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SOCiOlOg! f/W Date November 11, 1982 MSUI'UM‘” ,. . . n1 .,. - . ..-- 0.12771 RETURNING MATERIALS: Place in book drop to remove this checkout from your record. FINES will be charged if book is returned after the date stamped below. MSU LIBRARIES ORGANIZED LABOR AND THE CAPITALIST STATE: THE CASE OF FULL EMPLOYMENT POLICY By Leonard George Berkey A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Sociology 1983 6190537 @Copyright by LEONARD GEORGE BERKEY 1983 ABSTRACT ORGANIZED LABOR AND THE CAPITALIST STATE: THE CASE OF FULL EMPLOYMENT POLICY By Leonard George Berkey The purpose of this research is to explore the impact of organized labor upon the formation of capitalist State policy. It is intended both to illustrate the function of the State as an increasingly important locus of class strug- gle in advanced capitalist societies and to assess the political orientation and legislative agenda of American trade unions in the post-World War 11 period. We have chosen to focus on the postwar debates surrounding the fea- sibility of a policy of ”guaranteed” full employment because (1) the issue of full employment has such significant implications for class relations and working class power in capitalist societies that it should provide a clear indication of the political objectives of the labor movement; and, (2) the historical context for each of these debates——dur- ing the periods from 1944-46 and 1974-78——represented a period of crisis in capital accumulation which is ideal for illuminating the class nature of the State. An analysis of both primary and secondary sources indi- cates the following: Leonard George Berkey In 1944 and again in 1974, legislation was introduced in the Congress which, if passed, would have committed the federal government to guaranteeing a job for all who want to work. Organized labor vigorously supported the Full Employ- ment Act of 1945 but with little effect. Pressure from business groups resulted in the bill's emasculation. Labor organizations themselves were instrumental in weakening the Equal Opportunity and Full Employment Act of 1976, popularly known as the Humphrey—Hawkins Bill, because of their concern for its effects upon estab- lished collective bargaining agreements and on labor's rank and file. These findings suggest the need to reconceptualize the nature of class relations in advanced capitalist society in order to account for trade union objectives in regard to State policy. ACKNOWLEDGMENTS I would like to express my sincere appreciation to Rick Hill, Jim McKee, Dick Peterson, and Marilyn Aronoff for their support and helpful comments on this work. As my advisor, teacher, and friend, I owe a great deal to Rick Hill. He taught me that it is entirely possible to combine rigorous scholarship and an inquisitive mind with personal warmth and concern for human relationships in a way which allows those qualities in others to flourish. Jim McKee's sense of honesty, dignity, and fair play have made him a role model for a generation of graduate students. Like most people, I am also deeply indebted to my family. I want especially to thank Ramona and Erin. Their unfailing patience and love, even when I was unbearable, more than anything else kept me going. LIST OF LIST OF Chapter 1 TABLE OF CONTENTS TABLES ........................................ FIGURES ....................................... INTRODUCTION TO THE RESEARCH .................. Statement of Method ........................... THE ROLE OF THE STATE IN ADVANCED CAPITALIST SOCIETY ....................................... Alternative Theories of the State ............. An Adumbrated Class Theory of the State and the Process of Policy Formation ................... THE POSTNAR ECONOMY: FROM CONSENSUS TO CRISIS I. The Roots of the Postwar Economy .............. Keynes to the Rescue .......................... Alvin Hansen and the Theory of Secular Stagna- tion .......................................... Critique of Keynesianism ...................... II. The Postwar Keynesian Coalition ............... III. The Reemergence of Stagnation ................. The Drift Toward National Economic Planning: Socialism or Corporatism? ..................... 21 33 33 39 42 44 47 56 6O 64 ORGANIZED LABOR AND POLICY FORMATION: THE LIMITED AGENDA ................................ 73 I. The Roots of the Postwar Economy .............. 73 The Bureaucratization of the American Labor Movement: From Class Struggle to Collective Bargaining .................................... 76 Is Bureaucratization Inevitable?——The Challenge of Michels' “Iron Law of Oligarchy” ........... 84 II. Organized Labor and the Democratic Party—— ”Reward Your Friends and Punish Your Enemies”.. 90 The Depoliticization of Labor ................. 95 The Status of Full Employment Policy Within Labor's Limited Political Agenda .............. 99 ORGANIZED LABOR AND FULL EMPLOYMENT POLICY: THE SHAPING OF THE FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 ............................ 108 I. The Problem of Secularly Rising Unemployment .. 110 The Politics of Rationalizing Unemployment and Redefining Full Employment .................... 116 II. Humphrey-Hawkins in Context: A Look Back at the Employment Act of 1946 .................... 121 From Full Employment Bill to Employment Act ... 133 Why the Full Employment Bill Failed ........... 140 111. Full Employment Policy Redivivus: The Equal Opportunity and Full Employment Act of 1976 ... 144 Labor's Response to ”Guaranteed” Full Employ- ment .......................................... 150 LIST OF The Emasculation of the Humphrey—Hawkins Bill—— From ”Equal Opportunity” to ”Balanced Growth” The Role of the Full Employment Action Council in the Humphrey—Hawkins Debate ................. The Full Employment and Balanced Growth Act of 1978 and Its Aftermath ......................... SUMMARY AND CONCLUSIONS ........................ REFERENCES ..................................... General Sources ................................ Government Sources ............................. Interviews ..................................... APPENDIX A. EQUAL OPPORTUNITY AND FULL EMPLOYMENT ACT OF 1976 ........................................ APPENDIX B. FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 ........................................... vi Table LIST OF TABLES Selected Measures of the Severity of the Great Depression and the Extent of Recovery by 1939 Summary of Federal Government Spending: 1929 to 1939 ........................................... Value of Direct Investment in Foreign Countries by Area: 1940 to 1970 ......................... Average Annual Percentage of the Civilian Labor Force UnempIOyed, 1940 to 1979 Her Persons 16 Years of Age and Over) ......................... Total Civilian Labor Force Unemployment: Full— Time, Part-Time, and Hidden Unemployment, 1967- 1976 ........................................... Unemployment Rates by Race for Persons 16 Years Old and Over: 1948-1979 ....................... Percent Changes in Number of Unemployment for Periods of Recession and Recovery, 1954—1977 35 38 52 111 112 114 115 .4 ..41 F" . LIST OF FIGURES Figure 1 Schematic View of Potential Variants of Capital- ist State Policy ............................... 29 2 Ratio of Profits to Wages, 1952—1972 ........... 102 viii CHAPTER 1 INTRODUCTION TO THE RESEARCH The United States is currently beset with the worst period of economic stagnation since the Great Depression of the 19305. Corporate profits, private investment in busi— ness expansion, and the growth in GNP have all dramatically declined while business failures are reaching epidemic pro- portions. The rate of unemployment has exceeded ten percent for the first time since 1940, and the broad consensus among economists and policy makers is that even with a strong recovery from the present malaise unemployment will probably not drop much below nine percent for years to come. The crisis is most severe in the industrial heartland of the nation where outmoded production facilities bode ill for any foreseeable recovery. All of this has spawned a lively discussion among vari- ous segments of the society over appropriate strategies for revitalizing the American economy and "reindustrializing“ its basic infrastructure (Business Week, 30 June 1980). For our purposes, the most interesting proposal thus far, and one which harked back to the economic crisis of an ear- lier time, has been the Humphrey-Hawkins full employment bill which was first introduced in the Congress in the 2 summer of 1974 and was designed to require the federal gov- ernment to formulate a framework for national economic plan- ning with the intention of eliminating or at least mitigating cyclical fluctuations in business activity thereby assuring continuous full employment within the labor force. Neither the original Full Employment Act of 1945 nor the Equal Opportunity and Full Employment Act of 1976 were passed in anything remotely resembling its original form, yet each touched off a lengthy and spirited debate over economic policy which highlighted basic class divisions within the society and illuminated the essential class char- acter of State power (Offe, 1974). The purpose of this research is to examine these post- war debates over full employment policy in an attempt both to illustrate the process of policy formation within the capitalist State and to assess the degree to which class interests, and particularly the interests of organized labor, are manifested in such policy. This project draws much of its inspiration from the pathbreaking work of Stephen Kemp Bailey on the 1944—46 full employment debate, Congress Mekee A Lee. Like Bailey, we will also be con- cerned with the interaction of four elements: ieeee, institutions, interests, and individuals (Bailey, 1950: x). He was privy to a great deal of inside information concern- ing the negotiations among the various parties to the debate, and he conducted over four hundred interviews with 3 the individuals involved in an effort to explicate the legislative process. This work does not pretend to have that scope. None- theless, we have supplemented our analysis of government documents, congressional hearings, internal memoranda and archival material from a number of labor sources, and sec- ondary sources related to these full employment debates with a selected group of interviews involving key participants in the policy process. While acknowledging that we have addressed only a small part of the overall process, we trust that this work will be of use to those who seek a better understanding of the political objectives of organized labor and its role in the formation of government policy. Statement of Method Those who boast that they are not, as social sci— entists, interested in what ought to be, generally assume (tacitly) that the hitherto prevailing order is the proper ideal of what ought to be.... ——Morris Cohen, Reason and Nature The most significant methodological problem in attempt- ing to illustrate the process of policy formation within the capitalist State involves the selection of an appropriate context, where the stakes are high and the range of options consistent with capitalist class interests is narrowly cir— cumscribed. For as Offe (1974: 51) has argued, the class character of State power cannot be demonstrated: 4 . . from the simple concrete state of political institutions or the day-to-day routines of the political system but only from crisis situations and manifest class—conflicts which suspend the mechanisms of objective self—disguise and which ONLY THEN and ONLY FOR THIS REASON make it possi— ble to perceive them as such. It is our contention that such conditions indeed existed in both the 1944-46 and 1974-78 periods, as mani- fested in the full employment debates. During both periods, powerful segments of the capitalist class and their politi— cal allies feared the prospect of increasing stagnation in capital accumulation and sought intervention from the State in order to restore conditions in the private economy requi— site for renewed expansion. In both instances, however, this uncertainty fostered proposals which directed the State to orient its intervention around the central goal of plan— ning for full employment. The resolution of the debates which followed illustrate both the nature of class relations and the relative distribution of class power at the time. This work is then an examination of the ”political economy“ of full employment policy. This implies that embedded within the concept of full employment are a great many others, most of which remain dormant in the following discussion. Full employment, in other words, should be viewed as a relational concept in the Marxian sense that it encompasses both the possibilities and the limitations of social relations within capitalist society. The relation is the irreducible minimum for all units in Marx's conception of social reality. This is really the nub of our difficulty in 5 understanding Marxism, whose subject matter is not simply society but society conceived of ”relation- ally." Capital, labor, value, commodity, etc., are all grasped as relations, containing in them- selves, as integral elements of what they are, those parts with which we tend to see them externally tied (Ollman, 1971: 15). Our investigation is organized according to what Sweezy (1942: 11) has termed the logic of "successive approximations," whereby one moves from the most abstract level of analysis “to the more concrete in a step—by—step fashion, removing simplifying assumptions at successive stages of the investigation so that theory may take account of and explain an ever wider range of actual phenomena.“ Chapter 2, therefore, provides an overview of contending theories of the nature of the capitalist State, with partic— ular attention given to recent theoretical conceptions which have arisen out of a Marxian framework. The chapter ends with a schematic presentation of a class theory of the State and policy process. Chapter 3 moves from this general theory of the State to its empirical application within a particular national and historical context, the United States in the post-World War 11 period. We contend that the problem of economic stagnation which ravaged the capitalist world in the 19305 was at least temporarily resolved at the close of World War 11 through the formation in the United States of a Keynesian “pro—growth” coalition, which included both labor and capi- tal and which allocated a much greater role to the State in regulating economic performance by adjusting policies 6 related to the level of aggregate demand. This ”political” coalition was augmented by an "economic settlement" between capital and labor premised upon the possibility of a secu- lar rise in the standard of living for workers in exchange for labor cooperation in improving economic productivity and trade union acceptance of responsibility for enforcing contracts. The contradictions inherent in this strategy, we assert, led to renewed stagnation in the 19705 and a new crisis. Chapter 4 analyzes the political orientation of the American labor movement and the problems associated with the bureaucratization of trade union structures in the postwar period. We conclude with an assessment of the role of full employment policy within labor's political agenda. Chapter 5, finally, explains how all of the above——a greatly expanded role for the State in economic management, an increasingly bureaucratic trade union movement, and renewed economic stagnation——coalesced in the postwar debate over full employment policy. It seeks, in other words, to utilize a general theory of the State and policy process to illuminate specific public policy decisions. Our particular concern is with the impact of organized labor upon the drafting and revision of full employment policy and with labor's role in the coalition which actively supported passage of such legislation. Chapter 6 offers a summary and conclusion. Throughout this work, we use the term ”State” (capital- ized) to refer to the institutional and ideological mechan- isms which unify any particular capitalist social formation and function to reproduce the status quo. This refers especially to those bureaucratically organized structures of government which remain ”relatively autonomous” from instru- mental manipulation by specific class fractions and are responsible for the continued viability of the political economy as a whole (O'Connor, 1978). We also use the term "organized labor” to refer to the largest and most powerful labor institutions in the United States and those most active in the political arena. In this work, those institu— tions include the AFL-CIO and the United Auto Workers. In terms of the actual research design, a careful exam— ination of congressional hearings, government documents, archival materials, and secondary sources related to full employment policy provided sufficient information for under- standing the issues under consideration and the general sequence of events surrounding the 1944-46 and 1974-78 full employment debates. It was necessary, in addition, to interview a cross-section of the actual participants in the negotiations in order to determine which organizations and individuals demanded specific changes in the legislation. The reading provided essential preparation for these inter- views by clarifying the questions which remained to be answered. 8 As principal drafters of the legislation, Bertram Gross-and Leon Keyserling were interviewed first. They, in turn, recommended those individuals who were subsequently interviewed for their expertise on critical issues. The journalist's credo which mandates two or more sources as verification for one's description of events animated much of these discussions. This work does not, in the final analysis, purport to be a model of “value-free” sociology. Our concern with full employment policy emanates from a commitment to assuring the freedom and dignity of all human beings by guaranteeing them the right to work and to be self-sufficient. This is not to imply that we have in any way purposely biased our analysis in support of this prior commitment. To the contrary, we have steadfastly endeavored to be ”objective” in our treat~ ment of the facts, without ever becoming ”detached.“ The reader is encouraged to evaluate our success. CHAPTER 2 THE ROLE OF THE STATE IN ADVANCED CAPITALIST SOCIETY An examination of the process of policy formation in an advanced capitalist society like the United States must log- ically begin with a theory of “the State”: its composition, function(s), and mode of operation.1 It is essential to understand the dynamics underlying the dramatic growth of the American State apparatus in the twentieth century and to clarify the ways in which this growth has been structurally related to increased pressures upon the State to (1) foster the conditions necessary for capital accumulation in the private sector and (2) maintain the legitimacy mrthe polit- ical economy as a whole. Moreover, in the following, we will attempt to assess the hypothesis that organized labor might in fact acquire and exercise some degree of State "power" through active struggle over the formation of policy. It is difficult to overestimate the growth in signifi— cance of the State in advanced capitalist nations such as the United States over the past fifty years. The 19205 represented the "last hurrah“ of laissez-faire capitalism in the United States (Dowd, 1975). Subsequently, the Great Depression, World War II, and the rapid economic expansion of the postwar period witnessed the burgeoning of an 10 aggressive, interventionist State which has underwritten economic expansion at home and abroad through its Janus- faced policies of welfare and warfare (O'Connor, 1973). Theoretically, these policies have been rooted in the Keynesian response to the secular stagnation of the 19305 (Keynes, 1976; Hansen, 1938, 1941, 1942). Massive State spending during World War II finally lifted the United States out of depression, and subsequent expenditures on social capital and social expenses2 by both Republican and Democratic administrations assured the longest and most spectacular period of economic expansion in United States history. Even the arch conservative, Richard Nixon, was forced to admit——somewhat furtively——in 1971 that he had become a Keynesian (cf. Boddy and Crotty, 1975, for an over— view of the "New Economic Policy”). In this chapter and the next, we shall examine two salient questions which remain. First, has this expanded role of the State in fostering capital accumulation, in part an outgrowth of Keynesian economic policy, led to the devel- opment of an "independent” State, and what consequences fol- low if it has? Second, if the power of the State to the contrary is governed by the capitalist class, as Marxists are wont to argue, how can we account for the implementation of policies which appear to run counter to that class's immediate interests? (Cf. DiTomaso, 1977, for a similar discussion.) 11 Alternative Theories of the State3 The position which has captured the liberal imagination and dominated mainstream American social science for decades views the State "as a pluralist, aggregating mechanism in which agencies, programs and legislation are substantive responses to the demands and interests of competing groups" (Esping-Andersen, Friedland, and Wright, 1976: 187). Plu- ralist theorists regard the struggle for control of State bureaucracies by competing "interest“ or ”veto” groups (Domhoff and Ballard, 1968) as the expression of class structure impacting upon the State. Some (Lipset, 1960; Lipset and Rokkan, 1967) characterize this struggle as party competition for control of otherwise politically neutral State agencies. Others (Dahl, 1961; McConnell, 1966) per— ceive State agencies as ”directly accessible to interest groups and classes for particularized, non-electoral con- trol, and thus as bases of political power“ (Esping- Andersen, Friedland, and Wright, 1976: 187). Both agree, however, that the proliferation of State agencies and pro— grams offers avenues for political input to all sectors (at least all "organized" sectors) of the society. A slightly different and more challenging variant of the pluralist perspective characterizes the United States as a "post-industrial" society in which, due largely to rapid technological advance, the traditional problems of class domination surrounding property ownership have been sup- planted by conflict over the control of administrative 12 bureaucracies (Dahrendorf, 1959; Galbraith, 1967, 1973; Bell,_1973). On the one hand, Galbraith (1967: 130) has contended that the principal concern of the new "techno— structure," as he terms the managers of modern corporations, has shifted from generating maximum profit at any cost to providing for the long-term stability and health of the organization. This, in fact, distinguishes the ”mature" from the once dominant “entrepreneurial" corporation (cf. DiTomaso, 1977: 232-236). On the other hand, the his- torical conflict between private and State sectors over the distribution of resources has been replaced by their cooper- ation surrounding common goals and needs (Galbraith, 1967: 298-319). Implied is the notion that similar dynamics oper- ate in all of the economically advanced nations and hence that the character of social and political relations within the United States and the Soviet Union will tend to ”con- verge” over time (Bell, 1973). Criticisms of the pluralist perspective run along sev- eral lines. The most obvious point of contention, of course, is that pluralism fails to adequately explicate the historical and empirical pattern of State activity. As we shall attempt to show through an analysis of full employment policy. the possibilities for State intervention in the American economy are severely circumscribed due to the fact that the American State is a “capitalist“ State. Epistemologically, the pluralist tradition within main- stream social science——particularly political science and 13 political sociology——is guided by the dictates of operation— alismgand behaviorism. Operationalism demands that the political process be fragmented into clearly observable units and their interactions explored, the upshot being that the concept of the State as a meaningful totality is lost. Behaviorism, furthermore, delimits the research focus to the microprocesses of politics and decision making. Together they render liberal social science incapable of identifying the class character of a system of political governance ”because [it is] methodologically incapable of ascertaining the HISTORICALLY CONCRETE selectiveness of the exercise of political power”; that is to say, they assure that consider- ation is given only to those events which fall within the purview of the system in question and not those ”non-events” which are structurally SELECTED OUT before hand (Offe, 1974: 42). Finally, the pluralist conception of technology and industrialization as somehow supra-historical phenomena—— i.e., determinant of, rather than determined by, historical forces——obscures the historical uniqueness of a given social formation and causes its analysis to be static. Marxist theories of the State derive their inspiration from a number of arcane and often contradictory passages within Marx's writings which only indirectly address the 4 question of the role of the State. These theories may be roughly divided into three traditions: instrumentalist, 14 structuralist, and Hegelian-Marxist. Gold, et al. (1975: 31), distinguish among these as follows: What we mean . . . by an "instrumentalist theory” of the state is a theory in which the ties between the ruling class and state are systematically examined, while the structural context within which those ties occur remains largely theoreti— cally unorganized. A "structuralist theory,” in a complementary way, systematically elaborates how state policy is determined by the contradictions and constraints of the capitalist system, while instrumental manipulation remains a secondary con- sideration. Finally, a “Hegelian-Marxist theory" places its emphasis on consciousness and ideology, while the link to accumulation and instrumental manipulation stays in the background. The instrumentalist perspective emanates from the famous quote in the Communist Manifesto wherein Marx and Engels assert, ”The executive of the modern State is but a committee for managing the common affairs of the whole bourgeoisie” (Marx and Engels, 1968: 37). In a similar vein, Lenin contended in The State and Revolution: The state is the product and the manifestation of the IRRECONCILABILITY of class antagonisms. The state arises when, where and to the extent that class antagonisms CANNOT be objectively recon- ciled. And, conversely, the existence of the state proves that the class antagonisms ARE irrec- oncilable (Christman, 1966: 273). Contemporary theorists such as Sweezy (1942) and Miliband (1969) have likewise argued that the economic power of the capitalist class as a consequence of its owner- ship and control over the means of production ensures its ability to manage the State as an instrument of its own class domination. This may be expressed directly through the manipulation of State policies and programs or indirectly through the exertion of pressures upon the State 15 (Gold, et al., 1975: 34). Domhoff (1967, 1970, 1972a, 1972b, 1974) and others5 have gone to great lengths to specify concretely the membership of the capitalist class, their social and educational background, their links to the State, and their impact upon particular State policies. The contributions of this instrumentalist perspective to an adequate Marxist theory of the State have been mani— fold and significant. It has spawned critical empirical research into the sociology of the capitalist class which has made it possible to demystify the impact of capitalist input into the policy process; to highlight the ideological conflicts which exist within the capitalist class per se; and to identify the local, regional, and national bases of capitalist class power (Gold, et al., 1975: 34). Nevertheless, instrumentalism as the single Marxist approach to the State exhibits serious shortcomings. In their rush to counter the pluralist description of State activity, instrumentalist theorists have generally adopted the basic pluralist framework, focusing on social and polit- ical groupings such as ”elites” rather than upon classes. The product is frequently “descriptive” rather than ”dialec— tical” analysis (Poulantzas, 1973: 240-250). Instrumental- ist theorists have also been unable to explain the implemen- tation of State policy which appears to contravene the immediate interests of the capitalist class, reflecting their depreciation of class struggle and an overly elitist view of the nature of historical transformation.6 16 Structuralist theories of the State tend to view Marx's later works (most notably Capital) along with his discussion of Bonapartism (especially in The Eighteenth Brumaire g: Louis Bonaparte) as the locus of his “mature” understanding of the State.7 French structuralists, represented by Althusser (1970a, 1970b) and Poulantzas (1972, 1973) in par- ticular, have vigorously castigated the instrumentalists for stressing the importance of direct capitalist intervention in the State apparatus: . because the DIRECT participation of members of the capitalist class in the State apparatus and in the government, even where it exists, is not the important side of the matter. The relation between the bourgeois class and the State is an OBJECTIVE RELATION. This means that if the FUNC- TION of the State is a determinate social forma— tion and the INTERESTS of the dominant class in this formation COINCIDE, it is by reason of the system itself: the direct participation of the members of the ruling class in the State apparatus is not the CAUSE but the EFFECT, and moreover a chance and contingent one, of this objective coin— cidence (Poulantzas, 1972: 245). According to Poulantzas, the State should be defined as "THE FACTOR OF COHESION OF A SOCIAL FORMATION AND THE FACTOR OF REPRODUCTION OF THE CONDITIONS OF PRODUCTION OF A SYSTEM that itself determines the domination of one class over the others”; and, in contradistinction to the instrumentalist position, the ”capitalist” State must be understood as most closely serving the interests of the capitalist class “only when the members of this class do not participate directly in the State apparatus, that is to say, when the RULING CLASS is not the POLITICALLY GOVERNING CLASS” (Poulantzas, 17 1972: 246). In simple terms, the success of the capitalist State.in unifying a given social formation—-its principal function——is conditioned by the degree to which it is able to obtain ”relative autonomy” from instrumental manipulation (Poulantzas, 1973: 44-50 and passim) and implement those policies—~often involving substantial ”reforms" such as those of the New Deal——requisite to the continued viability of the political economy as a whole. The (capitalist) State, in the long run, can only correspond to the political interests of the dom- inant class or classes. . . . Yet, within these limits, the degree, the extent, the forms, etc. (HOW relative, and HOW IT IS relative) of the relative autonomy of the State can only be exam- ined . . . with reference to a given capitalist State, and to the precise CONJUNCTURE of the cor- responding class struggle (the specific configu— ration of the power bloc, the relations between the bourgeoisie and its different fractions on the one hand and the working classes and support— ing classes on the other, etc.) (Poulantzas, 1976: 72). Despite the relative sophistication of this structuralist-Marxist perspective on the State, it, too, exhibits a number of formidable deficiencies. In the first place, the treatment of individual human beings solely as “agents of a social formation" or as "the 'bearers' of objective instances,“ as Poulantzas does (1972: 242), opens this type of structuralism to the charge of being "anti- humanist” and ”a-historical“ (Bridges, 1974: 1980). The attempt to provide a corrective to the instrumentalist's overly voluntaristic analysis of social interaction leads the structuralists too far in the other direction to a 18 denial of the significance of class consciousness and class struggle (Poulantzas, 1976: 74, indeed has recently admitted that this was true of his earlier work and that he is attempting to correct the problem). Overemphasis upon the autonomy of the capitalist State apparatus even exposes Poulantzas to a degree of antimaterialism in his analysis (Bridges, 1974: 171). One never understands from Poulantzas, finally, why the State must act on behalf of capitalist political and economic interests——there is no demonstration of social mechanisms which would guarantee such action (Gold, Lo, and Wright, 1975: 38)——or how social transformation is apt to occur——leading one either to ”anarchist politics or to the worst kinds of reformism“ (Bridges, 1974: 180).8 In sum, neither instrumentalist nor structuralist theories offer an adequate Marxist perspective on the State. The instrumentalist view of the state stresses the POLITICAL INPUT into the state and the importance of the unequal class distribution of power. The structuralist view of the state stresses the POLITICAL OUTPUT of the state activity by which capitalist domination is reproduced and the cohe- sion of the social formation assured. Neither approach contains a theory of the mech- anisms that link political inputs and systemic constraints to the outputs of state activity. Neither approach can analytically distinguish the extent to which class action mediates between con- straints and state structures, or at times is irrelevant to the relationship of economic con- straints to the state (Esping-Andersen, Friedland, and Wright, 1976: 189). The Hegelian-Marxist perspective on the State, finally, unlike structuralism, draws much of its inspiration from 19 Marx's early writings.9 Where Althusser posits ”a radical break (coupure) between Marx's early and later writings” and contends that the later (post—1847) ”scientific“ works alone merit serious attention, Hegelian—Marxists such as Goldman, Korsch, and Lukacs criticize this later work for its overly ”mechanistic” character in comparison to Marx's earlier treatment of alienation in capitalist society. At the heart of the struggle is a disagreement over whether surplus value or alienation is the nodal point of Marxist theory (Wolfe, 1974: 133). Rather than an empirical and analytical investigation of the relationship between the State and the class struc- ture, the Hegelian-Marxist concern is more to actually define the State and explicate its “ideological” functions. They have placed great emphasis on ideology, con- sciousness, legitimacy, and the mediating role of institutions and ideas, thereby contributing sig— nificantly to current thinking on politics (Gold, Lo, and Wright, 1975a: 40). Despite the excessively abstract nature of Hegelian- Marxist theory and the difficulties it poses for empirical analysis, its concern with issues of ideology and legitima- tign is particularly important for our purposes because it offers, as in Wolfe's recent work (1974, 1977), the begin- nings of a Marxist theory of politics and policy formation. By combining Hegelian-Marxist theory with some elements of structuralism——assuming that ”alienation was Marx's way of talking about surplus value when Hegel rather than Ricardo was his guide“ (Wolfe, 1974: 133)——Wolfe has formulated a theory of "alienated politics" as an analogue to Marx's 20 theory of alienated labor. As in the social relations of capitalist production where people's labor power is "reim- posed upon [them] as capital, via surplus value” (Gold, Lo, and Wright, 1975b: 44), the natural desire that people express for community and cooperation with others becomes transformed in capitalist society into a ”fetishism of politics.