Making the Green New Deal real: lessons from the World War II conversion experience

The Green New Deal has become a rallying cry for activists seeking to build a mass movement capable of addressing our ever worsening, and increasingly interrelated, climate and social crises.  Building such a movement is no simple task, but I believe that our organizing efforts can greatly benefit from a careful study of the rapid transformation of the US economy from civilian to military production during World War II. 

In two recent publications, with links below, I describe and evaluate the planning process responsible for the wartime transformation and offer my thoughts on some of the key lessons to be learned. In what follows I highlight some of the reasons why I believe Green New Deal advocates would benefit from careful study of the wartime experience.

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Realizing a Green New Deal: Lessons from World War II

Many activists in the United States support a Green New Deal transformation of the economy in order to tackle the escalating global climate crisis and the country’s worsening economic and social problems.  At present, the Green New Deal remains a big tent idea, with advocates continuing to debate what it should include and even its ultimate aims.[1]  Although perhaps understandable given this lack of agreement, far too little attention has been paid to the process of transformation.  That is concerning, because it will be far from easy.

One productive way for us to sharpen our thinking about the transformation is to study the World War II-era mobilization process. Then, the U.S. government, facing remarkably similar challenges to the ones we are likely to confront, successfully converted the U.S. economy from civilian to military production in a period of only three years.

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The planning and politics of conversion: World War II lessons for a Green New Deal

This is the first in a series of posts that aim to describe and evaluate the World War II mobilization experience in the United States in order to illuminate some of the economic and political challenges we can expect to face as we work for a Green New Deal.  

This post highlights the successful government directed wartime reorientation of the U.S. economy from civilian to military production, an achievement that both demonstrates the feasibility of a rapid Green New Deal transformation of the U.S. economy and points to the kinds of organizational capacities we will need to develop. The post also highlights some of the strategies employed by big business to successfully stamp the wartime transformation as a victory for “market freedom,” an outcome that strengthened capital’s ability to dominate the postwar U.S. political economy and suggests the kind of political struggles we can expect and will need to overcome as we work to achieve a just Green New Deal transformation.

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The Green New Deal and the State: Lessons from World War II—Part II

There is growing interest in a Green New Deal, but far too little discussion among supporters about the challenging nature of the required economic transformation, the necessary role of public planning and ownership in shaping it, or the strategies necessary to institutionalize a strong worker-community voice in the process and final outcome. In this two-part series I draw on the experience of World War II, when the state was forced to direct a rapid transformation from civilian to military production, to help encourage and concretize that discussion.

In Part I, I first discussed the need for a rapid Green New Deal-inspired transformation and the value of studying the U.S. experience during World War II to help us achieve it. Then, I examined the evolution, challenges, and central role of state planning in the wartime conversion to alert us to the kind of state agencies and capacities we will need to develop. Finally, I highlighted two problematic aspects of the wartime conversion and postwar reconversion which we must guard against: the ability of corporations to strengthen their dominance and the marginalization of working people from any decision-making role in conversion planning.

Here in Part II, I discuss the efforts of labor activists to democratize the process of transformation during the war period in order to sharpen our thinking about how best to organize a labor-community movement for a Green New Deal.  During this period, many labor activists struggled against powerful political forces to open up space for new forms of economic planning with institutionalized worker-community involvement.  The organizing and movement building efforts of District 8 leaders of the United Electrical, Radio & Machine Workers of America (UE), as described by Rosemary Feuer in her book Radical Unionism in the Midwest, 1900-1950, stand out in this regard.  Although their success was limited, there is much that we can learn from their efforts.

Organizing for a worker-community planned conversion process

District 8 covered Missouri, Iowa, Kansas, Arkansas, southern Indiana and southern and western Illinois, and UE contracts in that area were heavily weighted towards small and medium sized firms producing mechanical and electrical products.  As the government began its war time economic conversion in 1941, its policy of suppressing civilian goods and rewarding big corporations with defense contracts hit the firms that employed UE members hard.

The UE response was to build a labor and community-based effort to gain control over the conversion process. In Evansville, Indiana, the UE organized a community campaign titled “Prevent Evansville from Becoming a Ghost Town.”  As Feurer explains,

District 8’s tentative proposal called upon union and civic and business leaders to request the establishment of a federal program that would “be administered through joint and bona fide union-management-government cooperation” at the local level. It would ensure that before reductions in the production of consumer goods were instituted, government must give enough primary war contracts and subcontracts to “take up the slack” of unemployment caused in cities such as Evansville. It also proposed that laid-off workers would get “first claim on jobs with other companies in the community,” while excessive overtime would be eliminated until unemployment was reduced.

District 8 organizers pressed Evansville’s mayor to gather community, labor, and business representatives from all over the Midwest to discuss how to manage the conversion to save jobs.  They organized mass petition drives and won endorsements for their campaign from many community groups and small businesses.  Persuaded, Evansville’s mayor contacted some 500 mayors from cities with populations under 250,000 in eleven midwestern states, requesting that they send delegations of “city officials, labor leaders, managers of industry and other civic leaders” to a gathering in Chicago.  Some 1500 delegates attended the September meeting.

The conference endorsed the UE’s call for a significant role for labor in conversion planning, specifically “equal participation of management and labor in determining a proper and adequate retraining program and allocation of primary and sub-contracts. . . [And that] all possible steps be taken to avoid serious dislocations in non-defense industries.”  A committee of seven, with two labor representatives, was chosen to draw up a more concrete program of action.

