The Fire Last Time

Just over a decade ago, the collapse of Lehman Brothers triggered a global financial crisis. That crisis brought into sharp relief the fault lines of an accumulation model that was propelled by the rise of finance, growing corporate concentration through waves of mergers and acquisitions, and the capture of income and revenue on an ever-larger scale by a narrow corporate elite.

This transformation of the corporate landscape gathered pace after the 1980s, unleashing a brutal regime of downsizing, layoffs, and closures on American workers. The whip of “continuous improvement” and flexible employment ratcheted up the pace of work. The workplace split and fissured, as corporations embraced subcontracting and franchising arrangements for a wide range of tasks, from janitorial services and security to payroll and IT.

As the big corporations shed chunks of their core activities to smaller businesses, and those businesses in turn subcontracted to even smaller firms, they also passed on the legal responsibility for ensuring labor standards and basic employment benefits.

The gap between wage and productivity growth has widened inexorably since the 1980s. The working poor faced deteriorating labor conditions and found themselves increasingly vulnerable, while CEOs and big shareholders cornered huge bonuses and dividends.

The unraveling of the market for predatory subprime mortgages triggered the financial crisis and shone a harsh spotlight on the way working-class livelihoods had been squeezed over the course of three decades. But since then, the social fractures have merely intensified. Corporate capital has tightened its grip, primed by bank bailouts and the extraordinary spigot of cheap funding.

Between 2009 and 2018, the top 1 percent in the United States cornered 45 percent of the total rise in incomes, while ordinary workers saw their share decline even more sharply. Even though US unemployment has fallen from a high of 10 percent in 2010 to reach a five-decade low of about 3.5 percent last year, wage growth has remained stubbornly anemic.

On the Edge of a Cliff

One obvious factor behind this is the systematic erosion of union rights, collective bargaining, and legal protections for workers. Even in the face of labor markets that appear to be tighter, labor is unable to push back against the squeeze. But the precarious nature of job growth during this period is also of significance.

As secure blue-collar jobs in US manufacturing disappeared, workers flooded into low-wage sectors like business services, retail, food, education, and health, exacerbating the broader trend of wage repression. The vast bulk of the much-touted jobs recovery — as much as 94 percent of job growth between 2005 and 2015 — has been concentrated in the vulnerable and insecure world of the gig economy and freelance workers. Workers thrown out of regular employment, or stuck with low-wage, casual jobs, find themselves reclassified as “independent contractors,” forced to scavenge for work.

The “flexible” just-in-time systems launched by corporate capital have devoured the “slack” in our economic machinery and eliminated the cushions that protect workers. Simultaneously, the state had been chipping away at what remains of social safety nets. As a result, working families must bear the brunt of economic shocks and fluctuations. They were already on the brink, even before the pandemic upended their lives.

Zombie Economy

In spite of this relentless squeeze on the livelihoods of workers, the US corporate engine has been stalling. The stock market might have remained buoyant, fueled by cheap money and corporate programs of buying back their own stock. But even as the S&P 500 index soared over the past year, there were signs of an “earnings recession” in September 2019, as profits for US blue-chip companies flagged, and their spending on plant and equipment plummeted.

Warning signs were multiplying, from the rising burden of corporate debt — now exceeding $10 trillion, or about 47 percent of US GDP — to the increasing share of riskier bond issues at the lower end of the credit ratings spectrum, and the explosion of the market for leveraged loans. Zombie firms, which are unable to cover debt service obligations from their operational earnings, had begun stalking the corporate landscape, gorging on a bonanza of cheap money. By one estimate, one in every six US companies is now a zombie.

The growth and persistence of such walking-dead firms is the flip side of a stock market boom stoked by a decade of cheap money. It is a symptom of the underlying financial fragility of the postcrisis US recovery, which ratcheted up the same tendencies that had precipitated the crisis in the first place. The structural flaws exposed after the collapse of Lehman Brothers have only deepened in the meantime. The economy was running out of steam.

