The relentless revolution: a history of capitalism (51 page)

Labor representatives won more than higher wages and complaint procedures when they sat down with management at the bargaining table. They gained respect that many managers had long been loath to extend to them. Beneficent employers from Wedgwood to Watson treated their employees as fellow human beings, but it took unions to secure recognition that manual laborers had legitimate interests of their own in the workplace, even if someone else owned it. Labor and management settled most conflicts peacefully, but strikes continued. President Truman ordered the U.S. Army to take over the railroads to end a 1950 strike. He tried to do the same thing with steelworkers in 1952, but these flare-ups did not halt the spread of union shops across America. Still, prosperity offered the best road to higher wages. The percentage of people living below the poverty level went from one-third in 1950 to 10 percent in 1973.
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What Americans didn’t get was a social safety net like those that were being put in place, or perfected, in Europe. Walter Reuther, head of the United Auto Workers, had taken a world tour for thirty-two months before the war, working around the globe. When he became head of the UAW after the war, he threw himself into lobbying Congress for full pensions, health care, and workers’ wage protection during bad times. His efforts coincided with Americans’ growing hostility to the Soviet Union, making his ideas sound like socialism—or worse, communism. They were rejected so Reuther, who had started out campaigning for all American workers, changed course and won these benefits for UAW members at the bargaining table. Those workers without unions had to catch as catch can.
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In retrospect, business leaders like General Motors’ Alfred Sloan made the wrong decision when they opposed public financing of pensions. They saddled their companies with costs that kept growing when the burden might have been spread through public funding, as was the New Deal’s Aid to Families with Dependent Children. Aside from the expansion of higher education, the engine of social reform had an uphill push in the 1960s. Progressive income tax rates and rising wages shrank the gap between rich and poor for twenty years while the economy moved ahead at full tilt. President Lyndon Johnson declared war on poverty, but the real war in Vietnam undercut many of his domestic goals.

The quest for acknowledgment of labor has been made more difficult by the language of economic analysis that depersonalizes workers. Labor is bundled with land and capital as the principal components of enterprise. In a subtle way, this has a dehumanizing effect, for it obscures the enormous difference between the human and material elements in production. We might consider the capitalist perspective that dominates public discourse as another perk for business. A recent
New York Times
headline announced, L
ABOR
C
OSTS
S
OAR IN
C
HINA
.
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Why not say, W
ORKERS
’ W
AGES
H
AVE
R
ISEN IN
C
HINA
? Even liberal institutions like universities act like hard-nosed employers when it comes to their own labor relations. In economic analysis, gains to labor can still be labeled “expropriation of profits by trade unions” and linked analytically to “extortion by organized crime.”
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From an ideological perspective, organized labor started with a deficit, relying, as it must, on collective action in a nation that celebrates the individual, even though it was the giant corporations that did most of the employing.

When companies changed owners, contracts won were lost. Union activity created strong incentives for management to mechanize as many tasks as possible. Far more significant for labor, business interests began a long campaign to push back on the Wagner Act’s support for unions. They succeeded with the Taft-Hartley Act of 1947 in limiting some union activity. From its heyday in the twenty years after World War II, union membership has steadily declined. In 1970, it peaked with 27 percent of all workers; in 1980 one in five workers belonged to a union; in 2007 one in eight, most of them working in the public sector. Legislative efforts to gain a Wagner Act-like protection for state and local government workers foundered in the 1970s.

The ease with which business interests passed the Taft-Hartley Act just a dozen years after the Wagner Act signaled the loss of momentum for organized labor. To avoid unionization, carpet and furniture-making firms began moving their plants to the South. Once there the manufacturers in the North formed a coalition with southern members of Congress to check labor’s demands for supportive legislation.
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Employers who wanted to keep out all unions kept up a steady eroding pressure on the power of organized labor. Representing a small minority, the business interests in the United States obscured in public discussions the interests of the great majority of wage earners. What management lacked in the number of its voters, it compensated for in superb organization.

