How capitalism blunts social reforms


Every four years the presidential election season sprouts another set of politicians singing songs of social reform, a chorus as predictable as carolers at Christmas. Winter voices ring with words of cheer: “Peace on earth, good will to men”—words as routine and meaningless as any campaign promise of “hope and change” or “Make America Great Again.”

Every four years earnest candidates vow to improve on the failed policies of their predecessors. New slogans and new reforms are freshly wrapped, as if they had never been offered before, as if they were tidings of comfort and joy. The election-time promise of change and reform is like catnip to capitalist politicians.

Even with a do-nothing Congress, though, new laws are passed. What happens when reform legislation is adopted? Why do the reforms that were to deliver so much so often fail to live up to their promise? Is it really possible to overhaul the political and economic systems of this country by a series of reforms, a kind of New Deal for the new millennium?

A look at several reform movements and laws is revealing in the kind of pattern that emerges, one that shows how reforms are made to be limited. First, one major change initiative this season centers on income inequality.

Currently, a national effort is underway to oppose the worst excesses of executive salaries and to create more equitable workplaces. The standard difference in pay between the top floor and the shop floor is simply staggering. The disparity and injustice are real and almost beyond belief.

Number One on a CEO Rogue’s List would be the chief of Discovery Communications (owners of the Discovery Channel, TLC, and Animal Planet) whose income is 1951 times higher than a worker in the company. Second place goes to the CEO of Chipotle Mexican Grill, whose pay ratio is a more modest 1522, which still yields bragging rights against the CEO of CVS Health, who lags behind with an income only 1192 that of a typical CVS worker.

These are the most extreme examples, but they are not so far removed from the typical corporate CEO, in whose heart the spirit of Scrooge still lives. According to the Economic Policy Institute, 50 years ago a Chief Executive Officer (CEO) was paid 20 times more than the average worker. By 2013, the difference had skyrocketed to 300 times a worker’s income.

That overall trend has not diminished at all in the past two years. For instance, a full-time employee for T.J. Maxx, on average earning $25,000 a year, would, after working a century, still fall short of the CEO’s 2015 salary of $28.69 million (only 1159 times the worker’s salary).

No surprise, therefore, that income inequality is the rallying point for the Bernie Sanders presidential campaign. Sensing the importance of this issue and the likelihood of popular support, Democratic presidential candidate Hillary Clinton also criticized income inequality in America when she formally announced her campaign. Her rhetoric reveals the severity of the problem.

When a candidate so closely connected to Wall Street makes some noise against her corporate sponsors (presumably with their permission), the situation must be dire indeed.

Is there, then, much comfort to be found in the reform legislation that has already been proposed or put into place? For people with faith in the system, the answer is a disheartening “No.” Reforming capitalism by changing the laws is as effective as tying up Jell-O with rope.

In California, for instance, legislation has been proposed to offer incentives to companies that exploit their workers less obscenely. Let the CEO be paid only 25 times more than the median income of the company’s workers, and the business tax rate for the company will be lowered to 7%. When the CEO is paid 250 times or more than the average worker, the business tax rate would remain at 9%. Even this modest legislative reform has not been passed.

Of course, if some incentive-reform rule is enacted, companies have at their disposal numerous ways to beat the intent of the law. Numbers can be rigged and legal definitions can be rewritten. Companies could “outsource” their lowest-paid workers by re-hiring them as “independent contractors” who are not technically part of the workforce. As a result, the “average” worker salary would automatically rise, even if the same people were still doing the same jobs, and the CEO pay ratio would look better to government regulators. The result would be lower taxes for the company and no change at all in the CEO salary.

Progressive groups across the country that have been campaigning for corporate responsibility are excited about changes that are afoot. A new rule by the Securities and Exchange Commission, to take effect in 2017, will require large companies to disclose pay ratios and thereby expose the exorbitant rates of CEO salaries.

A recent business article quotes Charles Elson of the Weinberg Center for Corporate Governance, who said, “… the numbers are embarrassing. … What [the disclosure law] was designed to do was to inflame the employees of the company and create discontent in the organization to force boards to reconsider pay” (Boston Herald, Aug. 14, 2015).

Public disclosure is the full extent of the reform. Within the law itself, no further action is intended or implied. Corporations are required to make no changes whatsoever. Having forced out the truth about the executive pay scale, the power of Law and Government dares do no more. The peoples’ elected officials approach Private Profit, not with a raised fist, but with the raised hands of surrender.