One result was that Evansville and Newton, Iowa (another city with a strong UE presence) were named “Priority Unemployment Plan” areas, and allowed to conduct “an experiment for community-based solving of unemployment and dislocations caused by war priorities.”  The plan restricted new plant construction if existing production capacity was considered sufficient, encouraged industry-wide and geographical-based pooling of production facilities to boost efficiency and stabilize employment, required companies to provide training to help workers upgrade their skills, and supported industry-wide studies to determine how to best adapt existing facilities for military production.

William Sentner, the head of District 8, called for labor to take a leading role in organizing community gatherings in other regions and creating regional planning councils. Unfortunately, CIO leaders did little to support the idea. Moreover, once the war started, unemployment stopped being a serious problem and the federal government took direct control over the conversion process.

Organizing for a worker-community planned reconversion process

As the war began to wind down, District 8 leaders once again took up the issue of conversion, this time conversion back to a peacetime economy.  In 1943, they got the mayor of St. Louis to create a community planning committee, with strong labor participation, to discuss future economic possibilities for the city.  In 1944, they organized a series of union conferences with elected worker representatives from each factory department in plants under UE contract throughout the district, along with selected guests, to discuss reconversion and postwar employment issues.

At these conferences District 8 leaders emphasized the importance of continued government planning to guarantee full employment, but also stressed that the new jobs should be interesting and fulfilling and the workweek should be reduced to 30 hours to allow more time for study, recreation, and family life.  They also discussed the importance of other goals: an expansion of workers’ rights in production; labor-management collaboration to develop and produce new products responsive to new needs; support for women who wanted to continue working, in part by the provision of nurseries; and the need to end employment discrimination against African Americans.

While these conferences were taking place, the Missouri River flooded, covering many thousands of acres of farmland with dirt and sand, and leaving thousands of people homeless.  The US Army Corps of Engineers rushed to take advantage of the situation, proposing a major dredging operation to deepen the lower Missouri River channel, an effort strongly supported by big shipping interests.  It became known as the Pick Plan. Not long after, the Bureau of Reclamation proposed a competing plan that involved building a series of dams and reservoirs in the upper river valley, a plan strongly supported by big agricultural interests. It became known as the Sloan Plan.

While lower river and upper river business interests battled, a grassroots movement grew across the region opposing both plans, seeing them, each in their own way, as highly destructive.  For example, building the dams and reservoirs would destroy the environment and require the flooding of hundreds of thousands of acres, much of it owned by small farmers, and leave tens of thousands of families without homes.

Influenced by the growing public anger, newspapers in St. Louis began calling for the creation of a new public authority, a Missouri Valley Authority (MVA), to implement a unified plan for flood control and development that was responsive to popular needs.  Their interest in an MVA reflected the popularity of the Tennessee Valley Authority (TVA), an agency created in 1933 and tasked with providing cheap electricity to homes and businesses and addressing many of the region’s other development challenges, such as flooding, land erosion, and population out-migration.  In fact, during the 1930s, several bills were submitted to Congress to establish other river-based regional authorities.  Roosevelt endorsed seven of them, but they all died in committee as the Congress grew more conservative and war planning took center stage in Washington DC.

District 8, building on its desire to promote postwar regional public planning, eagerly took up the idea of an MVA.  It issued a pamphlet titled “One River, One Plan” that laid out its vision for the agency.  As a public agency, it was to be responsive to a broad community steering committee; have the authority to engage in economic and environmental planning for the region; and, like the TVA, directly employ unionized workers to carry out much of its work.  Its primary tasks would be the electrification of rural areas and flood control through soil and water conservation projects and reforestation.  The pamphlet estimated that five hundred thousand jobs could be created within five years as a result of these activities and the greater demand for goods and services flowing from electrification and the revitalization of small farms and their communities.

District 8 used its pamphlet to launch a community-based grassroots campaign for its MVA, which received strong support from many unions, environmentalists, and farm groups.  And, in August 1944, Senator James Murray from Montana submitted legislation to establish an MVA, written largely with the help of District 8 representatives.  A similar bill was submitted in the House.  Both versions called for a two-year planning period with the final plan to be voted on by Congress.

District 8 began planning for a bigger campaign to win Congressional approval.  However, their efforts were dealt a major blow when rival supporters of the Pick and Sloan plans settled their differences and coalesced around a compromise plan.  Congress quickly approved the Pick-Sloan Flood Control Act late December 1944 but, giving MVA supporters some hope that they could still prevail, Senator Murray succeeded in removing the act’s anti-MVA provisions.

District 8 leaders persuaded their national union to assign staff to help them establish a St. Louis committee, a nine-state committee, and a national committee to support the MVA. The St. Louis committee was formed in January 1945 with a diverse community-based steering committee.  Its strong outreach effort was remarkably successful, even winning support from the St. Louis Chamber of Commerce.  Feurer provides a good picture of the breadth and success of the effort:

By early 1945, other city-based committees were organizing in the nine-state region. A new national CIO committee for an MVA laid plans for “reaching every CIO member in the nine-state region on the importance of regionally administered MVA.  In addition, other state CIO federations pledged to organize for an MVA and to disseminate material on the MVA through local unions to individual members.  Further the seeds planted in 1944 among AFL unions were beginning to develop into a real coalition.  In Kansas City, the AFL was “circulating all the building trades unions in the nine states for support” to establish a nine-state buildings trades MVA committee. Both the AFL and CIO held valley wide conferences on the MVA to promote and organize for it.

Murray submitted a new bill in February 1945, which included new measures on soil conversation and the protection of wild game, water conservation, and forest renewal. It also gave the MVA responsibility for the “disposal of war and defense factories to encourage industrial and business expansion.”