“ Politics in general represents the social relation- ships among people, the ways they co-operate and refuse to co—operate with each other. But in capi- talist society politics is replaced by ALIENATED POLITICS, WHICH CAN BE DEFINED AS THE PROCESS THROUGH WHICH PEOPLE IN SIMILAR POSITIONS ARE SEP- ARATED FROM EACH OTHER, FORCED TO COMPETE INSTEAD OF TO CO—OPERATE. At the same time, this alienated relationship returns to people as a higher author- ity, as something over which they are not expected to have any control. Hence——POLITICAL INSTITUTIONS IN CAPITALIST SOCIETY CAN BE DEFINED AS THOSE INSTITUTIONS RESPONSIBLE FOR ABSORBING THE COMMON POWER THAT PEOPLE POSSESS AS MEMBERS OF A DOMINATED BUT MAJORITARIAN SOCIAL CLASS AND FOR USING THAT POWER TO RULE THEM, THAT IS, TO EXERCISE POLITICAL POWER (THEIR OWN POLITICAL POWER) OVER THEM FOR PUR— POSES ALIENATED FROM THOSE PEOPLE THEMSELVES (Wolfe, 1974: 148). Indeed, as we shall see below, the crisis of disaccumu- lation in late-capitalist societies (Mandel, 1972) mandates an accelerated DEPOLITICIZATION of the working classes in order to reestablish legitimation and construct a viable accumulation model.10 This, then, becomes the responsibil— ity of the capitalist State (Wolfe, 1974: 149). Whether it‘ succeeds depends upon the course of class struggle. In the remainder of this chapter, we will endeavor to delineate a ”class” theory of the State which incorporates the strengths of each of the Marxist perspectives, avoids 21 some of the pitfalls, and furnishes a reasonable framework for empirically investigating the phenomenon of postwar full employment policy. An Adumbrated Class Theory of the State and the Process of Policy Formation The focus of this research, as stated above, is an examination of the debate surrounding the implementation of full employment policy in the United States in the post- World War II period in an effort to gain a better under- standing of both the role of the State in maintaining and solidifying the political economy and the status of organ- ized labor relative to the process of policy formation. The following postulates, then, are an attempt to outline the major lineaments of a class theory of the State and policy process. They do not represent a comprehensive theory, but only the broad outline of such a theory. A great deal of work remains to be done in this area. Evaluation of their merit, however, should reflect an assessment of the degree to which they suggest a theory: (1) which views the State simultaneously as “a PRODUCT, an OBJECT, and a DETERMINANT of class conflict" (Esping- Andersen, Friedland, and Wright, 1976: 191); (2) that is ”materialist,” without being deterministic;11 (3) that adequately articulates the "relative autonomy" of the State; 22 (4) which clarifies who is served by State activity and how; and finally; (5) that specifies areas of crisis and potential political struggle. It should be carefully noted that these postulates draw heavily from the path-breaking work of O'Connor (1973), Offe (1974, 1975a, 1975b, 1975c), and more recently, Esping— Andersen, Friedland, and Wright (1976). (1) An adequate Marxist theory of the State must begin by distinguishing a "CAPITALIST State” from a mere “State in capitalist society.“ The latter implies ”the neutrality of the State apparatus as an instrument which, according to its internal structure, could in principle also be used to implement other interests“ (Offe, 1974: 32-33). A ”capital- ist State,” on the other hand, is not only functionally related to and dependent upon the accumulation process, it is internally structured in a way which ensures its role in fostering further accumulation. It is integral to the accumulation process, in other words, and is not a neutral onlooker (O'Connor, 1973). Accordingly, a “pure“ capitalist State (the ”ideal type,” as opposed to such concrete exam— ples as the mixed economies of Western Europe) is defined by four fundamental principles (Offe, 1975b: 125-27): (a) It is excluded from any State—run production for profit; such is the exclusive province of the pri- vate sector. Moreover, it is denied the authority to 23 order or directly control production within the private sector, although it often possesses significant regula- tory authority over decisions ranging from utility rate increases to oil and natural gas prices, pollution emissions, air fares, and other areas. (b) While precluded from capital accumulation on its own, the State is compelled to guarantee the CONDI- TIONS necessary for accumulation in the private sector——to protect the private sector from threats external or internal to its operations. Of course, given the contradictions inherent in capitalist devel- opment, State activity to "protect” the private sector, such as the relaxation of antitrust laws or revision of the tax code to encourage corporate investment which furthers the natural tendency toward the concentration of capital, may actually foster crises of a deeper and more profound character (see Chapter 3). (c) Its freedom, therefore, to develop and imple- ment policy is severely constrained by its dependence upon the success of the accumulation process (cf. Block, 1977). (d) Underlying the “EXCLUSION, MAINTENANCE, and DEPENDENCY” of the capitalist State and imperative for its continued functioning rests its ability to achieve “LEGITIMATION” for its activity. The idea is that only if (and only as long as) the capitalist state manages, through a variety of institutional mechanisms, to convey the image of ‘a$w* 24 organization of power that pursues common and gen- eral interests of society as a whole, allows equal access to power and is responsive to justified demands, can the state function in its specific relationship to accumulation. This is equivalent to saying that the state can only FUNCTION as a capitalist state by appealing to symbols and sources of support that CONCEAL its nature as a capitalist; the EXISTENCE of a capitalist state presupposes the systematic DENIAL of its nature as a CAPITALIST state (Offe, 1975b: 127). Nevertheless, none of this is possible——its support for capital accumulation or the legitimation of its role within the society——unless the capitalist State main- tains its ”relative autonomy“ from direct manipulation by members of the capitalist class. It must act on behalf of the class's interests as a whole. (2) In one sense, this is not complicated at all. For the particular activities of the capitalist State must be guided by one overriding maxim: Act only i a way which further universalizes the commodity form. As the most general strategic rule, which is the key to most observable policies and changes in the method of policy making, the imperative to universalize the commodity form means nothing but to do two things: first, to put every owner of labor power in a position that makes him or her able to find employment on the labor market, the demand side of which is directly or indirectly determined by profitability criteria of owners of capital; as soon as labor is made employable under these criteria, the surplus-value extracted from the labor power under conditions of equivalent exchange is guaranteed; second, to put individual units of capital or capital as a whole in a posi- tion in which it actually appears to be profit- able to buy labor power. In this sense full employment of all units of value under the exploitative conditions of the capitalist mode of production is in fact the supreme purpose of the 25 capitalist state and the substance of its observ- able activity (Offe, 1975c: 251). But of course things are never that simple. The monopoliza- tion of the United States economy in the twentieth century has tended more and more to ”PARALYZE the commodity form of value” (Offe, 1975a: 141). And the response by the State to redress this phenomenon through augmented expenditures on SOCIAL CAPITAL has resulted in both new areas of noncommodi- fied production——expanded public education, for example——and a rapid increase in SOCIAL EXPENSES (O'Connor, 1973). (3) This drift toward DECOMMODIFICATION throughout the American economy, as a consequence of the increased costs and risks to private corporations in continued production, is paralleled by a corresponding alteration in the charac- ter and thrust of State policies. From an almost exclusive concern with ALLOCATIVE types of activity (Offe, 1975b), or activity directed at the level of CIRCULATION (Esping- Andersen, Friedland, and Wright, 1976)——ranging from grants of government land to private businesses such as railroads to the adoption of Keynesian fiscal and monetary policies in an effort to stimulate aggregate demand——the State has been increasingly compelled to undertake the actual PRODUCTION of goods and services necessary to sustain the conditions of accumulation——including everything from the development of manpower training programs to the guaranteeing of an ade- quate and inexpensive supply of energy and raw materials. 26 The problem arises from the fact that while questions surrounding the allocation of resources already owned or controlled by the State can be settled directly through com- petition within the political arena, the actual production of goods and services necessary to further accumulation requires that the State adopt an organizational procedure from which actual policies may emerge, without having——as does the private sector-the benefit of the market as its guide (Offe, 1975b). (4) There are, however, at least three basic ”logics of policy production,” other than the market, which the State may seek to adopt: "bureaucracy, purposive action, and consensus” (Offe, 1975b: 136). Each has its own short- comings. Bureaucracy is inefficient and inflexible relative to changing market demands for particular inputs. Purposive rational or technocratic modes of decision making are inef— fectual unless they are provided at the outset with firm, clear-cut, and noncontroversial goals to be attained and unless they are free of fiscal and other external con- straints (Offe, 1975b: 139). Decentralized and democratic decision making threaten the prerogative of the private sec- tor and undermine the established bases of class, i.e., man- agerial control and the legitimacy of hierarchical relations in production (Braverman, 1974; Edwards, 1979). Thus, while each of these forms of policy making: 27 . might be viable as a structure of decision making, . . . none of them is adequate for solving the specific problem of the capitalist state, which is to establish a balance between its REQUIRED FUNCTIONS, which result from a certain state of the accumulation process, and its dynamics on the one side and its INTERNAL STRUCTURE on the other side. It thus seems that the problem of the capitalist state is NOT how to solve certain prob- lems that are brought by the accumulation process, like how to control inflation or unemployment or how to produce technological change and education. The problem of the capitalist state is rather one that has to be solved before any of those changing problems can be dealt with, namely, how to estab- lish and institutionalize a method of policy pro- duction that constitutes a BALANCE (or reciprocity) between required state activities and the internal structure of the state (Offe, 1975b: 140). None of the three major strategies appear to offer a reason- able answer, and this underlies the State's mounting insta- bility. (5) Yet if the capitalist State has difficulty struc— turing itself in a way which will enable it to distill from the plethora of isolated and competing units of capital something approximating the ”collective interest of capi- tal," it nonetheless operates through a framework of insti- tutionalized ”EXCLUSION RULES" to “SELECT OUT“ those policy proposals which patently threaten capitalist hegemony. Selection mechanisms anchored in the institu- tions can be analytically identified in the polit- ical system on at least four levels——structure, ideology, process, and repression. They represent a system of filters operated in series the results of which, namely concrete actions on the part of authorities and political processes, are deter- mined by the cumulative selections performed by this system (Offe, 1974: 39). 28 If these selective mechanisms function effectively, it is virtually impossible to ”demonstrate empirically the class nature of the state” (Gold, Lo, and Wright, 1975b: 39). Only in periods of crisis for the most part, when the condi- tions required to sustain both accumulation and legitimation are jeopardized, can one successfully begin to isolate and substantiate the class nature of the State. (6) In summary, as illustrated in Figure 1, in its ideal-typical form, the capitalist State formulates policies which serve to reinforce the prerogatives of the private market: it limits its activity to intervention at the level of CIRCULATION relations (examples include tax cuts and transfer payments such as Social Security and unemployment compensation) and to COMMODIFIED rather than noncommodified forms of production. It avoids the establishment of community—controlled rent boards, publically-controlled utilities, expanded public service employment projects, and the like, which supplement and/or alter the operation of the market at either the level of production or circulation relations and tend over time to politicize questions regard- ing what is to be produced, how it is to be produced, and who will produce it. The ultimate goal of any truly ”capi- talist” State policy is always to REPRODUCE, stabilize, and expand the social relations of capital. Nevertheless, because the existing State must always act in contradictory ways and because the problems it faces 29 Figure 1. Schematic View of Potential Variants of Capital- ist State Policy. I. REPRODUCTIVE OF CAPITALIST SOCIAL RELATIONS FORM of state intervention implied by political demands COMMODIFIED FORM NONCOMMODIFIED FORM Tax cuts, price supports and Libraries, free goods and CIRCULATION other governnnent subsidies, services provided by the 13 LEVEL unemployment payments, state, welfare in the form 3 cash fOFHTS of welfare of free goods 0 (D .: Government contracting with National health services, '0 . . . . . PRODUCTION private capital to build eco- free public education g LEVEL nonfic infrastructures, w nationaHzed profit—nnaking E industries (e.g., Renault) (U E cu ‘0 T3 E II. UNREPRODUCTIVE OF CAPITALIST SOCIAL RELATIONS o a g FORM of state intervention inaned by polhical deniands 0 g y COMMODIFIED FORM NONCOMMODIFIED FORM m 2 Adequate guaranteed incorne Connnunity control of pub— o . . . , . 3; (not restricted to retired 11C servnces, connnwunlty g CIRCULATION workers) sufficient to under— controHed rent boards ‘— LEVEL mine the commodity status E oflabor power, wage '5 demands combined with o . . tn profit and price controls “5 __l Demands for infrastructure Workers' takeovers of fac- g construction under condi— tories which restructured 3 PRODUCTION tions of the fiscal crisis of labor process in ways which LEVEL the state increase worker control within production, tenant control of public housing construction SOURCE: Gosta Esping-Andersen, Roger Friedland, and Erik Olin Wright, "Modes of Class Struggle and the Capitalist State, " KAPITALISTATE (Number A—S, 1976): 201. 30 in maintaining accumulation and legitimation tend to worsen over time——as we noted above, the capitalist State is a PRODUCT, and OBJECT, and a DETERMINANT of class struggle—— it increasingly finds itself in crisis. The response to such crisis in recent years by the most ”enlightened" and class—conscious fractions within the American ruling class and the State has been a growing CORPORATISM on the one hand (cf. Pahl and Winkler, 1974; Schmitter, 1974; Tabb, 1975) and a movement to DEPOLITICIZE State activity on the other (Huntington, 1975; Wolfe, 1977). These developments will be analyzed in greater detail in Chapters 3 and 4, respectively. 31 NOTES 1Cf. Chapter 1 for a discussion of the problems involved in actually defining “the State.” 2O'Connor defines these terms as follows: SOCIAL CAPITAL is expenditures required for profitable private accumu- lation; it is indirectly productive. . . . There are two kinds of social capital: social investment and social consumption (in Marxist terms, social constant capital and social variable capital). SOCIAL INVESTMENT consists of projects and services that increase the produc- tivity of a given amount of labor power and, other factors being equal, increase the rate of profit. An example of this is social insurance, which extends the reproductive powers of the work force while simultaneously lowering labor costs. The second category, SOCIAL EXPENSES, consists of projects and services which are required to maintain social harmony-—to fulfill the state's "legitimation" function. They are not even indirectly productive. The best example is the welfare system, which is designed chiefly to keep social peace among unemployed workers (O'Connor, 1973: 6-7). 3An excellent overview of competing theories of the State, in more detail than the following, can be found in Mollenkopf (1975); Gold, Lo, and Wright (1975a, 1975b); and Esping-Andersen, Friedland, and Wright (1976). 4Marx had indicated in an 1859 letter to Joseph Weydemeyer that he intended to write a fourth ”volume" of Capital on the nature of the State, but this was never com- pleted (Giradin, 1974: 194). 5Cf. for example Lundberg (1968), Andreano (1973), and Zeitlin (1970). A sophisticated and fascinating version of instrumentalist research is also exhibited in work on ”cor- porate liberalism” like that of Kolko (1963) and Weinstein 1968 . 6One searches hard even in the work of so brilliant a Marxist historian as W. A. Williams (1964, 1966) for a meaningful discussion of the significance of class struggle in precipitating change. 7This is the position of Althusser (1970) who argues that there is a sharp break between the writings of the young and the older Marx, the early works being character- ized by “a humanist/anthropological/historicist problem— atic,” and the later works by a "scientific" view of history ——historical materialism (Bridges, 1974: 162-63). 32 8Poulantzas (1976: 68) asserts, on the contrary, that this is precisely the danger which he has sought to avoid. He contends that even his earlier work was an attempt to counter the reformist thrust of such authors as Gorz and Mallet. 9By ”early writings," we mean especially Critique gfi Hegel's PhIIOSOphy of the State and Contribution to the Critique of Hegel's—Rhilosophy 9: Right (1842-18437 35—well as the GeFman Ideolbgy, the Economic and Philosophic Manu- scripts 6f“1944, and the essay on the Jewish Question (Wolfe, T974: 133). —_ 10This theme has been enunciated by most of the so- called "neoconservative" intelligentsia, including Daniel Bell (1975, 1976), Daniel Moynihan (1973), and various writers for the journal, Public Interest. But it was given classic expression in the 1975 report of the Trilateral Commission, The Crisis of Democracy, co-authored by Samuel Huntington. See ChapteF—4 for a discussion of that docu- ment. 11Marx's famous remark (1968): 97) still holds. “Men make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from the past.” CHAPTER 3 THE POSTWAR ECONOMY: FROM CONCENSUS TO CRISIS I There can be so much for all that the removal of unmerited poverty will remove the threat to merited wealth. Leon Keyserling The Roots of the Postwar Economy The development of the United States economy in the post-World War II period, like all significant historical phenomena, is rooted in what preceded it——in this instance, depression and war. As early as November of 1943, govern— mental agencies from the War Production Board to the Depart- ments of Commerce, Treasury, and Budget began laying the groundwork for reconversion to peacetime production (Jones, 1972). President Franklin Roosevelt and the liberal politi- cal coalition which supported him faced a plethora of vexing problems surrounding "employment; the division of authority and operations between government and private interests; the distribution of the shares of income; the contributions of governmental and private interests to total spending; the manner of carrying on international trade; social security; reconstruction bothen home and abroad" (Harris, 1943: 2). 33 34 At the same time, they were haunted by the fear that an unsatisfactory resolution of these problems, and a conse- quent return to depression conditions, would prefigure the ascendence of fascism in the United States. The purchasing power accumulated during the war might stave off economic collapse for a time—— there might even be a spurt of rampant inflation ——but disaster seemed probable. And when it came, the demogogues of the extreme right, never wholly silent during the war, would reappear, directing their hymnscfi hate at disillusioned, frustrated masses searching desperately both for a leader and for a scapegoat. The Gerald Smiths, the Father Coughlins, and their ilk could recruit battalions of storm troopers from among the embittered veterans. Corporate leaders, ter- rified by the possibility of mass revolt, desper- ately bargaining to retain their immense power, would provide financial backing, just as the German industrialists had turned to Hitler. Reactionaries and extreme isolationists——Burton Wheeler, Gerald Nye, Hamilton Fish, Martin Dies, and others——would rule Congress; Lindberg might become a figurehead Fuhrer. The nightmare of a totalitarian America, should progressivism fail to meet postwar necessities, existed constantly in the back of the liberal mind (Hamby, 1973: 5). They had sufficient reason to worry. The record of the New Deal in counteracting the Depression and stimulating recovery had left much to be desired.1 As Table 1 indi- cates, the national income had grown to $72.6 billion in 1939——before the preparations for World War II had begun to have their effect—~reflecting an eighty percent increase over the 1933 nadir of $40.3 billion. But even this was substantially below the 1929 peak of $86.8 billion and rep- resented a drop from the 1937 level of $73.7 billion. An unemployment rate of 17.2% in 1939, while an improvement over the 24.9% high of 1933, was a far cry from the 3.2% Table 1. Selected Measures of the Severity of the Great Depression and the Extent of Recovery by 1939. 1929 1932-33 1937 1939 Pre- Low Depression Depression Peak National income* 86.8 40.3 73.7 72.6 $§§e 0f unemployment 3.2 24.9 14.3 17.2 Rate of capacity utilization (%) 86 42 83 72 Gross private domestic 40 5 30 25 investment* *In billions of dollars, adjusted to 1958 standard values. Source: Adapted from The Statistical History of the United States (New YBFR: Basic Books, 1976), ppT_135 and 235; U.S. Department of Commerce, Long Term Eco- nomic Growth: 1980-1970 (U.S. Government Printing Office, 1973), pp. 216-17; Douglas Dowd, The Twisted Dream, 2nd ed. (Cambridge, Mass.:_WTnthrop Publishers, 1977), pp. 104-106. 36 unemployed in 1929. The rate of capacity utilization for industrial producers in 1939 was only seventy-two percent. Gross private domestic investment for that year was $25 billion, down thirty-eight percent from the 1929 figure of $40 billion. Even as late as 1948, Leon Keyserling, Chairman of President Truman's Council of Economic Advisers, was pre- dicting that the United States was headed for a major depression in the 19505, ”which might be as much larger than the one commencing in 1929 as the second World War was larger than the first,” if a comprehensive antidepression program was not immediately adopted. He based his forecast on "the tendency of our productive capacity to outrun our mass buying power, the chronic weakness of such bellwether industries as residential construction, the seeming reluc- tance of capital investment to expand as dynamically as it once did, the uncertain elements in foreign trade, the enor- mous disparities in the price-and-wage structure, and huge differentials in the enjoyment of national income whether measured by regions or by individuals“ (Harris, 1948: 82). Roosevelt had responded to the deepening depression in fits and starts. As a candidate for president in 1932, he had forcefully denounced then—president Hoover for his fail- ure to balance the budget and for excessive government spending. Roosevelt's choice of Henry Morgenthau as Secre- tary of the Treasury, moreover, confirmed that he was per- sonally committed to a policy of fiscal conservatism in his 37 administration. The relative ineffectiveness of his initial programs in spurring recovery, however, led to greater reli- ance on spending as a way of both providing immediate relief and stimulating demand. Yet throughout his first term, Roosevelt conceived of government spending only as a "stop-gap” measure for meeting "certain emergency needs, especially for work relief, until his other reforms——NRA, AAA, 'cleaning up' the financial sys- tem, tax revision, etc.——would produce recovery” (Stein, 1969: 60). It was always intended that spending would decline as the economy recovered, never that the government had responsibility to spend until the economy reached full employment. Table 2 indicates the relatively meager federal budget deficits which accrued during this 1929 to 1939 per- iod. Only after an aborted attempt to balance the budget in early 1937 precipitated the sharpest decline in industrial production on record——and threatened to bury Roosevelt and the New Deal——was the importance of spending fully recog- nized and accepted (Stein, 1969: 104—130). Roosevelt's commitment from 1938 on to managing the overall performance of the economy through regulation of fis- cal and monetary policy, though revolutionary in concept,' reflected his administration's pragmatic response to depres- sion conditions; it did not, in other words, stem from any coherent and elaborate economic theory. It succeeded, given hindsight, because it was an essentially conservative choice "involving the least disruption of the existing economic 38 Table 2. Summary of Federal Government Spending: 1929 to 1939 (In billions of dollars). ) Y e a r Dseufripcliuts (or) 1929 .9 1930 .9 1931 -1.0 1932 —2.7 1933 -2.6 1934 —3.3 1935 —2.4 1936 -3.5 1937 -2.8 1938 - .1 1939 -2.9 Source: The Statistical History of the United States (New York: Basic Books, T976), p. 1105. 39 system and the least political struggle” (Stein, 1969: 460-61. Cf. also Bernstein, 1969). Nevertheless, an event had occurred two years earlier, in 1936, that would even- tually provide not only a theoretical rationale for Roosevelt's economic program but, more importantly, would establish the basis for an extended period of postwar growth and stability: the publication by John Maynard Keynes of The General Theory 9: Employment, Interest, and Money.2 Keynes to the Rescue John Maynard Keynes, son of noted British economist John Neville Keynes and a brilliant student of the eminent economists Alfred Marshall and A. C. Pigou at Cambridge, had by the late-19205 become a leading figure in British eco- nomic and political circles as well as a prominent exponent 3 The more he wrestled with and of neoclassical theory. analyzed the events of the 19305, however, the more certain he became that neoclassical theory4 was severely flawed. The General Theory represented his attempt to reformulate that theory. He began with a devastating assault upon Say's Law of Markets,5 a linchpin of neoclassical theory. Say's Law held that "there can never be a shortage of demand in relation to production,” or alternatively, that ”supply creates its own 6 It implied that depression conditions——like those demand.“ of the 1930s——were a reflection of maladjustments in the market mechanism and that a return to full employment 40 equilibrium was possible as soon as the unemployed agreed to accept lower wage rates (Lekachman, 1966: 83-87). Keynes countered with a theory of economic activity which designated stagnation and depression as the £212 rather than the exception in capitalist economies. He rea- soned, briefly, that income in such economies proceeds in a "CIRCULAR FLOW: Money flows from businesses to the public in the form of wages, salaries, rents, interests, and prof- its; this money then flows back to the businesses when the public buys goods and services from them. AS LONG AS BUSI- NESSES SELL ALL THEY HAVE PRODUCED AND MAKE SATISFACTORY PROFITS, the process continues" (Hunt and Sherman, 1975: 142). The problem is that the circular flow has leakages, 7 the most important of which is saving. The total amount of saving, moreover, tends to rise relative to increases in disposable income and to outpace the demands of consumer bdrrowing. If this ”surplus” of saved capital is not absorbed by businesses who borrow in order to invest in expanded production, the level of aggregate income gener- ated by the economy will fall and depression will ensue. Keynes, however, believed it was unlikely that the process could continue uninterrupted for very long. Investment, which is necessary to absorb savings, enlarges the capital stock and hence increases the economy's productive capacity. In order to utilize the new productive capacity fully, production and income must increase in the next period. But with the higher income there will be more saving, which necessitates more investment; and this investment is by no means automatically forthcoming. 