BY ARGIRIS MALAPANIS
The fears among many in the ruling class in the United States that the Teamsters strike against United Parcel Service could set a dangerous precedent on wages turned out to be true. Union members, both full-time and part-time workers, won substantial raises in their hourly wages and a pledge for a not insignificant increase in the number of full-time jobs.

"UPS faces huge rise in annual labor costs," was the headline of an article in the August 20 Wall Street Journal that described the terms of the UPS settlement. "It appeared that it was UPS that blinked in the face of revenue losses totaling more than $600 million since the start of the strike Aug. 4," the Journal article said.

A substantial section of the employers and their spokespeople in the big-business press were concerned about the impact that a wage settlement favorable to UPS workers may have throughout the economy, given the stagnation in labor productivity and the volatility of the speculative bubble on Wall Street. For many among the rulers the wage package was more important than the dispute over part-time work or pensions.

Higher wages will cut into profits
An article in the Sunday, August 17, New York Times, titled "Labor showdowns: The effect on stocks," pointed precisely to this fear among the bosses. It quoted David Wyss, director of research at DRI/McGraw Hill, an economic consulting service, saying, "Currently, with labor markets so tight, the questions have more to do with what the agreements will contribute to wage pressures, not other union concerns."

The article ended by saying, "Byron Wien, United States investment strategist at Morgan Stanley Dean Witter, said investors should be concerned about the impact a U.P.S. settlement might have on wage costs... Markets have been looking for signs of higher inflation, and since labor represents about 70 percent of manufacturing costs, the importance of this strike will be if it is the first in a series of efforts by labor to be better compensated."

"If employers are pressured to move more workers [into full-time positions], a significant inflation effect will occur across the economy," John Challenger, executive vice president of an outplacement firm, told the August 20 Christian Science Monitor.

These fears contributed to the loss of confidence among a number of speculators on Wall Street that resulted in a substantial drop in the value of stocks during the UPS strike. The Dow Jones industrial average dropped 247 points on August 15, the steepest one-day decline in points since the plunge of 508 points on Oct. 19, 1987 - the last stock market crash. "The strike by employees of United Parcel Service might also be worrying investors who fear that stepped-up demands from labor could hurt corporate profits and create inflationary pressures," said the lead front-page article in the August 16 New York Times.

Even after the Dow Jones regained over 100 points on August 18, hours before the UPS settlement was announced, big business was still queasy. "The economic horizon is suddenly filled with August clouds," began the lead editorial in the August 19 Wall Street Journal. "The stock market will always fluctuate, but not always in such a dizzying way. It rallied yesterday, after careening nearly 7% from its August 6 record of 8259. The fall of the Thai baht on August 2 set off a round of competitive currency devaluation in Asia. The August 4 United Parcel Service strike threatens a new and unsettling era in labor relations."

During the strike, a debate broke out among financial "analysts" and other bourgeois commentators over whether the recent boom of stock prices and rising money profits of U.S. big business can be sustained. One school among the ruling class states that the explosion of paper values in the stock and bond markets is not sustainable. They talk about manipulating interest rates and taking other steps to slow economic growth and bring the economy to a "soft landing" in order to avoid a rise in inflation or a sudden deflationary collapse. "We'd better hope [Federal Reserve Board chairman Alan] Greenspan can land softly on a dime," concluded Kathryn Welling of Barron's in an interview with James Paulsen, chief investment officer of Norwest Investment Management, published in the July 28 issue of the financial weekly.

The other school argues that capitalism is in a new period of expansion fueled by computerization and other technological advances and the boom-and-bust business cycles are a thing of the past.

Stagnating productivity fuels debate
Recently released figures that point to a further stagnation of labor productivity are feeding this debate. According to the government's Bureau of Labor Statistics, growth of labor productivity slowed to a mere 0.6 percent in the second quarter of 1997 - significantly below what the rulers need and hoped for. This came on the heels of a rise of labor productivity by only 1.4 percent in the first quarter of this year, not the 2.6 percent that had been earlier reported by the Labor Department. In contrast, the productivity growth rate nationwide averaged 2.8 percent annually between 1947 and 1973 - that is during the post- World War II capitalist boom. Since the worldwide recession of 1974-75, the rate has averaged 1 percent or less. Those in the "everything is new" school reacted with disbelief. "The numbers must be wrong; they must be understated," Bruce Steinberg, chief economist at Merrill Lynch, insisted in an article published in the August 13 New York Times that reported the Bureau of Labor Statistics findings. "There is no way we could have had the outstanding economic performance this country has had over the last couple of years if those numbers were remotely accurate."

Bourgeois economists like Steinberg argue that the official data is failing to capture technology's growing contribution to productivity, the hidden output generated by computer software, or the true efficiency of workers in the service sector of the economy, the Times article said.

"The opposite side in this debate says the contribution of computers to productivity is greatly overstated," the article continued, "the service sector includes areas of inefficient labor and much production today is often labor intensive."

Behind this stagnation in productivity are the deflationary pressures building in a world capitalist economy mired in depression conditions. The average rate of industrial profit has been in a long-term decline, which has led big business to shy from expanding productive capacity by investing in new plants and equipment. Instead money capital is pouring into the stock markets.

One sign of the approaching deflation was the recent announcement that the Producer Price Index, that is wholesale prices, declined for the seventh consecutive month in July, unprecedented in the 50-year history of the measure. Real earnings in retail sales also fell 1 percent in July, ending a quarter with an anemic 0.2 percent rise.

An article in the August 14 Washington Post that reported on these figures stated, "The nation has not experienced full-scale deflation - price level drops, asset value declines, and a contraction in gross domestic product - since the Eisenhower administration, said Joseph Abate, an economist at Lehman Brothers Inc... At is worst, Abate said, deflation `could turn a recession into a full- blown depression.' "  
 
 
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