But the political tide had turned.  The economy was in expansion, the Democratic Party was moving rightward, and powerful forces were promoting a growing fear of communism.  Murray’s new bill was shunted to a hostile committee and big business mounted an unrelenting and successful campaign to kill it, arguing that the MVA would establish an undemocratic “super-government,” was a step toward “state socialism,” and was now unnecessary given passage of the Pick-Sloan Flood Control Act.

Drawing lessons

A careful study of District 8’s efforts, especially its campaign for an MVA, can help us think more creatively and effectively about how to build a labor-community coalition in support of a Green New Deal.  In terms of policy, there are many reasons to consider following District 8 in advocating for regionally based public entities empowered to plan and direct economic activity as a way to begin the national process of transformation.  For example, many of the consequences of climate change are experienced differently depending on region, which makes it far more effective to plan regional responses.  And many of the energy and natural resources that need to be managed during a period of transformation are shared by neighboring states.  Moreover, state governments, unions, and community groups are more likely to have established relations with their regional counterparts, making conversation and coordination easier to achieve.  Also, regionally organized action would make it much harder for corporations to use inter-state competition to weaken initiatives.

Jonathan Kissam, UE’s Communication Director and editor of the UE News, advocates just such an approach:

UE District 8’s Missouri Valley Authority proposal could easily be revived and modernized, and combined with elements of the British proposal for a National Climate Service. A network of regional Just Transition Authorities, publicly owned and accountable to communities and workers, could be set up to address the specific carbon-reduction and employment needs of different regions of the country.

The political lessons are perhaps the most important.  District 8’s success in building significant labor-community alliances around innovative plans for war conversion and then peacetime reconversion highlights the pivotal role unions can, or perhaps must, play in a progressive transformation process.  Underpinning this success was District 8’s commitment to sustained internal organizing and engagement with community partners.  Union members embraced the campaigns because they could see how a planned transformation of regional economic activity was the only way to secure meaningful improvements in workplace conditions, and such a transformation could only be won in alliance with the broader community.  And community allies, and eventually even political leaders, were drawn to the campaigns because they recognized that joining with organized labor gave them the best chance to win structural changes that also benefited them.

We face enormous challenges in attempting to build a similar kind of working class-anchored movement for a Green New Deal-inspired economic transformation.  Among them: weakened unions; popular distrust of the effectiveness of public planning and production; and weak ties between labor, environmental, and other community groups.  Overcoming these challenges will require our own sustained conversations and organizing to strengthen the capacities of, and connections between, our organizations and to develop a shared and grounded vision of a Green New Deal, one that can unite and empower the broader movement for change we so desperately need.

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.

We Need To Strengthen The Public In The US Public Sector

Many people have given up on the idea of government as an instrument of progressive social change, especially the federal government.  They think that the federal government is dominating and distorting economic activity and, more often than not, believe that the cause is a bloated, highly paid, and selfish federal workforce.

In fact, federal programs are increasingly being delivered by private contractors.  As a result, private employees doing work for the federal government now outnumber the federal workforce.  Moreover, in most cases, they are paid far more than the public employees they replace.  And, as more federal work is carried out under the direction of profit-seeking firms, there is good reason to believe that programs are reshaped to ensure that it is the private rather than public interest that is best served.

The declining share of federal workers

As a Public Goods Post explains:

the federal government workforce has not increased in absolute numbers in half a century. Not only is it the same size now as it was in the 1960s, since the 1980s it has shrunk. There are actually fewer government employees now than there were under Reagan even though the population has grown by over 30%.

As a consequence, as we see below, the size of the federal workforce as a share of the total civilian non-farm workforce has steadily fallen.  It is now less than 2 percent of the total.

The growth in private contractors

While the size of federal workforce has remained relatively unchanged for decades, the same is not true for real federal government spending on consumption and investment, as seen in the figure below.

So, how has the federal government been able to boost its activity with a relatively unchanged workforce?  The answer is an explosion in the use of private contractors.

According to the Public Goods Post,

the federal contractor workforce dwarfs the federal employee workforce nearly four-fold.

This massive third-party workforce has been mostly hidden from public view, kept intentionally out of sight by corporations and their lobbyists who have the most to gain, as well as by elected officials who want to claim that they are not growing government. Moreover, federal corporate contractors operate behind a shield of secrecy, enabled by their de facto exemption from the Freedom of Information Act (FOIA), and ensuring that they can operate without public scrutiny.

Fattening the corporate sector at public expense

This outsourcing of federal activities to private firms is likely an important reason for people’s dissatisfaction with government: they are far more expensive and their goal is profit not service.

A Project on Government Oversight study examined compensation paid to federal and private sector employees, as well as annual billing rates for contractor employees across 35 occupational classifications covering over 550 service activities.

It found, among other things, that:

Federal government employees were less expensive than contractors in 33 of the 35 occupational classifications reviewed.

Private sector compensation was lower than contractor billing rates in all 35 occupational classifications we reviewed.

The federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services.

Here are some examples of the compensation bias favoring private contractors:

As bad as it is, this compensation bias is far from the whole story.  The fact is that public regulators incur significant costs trying to develop contracts that are supposed to ensure acceptable private contractor outcomes as well as actually monitoring performance.  And shortfalls in performance, an all too frequent outcome, require either additional federal expenditures beyond those initially stipulated in the contract or a lowering of public standards.

Moreover, a recent review of “the extensive global empirical evidence on the relative efficiency of the private versus public sectors” found no evidence:

that there is any systematic difference in efficiency between public and private sector companies, either in services which are subject to outsourcing, such as waste management, or in sectors privatized by sale, such as telecoms. . . .

This picture is further confirmed by examination of nine sectors which are most often subject to privatization, outsourcing and PPPs – buses, electricity, healthcare, ports, prisons, rail, telecoms, waste management and water – and the same results hold true in each sector: the evidence does not show any superior efficiency by private companies.

