Thanks to the Tea Party
- Pivotal Decade: How the United States Traded Factories for Finance in the 1970s by Judith Stein
Yale, 367 pp, £25.00, May 2010, ISBN 978 0 300 11818 6
- Stayin’ Alive: The 1970s and the Last Days of the Working Class by Jefferson Cowie
New Press, 464 pp, £19.99, September 2010, ISBN 978 1 56584 875 7
Half a century ago it would have come as no surprise to find demonstrating workers from both the public and the private sectors occupying the state house in Madison, Wisconsin along with students, community organisations and church groups. And it isn’t only in Wisconsin – much the same is happening in Ohio and Indiana and elsewhere. Legislative action in Wisconsin has come to a halt as the Democratic Party minority in the state senate, in sympathy with the public workers, has fled the state to make it legally impossible to conduct business. Again the same thing has happened in Indiana. Southern Wisconsin’s Central Labor Council has taken the first steps towards calling a general strike.
It is the Tea Party that has effectively brought the unions back to life. Newly elected Republican governors in the Midwest, catapulted into office thanks to the Tea Party insurgency against Big Government, have launched a no-holds-barred assault on public sector unions. They don’t just threaten to slash wages and benefits and eliminate jobs: they want to deprive the unions of their right to exist. The response has been electric. Sympathy rallies have erupted across the country, calling on their own state and local governments to stop scapegoating public sector workers for problems that originated on Wall Street.
The economy started going wrong in the 1970s – Tom Wolfe’s ‘me decade’. Frivolous and self-regarding, the 1970s were also profoundly grim. It was in this decade that the American (and global) economy embarked on its fateful transformation from industrial to finance-driven capitalism and that the American working class underwent a makeover that would soon render it virtually invisible. And it was during this decade that the labour question was asked for the last time.
As Judith Stein observes in Pivotal Decade, the 1970s was the only decade except for the 1930s during which Americans grew poorer. By the late 1960s, around a quarter of all new investment by US companies in electrical and non-electrical machinery, transportation equipment, rubber and chemical manufacturing was being made abroad. As the new decade began the US suffered its first trade deficit since 1893. By its end productivity had slowed and turned negative; the US share of the world market for manufactured goods shrank by 23 per cent. America’s share of world steel production shrank from 50 to 20 per cent. Only the UK had a lower rate of gross capital formation as a percentage of GDP.
Stein argues that this was a fundamental structural crisis, not merely a low point in the economic cycle. Core sectors of American industrial capitalism could no longer compete: plant and equipment were increasingly antiquated; productivity was declining compared to European and Japanese producers, whose revival had been made possible by Cold War imperatives. Trade, currency and other measures favoured Western Europe and Japan even when that meant loading American industry with burdens it couldn’t bear: this was the price of empire. At the beginning of the decade members of a still powerful labour movement, deploying the leverage it enjoyed thanks to Vietnam War-generated full employment, went on strike in numbers not seen since the wave of strikes that followed World War Two. But the administrations of Nixon, Ford and Carter weren’t particularly moved by the industrialists’ troubles. Later, the double-dip oil shocks that followed the Opec embargo of 1973 and then the Iranian Revolution of 1979 served to ratchet up the costs of production in an increasingly oil-dependent economy.
Profit rates shrank as the nominal value of US industry’s assets greatly exceeded their real worth in the international marketplace. Capital began flowing elsewhere, not just into Europe but also into select parts of the Third World, and into non-industrial sectors – finance especially but also real estate, retail and service businesses – and into an increasing array of leveraged speculations in corporate and government securities. So began the deindustrialisation of America, the shutting down of what had for a century been the engine house of the economy. A whole way of life was headed for extinction.
It is not merely in hindsight that we can see this as a structural crisis. Pivotal Decade makes it quite clear that remnants of the New Deal coalition, including the trade unions and labour liberals, recognised that something other than conventional postwar Keynesian fiscal and monetary policy was called for. Even the sclerotic bureaucracy running the major trade unions pressed hard for industrial and even national economic planning: a full employment bill that would legally oblige the government to guarantee jobs, either by creating them in the public sector or by encouraging private investment; a new development bank to help steer capital to ageing sectors of American industry and to help new ones get started; government sponsorship of regional and infrastructural development, and more.
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