On May 15, 2014, a worldwide strike of McDonald’s workers involved workers in at least 33 countries, both imperialist and oppressed.
While participation in the strike varied, and most workers who participated were out for only an hour or so, this was a historic event all the same. It points the way forward to a far more internationalist future for the workers’ movement. To understand why this is so, we have to examine long-term underlying economic changes making the low-wage movement both possible and necessary.
This post is part of a series that explores the evolution of imperialism and the world capitalist economy in the century that began with the events of August 1914—the start of World War I. Let’s go back, not a full century but rather half a century, to the year 1964. This is the mid-way point between 1914 and the present day.
In 1964, the postwar, post-Depression “Long Boom” (strictly speaking, a series of industrial cycles with strong booms and relatively mild recessions) was underway. Indeed, to all appearances the “boom” was gaining momentum. In 1964, the U.S. and world capitalist economy entered a cyclical boom following a period of stagnation—a pause in the long postwar expansion—that occurred in the wake of the global economic recession of 1957-58. (1)
Over the next couple of years, the Long Boom picked up steam as it was fueled—in addition to purely cyclical forces—by U.S. federal government deficits created by the escalation of the Vietnam War (called the American war by our good friends in Vietnam), further increased by a huge regressive tax cut signed by President Lyndon Johnson in 1964, backed up by the Federal Reserve Board’s then expansionary policies.
This was the heyday of Keynesian economics, and even many Marxists were inclined to see the Long Boom as the new norm of capitalism thanks to the increasing intervention in the economy of the capitalist state. The Johnson administration boasted that the U.S. economy was so strong that the government could follow policies that would provide both “guns and butter.”
Despite these “good times,” it was becoming obvious, even to bourgeois economists, that due to the growth of automation in industrial production, the rate of growth of traditional factory jobs, though still rising in absolute terms in both the imperialist and oppressed capitalist countries, would absorb only a small part of the coming generations of young workers. This was especially true in the United States and Britain, where long-term economic growth was much lower than in Western Europe and Japan. Many social scientists and other observers expressed fears that a permanent crisis of mass unemployment was inevitable.
With few exceptions, however, professional economists insisted there was no danger of a crisis of permanent mass unemployment caused by automation. What was really happening, they claimed, and had been claiming since concerns about the long-term effects of automation on employment first arose in the 1950s, was a shift from an industrial economy where most jobs were “blue collar” jobs in factories, mining, construction, and agriculture to a “post-industrial” economy where most jobs would be white-collar salaried office jobs.
Computerization and the automation linked to it, the economists insisted, was actually creating more jobs than it was destroying. (2) As the role of computers grew dramatically in coming years, economists assured us, huge numbers of highly skilled white-collar workers would be needed to write the software programs that would run on all those computers. (3)
As a result, the traditional blue-collar working class would fade away over the next few decades to be replaced by the highly paid “middle-class” white-collar workforce. Since salaried white-collar workers have little interest in unions, unions were becoming obsolete and had little future. These unfolding developments—along with the “boom” that many viewed as permanent due to government policies inspired by the work of British economist John Maynard Keynes—represented the final refutation of Marx, the economists explained to their university students.
Instead of Marx’s predictions of a society increasingly polarized between a relatively few, extremely rich capitalists, on one hand, and a great mass of low-wage blue-collar workers, on the other, the “free enterprise system” was allegedly evolving toward a society that would be made up overwhelmingly of a high-salaried “middle class” without the extremes of wealth and poverty that had marked the early days of capitalism. (4)
The future arrives
That future is now here, but it has not exactly turned out the way the economists predicted. To be sure, the number of computer programmer jobs—programmers are now called “software engineers”—and other related “high-tech” jobs has increased but not nearly to the extent economists of a half century ago had hoped. For example, in 2012 in the U.S. state of California, where “Silicon Valley” is located, high-tech jobs accounted for only 1.2 percent of total employment.
While this is a huge increase compared to 1964, when only a handful of people worked in what would later be dubbed high-tech jobs, the number of such jobs doesn’t come close to the number needed by today’s generation of workers. For the vast majority of young people, jobs in high tech remain completely out of reach. Many bourgeois economists and journalists for the financial press now write about the “hollowing out of the middle class.”
Instead, the jobs at the very bottom have seen the most growth, while the traditional middle-income, “middle-class” jobs are in fact disappearing. Capitalism is not behaving as the economists say it should. Instead, the capitalist system has a nasty habit of obeying the economic laws that Karl Marx discovered and not the laws invented—not discovered—by our pro-capitalist economists.
Instead of writing computer code in air-conditioned offices, flipping burgers in McDonald’s or Burger King for wages that do not cover basic living expenses—in Marxist terms, are less than the value of labor power—have turned out to be the typical “job of the future” that is now the present.