The challenge ahead

A report summarizing the discussions and outcomes of an October 2017 conference titled “Restoring Public Control of Public Goods” began as follows:

Over the past thirty-five years, government in the United States has been vilified and vitiated through a movement designed to de-legitimize government in the eyes of the public, to reduce government’s capacity to operate, and to replace that capacity with private contractors and other forms of privatization. . . .

We now are left with:

  • An increasingly hollowed-out, de-moralized, de-professionalized, and devalued government;
  • A hidden and growing “shadow government” of corporate contractors;
  • An array of expensive false economies–since, in fact, contracting out regularly costs taxpayers more than direct government provision of services;
  • Public goods that are so invisible as to be under-valued, and are therefore underfunded or struck from the budget;
  • Counter-productive systems of performance measurement that create further harmful (if sometimes unintended) consequences;
  • A citizenry that under-appreciates, or are unaware, of the public goods they receive.

The private sector has been quietly and efficiently winning its war to control and profit from public sector activities.  One can only hope that the recent interest in socialism will encourage a renewed popular commitment to work with public sector workers to resist this war on the public and build a new, more accountable, not to mentioned well-financed, public sector.

A Seat At The Table Of Power

A growing number of analysts are taking seriously the possibility that the U.S. economy is heading back into recession.   No wonder President Roosevelt’s 1933 first inaugural address is getting heavy internet circulation.  Here is a snippet:  

Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources. . . .

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.

These are the lines of attack.

Sadly our government appears to have no interest in directly “recruiting” people and putting them to work meeting the needs of our country.  In fact, most Republican and Democratic party leaders refuse to support a substantial fiscal stimulus even if it would be used to encourage private production.

Right now, the only governmental body committed to expansionary policy is the Federal Reserve, the body that determines our country’s monetary policy.   However, it appears that the banking sector opposes even that effort and it remains to be seen how successful they will be in getting their way. 

Our Federal Reserve System is an odd creation.  It was created in 1913 and consists of a seven member Board of Governors and twelve regional federal reserve banks located in different cities throughout the United States. 

As the Federal Reserve itself explains:

The seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms.

Sounds pretty straight forward.  The odd part is the system of regional federal reserve banks. 

Each regional bank has a president who serves a five year term and may be reappointed.  The president is chosen by the bank’s board of directors–and here is where the issue of who gets to sit at the table of power becomes important. 

Each regional bank’s board of directors consists of nine members selected from three “classes,” A, B, and C. The three Class A directors are chosen by the private banks operating in the region to represent the interests of the member banks.  The three Class B board members are also chosen by the private banks; they are supposed to represent “the public.”  The three Class C board members are chosen by the Board of Governors and are also supposed to represent the public.

In short, private bankers are structurally placed to dominate the selection of the presidents of the twelve regional federal reserve banks, and through them, influence the direction of the country’s monetary policy. 

Monetary policy is made by the Federal Reserve Open Market Committee (FOMC).  The voting members of the FOMC include the seven members of the Board of Governors and five of the twelve federal reserve presidents (on a rotating basis).  Thus, representatives of the banking sector are legally empowered to sit at the table where decisions about monetary policy and our economic future are made. 

If you are wondering if this is wise, you are not alone.  Barney Frank, Congressman from Massachusetts, has long worried about this.  As he said this September:

The Federal Reserve (Fed) regional presidents, 5 of whom vote at all times on the Federal Open Market Committee, are neither elected nor appointed by officials who are themselves elected.  Instead, they are part of a self-perpetuating group of private citizens who select each other and who are treated as equals in setting federal monetary policy with officials appointed by the President and confirmed by the Senate.

For some time this has troubled me from a theoretical democratic standpoint.  But several years ago it became clear that their voting presence on the FOMC was not simply an imperfection in our model of government based on public accountability, but was almost certainly a factor, influencing in a systematic way the decisions of the Federal Reserve.  In particular, it seems highly likely to me that their voting presence on the Committee has the effect of skewing policy to one side of the Fed’s dual mandate — specifically that they were a factor moving the Fed to pay more attention to combating inflation than to the equally important, and required by law, policy of promoting employment.

In 2009, I asked staff of the Financial Services Committee to prepare an analysis of FOMC voting patterns.  It confirmed two points.  First, the great majority of dissents, 90 percent — from FOMC policy before 2010 — came from the regional presidents.  Second, the overwhelming majority of those dissents were in the direction of higher interest rates.  In fact, vote data confirmed that 97 percent of hawkish dissents came from the regional bank presidents and 80 percent of all dissenting votes in the FOMC over the past decade were from a hawkish stance.

One day before Frank issued his statement, the FOMC voted to modestly lower long term interest rates in an attempt to boost investment. The decision was supported by a 7-3 vote.  At present there are only five voting members of the Board of Governors; two seats remain open.  As Dean Baker explains:

What was striking about this vote was that all 5 governors voted for this measure obviously feeling that the potential benefits in the form of stronger growth and lower unemployment outweighed any risks of higher inflation.  However, 3 of the 5 voting bank presidents opposed the measure, apparently viewing the threat of inflation as being a greater concern than any possible growth and employment dividend.

This raises an obvious question about the interests being represented by the bank presidents.  Inflation is especially bad news for banks because it reduces the value of their assets.  On the other hand bankers may not be very concerned about unemployment. They have jobs, as is probably the case for most of their friends as well.

It is hard not to wonder whether the bank presidents voting against further steps to spur growth and reduce unemployment were acting in the best interest of the country as a whole or whether they were representing the banks in their districts.  If the latter is the case, then it is reasonable to ask why we are giving the banks a direct role in setting the country’s monetary policy.  There is no obvious reason that they should have any more voice in determining monetary policy than anyone else.

