One-thing-at-a-time pragmatism is the hallmark of good old Anglo-Saxon common sense: systemic connections between diverse spheres of human life are the teutonic vice of the likes of Sombart and Schumpeter. But sometimes vice must prevail. Consider three sets of numbers.

On 10 August 1995, the Boeing Co., premier manufacturer of passenger airliners as well as sundry advanced weapons, was so highly regarded by analysts and investors that its shares were quoted at $65 on the New York Stock Exchange. This figure represents 77 times the earnings of the share in the previous four quarters – an enormous ‘multiple’, as stockbrokers say, which implies an equally enormous faith in Boeing’s future prospects. The shares of its nearest equivalent, McDonnell Douglas, were by contrast selling at only 15 times earnings, while the price-earnings ratio for General Electric, that great battleship of corporate America, was only 19.

In that same week, a survey of members of the International Association of Machinists and Aerospace Workers – a union which represents 34,650 of Boeing’s employees, almost all of whom regard themselves as belonging to the middle class – showed that just over 20 per cent thought their own job was ‘somewhat secure’, while over 50 percent declared themselves ‘not secure’.

At the last count (on 31 December 1994) 4.9 million Americans were under some form of ‘correctional supervision’, with some 2.8 million on probation, 671,000 on parole, 958,704 in state prisons, 95,034 in federal prisons and some 446,000 in local jails, to give a total of one incarcerated American out of 189 men, women and children, as compared to the already very high 1980 ratio of one to 480.

Explanations of the first set of numbers are uncontroversial, and can readily be obtained from any number of stockbrokers’ recommendations to their clients. Boeing is a beneficiary of globalisation twice over. Because it sells airliners to a truly worldwide market – now that Messrs Yakovlev and Tupolev have lost their Soviet-sphere monopoly – Boeing’s revenues are not subject to the ups and downs of national or even continental economies. As of now, Japan is in recession but China is booming, Latin America has slowed down but Europe has picked up, while the sum-total of more stable exports offsets the volatility of the home market, where US airlines are ingloriously surviving deregulation by means of cut-throat fare wars, extremes of cost-cutting (service standards compete with those of Aeroflot at its mythic worst), abrupt shifts from expansion to contraction, repeated transits through Chapter 11 bankruptcy, and by what hurts Boeing: sudden cancellations of options or even firm orders for its airliners.

Globalisation serves Boeing the other way as well, in its capacity as a buyer rather than a seller. Whenever a qualified producer somewhere around the world can supply an airframe ‘sub-assembly’ or even a single fuselage panel cheaper than one of its own machine-shops or some outside US ‘vendor’, Boeing’s manufacturing costs are reduced by that much, minus the smaller and smaller contracting, communication and transport costs of ‘offshore procurement’.

Total Boeing costs are being reduced still further by the steady progress of computerisation, and the ‘downsizing’ of employee payrolls it allows. At the design and development stage for both once-in-a-while new airliners and far more frequent modifications, expensive engineering hours are replaced by ever more complete applications of computer-assisted design, and although inventories of parts and tools were computerised a generation ago, it is only now that the entire administration of production and assembly is being fully computerised, to feed a myriad detailed orders directly to machinery that is itself computerised.

At the same time, the computerisation of clerical work is emptying corporate office buildings throughout the United States, including Boeing’s. There, too, the last telephone-answering secretaries are being replaced by voicemail, letter-writing secretaries by word-processing, and filing secretaries by digitalised records, which in turn removes the need for the supervisors of these clerical employees, and therefore for their supervisors, all the way up to the higher executive levels. It is all this cost-cutting, a.k.a. job-cutting, that arouses so much enthusiasm on Wall Street.

Thus the first set of numbers (the high price-earnings ratio of Boeing shares) and the second (the high proportion of Boeing employees who experience acute insecurity) are to a large extent explained by the same fact: that Boeing is a leading beneficiary of today’s technology-powered, deregulated, globalising ‘turbo-charged’ capitalism. The Boeing workforce have every reason to feel that their jobs are precarious because Boeing has joined other American businesses, large and small, in firing employees not only en masse when hard-pressed, as they always did of necessity, but even in prosperity, as a matter of deliberate choice, every day of the week. In theory, it is just the objective force of technology-driven ‘creative destruction’ that is at work: more efficient modes of production displace less efficient ones, releasing manpower (and other resources) that will eventually increase the world’s total production of goods and services insofar as it is re-employed elsewhere. In theory, too, if Boeing becomes more efficient, then the US economy as a whole is made that much more efficient.

