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The Real Enemy of Unions

Why organized labor should join with entrepreneurs to bust the corporate monopolies threatening them both
May/June 2011 |
Traditional goals of labor ... do not differ all that much from the dreams that animate small business owners and farmers. (Or, for that matter, most Tea Partiers.)
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Washington Monthly

Last August, on a blazing-hot Nebraska evening, I sat in a cool hotel bar in downtown Omaha and listened as a team of Dockers-clad union organizers joked, drank, and argued their way into an alliance with a group of southern and western ranchers. The organizers, from the United Food and Commercial Workers (UFCW), made a simple argument: Meat-packing houses like JBS and Smithfield — their already immense power swelled from years of mergers — are using their dominance of cattle markets to hammer down what they pay for beef and for in-house unionized meatcutters. So rather than “scrap over nickels,” perhaps the ranchers and workers should lock arms and fight for bigger stakes.

Cowboys and labor? Plotting together? Polo shirt and bolo tie? In recent years, the two groups have, on occasion, signed the same statements against foreign trade. But closer to home, ranchers and unions have tended to view one another as rivals for the same wafer-thin slice of the retail dollar — and as parties on opposite ends of a gaping cultural divide. “It wasn’t easy,” one union organizer summed it up recently. “In recent years, we have not been friends.”

Yet half a year on, it’s evident that the alliance was no momentary fling, no mere “enemy of my enemy” excuse to clink a few beer bottles before stumbling back to opposite ends of the political corral. When the Justice Department held a series of hearings last year on concentration in agriculture markets, including cattle, the UFCW helped to pack the room for the cattlemen’s testimony, one of the only times in recent decades that an American labor union has promoted stronger enforcement of anti-monopoly law.

And in exchange? While in that room, the UFCW got a chance to make the case that the trustbusters should take on Walmart. The union views the retailing goliath as the main force smashing down the wages and benefits of the retail workers the union represents. More to the point, the union has also come to view Walmart as the real power driving the big meatpackers’ assault on both cattlemen and packing- house workers. (The basic thinking here is that Walmart now controls such a giant swath of the U.S. marketplace that it can dictate prices even to the biggest of suppliers, which leaves less money in the system for the people who actually produce goods and provide labor.)

Ever since Scott Walker and the Republican Party of Wisconsin set out to bust the public-sector unions in that state, one of the biggest questions in American politics has been whether organized labor, seventy-five years after winning a seat at the mahogany table, is about to get the bum’s rush. And if so, what does this mean for the Democratic Party and for popular politics in general?

Yet the future may be brighter than even the most optimistic of union members hope. If, that is, the UFCW’s example inspires the rest of organized labor to open its eyes to the political and economic dangers posed by the radical consolidation evident in most sectors of America’s political economy over the last generation. Doing so would give organized labor a far more complete and sophisticated grasp of how the few exert power over the many in America today. And it would arm organized workers with a message that enables them to reach out to all sorts of economic groups that now tend to oppose labor politically—not least America’s independent entrepreneurs.

In a recent editorial, the Wall Street Journal urged GOP operatives to attack the “monopoly power” of unions to win votes and undermine popular political structures. If organized workers respond in kind, and attack the monopoly power of actual monopolists—the people who pose real threats to the economic and political well-being of the great majority of Americans—maybe they too would win some votes. Better yet, maybe they could begin to undermine the ideological and institutional foundations of the very groups that are now using both major parties to organize the assault against labor.

***

The idea that labor is doomed to imminent irrelevance has become an accepted truth of American politics. The story of labor’s long decline has been told and retold so often that the blunt numbers—unionization has fallen from about a third of all non-farm workers to less than 10 percent—have lost much of their power to shock.

