Saturday, February 26, 2011

State Budgets and Union Busting

by Richard Crews
In recent days there have been massive demonstrations in state capitols across the United States protesting legislators' actions aimed at curbing the power of labor unions. This is an important problem, but also a complex one that can only be understood in an historical context.

In 1941 the U.S. emerged from the Great Depression of the 1930s into the Second World War. The men went to war, the women went to work filling in behind them, and amid a torrent of economic stimulation the government went into debt. By the end of the war in 1945, the U.S. national debt was greater than the GDP of the country for the first time in history. (The GDP or Gross Domestic Product is the total value for a given year of all the goods and services produced in a country.)

After the War there followed a wave of economic activity and prosperity in the U.S. which was, again, unprecedented in history. There was little competition. Europe was in ruins, the economic power that had begun to rise in the Orient had been decimated, and the emergence of the Third World in Africa and South America was still in the future. Fifteen million men returned from the war: half went to college under the G.I. Bill, the other half swelled the workforce (the women left their wartime jobs and returned home, but with a new self-assurance they would never relinquish). With the Marshall Plan the U.S. undertook to help rebuild war-torn Europe. This provided the U.S. economy with enormous stimulation. And the Cold War with the U.S.S.R. emerged to keep the U.S. competitiveness on a razor edge with threats of Communist world domination and nuclear annihilation hanging overhead for the next 40 years.

During the late 1940s the national debt was paid down (and never again rose to the level of the GDP until now, 2011).

The decades following the Second World War were also the heyday of labor unions. Through their negotiating power, such pillars of U.S. economic democracy were established as the eight-hour workday, the five-day work week, the minimum wage, child labor laws, safety in work environments, and health and retirement benefits for U.S. workers.

The union movement also organized the public sector as well as the private. Teachers, police and fire fighters, garbage collectors and clerks, and bureaucrats at every level of government were organized into unions and lobbied for better pay and benefits.

One of the most important effects of union power was that the economic prosperity of the period following World War II was widely distributed in the population. The G.I. Bill plus economic prosperity plus union power led to the rise of the great American middle class. The polarization of wealth between the very rich and the non-rich population masses that had characterized Western civilization for centuries and come to the fore in the U.S. with the robber barons and wealthy industrialists of the late 19th and early 20th century was not reestablished in post-Depression, post-World War II United States. Wages, wealth, education, health, and all aspects of the country's "standard of living" not only improved but expanded widely in the population.

Until, that is, the past 20 years. With the rise of global markets and financial flows enhanced by information technology, class disparity between the super-rich and the rest of us has risen again. In 1983, for example, the richest one percent of Americans got 11.6 percent of total income; today the top one percent take in more than 20 percent. In 2010, six leading hedge-fund managers got average incomes of $1 billion each while the average teacher salary in the U.S. was under $50,000. In other words, the income of one hedge-fund manager equaled the salary of more than 20,000 teachers.

During the ascendancy of union power, many government entities within the U.S. struck a Faustian bargain. Union demands for their members were met with modest pay raises to be paid now, but with appeasing health and retirement benefits--that the governments could not really afford--to be paid later. These were built into union contracts to be paid, somehow, by future generations of voters and their governments.

Those chickens have now come home to roost. With falling tax income due to the Great Recession and with U.S. Government stimulus money running out, many state governments are being called on to pay huge health and retirement benefits for their workers. Many states, as a result of this and tax breaks for the rich, face severe budget shortfalls. They must raise taxes--but, politically, they cannot; they must lay off teachers and nurses and emergency workers as well as clerks--but, in good conscience, they must not, certainly not enough to cover the shortfalls. Many states are faced with defaulting on their debts--many are, in fact, faced with bankruptcy or the equivalent (although it has not entirely been established whether a state can, in fact, declare bankruptcy). Many are presently attempting to disrupt the lingering power of labor unions in the name of addressing the states' fiscal woes.

Unions have been a powerful positive force in American history. They must not be gutted now to help solve government fiscal problems. They are, in fact, badly needed now because a class of super-rich and powerful financiers, big-business types, and politicians (also including, one notes, overpaid entertainers and athletes) has risen up again in recent years.

The income disparity in the U.S. represents a significant threat to our democratic institutions and our way of life. Unions can help address this, and we need all the help we can get.