41 Keynes saw that individuals with higher incomes saved a higher percentage of their incomes than those with low incomes. He concluded that this pattern would hold for the whole society. As the aggregate income of society increases, total sav- ings increase more than proportionately. In other words, at each new higher level of income a larger percentage of income is saved. Thus investment would have to increase at a faster rate than income if it were to continually offset saving. Only this rapid increase would permit businesses to sell everything they pro- duced; but the faster investment grows, the more rapid is the increase in productive capacity. Because of this, the economy must invest ever- greater amounts (both absolutely and relatively) in each successive period if the balance is to be maintained. However, according to Keynes, in any mature private enterprise economy the number of profitable investment outlets is limited. Hence, as the process of economic growth continues, the difficulty of finding sufficient investment out- lets becomes more and more acute (Hunt and Sherman, 1975: 143). His answer was straightforward: Government could step in when saving exceeded investment, borrow the excess saving, then spend the money on socially useful projects. These projects would be chosen in order not to increase the economy's productive capacity or decrease the investment opportunities of the future. This gov- ernment spending would increase the injections into the spending stream and create a full- employment equilibrium. In doing so, it would not add to the capital stock. Therefore, unlike investment spending, it would not make a full- employment level of production more difficult to attain in the next period (Hunt and Sherman, 1975: 144 . While he preferred that this spending be for socially useful projects such as hospitals, schools,and the like, Keynes frankly conceded that the actual spending of the funds, regardless of the objectives, was the key to economic health. The problem of stagnation, in other words, was a 42 problem of insufficient aggregate demand. With tongue in cheek, he wrote: If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enter- prise on well-tried principles of LAISSEZ-FAIRE to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercus- sions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical dif- ficulties in the way of this, the above would be better than nothing (Keynes, 1964: 129). Alvin Hansen and the Theory of Secular Stagnation American Keynesians during the war and early postwar years——including a number of those active in the Roosevelt administration such as Harry Dexter White, Leon Henderson, Harry Hopkins, and Lauchlin Currie8——were deeply concerned about the tendencies toward stagnation in the American economy. Indeed, Alvin Hansen, perhaps their most illustri- ous member, developed independently a doctrine of “secular stagnation” to account for the American experience of the 19305.9 In his presidential address before the annual meet- ing of the American Economic Association in December of 1938,10 Hansen argued that the economic order of the Western world had undergone structural changes in the first third of the twentieth century as profound as those associated with the so-called “Industrial Revolution." The factors 43 underlying the tremendous growth in capital formation in the nineteenth century, "(a) inventions, (b) the discovery and development of new territory and new resources, and (c) the growth of population,” no longer afforded the necessary out- lets for private investment. No technological innovations equivalent to the railroad or the automobile appeared in the offing. The frontier had evaporated. And perhaps most ominously, the rate of population growth had fallen off 11 Yet ”without a volume of investment expenditures sharply. adequate to fill the gap between consumption expenditures and that level of income which could be achieved were all the factors employed,” full employment and the maximum cur- rently attainable income level were impossible (Hansen,1944: 371). In truth, he contended, the character of private invest- ment for the preceding fifty years or more had reflected a ”widening of capital"——investment designed to expand the out- put of final goods in line with a growing population——rather than a ”deeping of capital”——increased capital intensity per unit of output. In the beginning stages of modern capitalism both the deepening and the widening processes of capital formation were developing side by side. But in the later stages the deepening process, tak- ing the economy as a whole, rapidly diminished. And now with the rapid cessation of population growth, even the widening process may slow down. Moreover it is possible that capital—saving inven— tions may cause capital formation in many indus- tries to lag behind the increase in output (Hansen, 1944: 375). 44 This trend was accelerated as a result of the advance of monopoly power within the economy (cf. Baran and Sweezy, 1966) but could not be reversed merely through antitrust action (though Hansen encouraged this). Expanded consump- tion through reduction of taxes, along with increased public investment, might prove partial correctives (though he cau- tioned against the dangers to free enterprise in the latter course); but in the final analysis, he remained pessimistic. The problem of secular stagnation seemed unlikely to go away. Critique of Keynesianism In the long run we are all dead. ——J. M. Keynes The reason for Hansen's pessimism, nevertheless, it can be argued, derived not from the sagacity of his insight but from critical weaknesses in The General Theory. For all of his evident brilliance, Keynes had exhibited the character- istic myopia of most bourgeois theorists. He never ques- tioned the fundamental premise that "capitalism is the only possible form of civilized society." He never sought to analyze ”the system as a whole; never studied the economy in its historical setting; never appreciated the interconnect- edness of economic phenomena on the one hand and technologi- cal, political, and cultural phenomena on the other” (Sweezy, 1964: 302). Keynes sought in the General Theory to address the problems of a national or domestic economy at a E:T_____________________________________________—_"—T: ‘7‘“:" 45 time when the dynamics of capitalist economies were becom- ing increasingly international in scope. He assumed a fun- damentally private economy just when the State had become most integrally infused as ”spender, taxer, and employer" (Dowd, 1977: 25). He ignored the development of monopoly altogether. His theory of stagnation was based more on intuition than any thorough analysis of the factors which influence the inducement to invest (Sweezy, 1964: 308). All of this underlies and foreshadows the current malaise sur- rounding Keynesian policy. Yet despite all of the shortcomings of the General Theory, the crisis in Keynesian circles might have been at least postponed had the majority of Keynes's adherents fol- lowed his advice to the letter. In the final chapter, entitled ”Concluding Notes on the Social Philosophy Towards Which the General Theory Might Lead,” he suggested a series of ”reforms“ in economic and social relations which he felt were necessary to facilitate and buttress his proposed mone— tary and fiscal policies. These included a marked decline in the acceptable rate of profit, a substantial lowering of the rate of interest, and corresponding changes in tax policy (including inheritance taxes) in order to diminish the tremendous inequality in the distribution of income and wealth which he considered not only unjust but inimical to the attainment of permanent full employment. Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, 46 consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital (Keynes, 1964: 375—76). In addition, he proposed a vastly expanded role for the State in the regulation of investment, culminating in a "somewhat comprehensive socialization of investment" (Keynes, 1964: 378). By which he meant: . state determination, year by year, of the percent of total output going to investment, as well as the rate of profit. If this were done effectively, then there would be no need, accord- ing to Keynes, for the abolition of capitalist ownership of the means of production. All that would be needed for the smooth functioning of the economy was government control over total invest- ment and profits; individual capitalists could be relied upon to make the decisions about what and how much needs to be produced (Sweezy and Magdoff, April 1977: 5). Those ”left” Keynesians in the 19305 and 19405 who took these purported reforms seriously and argued for income redistribution and an augmented role for the State were, however, outflanked by a larger, more “pragmatic” group of Keynesians who stressed "the 'tool' aspects of the new doc- trine, along with its 'policy neutrality' and its service- ability to policymakers for carrying out whatever objectives they might choose to plug in” (DuBoff and Herman, 1972: 83). The relative success of economic policy during the war and postwar expansion was creditied in large part to the preci— sion of these "tools,“ further undermining the calls for radical reform.12 47 II The Postwar Keynesian Coalition Ever since the historic passage of the Employ- ment Act in 1946, economic policies have responded to the fire alarm of recession and boom. In the 1960's, we have adopted a new strategy aimed at fire prevention—~sustaining prosperity and heading off recession or serious inflation before they could take hold. ——Council of Economic Advisors 1969 Annual Report The growth in popularity of Keynesian analysis after 1938, first in the universities and gradually within govern- mental agencies and private research organizations, afforded the basis for the formation of a Keynesian coalition which dominated economic and political policymaking in the United States after 1945. This compromise coalition was able to merge elements from both liberal and conservative policy currents13 into a consensus ideology of ”cold war liberal- ism” which propounded an enlarged role for the State in pro- moting and ensuring growth both at home and abroad. It succeeded: . first by getting segments of the left to accept the notion that long- term growth was super- ior to immediate redistribution, and second, by tailoring the new state mechanisms and policies to reinforce, rather than undermine, the forces of the market (Gold, 1977: 44). The heart of this emergent Keynesian strategy consisted of four basic tenets: (1) “overall stability was to be achieved by using aggre- gate policy tools, such as the size of the federal 48 budget deficit or surplus, to achieve aggregate objec- tives, such as the level of unemployment or the rate of change of prices”; (2) a more explicit role for the State in managing the economy, reflected in ”a greater degree of centralism within the state”; (3) "changed political and economic relations between labor and the corporate economy"; and (4) the "establishment of U.S. hegemony in the world econ- omy" (Gold, 1977). The first two were embodied in the postwar "political“ 14 This settlement typified by the Employment Act of 1946. act formally acknowledged the value of the Keynesian empha— sis upon manipulation of a small number of aggregate vari- ables, largely through variations in fiscal and monetary policy, for maintaining both stability and growth in the economy (Stein, 1969: 197). It committed the power of the State from the president——acting with the advice of a coun- cil of economic advisers established under the Act——to the Congress, the Treasury, and the Federal Reserve to guaran- teeing corporate growth through ”assured expansion of market demand, assured returns on capital, and a guaranteed supply of inputs including trained or educated labor" (Gross and Straussman, 1975: 1). This assurance of continued growth, in turn, facili- tated the I'economic” settlement between capital and labor exemplified in the 1948 UAW-GM accord: 49 A postwar economic settlement between capital and labor eventually emerged in the auto industry. This settlement was predicated upon the dual prin- ciples of labor productivity and cost of living adjustments. The guiding standard for industrial unions to the present day was the wage formula pro- posed by General Motors president Charles Wilson, and accepted by the United Auto Workers in 1948. The Wilson formula proposed that wage increases be tied to increases in national productivity and but— tressed against inflation by a cost-of—living allowance based on increases in the federal con- sumer price index. In the wake of the bitter GM strike of 1946, the auto companies considered such measures essential. The COLA provision and produc- tivity bargaining were proposed by GM as a way to avoid auto strikes in the future and stabilize its relations with the young and still militant auto union. The cost to the corporation would be mini— mal, GM's executives believed, since prices would be relatively stable in the postwar period. UAW negotiators and their counterparts throughout the community of organized labor united behind the cor- porate rationale that labor's share should be wedded to national productivity and growth (Hill, 1977: 11—12). Labor accepted the Keynesian strategy for several rea- sons. In the first place, the Keynesian emphasis on demand, employment, and State expenditures ”provided, in principle, a number of areas that could serve to support working-class demands. There was, at the same time, a relative de—emphasis on profits, credit, and costs and, therefore, a de-emphasis on the need to discipline labor" (Gold, 1977: 135). Secondly, the rash of bitter industrial strikes dur- ing 1946 had turned public opinion against labor, culminat- ing in the passage of the Taft—Hartley Act in 1947. Thus, labor was operating from a position of relative weakness. Taft-Hartley not only reinforced the prerogatives of capital in dealing with potentially disruptive strikes; it included 50 provisions which seriously hampered subsequent efforts to organize the labor force and which mandated the elimination of radical elements within the labor movement (Hamby, 1973; Hurd, 1976). Finally, the centrality of a growth ideology in the Keynesian model convinced labor leaders that their incorporation——even as junior partners——in the postwar gov- erning coalition would result in substantial benefits to their members. In return, these leaders agreed to surrender effective control over the workplace, to cooperate with man- agement in instituting mechanisms and procedures for increas- ing productivity, and to enforce contracts reached through collective bargaining which prohibit disruptive rank-and- file activity and guarantee labor discipline (O'Connor, 1973: 22-23). On the international front, the United States emerged from World War II in a position of unchallenged political, military, and economic power among capitalist nations. Unlike its principal competitors——Britain, Germany, France, and Japan——the United States had not suffered devastation during the war but had vastly increased and modernized its production facilities. Hence, it was possible to re- establish under U.S. hegemony ”an international order which had been lacking for over half a century——slnce the time when other nations had begun to seriously challenge Britain's pre-eminence” (MacEwan, 1974: 74). The strategy was relatively simple. It sought: 51 . . . a drastic reversal of the protectionism of the late-19205 and 19305, and a consequent widen- ing of the world economy through freer trade and payments. It argued for multilateral trade medi- ated by the dollar as the key currency. In effect, the U.S. would secure its hegemony by using its massive productive power to out- compete the rest of the world (Gold, 1977: 138). To accomplish this, it was necessary to reorganize the pattern of international relations which had prevailed prior to the war. The Allied Conference at Bretton Woods, New Hampshire, in the summer of 194415 spawned two new organiza- tions, the International Bank for Reconstruction and Devel- opment (the World Bank) and the International Monetary Fund, which proposed to accelerate international trade through the stabilization of currency values with the dollar as the principal reserve currency. This agreement, coupled with the implementation of the Marshall Plan to rebuild Europe and related efforts in Japan (Hamby, 1973: 167-194), a policy of "free trade” and opposition to nationalization in relations with the Third World (Payer, 1974) and a program for isolating and containing the socialist bloc (Yergin, 1977), paved the way for U.S. multinationals to penetrate international markets and flood the world with American goods (Gold, 1977: 138-147). Table 3 offers some indication of the magnitude of direct foreign investment by U.S. firms during this period. The total value of each investment increased 1100% from 1940 to 1970 ($7 billion to $78 billion) with substantial amounts going to Canada and Western Europe as well as Third 52 Table 3. Value of Direct Investment in Foreign Countries by Area: 1940 to 1970 (In Millions of Dollars). Total: Latin Western (Rher Year All Areas Canada America3 Europe Unumrie§ 1970 78,178 22,790 14,760 24,516 16,113 1960 31,856 11,179 8,365 6,691 5,630 1950 11,788 3,579 4,576 1,733 1,900 1940 7,000 2,103 2,771 1,420 706 aIncludes Western Hemisphere dependencies in 1950, 1960, and 1970. bIncludes investment in Eastern Europe in 1940 amount- ing to $259 million. CIncludes Western Hemisphere dependencies in 1940. Source: The Statistical History of the United States (New York: Basic Books, 19767? pp. 870-871. 53 World countries. In Europe alone, U.S. investment nearly quadrupled between 1950 and 1960 (from $1.7 billion to $6.7 billion) and more than tripled again (to $24.5 billion) by 1970. Equally striking profits to U.S. corporations from investments abroad rose steadily as a proportion of their total after-tax profits from approximately ten percent in the early 1950s to roughly twenty percent by the early 19705. Moreover, these profits accrued “disproportionately to the very large firms in the U.S. economy. Gillette, Woolworth, Pfizer, Mobil, IBM, and Coca Cola, for example, all earn more than fifty percent of their profits overseas. In 1972, the First National City Bank, the world's first bank to earn over $200 million in a single year, earned $109 million abroad (MacEwan, 1975: 75. Cf. also Magdoff, 1969; Weisskopf, 1972; and Barnet and Mflller, 1975). Establishing U.S. hegemony in the world economy also entailed beefed up military spending. This was mandated in part by the desire to contain the spread of communism and to quell revolutionary insurgencies which might arise within the underdeveloped world. But in addition, such spending served the related and often contradictory functions of structuring international trade, bolstering aggregate demand, and providing profitable investment outlets within the private economy (Lo, 1975: 46). All of this was made explicit in a 1950 report written by the National Security Council at President Truman's behest designated NSC-68. 54 The study's key recommendation was that the military budget should be increased by at least 100 percent. The figures being discussed at the time were in a range of from $35-50 billion to take effect immediately. There were a number of reasons given. such as enabling the U.S. to catch up to the U.S.S.R. in terms of the share of GNP devoted to the military. The economic arguments were quite important. First, in direct contrast to the position that had dominated only a few years earlier, it was argued that the U.S. economy would not be damaged by such a huge increase in military spending. On the contrary, the economy could stand even more of a rise. Second, an increase in the military budget would be an eco- nomic stimulant, along Keynesian lines, and there- fore would foster economic expansion, not retard it as had previously been argued. Finally, rearm- ament and foreign military aid could replace Marshall Plan aid in providing a stimulant for other capitalist economies and thereby boost U.S. exports. . . . Within a few weeks after the com- pletion of NSC-68 the start of the Korean War gave Truman the opportunity to put its recommen- dations into practice (Gold, 1977: 142-43). Throughout the 19505, military spending in a wide array of manufacturing industries——most notably electronics, aircraft, and other transportation equipment——as well as in research and development served to underwrite growth and relative prosperity in the economy (Vatter, 1963). None- theless. it was the election of John F. Kennedy to the presidency in 1960 which solidified and expanded the role of military spending in sustaining aggregate demand and sig- nified, for the first time, the full accession to power of the Keynesian coalition. In an effort to rein in the federal budget and to douse the rising fires of inflation, the Eisenhower Administration had sought in early 1958 to attempt to trim the military budget. Coming as this did on the heels of the successful 55 Russian launch of the first Sputnik satellite in October of 1957,-this move offered a ready-made campaign issue for the Democrats in the 1960 election. In his assault upon then- vice president Nixon, Kennedy stressed that the sluggish rate of growth stemming from Eisenhower's policies had severely weakened the United States, resulting in a “missile gap" between the U.S. and the Soviet Union which dangerously threatened our national security (DuBoff and Herman, 1972: 64-65). Once in office. Kennedy responded to the emerging recession by boosting the defense budget for 1961 by sixteen percent. Military outlays subsequently constituted roughly seventy-five percent of the total increase in federal expen- ditures through fiscal year 1964——this in an administration celebrated for its purported commitment to social welfare spending. It was all turning out to be remarkably conveni- ent: bigger defense spending would, by itself, answer the twin themes of the JFK Presidential cam- paign——the need for higher growth rates and improved military security——and it would accomplish this without stirring up the political opposition that any other increases in government spending would surely evoke. Once again, the exigencies of "national crisis" would take precedence over economic-political reforms and structural changes. But the ECONOMISTS would have "growth," their top- most priority. Later, when the crises had sim- mered down and when the growth had produced its "dividends,” then we could turn our national ener- gies and federal funds toward "urgent domestic needs.” It is a story that would be heard again and again. . . fl (DuBoff and Herman, 1972: 68). The “growthmanship” characteristic of the Keynesians who formulated economic policy during the Kennedy Adminis- tration——from Walter Heller to James Tobin, W. W. Rostow, 56 16——was a vastly modified version of the and Paul Samuelson standard Keynesianism of 1946. Fear of secular stagnation and the commitment to redistributive taxation and structural reform had given way to a reliance upon fiscal stimulation through tax reduction and a greater role for monetary policy (Stein, 1969: 372-468). This was reflected in the capstones of Kennedy's economic policy, the tax cuts of 1962 and 1964. They mirrored the achievement of a new consensus, a resolu- tion of the differences between Keynesians and anti- Keynesians around the themes of “aggregate stimulation and private profitability” (Gold, 1977: 147). The upshot was a near decade of continuous economic expansion and an optimism regarding the future almost unparalleled in the American experience.17 III the surest cure for inflation is a severe recession. ——Royal Little, Founder of Textron and member of Fortune's Business Hall of Fame Toward the end of the 19605 things began to unravel. The economy, artificially buoyed by the massive defense expenditures surrounding the war in Vietnam, became over- heated. Efforts by the Nixon Administration to cool it down through a government-induced recession in 1969-70 proved ineffective and were followed by a contradictory drive to pump it back up during 1972 in order to ensure the 57 President's reelection. Inflation worsened, coupled now with rising unemployment, and in 1974, the U.S. slumped into the deepest and longest recession since the 19305. More than mere "temporary economic instability," these developments signaled a restructuring of the world order based upon the decline of U.S. hegemony. From the Third World. challenges arose to the United States' right to an unlimited supply of cheap raw materials, epitomized by the Arab oil embargo in 1973. This followed closely on the heels of the U.S. defeat in Vietnam. From Europe and Japan stiff competition surfaced for shares of the international market, spawning mushrooming U.S. trade deficits. This weakened the position of the dollar in international cur- rency markets—~a process which has not yet completely stabilized——and resulted in the breakdown of international monetary agreements which had held since the 19405.18 These phenomena also reflected the contradictions19 inherent in postwar Keynesianism. Reliance upon macroeco- nomic policy to stimulate aggregate demand, without taking cognizance of the fundamental changes occurring within the American economy (particularly the increasing levels of industrial concentration), greatly accelerated the bifurca- tion between monopoly and competitive sector industries, resulting in the uneven development of resources, labor, and localities (O'Connor, 1973). The consequence in recent years has been excess industrial capacity, rising levels of 58 unemployment, raging inflation, and escalating public and private debt. The issue of debt, in particular, and its relationship to sagging private investment has preoccupied the business press. The rapid expansion of credit after World War II, which underwrote the postwar boom in terms of mortgages for single-family home construction and loans for the automo- biles, refrigerators, televisions, and so on necessary to equip them, had accelerated to dangerous heights by the 20 19705. Surveying the problem, the editors of Business Week (16 October 1978: 76) concluded: The debt economy, which flourished from 1968 through 1974, ended abruptly when the worst reces- sion in four decades forced the U.S. to go slower in adding to what was then a $2.5 trillion tower of debt. Since those dark days——when the tower escaped toppling only by the thinnest of margins ——the accepted wisdom has been that four years of prosperity have put an end to excessive borrowing, eliminated the peril of widespread defaults in the U.S. and abroad, and restored the world's finan- cial system to good health. Nothing could be further from the truth. Since late 1975 the U.S. has created a new debt economy, a credit explosion 50 wild and so eccentric that it dwarfs even the borrowing binge of the early 19705. True, the heaviest borrowers of the orig- inal debt economy are not today's worst offenders. In the three years of the new debt economy, cor- porate debt has risen 36% to slightly more than $1 trillion, and state and local government debt has increased just 33% to $295 billion, while total debt in the economy has risen 42% to $3.9 trillion. More ominous is that consumer installment debt is up 49% to $300 billion. residential mortgage debt has soared 54% to $750 billion, and the borrowing of the U.S. government. including the Treasury and federal agencies. is up 47% to $825 billion. 