The SEC reform legislation hopes or assumes that public shame will lead to more humane and generous behavior from CEOs. Of course, given what is known of CEOs, any shame they might feel will result from not having even more outsized pay ratios.

When the Law trembles before Capital, who will force real change? Corporate boards voted the senior executive pay ratios in the first place; shareholders do not determine salaries. Workers have the greatest potential to resist corporate greed, but workers also bear the greatest risk. Most public workers are not in unions, which could provide them some support and protection. Companies find plausible-sounding excuses to isolate and fire potential “trouble-makers.” The dangers of “going-it-alone” will likely limit the amount and extent of organized resistance, especially in an economy where jobs are scarce and precarious.

Yet, pushed too far, workers still fight back. At Walmart, where the CEO received $25.6 million last year—about half a million dollars a week—workers organized as OUR Walmart have been agitating for a $15 hourly minimum wage. They have forced a company concession: a pay raise to $10 an hour in 2016 for 500,000 of the company’s 1.4 million workers.

Of course, Walmart offered something so that it will not have to give up even more. The company intends to divide the OUR Walmart workers between those who will accept the concession and those who will reject it and keep fighting. The dilemma is difficult. Many Walmart workers are so badly off that the certainty of a small pay raise will outweigh the possibility of a larger and more equitable settlement. The hungry cannot easily afford to look scornfully on “half a loaf.” At this point, though, OUR Walmart workers are continuing their struggle. (See the website:

Of course, a company like Walmart can maintain its profits in many ways. What’s lost on one front can be regained on another. Walmart has joined with other companies to lobby for a reform more to its liking: seeking changes in workers’ compensation laws. Corporations are asking for the standards to be rewritten so that companies themselves determine the extent of a worker’s injury and the rate of compensation. Needless to say, corporate America intends to grant injured workers even less money and require them to make more effort to obtain it.

The Wall Street influence on Washington is such that reform legislation is conceived from the beginning to have the least impact, to make the fewest inroads into private profit. When, for instance, a different Clinton was president, the Family and Medical Leave Act of 1993 was passed and celebrated with much public commendation. It was, in fact, Bill Clinton’s first law as chief executive. Even today, former Secretary of Labor Robert Reich says he is “proud” of his efforts to implement it.

The limits of the law have become quite obvious over time. First, to qualify for 12 weeks of leave, full-time workers must have been employed at the same firm for 12 months. Most important, all of the leave is unpaid. Without an income, it’s estimated that only 40 percent of eligible workers can make much use of the law that was supposed to help them. In reality, this reform applies best to those with a trust fund or with a spouse earning an outsized salary—a corporate CEO, for instance.

Last January, in his State of the Union Address, President Obama said, “We are the only advanced country on Earth that doesn’t guarantee paid sick leave or paid maternity leave to our workers. Think about that.” In Washington, “thinking” is definitely encouraged. The Secretary of Labor has put together a program that would offer $500,000 to any state willing to conduct a paid leave feasibility study. But that amount of thinking has not led legislators to action.

No actual law has been passed. No federal law is likely to be enacted in the foreseeable future. The United States will continue to offer a Family and Medical Leave Act that will prevent most women from taking a medical leave when they start or add to their family.

This apparent paradox—reforms designed to make no substantial changes—is evidenced throughout the political system. Consider President Obama’s Home Affordable Modification Program, intended to provide mortgage relief to struggling homeowners. A report by government officials charged with overseeing the program shows that 887,001 borrowers have obtained loan modifications, but some four million have been rejected.

A recent New York Times article (Aug. 2, 2015) notes, “It appears that the program has allowed big banks to run roughshod over borrowers again and again.” How is it possible? The answer is that this reform legislation was built with “two design flaws: making the program voluntary for the banks and letting those banks that participated run the process on their own.” The result is that 72% of eligible applicants have been rejected, since the actual criteria for relief is profitability for the banks, not assistance to the homeowners.

The history of federal campaign finance reform is another story beyond any paradox. Significant bipartisan measures had been achieved, at least on paper. A 2002 federal law prohibited unlimited contributions to political parties, and while the Supreme Court later shredded the substance of that law, its loopholes were always huge.

In real life all the presidential candidates from both parties find it easy to skirt the laws, including the $2600 limit that a single donor can give to a single candidate. According to a New York Times report (July 26, 2015), “[P]residential hopefuls have been romancing donors, hiring staff and haunting the diners and senior centers of Manchester and Dubuque.” All this activity, all this fundraising and spending, technically occurred outside of campaign finance law.