In April, Barney Frank introduced H.R. 1512, which would eliminate the voting power of the regional bank presidents.  This seems like a good step.  We might want to go further and restructure the way in which bank presidents are elected; we shouldn’t be relying on bankers to decide who represents the public interest.  

Market Outcomes And Political Power

The media likes to talk about markets as if they were just a force of nature.  In fact, markets and their outcomes are largely shaped by political power.  In a capitalist system like ours, that power is largely used to advance the interests of those who own and run our dominant corporations. 

Thanks to Bloomberg News we have yet another example of this reality.  In brief, as a result of Congressional and media pressure the Federal Reserve was recently forced to reveal its lending activity for the period August 2007 through April 2010.   Bloomberg News examined these Federal Reserve records and found that the Fed secretly provided selected banks, brokerage houses, and even non-financial firms (such as General Electric and Ford) with at least $1.2 trillion in loans, often with minimal collateral required and at below market interest rates.

This money was given through more than a dozen lending programs.  Many firms tapped multiple programs through multiple subsidiaries. Bloomberg arrived at its total by focusing on the seven largest programs, which included the Fed’s discount window and six temporary lending facilities (the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; the Commercial Paper Funding Facility; the Primary Dealer Credit Facility; the Term Auction Facility; the Term Securities Lending Facility; and so-called single- tranche open market operations.

If you like visuals, here is a 5 minute video that provides a good summary of what Bloomberg gleaned from its examination.



Bloomberg also has an interactive site that allows you to chart who got what and over what period.    

Some of the highlights are as follows:

The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion . . .

Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG, which got $77.2 billion. . . .

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The Federal Reserve fiercely resisted making its records public, arguing that doing so would stigmatize those institutions that received loans.  A group of the largest commercial banks actually petitioned the Supreme Court in an unsuccessful effort to keep the loan information secret.  

Perhaps one reason that the Federal Reserve and the banks were reluctant to have these records made public is that they raise significant questions of conflict of interest.  According to a statement by Vermont Senator Bernie Sanders,

the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

Another reason may be that the Federal Reserve didn’t want it known that it was deviating from its past practice of requiring borrowers to provide secure collateral, which was normally either Treasuries or corporate bonds with the highest credit rating, and never stocks.  For example:

Morgan Stanley borrowed $61.3 billion from one Fed program in September 2008, pledging a total of $66.5 billion of collateral, according to Fed documents. Securities pledged included $21.5 billion of stocks, $6.68 billion of bonds with a junk credit rating and $19.5 billion of assets with an “unknown rating,” according to the documents. About 25 percent of the collateral was foreign-denominated.

Moreover, as Bloomberg News also reported, many Fed loans were made at below market interest.

On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.  

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

These loans were absolutely critical to the survival of our leading companies.  A case in point:

Citigroup was in debt to the Fed on seven out of every 10 days from August 2007 through April 2010, the most frequent U.S. borrower among the 100 biggest publicly traded firms by pre- crisis market valuation. On average, the bank had a daily balance at the Fed of almost $20 billion.

These loans are also a key reason that our post-Great Recession economy remains largely unchanged in structure.  In other words, it was the exercise of political power, rather than so-called market dynamics or efficiencies, that explains the financial industry’s continuing profitability and economic dominance.

Now imagine if we had a state that engaged in transparent planning and was committed to using our significant public resources to reshape our economy in the public interest.  As we have seen, state planning and intervention in economic activity already goes on.  Unfortunately, it happens behind closed doors and for the benefit of a small minority. It doesn’t have to be that way.

Learning From The UK

The U.S. economy isn’t the only one struggling.  That means there are things to learn from other countries.  Take the United Kingdom, for example. 

The United Kingdom faces many of the same problems we do.  And the British government has decided to respond to these problems with many of the same policies promoted by our own conservative political leaders: slash public spending and cut public sector jobs and wages.  In fact,  the British plan calls for six consecutive years of spending cuts.  As Paul Krugman explains:

Britain, like America, is suffering from the aftermath of a housing and debt bubble. Its problems are compounded by London’s role as an international financial center: Britain came to rely too much on profits from wheeling and dealing to drive its economy — and on financial-industry tax payments to pay for government programs.

Over-reliance on the financial industry largely explains why Britain, which came into the crisis with relatively low public debt, has seen its budget deficit soar to 11 percent of G.D.P. — slightly worse than the U.S. deficit. And there’s no question that Britain will eventually need to balance its books with spending cuts and tax increases.

The operative word here should, however, be “eventually.” Fiscal austerity will depress the economy further unless it can be offset by a fall in interest rates. Right now, interest rates in Britain, as in America, are already very low, with little room to fall further. The sensible thing, then, is to devise a plan for putting the nation’s fiscal house in order, while waiting until a solid economic recovery is under way before wielding the ax.

But trendy fashion, almost by definition, isn’t sensible — and the British government seems determined to ignore the lessons of history.

Both the new British budget announced on Wednesday [October 20, 2010] and the rhetoric that accompanied the announcement might have come straight from the desk of Andrew Mellon, the Treasury secretary who told President Herbert Hoover to fight the Depression by liquidating the farmers, liquidating the workers, and driving down wages. Or if you prefer more British precedents, it echoes the Snowden budget of 1931, which tried to restore confidence but ended up deepening the economic crisis.

The British government’s plan is bold, say the pundits — and so it is. But it boldly goes in exactly the wrong direction. It would cut government employment by 490,000 workers — the equivalent of almost three million layoffs in the United States — at a time when the private sector is in no position to provide alternative employment. It would slash spending at a time when private demand isn’t at all ready to take up the slack.