59 Overall, for every $3 owed in 1974, the U.S. now owes $4, a growth in debt far faster than the growth of the U.S. economy, even when inflation is counted in economic growth. What is so worrisome is that the biggest borrowers now are consumers whose ability to repay has been stretched razor- thin, and the federal government whose borrowing is the most inflationary of all. And new business is joining in, again borrowing heaps of short-term money, while the equity markets remain shut to most corporations. The problem only threatens to get worse. The real issue, however, is not the expansion of debt; no one knows in point of fact how much debt can accumulate before the bubble bursts. The core issues——for both corpor- ate and government elites——continues to be the relative paucity of private capital investment. As early as the fall of 1975, Business Week published a clarion call for $4.5 trillion in new private capital investment over the follow- ing ten years in order to modernize the American economy and reestablish its competitive edge in international trade. Those funds, it concluded, were unavailable due to a ”capi- 21 tal crisis” spawned by the combined effects of rising inflation, corporate debt, and governmental tax and regula— tory policies and could only be raised through a contraction of consumption and a rise in saving——hopefully augmented by a reduction in the corporate tax rate. * The growth of government spending must be curbed so that surpluses emerge in the federal budget. Virtually every study indicates that this is the key step in solving the capital crisis. The big- gest capital shortfall is in the private sector. All the serious work done on “crowding out" shows that private investment cannot increase as a share of gross national product unless government spend- ing declines. And it is private capital formation 60 that must grow the fastest if the nation is to meet its goals—~an unpalatable truth to many, but trust just the same. * The tax structure must be changed so that the cash flow to businesses increases. There is a prob- lem in that any tax break for businesses comes on as a business welfare program while businessmen are not perceived by the general public as among the deserv- ing poor. But it is a fact that, of the total tax take, a greater proportion comes from corporations in the U.S. than in any major country but Japan. * Rewards to individual savers and investors must be increased. Elimination of the double taxation of corporate dividends is an obvious step. Dropping the tax on savings-account interest is a step worth considering. Assuming the American people want neither eco— nomic stagnation nor still more inflation, the route to solving the capital crisis——to narrowing the gap between demand and supply to dimensions the economy can live with——lies in combining easy monetary policy to stimulate growth with a curb on government spending that shifts capital to private investment. This is the opposite of the policy now being fol- lowed, but it is the only way to end the crisis (Business Week, 22 September 1975: 115). The Reemergence of Stagnation22 To argue that the postwar Keynesian strategy incorpor- ated contradictions which led inevitably to its demise is not, however, to imply that certain adjustments might have been made to eliminate these contradictions or that some solution other than Keynesianism—~yet within the parameters of the postwar political economy-might have been adopted which would have fared better. Rather, the reason for the recent breakdown in Keynesian policy, we would contend, lies within the basic dynamics of an advanced capitalist economy. The temporary hiatus in stagnation tendencies 61 during and immediately after World War II, in other words, was precisely that: temporary. As early as the latter 19505, these tendencies had reemerged (Baran and Sweezy, 1966; Gordon, 1974: 108-136; Gold, 1977: 148). In retrospect the 1949-1953 expansion was the strongest of the post-World War II years. The next cycle reached its peak in July, 1957, as the cul- mination of thirty—five months of expansion. In thirty-four of these months unemployed dipped below 5 percent, in only three of those months below 4 percent and in NO months below 3 percent. At this cycle's peak, unemployment was a much less satisfac- tory 4.2 percent. A third cycle reached its high in May, 1960, after only twenty—five months of expansion. In only one month did unemployment fall below 5 percent and in no months below 4 percent. These statistics recounted a simple and disturb- ing tale. Each successive business cycle expansion was shorter than its predecessor. At each peak unemployment was higher than at the preceding cycle's peak, and from cycle to cycle average unem- ployment rose (Lekachman, 1966: 209). Except for the war—induced expansion of the 1960s, this trend has continued. The Carter Administration wrestled feebly with an economy burdened by relatively high unemploy- ment, double-digit inflation, and record interest rates exceeding twenty percent. Even the election of laissez- faire ideologue Ronald Reagan and the adoption of a package of drastic cuts in both taxes and federal government spend- ing have produced little in the way of accelerated economic growth. On the contrary, in the midst of a severe reces- sion——where unemployment has reached a new post-World War II high of 9.4% in April of 1982 and is expected to rise "above 10 percent before the recession bottoms out“ (Ih These Times, 19-25 May 1982: 3)——interest rates remain in the 62 sixteen to twenty percent range, and skeptical investors have assumed a wait-and-see attitude. The resumption of stagnationist tendencies, then, derives not from economic mismanagement or misguided policy but from the ”laws of motion” inherent in a capitalist mode of production, summarized as follows: (1) Competition of capitals generates concentra- tion and centralization, hence the inevitable replacement of competitive by monopoly capi— talism. (2) The accumulation process is inherently unstable and never tends to take the form of a moving equilibrium (a fantasy of bourgeois eco— nomic textbooks). Two forms of motion, attrib- utable to related but distinguishable struc- tural features of the system, characterize the accumulation process: (a) the more or less regular ups and downs of the business cycle (in recent times the length of the cycle, from peak to peak or trough to trough, has tended to be around four years); and (b) a long-range and persistent tendency to stagnation mani- fested in high rates of unemployment and much idle productive capacity. (3) The process of monopolization has relatively little effect on the business cycle, but it exacerbates the tendency to stagnation (Sweezy and Magdoff, 1975a: 1-2). As Baran and Sweezy (1966: 108) observed, long before the current crisis, monopoly capitalism is a ”self-contradictory system. It tends to generate ever more surplus, yet it fails to provide the consumption and investment outlets required for the absorption of a rising surplus and hence for the smooth working of the system. Since surplus which cannot be absorbed will not be produced, it follows that the NORMAL state of the monopoly capitalist economy is stagna— tion." 63 In the case of the United States, as we indicated in Chapter 2, the growth of monopoly capitalism over the course of the twentieth century has been aided and abetted by the growth of the State. Indeed, the growth of State spending and State programs have been "both a cause and effect of the expansion of monopoly capitalism“ (O'Connor, 1973: 8). In order to guarantee profitable capital accumulation in the private sector, the State has increasingly been compelled to provide SOCIAL CAPITAL outlays. These, in turn, have accel- erated the demand for State outlays in such areas as welfare and police protection to meet the SOCIAL EXPENSES generated as a result of monOpoly sector growth (O'Connor, 1973: 7). According to O'Connor: . greater social investment and social consum- tion spending generate greater private investment and private consumption spending, which in turn generate surplus capital (surplus productive capacity and a surplus population) and a larger volume of social expenses. Briefly, the supply of social capital creates the demand for social expenses. . . . The impact of the budget depends on the volume and indirect productivity of social capital and the volume of social expenses. On the one hand, social capital outlays indirectly increase productive capacity and simultaneously increase aggregate demand. On the other hand, social expense outlays do not increase productive capacity, although they do expand aggregate demand. Whether the growth of productive capacity runs ahead or behind the growth of demand thus depends on the composition of the state Budget (0' Connor, T973: 8. Emphasis added). The reemergence in the last ten years of profound stag- nationist tendencies in the American economy, coupled for the first time with double-digit inflation, has greatly intensified the perennial debate over the composition of the 64 State budget.23 The postwar Keynesian coalition outlined above.has disintegrated, and the most significant conse- quence has been a forceful new initiative on the part of capital——apparently supported by a large proportion of middle—income persons who judge themselves to be overly bur— dened by taxes and who fear that their standard of living will be seriously eroded by inflation——to forge a ”new social contract“24 wherein previously won concessions to demands for social welfare spending will be ”rolled back” and those funds redirected, through tax “reform,” to private capital investment. The Drift Toward National Economic Planning: Socialism or Corporatism? The severity of the current economic crisis is clearly manifested in the seriousness of the emerging debate over the necessity of some form of national economic planning for the United States. Not since the mid-19405 has economic planning gained such widespread currency. The spectrum of support for economic planning in one form or another ranges from leading corporate executives and financiers, such as Henry Ford II and Felix Rohatyn (of Lazard Freres) to social- ist leaders, like Michael Harrington (Democratic Socialist Organizing Committee), and includes prominent trade union officials (Douglas Frazier of the UAW, Nat Goldfinger of the AFL—CIO, Jerry Wurf of AFSME), liberal politicians (most notably former Senators Humphrey and Javits), and economists 65 (Wassily Leontief, John Kenneth Galbraith, and Otto Eckstein, to name a few).25 For the left, national economic planning offers hope of controlling the irrational swings in the capitalist business cycle, reducing the inflation that has ravaged those on mod- erate and low incomes, and finally obtaining (and maintain- ing) full employment for all those persons able and willing to-work.26 For the right, national economic planning is viewed as a commitment on the part of the State to subsidizing the ”reindustrialization”——or as S. M. Miller terms it, the "recapitalization“ (Social Policy, November-December 1978: 5-13)——of the American economy (Business Week, 30 June 1980). In its simplest, pro-business formulation the call for reindustrialization is simply a pitch for more capital to the corporations, less protection for the environment, workers' safety and consumer interests, reduction in government spending for income support and general societal welfare, tax cuts and shortening of depreciation schedules (such as the Jones-Conable bill) that effectively reduce business taxes, and a lenient governmental eye toward ruthlessness in trade practices, monop- olization and bribery used to expand American business abroad (Moberg, 16-29 July 1980: 3). 27 if adopted——and This strategy of Keynes with Beveridge there is every reason to believe that much of it will be given the Reagan election and the anemia of the left at this point——will mean, in the short run, massive tax cuts, weighted heavily to business, and the substantial elimina- tion of governmental regulation of business activity in 66 order to encourage private capital investment. In the longer run, such measures are likely to be augmented with a reduction in social welfare spending, some type of incomes policy to limit labor's ability to bargain for higher wages, and the establishment of a formal or informal mechanism to facilitate greater business and government cooperation in the determination of national economic goals and priori- ties.28 The initial response by labor has been generally lim- ited to defensive actions in an effort both to consolidate the pattern of postwar collective bargaining arrangements—— highlighted by the unsuccessful push for labor law reform—— and to retain whatever prerogatives it has left as junior partner in the postwar Keynesian coalition. Despite some recent tentative support for economic planning,29 many in the American labor movement remain skeptical of any expanded government role in the regulation of the economy. Their distrust is deep-seated and rests upon the basic voluntarist ideology which has permeated labor thinking since its begin- nings (Horowitz, 1978). Nevertheless, the breakdown of political and economic agreements which facilitated the prolonged post-World War II period of Sustained capital accumulation in the United States necessitates that a ”new settlement” be forged between capital and labor which will expedite renewed capi— tal accumulation in the private sector and furnish legitima— tion for an augmented government role in economic planning. 67 The Full Employment and Balanced Growth Act of 1978, p0pu- larly-known as the Humphrey-Hawkins Bill, represented an early effort in this process. As we shall see in Chapters 4 and 5, organized labor's ambivalence toward that legisla- tion is symptomatic of its current ideological and struc— tural weakness. 68 NOTES 1The literature on the New Deal is much too voluminous to list in its entirety. Some of the best accounts, how- ever, are found in Mitchell (1947), Schlesinger (1958), Leuchtenberg (1963), Burns (1956), Fusfeld (1956), and Bernstein (1968). 2John Maynard Keynes, The General Theory of Employment, Interest and Money (New YorR: Harcourt, Brace and Co. 1 . 3The most respected biography of Keynes is Roy F. Harrod's, The Life of John Maynard Keynes (London: Macmillan 560 Co. Ltd., 1951). A more partisan but informa- tive and lively account is Robert Lekachman's, The Age of Keynes (New York: Random House, 1966) ___ _~. _— 4Cf. Sweezy (1953: 253-262) for a succinct explanation of Keynes's analysis. Fuller discussions are found in Lekachman (1966) and Fusfeld (1956). 5Jean—Baptiste Say was a 19th century, French, classi- cal economist whose theory of the market was developed in his Traité d'Economie Politique published in 1803. 6Keynes argued that by their unthinking acceptance of Say' 5 law his fellow economists were in effect “asserting the impossibility of what was actually happening. . He could reject Say' 5 law and the economic conclusions based on it because he thought they were largely responsible for the muddle; but it never occurred to him to question, still less to try to escape from, the broader philosophical and social tradition in which he was reared. The major unspoken premise of that tradition is that capitalism is the only possible form of civilized society“ (Sweezy, 1953: 258-59). 7The other two possible leakages identified by Keynes were when “(1) People buy goods and services from foreign businesses, but the money spent on these imports cannot be spent on domestically produced goods. (2) The taxes people pay are also withdrawn from the income-expenditure flow“ (Hunt and Sherman, 1975: 142). 8cr. Lekachman (1966: 123—143), Alan Sweezy (1972; 116—124), and Jones (1972: 125—33). 9Alvin H. Hansen, Full Recovery or Stagnation? (New York: Norton, 1938), Fiscal Policy and Business Cycles (New York: Norton, 1941), Economic PETic cy and Ful ll Employ- ment (New York: McGraw— Hill, 1947), The Postwar American 69 Economy (New York: Norton, 1964). Hansen's impact upon American economic thinking is thoroughly explored in Howard R. Smith, ”The Status of Stagnation Theory——Parts I and II," Southern Economic Journal (Volume 15, October 1948: 191-204, and January 1949: 289-302). 1OAlvin H. Hansen, "Economic Progress and Declining Population Growth.’' Presidential address delivered at the Fifty-first Annual Meeting of the American Economic Associa- tion, Detroit, Michigan, 28 December 1938. Reprinted in American Economic Association, Readings in Business Cycle Theory (Philadelphia: Blakiston, 1944)._— 11The postwar "baby boom“ and the extensive development of ”suburbia," of course, changed all of this, providing enormous opportunity for postwar capital investment. One of the principal assumptions of this paper, however, is that these developments have now largely run their course. 12This case is persuasively argued by Richard B. DuBoff and Edward S. Herman, ”The New Economics: Handmaiden of Inspired Truth,” Review of Radical Political Economics (August 1972): 54-84. ‘— 13David A. Gold, "The Rise and Decline of the Keynesian Coalition,” Kapitalistate (Fall 1977): 144. 14Richard Child Hill, ”At the Cross Roads: The Politi— cal Economy of Postwar Detroit,” unpUblished paper presented at A Conference on Urban Political Economy at the University of California, Santa Cruz, 8-10 April 1977. 15The history of these agreements and their dissolution is admirably explicated in Fred L. Block, The Origins 9: International Economic Disorder: A Study of United States International Monetary Policy from—World WEE II to the Present (Berkeley: University ofTCalifarnia PFe§§,_T977). 16John Kenneth Galbraith is a notable exception. While the bulk of Kennedy's advisors assumed that "government spending, whether for military of civilian ends, confers the same benefits on the economy," Galbraith argued long and hard——though finally unsuccessfully—~for an emphasis on non- military public sector spending (DuBoff and Herman, 1972: 61-65). 17The following quotations from the Economic Report 9: the President, transmitted to the Congress, January 1969 (Washington, D.C.: Government Printing Office, 1969, pp. 61 and 73-74) bear stunning witness to this fact: 7O . . during the past 8 years, national policy has been designed not merely to counter cycli- cal fluctuations but to promote steady expan- sion of economic activity in pact with produc- tive potential. While fiscal and monetary policies have not always been appropriate to the needs of the day, their general success in fulfilling the lofty promises of the Employment Act of 1946 is clearly demonstrated by the unparalleled prospertiy achieved during the Kennedy and Johnson Administrations. Eight consecutive years of economic expansion, the longest and largest sustained advance in the annals of U.S. history, have dispelled the doubts that prevailed in the late 1950's about the vitality of the American economic system. The vigorous and unbroken expansion of the last 8 years is in dramatic contrast to the 30- month average duration of previous expansions. No longer is the performance of the American economy generally interpreted in terms of stages of the business cycle. No longer do we consider periodic recessions once every 3 or 4 years an inevitable fact of life. The forces making for economic fluctuations have been contained through the active use of fiscal and monetary policies to sustain expan- sion. 18Block, International Economic Disorder. 19This term is to be understood precisely in the follow- ing manner: a contradiction is not simply a situation in which the indispensable requirements of a certain mode of production are absent or inade- quately fulfilled. If that were the case catas— trophies (like floods or epidemics and also “social catastrophies" like wars) would indicate contradictions. . . . What we mean by contra- dictions is rather narrower and more precise. A CONTRADICTION is the tendency inherent in a specific mode of production to destory those very preconditions on which its survival depends. Contradictions become manifest in situations where, in other words, a collision occurs between the constituent preconditions and the results of a specific mode of production, or where the neces- sary becomes impossible and the impossible becomes necessary. . . . Contradictions are not 71 contingent, but rooted in the mode of produc- tion, which is ITSELF seen to be contradictory, that is, self-paralyzing and self-destructive (Offe, 1975c: 246—47). 20The following data indicate this trend: Debt and Gross National Product (1) (2) (3) Net Additions to Gross National Net Additions Year Public and Private Product (GNP) as % of GNP Debt (Billion 5) (Billion $) [(1)+(2)x100] 1960 $ 38.5 $ 506.0 7.6% 1965 78.1 688.1 11.4 1973 238.0 1,306.6 18.2 1974 209.2 1,412.9 14.8 1975 196.5 1,518.8 12.9 1976 265.3 1,706.5 15.5 1977 378.3 1,889.6 20.0 Source: Review of the Month, “Debt and the Business Cycle,’ Monthly Review (June 1978): 2. 21For counter arguments, see Review of the Month, "Capital Shortage: Fact and Fancy,” Monthly Review (April 1976): 1-17; Victor Perlo, ”The New Propaganda of Declining Profit Shares and Inadequate Investment,” Review of Radical Political Economics (Fall 1976): 53-64. ‘- 22Whether termed ”stagnation” or ”stagflation,” even leading liberal economists like Arthur M. Okun (”The Great Stagflation Swamp,“ The Brookings Bulletin, Fall 1977, pp. 1-7) have begun EYEressing deep concern over the possi— bilities for renewed economic expansion. 23A5 James O'Connor (1973: 10n) has indicated, this struggle over the composition of the State budget must be central to any Marxist economic analysis, for, as Marx him- self concluded, ”tax struggle is the oldest form of class struggle.“ 24Business Week, "The Reindustrialization of America” (30 June 1980): 56. 72 255. M. Miller, ”Planning: Can It Make a Difference in Capitalist America?“ Social Policy (September—October 1975): 12—22; Peter Barnes, ”0055: Prospects for Full Employment," Working Papers (Fall 1975): 49-58. 26Michael Harrington, Full Employment: The Issue and the Movement (New York: Institute for DemocFEtic SociETTsm, T977); Gar Alperowitz and Jeff Faux, “Building a Democratic Economy,“ The Progressive (January 1977). 27S. M. Miller, ”The Recapitalization of Capitalism, Social Policy (November- December 1978): 8—9. 281bid., pp. 7-10. At this writing (July 1981), these proposals are being rapidly implemented. 29The ”Statement by the AFL-CIO Executive Council on The National Economy,“ issued 16 February 1981 (cf. Th These Times, 4-10 March 1981), indicated support for the formation of a “Reindustrialization Board” to be composed of represen- tatives from business, labor, and government which would oversee investment——through control of a renovated Recon— struction Finance Corporation——of both public and private funds in necessary reindustrialization projects. CHAPTER 4 ORGANIZED LABOR AND POLICY FORMATION: 'THE LIMITED AGENDA I I never went on a strike in my life, I never ordered anyone else to run a strike in my life, I never had anything to do with the picket line. . . In the final analysis, there is not a great deal of difference between the things I stand for and the things that the National Asso- ciation of Manufacturers stands for. ——George Meany, President, AFL-CIO In a speech to the National Association of Manufacturers, 1956 In bad times, even a George Meany lives on the edge of the class struggle. ——Robert Lekachman Economists he Bay Introduction The economic crisis of the 19305 and its resolution during the war and postwar expansions occurred amidst a period of trade union militancy in the United States. Labor leaders, particularly the industrial union leadership of the CIO, were aggressive in their drive to organize workers and innovative in the tactics they employed. Rank and file mem- bers were active in the formation of trade union policy and militant in their demands for recognition from capital. It 73 74 was, in other words, an accurate assessment during that period to speak about a labor "movement.” The current crisis is another matter. Renewed stagna- tion in the 19705 threatens to further undermine the power of an organized labor establishment that has become bloated, bureaucratic, and stagnant. The commitment to organizing the unorganized has long since dissipated. Those efforts that have been made in recent years have frequently met with disappointment. As 1978 began there were 98 million men and women in the U.S. work force. Just under 20 million of them were dues-paying members of a union. Despite the fact that the economy generated 6 million new jobs between 1974 and 1977, there are 500,000 fewer U.S. union members today than four years ago. Union labor now represents a smaller propor- tion of the work force——just 20% than at any time since World War II. * * * * In 1977, according to the National Labor Rela— tions Board, unions lost more organizing elections than they won. * In 1977, too, according to the NLRB, unions lost three of every four ”decertification” elec- tions, in which the right of an existing union to continue to represent workers was contested (Forbes, 1978: 44). Even corporate giants like General Motors have sensed the change. When GM opened its new Monroe, Louisiana, assembly plant in March of 1975, it challenged the United Auto Workers to organize the plant rather than sign a pro forma agreement with the union with which it had worked so closely over the years. An equally dramatic indication of labor's diminished clout has emerged in the legislative arena. An early defeat 75 of the proposed common situs picketing bill (Business Week, 11 April 1977: 100), despite the presence of a Democratic president and an overwhelmingly Democratic—controlled congress, cautioned labor leaders to broaden the appeal of their legislative agenda, but it did not diminish their optimism regarding the likely passage of labor law reforms essential to future organizing in the South and Southwest.1 They fully expected their corporate ”allies” to actively support such efforts. The AFL-CIO counted on the creation of a committee of 20 to 25 major corporations that would support labor-law reform. . . . In fact, Meany cannot now count even on neutrality. The policy committee of the Business Roundtable, the group of 180 chief executives of the nation's largest corporations, voted actively to oppose the legislation (Forbes, 1978: 46). The humiliating defeat on labor law reform, coupled with intense pressure for concessions at the bargaining 2 and the much-heralded movement in the United States table to the political Right, has both confused and demoralized the leadership of the labor movement. The bottom line, as von Hoffman (1978: 22) has sardonically suggested, is that ”Big Labor isn't very big anymore.“ Since the purpose of this research is to examine the position of organized labor in the recent debate surrounding the implementation of full employment policy in the United States, it is essential that we first determine the reasons for the declining vitality of the labor movement in general. In this chapter, then, we will analyze: 76 (1) The bureaucratization of trade union organizations which accompanied their incorporation into the postwar growth coalition. (2) The origin of labor's traditional ambivalence regarding the necessity for "political“ struggle over State resources to advance the welfare of its members; (3) The accelerating drift toward depoliticization and its impact upon labor power; and finally, (4) The status of full employment policy within labor's limited political agenda. The Bureaucratization of the American Labor Movement: From Class Struggle to Collective Bargaining The question of why American trade unions are so polit- ically conservative relative to their counterparts in Western Europe and Japan is a perennial topic for debate among scholars of all persuasions (Taft, 1964; Jacobs, 1963; Lester, 1958; Aronowitz, 1973). The answers given, however, are often simplistic and ideologically weighted. The real reasons would appear to be myriad and interactive with one another. To begin with, the American continent provided a unique context for the development of capitalist class relations. Without a feudal history to overcome, Americans——landowners, merchants, farmers, and laborers3——could look forward to developing what seemed to be an unlimited ”frontier” with bountiful opportunities for all (Williams, 1966; Aronowitz, 77 1973). This was the reality which confronted European immi- grants and to which their ”radical” world views frequently gave way (Handlin, 1951; Hansen, 1964). The enduring power of ”voluntarism“ as the dominant ideology of the American labor movement (Horowitz, 1978; McConnell, 1966) is rooted substantially in this fact: a belief in the opportunity Te: eTT hhe hehh. The eventual closing of the frontier toward the end of the nineteenth century created, according to classical liberal economic theory (Perlman, 1928), not the anticipated proletarian class consciousness forecast by Marxists but a ”scarcity consciousness" over the future availability of jobs. Trade unions, cut off from left intellectuals,became in this context more concerned with maximizing job opportunities and obtaining decent contracts for their members than with challenging the ownership of private property (Peck, 1978: 5). The very structure of the American working class, more- over, forged out of successive geographically distinct waves of immigration, has presented serious and continuing obstacles to the formation of a unified class consciousness (Aronowitz, 1973: 137-211). During the initial period of industrialization in the United States from approximately 1850 to 1880 a work force composed of native-born artisans, farmers, Northern European and Chinese immigrants developed (Aronowitz, 1973: 146) which eventually occupied most of the skilled positions in the new industries and assumed the leadership of trade union and other working class 78 organizations. After 1880, a new wave of Southern and Eastern European migration began which extended into the 19205. These later arrivals differed from earlier immi- grants not only in such obvious and significant respects as language and culture——these alone made organizing tremen- dously difficult——but in their background and tradition. As former peasants for the most part, they lacked the labor skills, organizational know-how, and ideological sophistica- tion of industrial workers. Entering as unskilled and semi- skilled labor, they tended to be frozen in those subordinate positions. The consolidation of labor stratification meant that most Southern and Eastern European immigrants remained at the unskilled and semiskilled levels. In most cases, their ”native-born" children did not become skilled workers, professionals, or propri- etors. Instead, first-generation workers from these nationality groups reentered the mills as unskilled or semiskilled labor or became workers in service industries and in the public sector. As we shall see, entrance into skilled occupations was restricted as trade unions established mechanisms, such as separate seniority lists, that distinguished between crafts and the rest of the labor force: unskilled and semiskilled workers were to remain barred from skilled jobs even when they accumulated seniority. This separation was reinforced in the early part of the twentieth century by the employers as well as the skilled trades that were unionized in industries where the unskilled remained without representation. But even the rise of industrial unions in the 19305 did not radically alter this situation. Instead, skilled workers maintained their differential wage levels and seniority lists and forced even the most progressive industrial unions to accommodate to this early pattern (Aronowitz, 1973: 151). Southern blacks, and more recently large numbers of women, who entered 'the labor force following World Wars One and 79 Two, experienced a similar fate (Baron, 1971; Edwards, Reich, and Gordon, 1975). Yet racism and/0r ethnic chauvinism were only part of the process which structured the emerging American working class in a manner which seriously undermined its collective strength. In almost all instances, underlying these cul- tural conflicts were very real fears over the availability of job opportunities and especially skilled job Opportuni- ties. The process that Braverman (1974) terms "the degrada- tion of labor“ was already under way in the latter part of the nineteenth century, i.e., the separation of mental from manual labor through increasing managerial control over the production process, generating a heightened sense of aliena- tion for some workers and technological displacement (auto- mation) for others. The separation of mental work from manual work reduces, at any given level of production, the need for workers engaged directly in production, since it divests them of time-consuming mental functions and assigns these functions elsewhere. This is true regardless of any increase in productivity resulting from the separation. Should productiv- ity increase as well, the need for manual workers to produce a given output is further reduced (Braverman, 1974: 124). Given the existing ethnic differences among workers, this emphasis upon managerial control and the advantages of ”technological” expansion resulted over time in the forma- tion of an American ”labor aristocracy.” The formation of an aristocracy of labor in the midst of the degradation of artisan skills is one of the critical features of the history of American workers. The aristocracy was formed out of 80 specific ethnic groups whose traditional skills had become rationalized, but whose social role was necessary for the domination of all labor within the industrial system. Skilled labor became more important as an ideological concept than its actual role in the production process warranted (Aronowitz, 1973: 156). The growth of monopoly capitalism in the twentieth cen- tury further reinforced these early divisions within the working class by fragmenting the economy into at least three distinct "sectors” (O'Connor, 1973). The "aristoc— racy" of white male Northern Europeans came to dominate the work force and trade union structures of monopoly sector industries such as automobiles and steel affording these workers considerably higher wages and benefits and rela- tively stable employment. The competitive sector, on the other hand, reflecting the characteristics of traditional small-scale enterprise, became the domain of a labor force disproportionately composed of minorities, women, youth, the aged, and those displaced by monopoly sector expansion. Employment in these industries is frequently unstable and generally low paying. Trade unions are often nonexistent. For many competitive sector employees, the only real hope for advancement——or for their children's advancement—~has been the surge of State sector employment since the 19305 in both State ”organized" and State ”contracted” industries (O'Connor, 1973: 17-18), from public education to national defense, providing wages, benefits, and working conditions which more closely approximate those in monOpoly than competitive sector industries. 