The Country as Pirate Ship

Editor Note: The New York Times Editorial Board compared the country to a “pirate crew: In recent decades, the owners of the ship have gradually claimed a larger share of booty at the expense of the crew.” I’m not satisfied with the analogy because I believe we’re better than pirates — at least the majority of us are. Furthermore, the Times failed to take the analogy to its bitter and logical conclusion — the crew will only tolerate the erosion of its share for so long before claiming the ship itself. In typical Times fashion, there are many good observations, but the call to action is lacking. Here’s hoping that when the Platform Committee of the Democratic National Convention meets later this month, their version calls for the necessary action behind these observations.

The Jobs We Need

Reprinted from the New York Times

NY Times 6/24/2020 (online 7/5/2020)

Over the past four decades, American workers have suffered a devastating loss of economic power, manifest in their wages, benefits and working conditions. The annual economic output of the United States has almost tripled, but, with the help of policymakers from both political parties, the wealthy hoarded the fruits.

In the nation’s slaughterhouses, the average worker in 1982 made $24 an hour in inflation-adjusted dollars, or $50,000 a year. Today the average meatpacker processes significantly more meat — and makes less than $14 an hour.

The hundreds of thousands of home health care aides, often female, often minorities, who care for a nation of aging baby boomers rarely receive paid time to care for their own families.

Even in the high-flying technology sector, companies have found ways to leave their workers behind. More than half of the people who work for Google do not actually work for Google. They are classified as contractors, which means they do not need to be treated as employees.

Picture the nation as a pirate crew: In recent decades, the owners of the ship have gradually claimed a larger share of booty at the expense of the crew. The annual sum that has shifted from workers to owners now tops $1 trillion.

Or consider the power shift from the perspective of an individual worker. If income had kept pace with overall economic growth since 1970, Americans in the bottom 90 percent of the income distribution would be making an extra $12,000 per year, on average. In effect, every American worker in the bottom 90 percent of the income distribution is sending an annual check for $12,000 to a richer person in the top 10 percent. Emphasis added.

American workers need a raise. But it is not enough to transfer wealth from the rich to the desperate. In confronting the Great Depression, President Franklin Delano Roosevelt understood that a sustainable improvement in the quality of most American lives required an overhaul of the institutions of government. Emphasis added.

“These economic royalists complain that we seek to overthrow the institutions of America,” Roosevelt said in 1936. “What they really complain of is that we seek to take away their power.

Now as then, the profound inequities of American life are the result of laws written at the behest of the wealthy and public institutions managed in their interest. Now as then, the nation’s economic problems are rooted in political problems. And now as then, the revival of broad prosperity — and the stability of American democracy — require the imposition of limits on the political influence of the wealthy. It requires the government to serve the interests of the governed.

Americans especially need to confront the fact that minorities are disproportionately the victims of economic inequality — the people most often denied the dignity of a decent wage. That inequity is the result of historic and continuing racism, and it should be addressed with the same sense of fierce urgency that has motivated the wave of protests against overt displays of racism.

The Rev. Dr. William Barber II, a civil-rights leader who emphasizes the foundational importance of economic justice, has pointed to the constitution that North Carolina adopted after the Civil War. The document affirms the rights of life, liberty and the pursuit of happiness. But African-Americans were among the state’s legislators for the first time, and the former slaves got another principle enshrined as well: that workers are entitled to “the fruits of their own labor.” They understood that economic security makes other freedoms meaningful.

It is time to ensure that all Americans can share in the nation’s prosperity.

A bit of modern American political-economic history

In February 1970, student protesters broke into a Bank of America branch near the University of California, Santa Barbara. They scattered the bank’s files and pushed a burning dumpster into the lobby, setting the building on fire.

One protester explained, “It was the biggest capitalist thing around.”

California’s governor, Ronald Reagan, condemning the protesters as “cowardly little bums,” sent in the National Guard. For Reagan and others, the bank fire was more than an isolated act of vandalism. Lewis F. Powell, a prominent corporate lawyer, described it as part of a larger assault on the business of America in a 1971 memo for the U.S. Chamber of Commerce.

Powell listed threats including Ralph Nader’s campaign for consumer safety regulations, the rise of the environmental movement and the expansion of social welfare programs. Warning that “business and the enterprise system are in deep trouble, and the hour is late,” he urged businesses to fight.

Corporations began to invest in politics on an unprecedented scale. The beer magnate Joseph Coors said Powell’s memo prompted him to create the Heritage Foundation, a conservative think tank that greatly influenced Reagan’s presidential policy agenda. The National Association of Manufacturers moved to Washington from New York. Blue chips including General Electric, Exxon and IBM funded a “boot camp” where economists lectured federal judges on free enterprise. By 1990, 40 percent of the judiciary had been re-educated.

Powell continued his corporate advocacy as a member of the Supreme Court, which he joined in 1972, writing important decisions removing restraints on corporate concentration and campaign spending.

The counterrevolutionaries embraced a radical view of the role of corporations: “The social responsibility of business is to increase its profits,” as the economist Milton Friedman wrote in an influential 1970 essay in The New York Times Magazine.

