Friday, September 27, 2013

Workers vs. producers: action and reaction

The growing disparity between workers’ wages and corporate profits is a perfect example of the Rule of Alternation in action.  Briefly stated, the Rule of Alternation states that for every action there’s an equal and opposite reaction, i.e. the pendulum swings both ways.

From the World War II era until the 1980s, workers were in the ascendant and benefited from rising wages during these decades.  Labor unions enjoyed unparalleled political power and were a contributor to those rising wages.  Unfortunately, the unions pushed too hard and were responsible in large measure for the de-industrialization trend that took shape in the ‘70s and ‘80s as corporations sought to escape onerous levels of taxation and wage hikes by moving to lower-cost countries such as Mexico and China. 

Since the 1980s, corporate profits have experienced a parabolic growth trend while wages have continued to decline.  What this shows is that when an entity, in this case workers/unions, push too hard, sooner or later the opposition pushes back with equal or greater force. 

There’s also something of the Kress cycles involved in this long-term pendulum shift.  The new 60-year inflationary cycle which began in 1954 onward favored the rise of the working class since it fostered rising wages and was supportive of America’s (at the time) vibrant industrial economy.  The peak of the 60-year cycle and the corresponding peak of inflation in the early 1980s saw the shift back in favor of corporations as wages began declining adjusted for inflation and interest rates started receding. 

Now that the pendulum is swinging decisively in favor of producers, how much longer can we expect this trend to continue?  There are no definite answers to this question, but remember that part and parcel of the Rule of Alternation is that “every trend sooner or later evokes its own reversal.”  At some point the worker/producer equation will once again favor workers.