81 The final two factors responsible for the relative political conservatism of American labor were also closely related to the growth of monopoly capitalism in the United States: the success of American imperialist expansion abroad and the role of the State in the co-optation and fre- quent repression of labor organizations at home. The clos- ing of the domestic American frontier toward the end of the nineteenth century together with the dramatic concentration and centralization of capital that followed (Kolko, 1963; Weinstein, 1968) failed to radicalize American labor4 in part because of the opening of the “frontier" abroad.5 It was the outcome of the violent imperial con- tests in World Wars I and II that created new and special conditions for U.S. working people. The successful expansion of the international frontier of U.S. centralized capital created a relatively favored situation for mainland labor. This was especially the case in the period 1940-1965 (Peck, 1978: 6). The post-World War II ”economic settlement” between capital and labor discussed above was undeniably anchored in the premise that the wealth to be gained from American imperial expansion abroad would be ”shared” with organized labor if it cooperated fully in establishing the necessary conditions at home. The celebrated cold war rhetoric of the AFL-CIO over the years is merely one indication of this agreement. While the development of U.S. military might was essen- tial to the achievement of PAX AMERICANA abroad, the inter- vention of the State in domestic capital-labor conflicts, sometimes with a carrot and oftentimes with a stick,6 was 82 ultimately decisive in determining the direction that the labor-movement would take. From the earliest days of the Molly Maguires to the sit-down strikes of the 19305, the force of State repression stood ready to protect capital from any serious challenges to its essential prerogatives by the emerging labor movement (cf. Lens, 1974). By ruthlessly stamping out labor radicalism, as they did with the Indus- trial Workers of the World (IWW) during World War I and com- munist trade unionists during the Red Scare following World War 11 while at the same time courting moderate leaders of both the AFL and CIO, government officials established the basis for the successful labor-management cooperation requi- site to capitalist expansion. This is not to say, however, that the State is merely an ”instrument” for implementing the wishes of the capital- ist class. As we indicated in Chapter 2, a successful capi- talist State must act both to facilitate private capital accumulation and assure legitimation for the political economy as a whole, and to accomplish this, it is compelled to maintain its “relative autonomy“ from direct manipulation by capitalist interests. Nowhere is this more evident than in the labor policies of the New Deal. As Hurd (1976) makes clear: . the labor policies adopted during the Great Depression were necessary responses to the crisis in capitalism. If the working class was to be per- suaded that the capitalist system was worth pre- serving, it was necessary to demonstrate that the state was willing to be responsive to worker con- cerns. In actuality, the policies were more 83 progressive in appearance than in effect. Not only was the NLRA poorly enforced, but also the availability of legal remedies to working class problems tended to sap worker militance and reduce the intensity of the class struggle. Furthermore, as soon as the crisis was over and the pressure was off, state labor policy was revised and overt repression of working class militance was reinsti— tuted (Hurd, 1976: 32). Section 7(a)of the National Labor Relations Act, passed in 1935 at the behest of the Roosevelt Administration in response to rising rank and file militancy, became the cen- terpiece of New Deal labor legislation guaranteeing to labor for the first time the right to organize and bargain collectively. After World War II,7 when labor assertiveness threatened to get out of hand, the Labor Management Rela- tions Act, or Taft—Hartley Act as it is commonly known, was passed in an effort to rectify what was considered the imbalance of power fostered by the NLRA. The LMRA outlawed closed shops, required sixty days notice before a strike, required a non— Communist oath from all union officials, allowed states to outlaw union shops, and made collective bargaining contracts enforceable in the courts. The LMRA also added a list of unfair labor prac- tices for labor unions, including: 1. organizing strikes, 2. jurisdictional strikes, 3. secondary boycotts, 4. featherbedding, 5. refusal to bargain with management. Finally, the LMRA set up a complex procedure to deal with ”national emergency” strikes; under this procedure, whenever the President decides that a strike endangers national health or safety, the strike can be enjoined by federal courts for 80 days. *** The limitations on secondary pressures are probably the most important part of the LMRA because they limit the degree to which workers can support struggles in other industries and unions, 84 thus hindering the development of a unified work- ing class movement (Hurd, 1976: 9). Thus, the pattern of collective bargaining established by New Deal labor legislation endured and became the basis of labor-capital relations in the postwar period. In sum, the early propensity among American labor leaders for a voluntarist ideology predicated upon the free— dom and bountiful opportunities offered by the American frontier, deep—rooted ethnic and cultural differences, the degradation of skilled labor under intensified managerial control and its reflection in a job “scarcity consciousness“ among workers, the evolution of qualitatively distinct eco- nomic sectors, the success of American imperialism abroad, and efforts by the State to both co-opt and where necessary repress labor organizations were collectively successful in diminishing labor radicalism in the United States and assur— ing that a politically conservative leadership would pre— vail. Is Bureaucratization Inevitable?—— The Challenge of Michels' "Iron Law of Oligarchy" It is organization which gives birth to the dom— ination of the elected over the electors, of the mandataries over the mandators, of the delegates over the delegators. Who says organization says oligarchy. ——Robert Michels (1911) No attempt to grapple with the economic and political limitations of American trade unions is c0mplete until it confronts the challenge posed by Robert Michels in his 85 8 classic work, Political Parties, published in 1915, to the effect that democracy and large-scale social organizations are inherently incompatible. The formation of oligarchies within the various forms of democracy is the outcome of organic neces- sity, and consequently affects every organization, be it socialist or even anarchist (Michels, 1962: 365-66). This thesis is brilliantly applied by Piven and Cloward (1977) in their recent account of the decline of American labor. They argue, contrary to the position that intrinsic divisions (racial, ethnic, skill, and the like) within the American working class fundamentally undermined its collective unity, that even as these divisions became submerged during the wave of militant rank and file strike activity of the early 19305 the seeds were being sewn which would gradually eviscerate labor's strength. Factory workers had their greatest influence and were able to extract their most substantial con- cessions from government during the early years of the Great Depression BEFORE THEY WERE ORGANIZED INTO UNIONS. Their power was not rooted in organ- ization, but in their capacity to disrupt the econ- omy. For the most part strikes, demonstrations, and sit-downs spread during the mid-19305 despite existing unions rather than because of them. Since these disorders occurred at a time of wide- spread political instability, threatened political leaders were forced to respond with placating con- cessions. One of these concessions was protection by government of the right to organize. After— wards, union membership rose, largely because gov- ernment supported organization. But once organ- ized, the political influence of workers declined. The unions not only failed to win new victories from government commensurate with the victories of unorganized workers during the 19305, but those already won were whittled away (Piven and Cloward, 1977: 96-97). 86 Moreover, and most importantly, the dissipation of historic rank and file victories of the 19305 and the decline of organized labor in general were, according to Piven and Cloward, only superficially related to the collaborative and short-sighted character of much of the top labor leadership. These developments, they contend, a la Michels, were a con- sequence of organizational maturity. What had happened, quite simply, was that the organizations born out of the workers' protests had become over time less and less dependent on workers, and more and more dependent on the regular relations established with management. This move- ment away from workers and towards management was, in part, a natural result of the tendency toward oligarchy in formal organi§3tlons. . . . In part, it was the—Fesult of the dependence of the unions for their own organizational stability on the well- being of the industry. . . . Finally, the orien- tation of the unions toward management was facili- tated by the severing of union leadership from dependence on the rank and file, first through the dues check-off (Piven and Cloward, 1977: 159- 60, emphasis added). They conclude that only a return to “mass defiance” by a rank and file willing to break the established rules and challenge "legitimate" authority will produce meaningful gains for working people in the future. This final point may well be correct, as the analysis of the history of the Humphrey-Hawkins full employment bill in Chapter 5 indicates. Nonetheless, it would appear, in light of our discussion above concerning the nature of a capitalist State, that their convincing description of post- war American labor history fails to warrant their pessimis- tic conclusion as to the inevitability of oligarchy in 87 organizations. To begin with, their analysis has the sort of positivist flavor of resting upon a supra-historical law of social behavior that we rejected in Chapter 1 in favor of a more dialectical understanding of social relations.9 The fact that post-World War II labor leaders sold out the rank and file is more a reflection of the particular historical conjoining of forces than of the ineluctable pressures of running a union. The revolt of young workers during the 19305, which established the conditions necessary for the success of industrial unionism, must be understood within the context of a century-long drive on the part of union leaders for ”union recognition and union security“ (McConnell, 1966: 305). Opposition from capital had always been virulent, and its tactics were consistently backed by the State. Even Piven and Cloward acknowledge (1977: 98) that ”worker strug- gles did not collapse from lack of internal unity; they were smashed by the coercive power of the State.“ Public support for labor, finally, reflecting the values of current or former small proprietors and farmers, was weak. The appearance, then, of an apparent end to State repression of labor organizing,symbolized by Section 7(a) of the NLRA together with the confidence that labor leaders placed in President Roosevelt and the Democrats (Preis, 1972; Bernstein, 1971) and the “historical tendency within both employer and trade union ranks to formalize and regulate labor relations” (Aronowitz, 1973: 238), all coalesced in -: —. - 88 labor's ready acceptance of a formalized system of collec— tive bargaining as the most appropriate mechanism through which to solidify and further their long-term interests. While a good case can be made that labor leaders in the 19305 had few appealing alternatives to collective bargain- ing for obtaining their objectives and indeed that their acceptance of a junior partnership with business and govern- ment yielded enormous advances in wages and benefits for their members over the post-World War II period (Barbash, 1971), this institutionalization of class struggle undoubtedly underlies labor's current malaise. What happened from 1945 to 1970 in the labor movement was not entirely a product of economic concentration. Conscious decisions also played a large part. When the United States emerged vic- torious from the war, with a much greater degree of economic concentration than had been the case prior to the Great Depression, the large corpora- tions were in a position to offer a new type of deal to the unions. IF the unions would enforce labor discipline, supply labor stability, accept longer contracts, purge the radicals, set up grievance procedures which remove the handling of grievances from the rank and file as much as pos— sible, stay within the two-party system, leave price and other social decisions alone, etc., THEN the employers would recognize the unions, provide dues check-off, increase wages substantially, not resist too strenuously certain types of legisla— tion favorable to labor, grant seniority rights, etc. The mainstream of the labor movement basically accepted this deal. The price it ultimately had to pay has been very high. By seriously curtail- ing its capability for a serious political offen- sive to limit and eventually even change property rights . . . , the labor movement has lost most of its grass-roots vitality. This was not apparent to most labor leaders until the 19705 when the economy slowed down. . . . Aggressive union- busting, decertification campaigns, hard-line 89 bargaining aimed at cutting real wages, relocating plants to non-union environments, and a whole host of conservative and reactionary legislative initia- tives are some of the signs of what is now going on (Nissen, 1981: 25-26). In order to bargain effectively with increasingly con- centrated and centralized industrial giants, unions were compelled to evolve analogous union structures10 which dramatically reduced the prerogatives of local unions. But- tressed by the acceptance of a dues check-off system, national union leaders began paying less attention to “local” issues and problems, such as grievances over working condi— tions and managerial abuses. The decision to replace the traditional "shop steward“ system where unpaid laborers were popularly elected by small groups of workers to represent them in negotiations over immediate workplace grievances with a ”committee" system where company-paid committeemen, respon- sible often for hundreds of workers spread out over several geographical locations, assume the contradictory functions of both representing the rank and file and enforcing the union-endorsed contract greatly intensified the gulf between union members and their leaders (Aronowitz, 1973: 252-54). Gradually, the rank and file vitality responsible for labor's early victories vanished. In recent years, a series of progressive movements ranging from the struggle for minority civil rights to women's rights, environmental and consumer protection, and opposition to the Vietnam war offered possibilities for 9O revitalizing the labor movement and significantly expanding union.membership, yet big labor remained aloof if not openly hostile (von Hoffman, 1978: 23-25). The earlier decision not to rock the boat meant that the concerns of these con- stituencies——and potentially powerful allies——fell outside of labor's limited agenda. In effect, organized labor may have sealed its current fate. II Organized Labor and the Democratic Party—— ”Reward Your Friends and Punish Your Enemies” For all their militancy in trade-union matters, the CIO leaders of the 19305 had no coherent intel- lectual system that could have stabilized and rad- icalized their demands for reform. ——J. David Greenstone (1969) Right now, labor has found itself isolated, both to its left and to its right, and there are few signs of efforts to rebuild or create alliances. In the main, unions still operate at the top with the leaders of the Democratic Party rather than at its mass base. Labor has no independent polit— ical role, and seems incapable of conceptualizing, much less implementing, an independent line around its own demands. ——Stanley Aronowitz (1979) The other factor which accounts for organized labor's impressive gains over the last forty-five years as well as to a substantial degree its current malaise has been its abiding commitment to the Democratic Party. Prior to the 19305, the American labor movement adopted an almost unchal- lenged voluntarist strategy in its approach to politics, choosing to focus on those “pragmatic” issues involving 91 wages, benefits, and job control for union members rather than to struggle for social welfare concessions that would benefit both union and nonunion members alike (McConnell, 1966: 298—99). This reflected both the narrow self- centeredness of traditional craft unions and an adroit recognition on the part of the leadership that government intervention in union affairs might prove to be a double- edged sword. Borrowing the Marxist tenet of the state as the creature of the bourgeoisie, voluntarists saw gov— ernmental interference in the economy as necessar— ily antiunion. . AFL officials were particularly opposed to pro- grams that might have allowed the government to compete for their members' loyalties such as pro— tection for collective bargaining, medical insur- ance, minimum-wage and maximum-hour laws (at least for privately-employed adult males), and unemploy- ment insurance. This last program, for example, threatened to make union activities like collec- tive bargaining seem less vital (Greenstone, 1977: 25—26). Nevertheless, the New Deal drew labor inexorably into electoral politics on the side of the Democrats. With the passage of the Wagner Act in 1935, for labor the center- piece of New Deal legislation, trade unions were finally accorded the legal right to organize and to bargain collec- tively for their members. The long sought goals of union recognition and security appeared to be within reach. Per— haps most significantly, this new government sanction for their efforts spurred leaders such as John L. Lewis of the United Mine Workers, Sidney Hillman of the Amalgamated Clothing Workers, and David Dubinsky of the International 92 Ladies' Garment Workers to mount aggressive campaigns to organize mass, industrial unions (McConnell, 1966: 303). Their phenomenal success,11 coupled with their preoccupation with politics (Preis, 1972: 46), thrust the leaders of the new Congress of Industrial Organizations (CIO) into the national limelight and forced the more conservative AFL, temporarily at least, to abandon its voluntarist ideology. Political victories, once won, had to be defended. The Wagner Act, for example, established the National Labor Relations Board (NLRB) as its administrative agency with 12 It thus broad powers over labor—management relations. became incumbent upon labor to press for Board appointments sympathetic to its interests. While it is at least con- ceivable that labor might have chosen a path of independent political action manifested in the formation of a “labor” party to accomplish its objectives, the pragmatic and pro- capitalist labor leadership——including that of the CIO—— chose to back the Democrats. As early as 1936, CIO leaders formed Labor's Non-Partisan League (an ironic title, given its designated function) in an effort to transmute the inde- pendent political activity of “hundreds of thousands of unionists who then customarily voted Socialist or Communist or were clamoring at the time for a labor party“ into a mobilization of votes for Roosevelt (Preis, 1972: 46—47). By the time the CIO's Political Action Committee (CIO-PAC) was established in 1943, organized labor had emerged as “a major, nationwide electoral organization of the national 93 Democratic party,” a development which represents ”the most important change in the STRUCTURE of the American party sys— tem during the last quarter century” (Greenstone, 1977: xxxi-xxxii). After World War II, the fortunes of the Demo- cratic Party closely paralleled labor's electoral efficiency (Scoble, 1963). It is critical for our purposes, nonetheless, that we have a clear understanding of organized labor's ideological orientation to political activity in the postwar period. Greenstone (1977: 54) contends that by the end of World War II ”voluntarism as a laissez-faire political doctrine was entirely dead.” The bitter class conflict between capital and labor of the 19305, he suggests, has been superseded by a new cleavage ”between producers and consumers.“ Producers seek greater economic efficiency, profit— ability, and growth through rationalization of pro- duction. Consumers, on occasion led by organized labor, insist on protecting the.quality of life—— as expressed by individual and collective patterns of consumption——against the dislocations that this economic rationalization can impose (Greenstone, 1977: xxxvi). Yet this ignores the negative consequences of labor's involvement with the Democrats. For while total union mem— bership rose dramatically from roughly 4,300,000 in 1935 to some 13,400,000 in 1945, labor's influence over government policy had already begun to recede markedly during the war (Preis, 1972). After the war, considering the passage of such tough anti—labor legislation as the Taft—Hartley Act in 9,13 1947 and the Landrum—Griffin Act in 195 it could be 94 reasonably argued that “government was more likely to hamper than to assist the exercise of union power” (McConnell, 1966: 316). In reality, as McConnell (1966) has demon- strated, while the old voluntarism of Samuel Gompers with its emphasis upon the avoidance of politics had largely dis— appeared by the end of World War II, much of the labor move— ment remained cautious. If political action is taken as the test, it may appear that voluntarism is dead. But appearances may be deceptive. Although resolutions on particu- lar matters of public policy are passed by federa— tion and union conventions, few of these have been able to muster the subsequent energetic support of labor organizations that is essential to their translation into legislation and that indicates serious commitment. 0n the whole, the measures that do receive this sort of attention are those which affect union security and autonomy. The entrance of organized labor into electoral politics is real, but it is sporadic and uneven. And it is rather plainly the consequence of necessity. Ever since the Pandora's box of political action was opened in the 19305, there has been no way to close it upon the ills that were released (McConnell, 1966: 319). The question, then, is not whether labor has been involved in political action over the last forty-five years, but rather the nature of that political action and its impact upon trade union organization and power. On the one hand, it could be concluded that the labor movement made a fundamental error when it accepted positive governmental assistance during the New Deal era. Thus, while adoption of the Wagner Act and the use of the NLRB's certification process had been useful in gathering in a large new membership, unions had laid themselves open to government regulation when the fortunes of poli— tics changed. According to such reasoning, the restraints of the Taft-Hartley and Landrum-Griffin Acts were the price paid for the benefits of the Wagner Act. On the other hand, the conclusion 95 might be reached that the labor movement had not engaged sufficiently in political activity. Thus, if unions had devoted more of their energies to political indoctrination of their membership, the voice of labor might have been louder in Congress and the two restraining measures might never have been passed. Moreover, with more vigorous politi- cal activity, labor might have enjoyed greater influence with the executive branch of government (McConnell, 1966: 316). The Depoliticization of Labor This reluctance on the part of labor leadership to engage in political indoctrination of the rank and file has fostered, within the context of the fiscal crisis of the State, an accelerated depoliticization of labor. The post- World War II transition of the American economy, and hence the nature of employment, from manufacturing to administra- tion and services (Aronowitz, 1979) has diminished the relative proportion of the labor force which is unionized and, as a consequence, labor's clout within the Democratic Party (Moberg, 1981). Moreover, the economistic focus of American trade union leaders upon issues of consumption rather than control of the workplace has furthered ”the disintegration of the [politically] ACTIVE base of the unions” (Aronowitz, 1979: 21) and has made them vulnerable to charges that they act only on behalf of their narrow self-interest. In the short run, this has enabled capital to exact substantial wage and benefit concessions from labor as part of the effort to reduce production costs and restore 96 American competitiveness abroad. But the depoliticization of labor also serves to legitimate attempts on the part of the State to "rationalize” governmental expenditures by sharply constricting allocations for social expenses and those social consumption entitlements, such as unemployment compensation,which have come to be considered "the social wage.“ This possibility was given classic expression in the 14 1975 report of the Trilateral Commission, entitled The Crisis e: Democracy. In the section on the United States, Samuel Huntington argued that: The vigor of democracy in the United States in the 19605 . . . contributed to a democratic dis- temper, involving the expansion of governmental activity, on the one hand, and the reduction of governmental authority, on the other. The implications of . . . the democratic dis- temper extend far beyond the United States. For a quarter-century the United States was the hege- monic power in a system of world order. The mani- festations of the democratic distemper, however, have already stimulated uncertainty among allies and could well stimulate adventurism among enemies. If American citizens don't trust their government, why should friendly foreigners? If American citi- zens challenge the authority of American govern- ment, why shouldn't unfriendly governments? The turning inward of American attention and the decline in the authority of American governing institutions are closely related, as both cause and effect, to the relative downturn in American power and influence in world affairs. A decline in the governability of democracy at home means a decline in the influence of democracy abroad (Huntington, 1975: 102, 106). To which he finally concluded: Al Smith once remarked that "the only cure for the evils of democracy is more democracy.” Our analysis suggests that applying that cure at the present time could well be adding fuel to the flames. Instead, some of the problems of 97 governance in the United States today stem from an excess of democracy——an ”excess of democracy” in much the same sense in which David Donald used the term to refer to the consequences of the Jacksonian revolution which helped to precipitate the Civil War. Needed, instead, is a greater degree of mod- eration in democracy (Huntington, 1975: 113). The Trilateral report affirms, in other words, that ”accumulation is far more important than legitimation“ (Wolfe, 1977: 29). Its line of reasoning suggests the fol- lowing causal sequence: (1) LATE CAPITALIST SOCIETIES gen- erate (2) DISACCUMULATION, which in turn produces (3) a DEMOCRATIC UPSURGE and (4) GREATER GOVERNMENT INVOLVEMENT in economic and social life. Demands upon the State become excessive, resulting inevitably in a (5) FISCAL CRISIS, on the one hand, and a (6) CRISIS 0F LEGITIMACY, on the other. The only solution is to (7) DEPOLITICIZE democratic partici- pation (Wolfe, 1977). Thus, organized labor finds itself under severe pres- sure to "give back" wages and benefits previously won through collective bargaining, at the same time that its old allies in the Democratic Party are forsaking long- established social welfare programs designed——at least in part——to benefit union members. Yet labor leaders have responded feebly. Their dilemma is illustrated in the for— mation of the Progressive Alliance in the fall of 1978 under the leadership of United Auto Workers' President Douglas Fraser. Delegates from 115 organizations ranging from trade unions to women's groups, minority and consumer groups, and farmers met in Detroit to outline a common strategy for 98 redressing the right-wing assault upon social welfare legis- lation. This was the first such gathering in the United States ”in more than three decades“ (Weir, 1979: 22). Despite the camaraderie of the meeting, however, the Alliance was doomed from the outset to failure. In the first place, Fraser picked the Democratic Party as the arena in which to make his fight. . . . It may well be that millions of American workers vote the Democratic Party ticket, but it is not an arena that a mass of people can get into. The party is consciously structured to make it pos- sible for it to accept votes, but not mass partici- pation of the kind that determines party policy. In the second place, Fraser could not and dare not make a real and general appeal to his ranks, asking their participation. Most auto workers today reject the international leadership of their union. The rejection is a complex one. They do not reject their union despite their oftentime disgust and even hatred of its officials. It is the only official weapon they have going for them. But the leadership of the union refuses to champion the demands they need most to fight for. . . . Fraser and his staff, like those of the UAW presidents before him, are experts at out- maneuvering and coercing the ranks into accepting contracts they don't want, contracts in which ”packages” are substituted for improved working conditions. . . . Fraser CAN involve these employees and prospective employees in the activ- ity of the coalition. But if he sought the open help of his regular rank and file, he would then owe them. He would in turn have to make some important concessions to them. And it is certain that the ranks would turn the coalition into an arena for airing their case against Fraser and the international (Weir, 1979: 26-27). Faced, then, with mounting pressure from capital to accept a "new social contract“ on terms decidedly less appealing than those which characterized the post-World War II economic settlement and with diminished political influ- ence over government policy making, organized labor has 99 little room to maneuver. It can abandon the "business unionism” of the last thirty-five years and seek to regain the offensive against management by rekindling active par- ticipation of the rank and file in union decision making. Or it can accommodate itself to the new business initiatives, hoping that whatever concessions it is forced to make will be short term and that a comfortable new partnership with business will ensue once economic growth is restored (Moberg, 1981). As we have indicated in the preceding ana— lysis, for reasons that are both structural and cultural there is little cause to be optimistic. The Status of Full Employment Policy Within Labor's Limited Political Agenda It would appear at first glance that a policy proposal requiring the State to ”guarantee” employment opportunities for all who want to work would be a labor issue par excel- lence. As Marx pointed out in Das Kapital, the continuous presence of a surplus pool of unemployed laborers is the surest mechanism available to capital for holding down wages and enforcing labor discipline. But if a surplus laboring population is a neces- sary product of accumulation or of the development of wealth on a capitalist basis, this surplus pop- ulation becomes, conversely, the lever of capital- ist accumulation, nay, a condition of existence of the capitalist mode of production. It forms an industrial reserve army that belongs to capital quite as absolutely as if the latter had bred it at its own cost. Independently of the limits of the actual increase of population, it creates for 100 the changing needs of the self-expansion of capi- tal a mass of human material always ready for exploitation (quoted in Sweezy and Magdoff, 1975c: 2). The leverage which this ”reserve army of the unemployed“ (cf. Sweezy, 1942: 87-92; Gordon, 1972: 53-81) affords capi- tal in its relations with labor operates in two ways. On the one hand, the availability of a pool of unemployed workers undermines the bargaining power of those who are employed since they constantly face the possibility of being replaced by those who would work for less. Lower wages, ceteris paribus, mean higher profits. On the other hand, the realistic threat of being sacked militates against labor's struggle for control of the workplace, thereby con- tributing to management's ability to discipline its work- force and raise their level of productivity——in Marx'sterms, to transform ”labor power” into actual ”labor." Workers must provide labor power in order to receive their wages, that is, they must show up for work; but they need not necessarily provide LABOR, much less the amount of labor that the capi- talist desires to extract from the labor power they have sold. In a situation where workers do not con- trol their own labor process and cannot make their work a creative experience, any exertion beyond the minimum needed to avert boredom will not be in the workers' interest. On the other side, for the cap— italist it is true WITHOUT LIMIT that the more work he can wring out of the labor power he has pur- chased, the more goods will be produced; and they will be produced without any increased wage costs. It is this discrepancy between what the capitalist can buy in the market and what he needs for produc- tion that makes it imperative for him to control the labor process and the workers' activities. The capitalist need not be motivated to control things by an obsession for power; a simple desire for profit will do (Edwards, 1979: 12). 