1977: The Rise of Discounters and De-regulation

Why 1977? 1977 because it was an exciting time, and I’m a great fan of Disco. Many of the economic trends I’m talking about were already underway by then. The late 70s were known for insane interest rates upwards of 21%, stagflation as a result of the new fiat currency that left the Bretton Woods standard behind, and rising prices and transformative changes in the economy.

1977 is the last year wages increased in real terms for hourly workers in this country. Many of the economic problems of the late 1970s are applicable today. The American landscape had radically changed as well. By 1977, the white flight from the urban areas to the suburbs was complete leaving the inner cities of most large metros in terrible shape, inhabited by the poor who couldn’t leave, minorities who were stuck there due to race-based housing policies, and the criminally inclined. Life was happening out of city centers and in a checkerboard of fiat towns created around the developer-planned neighborhoods in areas around the cities. Cities were still centers of business, and people still flocked to these cities for work and promptly left them for the wide streets of the safer, quieter, nicer suburbs at 5 p.m. Life was good for Americans until a series of economic changes caused the whole economy to begin a series of changes from which the middle class would never recover.

The Great Middle Class

The period from 1945 to 1977 was one of the most prosperous in world history. At no other time have so many people achieved such wealth and quality of living. People had jobs, owned homes, owned cars, television, and an array of consumer products took vacations. However, this was based on some basic assumptions, norms, and standards that had been hard-won before the war.

Unlike the Europeans, who expanded socialist social policies in the years after the war, the US hesitated to do so. Roosevelt, in 1933-1934 had strong-armed Congress to pass something as simple as Social Security so that no one would go hungry in their old age. Congress appropriated a massive amount of money into the trust fund so that the program would fund itself from payroll taxes and earnings on the trust fund in perpetuity. However, when it came to other sorts of social politics like universal

Healthcare for all, even FDR, was unable to support that program. At the time, the idea of universal healthcare was not new. The idea sprang up in the 19th Century and through the Progressive period in the early 20th Century. Britain and France both embrace socialized medicine. The US, meanwhile, had begun to include health insurance and health care as a p rt of employment. This would be a standard feature of mo t full-time work until recently. This was also part of the efforts of unions.

Unions were bringing new changes to the workplace. The 1930s were dotted with a series of strikes, including a strike at General Motors. Steelworkers went on strike, and other unions took to the picket line to demand better treatment and better wages. Unions were responsible for such changes as retirement pensions, required unemployment insurance, workman’s compensation for injuries, and the 8-hour workday. Healthcare also became a contentious issue for union members, and employer-sponsored health insurance or healthcare was born. The unions of the early 20th Century began to create the social safety on which everyone relied. This safety net would expand in post-war America.

As World War II set in, offering healthcare became not just something unions demanded. It also became part of what companies offered to attract workers. Workers and companies often shared the cost of this care. Because most people had access to reasonable healthcare through their jobs, there seemed to be no need for universal healthcare in the United States. Those who stayed in the military longer were offered healthcare by the Veteran’s Administration directly and eventually through Tricare. By the mid-60s, however, there were already cracks in the social safety net due to its nature being tied to employment and closely associated with the business.

Lyndon Johnson proposed sweeping social changes he called “The Great Society.” Despite the wealth of the day and the vast employment opportunities, there was still quite a bit of grinding poverty in America. Much of this was in the inner cities and among older people. Because health insurance was tied to employment, when workers retired, they were left to bear all their healthcare costs at the time of their lives when their resources were the least, and their healthcare needs the greatest. Workers often retired with their pension and social security, which was the totality of their income. Some unions had negotiated for health insurance to extend into retirement. Still, old age healthcare was a significant expense and a bigger problem for many, causing them to rely on family or go without essentials to pay for it.

Children and single mothers also suffered from a lack of healthcare and often lacked cash. Women did not usually have skills or access to learn skills to maintain a job. They often took low-skill and low-paying jobs and sometimes didn’t come with great benefits. The plight of these women was severe. To combat the lack of old-age healthcare, the lack of healthcare for those who simply couldn’t work, and to combat poverty, Johnson proposed The Great Society, which launched his so-called War on Poverty. This is the closest America would come to European democratic socialism. The Great Society legislation included Medicare (healthcare for the elderly), Medicaid (managed by the states to provide healthcare for those who can’t work, children, etc.), Welfare (cash assistance), Section 8 (Housing Assistance), Food Stamps, and programs that would go on to become Temporary Assistance for Needy.