This story of decline and fall is built on two main arguments. First, that labor began to lose political clout long ago. At the level of the party, this is certainly true. Organized labor’s relationship with the GOP was tenuous even at the best of times, and Ronald Reagan all but drove unions from the party in 1981. Labor’s problems with Democrats, meanwhile, date to the 1960s, when younger activists began to break ranks with workers. The usual take here focuses on the rise of the New Left and political fights over the Vietnam War. But the breach was also philosophical. In the 1970s, a number of left-leaning economists and a new breed of consumer activists associated with groups like the Consumers Union tended to view the wages of organized labor as a cost to drive down, rather than an achievement to prop up.

The second argument is simply that times have changed—that immense and irresistible forces have destroyed the economic environment that first gave birth to big labor. According to this theory, unionism requires great assembly lines and industrial campuses to grow and thrive. But globalization and technological advance have done away with these forever. As a reporter for that bastion of left liberalism, Mother Jones, put it recently, “Unions, for better or worse, are history.”

But is this really so?

For starters, the idea that popular support for collective bargaining has dropped dramatically is simply not true. Perhaps the most fascinating fact to emerge from the battle in Wisconsin is that support for unions was far stronger and more widespread than party leaders have assumed. This is true even when unions represent public-sector workers, and even among citizens who identify themselves as Republicans.

Meanwhile, the idea that globalization and technology have scoured away the soil in which unions grow is even harder to defend. On the contrary, millions of American citizens continue to labor in highly commodified jobs—as teachers, nurses, bus drivers, maids, janitors, home care workers—largely untouched by either of these factors. If anything, entirely new pockets of the American workforce—ones that don’t necessarily enjoy collective bargaining rights, narrowly defined—now stand in desperate need of collective bargaining power. As the cattlemen can attest, when a single packer captures control over an entire market, even the most self-reliant of ranchers can become just as subject to the arbitrary whims of a local boss as any salaried worker.

The American people, in other words, still want unions. And the American people still stand to benefit from unions.

The question, then, is not whether the Democratic Party—or progressives in general—can survive without organized labor. The question is whether labor can radically change its thinking. More specifically, will organized workers notice that many other groups of American workers and entrepreneurs are also fighting for survival against the same powers that have fingered labor for extinction? And if so, will labor have the savvy to link up with these other groups to form a broad political alliance that can fight back effectively, over the long run?

***

The first big challenge is intellectual. The idea that labor should attack big business for being big strikes many in the movement as hypocritical, and potentially dangerous. After all, the basic premise of labor law is that workers can earn a license to cartelize some particular labor market. And among labor leaders, the standard response to the mere mention of the word “antitrust” tends to be “big is better for us.”

Indeed, labor leaders for decades have generally assumed it is easier to organize workers after they have been lined up in rows by capitalists using giant corporations. And labor leaders have also tended to assume that bosses who enjoy sufficient market power to charge higher prices for their products will also be willing to share some of this booty with their employees.

Yet it doesn’t take much sifting through America’s political economy to realize that far bigger dangers are posed by labor’s complete failure to account for the effects of the radical changes in the enforcement of anti-monopoly law over the last generation.

For 200 years, Americans used various forms of antimonopoly law—at the local, state, and federal levels—to disperse power, foster productive competition, and protect open markets. Americans used these laws, in essence, to extend the system of checks and balances into the political economy. Then, beginning in the late 1970s, an odd coalition of the consumerist (and Democratic Socialist) left and laissez-faire right—led by such Chicago School stalwarts as Robert Bork—imposed a new “consumer welfare” test for anti-monopoly enforcement.

The goal now was to promote greater “efficiency,” even if this meant outright monopoly. And corporate managers and financiers were quick to oblige, responding with the greatest merger frenzy in American history, a deal-making mania that has crested four times in the years since.