Regulations can be made to disappear; money can be shifted into different accounts; candidates can even pretend not (yet) to be candidates—scenes from an “Alice in Wonderland” world. An illusion of legality is even better than the real thing. Candidates need only claim that “the much-promoted campaign staff they hired had other jobs. And their many, many trips to New Hampshire and Iowa had nothing to do with running for president.” It is an outrage to common sense but agreeable to the law.

The same New York Times article quotes a former lawyer of the Federal Election Commission who said, “We’re in uncharted territory.” Campaign reform, in other words, has been bypassed, and big money will continue to dominate the elections. It’s another reform that made few or no changes.

In recent years the most significant and divisive social reform has centered on the health and medical industry with the enacting in 2010 of the Affordable Care Act (A.C.A.), or “Obamacare.” It has withstood repeated “no” votes by Congressional Republicans, Senate filibusters, a government shut-down, and a legal challenge brought to the U.S. Supreme Court. With this much right-wing opposition, it would seem that the health-for-profit system itself is on life-support.

Though much about the A.C.A. is complex and confusing, that conclusion would be ill-founded. Book-length evaluations of this controversial legislation are beginning to appear, and more will certainly be published in the future. Sufficient time has passed, though, for reasonable judgments to be made.

The Washington Post summarized the findings of journalist Steven Brill’s new book, “America’s Bitter Pill,” by noting that his study “details the backroom deals that allowed the Affordable Care Act to become law… and why he believes the law won’t do anything to keep health care costs from running wild. His assessment: the deals Democrats struck with industry to get the law passed ensured that the flawed system would remain intact” (Jan. 5, 2015).

A July 2015 article in Harper’s magazine, (“Wrong Prescription? The failed promise of the Affordable Care Act,”) points out, “The A.C.A. was sold to the public on the pledge of ‘affordable, quality health care.’”

The result, given the history of reform legislation in the United States was predictably different. “Instead, the A.C.A. was a canny restructuring of the American health-care market place, one that delivered millions of new customers to insurance companies, created new payment mechanisms for hospitals, steered more business to pharmaceutical companies, and dictated expensive, high-tech solutions for a wide range of problems.”

Obamacare is riddled with shortcomings, not because of a failure of legislators’ intelligence, but “because of a failure of nerve and the immense power of health-care stakeholders [so that] the A.C.A. has reinforced and accelerated many of the system’s most toxic features.” Designed to prevent a movement for universal health care, which would have been in the people’s interest, and to preserve a market-driven health-care structure, on behalf of business interests, Obamacare has actually succeeded in its most important objective.

The example reveals the general rule. The apparent paradox in logic of any particular reform can be clarified by understanding the nature of the contradictory social forces that shaped it. Less a compromise, a reform is a hostile stand-off between ultimately competing class interests. Or, as Neil Young once sang, “They give you this/But you pay for that.”

Of course, when the needs of the working class—the majority of the population—are represented by one of the two ruling-class parties, the conflict between them is an argument over the best and most effective means of sustaining corporate rule. In the debate on health care, a debate on the quality and even the saving of people’s lives, the people never had a voice.

Hillary Clinton has declared her desire to be that voice, to run for president because “everyday Americans need a champion.” Bernie Sanders calls for people to stand with him and start a political revolution, one that draws its inspiration from the New Deal. His is a politically adroit move, as recent polls show, but not one that will ever lead to any revolution.

In the popular imagination, the most far-reaching and successful reform of the past century was President Franklin Delano Roosevelt’s New Deal. The reality of that program is more complex and troubling than many realize. Howard Zinn, author of “A People’s History of the United States,” wrote that the New Deal was “tentative, cautious.”

Zinn pointed to the limits of the New Deal reforms: “It created many jobs but left 9 million unemployed. It built public housing but not nearly enough. It helped large commercial farmers but not tenant farmers. Excluded from its programs were the poorest of the poor, especially blacks. As farm laborers, migrants or domestic workers, they didn’t qualify for unemployment insurance, a minimum wage, Social Security or farm subsidies” (The Nation, April 7, 2008).

The lessons of the recent past and current practice point to the same conclusion: The intent of a political reform—its potential socio-economic benefit—can be blunted or neutralized in its implementation or enforcement. Limits may be found, exceptions can be made, and loopholes can be created. A reform meant to aid workers and youth runs counter to the logic of capitalism, counter to the imperatives of a profit-making system. The value of a new law must never threaten the law of value. People must never be placed above profit.

