Adam Smith on the fate of the working man

July 11, 1996|By Richard Reeves

NEW YORK -- Leaders of both politics and business find it to their advantage to deal with economic statistics by saying (and hoping) that no one can understand them. ''Contradictory'' was the word the current president of the United States used last summer to define if not explain the fact that the stock market and corporate profits were soaring while the nation's median wage was going down.

But this year's numbers of July seem simple enough for almost anyone. On the morning of July 5, the federal government announced that national unemployment had dropped from 5.6 percent to 5.3 percent, and that the average wage of 83 million non-management production workers had risen 9 cents to $11.82 an hour.

Good news all around, one would think. But not on Wall Street. The Dow Jones stock average dropped 115 points -- 2 percent of its total value -- in five hours of trading that day.

The richest 5 percent

Contradictory? Not at all. There has been a massive transfer of American wealth going on for years -- from working people (most of the nation) to what a former president, George Bush, liked to call ''the investing class.'' The message of last week from the richest 5 percent of Americans, who own 75 percent of stock, was quite clear: What is good for most of the nation is bad for me, and I'll do whatever I can to grab and protect every penny I can.

The numbers, pretty simple this time, were a small dramatization of what has been happening for the past 25 years. The rich are getting richer, the poor are staying poor, and the middle class, the backbone of the country, is being squeezed and broken, paid less to produce more for the rich investing class.

Between 1968 and 1994, according to census statistics, the income of the top 20 percent of American households increased by 44 percent, while the income of the bottom 20 percent increased by 7 percent.

The gap between rich and poor has steadily increased in recent years, with that same top 20 controlling 47 percent of aggregate wealth now, compared with 40 percent in 1968.

Another gap is growing wider at the same time, a gap between big and small American dreams. The big American dream is in the stories of Horatio Alger and Bill Clinton and Michael Jordan, or a guy named Robert Mahoney. In America, if you work hard and play by the rules (mostly), you can be anything you want or you can make all the money you want. The big lottery. With a little luck, that dream is alive and well.

Mr. Mahoney, by the way, is the chief executive officer of Diebold, a company in Canton, Ohio, that makes automatic teller machines (the ATMs that have replaced breathing tellers).

The measure of success

He has apparently done a hell of a job, by the standards of the company's board of directors, producing record profits and reducing the size of the company's work force from 6,700 to 3,800 in 1990 and back up to 5,200 now, most in non-union plants in Southern states rather than in unionized Ohio. His pay has increased from $150,000 a year as a senior vice president in 1983 to $464,000 in 1990 and $2.37 million last year.

But small American dreams are dying all over the place. Those lesser but glorious dreams held that, in America, if you work hard and play by the rules, you will be able to buy a house and make enough money to send your kids to college. That one's a lot tougher for the people who work for Mr. Mahoney. An assembler who made $11.83 an hour when Mr. Mahoney arrived in 1983 now makes $9.93 an hour -- a drop in pay from about $25,000 a year to $21,000.

You do not have to be Karl Marx to understand that America is being diminished in undeclared class war because the lives of so many Americans are being diminished by this transfer of wealth from the many to the few. In fact, as we know, Marx got a lot wrong in trying to predict what true capitalist societies would be like before the worker revolutions he thought were inevitable.

It was the founding father of capitalism, Adam Smith, author of ''The Wealth of Nations'' in the 18th century, who better understood and worried most about the consequences of the triumph of his own ideas. He had a chilling vision of capitalism's endgame and the fate of the working man that resonates a little too much with the events of our time:

''He generally becomes stupid and ignorant. The torpor of his mind renders him, not only incapable of relishing or bearing part in any rational conversation, but of conceiving any generous, noble or tender sentiment, and consequently of forming any just judgment concerning many of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging. . . . The laboring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.''

Richard Reeves is a syndicated columnist.

Pub Date: 7/11/96

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