Health check: US manufacturing is in trouble

President Trump is all in, touting his success in rebuilding US manufacturing.  For example, in his state of the union address he claimed:

We are restoring our nation’s manufacturing might, even though predictions were that this could never be done. After losing 60,000 factories under the previous two administrations, America has now gained 12,000 new factories under my administration.

Apparently, it is a family achievement.  Joe Ragazzo, writing at TPM Café, reports that:

In a towering act of sycophantry, the National Association of Manufacturers announced Friday that it will be giving Ivanka Trump the organization’s first ever Alexander Hamilton Award for “extraordinary support of manufacturing in America.” The organization made the outrageous claim that “no one”  — no one! — has ever “provided singular leadership and shown an unwavering commitment to modern manufacturing in America” like she has.

Unfortunately, US manufacturing is far from healthy.

Production

The reality is that manufacturing output has been relatively flat over the last two decades, thanks in large part to the globalization of US production.  In 2019, despite the growth of the overall economy, the manufacturing sector actually fell into recession.  In contrast to Trump’s claim, manufacturing output fell 1.3 percent over the year.

The figure below shows real manufacturing output indexed to 2012.  We see slow but steady growth from 2000 to 2007, relatively flat growth from 2010 to 2018, and then a decline in real output in 2019.

The manufacturing sector’s woes in 2019 are on display in the following figure.

Investment

In line with these trends, as we can see below real investment in new structures by manufacturing firms has also been falling.  Real investment fell from $73.7 billion in 2015 to $56.4 billion in 2019.

Productivity

Manufacturing productivity is at a standstill.  The following figure shows manufacturing output per worker hour, indexed to 2012.  As we can see, it was largely unchanged from 2010 to 2014.  Since then it has trended downward.

Employment

The employment story is even worse.  As the next figure shows, manufacturing employment, in millions of jobs, took a nose dive beginning in the late 1990s and has yet to make a meaningful recovery.

Some 5 million manufacturing jobs have been lost since the late 1990s.  Nearly 90,000 U.S. factories have been lost as well.  And in line with manufacturing’s current recession, manufacturing employment, as we see below, is again falling.

Earnings

Equally alarming, the average hourly earnings of production workers employed in manufacturing has now fallen below the average hourly earnings of private sector production and nonsupervisory workers.  Thus, even if US policy were to succeed in bringing back or spurring the creation of new manufacturing jobs, they likely won’t be the living wage jobs of the past.

As the Monthly Labor Review explains:

Although manufacturing industries had a reputation for stable, well-paying jobs for much of the 20th century, shifts within the industry in the last several decades have considerably altered that picture. Since 1990, average hourly earnings trends in the various manufacturing industries have been disparate, with a few industries showing strong growth but many others showing growth rates that are lower than those of the total private sector. In fact, average hourly earnings of production and nonsupervisory workers in the total private sector have recently surpassed those of their counterparts in the relatively high-paying durable goods portion of manufacturing.

As we can see in the following figure, in 1990 average hourly earnings of production workers in manufacturing were greater than those of production and nonsupervisory workers in the total private sector (by about 6 percent.)  However, by 2007, average hourly earnings in the private sector had surpassed average hourly earnings in manufacturing.  And by 2015, average hourly earnings in the private sector surpassed average hourly earnings of manufacturing workers in the more highly compensated durable goods sector.  In 2018, the average hourly earnings of private sector production and nonsupervisory workers was approximately 5 percent greater than those of their manufacturing counterparts.

Workers in the auto industry have especially taken a big hit.

Trade

The overall trade deficit, which reflects the combined balances on trade in goods and services, slightly improved in 2019—falling by 1.7 percent or $10.9 billion.  So did the deficit in the trade of goods, falling by 2.4 percent or $21.4 billion. However, those improvements were mostly driven by the rapid growth in US exports of petroleum products.  The trade deficit in non-oil goods, mostly manufactures, actually increased by 1.8 percent in 2019, as can be seen in the following figure.

As Robert E. Scott remarks,

The small decline in overall US trade deficits follows an 18.3 percent increase in the goods trade deficit in the first two years of the Trump administration. Taken altogether, the US goods trade deficit increased $116.2 billion (15.5 percent) in the first three years of the Trump Administration. . . .

Meanwhile, the deficit in non-oil goods trade has nearly tripled since 2000, rising from $317.2 billion in 2000 to $852.3 billion in 2019, an all-time high. For the past two years, the non-oil goods trade deficit also reached record territory as a share of GDP, reaching or exceeding 4.0% of GDP. This growing U.S. trade deficit in non-oil goods is largely responsible for the loss of 5 million U.S. manufacturing jobs since 1998.

 

As we can see, talk of a manufacturing renaissance is nonsense.  And there is no reason, based on Trump administration’s economic policies, to expect one.

Another sign of the deepening social crisis: The decline in US life expectancy

US life expectancy is on the decline, falling from 2014 to 2017—the first years of decline in life expectancy in over twenty years.  And according to Steven H. Woolf and Heidi Schoomaker, authors of the recently published “Life Expectancy and Mortality Rates in the United States, 1959-2017” in the Journal of the American Medical Association, “A major contributor has been an increase in mortality from specific causes (e.g., drug overdoses, suicides, organ system diseases) among young and middle-aged adults of all racial groups, with an onset as early as the 1990s and with the largest relative increases occurring in the Ohio Valley and New England.”

Declining life expectancy

In 1960, the US had the highest life expectancy of any country in the world.  By 2017 US life expectancy significantly trailed that of other comparable countries, as illustrated below.

In 1980, the difference between average life expectancy in the US and that of comparable countries was not large–73.7 years versus 74.5 years.  However, as we can see in the next figure, the gap steadily grew over the following years.  The US gained 4.9 years in average life expectancy from 1980 to 2017; comparable countries gained 7.8 years on average.

As researchers for the Kaiser Family Foundation point out, “The U.S. and most comparable countries experienced a slight decline in life expectancy in 2015. By 2016, life expectancy for these comparable countries rebounded to pre-2015 numbers, but in the US, such a bounce back did not occur.”  After averaging 78.9 years in 2014, averaged life expectancy in the US fell to 78.7 years in both 2015 and 2016, and then dropped again in 2017 to 78.6 years. These declines mark the first decreases in US life expectancy in more than 20 years.

Moreover, this growing gap and outright decline in average life expectancy holds for both US males and females, as we see from the following figure.

The growing social crisis

Woolf and Schoomaker drew upon 50 years’ worth of data from the US Mortality Database and the US Centers for Disease Control and Prevention’s WONDER database in an attempt to explain why US life expectancy has not kept pace with that of other wealthy countries and is now falling.  Their primary finding, as noted above, is that US life expectancy is being dragged down by “an increase in mortality from specific causes (eg, drug overdoses, suicides, organ system diseases) among young and middle-aged adults of all racial groups.”

More specifically, while over the period 1999-2017, infant mortality, mortality rates among children and early adolescents (1-14 years of age), and age-adjusted mortality rates among adults 65-84 all declined, individuals aged 25-64 “experienced retrogression” beginning in 2010, as we can see in the following figures taken from their article.  Between 2010 and 2017, these midlife adults experienced a 6 percent total increase in mortality rate. This increase overwhelmed gains experienced by the other age cohorts, dragging down overall US average life expectancy.

Woolf and Schoomaker concluded that there were multiple causes for this rise in mortality rates among individuals 25-64.  However, they highlighted drug overdose, alcohol abuse and suicide as among the most important.  This age cohort experienced a nearly four-fold increase in fatal drug overdoses between 1999 and 2017.  Their suicide rates went up nearly 40 percent over the same period. The rate of alcohol-related disease deaths soared by almost 160 percent for those 25-34 years.

In an interview with BusinessInsider, Woolf wrestled with why the country is experiencing such a dramatic rise in mortality rates among young and middle aged adults. “It’s a quandary of why this is happening when we spend so much on healthcare,” Woolf said, adding: “But my betting money is on the economy.”

That seems like a pretty safe answer.  It also raises the question: how do we help working people understand the increasingly toxic nature of the workings of the US economy and build the ties of solidarity necessary to advance the struggle for system transformation.

The Harsh Reality of Job Growth in America

The current US economic expansion, which began a little over a decade ago, is now the longest in US history.  But while commentators celebrate the slow but steady growth in economic activity, and the wealthy toast continuing strong corporate profits, lowered taxes, and record highs in the stock market, things are not so bright for the majority of workers, despite record low levels of unemployment.

The fact is, despite the long expansion, the share of workers in low-wage jobs remains substantial. To make matters worse, the share of low-quality jobs in total employment seems likely to keep growing. And, although US workers are not unique in facing hard times, the downward press on worker well-being in the US has been more punishing than in many other advanced capitalist countries, leaving the average US worker absolutely poorer than the average worker in several of them.

The low wage reality

According to a recent Bookings report by Martha Ross and Nicole Bateman, titled Meet the Low-wage Workforce,

Low-wage workers comprise a substantial share of the workforce.  More than 53 million people, or 44 percent of all workers ages 18 to 64 in the United States, earn low hourly wages. More than half (56 percent) are in their prime working years of 25-50, and this age group is also the most likely to be raising children (43 percent).

Ross and Bateman draw upon the Census Bureau’s 2012-2016 American Community Survey 5-year Public Use Microdata Sample to identify low-wage workers.  Although their work does not incorporate the small increase in wages between 2017-2019, they are confident that doing so would not significantly change their findings.

Their workforce definition started with all civilian, non-institutionalized individuals, 18 to 64 years of age, who worked at some point in the previous year (during the survey period) and remained in the labor force (either employed or unemployed).  They then removed graduate and professional students and traditional high school and college students, as well as those who reported being self-employed or earning self-employment income and those who worked without pay in a family business or farm.  This left them with a total of 122 million workers.

Their definition of a low-wage worker started with the “often-employed threshold” of two-thirds the median hourly wage of a full-time/full year worker, with one major modification. They used the male wage because they wanted to establish a threshold that was not affected by gender inequality.  They identified anyone earning a lower hourly wage as a low-wage worker.

The average national threshold across their five years of data, in 2016 real dollars, was $16.03.  They then adjusted this value, using the Bureau of Economic Analysis’s Regional Price Parities, to take into account variations in the cost of living in individual metropolitan areas.  The adjusted thresholds ranged from $12.54 in Beckley, West Virginia to $20.02 in San Jose, California.  Using these thresholds, the authors found that 44 percent of the workforce, some 53 million workers, were low-wage workers.

These low-wage workers were a racially diverse group.  Fifty-two percent were white, 25 percent Latinx, 15 percent Black, and 5 percent Asian American. Both Latinx and Black workers were over-represented relative to their share of the total workforce.

Strikingly, 57 percent of low-wage workers worked full time year-round.  And half of all low-wage workers “are primary earners or contribute substantially to family living expenses. Twenty-six percent of low-wage workers are the sole earners in their families, with median family earnings of $20,400.”

Finally, as the authors also note, the economic mobility of low wage workers appears quite limited. They cite one study that “found that, within a 12-month period, 70 percent of low-wage workers stayed in the same job, 6 percent switched to a different low-wage job, and just 5 percent found a better job.”

The growing share of low-wage jobs

The downward movement in a new monthly index, the job quality index (JQI), makes clear that economic growth alone will not solve the problem of too many workers employed in low-wage work.  The index measures the ratio of high-quality jobs (those that pay more than the average weekly income) to low quality jobs (those that pay less than the average weekly income).  The index steadily declined over the past three decades, during periods of expansion as well as recession, from a ratio of 94.9 in 1990 to a ratio of 79.0 as of July 2019 (as illustrated below).

The process of creating the index and its usefulness is described in a recent paper authored by Daniel Alpert, Jeffrey Ferry, Robert C. Hockett, Amir Khaleghi.  The index itself is maintained by a group of researchers from Cornell University Law School, the Coalition for a Prosperous America, the University of Missouri-Kansas City, and the Global Institute for Sustainable Prosperity.  As the authors note, the most prominent factor underlying the three decade fall in the ratio is the “relative devaluation” of US labor.

The index tracks private sector jobs provided by third party employers, which excludes self-employed workers, and, for now, covers only production and nonsupervisory (P&NS) positions, which account for approximately 82 percent of total private sector jobs in the country.

The index draws on the BLS’s Current Employment Statistics which provides average weekly hours, average hourly wages, and total employment for 180 distinct job categories organized in industry groups.  As the authors explain:

JQI itself is a fairly simple measure. The index divides all categories of jobs in the US into high and low quality by calculating the mean weekly income (hourly wages multiplied by hours worked) of all P&NS jobs and then calculates the number of P&NS jobs that are above or below that mean. An index reading of 100 would indicate an even distribution, as between high- and low-quality jobs. Readings below 100 indicate a greater concentration in lower quality (those below the mean) positions, and a reading above 100 would greater concentration in high quality (above the mean) positions.

Recognizing that some groups are quite large and include a wide range of jobs hovering around the mean, the JQI is further adjusted by disaggregating those particular groups into subgroups. The average income of each of those subgroups is then compared with the mean weekly income derived from the entire sample to determine whether the positions should be classified as high or low quality jobs.

As noted above, the JQI fell from 94.9 in 1990 to 79.0 as of July 2019.  As for the significance of this decline:

The decline confirms sustained and steadily mounting dependence of the U.S. employment situation on private P&NS jobs that are below the mean level of weekly wages. . . .

Notably, movements in the JQI are not particularly correlated with recession; it is important to note that the first big decline occurred during the expansion of the late 1990s. The index was steady during the 2001 recession, and its second big decline occurred during and after the Great Recession. There is admittedly some cyclical patterning evidenced in the JQI output, but this is overwhelmed by a larger secular phenomenon.

Losing ground

Not only are US workers facing a labor market increasingly oriented towards low-wage employment, the resulting downward pressure on wages appears to be proceeding at a more rapid pace in the US than in other countries.  As a consequence, a majority of US workers are now poorer, in real terms, than many of their counterparts in other countries.