[The Times here reviews the history of General Electric as an example of this “counter revolution.” In 1953, GE bragged about paying substantial sums in taxes; ” GE understood its success as intertwined with the health of the government, the prosperity of its workforce
and the growth of the U.S. economy.” By 1981, that had changed dramatically and GE boasted of paying no federal taxes.]

This unapologetic pursuit of profit reached new heights with the deregulation of financial markets.

Lending surged as the federal government lifted strict limits on interest rates and on foreign investment in the United States. Investors bought companies and squeezed them like lemons, while surviving firms scrambled to keep shareholders happy. In 1982, the Securities and Exchange Commission — led by a Wall Street banker for the first time since the Great Depression — provided a new way for corporations to shovel money to shareholders by voting to let companies buy back shares of their own stock.

Companies also began to compensate executives primarily with options to purchase stock. The chief executives of large American corporations made about 20 times more than the median worker at those companies in the mid-1960s. By 2018, the gap was some 278 times.

Meanwhile, the union movement declined, removing an important counterweight to corporate power. Unions lost traction partly under the weight of their own shortcomings, including endemic corruption and a focus on preserving employment in declining industries rather than expanding membership in growing industries. [Editor’s Note: Unions also suffered from racial and sex discrimination and union leadership’s support of the Vietnam War; thereby losing support from the progressive wing of the Democratic Party — See Alfred Kahn quotation regarding the Teamsters below.]

Companies also became more militant in their opposition to unions. Kate Bronfenbrenner, a professor at Cornell University, surveyed workers who had participated in unionization drives between 1999 and 2003 and found 57 percent of their employers had threatened to close the business if a union was formed; 47 percent threatened to cut wages or benefits; and 34 percent fired workers who supported unionization.

To sustain the goals of the private sector at the expense of the public interest, corporations poured money into lobbying. They told policymakers that the decline in the fortunes of American workers was the tough-but-fair result of market forces.

“People will get paid on how valuable they are to the enterprise,” John Snow, an economist then serving as Treasury secretary under President George W. Bush, explained in 2006. On this theory, thanks to new technologies and increased foreign competition, most Americans just weren’t worth what they used to be.

Politicians didn’t pay much attention to the flaws in that logic: that U.S. workers have fared more poorly than those in other nations, and that wage growth also has lagged far behind the rising value of the average worker’s output. In a recent study, the Harvard economists Anna Stansbury and Lawrence Summers tied those trends to the shift in political power from workers to employers.

Wages are substantially determined by a tug of war between workers and employers and, with the help of government, employers have been winning. The hostility of the Republican Party was nothing new, but Democrats also parted ways with workers. As Americans moved from thinking of themselves primarily as workers to thinking of themselves primarily as consumers, the Democratic Party recast itself.

“I’d love the Teamsters to be worse off,” said Alfred Kahn, an economic adviser to President Jimmy Carter. “I’d love the automobile workers to be worse off.”

Kahn and other economists insisted that reducing union wages would benefit everyone else. And as unions faded, the government demurred from championing the rights of workers. The purchasing power of the federal minimum wage peaked in 1968; it’s been falling ever since. The Economic Policy Institute estimates that employers illegally deprive workers of more than $50 billion in wages each year by underpaying them or requiring unpaid work; violators are rarely punished. Emphasis added. [Editor’s Note: The 2016 DNC Platform called for a $15 minimum wage.]

Workers could track the loss of power in their paychecks: Weekly wages have stagnated since the late 1970s. Newer employers, like mobile phone companies, simply refused to treat workers in the same way as older employers like the landline telephone companies. And old-line companies that survived, like the heavy equipment maker Caterpillar, gradually forced workers to accept less compensation.

“Working on the railroad is a mentally taxing and challenging job; I would say it has gotten harder and the compensation is now less than it once was,” said Daniel Lyon, a 63-year-old locomotive engineer from Cheyenne, Wyo. “And the cost of everything has gone up all these years.”

Employers also took advantage of the growing number of women in the work force. As the share of female workers in a given industry increased, wages fell for employees of both sexes.

Over the past decade, as the gilded class enjoyed the longest period of uninterrupted economic growth in American history, many middle- and lower-income Americans borrowed to maintain their standard of living. Household debt as a share of the economy has roughly doubled since 1980. Many less affluent Americans effectively are paying wealthier Americans for the money that they once were paid in wages. [Emphasis added.]

In recent months, the government has reinforced those patterns, responding to the coronavirus pandemic by pumping into the economy trillions of dollars aimed mostly at preserving wealth rather than jobs. The government has backstopped corporate borrowing while allowing companies to lay off millions of workers. As a result, stock prices have soared even as people stand in long lines at unemployment offices and food pantries. Emphasis added. [Editor’s Note: The Republican-controlled Senate refused to include oversight provisions to ensure that employers receiving subsidies would preserve jobs and Trump defied of the weak oversight provisions that were included.]

And those who waited longest for new opportunities after the 2008 financial crisis have often been among the first to lose their jobs. Black people and women have been especially hard-hit. Astonishingly, just 54 percent of black men in America were employed in May, up slightly from a modern low of 53 percent in April.