Families (TANF) and Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Former President Truman and his wife were the first people to receive a Medicare card, as former presidents did not have a retirement program at the time, and President Truman, having only been a professor and author, did not have reliable access to healthcare. The Great Society seemed to fulfill the vital part of a social contract between regular working people and America. These programs were not inexpensive, but they only compromised a small amount of the Federal budget and were passed while America was spending billions in Vietnam. These programs were meant to lift people out of poverty and give them the necessary help that they needed to become part of a functional part of society. The results were mixed at best, and because of those mixed results, the programs became easy targets for more conservative politicians who wanted them eliminated. This discussion began in 1977 and would help a certain California governor move into 1600 Pennsylvania Ave.

The American social safety net was partly private and partly public. It was deeply tied to having a job and being employed. For those who lost a job, there was some help available but nothing on par with what various European nations were offering. Although it is obvious now that America’s social safety is worn though and many people get lost in the cracks, 1977 saw that this whole system was already coming apart at the seams.

Tough Times for Joe Six-Pack

Things were getting tough for the Middle Class. Jobs were becoming scarce, the economy had been slowing down since 1960, and the oil shocks of the early 70s had only exasperated the problem. In almost every sector, there was a struggle. Companies were trying to cut expenses; unions were fairly unforgiving in these cost-cutting attempts, which led to terrible conflicts; things were simply difficult everywhere you looked.

The 1970s was a time where exciting things were happening in sports and even around the nation, including a New York City blackout, Egypt recognizing Israel as a state, and a historically significant speech from President Jimmy Carter telling Americans that they had to curb their consumption of oil for the national interest. Economically, things still struggled between the changing nature of currency, Inflation, stagflation, and the oil shocks from the Middle East oil producers deciding to embargo oil; the US economy struggled throughout the decade. The US had run its last trade surplus in 1975 (current to 2015) and had begun to run the now-infamous trade deficit, assiduously tracked by the media and those in the financial sector. The world has changed. America imported more than it exported in various goods, and the largest economy was at the mercy of leaders in the Middle East and their valuable oil.

From 1945 to 1974, the American economy had produced unparalleled prosperity by expanding its exports and welcoming back millions of single GIs who all began to go to school, start businesses, and have families. Thousands of new and exciting products were introduced to fill these needs. From soft goods to cars and homes, the

The economy boomed as a new American paradigm formed around the American Century. People could make enough money to buy a house and a car and be good enough to raise a family in a decent lifestyle. A $47,000 (adjusted) salary was average and afforded people an excellent life. With a single income, people could raise a family. With two incomes (which was rare), you could excel even more. 1977 began the end of this trend.

Before 1977 and into the 1980s, when businesses generated a return, they tended to reinvest in growing their business and not stashing it in overseas bank accounts. Auto companies offered more cars in more variety. Textile companies expanded their operations, bought out the competition, or expanded factories. Wages also grew during this period. The more productive workers were, the more they were paid. This process that created prosperity had all but evaporated by 1977. One of the most prominent reasons for this was the workers themselves.

It was at this point that labor had simply “become too expensive for most companies.” Companies were looking for a way to generate growth and increase profits. These new profits couldn’t come from savings in resources, considering the price of extraction and acquisition was relatively stable, and the cost of energy had increased. Instead, the growth came from eliminating workers and the workers’ paychecks. Workers had been encouraged by long terms of employment, little prospect of unemployment, and because of that, they were willing to push back against their bosses. With the unionization rate nearing 50%, labor was well connected, well organized, and was not ready to budge with the white-collar executives.

The shock to the American economy started in a simple but dramatic act; companies started closing plants. From steel plants to automobile factories, newspapers were filled with blaring headlines about plant closures and the resulting unemployment. In some cases, dozens of plants were shut down at a time. This rocked communities where the entire local economy depended on these factories, mills, and plants as primary sources of economic activity. When a plant or mill closed, the stores and other businesses in the town weren’t far behind or struggled to survive as people had to move away to find work. This pattern was on the minds of many Americans in 1977, especially in complex hit communities in the mid-west. Sometimes the closures were so sudden that the companies simply locked the doors leaving products sitting on the line in the middle of assembly. Businesses were getting more efficient to cut costs and generate growth and profits. While some companies had cash squeezes due to the ongoing credit crunch, it was more often a way to cut costs simply. Manufactured emergencies and dour-faced executives made it seem like these companies would go under if they didn’t take these drastic steps. While there was a credit crunch, the reorganization had more to do with increasing shareholder profits than any other concern. Rather than spread out production over a wide area of small plants, the idea was to centralize production into a few plants, reduce the total amount of workers, and then increase production with the same amount of workers at those plants paid “competitively.” With the threat of unemployment or simply being replaced, unions began to buckle, and unionization rates fell.