In practice, the theory ignores both irrational fashion and self-serving motives. Quite often these days employees are fired whenever their labour can plausibly be held to be expendable by executives high or low eager to show themselves ‘hard-nosed’ and thoroughly up-to-date with the latest management-consultant slogans (‘re-engineering the corporation’ etc). That is how promotion is gained nowadays in corporate America: the Seventies fashion for ‘human resources management’ (maximise the market value of the sum total of employee skills) is entirely passé, having given way to the suitably de-sexed North American substitute for machismo, the cult of the ‘tough’ executive who fires his subordinate without sentimental hesitations.

The proof that serious cost-accounting is overlayed by mere fashion, albeit powered by the very real rewards of promotion for middle-rankers, and even more substantial stock-option millions for top executives (the same fashion dictates that shares go up when mass firings are announced, long before the financial result can be known), is to be found in the growing number of studies that demonstrate in numerical detail the damage that US corporations have inflicted on themselves by ‘letting go’ (no meretrix was ever more meretricious) too many or too valuable employees, while simultaneously depressing those who remain and inducing others still to resign. Also suggestive is the spectacular growth of ‘body-shops’ which rent manpower by the day, week or month, and whose best customers are often yesterday’s proud downsizers.

None of this is at all likely to impress US chief executives, because ‘caring’ management that offers steady jobs and periodic retraining to enhance both loyalty and skills has feminine undertones wholly out of place in the present neo-Darwinian climate (it is the respect of other corporate low-testosterone machos that they crave). Moreover, the language of stock-option profits is far more persuasive than even the best-documented footnotes. Yet more important, the US labour market as a whole is characterised by a chronic, and increasing, over-supply of engineers, physicists, accountants and clericals, as well as of the unskilled or semi-skilled workers whose utter uselessness in a ‘high-tech’ economy is by now proverbial. Clinton’s Secretary of labour Robert Reich, for example, has made an entire career out of mourning their fate, while at every turn disclaiming any intention of interfering with the divine processes of the economy – he takes it for granted, as almost everybody else does, that American society exists to service the needs of the economy, and not the other way around.

Technology-driven, or merely technology-inspired, job losses are undoubtedly much greater, but the incoming tide of globalisation is scarcely insignificant. By running huge trade deficits in manufactured goods with East Asia, the US imports not only cars, textiles and sundry fripperies but also unemployment and/or lower wages. Every time Boeing cuts costs by purchasing abroad, jobs migrate overseas at the expense of local workers, but to the greater benefit of shareholders, top executives and all those employed outside the US. For at its present stage, globalisation enriches industrialising poor countries, impoverishes the semi-affluent majority at home, and greatly adds to the incomes of the top 1 per cent who are managing or indirectly benefiting from the process. The next stage of globalisation should eventually re-launch the advanced economies, thanks to rising demand from newly affluent ex-Third World countries, but those who are now being impoverished in the US and other globalising economies will have to wait a generation for the turn-around.

The cheapening of American labour (PhDs very much included) is no longer news. In fact, none of the presidential candidates except Bill Bradley finds it necessary even to mention the trivial little statistic that the real hourly pay of more than seven out of ten American employees has been declining ever since the late Seventies (average household incomes have merely been marking time, because many more wives work, and more hours are worked), as indeed one would expect in the country where technology-powered, deregulated, globalising, ‘turbo-charged’ capitalism is most advanced.

That US unemployment is not increasing in spite of all the corporate firings, as it certainly would in bad old rigid-wage Europe, is due to the superior flexibility of the American economy, as everyone knows. That US financial institutions as well as venture capitalists are far more willing to lend on future earnings, rather than assets in hand, is true and especially important in allowing young people to start new businesses. But what ‘flexibility’ amounts to as far as employed labour is concerned is that every year millions of Americans bereft of supporting families (forget the generous cousins that unemployed Andalusians and Greeks can still count on, or the functioning nuclear families of France or Italy – in contemporary America not even brothers and sisters help one another), and facing a six-month limit on unemployment compensation (as opposed to 12 or even 24 months in Western Europe) must and do accept even drastically reduced earnings to work at all, so that jobs in retailing and small service businesses of the dog-washing variety can expand ad infinitum (it will soon be unnecessary to brush one’s own teeth). As better-paid ‘corporate’ employment from factory floor to executive suite is replaced by the proliferation of marginal service jobs, the hourly earnings of the bottom 70 per cent of all Americans will inevitably decline, even as the total national income continues to increase.

On top of all the general economic forces working against them, Boeing employees must also contend with the peculiarities of the airliner business. One is that to sell, or sell more, in certain markets (such as China) Boeing co-produces or purchases locally to attract political support, even when lower costs would not induce it to do so anyway. Another is that the risk-capital needed to plan, design and engineer an entirely new airliner is huge enough to put even Boeing at risk. Its only rival, Airbus, the quintessential ‘geo-economic’ phenomenon of our times, has all the trappings of a big-time corporation but in truth is merely the instrument of the French, German and British Governments, now co-operating to conquer market share in the aviation industry instead of competing to conquer colonial territories as they did a century ago. As such, Airbus develops its own airliners with money from the French, German and British Treasuries, and the very notion of risk becomes irrelevant. Boeing, on the other hand, has set out to reduce its exposure by acquiring risk-sharing partners. Thus 20 per cent of the latest 777 airliner belongs to a Japanese aviation consortium, which has participated in every phase of the process from initial design to international marketing.