The coronavirus recession has driven unemployment in America to the highest levels since the Great Depression. For many workers, for many years to come, the limits of the political horizon may seem to be defined by the bitter truth that a poorly paid job is better than none.

Yet this is the moment to insist that workers deserve more.

The nation has ample resources to ensure that every worker is paid enough to afford housing, food and other necessities of daily life. Anything less is intolerable. Yet in 2017, more than 17 million workers — disproportionately minorities and women — labored for wages too meager to lift their households above the federal poverty line. [Editor’s note: Meanwhile, the Republican-controlled government granted the wealthy over $1 Trillion in tax cuts.]

Many workers similarly are deprived of benefits that federal law ought to guarantee. Millions lack affordable health insurance. Many large employers, particularly in the restaurant and retail sectors, do not provide paid sick leave to all their workers, a refusal that is not only callous but has endangered workers and customers during the pandemic. The United States is the only developed democracy that does not require companies to provide paid time off for workers to care for a baby or a dying parent.

When people are deprived of means and opportunity, society is deprived of their potential contributions.

In June 1933, President Roosevelt called on employers to embrace an “industrial covenant” — a commitment to provide “living wages and sustained employment.” He argued this was greatly in the interest of industry, because well-paid workers would become customers, too.

Almost a century later, employers continue to resist that basic logic, seeking short-term savings at the expense of their own long-term prosperity.

Is Change Possible?

Change is possible. A government more inclined to help workers would have ample opportunity. But as in the early 1930s, political change must precede economic change. For the voices of workers to be heard, the influence of the wealthy must be curbed. Emphasis added.

The power of the wealthy also has been amplified by the willingness of many Americans to accept cheap goods as a substitute for good jobs. A more equitable society requires a willingness to pay a little more for the burger or the bicycle — and for the welfare of the Americans who make and sell those products.

Americans need robust minimum standards for employee compensation and benefits, and the revitalization of institutions to safeguard those guarantees. The federal minimum wage needs to be raised to $15 an hour, with regular adjustments for inflation. Corporations have long warned that raising the minimum, now $7.25 an hour, will force companies to get rid of workers.

But a growing number of state and local governments have made the leap, with no evidence of dire consequences. If McDonald’s can turn a profit in Denmark, where even the most junior workers earn the equivalent of more than $20 an hour, it can turn a profit paying $15 an hour in America.

Lyndon Johnson fought for the creation of a federal minimum wage as a first-term congressman in 1938. Three decades later, as president, he signed an increase in the minimum wage to what remains the highest level on record, after adjusting for inflation.

The purpose, Johnson said, was “to bring a larger piece of this country’s prosperity, and a greater share of personal dignity, to millions of our workers, their wives and their children. And for me, frankly, that is what being president is all about.”

Americans also need the government to restrain the power of corporations. The dominance of a few large companies in a growing number of industries limits wage growth because workers have fewer alternatives, a problem that could be checked by a revival of antitrust enforcement. Companies also have made a mockery of legal protections for employees by classifying a growing share of workers as contractors, a farce embodied by Uber’s fierce insistence that Uber drivers are not Uber drivers.

The government can also make it easier for workers to switch jobs, which is often the best route upward. Ensuring that workers are not dependent on employers for affordable health insurance would make a big difference.

The government also should prohibit noncompete clauses, which impose contractual limitations on job-hopping. Once reserved for executives and other highly paid employees, the practice has become widespread, binding an estimated 30 million workers. One measure of the madness: A recent survey found 30 percent of the nation’s hair salons require noncompete clauses.

There are signs that some corporate leaders recognize the need for change. The Business Roundtable, a trade group for some of the nation’s largest companies, issued a new version of its mission statement last year acknowledging that corporations have responsibilities beyond making money. It is a purely symbolic gesture, but it points in the necessary direction.

Policymakers can encourage that new direction, for example by reversing the legalization of share buybacks and policing the classification of workers as independent contractors. And workers who want to join unions should be able to do so without the fear of reprisals.

The jobs that Americans do will continue to change as technology improves and tastes drift. But the need to work will not change, nor will the basic imperative to ensure that workers are compensated fairly and treated with dignity.

We live in an era of profits without broad prosperity, but the power to rewrite the rules of the market is in our hands. In 2016, Dr. Barber was arrested in Durham, N.C., while protesting for a $15 minimum wage. He said that he was pursuing the fulfillment of the language written into the state’s constitution by freed slaves more than 150 years ago.

The injustice remains. So does the opportunity.


Commentary on the Commentary

There ends the New York Times’ editorial. But what of the pirate crew? If the current situation is “intolerable,” at the Times says, can the crew be satisfied through political change leading to real economic change, as happened in the 1930s under FDR? Will this election bring the “big structural change” that our times demand, as in the 1930s and the 1960s? Unlike the New York Times, our party leaders and the voters must consider the consequences of failing to lead as FDR and LBJ did — or the pirate crew may take the ship.

Posted in Latest News, Talking Points.