From The Archive
David Moberg
No. 13  December 1999

On the Stick

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If Hollywood were casting Backlash: Attack from the Right, the male lead would probably be a white guy—call him “Butch”—with a short haircut and a vaguely Southern accent. His Ford pickup truck would have a gun rack and bumper stickers announcing “Abortion Kills” and “Born Again.” His radio would be tuned to Rush Limbaugh. But the movie could be cast differently. Butch could be “Brad,” an altogether different white guy, corporate counsel for a large manufacturer, riding home from work in his Lincoln Navigator, his radio tuned to NPR’s Marketplace as he talks on his cell phone about the day’s business: busting a union organizing drive, shifting a factory from Warren, Ohio to Ciudad Juarez, and subcontracting as much janitorial and clerical work as possible—while cutting pension and health care benefits for the workers who remain on the payroll.

In the popular imagination, the conservative ascendancy of the last two decades is one part reality check on postwar liberalism, one part cultural backlash against the excesses of the Sixties New Left. The corporate offensive launched against American workers in the early Seventies, however, is part of a different story: That was just business, and if it was often nasty business, that’s just the way the world works. Of course, corporations funded politicians of both parties to gain influence, and the right-wing cultural and corporate agendas were linked in complex ways, in sync on some issues (like cutting taxes), offering opportunistic alliances on others (for example, businessmen were content to cloak their deregulatory agenda under gun nuts’ populist anger against government). But as employers, as investors, and as business strategists, corporations were political in a broader sense that goes largely unrecognized: They fundamentally shifted the balance of social power in American life.

The New Deal and the rebirth of the labor movement in the Thirties and Forties had momentarily constrained the deeply rooted hostility of American big business leaders to workers, unions, and the government, but despite the hopeful illusions of some politicians, academies, and labor leaders about a new social accord, the old distrust and antagonism never really died. At their first opportunity with a congressional majority in 1947, Republicans pushed through the Taft-Hartley Act, which weakened unions, expanded employer rights, and advanced the bureaucratization of labor relations. Although they continued to fund attacks on labor, however, most big corporations either learned to live with unions or at least to mimic their contracts and grievance procedures as a means to discourage unionization. In the era of prosperity and global dominance following the Second World War, American corporations often grudgingly acceded to the wage increases and benefits that unions demanded, and unions came to believe they could at least count on a détente in the class war. But by the early Seventies, American business executives felt under siege. Profits had dropped by a third from their peak of the mid-Sixties. The first pressures of low-priced foreign competition were hitting industries like electronics, apparel, textile, steel, and autos. Even Richard Nixon was compelled to endorse new regulations, such as the Occupational Safety and Health Act and the Clean Air Act. The country’s boom, fueled in part by Johnson’s strategy for financing the Vietnam War, produced the first concerns about inflation, which in turn helped to precipitate Nixon’s later decision to break the link between gold and the dollar.

Then the first OPEC oil price shock hit. Since industry in the rest of the world was typically more energy-efficient, American businesses were hit especially hard. American productivity growth also lagged, but rather than invest heavily to raise the productivity of labor, improve product quality, and boost energy efficiency, business was more inclined to make employees pay for the squeeze on profits through reduced real incomes. While unions resisted and defended their cost-of-living agreements, nonunion workers suffered real wage losses. The gap between union and nonunion workers widened, with the union pay advantage over nonunion workers increasing by half during the Seventies. This undermined the already tenuous social and political cohesion of the working class and gave new incentives to employers to operate nonunion. Companies increasingly pursued “Southern strategies”—shifting production to nonunion states. Once companies proved they could aggressively break strikes using “permanent replacement workers,” they found they could call on even lower-paid workers to cross picket lines in union strongholds like Austin, Minnesota, Jay, Maine, or Decatur, Illinois. In the late Seventies, unionized blue chip corporations joined their more vocal lesser brethren in defeating a modest union-led effort to reform labor laws. It provoked UAW President Doug Fraser to denounce the “one-sided class war” that corporations had launched. It has remained one-sided for much too long.

