his plane disabled by a collision with a flock of birds, he steered the craft away from populated areas and miraculously managed to land the plane on the Hudson River without a single fatality. Suddenly, his image was everywhere in the media.

When he appeared before Congress on February 24, 2009, Sullenberger testified about a different kind of challenge. After giving his condolences to those affected by the tragic crash of Continental Connection flight 3407 in Buffalo twelve days before, the captain complained:

Revolving door management teams … have used airline employees as an ATM [leaving] the people who work for airlines in the United States with extreme economic difficulties. It is an incredible testament to the collective character, professionalism and dedication of my colleagues in the industry that they are still able to function at such a high level. It is my personal experience that my decision to remain in the profession I love has come at a great financial cost to me and my family. My pay has been cut 40%, my pension, like most airline pensions, has been terminated and replaced by a PBGC guarantee worth only pennies on the dollar…. I am worried that the airline piloting profession will not be able to continue to attract the best and the brightest.
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The experience of the crew of the Continental Connection flight 3407 confirmed Sullenberger’s warnings. The co-pilot of the crew commuted to her base in Newark, New Jersey, from Seattle. Her salary was less than $17,000 a year. For a while, she held down a second job in a coffee shop while working as a pilot.
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The pilot was also a commuter. He slept in the Newark Airport crew lounge to save money. Although he had the previous day off, he “was coming off weeks of late-evening and early-morning flying schedules, often sandwiched around only a few hours of rest.”
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According to the National Transportation Safety Board, the company that operated the flight employed 137 Newark-based pilots: ninety-three of them identified themselves as commuters, including forty-nine who commuted greater than 400 miles and twenty-nine who lived more than 1,000 miles away.
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After the accident, which took the lives of the pilots and all of their passengers, much of the blame landed on the pilot. Because the company that employed him had been so lax, it endured a short period of bad press. Unfortunately, Captain Sullenberger’s words soon will be forgotten, along with the loss of the commuter flight, and companies will continue to claw some extra profits by squeezing workers. People might realize that this arrangement puts others at risk, but memories are short.

The Early Primacy of Labor

Before modern technology was important in production, considerations of labor were of great importance to economic thinking. The early political economists (as economists of the time were known) advocated policies to increase the amount of work, which, in turn, would make the nation more prosperous. Either directly or indirectly, they supported policies to drive people from their traditional occupations in the countryside. Such measures would prevent people from producing goods for their own needs, forcing them to work for wages. These economists were also unanimous in their support for extending the workday as long as was humanly possible.

This perspective led many early economists to measure economic success in terms of hours of labor. Even as economics became more sophisticated, much of this labor perspective persisted, reaching a high point with David Ricardo’s 1817
Principles of Political Economy
.

These economists also followed the commonsense idea that labor would be the natural choice as a standard of value. The money price of a product can fluctuate substantially over time, and the value of money itself changes with inflation or deflation. Consequently, William Petty, the most creative seventeenth-century economist, and even Adam Smith argued (although not consistently in Smith’s case) that an hour of labor was an hour of labor, regardless of economic conditions. Thus labor offered a more accurate measurement of a commodity than any alternative.

In addition, economists needed a simple way to take account of the broad array of factors that make up an economy. Labor inputs, both direct and indirect, are one thing that all products bought and sold in a market economy have in common. For this reason, early economics used labor as a measure of value.

Although this crude labor standard of value recognized the importance of work, economics still ignored working conditions and promoted measures that were inconsistent with workers’ well-being. This cavalier attitude should not be surprising. Not only were economists unfamiliar with workers’ day-to-day experience, they made no effort to learn about such matters. Workers were commonly seen as little better than beasts of burden. At one point, Adam Smith lumped workers together with working cattle.
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Petty’s work illustrates how economists used this labor measure. In his primitive efforts to calculate the total production of a country (the Gross Domestic Product, as we would call this measure today), Petty in 1692 traced all production to a combination of land and labor: “All things ought to be valued by two natural Denominations, which is Land and Labour.” Then Petty suggested measuring the value of land by the number of years of work required to purchase it: “Having found the Rent or value of the
usus fructus
per annum [a right to use the property of a third party for a year according to Roman law], the question is, how many years purchase (as we usually say) is the Fee simple naturally worth.”
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In his youth, Petty went much further in exploring the nature of work. He was one of the founders of the world’s leading scientific body, the British Royal Society, as well as the major organizer of
the society’s program to produce an encyclopedic history of the trades. The idea was to precisely document the work of various trades in order to improve efficiency and learn about the scientific principles that workers used. After a promising start, the project was abandoned and remains unfinished after more than three centuries.