For example, in a study comparing income inequality in France and the US, the economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman found that the average pre-tax national income of adults in the bottom 50 percent of the income distribution is now greater in France than in the United States.  “While the bottom 50 percent of incomes were 11 percent lower in France than in the US in 1980, they are now 16 percent higher.”  Moreover,

The bottom 50 percent of income earners makes more in France than in the US even though average income per adult is still 35 percent lower in France than in the US (partly due to differences in standard working hours in the two countries). Since the welfare state is more generous in France, the gap between the bottom 50 percent of income earners in France and the US would be even greater after taxes and transfers.

A recent study by the Center for the Study of Living Standards finds that growing numbers of US workers are also falling behind their Canadian counterparts.  More specifically, “the study compares incomes in every percentile of the income distribution, and finds that up through the 56th percentile Canadians are better off than their U.S. counterparts.”

The study’s author, Simon Lapointe, in words that echo the comments of Piketty, Saez, and Zucman, adds:

Our income estimates may actually underestimate the economic well-being of Canadians relative to Americans. Indeed, Canadians usually receive more in-kind benefits from their governments, including notably in health care. Had these benefits been included in the estimates, the median augmented household income in Canada would likely surpass the American median by a greater margin. While these benefits also come with higher taxes, the progressivity of the income tax system is such that the median household is most likely a net beneficiary.

The takeaway

There are many reasons for those at the top of the US income distribution to celebrate the performance of the US economy and tout the superiority of current US economic and political institutions and policies.  Unfortunately, there is a strong connection between the continuing gains for those at the top and the steadily deteriorating employment conditions experienced by growing numbers of workers.  Hopefully, this economic reality will become far better understood, leading to a more widespread recognition of the need for collective action to transform the US economy in ways that are responsive to majority interests.

Overworked America

Those living in the US are encouraged to think that they live in the best country in the world with little to learn from the experiences of working people in other countries.  This sense is reinforced by the fact that the mainstream media generally discusses US problems without reference to developments or trends in other developed capitalist countries.

Here is one example: hours of work.  It is a common complaint that Americans work too many hours.  What is rarely noted, as Ryan Cooper points out in his study titled The Leisure Agenda, is that “Americans work far, far more than their counterparts in peer European nations.”

The figure below, based on OECD reported data for the year 2018, shows just how much more. The average US worker works roughly 110 hours a year more than the average Japanese worker, or some 2.6 weeks more; about 265 hours a year more than the average French worker, or some 6.6 weeks more; and 420 hours more than the average German worker, or some 10.5 weeks.

The OECD defines average annual hours worked per employed person as:

the total number of hours actually worked per year divided by the average number of people in employment per year. Actual hours worked include regular work hours of full-time, part-time and part-year workers, paid and unpaid overtime, hours worked in additional jobs, and exclude time not worked because of public holidays, annual paid leave, own illness, injury and temporary disability, maternity leave, parental leave, schooling or training, slack work for technical or economic reasons, strike or labor dispute, bad weather, compensation leave and other reasons. The data cover employees and self-employed workers.

The trend in average annual hours of work in the US and other developed capitalist countries highlights just how far outside the mainstream the US labor experience is.  The following figure, again based on OECD data, is taken from Cooper’s study.  As he summarizes:

As most nations have gotten richer, their average worker has worked fewer hours. But this is not true of the United States. As shown [below], among wealthy OECD nations with data going back that far, the US was in the middle of the pack among rich nations in 1970. Now, it works the most out of any in this cohort.

One reason for the higher average hours of work in the US is that it is the only major OECD country that does not provide a federal statutory minimum annual leave entitlement to its workers, as illustrated in the following figure which is also from Cooper’s study.

The annual US work hours presented above is for the average worker, which means that it includes the work experience of people who are forced to work extremely long hours as well as those who cannot find full-time employment. In both cases, the US employment situation is a major contributor to the stress, poor health, and weakening community ties experienced by growing numbers of workers.

The lower average annual hours of work in other OECD countries does not mean that workers in those countries don’t have their own challenges, especially as many now confront governments that seek to undermine their past gains. At the same time, it does demonstrate that there is plenty of room for improvement in the United States.

In other countries a reduction in work hours and paid annual leave entitlements were won through aggressive workplace struggle and political pressure on governments. There is, of course, a long history of struggle for a shorter workday in the US, which came to be symbolized by May Day demonstrations and strike actions, and deserves renewed attention.  It is also worth remembering that activists in that struggle were well aware that achieving a shorter work week was critical to securing for workers the time and energy needed to build a powerful working class movement for social transformation.

What the New Deal can teach us about winning a Green New Deal: Part V—summing up the New Deal experience

Growing awareness of our ever-worsening climate crisis has boosted the popularity of movements calling for a Green New Deal.  At present, the Green New Deal is a big tent idea, grounded to some extent by its identification with the original New Deal and emphasis on the need for strong state action to initiate social-system change on a massive scale.  Challenges abound for Green New Deal activists.  Among the many, how to:

  • create supportive working relationships between the different movements currently pushing for a Green New Deal
  • develop a sharper, shared vision of the aims of a Green New Deal
  • increase popular support for those aims as well as participation in those movements
  • build sufficient political power to force a change in state policy along lines favorable to the Green New Deal
  • ensure that the resulting trajectory of change strengthens the broader struggle to achieve a socially just and ecologically sustainable political-economy

While there are great differences between the crises and political movements and possibilities of the 1930s and now, there are also important lessons that can be learned from the efforts of activists to build mass movements for social transformation during the Great Depression.  My aim in this series, including in this fifth and last post, is to illuminate the challenges faced and choices made by these activists in order to draw out some of the relevant lessons.

In previous posts I argued that the despite the severity of the Great Depression, it took sustained, left-led, mass organizing and actions to force the federal government to accept responsibility for improving economic conditions.  Unfortunately, First New Deal relief and job creation policies were inadequate, far from what the growing movement of unemployed demanded or was needed to meet majority needs.  However, continued mass activity by the unemployed, those on relief, and those employed eventually forced the Roosevelt administration to undertake a Second New Deal, which included its widely praised programs for public works (WPA), social security (Social Security Act), and union rights (National Labor Relations Act).

These Second New Deal programs were unprecedented and did improve conditions for working people.  But, as I argue in this final post, both the WPA and the Social Security Act again fell short of the transformative changes demanded by activists.  And while the NLRA did offer workers important legal protections that made it safer for them to unionize their workplaces, its effect was to encourage a top-down system of labor-management relations that suppressed rank and file activism and class consciousness. Thus, despite their pathbreaking nature, these programs were far from revolutionary.  Rather they were designed to ameliorate the suffering caused by capitalism’s crisis without threatening capitalist control over economic activity.

Tragically, changes in the political and economic environment, as well as strategic choices made by the left in response to those changes led to the weakening of popular movements, leaving them unable to push the Roosevelt administration into yet a Third New Deal.  As a result, the upsurge of the 1930s failed to advance the socialist-inspired transformation that motivated many of its participants. In the end, it proved only able to force the state to adopt policies that reformed the workings of the system, a not inconsiderable achievement, but one that still left working people vulnerable to the vicissitudes of capitalism.  Hopefully, a careful study of the New Deal experience will help Green New Deal activists build movements able to avoid the trap of limited reform while fighting for the massive, interconnected, and empowering social-system change we so desperately need.

The Second New Deal

It is easy to understand why supporters of a Green New Deal look to the New Deal as a touchstone.  Growing numbers of people have come to the conclusion that our problems are too big to be solved by individual or local efforts alone, and that once again innovative and transformative state-led actions will be needed to solve them.  Quite simply, the New Deal experience inspires people to believe in the possibility of a Green New Deal.

When people talk about the innovative and transformative policies of the New Deal they normally mean the core policies of the Second New Deal: the WPA, the Social Security Act, and the National Labor Relations Act.  As innovative as these policies were, they were, as discussed in Part IV, largely forced on the Roosevelt Administration by left-led mass movements.  And, as we see next, they were, by design, meant to blunt more radical demands for change.  In short, they were important reforms, but no more than reforms, and as such offered only partial solutions to the problems of the time.  Sadly, workers today continue to suffer from their limitations.

Works Progress Administration

One of the most important Second New Deal programs was the Works Progress Administration (WPA). Established in May 1935, it employed millions of unemployed to carry out public projects such as construction of public buildings and roads.  Federal Project Number One, a much smaller program that also operated under the WPA umbrella, employed musicians, artists, writers, actors and directors in large arts, drama, media, and literacy projects. These included the Federal Writers’ Project, the Federal Theatre Project, the Federal Music Project, and the Federal Art Project.

Roosevelt’s decision to replace the Federal Emergency Relief Administration (FERA) with the WPA was a clear sign that he recognized that his First New Deal employment and relief programs — FERA and the Civil Works Administration (CWA) — had done little to satisfy fast growing left-led unemployed movements that were demanding a federal jobs program under which unemployed workers would be directly put to work, at union wages, producing a wide range of needed goods and services.

FERA had provided loans and grants to states which then offered relief work to those that qualified for relief.  As discussed in Part III, the program required workers to submit to demeaning financial investigations, often paid those chosen for relief with coupons that could only be redeemed for select food items, made no attempt to match worker skills with jobs, and often employed those on relief in make-work tasks.  While FERA marked the first direct federal support for relief and enabled states to greatly expand their relief rolls, it also required states to provide matching funds to receive FERA money.  Limited state resources meant that relief covered only about one-third of those unemployed.

CWA was a far more popular program, most importantly because it involved direct federal employment, had no relief requirement, paid relatively well, and sought to match workers’ skills with jobs.  However, it was, by design, a short-term program that lasted only 6 months, with most employment creation ending after 4 months.

The WPA was a federal program that operated its own projects in cooperation with state and local governments, which were required to cover some 10 to 30 percent of their costs.  In some cases, the WPA took over ongoing FERA state and local relief programs.  But, despite its impressive accomplishments, it also fell short of movement demands.

Although the WPA combined elements of both FERA and the CWA, it was far more like the former than the latter. For example, in contrast to the CWA, participation in WPA projects required a state means test.  Thus, unemployment alone was not enough to qualify a person for the program.  Moreover, as under FERA, participants were subject to demeaning monitoring of their spending habits and living conditions.

Again. unlike the CWA, little effort was made to match workers’ skills with jobs.  Workers were divided into two broad categories of skilled and unskilled.  The unskilled were assigned construction jobs even if they had no construction experience.  The skilled were assigned a variety of writing or teaching jobs regardless of whether they had experience in those areas.  The program did pay market wages.  However, limits were put on maximum allowable hours of weekly employment in addition to an overall limit on total earnings.

WPA employment opportunities were also limited.  Its average monthly employment was approximately 3 million workers.  The CWA, at its peak, employed over 4 million a month.  The WPA, like FERA, employed only about one-third of the unemployed.  Moreover, because of unstable program financing, even those employed by the WPA would sometimes suffer layoffs.

The unemployed movement wanted a permanent federal employment program that would guarantee full employment.  And they wanted that program to employ people to produce needed goods and services as a direct counter to private production.  This was far from the vision of the Roosevelt administration.  As Harry Hopkins, chief administrator of the WPA, explained:

Policy from the first was not to compete with private business. Hence we could neither work on private property, set up a rival merchandising system, nor form a work outlet through manufacturing, even though manufacturing had contributed to relief rolls hundreds of thousands of workers accustomed to operating machines and to doing nothing else for a living.

Operating under these limits, the WPA had little choice but to focus its efforts on the construction of public buildings and roads.  Post offices accounted for close to half of the more than 3000 public buildings constructed.

Moreover, despite its limitations, the unemployed had to fight to sustain the program.  Congress decided to provide funds for the program one year at a time.  Sometimes allocations fell short of planned spending, resulting in layoffs.   Other times, militant demonstrations by an alliance of unemployed groups forced Congress into making supplemental appropriations.

The number of public works projects and WPA participants began a steady decline in 1939.  The next year the Roosevelt administration decided to reorient program activity to projects of direct use to the military, including construction of base housing and military airfields as well as expansion of naval yards. The WPA was quietly terminated in 1943, with unemployment problems seemingly solved thanks to the demands of wartime production.  Sadly, the unemployed never developed the political weight or broader social movement needed to push the government into embracing a more expansive and ongoing program of national planning and public production.

The Social Security Act

The Social Security Act is widely considered to be the New Deal’s crown jewel.  According to his Secretary of Labor, “[President Roosevelt] always regarded the Social Security Act as the cornerstone of his administration . . . and . . . took greater satisfaction from it than from anything else he achieved on the domestic front.”

Roosevelt appointed a Committee on Economic Security in July 1934 with the charge to develop a social security bill that he could present to Congress in January 1935 that would include provisions for both unemployment insurance and old-age security.  An administration approved bill was in fact introduced in January and Roosevelt called for quick Congressional action.  The bill was revised in April by a House committee and given a new name, “The Social Security Act.”  After additional revisions the Social Security Act was approved by overwhelming majorities in both Houses of Congress, and the legislation was signed by the President on August 14, 1935.

The Social Security Act was a complex piece of legislation.  It included what we now call Social Security, a federal old-age benefit program; a program of unemployment benefits administered by the states, and a program of federal grants to states to fund benefits for the needy elderly and aid to dependent children.  It was a cautious beginning, as explained by Edwin E. Witte, the Executive Director and Secretary of the President’s Committee on Economic Security:

Because we were in the midst of a deep depression, the Administration and Congress were very anxious to avoid placing too great burdens on business and also to avoid adding to Government deficits. It was these considerations that resulted in the low beginning social security tax rates and the step-plan of the introduction of both old-age and unemployment insurance and also in the establishment of completely self-financed social insurance programs, without Government contributions–to this day a distinctive feature of social insurance in this country.

