by Andrew Wagner
Capitalist apologists—particularly those aligned with the Republican Party—have long referred to the 1% as “job creators.” As this popular myth goes, the capitalists alone are responsible for investing in the economy (“taking risks”), thereby creating the jobs that provide everyone else with a living. The legislative conclusions that flow from this idea include the infamous policy of “trickle-down” or “supply side” economics, which opposes progressive taxation and shifts the burden of funding the government away from the 1% and onto the working class. They justify such policies by arguing that taxation takes money away from the private sector, which the capitalists could otherwise use to invest in the economy. This explanation contains a grain of truth, but unfortunately the outcome doesn’t jibe with the way the capitalist system actually works.
With millions unemployed or underemployed, crumbling infrastructure, factories lying idle, and lagging labor productivity, one would think that direct investment into the economy is necessary. However, the capitalists have other ideas. According to Standard and Poor’s, the biggest corporations are currently sitting on $1.82 trillion worth of cash. What’s more curious is that central banks have set interest rates at record lows (in some cases, interest rates are nominally negative), in an effort to coax banks into lending in order to spur investment. On top of this, treasuries around the world have embarked on the uncharted voyage of quantitative easing—in essence, printing money in order to give banks the liquidity necessary to lend so companies can invest. Such measures have achieved nothing; investment in the advanced economies remains historically low.
As a result, productivity growth has come to a near standstill. As the Financial Times points out, “Companies may not be investing enough in new equipment and ideas. Instead they are frittering away cash on share buybacks and dividends that totalled $903bn for S&P 500 companies in 2014 . . . The fall in productivity growth started before the financial crisis, suggesting longer term forces are at work” (FT, 5/25/15). This represents a crisis of the development of society’s productive forces. As Marx pointed out, such a crisis often signals that revolutionary events are on the horizon, as the productive forces rebel against the constraints of their economic shackles.
What are the capitalists doing with all of their accumulated wealth? Just about anything other than “creating jobs.” According to the Wall Street Journal (5/26/15), corporations are now spending more money paying out massive dividends to “activist investors” than they are on investment in physical capital. Essentially, they are putting more money into the pockets of the super wealthy than they are into actual production. In fact, for some companies, this development comes at the same time as they are actually laying people off and closing down their plants. Some businesses are even taking advantage of the low interest rates mentioned above to borrow—not to invest in productive capacity—but to pay out dividends to their rich investors! Other companies are borrowing in order to buy back their own stock (which drives their value up on the stock market). In essence, they are borrowing in order to speculate on the stock market (which is not a new practice!) while laying people off, adding to the already swollen ranks of the unemployed. This is the practice of turning money into more money directly, neglecting the step of creating real use values for the rest of society.
Other capitalists have found even more egregious ways to spend their money. Hedge fund manager John Paulson, who made a fortune betting that the subprime mortgage bubble would burst in 2007–8 while millions of workers lost their homes, recently made a $400 million gift to Harvard University, adding to its $36 billion endowment. Apparently, giving to an already rich institution and its largely wealthy students was a more worthy investment than putting people to work at a decent wage. Examples of the 1% speculating on real estate in places like Manhattan, Vancouver, and San Francisco (driving working class people out of the areas in question) are legion, as are examples of the ultrarich speculating on pieces of modern “art,” creating what many have called an “art bubble.”
Upon closer examination, it becomes clear that the term “job creators” is little more than Orwellian doublespeak, crafted to justify the existence of a tiny minority of people which rules over the majority. We must tear down this myth to expose the true nature of the capitalist class, which represents a parasitic growth on human society.
The process of production under capitalism is exploitative. Workers only find work—and therefore, are only able to live—at the whim of those who own all of the productive property in society: the capitalists. Knowing this, the capitalists exploit the weak position of the workers to pay them less than the actual value of the commodities they produce. The difference between the sale price of these commodities and the wages paid by the capitalists to the workers who actually produced them is “surplus value,” which the capitalists take and use as they see fit.
The capitalists publicly justify their existence by arguing that they play a key role in the economy: reinvesting this surplus value into the economy, thereby providing more paid jobs, which begins the cycle again. Marxists recognize that early in capitalism’s history this was the case. As capitalism was in its ascendant phase, capitalists tended to devote most of the surplus wealth back into the economy through investment, in order to outcompete their rivals.
Evidence (such as that above) shows that this is not the case today, as capitalism has entered an organic crisis of the system. Due to the exploitative nature of capitalist production, and the fact that the workers never receive the full value of their labor in the form of wages, they are consequently unable to spend enough to purchase their collective product from the capitalists. This represents a massive contradiction in the system, which is the ultimate root of capitalist crises like the 2007–8 Great Recession. The capitalists tried to postpone this crisis by extending massive amounts of credit throughout the system, but now this debt acts as a tremendous drag on the economy.
Workers are struggling under these conditions to pay their consumer, student, mortgage, auto, medical, and other forms of debt, and are therefore buying even less than they once could. If the capitalists can’t sell their commodities because consumers—the bulk of whom are workers—can’t afford them, what incentive do they have to invest in order to produce them? The capitalists are in the business of making money, not in the business of producing for need, so they will naturally find other ways to do it. Hence all of the speculation on unproductive property, stock buybacks, and demands for higher and higher dividend payouts. Unfortunately, for those investors demanding payouts, the same economic conditions apply to them as well as the companies they’re invested in. Ultimately, the capitalists will be saddled with huge reserves of cash, restrained by the limits of their own decrepit system from investing in actual production. This is an absurd situation.
Humanity deserves better. People need jobs, the sick and elderly need care, the youth need opportunities and environments to learn, clean sustainable energy sources need development, we must fix our crumbling infrastructure. The resources exist to accomplish all of these things and more, yet those who own the bulk of society’s wealth see no reason to utilize them. The capitalists will continue their parasitic existence for as long as the working class permits them to remain. It’s high time we excised them from our economy.
Andrew is an organizer with the Workers International League and the Campaign for a Mass Party of Labor
This article first appeared in Socialist Appeal and can be found at http://socialistappeal.org/news-analysis/the-economy/1653-are-capitalists-job-creators.html