With that, 20 per cent of the work of developing and manufacturing the 777 was irrevocably denied the membership of the International Association of Machinists and Aerospace Workers. Boeing’s argument is that 80 per cent of something is far better than 100 per cent of nothing. The counter-observation is that while Boeing does not hesitate to ‘out-source’ at home or overseas whenever it is cheaper to do so, the Japanese consortium keeps its full 20 per cent manufacturing share at home for the factories of Mitsubishi et al, even though Japanese production costs are now much higher. Oddly enough, the Japanese seem to believe that the economy exists to serve society, and therefore that efficiency can be compromised, in this case to promote the development of an industry deemed important for the overall advancement of Japanese society. And in that sense, over and above the purely commercial advantages, Boeing has given the Japanese the century’s best bargain: in exchange for its 20 per cent investment, the consortium has acquired expertise in 100 per cent of the entire business.

All in all, even as Boeing’s top executives and shareholders are leading beneficiaries of globalisation, the great mass of its employees find themselves in a particularly ill-favoured patch of the global economic ocean. On the one hand, Boeing has been losing market share (and jobs) to Airbus, which can afford to be an altogether more reliable and rather more generous employer, courtesy of French, German and British taxpayers (its accumulated losses exceed $20 billion). On the other, Boeing is now in the business of handing over market share (and jobs) to risk-sharing partners. On the third hand (Kali, the death goddess, has several more), Boeing employees must in effect compete with ‘vendors’ worldwide for Boeing’s own work, and are thereby forced to strive for greater productivity to avoid unemployment and/or union ‘give-backs’, i.e. pay reductions (increasingly common in both US manufacturing and services, including the now deregulated airlines, whose real hourly pay rates are far below 1978 levels). On the fourth hand, Boeing employees are being fired with abandon because of ‘downsizing’ decisions that owe nothing to globalisation, or to the peculiarities of the air liner industry.

The acute sense of insecurity uncovered by the Union of Aerospace Workers’ survey is therefore abundantly justified. The jobs of Boeing employees are indeed especially precarious, and if the employees are tossed out they are likely to find themselves unwanted by an over-supplied labour market that offers mainly low-paid service jobs. For the workforce of a premier corporation that pays everyone rather well and also provides good fringe benefits, that is a catastrophic downfall entailing the possible loss of high-mortgage homes, the withdrawal of children from college education, and stress-induced sickness, without Boeing’s health-insurance benefits to pay for it (health-cost trauma should become a recognised medical syndrome – it is certainly more genuine than its Gulf War counterpart). Almost all Boeing employees emphatically view themselves as belonging to the middle class, but that is a conceit as precarious as their jobs.

It is at this point that the explanation of the third set of numbers comes within sight. Mr Reich and countless others by now have noticed that today’s ‘turbo-charged’ capitalism condemns the less skilled to a lifetime of declining earnings, and that it has eliminated many of the low-paid but respectable jobs that once allowed a striving section of the underclass to rise into the working class. What Reich and others have failed to grasp is that the upheavals and disruptions of ‘turbo-charged’ capitalism (= accelerated structural change) condemn most working Americans of all skill levels to lives of chronic economic insecurity. As entire industries rise and fall much faster than before, as firms expand, shrink, merge, separate, ‘downsize’ and restructure at an unprecedented pace, their employees at all but the highest levels must go to work one day without knowing whether they will still have their job the next.

That is true of virtually the entire employed middle class, professionals included. Lacking the formal safeguards of European employee-protection laws or prolonged post-employment benefits, lacking the functioning families on which most of the rest of humanity still relies to survive hard times, lacking the substantial liquid savings of their middle-class counterparts in all other developed countries, most working Americans must rely wholly on their jobs for economic security – and must therefore now live in conditions of chronic acute insecurity.

That the underclass has become economically useless merely means that the United States has spectacular crime rates, and that almost every city and town has its no-go areas where intruders can easily become victims of the permanent black intifada (of which the exculpation of O.J. Simpson is as much an expression as the Los Angeles riots).

That the low-skilled are being further impoverished merely means that the United States is on its way to acquiring the income-distribution characteristics of a Third World country, with a truly very rich top 1 per cent and a substantial minority (c. 12 per cent) which remains in poverty even though fully employed. But the consequences of the acute economic insecurity of the middle-class majority are necessarily far more serious. The underclass (less than 5 per cent of the US population) can only retaliate by individual criminality, and occasional mini-pogroms against vulnerable whites; the working poor silently accept their lot and even feel guilty about it, but no society can fail to pay a heavy price for widespread middle-class insecurity.