Before examining the way Roosevelt’s concerns for the well-being of business placed limits on the timeliness, coverage, and support provided by these programs, it is important to recognize that, as with the WPA, Roosevelt’s commitment to social security was a response to the efforts of the Communist Party (CP), which authored a far more progressive bill, one that would have significantly shifted the balance of class power towards workers.

The CP began pushing its Workers Unemployment Insurance Bill in the summer of 1930, and it, as well as the Unemployment Councils, worked hard to promote it over the following years.  On March 4, 1933, the day of Roosevelt’s inauguration, they organized demonstrations stressing the need for action on unemployment insurance.

Undeterred by Roosevelt’s lack of action, the CP authored a bill–the Workers Unemployment and Social Insurance Bill–that was introduced in Congress in February 1934 by Representative Ernest Lundeen of the Farmer-Labor Party.  In broad brush, as Chris Wright summarizes, the bill:

provided for unemployment insurance for workers and farmers (regardless of age, sex, or race) that was to be equal to average local wages but no less than $10 per week plus $3 for each dependent; people compelled to work part-time (because of inability to find full-time jobs) were to receive the difference between their earnings and the average local full-time wages; commissions directly elected by members of workers’ and farmers’ organizations were to administer the system; social insurance would be given to the sick and elderly, and maternity benefits would be paid eight weeks before and eight weeks after birth; and the system would be financed by unappropriated funds in the Treasury and by taxes on inheritances, gifts, and individual and corporate incomes above $5,000 a year. Later iterations of the bill went into greater detail on how the system would be financed and managed.

Not surprisingly, the bill enjoyed strong support among workers, employed and unemployed.  Thanks to the efforts of unemployed and union activists it was soon endorsed by 5 international unions, 35 central labor bodies, and more than 3000 local unions.  Rank and file worker committees also formed across the country to pressure members of Congress to pass it.

When Congress refused to act on the bill, Lundeen reintroduced it in January 1935. Because of public pressure, the bill became the first unemployment insurance plan in US history to be recommended by a congressional committee, in this case the House Labor Committee.  It was voted down in the full House of Representatives, 204 to 52.

Roosevelt strongly opposed the Lundeen bill and it was to provide a counter that he established his Committee on Economic Security in July 1934 and pressed Congress to approve the resulting Social Security Act as quickly as possible.  Roosevelt’s Social Security Act fell far short of what the Workers Unemployment and Social Insurance Bill offered, and it was strongly opposed by movement activists and organizations of the unemployed.

The part of the bill that established what we now call Social Security suffered from five main weaknesses.  First, it was to be self-financing because of administration fears of deficit spending, a decision which placed downward pressure on benefit levels.  Second, it was to be financed by contributions from both workers and employers.  Thus, workers had to shoulder half the costs of the program.

Third, the system was not universal.  The act covered only workers in commerce and industry, about half the jobs in the economy.  Among those left out were farm and domestic workers.

Fourth, the act provided for monthly retirement benefits payable only to the primary worker in a family when they retired at age 65 or older. Moreover, the amount received depended on the value of wages earned in covered employment starting in 1937.

Finally, the act mandated that monthly benefit payments would not begin until 1942.  A 1939 amendment did allow benefit payments to begin in 1940 and added child, spouse, and survivor benefits to the authorized retirement benefits.

In sum, this was a program that offered too little, too late, and to too few people.  And while improvements were made over the years, the current system pales in comparison to the kind of security and humane retirement workers would have enjoyed if the workers’ movement had been powerful enough to secure passage of its preferred bill.

The unemployment system established as part of the Social Security Act was also structured in ways unfavorable to workers compared with the proposed benefits of the Workers Unemployment and Social Insurance Bill.  Rather than set up a comprehensive national system of unemployment compensation, as workers desired, the act established a federal-state cooperative system that gave states wide latitude in determining standards.

More specifically, the act levied a uniform national pay-roll tax of 1 percent in 1936, 2 percent in 1937, and 3 percent in 1938, on covered employers, defined as those employers with eight or more employees for at least twenty weeks, not including government employers and employers in agriculture.  Only workers employed by a covered employer could receive benefits.

Covered employers were given a federal credit on up to 90 percent of the tax if they paid their credit amount into a certified state unemployment compensation fund.  The act left it to the states to decide whether to enact their own plans, and if so, to determine eligibility conditions, the waiting period to receive benefits, benefit amounts, minimum and maximum benefit levels, duration of benefits, disqualifications, and other administrative matters. It was not until 1937 that programs were established in every state as well as the then-territories of Alaska and Hawaii.  And it was not until 1938 that most began paying benefits.

In the early years, most states required eligible workers to wait 2 to 4 weeks before drawing benefits, which were commonly set at half recent earnings (subject to weekly maximums) for a period ranging from 12 to 16 weeks. Ten state laws called for employee contributions as well as employer contributions.

Just like with social security, over the following years the program was expanded in a number of positive ways, including by expanding coverage and benefits.  However, the unemployment program established by the Social Security Act fell far short of the universal, progressively funded social safety net that workers were demanding.

The National Labor Relations Act

In the spring of 1934, Senator Robert Wagner introduced a bill to establish a new labor relations board that, unlike the one established by the First New Deal’s National Industrial Recovery Act (NIRA), would have enforcement authority.  Few in Congress supported the bill; President Roosevelt also opposed it.

Wagner reintroduced a revised version of his bill a year later and to a dramatically different outcome.  In May 1935 it received unanimous support in the Senate Labor Committee, followed by strong support in both the Senate and House.  As reported by the editors of Who Built America?, President Roosevelt remained opposed to the bill up until the very end:

“It ought to be on the record,” his labor secretary noted, that the bill was “not a part of the President’s program.  It did not particularly appeal to him when it was described to him.”  But when the US Supreme Court struck down the NIRA in May and Wagner’s National Labor Relations bill was passed by one house of Congress, FDR finally endorsed the bill.

In broad brush, the National Labor Relations Act established a set of laws and regulations designed to guarantee the right of private sector workers to peacefully organize into trade unions of their choosing and engage in collective bargaining and actions such as strikes.  The act also created the National Labor Relations Board to organize and oversee the process by which workers decide on whether to join a union as well as determine whether collective bargaining agreements are being fairly bargained and enforced.

The turnaround in support for the NLRA owes much to the growing militancy of workers, and the threat that this militancy posed to the established order.  Section 7a of the NIRA had promised workers that they would “have the right to organize and bargain collectively through representatives of their own choosing . . . free from the interference, restraint, or coercion of employers.”  Unfortunately, with no mechanism to ensure that workers would be able to exercise this right, after a short period of successful union organizing, companies began violently repressing genuine union activity. By 1935, growing numbers of workers were calling the National Recovery Administration (NRA), which had been established to oversee the NIRA, the National Run Around.

However, it was not the corporate campaign of violence directed against workers that was the catalyst for the change in government policy.  Rather it was the explosion of powerful left-led worker victories in three major labor struggles in early 1934.  The first was in Toledo, Ohio, where American Workers’ Party sponsored unemployed organizations joined with striking auto workers seeking to unionize a major auto parts manufacturer.  The workers battled special deputies and National Guard troops for weeks, maintaining an effective strike.  Fearful of the possibility of an even larger strike, the Roosevelt administration finally sent federal mediators to Toledo, forcing the company to recognize the union and agree to significant wage increases.

At almost the same time, an even bigger struggle began in Minneapolis. A Trotskyist-led Teamster local, fighting to unionize a number of trucking and warehouse companies, effectively shut down commercial transport in the city.  Days of violence followed as police and special deputies tried to break the strike.  Faced with a growing threat of a general strike, federal mediators again were forced to intervene, and again forced the employers to recognize the union.

A general strike did take place in San Francisco.  Led by Communist and other radical rank and file activists, San Francisco longshoremen rejected a secretly negotiated deal between the national leadership of the International Longshoremen’s Association and the waterfront employers.  Their strike was quickly joined by dockworkers in every other West Coast port as well as many sailors and waterfront truckers.

Police attempts to break the San Francisco strike led to a full-scale battle and the death of two strikers by police on what became known as Bloody Thursday.  In response, the labor movement declared a general strike.  Some 150,000 workers went out, essentially bringing San Francisco, Oakland, Berkeley and other nearby municipalities, to a halt.  Again, federal intervention was required to bring the strike to a halt, with a victory for the workers.

These struggles, all with important left leadership, showed a dramatic growth in worker militancy, solidarity, and radicalism that sent shock waves throughout the corporate community as well as the government.  And it was to head off the further radicalization of the labor movement that the Congress and Roosevelt agreed to support the NLRA and its mechanisms to regularize the unionization process.  In the words of Steve Fraser:

The Wagner Act helped institutionalize a form of industrial democracy that steered clear of any frontal assault on the underlying political economy. It legitimated collective bargaining, imposed responsibilities on both management and trade union officialdom, and worked to establish peace on the shop floor.

Union leaders were to police their members, instilling a disciplined commitment to the terms of the contract. Control of life on the shop-floor remained with management. Militants who thought otherwise were soon enough reigned in. The much-maligned (not without cause) trade union bureaucracy was, after all, the fruit of a mass movement, an institution, created where there had been nothing, the slowly solidified residue of fiery desires.

For a few years, it appeared that worker militancy, a willingness to directly challenge corporate rights with no concern for issues of legality, would continue despite the NLRB’s existence.  For example, in early 1936 rubber workers in Akron, Ohio disregarded both union leadership and a court injunction to surround the eleven-mile perimeter of a Goodyear plant with pickets.  They shut down the plant in protest over recent wage cuts and layoffs of activists and rejected federal attempts at mediation.  When word came that the sheriff might come with armed deputies to open the plat, the strikers armed themselves.  Finally, after four weeks, Goodyear settled, agreeing to reinstate the fired workers, reduce the workweek, and recognize the authority of union shop committees.

Not long after, inspired by the rubber workers, auto workers began staging walk-outs and strikes at several different Chrysler and GM plants over firings and unionization.  The biggest action came at the end of 1936 with the Flint sit-down strike.  The workers held the plant for 44 days, during which time they fought off attempts by armed police to evict them and ignored injunctions issued by the courts demanding that they leave.  In the end GM agreed to recognize the UAW as the exclusive bargaining representative for all GM workers.

The number of strikes grew dramatically from 2,014 in 1935 to 4,740 in 1937, with workers increasingly winning unionization not through the machinery of the NLRA, but through direct action.  For example, the number of sit-down strikes lasting more than a day grew from 48 in 1936 to some 500 in 1937.

Unfortunately, this upward trajectory of militant, class conscious activity would not be sustained.  The reasons are complex.  One part of the explanation concerns the evolving political orientation of the CP.  Responding to the new strategic orientation of the Communist International, which stressed the importance of building coalitions with all progressive and liberal forces to check the rise of fascism, the CP began pursuing an anti-fascist popular front policy that included support for Roosevelt’s 1936 re-election and the New Deal more generally.

This new orientation also translated into an increasingly conservative line regarding labor activism.  Party activists were encouraged not only to support the new CIO union leadership but also to oppose militant organizing tactics.  As Frances Fox Piven and Richard A. Cloward describe:

The Communists, by now well into their Popular Front phase and some of them into the union bureaucracy as well, endorsed the call for union discipline. Wyndham Mortimer issued a statement early in 1937 saying: “Sit-down strikes should be resorted to only when absolutely necessary.” And the Flint Auto Worker, edited by Communist Henry Kraus, editorialized that “the problem is not to foster strikes and labor trouble. The union can only grow on the basis of established procedure and collective bargaining.”

At the same time, corporate leaders were taking direct aim at the new labor reforms.  One of their first big victories was a 1938 Supreme Court ruling that said companies had the right to hire permanent replacement workers when workers went on strike.  The following year it ruled sit-down strikes illegal, even if undertaken in response to an illegal corporate action.

States also joined in.  In 1939, as Piven and Cloward report:

state legislatures began to pass laws prohibiting some kinds of strikes and secondary boycotts, limiting picketing, outlawing the closed shop, requiring the registration of unions, limiting the amount of dues unions could charge, and providing stiff jail terms for violations of the new offenses. By 1947 almost all of the states had passed legislation imposing at least some of these limitations.

Finally, corporate leaders also launched an anti-Communist attack against union activists, especially those in leadership positions in the newly created unions of the CIO.  Their efforts were amplified by House Un-American Activities Committee hearings which began in 1938.  The 1947 Taft–Hartley Act codified all these developments, outlawing wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, and closed shops, as well as requiring union officers to sign non-communist affidavits as a condition for their union to secure NLRA rights.

In sum, as left and union leadership began to rely ever more heavily on the NLRA to win gains for workers, corporate and political elites began aggressively narrowing the acceptable boundaries of legal action.  As a consequence, although there would still be periods of worker militancy, the frequency of rank and file-led actions, open rebellion against the law, and moments of cross-union and class solidarity became increasingly rare.  Thus, the NLRB succeeded, as its supporters hoped, in creating a more stable system of labor relations that was consistent with and supportive of the needs of capitalist production.

The Movement’s Decline

The workers movement of the 1930s was a mass movement that, thanks to left leadership, encouraged class solidarity and support for a program of radical social change.  The movement was, as described in this and past posts, powerful enough to force the Roosevelt administration into adopting successively more progressive programs that, although flawed, did improve working and living conditions for many.

However, even as its different political tendencies began to unify, creating a national organization of the unemployed, the movement began to suffer a loss of militancy and vision that left it unable to further influence political developments.  As a consequence, the reforms of the Second New Deal came to define the limits of change.

