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THE JUDAS ECONOMY: The Triumph of Capital and the Betrayal of Work.\o7 By William Wolman and Anne Colamosca\f7 .\o7 Addison-Wesley: 256 pp., $24\f7

June 01, 1997|ROBERT HEILBRONER | Robert Heilbroner is Norman Thomas professor emeritus at the New School for Social Research and the author of numerous books, including "The Worldly Philosophers" and "21st Century Capitalism."

The title, "The Judas Economy: The Triumph of Capital and the Betrayal of Work," says it all: We are living in a time of self-inflicted economic troubles, a time when capitalism's triumph threatens to bring on its own defeat. At the core of this disquieting scenario is the belief that, in the new environment of a global market, the energies unleashed by the market become the source of profoundly destructive change. The message is that these energies must now be contained.

As the authors put it: "The market is now God; economic planning is the devil incarnate. Free market ideology has finally ridden to total victory. . . . The collapse of the Soviet Union brings to capitalism something it had always sought but never before achieved: a withering away of all the important opposition to the idea that the free market is the ideal way to organize society. . . ."

If these were the sentiments of someone speaking from the left, they would not carry much weight. But the words belong to William Wolman, chief economist at Business Week magazine and regular commentator on CNBC television, and co-author Anne Colamosca, a Business Week staff writer. They do not expect, nor do they want to see, capitalism replaced by socialism or some other economic system. Their worry is that capitalism may be in the process of severely injuring itself. There is a strong possibility that they are right.

At the heart of Wolman and Colamosca's impassioned tract is a deep concern about the emergence of a new worldwide economic trend, whose effect on us and on most other advanced economies has been twofold: profits for capital, losses for labor. We have all heard about the downsizing of big corporations and the outsourcing of production, but we may not be aware of their extent and implications: In the United States alone, about a half-million employees have been let go each year for the last six years, while on a worldwide scale, direct investment in building foreign plants and operations hit $325 billion in 1995, up 46% from 1994, with American companies investing the most.

Today's enormously competitive business atmosphere has pressured many companies in the United States to take such actions, while turning to foreign soil--China, Indonesia, South Korea or India, for example--where they can invest more profitably in plants and capital, not least because workers' wages are often only 10% of their American counterparts', although their productivity is at least 75% of their counterparts'. The result has been the emergence of a global work force, including highly trained workers capable of designing, as well as operating, the latest in production processes. A considerable number of American workers who have been displaced in the process have found employment again, although these jobs are not as remunerative as the positions from which they were severed. With higher productivity, business firms in the less-developed world--most of them owned by United States, Japanese and European corporations--can more easily enter the rich markets of the West. In combination with the widespread pulling-down of the barriers that formerly protected markets from low wage competition, the international playing field is certainly not level, but it is tilted far less than it was 20 or even 10 years ago.

The most disturbing effect of today's global economy has been an unprecedented shift in the distribution of incomes between capital and labor, especially in the United States, which lacks the strong unions and minimum wage standards widely found in Europe. Profits and remuneration for American chief executives have soared; workers' wages have remained stagnant or even declined. Wolman and Colamosca cite the latest figures showing that between 1983 and 1992, the net worth of the top 1% of the nation increased by an unprecedented 28%, while real hourly wages and family incomes remained unchanged or drifted slightly downward over roughly the same period.

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