101 15 which followed The economic and political settlements World War II and which relied upon a Keynesian model of a "DEMAND-CONSTRAINED ACCUMULATION PROCESS” rather than the classical model of accumulation "in which growth is limited primarily by conditions of exploitation" (Bowles, 1982: 54) appeared for a time to render the role of an industrial reserve army obsolete. State intervention in the private economy in the form of (1) fiscal and monetary policies designed to sustain a continuously high level of aggregate demand and (2) the increasing socialization of the costs of reproducing labor power provided the impetus for the extended postwar expansion. For labor, this meant rela- tively high levels of employment and a secular rise in the standard of living. For capital, it suggested that full employment no longer automatically entailed either reduced profits or accelerated inflation. Economic growth, it seemed, might generate additional wealth for everyone. The reemergence of stagnationist tendencies in the 19705, however, revived the classical accumulation model with its “zero-sum“ connotations (Thurow, 1981) and with good reason. For as Boddy and Crotty (1974) have shown, despite the increasing concentration of capital and the expanding role of the public sector over this period, wage gains during phases of economic expansion have still been purchased at the expense of profits. Figure 2 demonstrates that midway through each business cycle, as the level of 1111-11 .0 “Aemm_ Lwnopuov zmw>mm xficpcoz =.m~o>u mmwcwmzm esp use .mwwufifioa :m_mmcxw¥ .puwfiecou mmmfiu= .xppocu mmsow use xuuom ugoemm ”moczom .m:o_pm 102 8 B 8 8 3 um 2 2 s. m". 3. 2. -Loacou Hm_ocmcfiecoc cw cowpmmcmaeou fleece xn uwgsmmwe mew mommz .mcofipmeoagou ~m_u:mcfim:oc Low mmxmp prmm mpweoca xn owe: -mmms mew mpweoca .cucmwmmm oweocoum to smmczm Hmco_pmz mcp x3 uwc_mmu mm cowmmwumc mmmcwmza mo muo_cwa pcmmmcamc mmmcm uwumcm N2: Km” 22 $2 $3 $2 83 33 $2 $3 $3 $2 83 $2 $2 $2 mmmfl $2 3.2 $2 $2 .NmmFTNmmF 1;) J) 1):). 1T) Ilil Ii) 1 1+1 IJI. .. I) It.) .11 I ill leI JII I Ill '1 II 1 I.) - 1) 1111 11] [- IU‘III IIJY-ll llfil I'll Jill I 0' JTI r0 0]] II. J I I] 0/ m % J. J I I'll} L . r) x 1 u '1‘ 1 H D )1 / i) x 1 ~ .00.] ’0 [I J} 1... z 11 < 11d 1.. Ill. 7 [III I] Illvll all. JIII Ill 1] I! L .lijrll Illtl III- 1 [II 17‘ [I I10 [I .mwmmz Op mpflmoea Lo owpma .N mesa“; mo. 8. mo. mo. 2. 2. NH. 2. D. 103 unemployment diminishes, the ratio of profits to wages begins to fall until once again the economy enters a period of recession. Reliance on the business cycle to discipline labor has been a costly policy for American capi- talism. The erosion of the traditional trade sur- plus, the collapse of the U.S. dollar-based inter— national monetary system, and the emergence of other capitalist states, particularly Germany and Japan, as challengers to U.S. hegemony in capital- ist world affairs, have made business- cycle-as— usual a dangerous policy for U. S. capital. . . But in the absence of alternative methods for dis- ciplining labor, recession planning cannot be dis- carded without endangering capitalist-class dominance (Boddy and Crotty, 1974: 15-16). Thus, it would seem that labor has everything to gain and nothing to lose from a policy of guaranteed full employ- ment. Yet the two such proposals which have been debated in the post-World War II period, the Full Employment Act of 1945 and the Equal Opportunity and Full Employment Act of 1976 (the so-called Humphrey-Hawkins bill), originated out- side the ranks of organized labor and were able to garner only grudging support from labor after receiving widespread public attention. During the most recent debate in the period from 1974 to the final passage of the Full Employment and Balanced Growth Act in 1978, much of organized labor refused even to endorse the full employment bill until it had been significantly watered down. When asked about this, Nat Goldfinger, chief economist for the AFL-CIO, explained: We actively support job-creating legislation, as we have since 1946. . . . The essential problem is not the language of the 1946 Employment Act. It is the failure of the administrations and Con- gresses since Truman to pursue the objectives of 104 the Employment Act. We could get a better restate- ment, but what would happen without specific pro- grams? It's the day-to-day battle for specific programs that's important, and that's where the AFL-CIO is putting its emphasis (Barnes, 1975: 54). The ambivalence of organized labor regarding the strug- gle for full employment policy during the current economic crisis is also a reflection of changed historical Circum— stances. Unlike the 1944-46 debate, which occurred under conditions of full employment but within a psychological context of terror over the expected return to depression conditions following the war, the current crisis arose against the backdrop of some thirty years of successful col- lective bargaining agreements between capital and labor, many of which included reliable job security provisions and governmental protection against the pain of short-term unemployment. Indeed, as Bowles has recently argued, the emergence of sectoral divisions within the American economy, coupled with a corresponding segmentation of the labor mar- ket, suggests that organized workers in monopoly sector industries have “objective interests” which conflict with those of competitive sector workers and the unemployed. It is no longer true that all workers directly benefit from CYCLICAL MOVEMENTS TOWARD FULL EMPLOY- MENT. Those who would otherwise be unemployed—— the "marginal" workers, the racial or linguistic or cultural minorities, the "guest” workers, women, young people-—clearly benefit. But those with secure employment may find that the growth of their real wages falls with the movement towards full employment. Thus those workers who have lit- tle fear of being laid off may expect their own real incomes to rise faster (or to fall less fast) during periods of economic contraction. (This is less true for family incomes, of course, as fewer 105 family members succeed in finding paying work dur- ing contractions.) The unity of the working class around the ques- tion of full employment may still be maintained, but it is no longer a question simply of each seg- ment acting on the basis of its own material interest. The short-term material interests of the core and peripheral workers are now sharply divergent with respect to the question of full employment. For many core workers in the 19705 inflation became a greater concern than unemploy- ment. This divergence of short-term interests among different groups of workers may explain the surprisingly feeble response of the labor movement to the monetary and fiscal policies that deliber- ately created higher unemployment levels during the 19705. Similar considerations may have con- tributed to the uneasy relationship between the trade unions in core industries and the movements of women and young people (Bowles, 1982: 64). Finally, given the bureaucratization of the American trade union movement over the last several decades, a policy of State-guaranteed full employment threatens to reanimate rank and file activity around questions of union participa- tion and job control which the leadership is unprepared to face. Recent ”dissident” movements among mine workers, steelworkers, and teamsters are portents of what might be expected. This fear of a rank and file resurgence, as we shall see in Chapter 5, perhaps more than any other factor precludes the possibility of giving full employment policy a central place in labor's political agenda. 106 NOTES 1Following its crushing defeat in the 1980 elections, the AFL-CIO has intensified its grassroots organizing on behalf of local Democratic Party candidates and appears ready to risk an ”early endorsement” strategy during the 1984 presidential primaries in a last-ditch effort to secure passage gf its legislative program (Business Week, 28 June 1982: 75 . 2For a discussion of these concessions and mounting labor resistance to additional give-backs, see Business Week, ”Embattled Unions Strike Back at Management” (4 December 1978): 54-69; Business Week, “Concessionary Bargaining: Will the New Cooperation Last?" (14 June 1982): 66-81; The New York Times, "Effort Is Begun to Resist Unions' Job—CEnEEE- slons" (13 June 1982): section 3, p. 31. 3These opportunities were largely blocked, of course, for American Indians and for slaves, upon whose backs was purchased a great share of America's wealth and prosperity (North, 1961). 4Which is not by any means to say that there were no radical elements within the American labor movement or that this era was one of continuous labor peace, as any cursory investigation of the history of this period will attest (Lens, 1974; Boyer and Morais, 1955). 5This in part accounts for American labor's virulent anticommunist orientation to foreign policy (Radosh, 1973). 6Cf. Lens (1974), Cochran (1977). 7Taylor and Witney (1975) offer a concise and informa- tive overview of the labor legislation of this period. 8Robert Michels, Political Parties: A Sociological Study 9: the Oligarchical Tendencies eh MoHern Democracy (Glencoe: The Free Press, 1962). 9The importance of history in any sociological analysis has been eloquently stated by C. Wright Mills (1959: 146): Unless one assumes some trans-historical theory of the nature of history, or that man in society is a non-historical entity, no social science can be assumed to transcend history. All L..---"" 107 sociology worthy of the name is "historical sociology.” 10The problem trade unions face today, of course, is how to create "multinational unions" which can negotiate effec- tively with global corporations. That task is proving to be far more difficult than their earlier one. 11According to Preis (1972: 70-71), "the eight unions with 900,000 members that had formed the C10 in November 1935, grew to 32 international unions with a membership of 3,718,000 in September 1937." This was slightly more than the total AFL membership for that year of 3,600,000. 'Zcr. Taylor and Witney (1975); Millis and Brown (1950). 13lbid. 14A comprehensive analysis of the origin of the Tri- lateral Commission and its impact upon both the domestic and foreign policies of the major capitalist powers is provided by Sklar (1980). 15Bowles (1982) refers to these agreements as ”ACCORDS“ which structure the relationship between capital and labor by establishing ”the STAKES, the TOOLS and the TERRAIN of class conflict.“ 16Sherman (1976) argues, to the contrary, that it is pre- cisely the monopolization of the core of the American economy which has fostered the stagflation of the postwar period. Rather than a ”wage squeeze on profits,“ Sherman points to a "profit-push“ by monopoly sector industries who raise prices at a rate faster than the increase in wages thereby outrunning consumer demand. This factor, along with the rising cost of capital goods and raw materials, is the real cause of postwar recessions. For a similar analysis, see the report to the Joint Economic Committee of the Congress, ”The Inflationary Impact of Unemployment: Price Markups During Postwar Recessions, 1947-70” (1976c). CHAPTER 5 ORGANIZED LABOR AND FULL EMPLOYMENT POLICY: THE SHAPING OF THE FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 I There has been vast unemployment before and there will be again. There will be depression and infla- tion just as surely as the tides ebb and flow. I would have little enthusiasm for any proposed rem- edy which seeks either palliation or tonic from the Public Treasury. ——President Warren G. Harding, 1921 Unemployment remains too low for the work force to have flexibility. Anytime the jobless total is less than 2 million, even common labor is scarce. And certainly, the labor unions are in the driver's seat in wage negotiations. . . . There's no assurance against inflation like a pool of genu— ine unemployment. That is a blunt, hard-headed statement, but a fact. ——Business Week, 1952 (at a time when the official unemployment rate was 3%) Now any system of economics is bankrupt if it sees either value or virtue in unemployment. We simply cannot check inflation by keeping people out of work. -——Candidate Jimmy Carter Speaking before the 1976 Demo- cratic Nominating Convention. The reemergence of stagnation at home and the decline of U.S. hegemony abroad provided the context for a renewed 108 — ' 109 debate during the period from 1974 to 1978 over the federal government's responsibility for maintaining full employment. Passage of an authentic full employment bill would have sig— naled a profound reorientation of American economic policy in the direction of economic planning and expanded public enterprise, and would further have established the basis for a ”progressive“ resolution of the current crisis on terms favorable to women, minorities, ehe organized Teheh. This, of course, did not happen. Instead, the legislative negotiations which began with the submission to Congress in early 1974 of the “Equal Opportunity and Full Employment Act” by Representative Augustus Hawkins of California represented a process of “selecting out” or ”excluding” those provisions which effec- tively guaranteed full employment (Offe, 1974). Thus, after several revisions, a final version of the bill entitled ”The Full Employment and Balanced Growth Act” was passed by the Congress in late 1978 devoid of any mechanisms for achieving its goals. For our purposes, the significance of this debate over full employment policy and its disappointing outcomes lies in the way in which it illustrates both the functioning of a capitalist State in response to economic crisis and the relative influence of the various parties, most notably organized labor, over the process of policy formation. The following effort to reconstruct the history of this 110 legislation——its I'rise and demise” as Hill (1978) has described it——is an attempt to illuminate these questions. The Problem of Secularly Rising Unemployment1 The proximate cause for the renewed debate over full employment policy has been the secular rise in unemployment levels following World War II. As Table 4 indicates, unem- ployment averaged 4.5 percent during the 19505 and, after a four-year stretch from 1966 through 1969 of war-induced prosperity, rose sharply during the 19705 to an alarming 6.2 percent. The tendency since the early fifties has been for unemployment to decline ”less and less from its recession peak [1954, 1958, 1961, 1971, 1976] once the economy enters its recovery-expansion phase“ (DuBoff, 1977b: 2). The 8.5% overall unemployment rate for 1975, moreover, represented the highest level of U.S. unemployment since the beginning of World War II, though recently, as we noted above, even this bench mark has been superseded and most forecasts pre- dict exceptionally high levels of unemployment for the remainder of the decade (New York Times, 6 June 1982: sec- tion 3, p. 1). There have also been sharp increases in recent years in the number of people involuntarily forced to work parttime due to insufficient job opportunities as well as those who have become so discouraged by lengthy periods of unemploy- ment that they no longer actively seek work. If, as is demonstrated in Table 5, these two categories of workers 111 Table 4. Average Annual Percentage of the Civilian Labor Force Unemployed, 1940 to 1979 (for Persons 16 Years of Age and Over). 1940 1 1941 1942 1943 1944 1945 1946 1947 1948 1949 U'Iwww—b—e—fi-DKO-b LDCDKOkDKONKDVkDOW Average Unemployment for the Decade: 5.2 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 mmhbbmmwwm mmw—sbmtooww Average Unemployment for the Decade: 4.5 1960 5.5 1961 6.7 1962 5.5 1963 5.7 1964 5.2 1965 4.5 1966 3.8 1967 3.8 1968 3.6 1969 3.5 4.8 1970 4.9 1971 5.9 1972 5.6 1973 4.9 1974 5.6 1975 8.5 1976 7.7 1977 7.0 1978 6.0 1979 5.8 6.2 Source: Adapted from Richard B. DuBoff, "Unemployment in the United States: An Historical Summary," Monthly Review (November 1977: 11); Economic Report of the President, January 1982 (Government Printing—Office, 1982 ). 112 Table 5. Total Civilian Labor Force Unemployment: Full-Time, Part-Time, and Hidden Unemployment, 1967-1976. Year Ungigiéiiém FubleMggé-gimea ”113113325“? Rate Unemployment 1967 3.8 4.8 5.8 1968 3.6 4.5 5.3 1969 3.5 4.4 5.2 1970 4.9 6.0 6.8 1971 5.9 7.1 8.0 1972 5.6 6.7 7.6 1973 4.9 5.9 6.7 1974 5.6 6.8 7.5 1975 8.5 10.0 11.2 1976 7.7 9.1 10.1 aPart-time unemployed are included as ”weighted" equiv— alents of full-time workers and represent both (1) those who normally work full-time but are cut back to part-time sched- ules "for economic reasons" and (2) those who usually work part-time but are out of work altogether. bHidden unemployment refers to Bureau of Labor Statis- tics estimates of ”discouraged workers" who want a job but are not seeking work either for job market or personal rea— sons. Source: Richard B. DuBoff, "Unemployment in the United States: An Historical Summary,“ Monthly Review (November 1977: 14-20). 113 were added to the official unemployment figures, they would raise total unemployment by at least two to three percentage points.2 In addition, the proportion of the workforce experienc- ing "some” unemployment over the course of the year expanded during the 19705, as did the number of those out of work fifteen weeks or longer.3 Some groups, minorities in par- ticular, continue to be undercounted in government surveys thereby lowering estimates of their actual joblessness. Many others suffer from sub- and underemployment, given that they work full-time, year-round but earn wages which leave them below the official poverty threshold.4 One fact has not changed: the burden of joblessness continues to fall disproportionately upon black Americans. As Table 6 illustrates, black unemployment rates have remained roughly double those for whites since the 19405 whether the economy was expanding or contracting. Similar patterns obtain when separate comparisons are made between black and white male unemployment rates and black and white female unemployment rates for this period, although jobless rates for females consistently exceed those for males of their race (U.S. Department of Labor, Handbook e: Labor Statistics, December 1980: 62). Nevertheless, while overall black unemployment levels have historically responded to cyclical fluctuations in the economy in a manner similar to those of whites, the figures in Table 7 suggest that something new and potentially 114 Table 6. Unemployment Rates by Race for Persons 16 Years Old and Over: 1948 to 1979. Unemployment Rate Ratio: Black Year: Black . and Other Races and Other Races Whlte to White 1948 5.9 3.5 1.7 1949 8.9 5.6 1.6 1950 9.0 4.9 1.8 1951 5.3 3.1 1.7 1952 5.4 2.8 1.9 1953 4.5 2_7 1.7 1954 9.9 5.0 2.0 1955 8.7 3.9 2.2 1956 8.3 3.6 2.3 1957 7.9 3.8 2.1 1958 12.6 6.1 2.1 1959 10.7 4.8 2.2 1960 10.2 4.9 2.1 1961 12.4 6.0 2.1 1962 10.9 4.9 2.2 1963 10.8 5.0 2.1 1964 9.6 4.6 2.1 1965 8.1 4.1 2.0 1966 7.3 3.3 2.2 1967 7.4 3.4 2.2 1968 6.7 3.2 2_1 1969 6.4 3.1 2.1 1970 8.2 4.5 1.8 1971 9.9 5.4 1.8 1972 10.0 5.0 2.0 1973 8.9 4.3 2.1 1974 9.9 5.0 2.0 1975 13.9 7.8 1.8 1976 13.1 7.0 1.9 1977 13.1 6.2 2.1 1978 11.9 5_2 2.3 1979 11.3 5.1 2.2 Source: Bureau of the Census, The Social and Economic Status of the Black Population in the United States:_-An Historical View, T790-T978 (U.S. Gov- ernment PFlnting OfflCe, 1979: 69); U.S. Department of Labor, Handbook of Labor Statistics (U.S. Gov- ernment Printing Offlce, December 1980: 61). 115 Table 7. Percent Changes in Number of Unemployed for Periods of Recession and Recovery, 1954-1977. Change in 1954-57 1961-69 1969-72 1973-75 1975-77 Unemployed (Recovery) (Recovery) (Recession)(Recession) (Recovery) ALL WORKERS Black -16 -20 +68 + 83 + 2 White -20 -40 +72 + 87 -16 ADULT MEN Black -21 -67 +96 +113 -10 White -27 -63 +89 +114 -23 ADULT WOMEN Black -21 -32 +64 + 51 +13 White -17 -24 +57 + 86 -11 TEENAGERS Black +23 +22 +47 +26 + 6 White - 5 - 1 +54 +48 - 9 Source: Robert 8. Hill, "The Illusion of Black Progress,” Social Policy (November-December 1978: 17). 116 ominous is occurring. Not only has black teenage unemploy- ment ”continued to climb during periods of recovery as well as during recessions” since the early 19505, but the upturn from 1975 to 1977 was ”the only period of recovery over the last 20 years during which most Black workers experienced rises in unemployment, while white workers experienced sharp declines,” indicating that the "persistence of high level unemployment among Blacks over the past two decades may be transforming cyclical unemployment into structural pat- terns“ (Robert B. Hill, 1978: 16). It was precisely this deterioration in employment opportunities for black workers which provided the early impetus for a reconsideration of full employment policy. The Politics of Rationalizing Unemployment and Redefining Full Employment Rising unemployment can become a politically explosive issue and potentially threaten the prerogatives of capital in economic policy making. This recent upward drift in job- less rates has, therefore, engendered a plethora of conserv- ative economic ”theories" designed to explain the problem as a natural consequence of changing labor markets and/or per- sonal choices. The cumulative impact of business cycle swings and technological change on the demand for labor is rarely considered. Instead, the tone is distinctly microeconomic: the new theories all stress imbal- ances between demand and supply in the labor mar- ket. . . . Overall, unemployment is attributed to the desires and motivations of individuals clash- ing with available work opportunities. Personal 117 preferences become virtual causation; and the larger social parameters drop out of sight (DuBoff, 1977a: 18-19). Some economists posit that STRUCTURAL changes in the composition of industry and employment since World War II—— most notably the decline in agricultural employment and the rise in technological specialization——have undermined the employability of less skilled and less educated workers while expanding opportunities for those more skilled and better educated (Killingsworth, 1975). The massive influx of poorly trained minority and women workers into the post- war labor force thus by itself accounts for the increase in prosperity unemployment. Traditional Keynesian fiscal stim- uli alone cannot solve this problem; they must be accompan- ied by targeted manpower and labor market initiatives as well as generous investments in human capital (Becker, 1975). In sum, the unemployed, through inadequate personal plan- ning, are responsible for their own joblessness. Whether or not the average skill level of American workers has improved with technological innovation remains an open question, however. Braverman (1974) and others (Marglin, 1974; Edwards, 1979) argue convincingly that tech- nological advances are promulgated by management primarily in an effort to extend its control over the workplace and increase profits. Rather than raising levels of skill and job satisfaction, this process results in alienation and degradation for the worker. 118 The "structuralist" position fails in other ways as well,-even on its own terms. As Robert 8. Hill (1978: 20) has pointed out: Contrary to conventional wisdom, it has been the white labor force, not the Black, that has experienced the sharpest influx of "less-skilled" workers (i.e., adult women and teenagers) in recent years. Yet, in spite of this surge in the white labor force, the white unemployment rate steadily declined during the 1975-77 recovery. On the other hand, despite the fact that the Black labor force did not experience a similar influx, Black unemployment has failed to decline during the most recent period of recovery. Thus the "surge in the labor force” theory is more applica- ble to whites than Blacks and fails to provide an adequate explanation for the persistently high jobless rates among Blacks. Moreover, those who would "laud the resource mobility, pro- ductivity incentives, and entrepreneurial dynamism of the free market should not be permitted merely to blame the victims when that market fails. The fundamental point is that so long as there is excess productive capacity in the economy (except for a handful of boom years the usual state of affairs in the United States) it is spurious history to argue that joblessness is caused by structural changes in the labor force or by workers' decisions that set the terms of their own employ- ment. The skills and deficiencies of various peo- ple may help determine who becomes unemployed when aggregate demand slumps, when labor-displacing technology spreads, or when given industries decline; but they have no significant effect on the level at which the economy operates (DuBoff, 1977a: 23-24). At the heart of most conservative attempts to rational- ize higher unemployment is the presumption that in an unfet- tered ”free market" economy a ”natural rate of unemployment” exists at which all critical variables from wages and 119 profits to interest rates are in equilibrium (DuBoff, 1977a; Feldstein, 1973; Phelps, 1969). Incursions into the market by the federal government which result in inordinately ele- vated levels of unemployment compensation (Henry, 1979), the establishment of an artificially high wage floor through a mandated minimum wage, or excessively expansionary fiscal and monetary policies will not, it is argued, drive down this "natural rate" but merely spur uncontrollable infla— tion. This has been the painful lesson of the past fifteen years. The failure of these arguments once again rests in their attempt to substitute "economics” for political econ- omy. The profound institutional and sociological changes of the postwar period become in these models ”exogenous” vari- ables outside the accepted realm of discourse. In the rigorous microeconomic universe of the natural rate, unemployment is voluntary and has little to do with dismal labor market prospects, industrial relocation( interregionally and inter- nationally), labor saving technical innovation, or discriminatory hiring practices. Inflation is the result of government meddling; it is unrelated to monopoly power, sudden changes in prices and quan- tities of key commodities, or domestic repercus- sions of foreign exchange rate depreciation (or appreciation) (DuBoff, 1977a: 21). In addition to mitigating the seriousness of rising unemployment, these conservative theories offer ideological justification for raising the jobless figure which purport- edly represents the economy at "full" employment. Since the propagation of full employment policy requires that a consensus as to the definition of full employment be 120 reached, this question assumes enormous significance, despite the fact that all estimates of the available labor supply——those at any given time who are either employed or unemployed plus those who might be encouraged to seek work in an expanding job market——are premised upon value judg- ments and cannot be reconciled merely through increased technical expertise. Eliminating “discouraged workers,‘I teenagers, students, manpower trainees, housewives, and others from official labor force assessments, for example, reduces the available labor pool by millions of workers and substantially narrows the scope of governmental responsi- bility.5 Beginning with Lord Beveridge's celebrated declaration in 1944 that full employment means ”having always more vacant jobs than unemployed men, not slightly fewer jobs,”6 economists (and their political patrons) have engaged in a process of periodically revising their estimates of the min- imal level of “frictional" or voluntary unemployment in a capitalist economy operating at full capacity.7 From the end of World War 11 until the early 19605, a jobless rate of three percent was widely regarded as full employment. This was officially adjusted to four percent during the Kennedy Administration and to 4.9% by President Nixon's Council of Economic Advisors. In recent years, estimates as high as six percent and above have been common (see DuBoff, 1977a: 3-13 for an informative discussion of this process). One of the more intriguing and controversial aspects of the 121 Humphrey-Hawkins bill, therefore, was the insistence on the part of its sponsors and proponents that it commit the gov- ernment to a guarantee of (K) more than three percent unem- ployment, a figure which harked back to the early postwar period and the debate which preceded the passage of the Employment Act of 1946. II Humphrey-Hawkins in Context: A Look Back at the Employment Act of 1946 Twenty years later there are still people who think that in 1946 Congress enacted something called the "Full Employment Act.” It did not. It enacted the Employment Act of 1946. ——Herbert Stein (1969) In its formal statement of purpose, the Full Employment and Balanced Growth Act of 1978 is described as an amendment to the Employment Act of 1946, an effort to ”strengthen and supplement the purposes and policies” of that Act (see Section 101, point 4). In truth, the debate from 1974 to 1978 which preceded the passage of this legislation more accurately represented an attempt to reintroduce the goals of the original Full Employment Bill of 1945, with much the same result. Bertram Gross, who along with Leon Keyserling, Alvin Hansen, and a few others, was responsible for drafting the 1945 bill for Senator Murray's War Contracts Subcom- mittee, was also enlisted by Representative Hawkins to draft the original Equal Opportunity and Full Employment Act of 1975. Leon Keyserling was formally added to the staff soon 122 afterward and became the chief mediator between the various parties involved——the White House, Congress, civil rights groups, and organized labor——until the final passage of the bill. While it is unwarranted for our purposes to examine in detail the history of the 1945 bill,8 a brief description of its origin, the principal issues which were deliberated, and organized labor's role in framing the legislation will facil- itate our understanding of the debate surrounding Humphrey- Hawkins. The idea of guaranteeing jobs for all who want to work first appeared in socialist writing early in the nineteenth century. It was attempted in Paris during the Rvolution of 1848 and later became closely associated with Utopian social- ist thought (Nixon, 1973: 14-15). It received little atten- tion in the United States prior to the 19305 since, as we have noted, the neoclassical economists who held sway over American policy making tended to view unemployment as either an anomaly or an aberration in a free enterprise system9 and was never formally incorporated into the job-creating poli- cies of the New Deal whose pragmatic purpose was to reduce massive unemployment rather than to guarantee full employ- ment. In sum, prior to World War 11, there was no signifi- cant grassroots constituency in the United States organizing on behalf of full employment. In 1939 there was no strong liberal, labor, or left opposition driving for a more effective solu- tion to the unemployment problem. While the CIO 123 regularly supported enlarged appropriations for relief, it was otherwise mainly occupied with rep- resenting the employed——organizing them and getting wage increases——rather than with doing anything about the unemployed. The intellectual left was preoccupied with the international situation, with its own relations to communism and the Communists, and with remote ideas about general reform of the system. There was no spontaneous movement among those persons still suffering from unemployment, and there were no popular leaders——no Huey Longs or Townsends——to compete with Roosevelt for the sup- port of the forgotten man. The President had become not only a symbol of concern for the masses but the exclusive symbol, and what he would not do no)one else would propose to do (Stein, 1969: 170- 71 . The experience during the war dramatically changed all of this. Mobilization of American resources on behalf of the war effort not only provided jobs for millions of pre- viously unemployed workers; it also added additional mil- lions to the workforce from hitherto untapped sources. Some twelve million men and women were absorbed by the armed services alone, in addition to almost eight million persons who “entered the labor force as a result of the aggregate demands of World War II, BEYOND the normally expected growth of the labor force due to population and secular change" (Nixon, 1973: 21).10 Yet the official unemployment rate for 1944 still plummeted to an astounding 1.2 percent. This sudden transition from a situation of job scarcity to labor shortage revealed the inherent hypocrisy of government efforts during the late 1930s to construct a new ”labor force“ concept which precluded a whole range of potential workers from active government consideration. 