In 1934 the Communist Party organized Unemployed Councils tightened their organizational form, finally adopting a written constitution.  In early 1935, Socialist Party organized unemployed organizations and a number of Musteite organized Unemployed Leagues joined together to create a national organization of the unemployed, the Workers Alliance.  The following year, the Workers Alliance reached agreement with the Unemployed Councils and several other small unemployed organizations to form a new, larger national organization of the unemployed, the Workers Alliance of America (WAA). This unity was possible in large part because of the CP’s newly adopted popular front policy which led it to seek alliances with other political tendencies and groups that were seen as anti-fascist.  This included the Socialist Party and Muste’s Conference for Progressive Labor Action and their associated movements of unemployed.

The Workers Alliance of America, critical of the WPA, continued to fight for the unemployed and those on relief.  For example, when the Roosevelt administration announced planned cuts in WPA employment for 1937, the organization organized a number of sit-ins and demonstrations at city relief offices throughout the country.  The President, under pressure from big city mayors, rescinded the cuts.

However, defending an existing program is not the same as winning a new, improved one.  And this the movement could not do for several reasons.  One is that the rank and file base of the unemployed movement was shrinking because of the growth in the economy and the expansion in relief opportunities.  Another is that many of the movement’s most experienced activists were now employed as organizers in the growing trade union movement.

A third reason is that changes in the relief system undermined the movement’s ability to mobilize the unemployed and win gains through collective action.  The system had become professionalized, with relief officials in city after city establishing rules about the size of delegations that would be allowed in offices and the number of times each week that delegations could seek meetings with officials. Moreover, relief office workers were instructed not to meet clients if they were accompanied by a delegation or grant relief if a delegation was present in the office.

This left local unemployed organizers in the position of either accepting the new ground rules to ensure that their members received relief or continuing their mass activity hoping that their old strategy would be more effective in winning gains.   Increasingly, members advocated for the former, leaving organizers with no choice.  In fact, as a sign of the growing sophistication of the New Deal relief effort, a number of relief offices actually offered jobs to local activists with the unemployed movement with the promise that they could help make the system work more efficiently and effectively for those seeking relief.  In many cases, those offers were accepted.

Perhaps the most important reason for the movement’s growing political weakness was the Communist Party’s decision to pursue an alliance with the Roosevelt administration as part of its anti-fascist popular front policy.  This led the party to organize support for Roosevelt’s 1936 election and his New Deal policies, and to deemphasize oppositional and militant mass actions in support of social transformation in favor of more established political activity such as petition drives and lobbying for improvements in existing programs. In fact, hoping to win Roosevelt’s good will, the CP often organized rallies designed to show worker support for the WPA and other New Deal programs.  Roosevelt was actually invited to give the main speech at the WAA’s second annual convention.  When he turned down the invitation the honor was given to the WPA’s Director of Labor Relations. In 1938, WAA locals even campaigned for pro-New Deal candidates.

Increasingly the WAA became integrated into the New Deal.  As Piven and Cloward point out:

The [WAA became] recognized as the official bargaining agent for WPA workers, and alliance leaders now corresponded frequently with WPA administrators, communicating a host of complaints, and discussing innumerable procedural questions regarding WPA administrative regulations. Some of the complaints were major, having to do with pay cuts and arbitrary layoffs. Much of the correspondence, however, had to do with minute questions of procedure, and especially with the question of whether WPA workers were being allowed to make up the time lost while attending alliance meetings. Alliance leaders also wrote regularly to the president, reviewing the economic situation for him, deploring cuts in WPA, and calling for an expansion of the program.

The WAA continued to make demands on the administration, drafting their own bills calling for greater public spending and employment at union wages, advocating for their own far more sweeping social insurance program, and calling for the establishment of a national planning agency to oversee a permanent public works program.  But the movement no longer threatened Roosevelt, and its demands were largely ignored.  The WAA dissolved itself in 1941.

The labor movement, riding the growth in the economy, soon replaced the unemployed movement as the most powerful social force for change.  However, for reasons noted above, it also underwent its own moderation despite the efforts of rank and file activists.  For example, CIO leaders established Labor’s Non-Partisan League in 1936 to support President Roosevelt’s reelection and his New Deal program. World War II; the post-war vicious anti-communist attacks on all critics of capitalism, especially in the labor movement; and the strength of the post-war economic expansion finally buried the promise of a radical transformation.  There would be no transformative Third New Deal.

Lessons

The New Deal experience holds a number of important lessons for those advocating a Green New Deal.  First, the existence or even recognition of a crisis cannot be counted on to motivate a change in government policy if that change threatens the status quo.  It took years of mass organizing to force the federal government to acknowledge its responsibility to respond to the devastating social consequences of the Great Depression.  The challenge will be even greater today since, as opposed to the 1930s, the capitalist class continues to enjoy lucrative opportunities for profit-making.

Second, a broad-base mass movement that threatens the stability of the system can force a significant change in government policy.  The driving force for change in the 1930s was the movement of unemployed, and its early power came from the Communist Party’s ability to establish a network of local Unemployed Councils that provided unemployed workers with the opportunity to better understand the cause of their hard times, build class solidarity through collective actions in defense of local needs, and become part of broader campaigns for public policies on the national level that were directly responsive to their local concerns.

It is likely that activists for a Green New Deal will have to engage in a similar process of movement building if they hope to force a meaningful government response to our current crises.  Despite the fact that we face a number of interrelated social, economic, and ecological crises, activists must still find ways to weave together different local organizations engaged in collective actions in defense of their local needs into a nation-wide political force able to project a vision of responsive system change as well as define and fight for associated policies.

Third, government responses to political pressure can be expected to fall far short of movement demands for transformative change.  The Roosevelt administration’s First New Deal programs fell far short of what working people demanded and needed.  It took sustained organizing to win a Second New Deal, which while better, was still inadequate.  It the movement for a Green New Deal succeeds in forcing government action, it is safe to assume that, much as in the 1930s, the policies implemented will be partial and inadequate.  Thus, movement activists have to prepare participants for a long, and ongoing campaign of mobilization, organizational development, and pressure.

Fourth, because of the importance of government policy and the natural attraction of wanting to exert personal influence on it, movement activists must remain vigilant against becoming too tied to the government bureaucracy, thereby losing their political independence and weakening the movement’s capacity to continue pushing for further changes in state policy.  WAA leaders understandably wanted to influence New Deal policy, but their growing embrace of the Roosevelt administration, pursued for broader political objectives as well, ended up weakening the movement’s organizational strengthen and effectiveness and perhaps even more importantly, vision of a more egalitarian and democratic society. Green New Deal activists can be expected to face the same kind of pressures if a progressive government comes to power and begins to initiate its own reform program and movements must be alert to the danger.

Fifth, and finally, movements have to be careful not to become too policy oriented. The New Deal included a number of different programs each designed to address different problems.  This created a natural tendency for the different organizations that comprised the broader social movement to narrow their own focus and concentrate on finding ways to respond to the policy shortcomings that most affected their members.  Thus, while the unemployed, those on relief, and those fighting for unionization initially shared a sense of common struggle, over time, in large measure because of their success in winning reforms, they became separate movements, each with their own separate concerns. As a consequence, the overall power, unity, and commitment of the broader social movement for massive societal change was weakened.

This is a challenge that the movement for a Green New Deal can expect to face if it is successful enough to force meaningful government reforms, especially given the multiplicity of the challenges the country faces. The only way to minimize this challenge is to ensure that movement organizing, from the very beginning, encourages participants to see the need for the broader transformative change inspired by the notion of a Green New Deal, and to draw from their struggle an ever more concrete understanding of how that change can be advanced and how real improvement in their lives depends on its achievement.

What the New Deal can teach us about winning a Green New Deal: Part IV—Keeping the pressure on the state

Advocates for a Green New Deal, pointing to ever-worsening and interrelated environmental, economic, and social problems, seek adoption of a complex and multifaceted state-directed program of economic transformation.  Many point to the original New Deal–highlighting the federal government’s acceptance of responsibility for fighting the depression and introduction of new initiatives to stabilize markets, expand relief, create jobs producing public goods and services, and establish a system of social security–to make it easier for people to envision and support another transformative state effort to solve a major societal crisis.

While the New Deal experience might well inspire people to believe in the possibility of a Green New Deal, the way that experience is commonly presented may well encourage Green New Deal supporters to miss what is most important to learn from it and thus weaken our chances for advancing a meaningful and responsive Green New Deal.  Often the New Deal experience is described as a set of interconnected government policies that were implemented over a short period of time by a progressive government determined to end an economic crisis.  This emphasis on government policy encourages current activists to focus on developing policies appropriate to our contemporary crisis and on electing progressive leaders to implement them.

In reality, as discussed in Part I, Part II, and Part III of this series, despite the enormous negative social consequences of the Great Depression, it took sustained organizing, led by a movement of the unemployed, to transform the national political environment and force the federal government to accept responsibility for improving economic conditions.  Even then, the policies of the Roosevelt administration’s First New Deal were most concerned with stabilizing business conditions under terms more favorable to business than workers.  Its relief and job creation policies were minimal and far from what the movement demanded or was needed to meet majority needs.

As I argue in this post, it took continued mass organizing to force the Roosevelt administration to implement, two years later, its Second New Deal, which included its now widely praised programs for public works, social security, and union rights.  However, as important and unprecedented as these programs were, they again, as we will see in the next post, fell short of what working people were demanding at the time.

Thus, the most important take-away from this history is that winning a meaningful Green New Deal will require more than well-constructed policy demands and the election of a progressive president.  It will require building a left-led mass movement that prepares people for a long struggle to overcome expected state and corporate resistance to the needed transformative changes.  And a careful study of the New Deal experience can alert to the many challenges and strategic choices we are likely to confront in our movement building efforts as well as the many policy twists and turns we are likely to face as the federal government and corporate sector respond to our demands for a Green New Deal.

The failings of the First New Deal

The First New Deal, as important and innovative as it was, offered no meaningful solution to the crisis faced by working people.  The economy had hit bottom in early 1933 and was beginning to recover.  But although national income grew by one-quarter between 1933 and 1934, it was still only a little more than half of what it had been in 1929.  Some ten million workers remained without jobs and almost twenty million people remained at least partially dependent on relief.

As discussed in Part III, Roosevelt’s First New Deal relief and job programs, were, by design, inadequate to address the ongoing social crisis.  For example, the Federal Emergency Relief Administration (FERA) did provide the first direct federal financing of state relief.  But because the program required matching state funds, many states either refused to apply for FERA grants or kept their requests small. Moreover, because state governments were determined to minimize their own financial obligations and not undermine private business activity, those that did receive relief were subject to demeaning investigations into their personal finances and relief payments were kept small and often limited to coupons exchangeable only for food items on an approved list.

The Civil Works Administration (CWA), created under FERA’s umbrella, was a far more attractive program.  Most importantly, participation was not limited to those on relief. And the program offered meaningful, federally organized, work for pay.  However, with millions of workers seeking to participate in the program, Roosevelt, determined to keep the federal budget deficit small, refused to fund it beyond six months.

Many workers were also critical of one of the First New Deal’s most important efforts to promote economic recovery: the National Industrial Recovery Act (NIRA).  The NIRA suspended anti-trust laws and encouraged companies to engage in self-regulation through industry organized wage and price controls, and the establishment of production quotas and restrictions on market entry.  Workers saw this act as rewarding the same business leaders that were responsible for the Great Depression.

To appease trade union leaders, Section 7a of the NIRA included the statement that “employees shall have the right to organize and bargain collectively through representatives of their own choosing . . . free from the interference, restraint, or coercion of employers.”  Unfortunately, no mechanism was included to ensure that workers would be able to exercise this right, and after a short period of successful union organizing, companies began violently repressing genuine union activity.

Another key First New Deal initiative, The Agricultural Adjustment Act, was also unpopular.  It sought to strengthen the agricultural sector by paying farmers to take land out of production, thus lowering the supply of agricultural goods and boosting their price. However, most of the land that was taken out of production had been used by poor African American sharecroppers and tenant farmers.  Thus, the policy ended up rewarding the bigger farmers and punishing the poorest.

In short, the programs of the First New Deal, coming almost four years after the start of the Great Depression, fell far short of what workers needed and wanted.  And, they did little to slow the on-going mass organizing.

The unemployed movement continues

As described in Part II, the Communist Party (CP) was fast off the mark in organizing the unemployed.  As early as August 1929, two months before the stock market crash, it had begun work on the creation of a nationwide organization of Unemployed Councils (UCs).  The UCs grew fast, uniting and mobilizing the unemployed, who engaged in locally organized fights for relief and against evictions in many parts of the country.  The CP and the UCs also organized several national mobilizations in support of federal unemployment insurance and emergency relief assistance as well as a 7-hour workday and an end to discrimination against African American and foreign-born workers.

The Socialist Party (SP) and the Muste-led Conference of Progressive Labor Action (CPLA) each had their own organizations concerned with the unemployed.  But they were few in number and initially not engaged in the kind of direct organizing of the unemployed and direct action practiced by the UCs.  SP organizations concentrated on educating the population about the causes of unemployment and the need for national action to combat it.  While CPLA organizations did include the unemployed, they were mostly focused on promoting self-help activities for survival.  However, beginning in 1933, both the SP and CPLA began to change their approach, and their respective organizations began to operate much like the CP’s Unemployed Councils.

The SP sponsored Chicago Workers Committee on Unemployment began the turn towards direct organizing of the unemployed and a commitment to direct action.  By 1933 it had 67 locals in Chicago as well as some in other nearby cities.  Committees in other states, primarily in the Midwest, soon followed Chicago’s example.  And in November 1933, these more activist committees came together to found a new, Midwest-centered organization, the Unemployed Workers League of America.

The SP’s New York organizations of unemployed were also growing in number.  Several came together in 1933 to form the Workers Unemployed League, which later merged with other organizations in the state to become the Workers Unemployed Union.  This group eventually merged with groups in other East Coast states to form the Eastern Federation of the Unemployed and Emergency Workers.  Socialist Party-led unemployed organizations held multi-state demonstrations in their areas of strength in March 1933 and November 1934 to demand new and more expansive programs of federal relief and job creation.