Why is the British government doing this? The real reason has a lot to do with ideology: the Tories are using the deficit as an excuse to downsize the welfare state. But the official rationale is that there is no alternative. . . .

What happens now? Maybe Britain will get lucky, and something will come along to rescue the economy. But the best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it.

Well, not surprisingly, the outcome of this austerity plan has been further economic decline.   As the chart below shows, the UK economy actually fell back into recession the last three months of 2010, suffering a 0.5% contraction. 

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Despite that outcome, the government, according to the BBC, remains committed to its austerity policy: 

The Chancellor, George Osborne, said the numbers were disappointing.

But he added the government would not be “blown off course” from its austerity program.

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year.

The BBC’s economics editor Stephanie Flanders said people were right to worry about where the UK’s growth would come from in 2011, especially as higher-than-expected inflation had dealt a further blow to household budgets.

Michael Roberts provides the following update and summary of economic trends:

The UK economy is struggling to recover from the Great Recession of 2008-9.  While profitability has recovered, British big business is still refusing to invest.  In Q1’11, UK gross fixed investment slumped by 4.4% compared with Q4’10, while household consumption fell 0.6%.  Most significant, business investment excluding property fell 7.1%  (manufacturing investment fell 1.1%).  It prefers to heap up the cash, invest abroad or speculate in stock markets rather than invest in expanding production or employment in the UK.   And while that continues British households on average will continue to suffer significant losses in living standards.

Household spending  is set to experience the slowest pick-up of any post-recession period since 1830, according to a survey of economists.  British consumers will spending barely more by 2015 than they were before the financial crisis in 2008.  In the UK’s 18 major recessions since records began in 1830, Bank of England data show consumer spending on average recovered to 12% above its previous peak within seven years.  But forecasts by the UK’s Office for Budget Responsibility put spending in 2015 at just 5.4% above the 2008 peak, making it the slowest recovery of any comparable post-recession period.  After recessions in the early 1980s and 1990s, spending was 20% and 15% higher respectively.

That household spending will be so laboured is not surprising as the average British household faces the biggest drop in income for 30 years.   Average income could fall 3% this year, the steepest drop since 1981 and taking households back to 2004-5 levels.  The Institute for Fiscal Studies said average take-home incomes actually rose during recent recession due to low inflation and higher social benefits.  But IFS analysis suggests the long-term effects of the recession and higher inflation will soon squeeze incomes.  Lower wage increases and the corrosive effect of rising inflation mean that it is “entirely possible” that income this year will return to levels of six years ago.   Even the Bank of England warned that UK households faced a significant cut in their spending power as inflation heads towards a 5% annual rate.

So, one thing we can learn from studying the UK is not to adopt conservative budget policies.  Another is that there are alternatives to the other established policy option, which is to just keep spending and hoping for a magical revival of economic fortunes. 

For example, UK climate activists and several national trade unions are promoting a straightforward, effective campaign to create one million green climate jobs.  As the alliance says:

To find solutions to the climate crisis and the recession, we need more public spending, the opposite of current government policy. We have people who need jobs and work that needs to be done. A million climate jobs in the UK will not solve all the economy’s problems. But it will take a million human beings off the dole and put them to work saving the future.

Their plan is careful to distinguish between climate jobs (which reduce greenhouse gases) and green jobs (which can mean almost anything).  More specifically it calls for the creation of a million, new public sector jobs and a National Climate Service to employ them, highlights the kind of work that should be done, and presents a plan for financing it that does not rely on increasing the federal deficit.

In the words of the alliance:

We mean a million new jobs, not ones people are already doing. We don’t want to add up existing and new jobs and say that now we have a million climate jobs. We don’t mean jobs with a climate label, or a climate aspect. We don’t want old jobs with new names, or ones with ‘sustainable’ inserted into the job title. And we don’t mean ‘carbon finance’ jobs.

We mean new jobs now. We want the government to start employing 83,300 workers a month in climate jobs. Then, within twelve months, we will have created a million jobs.

We mean government jobs. This is a new idea. Up to now government policy under both Labour and Conservatives has been to use subsidies and tax breaks to encourage private industry to invest in renewable energy. The traditional approach is to encourage the market. That’s much too slow and inefficient. We want something more like the way the government used to run the National Health Service. In effect, the government sets up a National Climate Service (NCS) and employs staff to do the work that needs to be done. Government policy has also been to give people grants and loans to insulate and refit their houses. Instead, we want to send teams of construction workers to renovate everyone’s home, street by street. And we want the government to construct wind farms, build railways, and put buses on the streets.

Direct government employment means secure, flexible, permanent jobs. Workers with new climate jobs won’t always keep doing the same thing, but they will be retrained as new kinds of work are needed.

I strongly recommend reading their plan.
 

The Challenges Ahead

On May 6, 2011, I spoke at the First Unitarian Church in Portland along with Chuck Collins (from the Institute for Policy Studies) as part of a program sponsored by the church’s Real Wealth of Portland group.  We both addressed the following theme: “Economic Insecurity Continues…and Communities Respond.”   

Chuck talked about a very important initiative: Common Security Clubs.  The First Unitarian Church has sponsored similar clubs for approximately one year.  

What follows is the talk I gave:

The Challenges Ahead

I want to begin by summarizing my three main points—

First, our economic problems are serious and structural, and a long time in the making.  They did not start with the 2007 collapse of the housing bubble, which means that we should not assume that so called “normal market forces” will eventually return us to an acceptable economic state.  In other words, without major structural changes in the way our economy works we face a future of stagnation with ever worsening conditions for growing numbers of people.  