The revolutionary result, a generation later, is that the U.S. economy as a whole is, if anything, more concentrated today than during the age of John D. Rockefeller and J. P. Morgan. Back then, America’s citizens faced private corporate control over heavy industry, transport, and banking. Today, these sectors are often even more consolidated than a century ago. And we also face private dominion over retail (the sale of eyeglasses, for instance, is dominated by the Italian firm Luxottica, which controls such chains as LensCrafters and Pearle Vision); farming (more than 90 percent of all soybeans grown in America contain genes patented by one company, Monsanto); and information (one company, Intel, still makes and sells some 90 percent of all semiconductors used in personal computers). And to complicate matters, unlike a century ago, many of today’s powers are based overseas.

Arguably, this massive consolidation of power is the single biggest political economic story of the last thirty years. It is a story that helps to explain the extreme and growing concentration of wealth and power that is fast remaking our political system. It helps to explain the radical restructuring and relocation of huge amounts of manufacturing activity. Yet organized labor in America has all but willfully ignored this revolution, despite the fact that these changes have directly affected organized workers in innumerable ways.

Take jobs. In recent years, labor has devoted a huge amount of time and money to calling on the federal government and big business to create new jobs. Yet not once did labor question the laws that enable many of these same companies to engage in forms of consolidation that tend to result in fewer jobs in America.

The simple fact is that almost every large merger is followed by significant cuts in staff. The Pfizer takeover of Wyeth in 2009, for instance, resulted in the destruction of 19,000 jobs. Mergers also reduce the impulse for big business to create new jobs. Lack of competition means bosses can increase revenue simply by charging more for less. Giant firms today already boast of record profits, even without running the risk of investing in new lines of business. Mergers can also reduce the ability of smaller businesses to create new jobs. Not only does the fencing in of markets make it harder for up-and-coming entrepreneurs to launch new firms, it can prevent successful entrepreneurs from growing proven firms to scale (see “Who Broke America’s Jobs Machine?,” March/April 2010).

Or take the quality of jobs. Here again the equation is simple: the fewer the number of employers, the easier it is for bosses to exert power down onto workers, even when those workers are organized. As Stephen Ross, an antitrust attorney who has worked at the Justice Department and the Federal Trade Commission, says, “There’s a tipping point when … a more concentrated market is no longer good for workers.” A good example of this was the 2003 “mutual aid” pact in which three California supermarkets agreed to pool profits to fight a looming strike. In the years leading up to this deal, the employers had strengthened their hand through a long series of mergers. At least in this case, Ross says, unionized workers were “better off when they had six or seven big supermarkets than only three.”

Much of this consolidation has occurred right under the nose of labor leaders. The “Big Three” American automakers, for instance, have cut more than half a million jobs since 1980. Some firings were due to the loss of market share, and others to greater automation. Many, however, were due to consolidation, albeit not among the branded automakers whose labels we know so well. Rather, the consolidation took place down within the supply system, among, say, the companies that make dashboards and windshield wipers.

Over the last ten years organized labor has launched attack after attack on “outsourcing,” as the breaking apart of a vertically integrated corporation is often called. Yet during this period, labor appears not to have noticed that, in many instances, as fast as the carmakers spun off internal partsmaking operations, monopolists swooped in to roll up control. Or that, once in control, these new bosses used this more consolidated power to drive down wages and benefits and to speed the process of shifting work offshore.

Even more embarrassing is labor’s failure to make sense of the nature and scope of the threat posed by “big box” trading companies like Walmart and Home Depot. Consider the case of Walmart itself. Even as this firm grew to be well more than five times bigger than any previous retailer ever (relative to the overall size of the U.S. economy), labor leaders tended to view the giant trading company mainly as a vast pool of retail workers in need of organizing. Indeed, until the UFCW’s recent efforts, labor all but ignored the fact that Walmart had grown big enough to essentially dictate terms even to the largest of its suppliers and hence, indirectly, to the individual employees who work for those suppliers, many of whom are unionized.