The Musteites began their own turn to more militant unemployed organizing in early 1933.  By July 1933 their Unemployed Leagues (ULs) claimed 100,000 members in Ohio, 40,000 in Pennsylvania, and 10,000 more in West Virginia, New Jersey, and North Carolina.  That same month, their ULs formed a national organization to coordinate their work, the National Unemployed League.

The CPLA dissolved itself in December 1933, as activists established a new, more radical organization, the American Workers Party (AWP).  Reflecting this change, delegates to the National Unemployed League’s second national convention in 1934 formally rejected the organization’s past reliance on self-help activities and private relief and declared their opposition to capitalism.

The ULs, like the UCs, engaged in mass sit-ins at relief offices to overturn negative decisions by relief officials.  One sit-in in Pittsburgh lasted 59 days.  They also organized mass resistance to court ordered evictions, blocking sheriffs when possible or returning furniture to an evictees home if it had been removed.   ULs in several cities also engaged in direct appropriate of food from government warehouses in line with their slogan, “Give Us Relief, Or We’ll Take It.”  The AWP, like its processor, had a strong presence in the Midwest, but was never able to extend its influence or build networks of Uls outside that region.

Not only did the programs of the First New Deal not slow unemployed organizing, the unemployed movement began increasingly taking on a unified national character as unemployed activists from the three different political tendencies gradually began working together, often against the mandates of their leaders. The extent and militance of unemployed activism made it difficult for governments–local, state, and national–to rest easy.  For one thing, it highlighted a growing radicalization of the population, as more and more people demonstrated their willingness to openly challenge the legitimacy of the police, the court system, and state institutions.

Relief worker organizing

The First New Deal greatly expanded the number of people on relief, and the CP quickly began organizing relief workers in 1934, followed shortly by the SP and CPLA.  The CP sponsored Relief Workers Leagues (RWLs) targeted those receiving FERA relief funds or employed by the CWA. In addition to organizing grievance committees to fight discrimination, especially against African American, single, and foreign-born workers, the RLWs fought for timely payment of relief wages, higher pay for relief work with cost of living adjustments, free transportation to work sites and free medical care, and a moratorium on electric and gas charges for those on relief.

They also sent delegations to Washington D.C. to protest wage discrimination or low wages and organized in support of the CP’s call for a national Unemployment Insurance Bill.  Local RWL members also joined with the unemployed in marches on state capitals and on picket lines outside welfare offices to demand more employment opportunities and more money for relief.  League members were especially aggressive in protesting against the termination of the CWA.

Nels Anderson, director of Labor Relations for the Works Progress Administration (WPA), provides a good feeling for the work of RWL members:

They parade; they protest; they make demands; they write millions of letters to officials. . . . They are irreconcilable . . . they never stop asking.  They state their demands in every conceivable way.  They crowd through the doors of every relief station and every WPA office.  They surround social workers on the street.

Although not as large or as developed as the unemployment movement, the organization and activities of relief worker organizations were not easy to ignore and made it difficult for the Roosevelt administration to tout the success of its First New Deal initiatives.

Organizing for a national Unemployment Insurance Bill

The CP also continued to organize for a national Unemployment Insurance Bill.  The CP and the UCs had declared National Unemployment Insurance Day on Feb 4, 1932 with activities in many cities.  It was also the major demand of the second national Hunger March in late 1932.  On March 4, 1933, the day of Roosevelt’s inauguration, they organized demonstrations stressing the need for action on unemployment insurance.

Undeterred by Roosevelt’s lack of action, the CP authored a bill that was introduced in Congress in February 1934 by Representative Ernest Lundeen of the Farmer-Labor Party.  Not surprisingly, the Workers Unemployment and Social Insurance Bill was strongly supported by the UCs as well SP and Musteite organizations of unemployed.  And as a result of the efforts of activists from these and other organizations it was soon formally endorsed by 5 international unions, 35 central labor bodies, and more than 3000 local unions.  Rank and file worker committees also formed across the country to pressure members of Congress to pass it.

In broad brush, the bill proposed social insurance for all the jobless, the sick, and the elderly without discrimination, at the expense of the wealthy.  More specifically, as Chris Wright summarizes, the bill:

provided for unemployment insurance for workers and farmers (regardless of age, sex, or race) that was to be equal to average local wages but no less than $10 per week plus $3 for each dependent; people compelled to work part-time (because of inability to find full-time jobs) were to receive the difference between their earnings and the average local full-time wages; commissions directly elected by members of workers’ and farmers’ organizations were to administer the system; social insurance would be given to the sick and elderly, and maternity benefits would be paid eight weeks before and eight weeks after birth; and the system would be financed by unappropriated funds in the Treasury and by taxes on inheritances, gifts, and individual and corporate incomes above $5,000 a year. Later iterations of the bill went into greater detail on how the system would be financed and managed.

When Congress refused to act on the bill, Lundeen reintroduced it in January 1935. Because of public pressure, the bill became the first unemployment insurance plan in US history to be recommended by a congressional committee, in this case the House Labor Committee.  It was voted down in the full House of Representatives, 204 to 52.

Roosevelt strongly opposed the Workers Unemployment and Social Insurance Bill, and so moved quickly to pressure Congress to write a social security bill he could support.  He created the President’s Committee on Economic Security in July 1934, which established the principles that formed the basis of the Social Security Act that was eventually signed into law as part of the Second New Deal.

Trade union organizing

As the economy continued to recover, and the unemployed were increasingly able to find jobs or gain relief, left groups began shifting their attention towards organizing the employed.  As one UL organizer who later became an organizer for the CIO explained, the goal was not a permanent organization of the unemployed. “We wanted the day to come when unemployed organizations would be done away with and there would only be organizations of employed workers.”

A number of unions, hoping to build on worker anger over employment conditions and the NIRA’s Section 7a, which many workers were encouraged to believe meant that the President supported unionization, launched lighting fast organizing drives.  And with good success.  The United Mine Workers was one.  For example, it took the union only one day after the NIRA became law to sign up some 80 percent of Ohio miners.  And it was able to press its advantage, aided by a series of wildcat strikes, to win gains for its members. The Amalgamated Clothing Workers and the International Ladies’ Garment Workers’ Union also grew quickly, with each winning significant employer concessions following a series of short strikes.

The following year saw an explosion of trade union organizing, including three major successful union struggles.  The first was in Toledo Ohio, which at the time was a major center for automobile parts manufacturing.  Organizing began in the summer 1933 at several parts plants.  In February 1934 some 4000 workers went out on strike.  It appeared that the strike would be settled quickly when one of the largest companies, Electric Auto-Lite, decided to oppose any deal.  The other companies quickly followed Electric Auto-Lite’s lead and the strike resumed.  With Electric Auto-Lite hiring scabs and maintaining production, it appeared the strike was lost.  Then, in May, the local UL, the unemployed organization of the American Workers’ Party, intervened.

It organized a mass picket line around Electric Auto-Lite, even though the courts had issued an injunction against third party picketing.  The local sheriff and special deputies arrested several picketers, beating one badly. In response, the UL and the union organized a bigger blockade of some 10,000 workers, trapping the strikebreakers inside the factory.

The “Battle of Toledo” was on.  In an effort to break the blockade, the sheriff and deputies used tear gas, water hoses, and guns.  The workers responded by stoning the plant and burning cars that were in the company parking lot.  The National Guard was called out and in the fighting that followed two picketers were killed.  Unable to break the strike, the plant was forced to close.  After two weeks of Federal mediation, the company and the union reached an agreement: the company recognized the union, boosted its minimum wage, and hiked average wages by 5 percent.

At almost the same time as the struggle began in Toledo, another major union battle started in Minneapolis.  In February 1934, the Trotskyist-led Teamster Local 574 organized a short successful strike, winning contracts with most of the city’s coal delivery companies.  The victory brought in many new members, both truckers and those who worked in warehouses.  In May, when employers refused to bargain with the union, some 5000 walked off their jobs. The union, well prepared for the strike, effectively shut down commercial transport in the city, allowing only approved farmers to deliver food directly to grocers.

The Citizen’s Alliance, composed of the city’s leading business people, tried to break the strike.  Police and special deputies trapped and beat several of the strikers.  The union responded with its own ambush.  The fighting continued over two days. A number of deputies and strikers were badly hurt, some from beatings and some from gunshots; two strikers died.  But the strike held. The National Guard was called in an attempt to restore order, and while they brought a halt to the fighting, their presence didn’t end the strike.

Other unions, especially in the building trades, began striking in solidarity with the Teamsters, and the threat of a general strike was growing.  After several weeks, with federal authorities applying pressure, the employers finally settled, signing a contract with the union.

A general strike did take place in San Francisco.  Passage of the NIRA had, much like in the coal industry, spurred a massive increase in union membership in West Coast locals of the International Longshoremen’s Association (ILA).  Led by left-wing activists, these locals began, in March 1934, organizing for a coastwide strike to win a shorter workweek, higher pay, union recognition, and a union-run hiring hall.  The threatened strike was soon called off by the top East Coast-based leadership of the ILA, following a request from Roosevelt.  They then secretly negotiated a new agreement with the employers that met none of the workers demands.

The San Francisco longshoremen rejected the deal and struck on May 9.  They were quickly joined by dockworkers in every other West Coast port as well as many sailors and waterfront truckers.  All totaled some 40,000 maritime workers stopped working.

Battles between the police and strikers who resisted the employers use of strikebreakers led to injuries in several ports and the death of one striker. Roosevelt tried again to end the strike, but without success.  On July 3, employers decided to use the police to break the picket line in San Francisco, and succeeded in getting a few trucks through.  They tried again on July 5, leading to a full-scale battle between the police and the strikers.  Two strikers were shot and killed on what became known as Bloody Thursday.

On the following day San Francisco longshoreman called for a general strike.  Teamster locals in both San Francisco and Oakland quickly voted to strike, despite the opposition of their leaders. On July 14, after a number of other unions had voted for a general strike, the San Francisco Labor Council endorsed the action. Some 150,000 workers went out, essentially bringing the city, as well as Oakland, Berkeley and other nearby municipalities, to a halt.  Police tried to break the strike by arresting strike leaders, but the workers held firm.  General Hugh S. Johnson, head of the National Recovery Administration, denounced the strike as a “bloody insurrection” and “a menace to the government.”

After three days, city union leadership, fearful of the growing radicalization of the strikers and worried about escalating threats from employers, called off the strike.  Local ILA unions were forced to accept federal arbitration, but in October, the arbitrator gave the workers most of what they had demanded.

These struggles showed a growth in worker militancy and radicalism that sent shock waves throughout the corporate community as well as the government. As Steve Fraser explains:

General strikes are rare and inherently political. While they last, the mechanisms and authority of the strike supplant or co-exist with those of the “legitimate” municipal government. . . . Barring actual revolution, power ultimately devolves back to where it came from. But the act of calling and conducting a general strike is a grave one. It may have no revolutionary aspirations, yet it opens the door to the unknown. That these two strikes [in Minneapolis and San Francisco] happened in the same year — 1934 — is a barometer of just how far down the road of anti-capitalism the working-class movement had traveled.

Corporate leaders, as the editors of the American Social History Project describe, did not just roll over in the face of this growing activism:

After the employers’ initial shock over Section 7a had worn off, executives in steel, auto, rubber, and a host of other industries followed a two-pronged strategy to forestall unionization: they established or revived company unions to channel workers discontent in nonthreatening directions, and the vigorously resisted organizing drives.

Textile employers were among the more ruthless in their response.  The largest strike in 1934 began in September when 376,000 textile workers from Maine to Alabama walked off their jobs. The employers hired spies, fired union activists, and had workers evicted from their company housing.  With the support of a number of governors, they also made use of the National Guard to break strikes.  Many strikers were injured in the violence that followed, some fatally.  The employers rejected a Roosevelt attempt at mediation and after three weeks, the union leadership ended the strike, having suffered a major defeat.

While a few unions were able to take advantage of the NIRA, most were not.  In fact, by early 1935, five hundred AFL local unions had been disbanded. Section 7a’s statement promising workers the right to organize freely turned out to be largely meaningless.  It was supposed to be enforced by a tripartite National Labor Board, but the board was given no real enforcement power, and it often refused to intervene in unionization struggles.  A number of industries, such as auto, were not even covered by it.  By 1935, growing numbers of workers were calling the National Recovery Administration (NRA), which had been established by the President to oversee the NIRA, the National Run Around.

Mounting pressure for a Second New Deal

With his First New Deal, Roosevelt demonstrated a willingness to experiment, but within established limits.  For example, he remained determined to limit federal budget deficits and minimize federal responsibility for relief and job creation.  Thus, his early initiatives failed to calm the political waters.

Economic improvements, while real, were not sufficient to satisfy working people.  Unemployment remained too high, relief programs remained too limited and punitive, and possibilities for improving wages and work conditions remained daunting for most of those with paid employment.  Consequently, left-led movements continued to successfully mobilize, educate, and radicalize growing numbers of workers around demands increasingly threatening to the status quo.

Also noteworthy as an indicator of the tenor of the times was Upton Sinclair’s 1934 run for governor of California.  His popular End Poverty in California movement advocated production for use and not for profit.  Among other things, it called for the state to purchase unused land and factories for use by the unemployed, allowing them to barter what they produced, as well as pensions for the poor and those over sixty years old, all to be financed by higher taxes on the wealthy and corporations.

More right-wing political movements were also gaining in popularity, feeding off of popular disenchantment with government policy.  For example, Senator Huey Long from Louisiana criticized Roosevelt for creating huge bureaucracies and supporting monopolization.  In 1934 he launched his Share Our Wealth Plan, which called for a system of taxes on the wealthy to finance guaranteed payments of between three to five thousand dollars per household and pensions for everyone over sixty.  He also advocated a thirty-hour work week and an eleven-month work-year.  His Share Our Wealth Clubs enjoyed a membership of some seven or eight million people, mostly in the South but also in the Midwest and mid-Atlantic states as well.