American corporations faced a choice in the Seventies: They could have offered workers more secure jobs, incomes, and retirement benefits in exchange for cooperation in boosting productivity—thus reducing inflation, restoring profits, cutting waste, and meeting international competition. Instead they chose to play a zero-sum game. “It will be a hard pill for many Americans to swallow—the idea of doing with less so that big business can have more,” as a Business Week reporter put it in a blunt analysis in late 1974. “Nothing that this nation, or any other nation, has done in modern economic history compares in difficulty with the selling job that must now be done to make people accept the new reality.” It would be a hard pill indeed, considering that workers earning (and spending) more had long buttressed the popular legitimacy of the American system, particularly since the flowering of consumer-oriented capitalism in the Twenties. In 1959, when he faced Khrushchev in the famous “kitchen debate” at an American exhibit in Moscow, Nixon gibed that in the United States even a steelworker could own a house with new appliances like those on display. The ability of American capitalism to deliver the goods in the market probably counted more during the Cold War than the rhetoric about freedom and democracy, about which Americans had at best ambiguous feelings in practice.

Yet while American workers were at the top of the international heap in the Fifties, in the Seventies their edge began to slip. Depending on how wage statistics are adjusted for currency exchange rates, the average manufacturing worker in at least six—or as many as eleven—countries made more than American production workers in 1996, according to the Economic Policy Institute. Popular rhetoric shifted from extolling American greatness to public hand-wringing about America’s loss of “competitiveness.” Rather than recognize their own managerial shortcomings—such as failing to design high-quality goods, invest in the most advanced technology, or cut bloated, unproductive managerial overhead—American managers typically blamed their own workers. Looking overseas, they thought they were at a disadvantage because American workers were expensive (even though they often continued to lose the competitive battle in the Eighties and Nineties when the United States turned into a comparatively low-wage industrial country). They too wanted cheap workers, so they headed South or overseas and shifted production to nonunion plants. When they couldn’t flee, they fought, taking advantage of the deep recession of the early Eighties, for example, to demand concessions from workers even when their companies were quite profitable.

American business was already deeply committed to what the late economist David M. Gordon called the “Stick” strategy (which he contrasts to the “Carrot” strategy, based on more cooperative workplace relations). In his 1996 book, Fat and Mean, Gordon demonstrated how the “bureaucratic burden” of excessive supervisory and managerial personnel in American companies has grown dramatically since the end of the Second World War and remains several times greater than among leading industrial countries with more cooperative labor relations. In the Forties and Fifties corporate bureaucracy grew rapidly as American business attempted to gain tighter control over its work force. The ratio of managers to production workers leveled oft somewhat in the Sixties, then shot up again in the early Seventies before leveling off in the mid-Eighties. By 1989 the bureaucratic burden on U.S. corporations was about 3.6 times that of the average firm in Germany, Japan, and Sweden. The American model of surveillance and discipline became more top-heavy in part because in such a distrustful system even the monitors needed monitoring.

As Gordon maintained, Stick systems underperform Carrot systems on several counts—productivity, competitiveness, wages, hours of work. But when the crunch came in the early Seventies, American business merely expanded their managerial apparatus. They stuck with the Stick strategy because it was what they knew and it reinforced their wealth and power. But it was also true that individual companies could sometimes make short-term gains by cracking down on their workers, even if it was counterproductive in the long term. Despite the chaotic and counterproductive strategy of downsizing in recent years, Gordon found the bureaucratic burden has changed little and is still many times greater than in countries where management is less hostile to workers, in part because workers there are better organized and have more political leverage, but also because of cultural differences in both managerial circles and the country at large. The irony, Gordon noted, is that the intensification of authoritarian strategies over the past twenty-five years undermined productivity, thus pushing corporations to use an even bigger Stick.