Under these conditions, a new economic contract was forged and championed by a bright-faced actor who had been governor of California: Ronald Reagan. Without the economic troubles and foreign policy ineptitude of Jimmy Carter, Reagan would have had a much harder time unseating the incumbent President. However, speeches about finding work wherever someone could and giving people “economic freedom” spoke to the hearts of hardworking Americans. Little did they realize that economic freedom also meant the freedom to be functionally impoverished. It also meant that the luxuries they had of a reasonable workday, unemployment insurance, and healthcare would often become a thing of the past.

Beginning in 1977, America moved from an economy focused on the well-being of all the players involved and toward an economy focused on improving the value for shareholders invested in American corporations and practically no one else. The country has been paying the price ever since.

The Rise of Neoliberalism and the “Open” Market

Capitalism is oriented toward finding growth wherever growth can be found. Places where an increase is more significant, tend to attract capital. Capital has one goal: to generate a return to its owner. When resources are taken together and invested in something that generates profit, the money grows, and the proceeds from that are either reinvested for more return or are taken out and saved or spent. This is the system on which the entire world economy is based. In a developed economy, the chance for growth is more limited than in a developing economy. Developing economies can buy more products ranging from essentials to luxury goods, making for higher sales and better development on the return of capital invested in those businesses selling these goods. Developed economies tend to be more stable and predictable but grow less  as the market for new goods and services is smaller and spread farther out over time as people more slowly adopt new goods and services.

The economic environment before 1977 was much more constrained and regulated than the world that appeared afterward. During the Great Depression, FDR had used the power of government to regulate all sorts of areas of the economy to stabilize it following the crash and subsequent deprivation. This trend to end those Depression-era regulations was called De-regulation.

De-regulation can occur when technology or costs change, and the old rules about how to conduct business just don’t seem to apply anymore. In this case, the previous regulatory environment had become inconvenient for the desires of banks and corporations. The appeal of de-regulation seemed fairly straightforward: unfettered businesses could grow, hire more workers, and expand more quickly without jumping through government red tape on things like worker safety, benefits, or price. This narrative fed into the psyche of the average American worker who worked a solid week and worked hard for their money to provide for their family. People were frustrated by the failing policies of the liberal age. The New Deal had worked out well, and it seemed like Medicare/Medicaid and Great Society reforms held the same promise.

By 1977, in the eyes of the American public, these policies had failed. When neoliberalism was proposed, it offered a dream of creating a new future where an honest person could go out and get an honest day’s wage with little interference from a predatory governmental system; people were ready for that change because they were ready for a chance to make a good living. Little did they know that it would come at the expense of the society that they had become used to having and that rather than things getting better, things were going to get worse, much worse.

As the economy squeezed people’s wallets, Regan promoted an insidious public narrative, “why should someone get something for free in the welfare system while I work hard and fear unemployment?” At first blanche, this logic seems sound and uniquely American. The social contract had always been that the abundance of this continent was available to anyone who could work hard to capture it and exploit it. Genocidal westward expansion was predicated on that idea. The idea that society should take care of those less fortunate had less appeal by 1977 because many people felt that they too had become less fortunate with wild fluctuations in prices, job insecurity, and squeezed wages brought on by a recession that seemed unwilling to loose its grip on the average American. People were desperate for good and prosperous times to come around again. Neo-liberal economics, dressed up as “trickle-down” economics, seemed to offer this on a silver platter, with the only expense being the size of government.

Neo-liberalism has a somewhat deceptive name. In the 18th Century, Adam Smith wrote “The Wealth of Nations.” In this book, he advocated for market liberalization, in so much as he argued that markets should be open, freer, and  have fewer regulations. At the time, under Mercantilism, the government frequently charged significant sums of money for specific licenses, appointments, and other documentation to operate businesses of a wide variety. It was a way to control the market so that only a few organizations could get involved and greatly empowered the wealthy. The miracle of free-market capitalism was the relative lack of governmental involvement in deciding who could and could not sell bread, wagons, or other products. Fast forward to today, past the industrial revolution, the picture isn’t so rosy. Thanks to the investiture required to create the means of production to produce products cheaply at scale, most people had been removed from the small shops and farms that began the basis of capitalism in the first place. Instead, most people work for large companies, which are merely concentrated places of the capital and not for themselves.