Most stunning, perhaps, has been labor’s failure to connect the dots when it comes to who’s been funding the attacks on public education, teacher’s unions, and public-sector unions generally. As many in labor know, the Gates Foundation, established by Microsoft cofounder Bill Gates, has been one of the more active institutions in America in advocating policies that weaken the clout of teacher’s unions. And as many in labor also know, one of the main institutions behind the school voucher movement has been the Walton Family Foundation. What labor has all but ignored is that, a generation ago, neither Bill Gates nor the heirs of Walmart founder Sam Walton would have commanded nearly so much personal political power, in no small part because robust enforcement of antitrust laws would have limited their ability to build and exploit monopolies.

As organized labor leans on the ropes, absorbing blow after blow to head and body, it has no idea who hits it or how. Labor believes it can’t see its opponent because of all the blood pouring over its face, from cuts opened in a brutal and one-sided battle. The real reason labor can’t see? It has been covering its own eyes.

***

Organized labor is one of the few institutions in Washington with any sense of history. Labor leaders are often lifers, who love to swap stories about antique victories and are wont to break into song about battles lost long ago. Yet labor’s version of history, like all versions, is highly selective.

For decades one of labor’s mantras has been that the American middle class of the twentieth century was built on a simple foundation—the freedom to organize the workplace. It is a story that is routinely repeated back to workers whenever Democratic politicians panhandle for support. As Vice President Joe Biden put it in 2009, “Over the last 100 years the middle class was built on the back of organized labor.”

Yet it is a story based on an incomplete reading of the achievements of American citizens in the 1930s.

The Wagner Act of 1935—designed to protect the right of citizens to organize and bargain collectively—was undoubtedly one of the great political milestones in the decades-long effort to restore, after two generations of top-down plutocratic rule, some measure of the economic freedom and dignity that Americans enjoyed for the first hundred years of the nation’s existence, when most citizens were independent farmers, mechanics, craftsmen, and shop keeps. So too the creation of Social Security, also in 1935. What is missing from labor’s standard history of the New Deal era, however, is the fact that 1935 also saw the Roosevelt administration reverse itself 180 degrees on the regulation of competition, as it moved from promoting monopoly and the centralization of power to promoting competition and the distribution of power.

Soon after taking power in 1933, the New Dealers essentially suspended antitrust enforcement, as part of the National Industrial Recovery Act. The authors of NIRA believed the best way to restore the wage and price levels that existed before the Depression was to empower business and labor leaders and government officials to cooperate as closely as possible.They believed these groups would be able to rationally plan economic output, and to set production levels, prices, and wages throughout the industrial portion of the economy. But after the Supreme Court, in a 9-0 decision, declared this grand experiment in corporatism to be unconstitutional, both Congress and the administration took another look at antimonopoly law. (The fact that NIRA also failed economically contributed to this rethink.)

By the late 1930s, the Justice Department had developed an entirely new approach to managing competition in the industrial sphere. This second generation of New Dealers did not seek to impose government directors atop corporate giants, nor did they seek to break giant industry into little pieces. Rather their goal was to ensure at least some competition among a few large “oligopolies” manufacturing more or less the same basic product. Outside the industrial sphere, meanwhile, in sectors such as farming, retail, and services, Congress often took the lead. Here the aim was, often, nothing less than to restore the “Jeffersonian” yeoman to his property, and then to protect the open markets of these citizens from enclosure within the fences of private corporations.

The basic thinking was expressed by Wright Patman, the populist congressman from Texas. In a book he wrote to explain the workings of his 1936 Robinson-Patman Antitrust Act, often called the Anti-Chain Store Act, Patman said the purpose of the bill was “to protect the independent merchant, the public whom he serves, and the manufacturer from whom he buys” from the use of predatory tactics by overcapitalized traders. And in the event, the act, along with a wide-ranging set of other anti-monopoly laws, largely reversed the growth of retail chains and agricultural combines that had emerged as a major force in the economy during the plutocratic era.

By the early 1970s, the American economy had settled into a balance. Roughly half the economy was controlled by 1,000 industrial giants. The other half was divided among some twelve million small enterprises, competing in open market systems.

