Unions vs Plutocrats

Over at Salon, columnist Thomas Frank scrutinizes Thomas Piketty’s bestselling book on inequality, “Capital in the Twenty-First Century”. While he agrees with many of the author’s observations and points regarding the extent and seriousness of the problem, he takes issue with Piketty’s lackluster suggestion that the solution lies in a top-down approach (via some sort of global taxation regime).

I haven’t read the book yet so I can’t speak to this critique, but I do think Frank’s suggested solution is spot on in both its simplicity and empirical validity:

Turning to the problem of income inequality here in the United States, there is an even simpler solution, by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.

Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of “Capital” with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise.

The best remedy for inequality, however, is the one that comes up from below. Economists may not think very highly of those hardened people in SEIU t-shirts—some of them smoke too much, some are suspicious of “free trade,” some of them (gasp!) didn’t go to college—but the fact remains that in nearly every particular they represent the obvious and just about the only social force on the ground in America that might bend the inequality curve the other way.

It is not a coincidence that labor’s rise in the 1930s happened at the same time as the One Percent’s fall from grace, nor is it a coincidence that labor’s long decline has been almost a mirror image of the One Percent’s recovery of its nineteenth-century heaven. These things happened the way they did because labor’s most basic function is to turn the bright light of democratic scrutiny on economic power. When labor is strong, our composers write things like “Fanfare for the Common Man” and blue-collar workers buy cars and boats and snowmobiles. When labor is weak, we bow down before “job creators” and McMansions sprout like mushrooms after a rainstorm.

Indeed, a study by the Economic Policy Institute reached a similar conclusion: as unions decline in both numbers and political influence, inequality rises, as this graph so clearly conveys:

The reasons for this inverse relationship aren’t complex or surprising: without unions to bargain with, the upper echelons of any given company will simply take it upon themselves to allocate profits and assets to mostly suit themselves. As Frank notes:

Consider the crazy imbalance in the current capital-labor split, which is the central thread holding together Piketty’s enormous book. Well, having strong unions that are able to negotiate effectively would remedy this situation almost by definition. That’s the idea of unions in the first place.

Consider the problem of out-of-control executive compensation, of Piketty’s “supermanagers” who stuff their pockets with stock options simply because no one will stop them: As it happens, this is an issue of particular significance to organized labor, as you will learn from one look at the AFL-CIO’s shocking website, “Executive Paywatch.” Allowing workers to bargain fairly with bosses would put the brakes on the runaway CEO freight train instantly.

The disappearing middle class? This is labor’s grievance par excellence. The minimum wage? Labor is always the loudest voice calling for an increase. Stratospheric college tuition and student debt? The AFL-CIO has been admirably forthright on the issue. Social Security and the rest of the welfare state? There is no more dedicated supporter than organized labor. Were labor strong instead of weak, privatization and the other attacks on the welfare state would probably never even come up. Certainly no Democratic president would be able to say, as Barack Obama did in one of his debates with Mitt Romney, that his own position was “somewhat similar” to the Republican’s on this issue.

Nor is it utopian or even unrealistic to imagine labor staging a comeback. It would probably happen overnight if the workplace rights we are told we enjoy actually had force behind them. A large percentage of American workers consistently tell pollsters they’d like to have some kind of collective bargaining organization at work, and yet only a tiny sliver of them actually have such organizations—6.7% in the private sector, according to the latest data. The reason for the difference, to put it bluntly, is that management doesn’t want their workers to have such organizations, and bosses routinely threaten and fire workers who try to bring such organizations together, law or no law.

Granted, as Frank himself notes (and I concur) a powerful labor movement is not the complete solution to plutocracy, but it’s certainly a start and would go a long way to mitigating the present and long-term effects of excessive inequality.

Other solutions include protecting beleaguered and discouraged unionization with Civil Rights laws (which would allow workers who are fired for joining a union to sue their bosses directly rather than go through the sclerotic federal channels); helping new bargaining units to negotiate their first contract with management; and better punishing bosses who try to circumvent labor organizing.

Ultimately, it rests on workers to come together, organize, and take charge of their workplaces — no small feat given the entrenched and powerful opposition to such an approach, not to mention the taboo of organized labor (especially in the Deep South, which incidentally is the poorest region in the country).

But I feel this is a solution that people across the political spectrum can agree on: individuals acting on their rights as agents in the market to organize and bargain on their terms. As Frank noted, this would minimize state interference (baring the legal protections for such unions) while giving a more grassroots and democratic approach to solving these problems.

What do you all think?

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