The Chicago School of neo-liberalism maintained that to generate growth and prosperity, the key was to grow out of the problems that had arisen. To do that, the government needed to get out of the way of businesses and let businesses grow, exploit, and hire workers at whatever cost they chose with a nearly complete disregard to any kind of advantage to the worker, the environment, or the overall market. Together with advantageous trade deals created to reduce costs by moving jobs to various places ranging from Mexico to China, many businesses were able to reduce labor costs and increase profits. Jobs moved quickly off-shore, thanks to the liberalization of trade through NAFTA, permanent trading partner status with China, and other large-scale trade deals that allowed the free movement of goods and capital around the globe. This led to what we now call, Globalization. This trend accelerated after the fall of the USSR. However, the consequences here at home were pretty stark.

Globalization, powered by new technology like containerization, faster ships, improved communication, and jet air travel, allowed companies to put the whole planet to work on their capital-return process. This damaged the robust manufacturing base in the

The US employed millions of people in stable jobs that allowed them to thrive. Neoliberalism is uniquely American, but it wasn’t tried in America first. The first test was somewhere farther south: Chile.

Chile and China: Neo-Liberalism Rises

Augusto Pinochet had been the dictator of Chile since 1973 and continued the socialist policies popular in South America. Still, the Chilean economy refused to grow and create jobs and financial security for people. Pinochet was approached by Milton Friedman and his Chicago School of economists. They proposed hallmark neo-liberal policies like privatization of public industries and low taxes. Pinochet decided to adopt the Chicago School policies to bring jobs and prosperity to Chile. Outwardly, it seemed to work. The open environment allowed in foreign investment and brought jobs to Chile. Through his dictatorial powers, Pinochet slashed any regulation Milton Friedman demanded and any regulation that a potential employer might find inconvenient.

Pinochet was pleased, and Chile served as a ringing example of open and unrestricted market power. Neo-liberalism then turned its eye toward a much larger customer: China. China began to liberalize over 20 years following the death of Mao Zedong and the rise of Deng Xioping in 1989, who wanted to capture the prosperity of western economies. By any account, China is communist in name only. China can be described more like totalitarian capitalism than anything resembling a Marxist or Trotskyist policy. The government lightly regulates business and chooses to focus more on exports. This policy has drug hundreds of millions out of poverty and drawn them away from villages and farms into the large cities to work in factories. While raising people out of poverty is good, this policy has also produced places like Foxconn (builder of the iPhone/iPad), where the solution to workers jumping from the windows to their deaths was to put up nets to catch them as they fell. What about changing the worker’s conditions? What about improving pay? What about making it a better place to work? That is where neo-liberalism fails. It advantages those who own capital over the advantage of regular people trying to survive and thrive in the world.

Neo-liberalism reduces those regulations and instead creates solutions to stop workers from killing themselves, not solving any grievances around the work. Thousands died in the 19th Century when this kind of treatment was common in this country, and yet in 2016, we have the same problems, and while problems in China may seem far away and unimportant, we have issues of our own here in America. The Chicago School had two successes under its belt. On the surface, the policies seemed to work, which led to media exposure that proposed neo-liberal economies as the way forward for all economies.

Neo-Liberalism Grows

As neo-liberalism rose in prominence, a series of seemingly small but not insignificant changes began to take place. Technology is a massive driver of de-regulation. The idea is that regulation prevents innovation and prevents the market from growing at any rate it chooses because the government forces or discourages specific economic activity. The idea behind de-regulation was simple: times are changing, technology is changing, and government’s rules are not; get rid of them.

1977 introduced automation in factories and many aspects of everyday American life. This not only reduced the need for employees but accelerated the desire for less regulation, especially around labor. Labor-saving technologies were already coming into the market. New technology promised time and cost savings from the computer to the fax and copy machine. Keeping excess employees around when you’re “innovating” is no way to run a business, at least so the argument was made.

The bottom line and the shareholders were the business priority. Employees are expensive and hard to deal with at times. Labor is the highest cost for any business. This began to infect business life in all areas. Even if a machine hadn’t been invented to do someone’s job, the permanent understaffing of workplaces started in earnest. Soon, people were doing the duties of 1-3 people. The neoliberal logic was simple: everyone had to work hard to earn a living and keep the economy going; that was the argument at the time. Union rules that prevented employees from flexing between jobs at the worksite or shop floor became the comedic poster children of inefficiency and an argument for de-regulation and de-unionization. No care was given to people doing the job of two people, staying late, and possibly having wages stolen when companies asked employees to do things off the clock? A hard day’s work earned a hardworking person an honest salary, and that is the American way. Neoliberalism used patriotism as a way to paper over the real suffering of workers. Employees were told to be grateful for what jobs they could find because employment was becoming artificially scarce.