The History of the Trades Project could have had a valuable influence on economics. Unlike Petty, however, other early economists overlooked the underlying complications in their labor-based theory. For them, labor was simply labor. Differences of skill or the intensity of work did not often enter into their analysis. Petty, too, later fell into this perspective.

Interest in work was about to fall from view altogether because political economists were becoming more sensitive about the need to explain away the increasingly sharp divide between employers and their workers. A few decades before Ricardo, Smith had already laid the groundwork for a method of economics that saw the world in terms of the circulation of commodities rather than production. Smith’s influence was a decided step backwards. As Smith’s efforts took hold, the Ricardian approach of rooting economics in labor first ebbed and then disappeared altogether.

Even Smith was not consistent in this respect in avoiding considerations of work, workers, and working conditions beyond his passing approval of a labor standard of value. For example, he gave a nod in the direction of working conditions when he observed, “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”
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He took note of the toll that work took on workers, observing that carpenters in London could only work at full capacity for about seven years.
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Such observations made him seem like less of an ideologue than he really was.

The Brewing Conflict between Labor and Capital

Much of modern economic theory developed during the contentious times of the late nineteenth century when both modern technology
and labor’s increasingly militant organization was creating a strategic need for a new kind of economic theory. The early perspective of measuring production as the sum of hours worked seemed quaint once industry successfully began to harness the potential of fossil fuels. The spread of railroads across the landscape in the second half of the nineteenth century was emblematic of the emerging technology. Railroads both made possible and demanded radical changes in technology throughout much of the economy.

Railroads integrated the United States into a unified economy. One prominent historian described the country before the spread of railroads as “a society of island communities.”
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Railroads allowed agriculture to spread across the West. Arthur Twining Hadley, a noted economist who was also president of Yale University, estimated that before the railroad, shipping wheat more than two hundred miles was uneconomical.
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Agricultural expansion, in turn, provided a growing market for industry. In 1830, one year’s wear-and-tear for horseshoes and other farm implements required 100,000 tons of pig iron, while total U.S. consumption of pig iron was only 200,000 tons.
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Suddenly, railroad construction demanded a massive supply of materials, setting in motion the formation of the modern steel industry. By the 1860s, railroads consumed half the iron rolled in the United States. By 1880, the production of rails would consume three-quarters of the nation’s steel.
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As Henry Adams wrote in the early twentieth century:

From the moment that railways were introduced, life took on extravagance … for it required all the new machinery to be created—capital, banks, mines, furnaces, shops, power-houses, technical knowledge, and mechanical population, together with a steady remodeling of social and political habits, ideas, and institutions to fit the new scale and suit the new conditions. The generation between 1865 and 1895 was already mortgaged to the railways, and no one knew it better than the generation itself.
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Just as was the case in agriculture, transportation costs previously prohibited most factories from selling very far beyond their local markets. With the construction of a national railroad network, massive factories could now sell their wares in far-off places. In addition, railroads provided industry with broader access to crucial inputs such as coal.

Railroads opened up new ways of making money. Railroad securities dominated the New York Stock Exchange. Despite massive public subsidies that allowed unscrupulous operators to get rich at the public trough, the cost of financing long-haul railroads still exceeded what a handful of partners could muster. The people who organized these huge investments had to turn to the stock exchange to tap in to a larger community of investors, who had no contact with the industry’s day-to-day operations.

Other industries soon tapped the stock market to finance their growing scale of operations. Because of expanding markets and greater access to credit, the average factory in the United States doubled in size, measured by wage earners per establishment, between 1869 and 1889.
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In this new environment, industry began to assemble large masses of workers in gargantuan workplaces. In these new factories, modern machinery, not labor, seemed to be the motor force that drove the production process. Although workers were producing outputs that would have been unimaginable in Smith’s day, their wages were far from commensurate with their increased productivity.

In the shadow of this new form of industry, class lines were hardening. Traditionally, workers had a chance to prosper by beginning as independent artisans and eventually becoming small employers in their own right. In modern industry, traversing the path from the shop floor to the main office was unlikely, even with the utmost perseverance.

For those endowed with sufficient money, finance offered a more direct road to success than did industry. Investors and unscrupulous promoters grew fabulously wealthy, although they had no direct connection with the labor process.

Workers in the United States were increasingly incensed by the gross disparities in the world around them. They were expected to labor long and hard for little pay. At the same time, the rapidly growing
fruits of modern productivity flowed almost exclusively to factory owners and speculators, who flaunted their fortunes in ostentatious displays of wealth that seemed to mock the poverty of the workers who made their wealth possible.