As a result of these evolving economic conditions, we have seen the gradual emergence of a movement of low-wage workers employed in what the economists call the “service sector.” These jobs include those in hotels and car washes. But the fast-food restaurant chains such as McDonald’s, KFC and Wendy’s, as well as the giant retailer Walmart, are the real engines of today’s new job creation in the old imperialist countries, and to a certain extent in the oppressed countries as well.
But unlike large-scale industries, isn’t organizing fast-food workers virtually impossible? The success of the dynamic union Unite—not to be confused with the U.S. trade union Unite Here (5)—in organizing the “unorganizable” fast-food workers in New Zealand shows that the organization of these workers is both necessary and possible, even if the specific conditions in New Zealand make it easier there than in many other countries.
As we will see below, fast-food is very much a big business that likes to disguise itself as “mom and pop” small business. According to Canadian-British blogger Cory Doctorow, the fast-food industry grosses $200 billion a year and the average CEO salary is $25,000 a day. But fast-food workers in New York on average make only $11,000 per year.
Just try to live on $11,000 in New York City in view of house rents in the “Big Apple.” Because of the high—and rising—cost of living, particularly in big cities, fast-food workers in New York City and other U.S. cities are demanding their wages be raised to $15 an hour.
Back in the 19th century, Marx and Engels insisted on the international nature of the workers’ movement and opposed all tendencies to limit it along national lines—such as the “American exceptionalism” that long plagued the U.S. labor movement but now appears to be in decline at long last.
One example of “American exceptionalism” was that U.S. unions for decades ignored the May Day holiday, though its origins were in the 1880s struggle of workers in Chicago for an eight-hour day. But since the huge demonstrations in 2006, including the mass demonstration and general strike of immigrant workers on May 1 of that year, May Day has staged a comeback in the country where it all began.
Marx and Engels didn’t insist on the international nature of the movement for moral reasons—the “brotherhood of man” in the old sexist language—but because of the very nature of the capitalist system. Capitalism began with the birth of the world market in the 16th century with the discovery of gold and silver—money material—in the “new world.” And as regular readers of this blog know, the industrial cycle that is crowned by periodic crises of overproduction is as thoroughly international as the capitalist system that breeds it.
But changes in the world economy over the last several decades have made internationalism both more necessary and more possible than was the case in earlier stages of the workers’ movement. These changes include (1) the growing centralization of capital that is now unfolding on a world scale; (2) the revolution in computerized communications; (3) the growing transfer of large-scale industrial production to the former colonial and semi-colonial countries, most famously to the Peoples Republic of China; and (4) the growing role of immigrant workers in the imperialist countries, both in the portion of large-scale industrial production that remains in those countries as well as the “service sector” such as fast food that is growing in imperialist and oppressed countries alike. As a result of these changes, the struggle between labor and capital is occurring under conditions that are quite different than those of 1964 or 1914.
Service workers and industrial workers
Bourgeois economists use “service sector” as a catchall term to mystify the nature of “service” workers and to see them as other than industrial workers. The most diverse groups of people are lumped into the category of “service workers,” ranging from highly paid white collar managerial personnel to low-paid workers who far from wearing suits to work wear company-mandated uniforms.
Most of these “service workers”—the fast-food, hotel and retail workers now being drawn into motion—are actually commodity-producing industrial workers, if by industrial workers we mean workers who produce surplus value. Indeed, with the exception of operating cash registers and credit-debit card readers, the work done by workers in McDonald’s, KFC, Chipotle, Burger King, Pizza Hut, Carl’s Junior, and so on are engaged in industrial production, even if the workplaces are called restaurants as opposed to factories.
In a fast-food restaurant, in contrast to the classic factory, the final customer comes directly to the place of work to purchase and consume (or take out) the product. And production in a fast-food restaurant is on a much smaller scale than the production of steel or the assembly of automobiles and computers—now called “devices.” Since fast-food restaurants produce a product for the ultimate consumer, they belong to what Marx called Department II—industries that produce means of personal consumption.
The above analysis is true of other service industries such as hotels and car washes. When you make your own bed, you are not engaged in commodity production, because you are consuming a product of your own labor—enjoying a made bed. No exchange takes place. Since you are not producing a commodity when you make your bed, the labor that goes into making your own bed does not take the form of value. It is individual labor that produces a product—a made bed—for your individual consumption. Since there is no value produced in this situation—though there is use value—no surplus value is produced. So in the capitalist sense, when I make my bed I am not engaged in “productive labor.”
If I hire a maid to make my bed, the labor is still not productive of surplus value, because the product of the maid’s labor, the made bed, is not sold. But if you are employed by a hotel and make the beds of the hotel’s customers, you are actually engaged in social labor whose product is exchanged for a sum of money on the market. It is therefore social value producing labor. This type of labor, whether embodied in a lasting object such as a gold bar stored in Fort Knox or in a service, becomes under the capitalist mode of production “value.”
