Summary: Generations of unceasing work – carefully planned, lavishly funded – by the 1% to roll back the New Deal have succeeded on an epic scale. Their greatest success has been crushing labor unions, which were one of the strongest forces building a large middle class in America. But greed is a dangerous master. Now comes the results. It is not pretty.
The story of America’s decline, in pictures
“What Unions No Longer Do”
By Justin Fox in the Harvard Business Review, Sept 2014.
“Forty years ago, about quarter of American workers belonged to unions, and those unions were a major economic and political force. Now union membership is down to 11.2% of the U.S. workforce, and it’s increasingly concentrated in the public sector – only 6.7% of private-sector workers were union members in 2013. …
“Income inequality has, for example, become a hot topic. You might think that the dwindling away of an institution that devoted much of its energy to equalizing incomes would be a big part of that discussion. It hasn’t been. …”
“50 Years Of Shrinking Union Membership, In One Map”
By Quoctrung Bui at NPR, February 2015.
The result: rising inequality
Businesses have gained more power over workers by many means. Increased concentration in many industries. Pushing wages down via massive immigration and H-1B visas. Illegal wage fixing, such as that among the big Silicon Valley corporations. They shifted their workers into part-time and contract arrangements (temp agencies, independent contractors, and overseas outsourcers). They used their rising political power to remove the protections unions gained during the New Deal.
Now comes the next phase, the pursuit of a broken foe. On Friday, Trump weakened the role of unions for Federal workers and weakened their civil service protections (details). Soon the Supreme Court will rule against mandatory fees to unions for non-members covered by collective bargaining agreements (details).
The result: high corporate profits and income inequality back to pre-New Deal levels. It is happening across the developed world. See this Credit Suisse graph of union membership vs. income share of the bottom 90% of workers in the OECD. Union member falls – and 90% of workers’ income share follows.
The result: slowing economic growth
We have a consumer-driven economy. Channeling more of America’s income to corporate profits (channeled into stock buy-backs) and incomes of the 1% boosts savings – explaining our low interest rates (the Fed is not doing it). The economy cannot grow much faster than the growth of workers’ wages.
So where is the money going? Into buying things. Stocks are at near-record valuations. Home prices are soaring in hot areas. And art! An untitled 1982 painting by Jean-Michel Basquia sold for $110.5 million in May 2017. Leonardo da Vinci’s “Salvator Mundi” sold for $450 million in November 2017.
Meanwhile, since 1982 the American middle class has used debt to maintain its lifestyle, with consumer debt rising faster than Gross Domestic Income (many things went wrong beginning in the Reagan years). But that is only a short-term solution.
How do businesses boost profits when consumers’ income stagnates?
- They use their political power to have the GOP cut their taxes — sending the deficit soaring.
- Defense contractors use their political power to boost military spending to over a trillion dollars – so the spending of America and our allies dwarfs that of our foes combined.
- Drug and medical device corporations use their political power to get premium payments from the government (who pays about half of all medical spending), without the discounts other nations gets.
- Elon Musk has perfected State Capitalism, perhaps the next phase of corporate profits. Local governments shower his companies with benefits. Government regulations transfer tax credits to his company. He provides cars for the rich and services to the government (that the government once provided).
We are repeating our experiences during 1870 – 1930. That did not end well. I doubt that this will end well. Failure to learn is not a survivable flaw.
Conclusions
This is America today. On the Right we have those who use the government to exploit us, to whom we are marks to be exploited. On the Left we have those who use the government to restructure our society, treating us as lab rats. This is our lot in life in a world where the meek inherit nothing.
But the political machinery bequeathed us by the Founders remains idle but potentially powerful. It needs only our energy to power it. See these posts for ideas how to begin.
For More Information
Recommended: “The rise and fall of US labor unions, and why they still matter” by Jake Rosenfeld (Assoc Prof of Sociology, U of Washington) at The Conversation. See his book below.
If you liked this post, like us on Facebook and follow us on Twitter. See all posts about increasing income inequality and falling social mobility, about corporate profits, about unions, especially these…
- Important: Remember the union workers who bled to create America.
- An essential explanation of our politics: A modern conservative dresses up Mr. Potter to suit our libertarian fashions.
- Why Americans should love Tolkien’s Lord of the Rings – we live there,
- Complaints about air travel are the cries of a dying middle class.
- See America’s income inequality grow during 1979-2011, a driver of Campaign 2016.
- Liz Bennett couldn’t marry Darcy. Nor can your daughter.
- More proof of rising inequality, perhaps our greatest threat.
Books about the death of unions
Against Labor: How U.S. Employers Organized to Defeat Union Activism
What Unions No Longer Do
Pingback: Unions die. America runs out of fuel. - Ryan Guillory
China has the highest union membership on earth. Founded on May Day 1925, the All-China Federation of Trade Unions (ACFTU) is the only legal trade union federation in China has 300 million members. ACFTU branches are compulsory and union membership automatic in many companies.