Second, business and political leaders are not committed to making any serious changes in our economic structure.  That is not because they are stupid.  Rather it reflects a real class interest in maintaining the status quo.  It is not that they are unaware of or unconcerned with our current social problems but rather that they view the cost of making necessary changes to our economy as too high.

Third, meaningful solutions will require building a movement that challenges our current reliance on profit driven market outcomes.  This movement has to be built by organizing strong social and community institutions, ones that give people the chance to develop in common a correct understanding of the causes of our problems and the organizational weight and confidence to promote the needed transformation of our economy.

Structural Crisis

The National Bureau of Economic Research, the official designator of recessions and expansions, declared that our economy went into recession in December 2007 and that this recession ended and an expansion began in June 2009.  In other words we have been in an expansion for almost two years.  Normally, the deeper the recession, the stronger the recovery.  However, as I am sure you are aware, the recession was very deep and to this point the recovery has been extremely weak.

The federal government has poured trillions of dollars into the economy to end the recession and boost the recovery.  The government’s great accomplishment has been a strong recovery of profits.  In fact, total domestic corporate profits are now about as high as they were in 2006 before the start of the crisis, and financial profits as a share of total profits are pushing 35%, which is close to the pre-crisis high of 40%.

But beyond this restoration of corporate profitability, and the recovery of finance as our leading economic sector, little has happened to generate sustained and beneficial growth for the great majority of us.  For example, total bank excess reserves averaged around $10 billion a year in the decades prior to the crisis.  Now they are pushing $1.4 trillion.  The banks are just holding this money.  One reason is that since October 2008 the Federal Reserve Board is paying them interest on those reserves.  Similarly non-financial corporations now have the highest ratio of cash to assets in post-war history; they are not using that money to invest in new plant and equipment.

What this means is that our leading financial and non-financial corporations have plenty of money, but see no privately profitable productive investment opportunities.  At the same time, they are in no hurry to pursue policy changes because despite the slow recovery they are doing quite well.  Thus, as things stand, there is little reason to believe that this government supported expansion will be long lasting or beneficial for working people. 

I cannot emphasize enough the fact that we are in an expansion; these are the good times—the period of recovery, when our income is supposed to go up, when unemployment is supposed to significantly decline, when we have money to rebuild our infrastructure, fund our health care and other social programs, and build a solid collective nest egg to cover the hard times which will of course come.  The fact that this is not happening—that we continue to struggle during this period of economic expansion—is indicative of the fact that our economic system as presently structured is not one we can count on; in other words it is a flawed system. 

With this perspective, you can see why the small increases in employment and production that are cheered by policy makers mean little—of course we are going to see some increases.  But for how long and with what effect?  Given the lack of corporate interest in investment or lending I think that there is little reason to be optimistic.  And now, there is even an increasingly strong movement to slash government spending.  Those who support that policy claim that we just have to put the collapse of the bubble economy behind us, tighten our fiscal belts, and let market forces return our economy to normal—but what is normal?

Let us consider the previous economic expansion.  That expansion lasted from 2001 to 2007.  If we compare it to the nine other post-war expansions, it ranks dead last in terms of the growth in GDP, investment, employment, wage and salary income, and compensation.  It ranks highly in only one category—and that was the growth in profits.  In fact, median household income actually fell over this period of economic expansion.  And it is important to recall that this expansion was long lasting only because it was supported by a debt-driven housing bubble.  We no longer have that bubble to support growth.  Therefore, the new normal appears to be ever weaker growth and deteriorating living and working conditions for the great majority of us.  I don’t find that to be acceptable. 

Class Struggle

Significantly, more and more people are arguing that our current problems are caused by government deficits that are too big, taxes that are too high, and unions that are too strong,.  They are therefore pushing for a major reduction and privatization of government social programs, tax cuts for the wealthy and corporations, and a weakening of unions, especially those in the public sector. 

This would be a recipe for disaster.  Where these policies have been implemented, in places like Ireland, Greece, and the UK, the result has been only more problems: lower growth, greater deficits, and of course worsening social conditions.  That is not a surprising outcome.  If you have an economy where there is weak domestic demand because banks will not lend and corporations will not invest, workers are deep in debt, unemployment is high, and exports are limited, and then you cut government spending—it should not surprise anyone that things go from bad to worse.

And, it is not like we haven’t tried similar policies here in the United States.  We have been cutting taxes, government programs, and union strength for more than two decades, and we can see the effects—ever weaker growth, greater inequality, and worsening living and working conditions for the great majority.

The fact is that government spending is one of the main reasons that we still have an economic expansion.  Debt fears are being hyped to scare us. 

So, why are there powerful social forces arguing for these policies?  I think there are two main reasons.  The first is to ensure that our anger is not directed at the corporate sector.  When this crisis broke in 2008 people were angry, and they were angry at our corporations.  There were demands for nationalization of the banks and auto industry and calls for greater government intervention in the economy to save homes, employ people, in short, chart a new economic course for the country. 

What happened was quite different.  The president immediately made clear that he was not going to interfere with market processes—in finance, in auto production, in the housing market, in health care, or in job creation.  Rather he did all he could to bail out those corporations that were in trouble because of their own reckless pursuit of profit.  And his efforts succeeded.  Profits are back up and finance continues to dominate.  Unfortunately for us, those efforts did little to address our needs. 

I think that the corporate sector is getting nervous.  They are fearful that their large profits in the face of our deteriorating social conditions might lead to a renewal of demands for social change.  And lets be clear—any significant social change is going to require a significant change in government policy.  For example, strengthening our economy will require an end to free trade agreements; rebuilding our infrastructure; a new green industrial policy directed at retrofitting our buildings, developing solar and wind power and mass transit; and a shrinking and redirection of finance.  Rebuilding our communities will require new labor laws to support unionization and higher minimum wages; support for education, health care, and transportation rather than military activity; and an increase in taxes on corporations and the wealthy to help pay for many of the needed initiatives. 