There were other forces working against labor in the United States. The union’s reliance on mandatory dues and closed shops offended a sense of fairness to many in the public. Scandals over union bosses and their misuse of funds eroded respect. And then there was the fact that jobs were moving out of the industrial sector to workplaces harder to organize, like restaurants and hospitals. A renewed flow of immigrants, both legal and illegal, gave employers access to a compliant labor force, particularly after a change in the law in 1965 that eliminated the preference for European immigrants.
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Labor even lost out rhetorically as less and less was said about the “working class” and more about the “middle class,” a term that obfuscated the profound differences between well-paid professionals and those who worked but still lived in poverty.

Corporations employ not only laborers but salaried clerical and managerial employees. Their relations have not been as confrontational as those with wage earners, but they were often just as harsh. Top executives could be fired with brutal swiftness. Probably unique was the dismissal of a National Cash Register executive by CEO John Henry Patterson, who dragged the man’s desk outside, doused it with kerosene, and set it on fire. Still others have returned from lunch to discover workers scraping their names off their office doors.
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The stress of middle management—those who mediate between upper management and the work force—has spawned its own extensive literature.

Clerical workers rarely got paid what their skill and responsibilities would merit in other work, but the largely female work force accepted this disparity. When Sandra Day O’Connor, the first female member of the Supreme Court, left Stanford Law School, the only job offered her was as secretary in a law firm. She had graduated second in her class. (Supreme Court Chief Justice William Rehnquist was the first.) Once women moved into the professions in large numbers in the 1960s, clerical salaries went up. Soon there was a full-blown movement to secure “equal pay for equal work,” a term that originated in the labor movement in the 1930s but came to refer exclusively to pay discrimination against women. In 1963 President John Kennedy signed into law the Equal Pay Act, and the venerable gap between male and female salaries began to close. Since then it has narrowed from fifty-nine cents to every dollar earned by men to seventy-seven cents.

Disparities among all employed Americans shrank all through the postwar era until 1973. The rising tide, extolled in business literature, buoyed by strong unions,
did
lift all boats. Business gained conspicuous public support in the stock market. The American Telephone & Telegraph Company announced proudly that it had 1 million shareholders. By 1952 there were 6.5 million stockholders, 76 percent of them earning less than ten thousand dollars, the salary of salesmen and entry-level university instructors.

In the liberal postwar environment, government interference with business decisions came from a new origin, the Bill of Rights. In 1955 the Interstate Commerce Commission banned segregation on interstate trains and buses. This proved to be the launching pad for a national movement to disband the segregation of the races in southern public places. Peaceful protesters for a full range of causes won when courts defined malls as public space where the expression of opinion could not be squelched. State and municipal fair housing legislation prohibited landlords from discriminating against prospective tenants, though the implementing machinery was rarely sufficient to police these common practices. In the same spirit, more recently, pharmacists have been denied the power to refuse to fill prescriptions, like birth control pills, that might violate their conscience. Private enterprise because of its intimate interface with the public could no longer make arbitrary decisions affecting that public.

“Follow the money” was the advice “Deep Throat” gave the investigative reporters in the Watergate scandal, but that’s not always easy. What happened to the money generated by the golden period of postwar prosperity in the United States, Western Europe, Japan, and parts of Latin America? Certainly we can see that workers in Germany, France, Great Britain, and Scandinavia took a large hunk of it out in leisure with a predictable drop in productivity. Western European countries increased their investment in underdeveloped countries of the Third World and beefed up support for the World Bank. They paid more for public services. Their guest workers sent home remittances in the billions. At its peak in 2006, immigrants in the United States sent twenty-four billion dollars back to Mexico; remittances represented 29 percent of the Nicaraguan gross domestic product. Similar figures can be found for Turks in Germany, and those from Curaçao in the Netherlands and British Commonwealth islands in the Caribbean.