Which means that the great middle class of twentieth-century America stood atop two foundations. One was freedom to organize the industrial workplace, to erect a “countervailing power” within a necessarily hierarchical governance structure. The other was freedom from organization, the freedom to be one’s own boss, the freedom to build up a business that—thanks to anti-monopoly law—was largely safe from predation. Every American could choose the path that fit best. A citizen who wanted to be her own boss, or run his own family business, could count on robust anti-monopoly law to protect farm, factory, or store from predators wielding massed capital. Citizens who wanted the security of a weekly wage could hire themselves out to an industrial giant or government monopoly, confident that they were protected against economic exploitation and arbitrary rule by open market systems and robust labor law.

And until the rise of the socialistic New Left and the laissez-faire Chicago School crew, this great alliance of workers and proprietors, for all intents, controlled both major parties.

Admittedly, today, it can be hard to conjure an image of labor leaders and small business leaders marching arm in arm toward the political barricades. On the contrary, small business and labor groups find themselves almost always on opposite sides of the line. There’s little mystery as to why. The nation’s main small business group, the National Federation of Independent Business, is even more intricately woven into the structure of the GOP than labor is woven into the structure of the Democratic Party. Last November, twenty-five members of the NFIB won new seats in the House or Senate. Every one was a Republican.

Yet a closer look reveals that this iron alliance between small business and the GOP may be much more brittle than it first appears. For one thing, recent surveys of small business owners show the portion who identify themselves as Democrats is roughly equal to the portion who identify themselves as Republicans. For another, many of the most energetic and creative of today’s small businesses are in sectors—restaurants, brewing, organic farming, technology and information—that tend to attract more progressive entrepreneurs.

Further, the traditional mom-and-pop businesses that have long been the backbone of the NFIB are in deep trouble, often precisely because of concentration. Between 2006 and 2009 the NFIB reduced its membership rolls from some 600,000 enterprises to roughly 350,000. Although the organization claims most of the drop was the result of better accounting, a spokesman recently admitted that it is also due to the fact that the number of “main street businesses” in America have been “diminished by the big box stores.”

Which leads us to what appears to be the NFIB’s failure to stand up for some of the most basic interests of its members. As Inc. magazine reporter Robb Mandelbaum wrote recently in the New York Times, the NFIB has “never made halting the big box expansion … one of its battle cries,” despite the fact that the big box stores are crushing its members. On the contrary, as Mandelbaum noted, NFIB members have found themselves roped into supporting tax cuts for the very big businesses that already enjoy such a huge advantage of power against them.

All of which means there’s a good chance that many existing members of the NFIB are looking for a new date.

Labor may never be able to ally effectively with the present leadership of the NFIB. But a well-structured appeal to Congress and the administration to take real practical action now to protect America’s independent proprietors from being wiped from the land by a few giant corporations might open the way for all sorts of new partnerships. At a minimum, such a strategy will attract the support of at least some individual small businesspeople and smaller associations. And it is not inconceivable that an honest discussion of monopolization in America today will weaken or even split this pillar of the GOP, much as labor’s push for a more aggressive response to China’s trade policies has helped to whittle down the once-great power of the National Association of Manufacturers. But even if labor does not win a single small business ally, there’s another reason for it to ramp up attacks on the enclosure of America’s markets. Defending open markets may well prove one of the most effective ways to educate unorganized groups of workers of the need to support stronger unions. After all, even if Congress and the administration moved tomorrow to take on America’s many monopolies, few of these powers will go easily into the good night. Which means that in many cases, employees would be wise to work together to protect themselves now.

To understand the potential stakes, consider the Justice Department’s revelation last September that Google, Apple, Intel, and other tech giants had secretly colluded not to hire each other’s workers. The agreement, the DOJ said, had “eliminated a significant form of competition to attract highly skilled employees.”