Part of what the use value that customers of the hotel purchase—what makes the hotel “experience” pleasant—is that the hotel—or rather its workers—and not customers make the beds, clean the rooms, launder the towels, clean the toilets and so on. And if you are a wage worker employed by a hotel and you make beds, clean rooms, launder towels, and clean the toilets for the hotel’s customers, you are not only producing value but surplus value.
During a certain portion of the day, your labor is reproducing the value of your wage—the value of the sum of money that you receive as pay that you use to purchase the commodities that will reproduce your labor power including the labor power of the next generation, while the rest of your workday is labor you perform free of charge for the bosses.
If you belong to a union, you can prevent the portion of labor that is unpaid from all but eliminating the portion that is paid. But you will still have to produce surplus value—engage in unpaid labor for the bosses—because if you don’t the hotel won’t hire you. The hotel capitalists are in business to make a profit, after all, and profit is nothing else but surplus value realized in money form.
As in the case with fast food, a hotel is an enterprise that provides a product that is almost immediately consumed by the consumer where the work is performed—the hotel room. Hotels, therefore, belong like fast food to Department II—the production of the means of consumption. As we can see, Karl Marx’s analysis of value, surplus value, wages and profits is by no means limited to what is called factory work.
The nature of retailing
The movement of low-paid workers has also spread in the U.S. to the giant notoriously anti-union retailer Walmart. Walmart workers have organized “Our Walmart” as a first step to gaining some kind of collective representation when dealing with their bosses, the ultra-rich multi-billionaire Walton family.
Are the workers who work for Walmart industrial or commercial workers? According to Marx’s theory of value, trade—the change in titles of ownership—represents unproductive labor. Marx called this labor unproductive not for moral reasons but because it does not contribute to the use value of commodities. If we follow Marx, labor that does not produce use value does not produce value and its form exchange value or monetary value.
The retailing industry, however, involves a lot more than just changes in titles of ownership. Retailing proper includes many kinds of value-creating labor. Examples are warehousing and the stocking of store shelves, which place the commodities where the consumers of commodities can inspect and purchase them.
A commodity that I cannot physically bring into my possession has no use value to me. Therefore, the labor of warehousing and stocking of store shelves very much adds to the use value of commodities and is therefore value-creating labor in the sense that Marx used the term. So is the labor that includes the work of cleaning and maintaining the physical plant of the store. And since the work done by Walmart workers is done by wage workers—not members of the multi-billionaire capitalist Walton family—that work is very much surplus value-producing productive labor.
Only pure sales work and the operation of cash registers that involve changes to the titles of ownership of commodities, or trying to convince customers to buy commodities, is unproductive in the sense defined above and therefore commercial work. Therefore, a salesperson in a Walmart store who is trying to convince a potential buyer to buy some product is a commercial or non-productive of surplus value worker. The industrial aspects of retailing belong just like fast-food restaurants and hotels to Department II, the production of the means of personal consumption.
The commercial proletariat
Marx explained that the commercial proletariat—wage workers who perform work that involves changes in the titles of ownership—are also exploited despite the fact that they don’t produce surplus value. They, however, perform surplus or unpaid labor and are therefore exploited. The reason is that the labor measured in terms of time they are required to perform in these commercial operations is more than the labor represented by their wages. Marx therefore spoke of the exploitation of the “commercial proletariat.”
So though McDonald’s workers while operating the cash register are not performing productive labor in the sense of “productive of surplus value,” they are very much exploited and are therefore much in need of union protection. In practice, workers in a fast-food restaurant will likely produce both a certain amount of productive of surplus value labor—flipping hamburgers—and perform a certain amount of commercial work—operating the cash registers and making change—but in general most of the work will be productive of surplus value. (6)
Peculiarities of service enterprises
This doesn’t mean that the peculiarities of the “service” enterprises are without significance. Unlike classic industrial enterprises, these service enterprises cannot be moved abroad. Therefore, there is no tendency to move McDonald’s, Burger King, KFC and so on from the imperialist countries to the oppressed countries. Instead, these types of enterprises are found in all types of countries—the U.S., the center of the Empire; its imperialist satellites Western Europe, Japan, Australia and New Zealand; and the oppressed and exploited countries including the ex-socialist countries such as the Russian Federated Republic, the Ukraine and the other countries of Eastern Europe.
Therefore, the developing movement of low-wage workers is a movement of mostly young, mostly surplus value-producing industrial workers—with some performing “unproductive” commercial functions as well—who in an earlier time—1914, for example—would more likely have been employed in actual factory work. However, we must remember that not all this factory work was in large-scale factories employing many thousands of workers. In reality, in the world of 1914 only a minority of factory workers worked in such factories.
