The myth of 'American exceptionalism' implodes

Until the 1970s, US capitalism shared its spoils with American
workers. But since 2008, it has made them pay for its failures

A homeless encampment known as Tent City in Sacramento, California A
homeless encampment known as Tent City, in Sacramento, California, in
2009. Since the 1970s, real wages stopped growing and the gap between
rich and poor expanded as the US economy slowed down after decades of
growth. Photograph: Rich Pedroncelli/AP

One aspect of "American exceptionalism" was always economic. US
workers, so the story went, enjoyed a rising level of real wages that
afforded their families a rising standard of living. Ever harder work
paid off in rising consumption. The rich got richer faster than the
middle and poor, but almost no one got poorer. Nearly all citizens
felt "middle class". A profitable US capitalism kept running ahead of
labour supply. So, it kept raising wages to attract waves of
immigration and to retain employees, across the 19th century until the

Then everything changed. Real wages stopped rising, as US capitalists
redirected their investments to produce and employ abroad, while
replacing millions of workers in the US with computers. The US women's
liberation moved millions of US adult women to seek paid employment.
US capitalism no longer faced a shortage of labour.

US employers took advantage of the changed situation: they stopped
raising wages. When basic labour scarcity became labour excess, not
only real wages, but eventually benefits, too, would stop rising. Over
the last 30 years, the vast majority of US workers have, in fact,
gotten poorer, when you sum up flat real wages, reduced benefits
(pensions, medical insurance, etc), reduced public services and raised
tax burdens. In economic terms, American "exceptionalism" began to die
in the 1970s.

The rich, however, have got much richer since the 1970s, as every
measure of US income and wealth inequality attests. The explanation is
simple: while workers' average real wages stayed flat, their
productivity rose (the goods and services that an average hour's
labour provided to employers). More and better machines (including
computers), better education, and harder and faster labour effort
raised productivity since the 1970s. While workers delivered more and
more value to employers, those employers paid workers no more. The
employers reaped all the benefits of rising productivity: rising
profits, rising salaries and bonuses to managers, rising dividends to
shareholders, and rising payments to the professionals who serve
employers (lawyers, architects, consultants, etc).

Since the 1970s, most US workers postponed facing up to what
capitalism had come to mean for them. They sent more family members to
do more hours of paid labour, and they borrowed huge amounts. By
exhausting themselves, stressing family life to the breaking point in
many households, and by taking on unsustainable levels of debt, the US
working class delayed the end of American exceptionalism – until the
global crisis hit in 2007. By then, their buying power could no longer
grow: rising unemployment kept wages flat, no more hours of work, nor
more borrowing, were possible. Reckoning time had arrived. A US
capitalism built on expanding mass consumption lost its foundation.

The richest 10-15% – those cashing in on employers' good fortune from
no longer-rising wages – helped bring on the crisis by speculating
wildly and unsuccessfully in all sorts of new financial instruments
(asset-backed securities, credit default swaps, etc). The richest also
contributed to the crisis by using their money to shift US politics to
the right, rendering government regulation and oversight inadequate to
anticipate or moderate the crisis or even to react properly once it

Indeed, the rich have so far been able to use the crisis to widen
still further the gulf separating themselves from the rest, to finally
bury American exceptionalism. First, they utilised both parties'
dependence on their financial support to make sure there would be no
mass federal hiring programme for the unemployed (as FDR used between
1934 and 1940). The absence of such a programme guaranteed that real
wages would not rise and, with job benefits, would likely fall – as
they indeed have done. Second, the rich made sure that the prime focus
of government response to the crisis would benefit banks, large
corporations and the stock markets. These have more or less

Third, the current drive for government budget austerity – especially
focused on the 50 states and the thousands of municipalities – forces
the mass of people to pick up the costs for the government's unjustly
imbalanced response to the crisis. The trillions spent to save the
banks and selected other corporations (AIG, GM, Fannie Mae, Freddie
Mac, etc) were mostly borrowed because the government dared not tax
the corporations and the richest citizens to raise the needed rescue
funds. Indeed, a good part of what the government borrowed came
precisely from those funds left in the hands of corporations and the
rich, because they had not been taxed to overcome the crisis. With
sharply enlarged debts, all levels of government face the pressure of
needing to take too much from current tax revenues to pay interest on
debts, leaving too little to sustain public services. So, they demand
the people pay more taxes and suffer reduced public services, so that
government can reduce its debt burden.

For example, California's new governor proposes to continue for five
more years the massive, broad-based tax increases begun during the
crisis and also to cut state services for the poor (reduced Medicaid
funding) and the middle class(reduced budgets for community colleges,
state colleges, and the university system). The governor admits that
California's budget faces sky-high interest costs and reduced federal
government assistance just when the crisis increases demands for
public services. The governor does not admit his fear to tax the
state's huge corporate and private individual wealth. So, he announces
an "austerity programme", as if no alternative existed. Indeed, a
major support for austerity comes from the large corporations and
wealthiest Californians, who hold the state's bonds and want
reassurances that the interest on those bonds will be paid.

California's austerity programme parallels similar programmes in many
other states, in thousands of municipalities, and at the federal level
(for example, social security). Together, they reinforce falling real
wages, falling benefits, falling government services and rising taxes.
In the US, capitalism has stopped "delivering the goods", as it so
long boasted. The reality of ever-deeper economic division clashes
with expectations built up when wages rose over the century before the
1970s. US capitalism now brings long-term painful decline for its
working class, the end of "American exceptionalism" and rising social,
cultural and political tensions.

• Richard Wolff gives his monthly talk on global capitalism at the
Brecht Forum in New York on 18 January; for more information about
Professor Wolff's lectures, podcasts and media appearance, visit his

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