Frances Townsend, a retired doctor from California, had his own proposal.  His Townsend Plan called for giving every person over 60 who was not working $200 a month on the promise that they would spend it all during the month.  It also called for abolishing all other forms of Federal relief and was to be financed by a regressive national sales tax.  Within two years of the publication of his plan, over 3000 Townsend Plan Clubs, with some 2.2 million members, were organized all over the country and began pressuring Congress to pass it.

Despite political differences, all these movements–at least initially in the case of the movements promoted by Long and Townsend–tended to encourage a critical view of private ownership and wealth inequality and most business leaders blamed Roosevelt, and his First New Deal policies, for this development.  They were especially worried about the possibility of greater government regulation of their activities.  In 1934, a number of top business leaders resigned from Roosevelt’s Business Advisory Council and began exploring ways to defeat him in the presidential election of 1936.

In sum, by 1935 Roosevelt was well aware that he needed to act, and act decisively to reestablish his authority and popularity.  In some ways his decision to launch a more worker-friendly Second New Deal spoke to his limited choices.  Most business leaders had now made clear their opposition not only to his administration but to any new major federal initiatives as well.  In fact, in May 1935, the Supreme Court ruled the National Industrial Recovery Act unconstitutional.  It did the same with the Agricultural Adjustment Act in January 1936.

A do-nothing policy was unlikely to win back business support or strengthen Roosevelt’s political standing given the economy’s weak on-going economic expansion.  Thus, as Steve Fraser comments:

The Roosevelt administration needed new allies. To get them it would have to pay closer attention to the social upheavals erupting around the country. The center of gravity was shifting, and the New Deal would have to shift with it or risk isolation.

Roosevelt’s response was the Second New Deal.  His political acumen is well illustrated by the fact that the three signature achievements of the Second New Deal—the Works Progress Administration, the National Labor Relations Act, and the Social Security Act–not only responded to the demands of the mass movements organized by left political forces, but did so in a way that allowed him to take back the initiative from the left.

The Works Progress Administration, created in May 1935, provided meaningful work for millions of jobless workers, satisfying the demands of many of those in the unemployed and relief workers movements.  Moreover, unlike the earlier short-lived CWA that focused on public construction work, the Works Progress Administration also included a Federal Arts Project, a Federal Theater Project, a Federal Writers’ Project, and a Federal Music Project.

The National Labor Relations Act, passed in July 1935, created a framework for protecting the rights of private sector workers to organize into unions of their choosing, engage in collective bargaining, and take collective actions such as strikes.  Many trade unionists celebrated this act, believing that it would secure their rights to organize.  The Social Security Act passed in August 1935 established a system of old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance, and aid for dependent mothers and children, the blind, and the physically handicapped.  This was a direct response to the demands of the broad workers’ movement for a federally organized system of social protection.

However, as we will see in the next post, while the Second New Deal represented a major step forward for working people, each of these signature initiatives, as designed, fell short of what progressive movements demanded.  Unfortunately, changing political and economic conditions greatly weakened the left over the following years, leaving it unable to sustain its organizing and its pressure on the state.  As a consequence, not only was there no meaningful Third New Deal, the reforms of the Second New Deal have either ended (direct public employment), greatly weakened (labor protections), or come under attack (social security).

Lessons

The New Deal was not a program conceived and implemented at a moment in time by a government committed to transformative policies in defense of popular needs.  Rather, it encompassed two very different New Deals, with the Second far more progressive than the First.  Moreover, the Second New Deal did not emerge as a natural evolution of the First New Deal.  Rather as shown above, it was a largely a response to continued popular pressure from movements with strong left leadership.

This history holds an important lesson for those advocating for a Green New Deal.  It is unlikely that popular movements can win and secure full implementation of their demands for a Green New Deal at one historical moment.  Rather, if we succeed, it will take time.  However, as the history of the New Deal shows, the process of change is not likely to be advanced by advocating for modest demands in the belief that these can be easily won and that governments will be predisposed to extend and deepen the required interventions over time.  Rather, we need to build awareness that our political leaders will most likely respond to our efforts with reforms designed to blunt or contain our demands for change. Thus, it is necessary to put forward the most progressive demands that can win popular support at the time while preparing movement participants for the fact that the struggle to win meaningful transformative policies will be long and complex.

Another lesson from the New Deal experience is that movement building itself must also be a dynamic process, responding and transforming in response to political and economic developments.  It was the movement of unemployed that spearheaded the political pressures leading to the First New Deal.  First New Deal policies and the economic recovery then changed the organizing terrain, leading to new organizing of relief workers and trade unions.

At the same time, there were strong threads tying these movements together. One of the most important was that experiences in one, say the unemployed movement, provided an educational experience that helped create organizers able to spur the work of the newer movements, for example that of relief workers.  And because of all these movements owed much to the work of left political groups, there was a common vision that also tied them together and encouraged each to support the struggles of the other and join in support of even bigger demands, such as for a new system of social insurance.

Advocates of a Green New Deal need to pay careful attention to this organizing experience. Given the Green New Deal’s multidimensional concerns, achieving it will likely require organizing in many different arenas which may well require, at least at an early stage, organizing a number of different movements, each with their own separate concerns.  The challenge will be finding ways to ensure coordination, productive interactions and interconnections, and an emerging unified vision around big transformative demands.

What the New Deal can teach us about winning a Green New Deal: Part III—the First New Deal

In Part I and Part II of this series on lessons to be learned from the New Deal I argued that despite the severity of the Great Depression, sustained organizing was required to transform the national political environment and force the federal government to accept direct responsibility for financing relief and job creation programs. In this post, I begin an examination of the evolution and aims of New Deal programs in order to highlight the complex and conflictual nature of a state-directed reform process.

The New Deal is often talked about as if it were a set of interconnected programs that were introduced at one moment in time to reinvigorate national economic activity and ameliorate the hardships faced by working people.  Advocates for a Green New Deal, which calls for a new state-led “national, social, industrial, and economic mobilization” to confront our multiple interlocking problems, tend to reinforce this view of the New Deal.  It is easy to understand why: state action is desperately needed, and pointing to a time in history when it appears that the state rose to the occasion, developing and implementing the programs necessary to solve a crisis, makes it easier for people to envision and support another major effort.

Unfortunately, this view misrepresents the experience of the New Deal.  And, to the extent it influences our approach to shaping and winning a Green New Deal, it weakens our ability to successfully organize and promote the kind of state action we want.

The New Deal actually encompasses two different periods; the First New Deal was begun in 1933, the Second New Deal in 1935.  In both periods, the programs designed to respond to working class concerns fell far short of popular demands.  In fact, it was continued mass organizing, spearheaded by an increasingly unified unemployed movement and an invigorated trade union movement, that pushed the Roosevelt administration to initiate its Second New Deal, which included new and significantly more progressive initiatives.

Unfortunately, as those social movements lost energy and vision in the years that followed, pressure on the state for further change largely abated, leaving the final reforms won compromised and vulnerable to future attack.   The lesson from this history for those advocating for a Green New Deal is clear: winning a Green New Deal requires, in addition to carefully constructed policy demands, an approach to movement building that prepares people for a long struggle to overcome expected state efforts to resist the needed transformative changes.

The First New Deal

Roosevelt’s initial policies were largely consistent with those of the previous Hoover administration.  Like Hoover, he sought to stabilize the banking system and balance the budget.  On his first day in office Roosevelt declared a national bank “holiday,” dismissing Congressional sentiment for bank nationalization.  He then rushed through a new law, the Emergency Banking Act, which gave the Comptroller of the Currency, the Secretary of the Treasury, and the Federal Reserve new powers to ensure that reopened banks would remain financially secure.

On his sixth day in office, he requested that Congress cut $500 million from the $3.6 billion federal budget, eliminate government agencies, reduce the salaries of civilian and military federal workers, and slash veterans’ benefits by 50 percent.  Congressional resistance led to spending cuts of “only” $243 million.

Roosevelt remained committed, against the advice of many of his most trusted advisers, to balanced budget policies for most of the decade.  While his administration did boost government spending to nearly double the levels of the Hoover administration, it also collected sufficient taxes to keep deficits low.  It wasn’t until 1938 that Roosevelt proposed a Keynesian-style deficit spending plan.

At the same time, facing escalating demands for action from the unemployed as well as many elected city leaders, Roosevelt also knew that the status quo was politically untenable.  And, in an effort to halt the deepening depression and growing militancy of working people, he pursued a dizzying array of initiatives, most within his first 100 days in office.  The great majority were aimed at stabilizing or reforming markets, which Roosevelt believed was the best way to restore business confidence, investment, and growth.  This emphasis is clear from the following list of some of his most important initiatives.

  • The Agricultural Adjustment Act (May 1933). The act sought to boost the prices of agricultural goods. The government bought livestock and paid subsidies to farmers in exchange for reduced planting. It also created the Agricultural Adjustment Administration to manage the payment of subsidies.
  • The Securities Act of 1933 (May 1933). The act sought to restore confidence in the stock market by requiring that securities issuers disclose all information necessary for investors to be able to make informed investment decisions.
  • The Home Owners’ Loan Act of 1933 (June 1933). The act sought to stabilize the finance industry and housing industry by providing mortgage assistance to homeowners. It created the Home Owners Loan Corporation which was authorized to issue bonds and loans to help homeowners in financial difficulties pay their mortgages, back taxes, and insurance.
  • The Banking Act of 1933 (June 1933). The act separated commercial and investment banking and created the Federal Deposit Insurance Corporation to insure bank deposits, curb bank runs, and reduce bank failures.
  • Farm Credit Act (June 1933). The act established the Farm Credit System as a group of cooperative lending institutions to provide low cost loans to farmers.
  • National Industrial Recovery Act (June 1933). Title I of the act suspended anti-trust laws and required companies to write industrywide codes of fair competition that included wage and price fixing, the establishment of production quotas, and restrictions on market entry.  It also gave workers the right to organize unions, although without legal protection.  Title I also created the National Recovery Administration to encourage business compliance.  The Supreme Court ruled the suspension of anti-trust laws unconstitutional in 1935.  Title II, which established the Federal Emergency Administration of Public Works or Public Works Administration, is discussed below.

Roosevelt also pursued several initiatives in response to working class demands for jobs and a humane system of relief.  These include:

  • The Emergency Conservation Work Act (March 1933). The act created the Civilian Conservation Corps which employed jobless young men to work in the nation’s forests and parks, planting trees, reducing erosion, and fighting fires.
  • The Federal Emergency Relief Act of 1933 (May 1933). The act created the Federal Emergency Relief Administration to provide work and cash relief for the unemployed.
  • The Federal Emergency Administration of Public Works or Public Works Administration (June 1933). Established under Title II of the National Industrial Recovery Act, the Public Works Administration was a federally funded public works program that financed private construction of major public projects such as dams, bridges, hospitals, and schools.
  • The Civil Works Administration (November 1933).  Established by executive order, the Civil Works Administration was a short-lived jobs program that employed jobless workers at mostly manual-labor construction jobs.

This is without doubt an impressive record of accomplishments, and it doesn’t include other noteworthy actions, such as the establishment of the Tennessee Valley Authority, the ending of prohibition, and the removal of the US from the gold standard.  Yet, when looked at from the point of view of working people, this First New Deal was sadly lacking.

Roosevelt’s pursuit of market reform rather than deficit spending meant a slow recovery from the depths of the recession.  In fact, John Maynard Keynes wrote Roosevelt a public letter in December 1933, pointing out that the Roosevelt administration appeared more concerned with reform than recovery or, to be charitable, was confusing the former with the latter.  Primary attention, he argued, should be on recovery, and that required greater government spending financed by loans to increase national purchasing power.

Roosevelt also refused to address one of the unemployed movement’s major policy demands: the establishment of a federal unemployment insurance fund financed by taxes on the wealthy.  Finally, as we see next, even the New Deal’s early job creation and relief initiatives were deliberately designed in ways that limited their ability to meaningfully address their targeted social concerns.

First New Deal employment and relief programs

The Roosevelt administration’s first direct response to the country’s massive unemployment was the Civilian Conservation Corps (CCC).  Its enrollees, as Roosevelt explained, were to be “used in complex work, not interfering with normal employment and confining itself to forestry, the prevention of soil erosion, flood control, and similar projects.”  The project was important for establishing a new level of federal responsibility, as employer of last resort, for boosting employment.  Over its nine-year lifespan, its participants built thousands of miles of hiking trails, planted millions of trees, and fought hundreds of forest fires.

However, the program was far from meeting the needs of the tens of million jobless and their dependents.  Participation in the program was limited to unmarried male citizens, 18 to 25 years of age, whose families were on local relief, and who were able to pass a physical exam.  By law, maximum enrollment in the program was limited to 300,000.

Moreover, although the CCC provided its participants with shelter, clothing, and food, the wages it paid, $30 a month ($25 of which had to be sent home to their families), were low.  And, while white and black were supposed to be housed together in the CCC camps where participants lived under Army supervision, many of the camps were segregated, with whites given preference for the best jobs.

Two months later, the Roosevelt administration launched the Federal Emergency Relief Administration (FERA), the first program of direct federal financing of relief.  Under the Hoover administration, the federal government had restricted its support of state relief efforts to the offer of loans.  Because of the precariousness of their own financial situation, many states were unable to take on new debt, and were thus left with no choice but to curtail their relief efforts.

FERA, in contrast, offered grants as well as loans, providing approximately $3 billion in grants over its 2 ½ year lifespan. The grants allowed state and local governments to employ people who were on relief rolls to work on a variety of public projects in agriculture, the arts, construction and education.  FERA grants supported the employment of over 20 million people, or about 16 percent of the total population of the United States.