Every Chinese union member has doubled her wages every decade for 50 years.
Coincidence, most likely.
Godfree,
“Founded on May Day 1925, the All-China Federation of Trade Unions (ACFTU) is the only legal trade union federation in China ”
Reality is complex. The Chinese revolution completely revised labor relations – creating the usual Communist mess (the “iron rice bowl”). Reforms began in 1979, a long rocky road. None of this provides much — or any — inspiration to America.
“Every Chinese union member has doubled her wages every decade for 50 years.”
That probably reflects two big factors: wage suppression under the previous economic regime, and China’s rapid economic growth (again, a reaction to the mind-blowing economic mismanagement of Mao’s China).
There are many useful sources of information about labor unions in modern China. Wikipedia’s Labor Relations in China (useful history, too). China Business Review’s “Trade Union Law and Collective Bargaining in China.” Etc.
There is a lot of inflation in China according to the CHinese I know. This may be due to the fact that they’re flooded with USD. We export our inflation through our trade imbalance and trade agreements. So Chinese wages have risen partially because they’ve had to.
PRCD,
“There is a lot of inflation in China according to the CHinese I know. This may be due to the fact that they’re flooded with USD.”
Totally false. Right-wing faux economics. There are three factors in the impossible trinity of macroeconomic policy; a government can control only two: a fixed foreign exchange rate, free capital movement (absence of capital controls), and an independent monetary policy. China undervalued its currency to boost imports – a successful mercantile trade policy. They also had capital controls. This means they were forced to have an inflationary monetary policy.
This policy has been largely unwound since 2008.
The public worker unions absolutely deserve to be crushed as they will bankrupt us all to pay their pensions. Their union dues are used to fund left wing candidates. I would venture to guess that most union membership is public now.
Several other things are affecting private union membership:
We’ve sent our mfg base to Asia.
Americans don’t want their kids working in trades. Wages due to trade unions are very good.
The remaining private sector unions got pretty greedy while failing to ensure worker quality. Much of this is because the unions forgot The Struggle and cared more about feathering their nests.
The American middle class is not very good with money. Drive by any open middle class garage and you’ll see it loaded with unused junk and a financed car in front of it. Look at American waistlines to see that we’re eating too much and eating out too much, which is very expensive. A good third of middle class wages, at least in coastal areas, are skimmed off in state/federal taxes. I say this looking at my own tax return which includes charitable deductions and maxing my 401(k). Finally, our health costs are soaring because the health care industry and Congress want to steal from us this way.
We never seem to push back on any of this though. I suspect it’s because we can’t even cooperate on the level of the nuclear family (see our divorce stats), so how can we cooperate on a higher level?
PRCD,
“The public worker unions absolutely deserve to be crushed as they will bankrupt us all to pay their pensions.”
I suggest that you diversify your reading from far-right sources. The pensions are past compensation. Crushing the unions now will not change that.
“Their union dues are used to fund left wing candidates.”
Do you have any evidence for that, other than made-up stuff in right-wing rags? Unions tend to support Democrats. Mostly moderate Democrats, plus many Republicans (Unions helped put Nixon and Reagan in office).
@PRCD
While many of your individual points make good advice, they seem like they would be a holding action. So everyone institutes whatever scheme of personal economy you like through some great awakening of will and morality – does this make the trends stop? What happens in ten years? What if mass adoption of these efficiencies causes other problems?
As for financing a car, for a great many people a car is a sine qua non of having a job at all.
“The economy cannot grow much faster than the growth of workers’ wages.”
Galbraith makes a similar point in ‘The Great Crash’ – he cites wages too low to buy what workers were making as one of the main causes of the crash. Will have to read your references before commenting further. I didn’t find Galbraith’s account convincing, because it missed the elephant in the room, credit and where it came from. But will read your refs. The speech by Fischer is very interesting on a first look.
In New Zealand, private sector unionism has also declined to levels that are not that different to the US. The reason here is possibly a bit different in that many union officials see their job as a stepping stone to a job with the more left of the country’s main political parties. As such, much of their rhetoric is toeing the party line and couched in class warfare lines, rather than looking after the interests of their members.
We get that too, but my impression is it’s mostly Republican governors auditioning to run for President and/or get a job on Fox.
SF,
“it’s mostly Republican governors auditioning to run for President and/or get a job on Fox.”
Got to love how the GOP has climbed to dominance (or near to it) in a majority of the nation at all levels of government. And still people mock them. It’s a long-time tradition it makes people feel better for their apathy as they’re being exploited. “Those stupid kings and aristos!”
“I suggest that you diversify your reading from far-right sources. The pensions are past compensation. Crushing the unions now will not change that.”
I read most of the pension blogs, starting with Pension Tsunami. What are these “far-right sources” you keep referring to? You seem to be trying to mind-read here.
Public pensions are obligations that cannot be paid being a three-legged stool of defined benefits (80% of base pay), lack of funding, and investing incompentence. The public sector unions prevent any meaningful reform to the defined benefits pensions that public workers expect to draw from to live large in retirement.