By scaring people with the possibility that if they didn’t make a change, their plant might be closed or their job might be sacrificed, the bourgeoisie, who wanted neoliberal reforms, got what they wanted: fewer workers working for less money and fearing for their lives. But of course, it all trickles down, doesn’t it? If the march of technology hadn’t been so swift, people would have noticed these trends far sooner. Still, the advent of women in the workforce and the arrival of the personal computer increased productivity dramatically.

Productivity between 1979 and 2009 increased steadily and was up 80% from that 1979 baseline. Wages have stayed flat or declined. If wages had kept up with the rate of increase that stopped in 1977, the median household income would be $92,000. The economic boom and credit boom that began in 1984 and eventually came to a halt in 2008 also covered the lack of wage growth, as people borrowed to finance their lifestyles. Between 2 incomes and high credit card balances, Americans were able to

Maintain and increase their lifestyles, power the economy, and not notice that wealth was slowly concentrating at the top and that it was not trickling anywhere, much less downward into their wallets. Instead, the only place that money trickled was overseas.

De-regulation

Much has been made of de-regulation in the last 40 years. The economy that caused what Robert Reich refers to as “the virtuous cycle” was highly regulated. Prices on freight, airline ticket prices, and other areas of the economy were regulated by the government. Labor practices were regulated by the government and enforced by unions. The capital was hard to move out of the country, and the wealth of most nations stayed within that nation, especially in the United States. Trans-national corporations were few due to the expense of exchange rates and the trouble with moving the capital to new markets. Companies that were in the export business faced tariffs both from importing goods to the United States and exporting their goods to other countries. These tariffs protected American industry by inflating the price of foreign goods. However, in the years after 1977, these helpful regulations that made the economy work for everyone have eroded.

Banks

Banking was one of the first areas to look for ways to de-regulate as a way to expand their operations. In 1976, Congress allowed branch banking, which allowed banks to work across state lines using branches that did not have to be accountable for every deposit held on file or dollar loaned out. This early de-regulation led to the late 1980s Savings and Loan crisis. The taxpayers bailed out several companies who had overextended themselves due to excessive lending in the housing market. The lack of financial activities and risk regulations would also lead to the 2008 economic collapse. This was one area where regulations, although they might have been perceived as onerous, were born out of a need to protect regular people and their money.

Due to the Great Depression and the numerous bank failures between 1929 and 1934, the Roosevelt administration instituted several new banking regulations to ensure that banks did not fail and wiped out the life savings of average Americans in concert with the Federal Reserve. Banks were insured by the Federal Deposit Insurance Corporation (FDIC), and any banks not in the Federal Reserve system at that time quickly joined it for their existence. Many of the more public parts of these regulations stayed, but many of the more technical aspects began to be dissolved in 1977. Allowing the free movement of capital and credit was deemed necessary, and in the 1980s, a president in the White House agreed.

This allowed banks to expand rapidly and find new ways to lend money, write mortgages, and encourage consumer spending, disregarding the more significant macroeconomic consequences. The best part was that they could make billions of dollars doing it and, in the case of mortgages, do it with securities guaranteed by the federal government. Banks began investing for themselves and taking on investment clients, which previous banks were not allowed to do. Investment banks and regular banks were kept separate to protect depositors; those lines soon blurred in the 1980s.

This change in banking regulation did not happen overnight but in a series of small changes over time.

One of the best ways to learn about this change is by introducing The Big Short’s Oscar-nominated film. Banks went from sleepy institutions that loaned out money and kept people’s money safe to high-flying places that steered the engine of global growth. This banking de-regulation eventually manifested itself in the financial crisis, as the highly sophisticated credit structures collapsed.

Trucking, Airlines, and Lowered Wages

The practice of causing a strike and then hiring non-union workers at a lower cost was spurred on by indirect attacks on Big Labor beginning around this pivotal time in 1977. From copper mines to air traffic controllers, companies squeezed their employees for ways to cut costs and, as Jack Welch of GE put it, “serve the shareholder better.” Industry frequently packed the regulatory agencies with their people to gain advantages that led to the de-regulation. The changes were seen all around the American landscape. The privatization of utilities was first. Soon the freight prices of trucking were relaxed. Regulations around airline ticket prices, taxi prices, and various other industries that the Commerce Department focused on were all relaxed in the name of the free market. De-regulation was sold as a cost savings and the source of why the economy was broken. By 1977, people were desperate for a solution. If getting rid of regulations was the key to getting the economy going again, then regulations had to go. Ronald Reagan arrived in 1980 with just that plan; people bought it.