However, the program suffered from a number of shortcomings.  FERA provided funds to the states on a matching basis, with states required to contribute three dollars for every federal dollar.  This restriction meant that a number of states, struggling with budget shortfalls, either refused to apply for FERA grants or kept their requests small.

Also problematic was the program’s requirement that participants be on state relief rolls.  This meant that only one person in a family was eligible for FERA work.  And the amount of pay or relief was determined by a social worker’s evaluation of the extent of the family’s financial need.  Many states had extremely low standards of necessity, resulting in either low wages or inadequate relief payments which could sometimes be limited to coupons exchangeable only for food items on an approved list.

Finally, FERA was not directly involved in the administration and oversight of the projects it funded. This meant that compensation for work and working conditions differed across states.  It also meant that in many states, white males were given preferential treatment.

A month later, the Public Works Administration (PWA) was created as part of the National Industrial Recovery Act.  The PWA was a federal public works program that financed private construction of major long-term public projects such as dams, bridges, hospitals, and schools.  Administrators at PWA headquarters planned the projects and then gave funds to appropriate federal agencies to enable them to help state and local governments finance the work. The PWA played no role in hiring or production; private construction companies carried out the work, hiring workers on the open market.

The program lasted for six years, spent $6 billion, and helped finance a number of important infrastructure projects.  It also gave federal administrators valuable public policy planning experience, which was put to good use during World War II.  However, as was the case with FERA, PWA projects required matching contributions from state and local governments, and given their financial constraints, the program never spent as much money as was budgeted.

These programs paint a picture of a serious but limited effort on the part of the Roosevelt administration to help workers weather the crisis.  In particular, the requirement that states match federal contributions to receive FERA and PWA funds greatly limited their reach.  And, the participant restrictions attached to both the CCC and FERA meant that program benefits were far from adequate.  Moreover, because all of these were new programs, it often took time for administrators to get funds flowing, projects developed, participants chosen, and benefits distributed.  Thus, despite a flurry of activity, millions of workers and their families remained in desperate conditions with winter approaching.

Pressed to do more, the Roosevelt administration launched its final First New Deal jobs program in November 1933, the Civil Works Administration (CWA), under the umbrella of FERA.  It was designed to be a short-term program, and it lasted only 6 months, with most employment creation ending after 4 months.  The jobs created were primarily low-skilled construction jobs, improving or constructing roads, schools, parks, airports, and bridges. The CWA gave jobs to some 4 million people.

This was a dramatically different program from those discussed above.  Most importantly, employment was not limited to those on relief, greatly enlarging the number of unemployed who could participate.  At the end of Hoover’s term in office, only one unemployed person out of four was on a relief roll.  It also meant that participants would not be subject to the relief system’s humiliating means tests or have their wages tied to their family’s “estimated budgetary deficit.”  Also significant was the fact that although many of the jobs were inherited from current relief projects, CWA administrators made a real effort to employ their workers in new projects designed to be of value to the community.

For all of these reasons, jobless workers flocked to the program, seeking an opportunity to do, in the words of the time, “real work for a real wage.”   As Harry Hopkins, the program’s chief administrator, summed up in a talk shortly after the program’s termination:

When we started Civil Works we said we were going to put four million men to work.  How many do you suppose applied for those four million jobs? About ten million. Now I don’t say there were ten million people out of work, but ten million people walked up to a window and stood in line, many of them all night, asking for a job that paid them somewhere between seven and eighteen dollars a week.

In point of fact, there were some fifteen million people unemployed.  And as the demand for CWA jobs became clear, Roosevelt moved to end the program.   As Jeff Singleton describes:

In early January Hopkins told Roosevelt that CWA would run out of funds sooner than expected.  According to one account, Roosevelt “blew up” and demanded that Hopkins begin phasing out the program immediately.  On January 18 Hopkins ordered weekly wages cut (through a reduction in hours worked) and hinted that the program would be terminated at the beginning of March.  The cutback, coming at a time when the program had just reached its promised quota, generated a storm of protest and a movement in Congress to continue CWA through the spring of 1934.  These pressures helped the New Deal secure a new emergency relief appropriation of $950 million, but the CWA was phased out in March and April.

Lessons

The First New Deal did represent an important change in the economic role of the federal government.  In particular, the Roosevelt administration broke new ground in acknowledging federal responsibility for job creation and relief.  Yet, the record of the First New Deal also makes clear that the Roosevelt administration was reluctant to embrace the transformative role that many now attribute to it.

As Keynes pointed out, Roosevelt’s primary concern in the first years of his administration was achieving market stability through market reform, not a larger financial stake in the economy to speed recovery.  In fact, in some cases, his initiatives gave private corporations even greater control over market activity.

The Roosevelt administration response to worker demands for jobs and a more humane system of welfare was also far from transformative.  Determined to place limits on federal spending, its major initiatives required substantial participation from struggling state governments.  They also did little to challenge the punitive and inadequate relief systems operated by state governments.  The one exception was the CWA, which mandated wage-paying federally directed employment.  And that was the one program, despite its popularity, that was quickly terminated.

Of course, there was a Second New Deal, which included a number of important and more progressive initiatives, including the Works Progress Administration, the Social Security Act, and the National Labor Relations Act.  However, as I will discuss in the next post in this series, this Second New Deal was largely undertaken in response to the growing strength of the unemployed movement and workplace labor militancy.   And as we shall see, even these initiatives fell short of what many working people demanded.

One lesson to be learned from this history for those advocating a Green New Deal is that major policy transformations do not come ready made, or emerge fully developed.  Even during a period of exceptional crisis, the Roosevelt administration was hesitant to pursue truly radical experiments.  And the evolution of its policy owed far more to political pressure than the maturation of its administrative capacities or a new found determination to experiment.

If we hope to win a Green New Deal we will have to build a movement that is not only powerful enough to push the federal government to take on new responsibilities with new capacities, but also has the political maturity required to appreciate the contested nature of state policy and the vision necessary to sustain its forward march.

What the New Deal can teach us about winning a Green New Deal: Part I–Confronting Crisis

The New Deal has recently become a touchstone for many progressive efforts, illustrated by Bernie Sanders’ recent embrace of its aims and accomplishments and the popularity of calls for a Green New Deal.  The reasons are not hard to understand. Once again, growing numbers of people have come to the conclusion that our problems are too big to be solved by individual or local efforts alone, that they are structural and thus innovative and transformative state-led actions will be needed to solve them.

The New Deal was indeed a big deal and, given contemporary conditions, it is not surprising that people are looking back to that period for inspiration and hope that meaningful change is possible.  However, inspiration, while important, is not the same as seeking and drawing useful organizing and strategic lessons from a study of the dynamics of that period.

This is the first of a series of posts in which I will try to illuminate some of those lessons.  In this first post I start with the importance of crisis as a motivator of change.  What the experience of the Great Depression shows is that years of major economic decline and social devastation are not themselves sufficient to motivate business and government elites to pursue policies likely to threaten the status quo.  It was only after three and a half years of organizing had also created a political crisis, that the government began taking halting steps at serious change, marked by the policies associated with the First New Deal.  In terms of contemporary lessons, this history should serve to dispel any illusions that simply establishing the seriousness of our current multifaceted crisis will be enough to win elite consideration of a transformative Green New Deal.

The Great Depression

The US economy expanded rapidly throughout the 1920s, a period dubbed the Roaring Twenties. It was a time of rapid technological change, business consolidation, and wealth concentration.  It was also a decade when many traditional industries struggled, such as agriculture, textiles, coal, and shipbuilding, as did most of those who worked in them.  Growth was increasingly sustained by consumer demand underpinned by stock market speculation and debt.

The economy suffered a major downturn in 1920-21, and then mild recessions in 1924 and 1927.  And there were growing signs of the start of another recession in summer 1929, months before the October 1929 stock market collapse, which triggered the beginning of the Great Depression.  The collapse quickly led to the unraveling of the US economy.

The Dow Jones average dropped from 381 in September 1929 to forty-one at the start of 1932.  Manufacturing output fell by roughly 40 percent between 1929 and 1933.  The number of full-time workers at United States Steel went from 25,000 in 1929 to zero in 1933.  Five thousand banks failed over the same period.  Steve Frazer captured the extent and depth of the decline as follows: “In early 1933, thirty-six of forty key economic indicators had arrived at the lowest point they were to reach during the whole eleven grim years of the Great Depression.”

The resulting crisis hit working people hard.   Between 1930 and 1932, the number of unemployed grew from 3 million to 15 million, or approximately 25 percent of the workforce.  The unemployment rate for those outside the agricultural sector was close to 37 percent.  As Danny Lucia describes:

Workers who managed to hold onto their jobs faced increased exploitation and reduction in wages and hours, which made it harder for them to help out jobless family and friends. The social fabric of America was ripped by the crisis: One-quarter of children suffered malnutrition, birth rates dropped, suicide rates rose. Many families were torn apart. In New York City alone, 20,000 children were placed in institutions because their parents couldn’t support them. Homeless armies wandered the country on freight trains; one railroad official testified that the number of train-hoppers caught by his company ballooned from 14,000 in 1929 to 186,000 in 1931.

“Not altogether a bad thing”

Strikingly, despite the severity of the economic and social crisis, business leaders and the federal government were in no hurry to act.  There was certainly no support for any meaningful federal relief effort.  In fact, business leaders initially tended to downplay the seriousness of the crisis and were generally optimistic about a quick recovery.

As the authors of Who Built America (volume 2) noted:

when the business leaders who made up the National Economic League were asked in January 1930 what the country’s ‘paramount economic problems’ were, they listed first, ‘administration of justice,’ second, ‘Prohibition,” and third, ‘lawlessness.’ Unemployment was eighteenth on their list!

Some members of the Hoover administration tended to agree. Treasury Secretary Andrew Mellon thought the crisis was “not altogether a bad thing.”  “People,” he argued, “will work harder, live a more moral life.  Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”

President Hoover repeatedly stated that the economy was “on a sound and prosperous basis.”  The solution to the crisis, he believed, was to be found in restoring business confidence and that was best achieved through maintaining a balanced budget.  When it came to relief for those unemployed or in need, Hoover believed that the federal government’s main role was to encourage local government and private efforts, not initiate programs of its own.

At time of stock market crash, relief for the poor was primarily provided by private charities, which relied on donations from charitable and religious organizations.  Only 8 states had any type of unemployment insurance.  Not surprisingly, this system was inadequate to meet popular needs.  As the authors of Who Built America explained:

by 1931 most local governments and many private agencies were running out of money for relief.  Sometimes needy people were simply removed from the relief rolls.  According to one survey, in 1932 only about one-quarter of the jobless were receiving aid.  Many cities discriminated against nonwhites.  In Dallas and Houston, African-Americans and Mexican-Americans were denied any assistances.

It was not until January 1932 that Congress made its first move to strengthen the economy, establishing the Reconstruction Finance Corporation (RFC) to provide support to financial institutions, corporations, and railroads.  Six months later, in July, it approved the Emergency Relief and Construction Act, which broadened the scope of the RFC, allowing it to provide loans to state and local governments for both public works and relief.  However, the Act was structured in ways that undermined its effectiveness. For example, the $322 million allocated for public works could only be used for projects that would generate revenue sufficient to pay back the loans, such as toll bridges and public housing.  The $300 million allocated for relief also had to be repaid.  Already worried about debt, many local governments refused to apply for the funds.

Finally, as 1932 came to a close, some business leaders began considering the desirability of a significant federal recovery program, but only for business.  Most of their suggestions were modeled on World War I programs and involved government-business partnerships designed to regulate and stabilize markets.  There was still no interest in any program involving sustained and direct federal relief to the millions needing jobs, food, and housing.

By the time of Roosevelt’s inauguration in March 1933, the economy, as noted above, had fallen to its lowest point of the entire depression.  Roosevelt had won the presidency promising “a new deal for the American people,” yet his first initiatives were very much in line with the policies of the previous administration. Two days after his inauguration he declared a national bank holiday, which shut down the entire banking system for four days and ended a month-long run on the banks. The “holiday” gave Congress time to approve a new law which empowered the Federal Reserve Board to supply unlimited currency to reopened banks, which reassured the public about the safety of their accounts.

Six days after his inauguration, Roosevelt, who had campaigned for the Presidency, in part, on a pledge to balance the federal budget, submitted legislation to Congress which would have cut $500 million from the $3.6 billion federal budget.  He proposed eliminating government agencies, reducing the pay of civilian and military federal workers (including members of Congress), and slashing veterans’ benefits by 50 percent.  Facing Congressional opposition, the final bill cut spending by “only” $243 million.

Lessons

It is striking that some 3 ½ years after the start of the Great Depression, despite the steep decline in economic activity and incredible pain and suffering felt by working people, business and government leaders were still not ready to support any serious federal program of economic restructuring or direct relief.  That history certainly suggests that even a deep economic and social crisis cannot be counted on to encourage elites to explore policies that might upset existing structures of production or relations of power, an important insight for those hoping that recognition of the seriousness of our current environmental crisis might encourage business or government receptivity to new transformative policies.

Of course, we do know that in May 1933 Roosevelt finally began introducing relief and job creation programs as part of his First New Deal.  And while many factors might have contributed to such a dramatic change in government policy, one of the most important was the growing movement of unemployed and their increasingly militant and collective action in defense of their interests.  Their activism was a clear refutation of business and elite claims that prosperity was just around the corner.  It also revealed a growing radical spark, as more and more people openly challenged the legitimacy of the police, courts, and other state institutions.  As a result, what was an economic and social crisis also became a political crisis.  As Adolf Berle, an important member of Roosevelt’s “Brain Trust,” wrote, “we may have anything on our hands from a recovery to a revolution.”

In Part II, I will discuss the rise and strategic orientation of the unemployment movement, highlighting the ways it was able to transform the political environment and thus encourage government experimentation.  And I will attempt to draw out some of the lessons from this experience for our own contemporary movement building efforts.