“Do you have any evidence for that, other than made-up stuff in right-wing rags? Unions tend to support Democrats. Mostly moderate Democrats, plus many Republicans (Unions helped put Nixon and Reagan in office).”
My evidence comes from talking to teachers who have looked into how their union dues are spent. This is why the public unions are so up-in-arms about the Janus decision – they might lose all of their lobbying money that allows them to run candidates who promise more bennies to public sector employees and their unions. Do you consider the California Policy Center to be a “right-wing rag?” You linked to it the other day. I get a lot of my information from it also.
Unions may have helped put Reagan and Nixon in office but that was half a century ago. Things change.
PRCD,
(1) You appear to be quite confused. Pension benefits are compensation for past work. If the GOP makes unions go away, that does not change the pension obligation a dot. Not paying pensions is called “default” for a State or “bankruptcy” for a local government.
Also, most public pension plans are in OK shape. There are many big ones deep in the red, most of which are in (roughly) six States. Just as there are many that are well-funded.
(2) “My evidence comes from talking to teachers ”
That’s called annec-data. Low-grade annec-data, since I doubt you talked with a national sample – and teachers are just one segment of public workers. Try cops, for a different perspective.
@SF
“While many of your individual points make good advice, they seem like they would be a holding action. So everyone institutes whatever scheme of personal economy you like through some great awakening of will and morality – does this make the trends stop? What happens in ten years? What if mass adoption of these efficiencies causes other problems?”
Are you worried that mass adoption of better spending habits (frugality) and morality will lead to other problems? I guess this is where worldviews part ways. Being an Old Side Protestant, I can’t see how that would happen. “Righteousness exalts a nation.” As Calvin said, bad governments are a punishment on wicked people. (ICR 4.20.25, Battles’ translation) This is generally true. We are here to “reignite the spirit of a nation grown cold” are we not?
“As for financing a car, for a great many people a car is a sine qua non of having a job at all.”
I can think of other ways of getting to work besides owning a car. Look at how illegal immigrants carpool! I remember my dad doing this early in his career so he could save money. You can also save a couple of paychecks and buy a used one. Or save one paycheck and buy a really used one. You can also live close to work and walk.
We can’t seem to see past these economic barriers we’ve erected for ourselves.
PRCD,
Quite amazing to see your recommendations – while the top 1% have creamed off most of the increased national income for several generations.
“We can’t seem to see past these economic barriers we’ve erected for ourselves.”
That’s exactly what I thought when reading your comment.
Follow-uo to PRCD,
“The American middle class is not very good with money.”
Walk around outside. Get outside your bubble. Most Americans in the middle class manage their money quite well.
“Are you worried that mass adoption of better spending habits (frugality) and morality will lead to other problems? I guess this is where worldviews part ways. Being an Old Side Protestant, I can’t see how that would happen.”
Will God reward us for our virtue by making automation stop improving?
My comments were in the same vein as your comments in the last several posts about how the elite continue their dominance through our gullibility. I talk to people from all walks of life – poor, rich, ex-cons, immigrants. All of these things you’ve said about the 1% are true AND Americans do very little to help themselves by working together, or by boycotting these corporations who take away their rights. American tech middle managers are often the ones bringing these H1-B immigrants here and telling themselves it’s noble to do so because it gives some immigrant “a better life.” “Conservatives” complain about illegal immigration while hiring illegal immigrants. “Go down to the Home Depot and hire some Mexicans to do your job!” These are all things I see all the time. Sure there is a lot of pressure from the 1% to go with the flow but there’s also no pushback from below.
Would Americans fix themselves and start working together and stop colluding with the 1%, we’d be a lot harder to plunder.
TBH, I’m surprised what I’m saying is controversial.
Having thought about this, I think the issue is causation. There is no doubt of the phenomenon of private sector union decline, as shown in the chart. There is also no doubt about the correlation between that and the share of income decline as shown in the other chart.
The question is whether both of these things have a common cause, or whether the decline in private sector unions is the main cause. The same question arises about the Galbraith explanation: were static working class incomes the cause of the crash, or were they and the bubble both the result of an underlying causal mechanism?
Fischer suggests that deficits are associated with lower interest rates because they occur in periods of recession. Recession lowers tax receipts, thus leading to deficits. The recession also leads to lack of investment which in turn, with other features of the recession, lowers debt issuance, and demand having fallen, interest rates fall to clear.
However he doesn’t cover the case where the deficit is deliberately incurred when the economy is not in recession.
If you adopt the explanation that the 1% are hoodwinking the rest, you have to explain why on earth and how this should have happened now. You say:
It has an uncomfortably conspiratorial sound. But the question you have to answer, even if you accept there is a conscious conspiracy on the part of some to undo the New Deal, is why it has succeeded. Why have the turkeys voted for Christmas?
I suspect a more plausible explanation is that the government, not the Fed, created a credit bubble, and this has had the consequences for inequality and sectoral profits that such bubbles have always had.