The End of Big Labor

One of the biggest problems companies faced with this strategy was breaking the back of incredibly well-organized and well-connected unions. From 1947 through to 1977, 50% of the American labor force was unionized. There were plenty of corrupt practices that were not good for the average worker. However, corrupt people do not make an entire institution useless. If that were true, the entire American government should have been scrapped a while ago. The reason workers enjoyed good wages, the 8-hour workday, and the institution of the weekend was all due to early 20th Century advances in progressive labor laws. Labor in the 19th Century was an ongoing, never-ending, 12-16 hour affair six days a week. If that didn’t work for the worker, factory owners would simply fire them and find someone who would work at these grueling paces.

Unionization rates started to fall rapidly in the following years. Inflation increased, and the economy began to grow. Rather than the return of the growth and productivity to the workers in the form of new investment in equipment, wages, or expansion, as it would have before 1977, it went to the executives and the shareholders. More stocks paid out dividends, and CEOs’ pay skyrocketed.

The corporate bourgeoisie has used productivity increases, available credit, and an expansion of the workforce to cover up the fact that the American worker has been

squeezed since 1977 in the name of cost-cutting, increasing profits, and a transfer of wealth from the bottom to the top. Rather than the tremendous economic growth that has occurred since 1977 being shared by everyone, it has been shared by an increasingly smaller group of people. The financial crisis exposed, in full view, the real problems that had existed in the economy since 1977 and made regular Americans finally take stock of the terrible deal that had been sold to them. There was nothing to hide the downturn; there was nothing to stop millions of foreclosures and homelessness. Wealth inequality has been exposed, and there is nothing to save workers from an economy that uses its tremendous engine of exploitative growth to enrich the global elite. While wages stay the same and fall downward, productivity has increased, and the pay for executives has skyrocketed to 600 times the lowest-paid worker. No other institution demonstrates this better than discount stores.

The Rise of Discount Stores

The 1980s saw the closure of many main streets in small towns across America as malls and discount stores, like Wal-Mart, became preferred places to shop for the variety of merchandise and the lower prices. When I was doing research at the Greeley Historical Society and collecting relevant data on a local historical building, I read advertisement after advertisement of prominent downtown retailers closing due to the competition by the Greeley Mall (opened in 1974) and by stores like K-Mart, Target, and Wal-Mart as well as major department stores that inhabited popular malls at the time. As I looked through the newspapers, more and more ads of popular but small leading street shops were placed in the Greeley Tribune announcing their closure due to “prices in favor of the discounter” and the rise of “larger, more popular, discount stores.” With fewer dollars, Americans had to “tighten their belts” and “make their dollar go farther,” and Americans did that by eschewing the popular stores on the main streets of their towns and heading just outside the city limits to buy things cheaper at the discount stores. If someone lived in a suburb of a major city, the drive was even more straightforward: that shopper could avoid the mall and the crowds and park close to the store they wanted and head in for fabulous goods at even better prices. Most of those goods would not be made in America in the years that followed. They would be made overseas and imported, leaving American workers in the unemployment line.

The discount store is not a new concept. Woolworths/Ben Franklin built an empire on a five and dime strategy of cheap goods. For many a middle-class and poor child in the 20th Century, these stores were wonderlands of possibility because the things on the shelves were affordable to them. Sales and discounts on goods were common at the department stores, but their high-quality goods were expensive and were only bought a few times a year or by wealthier people.

Even among the department stores, there was a hierarchy. Stores like Barney’s, Saks Fifth Avenue, and Nieman Marcus ranked near the top as stores like Sears, Montgomery Wards, JCPenney, Foley’s, and even Macy’s filled in the middle and lower tier department store goods. Department stores attracted sales professionals and department experts that may stay on for years and earn a good salary. They often were not paid enough to shop there, but they were paid enough to live a decent life from that

job and be respected for knowing how to fit a suit, take a measurement for curtains, or assist someone with a wedding registry.