The 1933 programs, although important for breaking new ground, were exceedingly modest.  And, as I will discuss in a future post, it was only the rejuvenated labor movement that pushed Roosevelt to implement significantly more labor friendly policies in the Second New Deal starting in 1935.  Another post will focus more directly on the development and range of New Deal policies in order to shed light on the forces driving state policy as well as the structural dynamics which tend to limit its progressive possibilities, topics of direct relevance to contemporary efforts to envision and advance a Green New Deal agenda.

Portrait of the 2009-2019 US expansion

June 2019 marks the 10th anniversary of the current US economic expansion.  If it makes it through July it will surpass the 1991-2001 expansion as the longest on record.  But while expansions are to be preferred over recessions, there are many reasons to view this record-breaking expansion critically.  In fact, the nature of this expansion, hopefully captured in the following portrait, highlights the growing inability of the US economic system, even when performing “well,” to meet majority needs.

Weak Growth

This has been a weak expansion in terms of growth.  By way of comparison, GDP grew by 43 percent over the first 39 quarters of the 1991-2001 expansion (which was the previous record holder).   In the first 39 quarters of this expansion, through March 2019, GDP grew by only 22 percent.

At its current pace, the current expansion would have to run six more years to equal the aggregate growth of the 1991-2001 expansion, and nine more years to match the 54 percent aggregate GDP growth recorded over the 1961-69 expansion.  The figure below illustrates the relative weakness of the current expansion in terms of growth.

Strong corporate profits

At the same time, weak growth did little to dampen corporate earnings.  As we can see in the following figure, corporate earnings have been on the rise since 2001, reaching their maximum in 2015.  While pre-tax profits have leveled off, after tax profits, thanks to the recent Trump tax cut, have resumed their upward march.

We see a similar trend in the figure below which shows corporate profits as a share of GDP.

After-tax corporate profits will likely turn down again soon, as the effects of the tax cut are already weakening, indicating the end to this expansion is not far off.

Weak wage growth

The suppression of wages is one of the main reasons that corporations were able to enjoy such strong profits despite weak growth.  The figure below shows the collapse of labor’s share of corporate income.  The trend began during the 2001-2009 expansion but accelerated during this expansion.  Even more striking, the share has remained low despite the many years of expansion.

The wage stagnation underlying this trend is illustrated more directly in the next figure.

As we can see, there have been only two recent periods when workers (outside those in the 95th percentile) enjoyed real gains: 1997-2001 and 2015-2017.  Both periods were marked by very low rates of unemployment and followed long periods of expansion during which wages remained largely unchanged.  It is worth noting that both periods were also marked by a decline in corporate profits, suggesting that corporations cannot long tolerate any kind of upward movement in majority earnings.

For reasons that remain unclear, wage growth in 2019 has slowed.  The Federal Reserve Board, always keen to make sure that wages remain low to ensure profitability, began pushing up interest rates in late 2015 in response to the rising wage levels noted above.  The recent wage slowdown has, at least temporarily, caused the Fed to halt its interest rate hikes, which will likely help extend the expansion.

Employment struggles

The dramatic decline in unemployment is perhaps the most celebrated achievement of this expansion.  As we can see in the figure below, the unemployment rate steadily fell over the expansion, from a high of 10 percent down to a low of 3.6 percent as of May 2019.  Such a low level suggests a very tight labor market, which makes the wage stagnation difficult to explain.  The likely answer is that the current low level of unemployment is a poor measure of labor tightness.

A better measure appears to be the labor force participation rate, which is calculated as the civilian labor force (i.e., those employed and those unemployed and actively looking for work) divided by the civilian noninstitutional population (i.e., those not in the military or institutionalized). The figure below also shows the labor force participation rate for those 16 years and older.

As we can see, the current labor force participation rate of 62.8 percent remains significantly below its 2008 peak and even further below the even higher peak reached at the turn of the century.  The decline in the labor force participation rate means that millions of workers have yet to return to the labor force, either to hold a job or to look for one.

The seriousness of this problem is highlighted by the labor force participation rate of the prime age cohort, those 25-54 years of age.  Their core status stems from the fact that, as Jill Mislinski explains,

This cohort leaves out the employment volatility of the high-school and college years, the lower employment of the retirement years and also the age 55-64 decade when many in the workforce begin transitioning to retirement … for example, two-income households that downsize into one-income households.

In the figure below we can see that the labor force participation rate of the prime age cohort remains significantly below its two previous peaks.  The fact that millions of prime age workers have yet to return to the labor market is a strong indicator that labor market conditions remain far from ideal despite years of economic expansion.

Weak Investment

One reason for the slow growth and associated weak job creation is that business has been reluctant to invest.  Instead, they have been content to use a growing share of their earnings to fund dividend payments and stock buybacks.  The following chart, taken from a Federal Reserve Board study of the relationship between corporate capital investment and net stock buybacks, shows a post-2000 downward trend in business investment as a share of GDP and a rise in the value of dividend payments and stock buybacks as a share of GDP.

While the Federal Reserve study concludes that it is difficult to determine whether “corporations are actively reducing investment in order to finance share repurchases and dividend payments . . . [or] pessimism about future demand and economic growth is leading corporations to defer capital spending, and companies are simply returning cash to their shareholders for want of attractive investment opportunities,” there can be no question that there has been a noticeable change in business behavior.

For example, as can see below, whereas in the past nonfinancial corporations invested up to 40 percent of their cash flow back into their business, that share has fallen below 20 percent for most of the current expansion.  In other words, the lack of investment has nothing to do with a shortage of funds.

As the Federal Reserve study points out, business has been funneling ever more of its earnings, through dividends and stock buybacks, to its top managers and stockholders.  According to the New York Times, “From 2008 to 2017, 466 S.&P. 500 companies distributed $4 trillion to shareholders as buybacks, equal to 53 percent of profits, along with $3.1 trillion as dividends.”  Beyond slowing growth and job creation, such a policy has helped to drive income and wealth inequality to record levels, ensuring that those at the top remain content with the economy’s performance despite the problems faced by most working people.

The following figure, from another Federal Reserve Board study, this one titled A Wealthless Recovery?, highlights the extremely uneven distribution of rewards during this expansion.  The authors of the report grouped working-age households into four different groups according to their reported “usual income.”  As we can see from the blue bars, the Great Recession left all groups with substantially less wealth.  However, as we can see from the green bars, which extend the period under analysis to 2016,  (which includes many years of expansion), only the top income group enjoys a gain in wealth.  In other words, the expansion has done little to help the bottom 90 percent of working-age households recover the wealth they lost during the Great Recession.

Austerity

Sustained fiscal austerity is another reason for the slow growth during this expansion. The figure below shows the cumulative growth in per capita spending by federal, state, and local governments following the troughs of the 11 recessions since World War II.  As Josh Bivens explains:

Astoundingly, per capita government spending in the first quarter of 2016—twenty-seven quarters into the recovery—was nearly 4.9 percent lower than at the trough of the Great Recession. By contrast, 27 quarters into the early 1990s recovery, per capita government spending was 3.6 percent higher than at the trough; 24 quarters after the early 2000s recession (a shorter recovery that did not last a full 27 quarters), it was almost 10 percent higher; and 27 quarters into the early 1980s recovery, it was more than 17 percent higher.

If government spending in this expansion had followed the pattern of previous recoveries, public spending would have been far greater, not only boosting demand and employment but ensuring provision of needed public services.  As Bivens points out,

If government spending following the Great Recession’s end had tracked the spending that followed the early 1980s recession—the only other postwar recession of similar magnitude—governments in 2016 would have been spending almost a trillion dollars more in that year alone.

State and local governments are primarily responsible for this austerity.  In many cases, their actions were the result of tax cuts enacted to benefit the wealthy and leading corporations that left state and local governments short of revenue.  Limited by balanced budget requirements, most ended up slashing spending on social services.  As a consequence, the brunt of austerity has been borne by working people.

Summing up 

This is far from a complete portrait of the current expansion.  Yet, it still clearly reveals how the logic of capitalism works against the interests of the great majority of working people, even during a long period of profitable economic activity.  A recession awaits, and then our troubles will intensify.  Key to our ability to build a popular democratic response in defense of majority interests may well be how people evaluate the benefits of remaining committed to an economic system that that undermines their well-being in multiple ways even when it is functioning well.

Making excuses for unemployment: The myth of a “skills gap”

It has taken ten years of expansion, but the US unemployment rate has finally fallen below 4 percent.  However, this low rate of unemployment presents a somewhat misleading picture of labor tightness.  For example, both the labor force participation rate and employment to population ratio remain significantly below previous highs, making clear that the economy is far from full employment.

The current labor force participation rate of prime age workers, those 25-54 years, is a case in point.  It remains below the previous peak rate in 2008, and even further below the peak rate at the turn of the century.  We would need an additional 1.2 million employed prime age workers to match the 2008 labor force participation rate and 2.5 million more to match the turn of the century rate.  Still it appears that at the present moment unemployment is no longer a major political issue.

That said, since we can be confident that this expansion will end and unemployment will once again become a serious problem, it is worth revisiting how mainstream economists and government policy makers treated the high rates of unemployment that marked the first five years of this expansion. In brief, and perhaps not surprisingly, most tended to explain away the slow decline in the unemployment rate by blaming workers themselves.  More specifically, they cited a “skills gap.”

As Matthew Yglesias describes:

Five or six years ago, everyone from the US Chamber of Commerce to the Obama White House was talking about a “skills gap.”

The theory here was that high unemployment reflected a structural shift in the labor market such that jobs were available, but workers simply didn’t have the right education or training for them. Harvard Business Review ran articles about this — including articles rebutting people who said the “skills gap” didn’t exist — and big companies like Siemens ran paid sponsor content in the Atlantic explaining how to fix the skills gap.

However, as Yglesias notes, the skills gap story doesn’t hold up.  Yes, business did complain for years that they found it hard to hire workers with the experience and skills they wanted.  But the fact is, as three economists demonstrate in their recently published paper, there was no real skills gap.  Rather, business just took advantage of the high rates of unemployment to jack up their skill requirements.  And as the unemployment rate gradually fell, they lowered them, which ended talk of the skills gap.  In short, employment problems are system generated, not worker caused.

The study

In “Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?,” the economists Alicia Sasser Modestino, Daniel Shoag, and Joshua Ballancee used a proprietary dataset of 36.2 million online job postings aggregated by Burning Glass Technologies (BGT).  BGT “aggregates detailed information daily on more than 7 million online job openings from over 40,000 sources including job boards, newspapers, government agencies, and employer sites.” It also extracts details from the posted advertisements, allowing analysis according to 70 job characteristics, including job title, employer name, location, and the level of education and years of experience required. About half of the BGT postings include employer name.  The authors tapped the BGT dataset to carry out three different tests to determine whether employer job requirements, specifically education and experience requirements, changed in response to changes in the supply of available workers over the years 2007 to 2014.

They first tested whether education and experience requirements grew more in states and occupations that experienced greater increases in the supply of available workers, measured both by state unemployment rates and by state labor supply/labor demand ratios.  Then they carried out the same test, but this time looking at individual firms and their job requirements for specific job titles.

For both tests, the authors also used several control variables, including “the share of the state population with a bachelor’s degree in 2000 and the average age of the state population in 2000 to account for both heterogeneity in the pre-existing pool of skilled labor available to employers, as well as the initial share of openings requiring a particular skill in 2007 to account for heterogeneity across state × occupation cells.”

As a final check of their work, the authors made use of a “labor shock” that was uncorrelated with underlying economic trends: the drawdown of troops from Iraq and Afghanistan between 2009 and 2012. The authors examined “whether state × occupation cells receiving larger numbers of returning veterans correspondingly experienced a greater increase in their skill requirements.”

The results

In the first test the authors examined whether changing labor market conditions influenced “the share of postings requiring a bachelor’s degree or greater and the share of postings requiring at least four years of experience.”  And they found a strong relationship:

within a six-digit detailed occupation, a 1 percentage point increase in the state unemployment rate is associated with a 0.64 percentage point increase in the share of job postings requiring a bachelor’s degree and a 0.84 percentage point increase in the share of job postings requiring at least four years of experience. How large is the upskilling effect in terms of economic importance? In the context of the most recent downturn, our results imply that the nationwide increase in unemployment rates between 2007 and 2010 raised education requirements within occupations by 3.2 percentage points and raised experience requirements by 4.2 percentage points, respectively. Relative to the observed increases in skill requirements . . . during this period, our estimates suggest that changes in employer skill requirements due to the increased availability of workers during the business cycle can account for up to 30 percent of the total increase for education and nearly 50 percent of the total increase for experience.

Their findings of a strong relationship between labor slack and increased skill requirements are illustrated in the following two figures.

The second test also found a positive relationship between employer skill requirements and labor market slack even when limited to a consideration of the same job title at the same employer in the same state.  As the authors state:

Controlling for firm × job-title pairs within a state, we find that a one percentage point increase in the state unemployment rate raises the share of jobs postings requiring a bachelor’s degree by 0.505 percentage points and the share of job postings requiring at least four years of experience by 0.483 percentage points.

As for the labor shock of returning veterans, the authors again found “a strong, significant, and positive relationship between the sharp increase in the supply of returning veterans and the rise in employer skill requirements for both education and experience.”

The takeaway

The claim of a skills gap was widely embraced by those looking to deflect attention from capitalism’s growing inability to generate adequate employment even during years of economic expansion.  If the problem is a skills gap, then the responsibility for solving the problem rests on the shoulders of workers themselves, who will have to do a better job of keeping up with the times.  However, as Yglesias notes in his article summary, “the skills gap was the consequence of high unemployment rather than its cause. With workers plentiful, employers got choosier.”

Unemployment rates will rise again, and papers like “Upskilling: Do Employers Demand Greater Skill When Workers Are Plentiful?” are helpful for preparing us to challenge those whose arguments serve to defend a system that has grown ever more unresponsive to majority needs.