Much of the factory work in 1914 was actually performed in small factories like garment shops or print shops owned by what were called in the old days “cockroach capitalists”—apologies to the hardy insects who never exploited anybody. For example, the movement of largely women immigrant workers in New York City in the first decade of the last century led by the International Ladies Garment Workers Union—a forerunner of today’s Unite Here union—inspired the Second International to declare March 8 International Women’s Day. And it was protests by women workers celebrating International Women’s Day in Petrograd in 1917 that led straight to the February 1917—old Russian calendar—revolution, which led to the socialist October revolution later that year.
So it is not true that only the actions of workers in large factories or mines can have revolutionary consequences, though a proletarian revolution is unthinkable without the workers in large-scale industrial enterprises playing a central role. The struggle of largely immigrant New York City workers—mostly from eastern and southeastern Europe—before 1914 that helped inspire the Russian Revolution among other things—involved workers who were not unlike those who work in fast-food restaurants and hotels today. The majority were immigrant workers who did not speak English as their native language.
Small factories and blurred class lines
The workers who lived on New York City’s Lower East Side and other similar immigrant working-class neighborhoods a century or more ago often worked in garment sweatshops that were small-scale operations employing only a few workers. They were nothing like the huge assembly plants that Henry Ford was developing to mass produce his Model T automobile. Indeed, some of the work was actually done at home.
This type of labor was known as the “industrial home work system.” This system was one of the key ways that the labor of children was exploited. Because the wages paid for work during the regular work day by the “cockroach capitalists” did not cover basic living expenses, the entire family including very young children would have to perform additional work at home in order to meet basic expenses.
There is, however, one important difference between small factories like the garment shops of a century ago and today’s industrial “service” businesses. In the world of 1914 and for years thereafter, the setting up of a small garment factory required very little capital. All you needed to do was rent a loft somewhere—rents even taking into account changes in the gold value of the dollar were a lot cheaper in those days—and buy a few sewing machines.
As a result, it was by no means impossible for skilled garment workers who saved up a little money to open their own little garment factory. Indeed, the workers in the New York garment industry and the small “cockroach capitalists” who owned them were often related. A worker might borrow some money from his uncle—perhaps even his boss—and open his own small garment factory.
This situation, common in pre-1914 New York City, was in contrast to the workers in large-scale heavy industries such as the steel industry. There was no chance the workers in U.S. Steel could borrow money from the U.S. Steel owners—who were represented by the Wall Street J.P. Morgan banking house that had organized this corporate giant—and open their own steel factories! The same situation was quickly established in the auto industry, as capital in that new industry rapidly became centralized. Unlike the garment industry—or the rag trade as it was called in the old days—the line between the classes in large-scale industry was crystal clear.
Today, the class line in apparently small-scale service businesses like fast-food is as stark as the class line was in iron and steel in 1914—and still is—and quite unlike the often blurred class lines in the “rag trade” of 1914.
Centralization of capital and decline of the traditional petty bourgeoisie
Much like the case with the peasantry or small working farmers, the traditional “mom and pop” type businesses have been in decline for years throughout the capitalist world. This trend has been accelerated by the crisis of 2008 and its aftermath. Today, most fast-food and other types of restaurants, hotels, and retail stores are part of gigantic chains that operate on a worldwide scale. Within these chains, there are two types of ownership.
The first is where the chain—a corporation—owns outright all the establishments that make up the chain. They are run by hired managers who are salaried employees. The other type of ownership is known as a franchise. In a franchise, an enterprise—for example a McDonald’s restaurant—is bought by someone for a sum of money the buyer has obtained one way or another. Formally, the buyers are small businesspersons, not unlike the owners of small garment shops of a century ago.
For example, the franchisees hire the staff—that is, purchase labor power for the cheapest price that they can obtain on the local labor market. Sometimes the big chains will grant a sub-franchise to a corporation, which will then grant franchises in a particular region. The sub-franchisee will then grant franchises to the actual operators of individual fast-food or other small enterprises. In this way, giant monopolistic multi-national businesses appear as “small business people.”
The franchisees—assuming that the establishments are not unionized—enjoy all the freedom that independent entrepreneurs enjoy when it comes to the purchasing of labor power. But they enjoy none of the other freedoms that traditional small businesspersons have. They have to purchase their equipment from the chain—or from whomever the chain says the equipment must be purchased; the layout of the enterprise is dictated by the chain, as is the branding—for example, McDonald’s, Burger King and so on. The franchise is then forced to pay a royalty for the privilege of using the chain’s branding. Even the uniforms worn by the workers are dictated by the chain. This is “free enterprise” 2014 style.