124 No longer did institutional mechanisms conspire to relegate the young, the old, females and the dis- abled to categories outside the labor supply, removed from calculations of unemployment. The question was whether the nation could mobilize its resources and produce enough to meet the new chal- lenges of world conflict. There was something for everybody to do; each person was needed; no one was superfluous. . . . No longer did one have to be a job seeker to qualify for consideration in the labor supply. . . In addition to inducements of patriotic fervor and cash, no effort was spared to facilitate work- ing. Elaborate daycare programs were introduced for the first time; special training and retrain- ing programs were developed; efforts at counseling and rehabilitation of the handicapped were encour- aged; pioneering efforts for scheduling and organ- izing the work day were experimented with; and extra inducements regarding commuting arrangements and other fringe benefits were proffered (Moses, 1975: 33). By 1943, maintaining full employment had become the paramount goal of postwar domestic planning (Harris, 1943; 1948). Public pronouncements concerning the necessity of government initiatives to assure continued full employment received widespread and bipartisan support. In his message to Congress in January of 1944, President Roosevelt pro- claimed that his objectives for postwar America constituted the equivalent of a new Bill of Rights, typified by ”the right to a useful and remunerative job in the industries or shops or farms or mines of the nation." A promise to ”guarantee full employment" after the war was included in the Democratic Party platform (Bailey, 1950: 41). Even more extraordinary was the position taken by the Republicans. In his acceptance speech before the Republican 125 National Convention in the summer of 1944, presidential candidate Thomas Dewey declared: It would be a tragedy after this war if Ameri- cans returned from our armed forces and failed to find the freedom and opportunity for which they fought. This must be a land where every man and woman has a fair chance to work and get ahead. Never again must free Americans face the specter of long-continued mass unemployment. We Republi- cans are agreed that full employment shall be a first objective of national policy. And by full employment, I mean a real chance for every man and woman to earn a decent living (Stein, 1969: 173). Later in the campaign he added: If at any time there are not sufficient jobs in private employment to go around, then government can and must create additional job opportunities because there must be jobs for all in this country of ours (Stein, 1969: 174). Public opinion appeared to be solidly behind government efforts to guarantee full employment as well. In an oft- quoted Fortune magazine poll conducted in the fall of 1944, respondents were asked, "Do you think the federal government should provide jobs for everyone able and willing to work but who cannot get a job in private employment?“ Some sixty-eight percent agreed that it should (Bailey, 1950: 9).11 Key institutional and administrative changes in the structure of the federal government requisite to a success- ful full employment program were also in place by the mid- 19405. The presidency had been greatly strengthened through the formation of Offices for Emergency Management and for War Mobilization and Reconversion and from the passage of the Reorganization Act of 1939, which “established the 126 concept of the Executive Office of the President" and brought the Bureau of the Budget tightly under its control. This resulted in a substantial improvement in the coordina- tion of Administration policies and programs. At the same time, the National Resources Planning Board, which had become a major locus of Keynesian thought within the govern- ment during the late-19305, was added to the Executive Office providing a "central long-range planning agency for the Executive branch” (Bailey, 1950: 11-12, 26). It was within this context, then, that the struggle for control of postwar legislation began in the Congress during the fall of 1943.12 While organized labor played a role in shaping particular aspects of this legislation and its lobbying activities were critical to the passage of various bills, it should be noted at the outset that none of the major postwar legislation originated from labor organiza- tions themselves. Rather, labor "reacted” to the legisla- tive proposals put forward by others. This, as we shall see later, was also true for the Humphrey-Hawkins bill. The chief protagonists were three strong—willed and powerful members of the Senate: Senator Harley M. Kilgore of West Virginia, a liberal with close ties to organized labor; Senator Walter F. George of Georgia, the conservative chairman of the Senate Finance Committee; and Senator James F. Murray of Montana, a man who despite enormous personal wealth sponsored ”more far-reaching social legislation than 127 any other Senator" of his generation, including the original Full Employment Act of 1945. Senator Kilgore was the first to introduce a comprehen- sive "Reconversion” bill (5.1823) in March of 1944, which called for extensive postwar economic planning to insure continued full employment. A new Office of War Mobilization and Adjustment ("Adjustment" was later changed to "reconversion”) was to be established with executive responsibil- ity for all reconversion activities. This office was to include a ”Bureau of Programs” which would be responsible for "full employment and full pro- duction planning.” Furthermore, the bill asked for a greatly extended unemployment compensation program, which it was hoped would serve the double function of insuring against disastrous economic instability as a result of reconversion and of giving advance notice to management that it would not be able to break the back of organized labor with the club of starvation. This it was felt would lead to orderly wage adjustments through peaceful collective bargaining (Bailey, 1950: 22-23). The bill received enthusiastic support from organized labor, particularly the activist left wing of the CIO which, from the beginning, wanted an ”Industry Council” approach to postwar planning in order to guarantee it maximum impact upon the development of those industrial sectors where it 13 The rationale for this was most heavily concentrated. position, moreover, foreshadowed much of the recent discus- sion on the left concerning the necessity for both demo- cratic control over the investment of capital and greater worker participation in corporate decision making (Carnoy and Shearer, 1980). It ran as follows: 128 Labor, management, and government got together successfully to produce the weapons of victory. They should stick together to build an enduring prosperity. These steps should be taken: (a) A NATIONAL PRODUCTION COUNCIL should be set up, properly linked with the War Production Board and other war agencies, which will be responsible for taking the country through reconversion and keep- ing it prosperous. It should be composed of repre- sentatives of labor, industry, agriculture, and gov- ernment. (b) INDUSTRY COUNCILS should be established in the great basic and mass production industries, com- posed of representatives of labor, management and government. (c) THE NATIONAL COUNCIL and the Industry Coun— cils should work out an overall national program and component industry programs for changing over to peace-time production and operating at capacity thereafter. MANY OF OUR GREAT CORPORATIONS ARE PREPARING PLANS NOW FOR THEIR OPERATIONS AFTER THE WAR. THEY ARE PLANNING THEIR INVESTMENTS IN NEW EQUIPMENT AND MACHINERY. THEY ARE COUNTING ON RUNNING CERTAIN PLANTS AND SHUTTING DOWN OTHERS. THEY ARE ESTIMAT- ING THEIR EXPECTED SALES AND FIXING THEIR SIGHTS FOR PRODUCTION AND EMPLOYMENT ACCORDINGLY. The people of this country have a vital interest in these activities. The plans which management is making for capital investment in new plants, machin- ery and equipment must be big enough to add up, along with public investment and foreign investment, to whatever is necessary to keep our capital goods industries going. The levels of production and employment which our big corporations are scheduling must be high enough, together with the employment provided by small busi- ness and government, to provide a job for every per- son in the country who wishes to work. THE PEOPLE IN EVERY COMMUNITY IN THE LAND HAVE A RIGHT TO KNOW WHETHER THE COMPANIES INTEND TO OPER- ATE THE PLANTS IN THAT COMMUNITY AND WHAT THEY INTEND TO PRODUCE (Philip Murray, 1944: 10-11). The planning provisions of the Kilgore bill appeared to be a definite movement in that direction. 129 Unfortunately, after several months of intense debate and political maneuvering, Senator George was able to out- flank the Kilgore staff by offering a substitute reconver- sion bill ”stripped of the unemployment compensation and planning measures," which after further revision in the House became law in October of 1944 (Bailey, 1950: 30-35). Thus, the issue of postwar planning for jobs remained unresolved through the end of 1944, engendering a new and even more controversial proposal. Immediately following Roosevelt's reelection in Novem- ber of 1944, Senator' Murray met with his War Contracts Sub- committee and authorized its staff director, Bertram Gross, to draft a full employment bill for inclusion in the Subcom- mittee's Year-End Report. Within a month, Gross and a few hand-picked colleagues produced a bill which reflected their shared belief that the analysis of Keynes and Hansen regard- ing the problem of stagnation in mature capitalist economies was basically sound and that, as a consequence, compensatory fiscal policy would be essential to continued full employ- ment after the war (Bailey, 1950: 45). The original Subcommittee print submitted by Senator Murray to the Senate Committee on Military Affairs on Decem- ber 18, 1944, and entitled "Legislation for Reconversion and Full Employment,” opened with the following declaration of policy (emphasis added): Sec. 2(a) Every American able to work and WILLING TO WORK has the right to a useful and remunerative 130 job in the industries or shops or offices or farms or mines of the nation. This obvious reference to Roosevelt's proposed new Bill of Rights14 was backed with an explicit government guarantee. Sec. 2(b) It is the RESPONSIBILITY of the Govern- ment to GUARANTEE that right by assuring continu- ing FULL EMPLOYMENT. Section 3 called for the drafting of an annual National Production and Employment Budget by the Executive Branch—— preferably the Bureau of the Budget——which would include both an estimate of the: number of jobs needed during the ensuing fis- cal year or years to assure continuing full employ- ment, and the estimated dollar volume of the gross national product, at the expected level of prices, required to provide such number of jobs. and a projection of the size of government expenditures: . for assistance to business enterprises, par- ticularly small business enterprises, for useful public works as tend to promote increased invest- ment and other expenditure by private enterprises; for useful public services as tend to raise the level of health and education; for slum clearance and urban rehabilitation; for conservation and deveIOpment of natural resources; and for rural electrification necessary to the maintenance of full employment (Bailey, 1950: 57-59). Section 5 authorized the appropriation, when needed, of public funds to "eliminate any deficiency in the National Budget"; that is, to compensate for any shortfall in the volume of private investment requisite to continued full employment. 131 The press response to the publication of the Year-End Report, however, was generally hostile, including editorial comment in such prestigious organs as the New York Times and The Wall Street Journal which "condemned the bill as a deficit financing measure and as leading toward the type of gradual collectivism which Mr. Hayek had challenged in his Road he Serfdom” (Bailey, 1950: 54-55). In an attempt to circumvent some of these objections and forestall antici- pated business opposition, the Full Employment Bill was rewritten seven times during early January and was finally formally introduced in the Senate on January 22, 1944, as 5.380.15 The revised Full Employment Bill had a distinctly dif- ferent tone from the original. In its opening declaration of policy, it asserted: Sec. 2(a) It is the policy of the United States to foster free competitive enterprise . The “right” to a job now received second billing and was rephrased to read, IIAll Americans able to work AND SEEKING WORK have the right to . . .” thereby limiting the intended scope of the bill to those already in the labor force. Sec- tion 2(b) clarified this further by defining the labor force as ”all Americans who have finished their schooling and who do not have full-time housekeeping responsibilities” (Bailey, 1950: 57-9). The broad parameters for possible federal expenditures necessary to continued full employment outlined in the 132 original draft were constricted in Section 3(c) of the new bill to those designed to "stimulate additional non-Federal investment and expenditure." Section 3(d) contained, for the first time, a reference to the President's responsibil- ity for preventing "INFLATIONARY dislocations" as well as unemployment. Finally, Section 8(d) specified that the appropriation of any funds for purposes set forth in the National Budget must be authorized by separate legislation (Bailey, 1950: 58). In terms of the schematic categorization of capitalist State policy presented in Chapter 2, it seems clear that the original draft of the Full Employment Bill contained pro- visions which were at least potentially UNREPRODUCTIVE of capitalist social relations and that most of these provi- sions had been deleted by the time the bill was formally introduced in the Senate. The federal government “guaran- tee“ of every individual's right to a job in the original draft, in particular, represented a serious challenge to capital's ability to discipline labor through the mainten- ance of a ”reserve army” of unemployed. Acceptance of extensive economic planning requisite to the development and implementation of the National Budget, moreover, threatened to involve the State in the actual production of a wide array of goods and services and to afford the public a sig- nificant voice in future investment decisions. These possi- bilities were missing from the revised bill. Still, the problem of maintaining full employment after the war was 133 finally on the public agenda, and the debate which ensued produced an agreement which facilitated American economic expansion for the next thirty years. From Full Employment Bill to Employment Act Liberal supporters of 5.380 gradually coalesced in an informal "Continuations Group” which became principally responsible for mapping a strategy for passage of the legis- lation, for public education and grassroots organizing around the bill, and for direct lobbying of Congress. The Continuations Group, assembled by Bertram Gross and Paul Sifton, included representatives from the American Federa- tion of Labor, the Congress of Industrial Organizations, the National Association for the Advancement of Colored People, the National Farmers Union, the Union for Democratic Action, various religious organizations, and even some small busi- ness associations (Bailey, 1950: 75-76). Despite their initial ambivalence, labor leaders were eventually persuaded to join the coalition due to such pressing circumstances as: . . (1) the failure of the Kilgore subcommittee 5taff to produce a substitute bill, (2) growing rank and file sentiment behind the bill largely as a result of the Wagner letter campaign organized by Gross in the spring; (3) fear on the part of both the A.F.L. and the C.I.O. that the other might give strong support to the bill and gain adherents thereby; (4) the work of Sifton and the Continuations Group; (5) the death of Roosevelt and the consequent realization on the part of labor leaders that a fight for any progressive postwar legislation would be an uphill battle; and (6) the speedy end of the war, which caused legiti- mate labor fears about widespread unemployment (Bailey, 1950: 92-93). 134 Their concern, however, was that the Full Employment Bill might come to completely dominate public attention to the exclusion of other equally important legislation to labor concerning adequate postwar wages, minimum wages, con- tinued price controls, collective bargaining guarantees, and the like (American FEDERATIONIST, May 1944). A widely dis- tributed CIO-PAC pamphlet-of—the-month entitled, "The Answer is FULL EMPLOYMENT” qualified its endorsement of 8.380 with the following caveat: This Bill is not a perfect instrument. It is not a cure-all. This Bill by itself is not a guar- antee of everlasting prosperity and economic security. But this Bill is needed to supplement the C.I.O. 12-Point Full-Employment Program (Gaer and Lamb, 1945: 14). In addition, although the leadership of both the AFL and the CIO supported the purposes of the Full Employment Bill and were willing to cooperate for the first time under the auspices of the Continuations Group (Bailey, 1950: 86), it is evident from the Congressional testimony16 that these two labor organizations wanted different things from the bill. In his remarks before the subcommittee of the Senate Committee on Banking and Currency which held hearings on 5.380, President Philip Murray of the CIO chided the legis- lators for not going far enough. Passage of this measure will be the legal acknowledgment that the National Government is will- ing to assume the responsibility for prosperity in peacetime. Much more will have to be done; the purpose of this measure is only to say what is desired. The bill does not, of course, either bring full employment or say how the new high stand- ard of living shall be attained. It is the 135 declaration of intention and the provision of the means to start the job. Even while I support the bill and urge your quick action upon it, there is a certain word in it which alarms me. "When there is a prospective deficiency in the National Budget ***," it says. The bill gives private enterprise two chances to make good——once under its own steam, and once with a stimulating injection by government. When pri- vate enterprise then fails, it calls for a making up of a "deficiency." This is certainly not the real vision we should have of the brave new world we are building. The concept of our CIO unions is not that Congress shall benevolently step in when private enterprise is found wanting and give the people something which shall keep them from starving. This is not a campaign to pass legislation merely to give us the right to barely stay alive. The idea we have is National Government planning and preparation of a program that will permit the Amer- ican people to achieve the full potential of what they can do for themselves. We say that the National Government has to be the instrument through which we can all work together to accom- plish full employment and a high annual income. We do not like a "deficiency" approach which presup- poses failure to reach our full capacity and assumes that the duty of government is nothing more than to "shore up” that deficiency. The “deficiency" thinking is an upside-down approach to our full production potential. Our vision is that now, for the first time in our his- tory, all Americans can have abundance because we can all work together with science and technology to create abundance. This is not talk against pri- vate enterprise; rather it is a plea for a program that will permit private enterprise to really do its stuff. Especially, we conceive of it as a plan to give private enterprise vast new markets for goods and services their most imaginative sales man- agers never dreamed of. All I am saying is that we cannot stand aside helpless to see whether private enterprise is going to lift the millstone of unem- ployment that has fallen on us. We can't take that chance again (Committee on Banking and Currency, United States Senate, 1945: 223-272). PLEASE NOTE: Page 136 seem to be missing in numbering only. Text Follows. Filmed as received. UNIVERSITY MICROFILMS 137 This was in sharp contrast to the testimony of William Green; president of the A.F. of L., which emphasized the dynamism of American free enterprise and the critical impor- tance of resolving most economic questions through collec- tive bargaining. Planning and timely initiation of public works are essential to ”full employment" but do not con- stitute the main driving power. "Full employment” will come mainly from placing responsibility on private industry and requiring reporting on stew- ardship. As the right of persons to employment becomes a moral obligation upon those in positions of responsibility, its responsibility can be pressed home. . . . There is needed a new sense of responsibility on the part of private industry and willingness to cooperate to the end that no one able to work and seeking work shall be denied Opportunity to earn a living. Unions have their responsibility for leadership in this new endeavor and for getting incorporated in union contracts wage rates and hours standards that would enable workers to have the purchasing power to sustain production at ”full employment” levels. To stabilize production at lower levels would lower national income and result in unem- ployment. Unemployment results from many causes. Under- investment and underconsumption are two important factors. Others, even more difficult to deal with, are unemployment due to technical progress, population changes, great social changes, like changes in transportation, communication, et cetera. We can deal with unemployment due to these causes only by studying the facts of each industry and anticipating forces making for the industrial changes affecting employment. Steadily rising productivity has always charac- terized American industry. The genius of American management, combined with the skill and effort of American workers, has given our country leadership over the entire world in production per man-hour. This rising productivity makes our high standards of living possible. 138 We cannot hOpe for "full employment" in the United States unless we plan to direct this dynamic force of increasing productivity so that it will create higher consuming power, higher living standards, and increasing markets for our indus- tries. The factual data included in the President's national budget on production, employment, labor force, national income and its distribution, invest- ment and its expenditures, will furnish the basis for planning by private industry, but the function of planning must remain the responsibility of man- ddement. Management, in turn, should consulE filth unions on problems of production, and has much to gain by establishing and maintaining machinery for union-management cooperation for that purpose. Cooperative relations can rest only on a foundation of collective bargaining, fostered by confidence of access to the machinery for justice. Any effort to restrict or restrain established rights and func- tions of either management or labor would endanger realization of our objectives (Committee on Banking and Currency, United States Senate, 1945: 507-515, emphasis added). Labor support for the Full Employment 8111 was also expressed in rank and file action groups at the local level who held mass rallies on behalf of the bill, wrote letters and telegrams to congressmen, and continued to pressure their national leadership for legislation to protect them from impending unemployment. Within a week after the sur- render of Japan, some 7,000 unemployed CIO members——with the official sanction of the CIO leadership——marched through Chicago's Loop demanding government action to generate jobs. This was followed by rallies of 50,000 union members in New York's Madison Square Garden; 25,000 in Camden, New Jer- sey; 30,000 in San Francisco; and more than 20,000 workers in Detroit (Preis, 1972: 260-62). In retrospect, it is apparent that this aggressive grass-roots activity 139 represented labor's most significant contribution to the full employment debate. As the bill wound its way through Congress, labor's influence in the negotiations dwindled. By the time the Senate approved an amended version of the bill on September 28, 1945, by an overwhelming vote of 71-10, the ”emotional heart of the bill”——those ”statements of obligation and assurance which had originally caught the imagination of liberal and labor supporters”——had been expunged. What remained was a commitment to use federal investment and expenditures when necessary to supplement private investment required for continued full employment (Bailey, 1950: 122- 23). Once the bill reached the more conservative House, fierce business opposition arose to soundly defeat the meas- ure in favor of an emasculated substitute bill which: . eliminated the declaration of the right to employment opportunity, of federal responsibility for full employment, the pledge of all the federal resources, including financial means to that end, and the safeguard against international warfare. For these it substituted a policy of aiming for a ”high" level of employment, production, and pur- chasing power, and of trying to prevent economic fluctuations by expanding and contracting public works and loans, and avoiding competition of gov- ernment with private business enterprise. The national budget was rejected with its goals, appraisal of economic trends, full employment program, and investigation into monopoly, and the distribution of national income. In its place was substituted an economic report on general economic conditions, causes underlying threats of inflation 140 or deflation, and recommendations for further legislation . . . (Bailey, 1950: 167). This substitute bill passed the House by a vote of 255-126 on December 14, 1945. A final version, retitled the Employment Act of 1946, emerged from the Joint Conference Committee on February 2, and after a positive review by both chambers was signed into law by President Truman on February 20, 1946. The Employ- ment Act substantially reflected the thinking of the House and was a bitter disappointment to labor. Some leaders went so far as to recommend a presidential veto (Bailey, 1950: 90). Why the Full Employment Bill Failed The failure to pass a full employment bill during the period from 1944 to 1946 can be understood at two levels. In the simplest of terms, changing circumstances undermined the intellectual justification for the bill. Rather than renewed stagnation and mass unemployment, the end of the war brought relatively brisk economic activity and an upsurge in the rate of inflation. It also ignited the greatest wave of militant labor strikes in the nation's history (Preis, 1972). Public attention then shifted from forestalling a return to the Depression to controlling labor radicalism. This undoubtedly weakened support for the Full Employment Bill. There was also the question of leadership. The decision by Roosevelt in 1944 and early 1945 to stay out of the fray 141 cost the supporters of the Full Employment Bill a potent resource. Although Truman reaffirmed his commitment to a full employment bill at the close of the war, he soon set- tled for the substitute version of the legislation (Hamby, 1973: 63-68). No one in Congress or in the liberal/labor community was able to fill this gap. At a more abstract level, a guarantee by the State of continued full employment would, as we have argued, repre- sent a contradiction (see Chapter 3, p. 57) to the precondi- tions for a stable, democratic capitalist society;17 it would shift the struggle for control of the workplace in labor's favor by providing ready alternatives to any exist- ing employment (Braverman, 1974; Edwards, 1979). The conse- quence for capital would inevitably be increased labor costs and reduced profits. Therefore, such proposals must be excluded from official government consideration (Offe, 1974). The fact that the Full Employment Bill progressed as far as it did attests to the severity of the crisis which preceded it. By the time the bill reached the House, the economy had stabilized sufficiently to allow for events to run their ”natural” course. As Bailey (1950: 148-49) concluded, busi- ness opposition to the Full Employment Bill may have been intense. But the short-run, overt influence of the con- servative pressures pales before their long-run and less obvious influence. Through the consid- ered use of word-symbols over a couple of genera- tions; through the attention paid by business and 142 big commercial agriculture to rural opinion; through the concerted drive of business organiza- tions to convince the public-at-large that ”What is good for business is good for America,” the conservative pressures helped to shape the prepos- sessions which a majority of our national legisla- tors brought with them to the 79th Congress. This educational campaign pays enormous dividends. Many legislators vote their own conscience and would be affronted by attempts of conservative organizations to exert direct influence on their votes. What they fail to recognize is that their consciences have been previously conditioned by the climate of values assiduously cultivated by these same conservative pressures. It is there, not in campaign contributions, direct lobbying, and letter campaigns, that the real and enormous power of the conservative lobby rests. In the end, passage of the Employment Act of 1946 sym- bolized the emergence of a new consensus among policy makers from across the political spectrum that (1) the fed- eral government had a legitimate role in regulating the overall performance of the economy and that (2) this would primarily involve periodic adjustments in fiscal and mone- tary policies to counter cyclical fluctuations in economic activity and prevent ”another mass depression” (Gross, 1975: 21). The critical commitment to a policy of managing the overall performance of the economy by fiscal and monetary policy was made by President Roosevelt in 1938 and confirmed in the course of national discussion over the next ten years. Roosevelt's choice of the fiscal-monetary path of enlarged spending and monetary expansion in 1938 was essen- tially a conservative choice involving the least disruption of the existing economic system and the least political struggle. The general public acceptance of this choice, once it had been made, assured that this would be the chosen path in the future (Stein, 1969: 460-61). 