Sales were often unregulated (unlike in Europe, where sales are strictly regulated), and people seemed to find all their goods at a reasonable price. However, discount stores started to become popular around 1977 because prices have dramatically increased in many areas of life and discount stores were able to appeal to the ability to save money and get similar goods for less. A store like Lohman’s could buy remainders from department stores and resell those items to people at a markdown. This was a key to helping Americans feel like they were maintaining or even advancing their lifestyle without everyday people noticing that they weren’t getting ahead.

Stores like Target and Walmart competed on price by reducing their labor cost significantly, making many of their goods, working directly with manufacturers, and thus, cutting out the wholesaler in the process. The new discount stores were faster, cheaper, and people were excited that they too could live well without waiting to buy a good lifestyle at the department stores when everything went on sale. Discount stores also did away with counters and lots of sales help. Instead of paying for them in a department, people picked out their goods and took them up to the central checkout counters. At first, discount stores and department stores tried to compete, but the price advantage of the discounter brought wages down at the department stores, and the change led them to optimize supply chains and cut out wholesalers. This eliminated jobs and turned retail from a profession to something one does in college to gain experience in the working world. In that way, the cost-cutting of the discounter translated into depressed wages for everyone else. The guiltiest party of this trend is Wal-Mart, itself. When a Walmart arrives in town, salaries drop $1–$3 for everyone, especially retail.

The High Cost of Wealth Concentration

Walmart had begun its rise throughout the South and by 1980 had over 1,100 stores. Walmart has used several strategies to ensure that wages were kept low throughout their entire supply chain. They frequently demanded that their supplies reduce their prices by 5-10%. Over time, this adds up to actual savings. On the labor side, Walmart hires low-wage, temporary workers from agencies to unpack the containers from China and repackage the merchandise to go to distribution centers and stores. Many of these workers have had the same job for many years and are far from temporary, but keeping them in that status saves money. Due to low worker wages, which has been the policy at Walmart since its start in 1962, Walmart presses down salaries where it goes, including non-retail sectors. The worst part is that when Walmart announced it was raising the minimum wage at its stores in 2015, the political pundits (including myself) had to cheer that they had raised their starting hourly worker to $9 an hour, which is still not a sufficient wage. If wages had stayed on track from 1977 onward, the current wages would double Walmart’s increase. This is the level of survival that has become commonplace in a country that generates $17 Trillion in GDP per annum. But this is replete throughout the system, the success of the current economy has come at the expense of everyday people, and the most significant symbol of this is the discount store.

The rise of the discount store coincided with the freezing or outright reduction of workers’ wages. By breaking the back of the unions, employees became fearful that their jobs would disappear. The attitude became fear and confrontation: be grateful for what the company so generously has decided to pay you. Long gone was the attitude of collaboration and that employees were an essential part of the organization as an executive. Employees were reduced to being an expense line item on a spreadsheet. A bothersome problem is that management spent time reducing the cost to increase profits. Wages weren’t about what workers earned or contributed but money from a generous corporation to whom the worker should be grateful. As the decades progressed and the ability to make goods overseas became more cost-effective, workers were threatened again by cheap overseas labor and outsourcing.

Companies soon found that whatever they didn’t want to buy, they could make themselves, and now they could make it in Asia for pennies on the dollar and reduce labor costs further. Before 1977, a business might reinvest these cost savings into their stores or domestic employees. Still, instead, that wealth went straight to the top of the company in the form of stock dividends to shareholders and bonuses for Executives. As Representative Barbara Lee (D-CA) states in one of her firebrand articles, “CEOs are rewarded for keeping their employees poor.”

It has to be disheartening, as an employee, to walk into work at a discounter and need to take things from the community collection box around the holidays because you simply aren’t paid enough to live your life. Shareholder value is far more important than the value of human life and existence in our modern society. The current situation in which we now find ourselves stems from changes in 1977. The very idea that someone works and is still poor would have been an odd thing to hear 60 years ago. The term “working poor” describes millions of Americans.

As time has gone on, this practice has reduced the wages in retail, and now there is a movement to raise those wages forcibly through government intervention. If wages had kept wages up with Inflation (as they do in Australia), it would be almost $20 an hour. The protesters only ask for $15, which isn’t even on par with where wages should be from 1977.