Advantages of the franchise system for the chains
From the viewpoint of the chains, the franchise system has considerable advantages over outright corporate ownership of each individual restaurant or other “small business.” First, the individual franchises are under pressure from the market to pay the lowest possible wage to the workers, since the franchisee’s net income is so dependent on the level of wages. This is the one sizable cost the franchisee has some control over. The lower the wage the higher the franchisee’s net income will be.
Let’s look at this a little more closely. The prices that the franchise holder can charge for “Big Macs” are determined by the chain. So are the prices franchise holders must pay for equipment—fixed capital such as ovens, as well raw materials—circulating capital—the meat, the cheese and whatever else goes into a Big Mac.
A traditional small businessperson, in contrast, has the freedom to haggle in the market place and play different suppliers against one another. A franchise holder has none of these traditional freedoms. The only price that the franchisees can haggle over is their “price of labor”—labor power—the wages they pay their workers. In this they will behave exactly like the “cockroach capitalists” in New York’s garment district a century ago.
Therefore, by its very nature the franchise system encourages super-exploitation of labor—paying less than the value of labor power. In ordinary language, this means that you are paid less than you can live on. This is in the interest of the capitalist class as whole. The reason is that the overall result—in the absence of unionization—is to further raise the rate of surplus value and the rate of profit not only in the specific industry involved, such as fast-food, but in industry as a whole through the tendency of the rate of profit to equalize throughout capitalist industry. However, what is good for the capitalist class is very bad for the working class.
For example, in New York City it is impossible to live and raise a family—reproduce the next generation of workers—on the $11,000 a year that the fast-food industry on average pays workers. If the wage was $15 an hour, which is more or less the value of labor power at today’s cost of living—though it will soon be less than the value of labor power if as is almost certain the cost of living continues to rise—the fast-food workers would be merely exploited. But as we see, the franchise system encourages not simply the exploitation of workers—which Marx explained in Volume I of his great work “Capital,” where he assumes that the capitalists pay the workers the full value of their labor power—but the super exploitation of the workers, where the capitalists pay the workers less than the value of their labor power.
Under the franchise system, if workers complain about being super exploited—being paid less than they need to live and raise a family—to the real boss, the chain—for example, McDonald’s Corporation—will say that this has nothing to do with us but is an issue between the workers and their employers—the individual franchise owners.
Another advantage for big capital of the franchise system is that without taking the responsibility that comes with outright ownership of, for example, the restaurants, the corporation retains the full ability to divide up the potential markets among the franchisees in a centralized way.
McDonald’s, for example, will be careful to see that each restaurant serves a certain neighborhood and doesn’t compete with another MacDonald’s within that neighborhood. It aims to have one—but only one—store in each neighborhood. But unlike the case with outright corporate ownership, the chain is able to pass the risk of doing business onto the shoulders of the franchisees—which tends to force the franchisees to act like the worst sweatshop “cockroach capitalists” of old. If the franchisee turns out to be an incompetent businessperson, the businessperson goes bankrupt and the corporation simply sells the franchise to another franchisee, perhaps one that is better at “sweating labor.”
The trustification of ‘mom and pop’
The franchise system makes it easier for government statisticians and capitalist economists eager to picture present-day capitalism as still dominated by “small business” with “free competition” still thriving. This helps hide the extent of the centralization of capital. If each individual McDonald’s, KFC, Pizza Hut and so on is seen as an independent business, capital looks like it is not only extremely decentralized in the fast-food industry, but is becoming daily even more decentralized as new fast-food restaurants open around the world.
In economics, a situation where a lot of apparently independently owned businesses in reality function as a single centralized capital is called a “trust.” The first modern trust was organized by John D. Rockefeller and his Standard Oil Company in the 1870s—the decade when the transition from capitalism based on free competition to modern monopoly capitalism began in earnest.
Rockefeller had gained control of many previously independently owned oil refiners. But the growth of the Rockefeller monopoly was creating mass anti-monopoly sentiment that was politically dangerous to him. In order to counter this, Rockefeller looked for a way to hide the true extent of his Standard Oil monopoly. The way to do this, he realized, was to maintain the appearance that the oil refineries he and his Standard Oil Company controlled were really still independent businesses. Rockefeller had his lawyers work out a legal cover for how this could be done. The Rockefeller lawyers decided to use a legal device known as a trust.
A trust involves the management of some assets—for example, moneyed capital or real estate—by a trustee in the interests of one or more beneficiaries. A trust is often used by rich families—money capitalists—who are descended from entrepreneurs who lived many generations ago. These families often create trust funds for their children.
The reasoning is that if these “trust fund kids” had complete control of their assets, they would likely spend the money on luxurious living and burn up the family fortune within a relatively short time. Future generations of these families would therefore have no capital to inherit and would not be members of the capitalist class, forcing them to work for a living.