Putting Capitalism to Sleep

In order to contain and mitigate the public health crisis, we now must adopt measures of isolation and physical distancing that put the machinery of capitalism to sleep. As the pandemic began, nearly half of US workers were in jobs with a high risk of being laid off. Jobless claims surged for three successive weeks from March 15 to reach a total of twenty-two million by April 16.

Demand for food banks is overwhelming the system, even as fresh foods and dairy are being dumped by producers. In the first week of April, nearly one-third of tenants in thirteen million houses across the country failed to pay their rent.

This is just the tip of the iceberg. The death toll continues to mount. The pursuit of one’s livelihood now threatens life itself, as employees risk exposure if they continue to work. The for-profit health care system in the United States, even if it had the logistical capacity needed, is beyond the reach of the twenty-eight million people who are uninsured and those who have seen their jobs disappear.

Within the logic of the capitalist market, paid employment is the only way for the vast majority of people who lack private wealth to secure access to basic necessities. The pandemic has cut off this lifeline.

No Way Back

The response of the United States to the unfolding humanitarian crisis has been to once again shovel money into the coffers of banks and corporations. Clearly, the plan is to somehow get the machinery moving again, to get profits and stock market returns rolling. Financial and corporate capital consolidated their power after the crisis of 2008. Everything possible will be done to entrench that power further in the wake of the COVID-19 pandemic.

Corporate lobbyists have resisted moves to rein in stock buybacks and dividend payouts, or channel state support to ensure that it protects jobs directly. The bill that Congress finally passed does acknowledge the need to keep payrolls intact and widen the safety net for the benefit of furloughed and gig economy workers. But in practice, the Coronavirus Aid, Relief, and Economic Security (CARES) Act offers much less than the kind of support European states are providing to working people.

There can be no going back to a society based on precarious, undervalued lives and livelihoods to supply our basic needs. The pandemic has revealed the interconnectedness of our lives. It also offers us a chance to build on the solidarities that physical isolation has made visible and rewrite the entire social contract.

We have already seen the opening salvos in this battle, from the walkout by workers in Amazon warehouses, to the nationwide call for a sickout by Wholefood employees on March 31 demanding better pay and protection.

Turbulence Ahead

The unfolding story of the $55 billion package for airlines, an important piece of the CARES Act, highlights both the possibilities and pitfalls of the path ahead. The airline industry has come through a decade of mergers and acquisitions and is now highly concentrated, “leaner” than ever, with record profits.

Airlines have been trimming costs by squeezing workers: that means stagnant pay, longer hours, and unpredictable schedules for regular employees, with a greater reliance on outsourcing and contract labor. Meanwhile, companies racked up debt and threw the vast majority of their cash pile into stock buybacks. Having frittered away their reserves to enrich shareholders and company executives, the airlines have turned to the US government for emergency support, raising the prospect of retrenchment and furloughs if the state doesn’t cough up.

It was only thanks to successful negotiation by the unions representing airline workers that Congress included a provision to actually pay those workers. Roughly $29 billion of the package is to be allocated in the form of grants, with no repayment or interest obligations, to cover the wages of 750,000 airline industry workers, from flight crew to caterers and baggage handlers.

This may not stop the airlines from trying to cut the hours and pay of their workers. The US Treasury is already using its power to change the terms of the package, converting one-third of what should have been a grant into a loan that the airlines have to repay: as a result, they may refuse the money altogether. This battle is going to be long and hard, but at least it is underway.

Throughout history, pandemics have been key moments in bringing about social transformation. The seismic shock of the Black Death in the fourteenth century helped precipitate the decline of feudalism in Europe. In the United States, the Spanish Flu of 1918 was followed by a period of rising labor militancy and a wave of corporate consolidation, setting the stage for the New Deal.

The current pandemic will also lead to a profound transformation of the social order. The stakes are high, and we don’t yet know what lies ahead. But we do know that the pandemic struck a system that was already failing. We need to root out the deeper pathology as well as the pathogen.