The fact that some of the world’s biggest and richest firms openly conspired to drive down wages and to restrict the most basic freedoms of individual employees would be, one might think, of some use to organized labor. Here, after all, is a perfect story to illuminate the fact that even the smartest and best educated of Americans—PhD scientists and PhD engineers—sometimes need protection when their markets are enclosed, just like autoworkers and nurses and teachers. Indeed, given that such concentration has begun to destroy the open market systems that have long helped to protect all sorts of white-collar professionals—ranging from book editors to advertising executives to doctors—a generalized attack on monopolization might prove to be a highly effective way to go on the offensive among groups of salaried employees who have, until now, viewed themselves as, somehow, immune to such rude treatment.

But when I recently mentioned the DOJ’s Silicon Valley settlement to a top executive at the AFL-CIO, he had never even heard of the case. It wasn’t that he and his team didn’t understand the value of the story. On the contrary, he immediately interrupted our talk to pick up the phone to yell at one of his subordinates. It was just that, as he explained later, he and his staff were not used to sifting for prospects in antitrust cases.

He needn’t fret about missing this particular opportunity. The Obama administration’s settlement will remain in place for only five years, so unions will soon enough have another chance to point out the Silicon Valley hiring cartel as an appeal to America’s high-tech workers.

***

Seven years ago, Thomas Frank wrote a book, What’s the Matter with Kansas?, about “people getting their fundamental interests wrong,” because they voted for Republicans rather than Democrats. Six years ago, Reihan Salam and Ross Douthat, in an article for the Weekly Standard, largely agreed with Frank. After noting that a large portion of GOP voters were “comfortable with bad-but-popular liberal ideas like raising the minimum wage, expanding clumsy environmental regulations, or hiking taxes on the wealthy to fund a health care entitlement,” they concluded the GOP was out of touch with many of its own voters. Then two years ago, after watching their leaders join Democrats in using tax dollars to bail out banks that had been made “Too Big to Fail,” a goodly portion of this same GOP wandered off the ranch to form the Tea Party.

The achievement of convincing so many hardworking entrepreneurs and farmers and salaried workers to vote GOP, supposedly against their own interests, is usually credited to the schemes of party hacks, or the purchase of votes by the malefactors of great wealth, or the pounding of propaganda machines like Fox News. And certainly, all of these have some effect.

But this version of recent political history seems to get cause and effect backward. Our parties today, just like the parties of yore, are merely the tools of the groups who know how to use them. And given that today labor and small business, two very large and politically active groups of American citizens, find that neither party works for them, it may be worth assigning at least some of the fault to labor and small business.

The traditional goals of organized labor—democracy, liberty, rule of law, the economic independence of the individual citizen, and the protection of property (in the form of labor)—do not differ all that much from the dreams that animate most small business owners and most farmers. (Or, for that matter, most members of the Tea Party.) Nor do many of these same business owners and farmers (or, for that matter, most members of the Tea Party) object to the fundamental idea behind organized labor—that individual citizens, to protect themselves and their families and their communities from impoverishment and autocracy, must link arms with one another.

Yet in recent decades, as the same concentrations of power that have been used to deprive workers of their most basic rights have also been used to deprive small business owners of their economic liberties and properties, organized labor has chosen to look away, largely because these neighbors, cousins, and brothers stood beneath a red banner rather than a blue.

Organized labor, in other words, violated the first rule of solidarity. By failing to understand the powers arrayed against their fellow citizens, by failing to reach out to their own neighbors, by failing to lock arms within their own communities, labor made it easier for the powerful few to split organized workers away from their own allies.

America’s independent entrepreneurs desperately need an organized brain to help them make sense of the dangers they perceive. Labor, meanwhile, retains an institutional capacity to think, but has lost the ability to see. If organized labor learns once more to open its eyes, learns again how to talk to its own neighbors about the powers that surround and threaten us all—then who knows what new coalitions can be built, and what power can be concentrated in the name of the people.