In order to avoid such a “disgrace” to the family name, the great bulk of the families’ assets are put in a trust managed by professional money managers—perhaps working for a giant universal bank—and the brats simply get to spend a portion of the trust’s earnings. This is enough to ensure them the life style appropriate for their family names while preventing them from dissipating the family fortune.
Another example where a trust might be used involves the capitalists who sit on the Open Market Committee of the Federal Reserve Board. If these capitalists could directly control their personal capital, they would be the ultimate inside traders. The reason is that they would have a good idea of what “the Fed” is likely to do ahead of their fellow capitalists. This would give them a tremendous advantage over their fellow money capitalists when it comes to trading on the stock market, bond market, and gold and commodities markets. So they are expected to put their assets—stocks, bonds, money market funds, real estate and so on—into a “blind trust.” At least in theory, the trustee who invests the capital of the trust is no more informed about the working of the Federal Reserve’s Open Market Committee than any other capitalist.
Back in the 1870s, Rockefeller’s lawyers hit upon the idea of having the stock of all the “independent” oil refiners he controlled be put in a trust that would provide the owner-beneficiaries with a stream of income paid by the trust but effectively deprive them—with the exception of Rockefeller and a handful of his associates—of any control of their “independent” businesses. Though not legally the same as the franchise business, the economic result was much the same.
The Standard Oil Trust functioned as a centrally controlled single capital. The trust differed from a cartel, where independent businesses—capitals—form an alliance, agree to divide up the markets between themselves, and avoid price competition but still retain their independence. During periods of crisis when the market contracts rather than expands, competition for the now shrunken market tends to increase sharply, straining alliances among the still independent capitalists that make up the cartel. The likely result is the cartel’s breakup. A trust overcomes this “problem” because the “independence” of the establishments that belong to the trust is only a legal fiction.
The Standard Oil Trust—and similar trusts that were soon organized in other industries—were so brazen in their monopolistic practices that “anti-trust” laws were passed. As a result, the trust was replaced by another legal device called a holding company. A holding company conducts no business of its own. Instead, it owns shares in other supposedly independent companies. In this way, centralized control of many apparently independent companies is achieved, much like it was in a trust. In the language of economics if not law, such holding companies are also considered to be “trusts.”
The original trusts in the economic sense involved large enterprises such as oil refiners, steel companies and railroads. But the franchise system has all the features of an economic trust. Nominally, there are many independently owned enterprises, and unlike the original trusts, these enterprises appear as small “locally owned” businesses that serve a given neighborhood. In reality, the individual “owners” have no control over their businesses; the trust is centrally controlled to ensure maximum monopoly profits for the real bosses, the chain.
The chain, in turn, might be controlled by a holding company. In that case, the holding company whose name is little known is the “trust” that controls the chain and the many “small businesses” that make it up. Imagine if all those McDonald’s restaurants were really independent and fought price wars with one another in a bid for greater market share. In that case, their profits would be a great deal lower. But of course that is not the world in which we live.
The centralization of capital has actually gone much further than even the above analysis would indicate. For example, KFC, formerly known as Kentucky Fried Chicken, is itself a mere subsidiary of a larger outfit called Yum! Brands—the economic trust that also owns Pizza Hut and Taco Bell. So if you happen to work in a KFC store or franchise, or for Pizza Hut or for Taco Bell, you work for the Yum! Brands trust. This is true despite the fact that KFC sells food from the U.S. South (fried chicken), Pizza Hut sells Italian food, while Taco Bell specializes in Mexican food.
But while the “trustification” of “mom and pop” businesses has many advantages for the bosses, it also has certain advantages for the workers if the workers know how to take advantage of them. When workers work for small independent employers, they have little weight. Unionization is all but impossible and “mom and pop” often pay very low wages. The reason is that the real “mom and pops” are barely holding on themselves, often relying on their families for labor, so they can only afford to pay anybody they employee beyond their immediate families the most miserable wages. Increasingly, this is the price for maintaining genuine small businesses that still exist.
But the workers of McDonald’s, Burger King, or KFC, for example, cannot but notice that they are producing exactly the same products made with the same ingredients—raw materials—selling for the same prices around the world. And the workers wear the same uniform as their fellow McDonald’s workers or KFC workers in a given country but also on a world scale. And the world now is tied together by modern communications—for example, those two-way television “devices” called smart phones.
Even where individual workers are paid such low wages they cannot afford a smart phone, if they band together in unions the unions can. This creates the possibility of workers in fast-food chains gaining the realization that they are in reality not employees of small businesses without much social power, but are in reality working for gigantic worldwide enterprises consisting of hundreds of thousands or even millions of workers. But unlike many traditional factories, these workers come from many nations around the world. This encourages an international consciousness from the very beginning, even if the workers in question have never read a line of Marx.