Hence, the promises of a reform are often unrealized when the reform is retrofit to a system not designed or prepared to accept it.

And yet … history also shows that ruling classes can be forced to make concessions; the profit system, in order to continue, must bend when popular pressure becomes sufficiently powerful. Reforms, however partial and fragmentary, are valuable in themselves. Certainly, Obamacare is thoroughly inadequate and no substitute for single-payer, universal health care, but the Affordable Care Act did provide medical insurance to 17 million people who had previously gone without. A small raise in pay—again, not adequate—will better enable half a million Walmart workers to buy groceries and pay the rent.

In addition to any specific reform, or series of reforms, there is much to consider about the best and most practical way to bring them into being. Lobbying efforts, mailing campaigns to Congress, even confrontations with presidential candidates may seem necessary to many activists. Some would argue, with apparent logic, that reforms can best be implemented by support for a reform party, like the Green Party in the United States.

Some supporters of reform go further to suggest that the creation of reforms, one by one, can ultimately replace capitalism. That belief can be a fatal illusion, as it was for President Salvador Allende and the Chilean working class in 1973.

A few years prior to that catastrophe in South America, veteran socialist George Breitman wrote, “Revolutionary Marxists, starting with Marx, have never been opposed to the struggle for reforms. … The essence of Marxist strategy, of any revolutionary strategy in our time, is to combine the struggle for reforms with the struggle for revolution. This is the only way in which to build a revolutionary party capable of providing reliable leadership … in action, from the struggle for reforms to the struggle for power and revolution” (“Is It Wrong for Revolutionaries to Fight for Reforms?” in “Malcolm X and the Third American Revolution,” page 230).

Unfortunately, these ideas and insights are not well known or yet understood among many supporters of reform-minded Democrats. Revolutionary Marxist organizations that have acquired tactical and strategic lessons from decades of political struggle have been too small and have too little influence to transmit their programmatic heritage. So, a new generation of activists has no road map for the difficult route it travels. A new movement must even learn the basic but not-so-obvious task of distinguishing friend from foe.

Not all the advice is helpful. For instance, some socialists argue that the Bernie Sanders campaign and the Black Lives Matter activists should merge to create “the program needed by our society” and “perhaps a movement for socialism.” This is the position of Solidarity National Committee member Dan LaBotz:

Yet, neither the Sanders campaign nor the BLM movement is explicitly anti-capitalist, and any program they might adopt would be reformist and oriented to bourgeois electoral activities—either to the left-wing of the Democratic Party or to ballot petitioning for the Green Party. To paraphrase Lenin, bourgeois reformism is not a step towards socialism but is instead a means of combating socialism.

Such hard-won lessons from the past are markers on today’s political road map. As another socialist veteran once wrote: “It is clear that any further advance—whether in health care, public housing, labor law reform, Social Security benefits, civil rights, or any other area of badly needed social legislation—will be made only through strikes, massive protest demonstrations, and other forms of independent political action against the employers and their political agencies” (Frank Lovell, “Health Care: key issue in coal strike,” The Militant, January 27, 1978).

A political struggle independent of any bourgeois party, a fight aimed directly at the dictatorship of capital, is not a new idea, but it is still a necessary one. Political principles are not commodities subject to the mantra of Madison Avenue, which holds that “new” always means improved. An older idea may prove to be better.

The movement today requires the leadership of an independent and revolutionary socialist organization that can offer clear alternatives to the reformist programs of the Sanders campaign, the Green Party, etc., which would limit political action to the orbit of capitalist elections. The most urgent and ultimately most effective task for activists is to join in the effort to build that kind of anti-capitalist party.

Photo: Walmart workers demonstrate on “Black Friday”2014, demanding $15 an hour, full-time shifts, and improved working conditions.









Related Articles

Behind Sam Bankman-Fried’s Cryptocurrency Crash

FTX’s plunge from $32 billion to bankruptcy and the collaping value of cryptocurrencies shows the speculative casino nature of the capitalist economy, where unimaginable wealth is driven by fictitious capital.

The International Food Crisis and Proposals To Overcome It

[Editor’s note: We reprint this article by the Committee for the Abolition of Illegitimate Debt (CADTM). In 1989, the Bastille Appeal was launched, inviting popular movements throughout the world to unite in demanding the immediate and unconditional cancellation of the debt of the so-called developing countries. This crushing debt, along with neo-liberal macro-economic reforms imposed on the global South, has led to an explosion of worldwide inequality, mass poverty, flagrant injustice and the destruction of the environment.