Discount retail has also spawned another ill that plagues society: On-demand scheduling. As stores like Walmart and Target sought to reduce the cost of labor by making sure that they only had as many people in the store as was necessary; they increasingly used sophisticated programs to create the ideal schedule to have as fewer workers as they needed in the store at any given moment. This led to the most bizarre shifts for workers, and in the UK, the policy has earned itself universal ridicule. At first, computed the number of workers by daily traffic—fewer workers during the week and more on the weekends. But now, thanks to computerized scheduling and Big Data, they know how many people are in their stores at any given time almost instantly. Computers can factor in weather, customer trends, and other data to decide how many needed workers. This may leave someone with “a job” but only working 12 hours a week or worse yet, being scheduled or poised to work and then being told they aren’t needed. Workers struggle scheduling child/elder care or transportation around

Those requirements. Although there have been some concessions with on-demand scheduling, it is fundamental in the discount strategy of keeping prices very low at the expense of the workers. The very existence of Uber, Lyft, Doordash, and Instacart are the poster children for billion-dollar businesses built on the back of workers who aren’t hired but brought on as contractors to perform individualized tasks for a set rate of pay with little to no safety for them. This is the natural throughput of the union-busting strategies that began in 1977.

The wealth concentration currently on display in this country comes with a high cost. It has cost advancements in healthcare and other social services. This policy has hollowed out America. Workers are disadvantaged and are left to struggle with low wages. Tax bases have been reduced to fund services, and long-term problems like retirement for millions of Americans have been jeopardized. These neo-liberal attitudes are the beginning of a much larger problem, and this problem creeps up in areas that we don’t even think about, like education and infrastructure.

The Real Problem

It’s not about any single issue. It’s not about any single problem.1977 was a critical moment in the economic history of this country. This time was when a conscious decision was made to enrich the wealthy at the expense of the workers and dope them up with the false philosophy of trickle-down economics and cheap goods to help them forget how they were being screwed over. In 2008, the proverbial chickens finally came home to roost. And now we find ourselves in a situation that doesn’t have any easy solutions. The years of low wages have left us with an economy that only works for the few, and cheap goods from Wal-Mart can no longer make up for the loss in real wages. This problem is about to be amplified in a new way.

The march of technology is fast-paced, and we’re facing another turning point where millions of jobs will be again eliminated in the Fourth Industrial Revolution. Automation, robotics, and interactive technologies will slowly eat away at jobs that allow people to survive and thrive. Think of the jobs a technology like an internet has eliminated. Unlike in the past, those jobs aren’t coming back and won’t pop up in some other sector. Those tasks simply don’t exist any more thanks to new technology. The trend of understaffing and low wages will continue into every area of life. Labor will continue to move to wherever it is cheapest and offering ever-more goods to people with meager funds to afford them.

If we don’t take a new tack in economic policy in the near future, the trend I have described will expand and enlarge itself. Much as the wealthy were able to take advantage of the concentration of wealth around the means of production in the early 19th Century, this will remain true in the 21st Century. Inequality will widen as more and more wealth is concentrated in fewer and fewer hands.

This problem infects everything about our American way of life. When everyone doesn’t contribute something, the whole country fails. This country knows how to pull together when times get tough. Thanks to neo-liberal attitudes that began to coalesce

Around 1977, we’ve lost that spirit. We, the People, have let our wealthy citizens and corporations run away with the country and left everyone else to deal with the problems they refuse to acknowledge that are there.

• Does anyone want to live in a country where a good life is only available to those who can afford it?
• Does anyone want to live in a country where being poor is criminalized?
• Does anyone want to live in a country where we have to cheer over the pettiest wages increase and act like grateful serfs when we get them?

What is happening in the present moment is the result of 30 years of neo-liberal, individualized, so-called business-friendly policies. Corporations and the wealthy have hijacked the government to their ends and made people believe it is for their good and benefit. Many things are best left in the common space and governmental sphere. Running a society of individuals working only in their own self-interest does not create a society that most want to live in. This creates ever-widening inequality and many associated problems that no one wants to solve. We are a part of society and humanity’s more excellent organism. If we go on with this grand experiment, we need to start acting like a group of people interested in a greater society rather than people who work only for our self-interest. Self-interest can be good and positive in the right setting. It creates amazing products and services, but we have to harness self-interest for the greater whole as they are inexorably linked. No one is an island unto themselves.

However, since 1977, we have begun to live in an ever-more individualized culture that has broken down the things that bind people together, like common goals and an economy that works for everyone and not just a few. The world of 1977 can only exist when the economy and the country works for everyone and not just a wealthy few. De-regulation and discounters have changed the economy from a virtuous one where everyone enjoys the benefits of growth to an economy where only owners of capital can get ahead. This system is slowly breaking down. The economy cannot continue as it has since 1977. It is time for the wealth of America to help everyone and for the economy to work for everyone.