This is not what the corporate sector wants.  Therefore, they are trying to steer us in a different direction—to encourage us to believe that the reason our economy is not doing better is that our government deficits are too great and workers have too much power.  It is ironic.  We have government deficits not because of runaway social programs but because the government had to bail out the private sector.  It was this spending that kept us out of depression and enriched our corporations.  And now the leading lights of the private sector are trying to convince us that the main cause of our slow growth is this very same deficit spending.  So, the first reason for this anti-government offensive is to keep us from focusing on corporate behavior and the contradictions of market processes by encouraging us to blame the government and unions for our problems. 

The second reason is that the push for marginalizing government programs will likely open up new private profit making opportunities for our large corporations.  For example, the privatization of our military, our education system, our health care system, our retirement and social insurance systems all mean public dollars flowing into private coffers.  And as a bonus corporations would likely get new tax breaks.

To state the obvious: corporations are defending policies that help them make profits at majority expense.  I think the best way to grasp this reality is to focus on General Electric.  GE is not only one of our nation’s largest corporation, its head, Jeffrey Immelt, was picked by President Obama to head his President’s Council on Jobs and Competitiveness.  President Obama said he picked him because “He understands what it takes for America to compete in the global economy.”

That may be true, but what is GE’s competitiveness strategy? 

First, it is to avoid taxes. GE reported worldwide profits of $14.2 billion in 2010, including $5.1 billion from its operations in the United States.  Yet, it paid no US taxes; in fact it claimed a tax benefit of $3.2 billion.

It accomplished this through a very aggressive working of our tax policy. Here is what the New York Times said:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

Second, it is to shift operations from production to finance.  According to the New York Times:

General Electric has been a household name for generations, with light bulbs, electric fans, refrigerators and other appliances in millions of American homes. But today the consumer appliance division accounts for less than 6 percent of revenue, while lending accounts for more than 30 percent. . . . Because its lending division, GE Capital, has provided more than half of the company’s profit in some recent years, many Wall Street analysts view G.E. not as a manufacturer but as an unregulated lender that also makes dishwashers and M.R.I. machines.

Third, it is to move its operations and profits outside the US.  Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment.  Over that same period G.E.’s accumulated offshore profits have risen from $15 billion to $92 billion.

GE is far from unique in employing this strategy.  For example, the Wall Street Journal reports that U.S. MNCs cut their work forces in the United States by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.

So, we are in a battle over the nature and direction of our economy.  Successive governments, in response to corporate demands, have worked to promote more mobility for corporations, lower taxes for corporations, and the growing power of finance—all at our expense.  And despite our current economic problems, our government continues to push for more of the same.  In sum, while we might be experiencing a crisis caused by capitalism it is not a crisis for capitalism.

Movement Building 

So, what shall we do?  In fact, we are not short of ideas.  We have all sorts of progressive policy suggestions.  The problem is that those with power are not interested in our suggestions.  This means that we need to organize if we are to succeed in making a real change.  Here are a few of my suggestions about next steps.

First, we need to make sure that people understand the structural nature of the problems we face.  We have to make sure that unions, neighborhood associations, and places of worship become venues where people can talk, learn, develop their understandings and most importantly connections. 

Second, we need to build alliances around critical demands—changes in government priorities, for example, such as cutting military spending in favor of social programs, raising taxes on the wealthy and corporations, and defending Medicare and Social Security.  These alliances shouldn’t be hard to build.

Third, we need to be creative in who and how we organize.  We need organizations where people can produce themselves more fully as actors.  In the 1930s, for example, we had councils of the unemployed.  They fought for greater government spending, unemployment insurance, and in support of unionization for workers with jobs.  Now, we have large numbers of homeless and hungry.  We need to do more that take food to food banks—we need to help the hungry and homeless organize themselves into powerful social movements. 

We also need to help students, for example, see that their likely future of job insecurity, low wages, and lack of health care can be changed if they join with others, including unions, and health care advocates, and perhaps their parents, to demand a change in the direction of the economy.  And we need our unions to recognize that many of our young workers will be moving from job to job, and company to company, in temporary positions, which means that unions will have to develop new forms of organization.   

Fourth, we need to focus our attention on the public sector.  I think that one of our key challenges is to develop new coalitions between public sector unions and those who use public services.  While I believe that we need to fight against spending cuts for important programs I also know that our existing programs are far from perfect.  Moreover, just maintaining the same level of spending is not the same as transforming our economy.  We need more accountable and responsive public programs and I think the key to that, to the democratizing of the state, is a community-public sector worker alliance.

For example, imagine if those that cared about the environment; worker rights; an end to militarization; and gay, lesbian, transgender rights could engage public school teachers who were responsive to these views and collectively develop curriculum that advanced those views, thereby producing young people able and eager to contribute to making a better society.  And also imagine that in return, those in the community committed to working to ensure good funding for schools and political protection and decent salaries for our teachers.  We would not only help to improve the school system but also develop a new and positive understanding of the benefits of public services.  The same process can be encouraged around transportation by finding ways to bring bus riders and bus drivers together.  The same for social workers and their clients.  You get the idea.  Public sector workers could become our defenders—blowing the whistle if our money is not being property spent and helping us find ways to play a meaningful role in determining the actual nature and delivery of the services we want and pay for. 

We really have little choice but to help build resistance to current political tendencies and shape more positive visions.  There are very few of us that can avoid the consequences of failure.