Of course, there are special problems in organizing these industries. Nobody desires to make a lifelong career as a fast-food worker in McDonald’s or KFC. But then again, who wanted to make a career as garment workers in the New York City of 1914 or for that matter as garment workers in the sweatshops of Bangladesh today?
Sometimes it is true that bosses may employ teenagers from relatively prosperous middle-class families who see their employment as only a summer job on their way to a career in management of a corporation or a high salaried job in engineering or even creating their “own company”—perhaps dreaming of being the next Steve Jobs. But as the low-wage sector expands, this is less and less likely to be the case.
Like it or not, the low-wage “service sector” is what capitalism offers young people—especially those from oppressed nationalities but not only from oppressed nationalities—in imperialist heartlands and the oppressed nations alike. Of course, the concentrations of workers in individual McDonald’s, KFC and similar establishments do not approach the level of workers in really large modern factories that can employ hundreds of thousands of workers in a relatively small area.
In this respect, those who work for the largest modern factories have an advantage, and their role remains as vital as it ever was. But the workers who work in fast-food and similar “service industries” have certain advantages of their own. For example, they are employed in giant centralized global enterprises that have branches that increasingly reach into every neighborhood around the world. For example, where I live there are two McDonald’s within easy walking distance. One is a few blocks to the east and the other a few blocks to the north. If I am willing to do some modest hiking, there are others within walking distance. And these workers often live in the neighborhoods they work in and interact with their neighbors in ways that workers who work in gigantic factories cannot.
In fast food, where the industry is controlled by a few giant trusts like McDonald’s Corporation or Yum Brands!, their workers have virtually no chance of establishing their own chain. Unlike the “rag trade” of old, the class lines are stark.
The most that could happen is that a worker might somehow get the money—by winning the lottery maybe—to buy a franchise from Yum! Brands or McDonald’s. But winning the lottery is hardly likely and buying a franchise takes a lot more money than a worker is likely to save up from fast-food wages, even if the workers were to win a $15-an-hour wage!
In large-scale industry like steel and auto, there was—and still is—always the possibility that a worker might be promoted to mid-level or top-level management. This possibility for an individual worker was—and is—actually more likely than the chance of a McDonald’s or Yum! Brands worker earning enough money to buy a franchise from a franchiser or sub-franchiser. Therefore, in these modern trustified “service businesses,” the class line is if anything more stark than the situation that prevails in large-scale industry.
The low-wage workers’ movement and the traditional trade union movement
The rise of the low-wage workers’ movement by no means negates the importance of the traditional trade union movement centered in large-scale factories, mining and other extractive industries. It rather complements it. In the final analysis, factory workers in large-scale industries are still the heavy battalions of labor. It is these workers who operate the most powerful forces of production the world has ever seen.
However, the old trade unions centered in the traditional sectors of factories and extractive industries were formed in another era, where the objective conditions were much less favorable for international working-class consciousness than is the case today. They are often linked to the old decaying liberal workers’ parties—Social Democratic parties that were formed in the era when the Second International led the workers’ movement before 1914, labor parties that at least originally were based on the trade unions such as the British Labor Party, or former sections of the Third International that have lost their revolutionary perspective and have long since gone over to liberal-labor bourgeois politics. In the worst cases, they are tied to outright capitalist parties like the U.S. Democratic Party.
While the winning of a living wage—such as $15 an hour and protection against arbitrary firing and so on—is extremely important, there is an even more important reason for low-wage workers to be unionized. Unionization is necessary if workers are to have any meaningful possibilities to take part in political life. In the final analysis, this is the most important role of trade unions. We cannot forget that the labor bureaucracy linked to the capitalist political parties and the capitalist state do all they can to strangle the unions politically.
In the old established unions, these bureaucratic machines, directly backed up by the state power, are very powerful and not easy to fight. But the low-wage workers’ movement, free of the labor aristocracy that is the social basis of the bureaucratic degeneration and decline of the old trade union movement, has the possibility of becoming a union movement with a vibrant democratic political life that creates the possibility of the politicization of millions of low-wage workers around the world. But as is always the case, the extent to which these possibilities are realized depends on the struggle.
Our class enemy also is aware of these possibilities and is doing all it can to prevent them from being realized. Success will depend in no small measure on the extent to which the workers involved in the struggle see it as not just a trade union organizing campaign, as important as that is, but also as a social movement concerned with all the issues that confront not only low-wage workers but all working people.
And remember, low-wage workers are the great majority of wage workers on planet Earth. It is the better-paid workers that the traditional trade union movement bases itself on that are in the distinct minority. To realize these possibilities, the low-wage movement must create unions or other forms of organization that allow all political tendencies of the international workers’ movement to compete with one another—which creates the conditions that will allow the most revolutionary tendencies to come to the fore and eventually combine into a mass revolutionary party. The low-wage movement can also develop into a powerful lever to revitalize the trade union movement in its traditional strongholds of factories and the extraction industries as well.