The corporate crackdown on workers extended beyond union-busting, concession bargaining, speed-ups, lockouts, subcontracting, and other assaults on workers. It undermined the minimum wage, attacked regulation, and promoted the use of contingent workers (such as temps and part-timers). It not only moved production outside the United States, but also used the mere threat to do so to bust unions and otherwise discipline workers. It entailed Federal Reserve policies that created recessions and kept unemployment high—all in the name of fighting inflation—even when wages were not driving inflation. It created new markets in corporate control, as raiders like Kohlberg Kravis Roberts & Co. challenged the power of corporate executives and demanded higher stock prices, even if their takeovers or the defenses against them led to massive layoffs and looted pension plans to pay stockholders more. It promoted management fads, such as downsizing, which often did more to destroy morale and productivity than they did to cut costs. It imposed a “Washington consensus” on global trade and finance, in effect exporting the Corporate Stick strategy to countries already trying to emerge from under the rule of other sticks in the hands of generals and dictators. Above all, the corporate backlash has enshrined the ideology of market society, where, to paraphrase journalist Robert Kuttner, if everything isn’t for sale, it sure ought to be. The “magic of the market” promised infinite freedom of choice for consumers and the liberation of entrepreneurial fulfillment, but the reality of the market was more often shrinking paychecks, more debt, and unpredictable, part-time, temporary work for the new hunters and gatherers picking amid the glitter of “the new economy.” While the market fundamentalists rhapsodized about freedom, corporations were stealthily pursuing and gaining more and more power.

One result in the United States has been a growing inequality, with the increasingly bloated managerial class, along with a tiny stratum of stockholders, capturing virtually all of the economic gains of the past twenty-five years, while the incomes of the bottom four-fifths of American working families have either fallen or stagnated, sustained only by more family members working harder and longer. This growing inequality has little to do with the unequal distribution of education and skills—contrary to what we’re so often told—and much to do with the skewed distribution of power.

Yet the corporate class’s power grab, which should be the center of American political debate, is taboo in the mainstream media. Pundits remark perplexedly about how confused the political spectrum is these days in America, how it’s hard to tell who’s on the left or right (which they typically define in terms of social issues, such as prayer in schools and abortion). Democrats figure they can win elections by craftily focusing on a few of these issues; they applaud Clinton for cleverly “taking away” the issues of crime and capital punishment from the Republicans. But during eight years in office, Clinton has never once talked about how workers deserve the “free choice”—free especially of interference from the boss—about whether they want a union. While his administration shortchanged the United Nations, neglected aid to impoverished countries, and promoted destructive austerity for poor nations, Clinton turned foreign policy into a trade mission for American business. Only during his first presidential campaign (and then later after he lost his bid for “fast track” trade negotiating authority) did Clinton talk about the need to protect workers’ rights in global trade deals—even though he still promoted legislation like the “NAFTA for Africa” bill that did little to protect African workers. After letting the real value of the minimum wage shrivel to its lowest level in five decades, Clinton only belatedly pushed for a modestly higher minimum wage when it became politically expedient. While willing to spar modestly with the cultural right, the Clintonian “third way” in politics resolutely ignores—or even embraces—the triumph of corporate power.

Thanks to the success of their agenda, corporations feel less need these days to court their sometimes distasteful partners in the cultural backlash. They will win with Gore or Bush, even if they prefer Bush. Meanwhile, many of those who once were or still are conservative cultural populists—pundits Kevin Phillips and Pat Buchanan, and presidential candidate Gary Bauer, for example—have begun to regard the corporate ascendancy as a threat to the average American family. At the same time, unions and many economic populists resent the Democratic Party’s reluctance to embrace the constructive role of government and to redress the injustices of the market and the growing tyranny of the workplace. Parts of the political left have occasionally allied with the anti-globalization right to block new international initiatives, but there is little chance that they will come together on many positive goals. Maybe Butch eventually could be persuaded to join a union and fight for single-payer health insurance, but until he is ready to scrape off his bumper stickers (or his economic populist allies decide to tolerate them), the culture wars will continue to serve the needs of its uneasy senior partner as it applies the Stick to Butch’s behind.

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