The End of the Postwar Boom

While most people old enough to have been alive remember where they were in 1963 when John Kennedy was assassinated, few recall their activities in 1973 with any clarity. Only in retrospect does that year emerge as the marker of more peaks and troughs than a roller coaster. The value of the dollar plunged, and the price of oil quadrupled. Union membership in the United States topped out, and the European birthrate began its long slide. Unemployment in the 1970s reached heights not seen since the Great Depression. Even increases in foreign trade, often described as an export boom, came to a rather abrupt stop in 1973 after having brought sustained prosperity to Western Europe and the United States. On average the rate of growth in the capitalist world halved in the next fourteen years.
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American military expenditures for the Vietnam War had greatly increased the number of dollars in circulation. Rather than raise taxes, President Lyndon Johnson preferred to have the Federal Reserve print money. This move exacerbated the ongoing weakening of the world’s major currency. The resulting glut made it difficult for the U.S. Treasury to continue to convert dollars into gold as it had promised to do in the Bretton Woods agreement. Johnson’s successor, Richard Nixon, pulled the dollar off the gold standard, in 1971. Now all currencies were free to float. In fact, agitated by worldwide inflation, they splashed around furiously for two years.
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Eroding even faster was American oil production. The United States had supplied almost 90 percent of the oil that the Allies used during World War II. At that time, the Middle Eastern countries, including all of the Arabian Peninsula, produced less than 5 percent. The voracious appetite for petroleum products during the boom period of the 1950s and 1960s changed all that. The Persian Gulf became the center of the oil world. Oil fields in Texas, Oklahoma, and California pumped around the clock, but it wasn’t enough. The United States had lost all its spare capacity at a time when world oil consumption was growing 7.5 percent a year. American production hit its high in 1955, and after that the United States turned increasingly to Mexico, Canada, and Venezuela for its oil. By 1955 two-thirds of the oil going to Europe was passing through the Suez Canal, which had regained the strategic importance lost when Britain left India a decade earlier. By 1973 the days of plentiful, and therefore cheap, oil were a thing of the past. Middle Eastern oil reserves were vast, but the actual production capacity of Arab states met 99 percent of demand, leaving a margin of 1 percent! Policy makers started talking about an oil crisis.

While the economic climate was losing some of its sunshine, far away a perfect storm was brewing. The hostility of the Arab countries to the presence of Israel in their neck of the globe led to the shock that made 1973 a year for capitalist countries to remember. It started on an October afternoon, when 250 Egyptian jets took off for the eastern bank of the Suez Canal to bomb Israeli positions in the Sinai Peninsula. The day was the holiest of the Jewish calendar. The Yom Kippur War might have remained a regional conflict had not other Muslim countries decided to use the “oil weapon.” They raised the price of oil 70 percent and cut production 5 percent for several months running. The price of gas at pumps in Europe and the United States rose twelvefold. In the next two decades the gross national product of the advanced capitalist countries fell from an average of 4.6 to 2.6 percent. Inflation found a new partner in unemployment.
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These decisions taken by the Arab members of the Organization of Petroleum Exporting Countries were an announcement of sovereignty; previously they had pretty much taken orders from Western producing companies like Exxon and Shell.
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Panic, shock, and disbelief coursed through the world, intensifying in those prosperous countries that depended most heavily upon petroleum products. The swiftness and unpredictability of the war and the subsequent embargo added more turbulence to the rising prices. It also caused episodic, local shortages. A whole way of life, a whole way of thinking about the future cracked, if they didn’t actually shatter. A bit of good wind in this storm of ill winds blew the way of local farmers and craftsmen who recovered old customers lost to larger cities earlier. Higher gas prices raised significantly the transportation component of costs. Flower growers in the upper Connecticut Valley, for instance, got back the trade that had gone to “the flower state” of New Jersey, an example of the old adage that one man’s disappointment is another’s opportunity.