The movement can also give a new impulse to the organization of agricultural workers, who certainly qualify as low-wage workers. On this basis, the low-wage workers’ movement, working closely with workers in large-scale industry, can play a crucial role in the struggle not only for basic labor rights that are being increasingly restricted or denied altogether by capitalist governments today, but in winning the battle for democracy in general, which must in the words of the Communist Manifesto end with the elevation of the working class to the position of ruling class.
Victory to the low-wage workers’ movement!
1 After the initial recession of 1957-58, the U.S. experienced a second, milder recession in 1960-61. After that, though unemployment was much lower than during the Depression, it remained much higher than earlier in the postwar boom until 1964, when a new boom set in. This cyclical boom, combined with the Vietnam War, led to a situation where many young people found “jobs” in the rice fields of Vietnam. This pushed the U.S. unemployment rate down to the lowest levels since the quasi-war economy of the Korean War of 1950-53. These developments temporarily damped fears that “automation” was leading toward a permanent crisis of mass unemployment. (back)
2 It has been a dogma of bourgeois economics for more than 200 years that replacement of living labor by machinery simply frees up labor from areas where it is no longer needed to new areas where it is needed. Whenever the question of new labor-saving technology is brought up, professional economists are trotted out and repeat the dogma that the new technology in question will “create more jobs than it destroys.”
The great classical economist David Ricardo originally believed this. But later, after considering the question more closely, he retracted this claim and admitted that the introduction of labor-saving technology in one sector does not mean that additional jobs are created somewhere else. Marx pointed to Ricardo’s retraction of this claim as an example of scientific honesty in contrast to the later apologetic—or as Marx called them “vulgar”—economists. Vulgar economists are the kind of economists that dominate the university economics departments today. (back)
3 One of the reasons this didn’t happen was that computer programming has itself become highly automated. In the early days of computers, “software” as it is now called had to be created by manually typing in individual computer instructions and feeding them into the computer.
These early programmers were highly skilled professional mathematicians and thus highly paid. They were the true craftspeople of software. If today’s software had to be created in this way, and we had the degree of computerization that we now have—which, of course, we wouldn’t—perhaps most of the population would be employed writing code in “assembly” as they say in the trade. In that case, the economists who claimed that the job-destroying implications of automation was nothing to worry about would have been proven correct.
But just as in factory production, software “machines”—called interpreters and compilers, along with libraries of reusable computer subroutines and “objects” that combine subroutines and structures to store the data the subroutines process, further automating the process—have greatly reduced the skill and labor necessary to write software. For example, a modern programmer might type in a simple instruction that calls a sorting sub-routine that was developed by mathematical programmers who worked in the 1950s at the dawn of the computer age. To call up the fruits of that labor, a programmer today might type in the word sortFile(). The programmer of 2014 doesn’t need to have the slightest idea how the file sorting program works. The use of such “black boxes” is considered one of most important principles of modern computer programming. (back)
4 The other big change that our economists of 1964 failed to foresee—though Lenin in his “Imperialism” did—was that there would be a progressive shift of large-scale industrial production from the imperialist countries to the low-wage, then colonial and semi-colonial countries—such as what was then in the U.S. media called “Red China”—in order to escape the “middle-class” wages that they were obliged to pay in large part due to the struggles of the old workers’ movement in the imperialist countries.
The reason is that capitalism is not interested in expanding material production for its own sake—that is merely a side effect from the capitalist viewpoint, though this “side effect” is the foundation of the socialist future. The capitalists are only interested in expanding the production of surplus value. And surplus value can only be produced by workers. No machines can produce an atom of surplus value though they produce use values.
Machines are useful to the capitalists only to the extent the machines enable the capitalists to force the workers to work an even greater number of hours free of charge for them. Therefore, overall the growth in automation has not been nearly as great as the economists of 1964 thought it would be—or indeed would be technically possible if production were carried out in the interest of the worker-consumer. Instead, capitalism has moved industrial production to countries where work in large-scale basic industry is very much low-wage work. The claims of the economists to the contrary notwithstanding, the trend of capitalism is to convert as much work as possible—ideally all work—into low-wage jobs. (back)
5 Unite Here is actually a descendant in part of the old International Ladies Garment Workers Union, whose struggles against the garment bosses in the years before 1914 inspired the International Women’s Day holiday that is now celebrated on March 8 around the world. (back)
6 The organization of labor in these modern service enterprises is indeed inspired by the organization of labor in factories with its deepening of the division of labor through the breaking down of tasks into simpler tasks. And though mechanization is not as advanced as in large-scale industry, it is by no means absent. In McDonald’s as in U.S. Steel, the capitalists pit machines against workers. (back)