One doesn’t have to be a historian of interwar Europe to recognise the connection between what the economy is doing to most Americans, and the increasingly intolerant climate of contemporary American life. European visitors nowadays often point out that more and more things are legally or socially prohibited in the Land of the Free. Because the insecure majority does not even realise that the economy, too, can be subject to the will of the majority – it believes in Invisible Hands, in the unchallengeable sovereignty of the market, and in the primacy of economic efficiency over its societal purposes – it is venting its anger and resentment by punishing, restricting and prohibiting all that can be punished, restricted and prohibited. America’s own product-improved fascism is not especially racist, let alone warlike, but it does contain the essence of the original item.

One symptom is the insatiable demand for tougher laws, longer prison sentences, mandatory life terms for repeat offenders, more and prompter executions and harsher forms of detention (including chain-gangs of late). Democracy works in America and politicians including Bill Clinton obey the popular will. The result is a great mass of new federal and state legislation that will greatly add to the huge number of Americans already behind bars.

This, however, is merely the most blatantly obvious law-and-order symptom of a much broader urge to prohibit and punish. In theory, America is in the grip of a kulturkampf between liberals and ‘family values’ conservatives. In practice, self-defined liberals and all but the libertarian fragment of the conservatives are tacitly collaborating to delegitimise anything and everything that can then be prohibited by laws or social disapproval. At first sight, each prohibition has its own independent justification valid for Left or Right or sometimes both, whether it is smoking (health) or the eating of rich foods (ditto), any sort of flirting however amiable (sexual harassment), actual sex of any sort (both health and decency’), pornography (decency again – see the tizzy over a few X-rated shops in Times Square), topless bathing and nude beaches (prudery masquerading as morality), all manner of speech and jest (racism, sexism, ageism, handicapism, the sanctity of all religions ...) and of course drugs, arguably to be legalised (if only because drug-enforcement is totally ineffectual), arguably to be prohibited, but now in fact so harshly punished that of roughly 250,000 imprisoned drug offenders some are behind bars for possessing a few grams of marijuana. Because each new prohibition has its own plausible defence, only their sheer number and great diversity reveal their common origin; they are all expressions of the same deep resentment, turned against targets of opportunity.

It is no coincidence that prohibitions multiply when the middle class is especially insecure. It has all happened before, and there is no need of a Gestapo when so many Americans volunteer to do the job themselves by pursing lips, narrowing eyes (just ask any smoker or fatty eater in public), and by voting for the least tolerant candidate available in one election after another. Adding to the great paradox of a genuinely democratic yet increasingly illiberal society is the blatant contradiction contained in the remedies that both Democrats and Republicans now advocate: a yet more dynamic turbocharged capitalism and more ‘family and community values’.

In the words of the Unabomber (suitably corrected):

The conservatives [correction: the ‘values’ crowd in toto, Democrats included] are tools: they whine about the decay of traditional values, yet they enthusiastically support technological progress and economic growth. Apparently it never occurs to them that you can’t make rapid, drastic changes in the technology and the economy of a society without causing rapid changes in all other aspects of the society as well, and that such rapid changes inevitably break down traditional values [correction: and tolerance].

Send Letters To:

The Editor
London Review of Books,
28 Little Russell Street
London, WC1A 2HN

Please include name, address, and a telephone number.


Vol. 17 No. 24 · 14 December 1995

Edward Luttwak (LRB, 2 November) argues that the Boeing Corporation is increasing productivity, reducing labour costs and discharging workers thanks to computer-aided design and the computerisation of clerical work etc. But who is making the computers, and the work stations, and the micro-processors and the software? US corporations. Even the Japanese are now slipping before the recovery of the semi-conductor industry in the United States. No one in Japan matches Intel and the processing chip. No one in Japan, or anywhere else in the world, matches American software. So what is the point of Luttwak’s complaint? He wrote a ludicrous book a few years ago predicting the decline of the American economy, and he was wrong. But as an old Roman strategist, Mr Luttwak knows that you never retreat: you attack again. But with what weapons?

Adam Kadmon
Cambridge, Massachusetts

send letters to

The Editor
London Review of Books
28 Little Russell Street
London, WC1A 2HN

Please include name, address and a telephone number

Read anywhere with the London Review of Books app, available now from the App Store for Apple devices, Google Play for Android devices and Amazon for your Kindle Fire.

Sign up to our newsletter

For highlights from the latest issue, our archive and the blog, as well as news, events and exclusive promotions.

Newsletter Preferences