143 The debate over full employment policy from 1944 to 1946 resulted in the ratification of the Keynesian revolu— tion in American economic theory; but not the Keynesianism of Alvin Hansen and the framers of the original bill. It was, as we indicated above (Chapter 3, p. 65), a recon— structed strategy of “Keynes without Beveridge” which broke the policy stalemate of the prewar years and enabled the long, postwar expansion. While they might have been prepared to accept an important role for fiscal policy, most businessmen and economists could not accept the idea of secular stagnation with the consequent implication of per- petually rising deficits to be achieved by even more rapidly rising expenditures, the emphasis on redistributive taxation, the denial of the role of incentives in investment decisions, the rejection of any role for monetary policy except to get interest rates as close to zero as possible, and the neglect of all political and operational prob- lems. Conservative opposition to these features of American Keynesianism and conservative counterpro- posals, together with changes in economic condi- tions brought or revealed by the war, produced a new version of fiscal and monetary policy by 1950 on which there was substantial consensus and from which much of early American Keynesianism had been purged. Secular stagnation was abandoned or indefinitely postponed. With federal spending necessarily high relative to the national income it became clear that any desired amount of fiscal stimulation could be generated by tax reduction. The possibilities of affecting the rate of invest— ment by the character of taxation were recognized. Monetary policy was reintroduced as an important, flexible, two—way instrument (Stein, 1969: 461). As for labor and the liberal community in general, the Employment Act of 1946 exhibited “no direct substantive evi- dence” of their efforts whatsoever (Bailey, 1950: 97). 144 III Full Employment Policy Redivivus: The Equal Opportunity and Full Employment Act of 1976 Genuine full employment entails immense difficul- ties. Even those who now lead the crusade are mostly not prepared to face them. ——James K. Galbraith (1978) While passage of the Employment Act of 1946 in no way committed the government to a guarantee of continued full employment, the acceptance by all parties of a significant federal role in macroeconomic planning nonetheless estab- lished a bench mark for all subsequent negotiations over employment policy. As Offe (1974: 50) has observed: At least in the form of a declaration of the aims of economic policy, a State policy of job-security has since the Second World War been part of the stock-in-trade of almost all the parties in every developed industrial state in the capitalist world. Without the political assurance of corresponding laws and programmes related to business, educa- tional and structural policies it would never have been possible to secure the degree of social peace and integration of the trade unions which, above all in West Germany, was a prerequisite for a suc— cessful capitalist restoration. Independently of the failure of (except in the USA) relative suc- cess of this programme its mere adoption alone has an important effect which modified reality: the actual fact of unemployment changes its social definition wherever it appears; it is no longer perceived as a periodic event in a blindly Operat- ing economic cycle but as a ”culpable” and there- fore "actionable" failure on the part of political- administrative direction. In the interim from 1946 to 1974, government efforts to ”promote maximum employment, production and purchasing power"——its charge under the Employment Act——ranged from economic stimulus and job development programs targeted for 145 depressed areas, to national manpower development and train- ing programs, youth employment programs, tax incentives to business for private job creation, and public service 18 The relative failure of these pro- employment programs. grams to halt the secular rise in unemployment levels over this period, or to dramatically improve the employment situ- ation for those groups, especially minorities, which suffer from chronic unemployment and underemployment, led ulti- mately to a reconsideration of full employment policy. By the early 19705, the Congressional Black Caucus had become disillusioned with programs which either trained people for nonexistent jobs or provided an insufficient num- ber of short-term and dead—end public service jobs.19 Representative Augustus Hawkins, an influential member of the Caucus from the Watts section of Los Angeles and chair- man of the Subcommittee on Equal Opportunities of the House Committee on Education and Labor, concluded that job crea- tion programs such as CETA merely treated the symptoms rather than the causes of poverty, crime, and misery in his district. At the urging of Frank Riessman and Alan Gartner, editors of Social Policy magazine, he began to move away from the ideas of manpower training and public service employment toward a consideration of national full employ- ment planning. On January 6, 1973, Hawkins requested that Gartner, Riessman, Russell Nixon of Columbia University's School of Social Welfare, and Bertram Gross meet with him in 146 Washington to discuss the feasibility of reviving the issue of full employment policy. Hawkins sent each of the partic- ipants a copy of Stephen Kemp Bailey's Congress Makes h Law prior to the meeting with the intention of beginning their conversations by reexamining the history of the earlier Full Employment Bill. No labor representatives were invited to this meeting. At its conclusion, Bertram Gross was asked to draft a “new” full employment bill for further analysis by the group. In October of 1973 and again in March of 1974, confer- ences were held at UCLA (see Bullock, 1974) and Columbia University to debate ”A Full Employment Policy for America” and to scrutinize Gross's draft bill. Top labor officials, including AFL-CIO President George Meany, were invited to attend these conferences, but the AFL-CIO abstained. United Auto Workers President Leonard Woodcock, in contrast, delivered the keynote address at the New York conference and committed the full force of the UAW behind the movement to make full employment a national issue. Gross's draft, with minor revisions, was subsequently introduced in the House by Representative Hawkins on June 19, 1974, as H.R. 15476, the "Equal Opportunity and Full Employment Act of 1976.II Senator Hubert Humphrey intro- duced the Senate version in October of 1974. This 11:21 draft of what later came to be popularly known as the Humphrey-Hawkins bill asserted that: 147 Sec. 2.(a) The Congress hereby declares that all adult Americans able and willing to work have the right to equal Opportunities for useful paid employment at fair rates of compensation. and mandated that this right to a job must be ”guaranteed” by the Federal Government, subject to administrative appeal and if necessary legal redress. ‘ Sec. 5.(h) . . Any person deprived of rights secured by this Act shall be entitled in an action brought against the United States to recover dam- ages, together with costs and attorneys' fees. Many congressional insiders, however, felt that the refer- ence to "1976” in the bill's title signified that the spon— sors were less concerned with passing a full employment bill than in rallying public support for Democratic Party candi- dates and their job creation programs during that crucial election year (Congressional Quarterly, 15 May 1976: 1172). A second version of the Humphrey—Hawkins bill, retitled simply the “Equal Opportunity and Full Employment Act,” and again written primarily by Bertram Gross, was introduced to the 94th Congress on May 20, 1975, this time as H.R. 50 and S. 50. This draft, included here as Appendix A, represented the most far-reaching and potentially progressive version of the bill to emerge. One liberal commentator described it as "one of the most striking pieces of legislation to appear in Congress since the New Deal” (Barnes, 1975: 49). Along with establishing the ”right” of all adult Ameri- cans (defined as those persons sixteen years of age or older) able and willing to work to useful employment at fair rates of compensation and providing administrative and 148 judicial appeal machinery for anyone denied the exercise of this right, this second version of the Humphrey-Hawkins bill contained provisions which: (1) Required the President fo the United States to submit each year to the Congress a Full Employment and National Purposes Budget which ”shall set forth national goals related to full employment and other national purposes, and the major policies and programs to achieve these goals” (Sec. 3-a). Specified that the full employment goals set forth in the Purposes Budget ”shall be consistent with not more than 3 percent full-time unemployment as customarily defined, to be attained within not more than 18 months after the first Economic Report transmitted under this Act. Necessary efforts shall be made to reduce this amount of such full-time unemployment to much lower levels in later years" (Sec. 3-b-1). Attempted to rein in the Federal Reserve by requiring it to submit to the President a yearly statement in regard to ”its intended policies for the year ahead with respect to the functions under its direction, and explaining how such intended policies will be consist- ent with this Act and the Purposes Budget“ (Sec. 3-d-4). Explicitly rejected policies which seek to curb infla- tion by "deliberately reducing employment and produc- tion" as being wasteful and ineffective (Sec. 3-e). 149 Established a United States Full Employment Service With responsibility for generating a "reservoir of public and private employment projects” in "each labor market area in the country" (Sec. 5-a, b). Created a Job Guarantee Office within the United States Full Employment Service to facilitate the job placement of those able and willing to work, with special atten- tion to be given to those individuals or groups who had suffered from discrimination or related obstacles to employment in the past (Sec. 5-c,d). Authorized the Job Guarantee Office to create a Standby Job Corps to ”provide temporary residual public service jobs” in the event that suitable private sector employ— ment was unavailable (Sec. 6). Directed that these reservoirs of public and private employment projects should be developed by Local Plan- ning Councils appointed by state and local governments and should include everything from the ”construction, repair, and maintenance of public buildings" to the provision of day care facilities (Sec. 7). Allocated primary responsibility for overseeing the progress toward achieving the goals, priorities, and programs set forth in the President's National Purposes Budget to the Joint Economic Committee of the Congress (Sec. 8). Established a National Institute for Full Employment Research within the Department of Labor to assist in 150 collection and analysis of data essential to fulfilling the purposes of the Act (sec. 9). One would expect, on the basis of our analysis above, that legislation requiring the State to guarantee everyone able and willing to work access to a job at decent wages would encounter fierce and unremitting opposition from capi- tal.20 Indeed, unlike the 1944-46 period when some small business support was mobilized on behalf of the Full Employ- ment Bill (Bailey, 1950: 76—77), business opposition to the Humphrey-Hawkins bill was universal and spirited, as illus— trated in repeated Congressional testimony by representa- tives of the United States Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable.21 More surprising, though, and for our purposes more interest— ing, was the reaction to the bill from organized labor. Labor's Response to ”Guaranteed” Full Employment I have been actively involved in most of the eco- nomic and social legislation since 1933, and it is a strange commentary on America that organized labor has hardly been an initiator on any of this. They don't seem to have the staff, the machinery, or the techniques for doing creative work; they're extremely busy with day to day battles on the Hill. This is very unfortunate. They have practically no inspirational input on any of this legislation. ——Leon Keyserling Advocates of full employment legislation first began to coalesce in June of 1974 with the formation of the National Committee for Full Employment, whose purpose was to mobilize 151 grassroots support for a full employment bill. The Commit- tee included representatives from a broad spectrum of liberal organizations, ranging from trade unions to reli- gious, civil rights, women's, and senior citizens' groups (Ginsburg, 1977: 140), who chose as their co-chairpersons Coretta Scott King and Murray Finley, head of the Amalgam- ated Clothing and Textile Workers Union. Its legislative arm, the Full Employment Action Council, assumed the role which the Continuations Group had played in relation to the earlier Full Employment Bill of coordinating local, state, and national activities on behalf of full employment and spearheading the lobbying effort before Congress. While the committee received enthusiastic backing from ”the United Auto Workers, the Steelworkers, the United Mine Workers, the American Federation of Teachers, American Fed- eration of State, County, and Municipal Employees, the United Farm Workers, Local 1199 of the Drug and Hospital Workers, the Retail Clerks, the Brotherhood of Sleeping Car Porters, the International Longshoremen's Association, the 011, Chemical and Atomic Workers, the Amalgamated Meatcut- ters, the Communications Workers, Electrical Workers, Postal Workers, and Transport Workers” (Barnes, 1975: 53), and obtained nearly all of its funding from the AFL-CIO,22 its early efforts were severely hampered by the ambivalence of the AFL-C10 leadership toward the first two versions of the Humphrey-Hawkins bill. Despite intense pressure from some members of the coalition——especially church groups——to 152 retain the job guarantee as the centerpiece of any acceptable full employment bill, the committee Nifact never endorsed the early versions of the bill due to AFL-C10 reticence. It was not until the fall of 1975, after much arm twisting from its Industrial Union Department, that the AFL-CIO began to seriously consider endorsing a revised version of the bill. The reasons for the AFL-CIO's opposition to the earlier drafts of Humphrey—Hawkins were complex. Some had to do with specific provisions in the bills; others involved per— sonality conflicts and organizational style. From the beginning, AFL—CIO President George Meany was skeptical about passing full employment legislation. A product of the old AFL craft union mentality, Meany was wary of the impact that a greatly expanded federal role in national economic planning might have on union influence over its membership and on its freedom to bargain collectively with management. He recognized in particular that an effective full employ- ment policy would inevitably incorporate provisions for curbing inflation in the form of wage and price controls or a broader national ”incomes policy."23 Meany's participa- tion on the Nixon Administration's Pay Board during 1971-72 had convinced him that it is far easier to control wages than prices, with the re5ult that labor winds up subsidizing capital in the bargain (heh Tehh TThee, 24 March 1976: 55. See also Sweezy and Magdoff, May 1980). The issue of a ”trade-off“ between reduced unemployment and higher inflation did in fact haunt the negotiations 153 24 Labor surrounding Humphrey-Hawkins from beginning to end. supporters, including the AFL—CIO, felt strongly about a provision in the "Labor Standards" section of the first three versions of the bill which required employers to pay persons hired under the auspices of the Act "wages at rates not less than those prevailing on similar construction in the locality . . . in accordance with the Davis-Bacon Act” (Sec. 10-b). Along with the mandate that the government become the ”employer of last resort,” this would in effect have established the federal minimum wage as the floor to the United States wage structure. Thus, the deletion of the ”prevailing wage” clause together with the addition of injunctions against ”job-hopping” from private to public sector employment in subsequent versions of the bill were hardly trivial revisions considering that there are nlexcess of eleven million American workers who are paid less than the federal minimum wage and who after working full-time, year-round earn ”less than 80 percent of the official poverty line for a family of four” (Hill, 1978: 277). Despite intense labor lobbying to retain these original wage standards, opposition to them——particularly from “liberal” economists (Currie, 1977: 107-O9)——prevented seri- ous congressional consideration of the bill until early 1977. Charles Schultze, then head of the Brookings Institu- tion and later chairman of Council of Economic Advisors under President Carter, is generally credited with offering the most damaging testimony regarding the inflationary 154 character of the early versions of the bill (interview with Bertram Gross, 5 March 1979). In his remarks before the Senate Committee on Labor and Public Welfare, Schultze con— tended: The Full Employment and Balanced Growth Act of 1976, S. 50, addresses the most important domestic problem of this decade——high and persistent unem- ployment. The chief obstacle to overcoming that problem, both politically and economically, is inflation. I believe that S. 50 does not suffi— ciently recognize that fact, and hence needs to be changed in a number of important respects. More- over, the combination of the "employer-of—last- resort" provisions in this bill and the wage stand— ards that go with it threatens to make the infla- tion problem worse. These sections, particularly, need extensive reworking. The basic problem with achieving and maintaining full employment is not that we lack the economic tools to generate increased employment. The tradi- tional weapons for stimulating economic activity~— easy money, tax cuts, and Government spending for worthwhile purposes——are perfectly capable of gen- erating an increased demand for public and private goods and services thereby inducing employers to hire more workers. Moreover, we do not need to have the Government hire people directly on special programs of public service employment as a long run device to reduce unemployment. The real problem is that every time we push the rate of unemployment toward acceptably low levels, by whatever means, we set off a new inflation. And, in turn, both the political and economic consequences of inflation make it impossible to achieve full employment, or once having achieved it, to keep the economy there. With unemployment now at 7.5 percent, the prob- lem is not an immediate one. A rapid recovery could continue for the next year and a half or even 2 years pushing the unemployment rate down steadily, without setting off a new inflation. But experience in the postwar period to date strongly suggests that once the overall rate of unemployment edges below 5% percent or so, and the rate of adult unem- ployment gets much below 4% percent, inflation will begin to accelerate. And since the underlying rate of inflation, even with good luck, is likely to be running at 4 or 5 percent a year, the new 155 acceleration could lead to very high rates indeed (Hearings before a Subcommittee of the Committee on Labor and Public Welfare, on S. 50, 94th Congress, Second Session, 14 May 1976: 141-42). In the end, pressure to confront this question head-on and incorporate specific provisions in the bill for controlling inflation very nearly shattered the full employment coali- tion. The AFL—CIO also ardently opposed the ”job guarantee” provisions in the first two versions of Humphrey-Hawkins, despite the fact that this declaration of every American's right to employment represented the emotional heart of the bill and afforded the best possible chance, in the opinion of many of the non-labor members of the National Commit- tee,25 for rallying public support around the issue of full employment. In their discussions with Congressman Hawkins and his staff, AFL-CIO Secretary-Treasurer Lane Kirkland, legislative director Andrew Biemiller, and chief economist Nat Goldfinger insisted that a bill which gave individuals a right to sue the federal government for a job had no chance of passage in the Congress and that its sponsors must take a more "pragmatic" approach to the issue of full employment policy if they hoped to win AFL-CIO endorsement (Interview with Kenneth Young, 9 March 1979). In part, the AFL-CIO's intransigence on this matter reflected a variety of personality conflicts and a generous amount of racism. Officials like Andrew Biemiller resented that a black member of Congress had assumed principal 156 leadership over the drafting of the bill, especially a black congressman with little dependence upon labor for future electoral support. He had felt much more comfortable work- ing with Senator Robert Wagner on the earlier Full Employ- ment Bill. There was also resentment among AFL-CIO leaders against William Higgs, Hawkins' legislative assistant and a former member of the Student Nonviolent Coordinating Com- mittee (SNCC), who demanded the retention of the job guarantee provisions. They complained that he was a ”radi- cal'l whose continued influence, if unchecked, would ulti- mately kill the bill (Interview with Markley Roberts, 7 March 1979). Finally, there was little admiration among top AFL-CIO brass for Bertram Gross who had authored the job guarantee provisions. Gross was considered to be a left- wing intellectual who had unfairly criticized labor over the years for not supporting legislation which he considered to be progressive. It is important to point out that supporters of the first two versions of the Humphrey-Hawkins bill felt that precedence had been adequately established by the historic civil rights legislation of the mid-19605 and ten years of subsequent litigation for according citizens the right to sue the government over the alleged abridgment of rights. Indeed, the United Auto Workers, who along with the United Electrical Workers supported Humphrey-Hawkins from the beginning, filed a legal brief with Hawkins' Subcommittee supporting the job guarantee provisions in the bill on 157 precisely this basis. In his testimony before the Subcom- mittee, UAW Vice President Irving Bluestone remarked: There is another point which some people have criticized and which it might be well to mention here. This bill in our judgment establishes the principle that useful employment with fair pay is a citizen's right, and there are those who fear that making lack of it judicially actionable is impractical and unworkable. I do not agree. If the act is executed in good faith, the num- ber of people who exhaust its remedies without achieving satisfaction should be extremely small. Much of the same objections were raised regard- ing court appeals under our unemployment insurance laws, yet in fact, so few litigations fail to be settled administratively that hardly any lawyers have ever found it worthwhile specializing in this area. Even court appeals under workmen's compensation laws, which do give rise to considerable litiga- tion, have hardly threatened our judicial system with collapse. The impact of the Civil Rights Act on employment has been and will continue to be immensely greater, more disruptive and more diffi- cult than the right of suit under H.R. 50 could ever be (Hearings before a Subcommittee of the Committee on Education and Labor, on H.R. 50, 94th Congress, First Session, 24 March 1975: 69). Nevertheless, old line trade unionists within the AFL- CIO such as George Meany had not supported the appeal pro- visions in the Civil Rights Act either, and they were not about to change their minds. They maintained that the place to administer the Act was not from the courtrooms of five hundred district judges, many of whom were highly reaction- ary. This would create utter chaos and render the Act unen- forceable. The consequence would be lengthy and prohibi- tively expensive litigation (Interview with Leon Keyserling, 8 March 1979). 158 The final and perhaps most significant reason for the AFL-CIO's opposition to the job guarantee provisions con- cerned the definition of the labor force in the first two bills; namely, "all adult Americans able and willing to work.” This implied that the right to a job was to be guar- anteed not only to union members or merely to those offi- cially considered to be part of the labor force but to any- one——teenagers, housewives, the handicapped, discouraged workers, and others——who in the future decided for whatever reasons to enter the workforce.26 Coming at a time (during 1975) when unemployment in the United States was approaching nine percent, this proposal threatened in the view of many union officials to generate a vast new pool of low-wage laborers who might potentially undermine the hard-won job security of their members. It may also incidentally, as we indicated earlier, have exacerbated the problems which some labor leaders were already having controlling an increas- ingly rebellious rank and file. In addition, both the AFL-CIO and the UAW expressed concern over the description of the responsibilities allo- cated to local planning councils in the first two drafts of the bill. They saw the language in these bills as a throw- back to the poverty programs, Model Cities, and the like of the 19605 with the potential for all of the waste, fraud, and excessive delay which those efforts had entailed. The AFL-CIO wanted a “more rational, centralized planning proce- dure” with representatives from business, labor, and the 159 government determining through negotiations what the thrust of job creation programs would look like (Interview with Markley Roberts, 7 March 1979). They were also interested, as was the UAW, in strengthening those provisions in the first two versions of the bill relating to the oversight prerogatives of the Joint Economic Committee of the Congress where liberal and labor interests had long been well repre- sented (Interview with Kenneth Young, 9 March 1979). The only other issues related to the first two versions of Humphrey-Hawkins which evoked much comment from labor reflected the perception of some top officials that the bill relied too heavily upon public sector employment to fill gaps left by insufficient private sector opportunities and their desire for even stronger measures to restrict the independence of the Federal Reserve (Interview with Sara Schwartz, 9 March 1979). According to Jacob Clayman, who headed the AFL-CIO's Industrial Union Department during this period: We stood firm on the government's ultimate respon- sibility for providing employment, but we greatly preferred that that employment be in the private sector (Interview, 7 March 1979). It must be said, in summary, that if our analysis in Chapter 2 of the process of policy formation within a capi- talist State is reasonably accurate, those labor leaders who argued that a bill which sought to guarantee '‘all adult Americans able and willing to work . . . equal opportunities for useful paid employment at fair rates of compensation“ 160 would never pass the Congress were undoubtedly correct. It would.have threatened the whole fabric of social relations between capital and labor by eliminating the discipline achieved through the presence of a labor reserve. What we are contending is merely that it was never attempted. No piece of employment legislation has a chance of passage in Congress without labor support, and in the case of Humphrey-Hawkins, opposition to the job guarantee provisions in the early versions of the bill from the power- ful leadership of the AFL-CIO insured that the bill would not be taken seriously unless it was greatly watered down. With the appearance of the third version of the bill in March of 1976 that process was well under way. The Emasculation of the Humphrey-Hawkins 8111—— From “Equal Opportunity” to "Balanced Growth” The original bill did specifically provide that the individual who wanted a job had a right to go to court to get one. There is as much difference between this bill and the original bill as between me and the man on the Moon. ——Leon Keyserling In testimony before the Senate Committee on Labor and Public Welfare, May 14, 1976. At its annual convention in the summer of 1975, the AFL-CIO authorized its Economic Policy Committee chaired by I. W. Abel, head of the AFL-CIO's Industrial Union Depart- ment and former president of the United Steelworkers, to ”study full employment proposals pending in the Congress and to determine those elements that are essential to an 161 achievable and workable Full Employment Act'I (AFL-CIO press release on "The Need for-Full Employment,” 16 February 1976). The Economic Policy Committee subsequently issued a statement on December 5, 1975, entitled ”Principles for Full Employment Legislation.“ Shortly thereafter (in mid- December), at the urging of the Industrial Union Department, top AFL-CIO officials called a meeting with the Congres- sional Black Caucus and announced that they were prepared to support a revised version of the Humphrey-Hawkins bill which incorporated their concerns.27 In its statement to the Executive Council, the Economic Policy Committee listed nine ”essential elements” of a work- able, full employment program, most of which were consistent with the version of Humphrey—Hawkins already before Congress: the Congress must "establish full employment as the top— priority objective of national economic policy”; it should require the President to submit annual ”targets, policies and programs” necessary to the achievement of full employ— ment; there must be clearly defined procedures ”for prompt Congressional review and action on the President's economic goals and policies”; the full employment goal should be set at no more than three percent unemployment for the civilian labor force; any public service jobs created to fill gaps left by "the economy's regular channels of private and pub- lic employment" should receive “prevailing rates of pay, but in no case less than the federal minimum wage”; and the Congress should require the Federal Reserve to ”justify to 162 the President and the Congress the manner in which its poli- cies concerning interest rates, the money supply and availa- bility of credit will help meet the targets and objectives that are established." What was new in this document was a redefinition and considerable narrowing of the labor force concept used in the early versions of the Humphrey-Hawkins bill and an assertion that "balanced economic growth and national needs” should be given equal weight with the goal of full employ- ment. The Economic Policy Committee reverted to the lan- guage of the Full Employment Bill of 1945 by attaching the words ”and seek employment" to the phrase ”all those who are 28 This meant that the ethos which character- able to work." ized the original bills of providing ”equal opportunity” to all of those groups in the society who had in some way been denied employment opportunity in the past should be deleted. Government efforts should be concentrated on the problem of reducing ”overall” unemployment to a level of three percent or less, without getting bogged down in the process of attempting to equalize the remaining unemployment among var- ious segments of the workforce——blacks and whites, men and women, teenagers, and so S'I‘A't‘lih‘ rem. lth’lan'AItix'r .s‘tcnvtetc SEC. 5. (a) The l'nited States Employment Service shall henceforth be called the finited States Full l‘hnploy- ment Service. (b) In addition to its responsibilities under other stat- utes, the linited States Full Employment Service under the general direction of the Secretary shall assist in the establishment of. in each labor market area in the country in conjunction with the local planning councils acting under Section -'f(b)_, the reservoir of public service and private employment projects. (e) .\ .lob (ittat'antee ()fliee is hereby created in the H.R. 15470—22 n o ) 5) it) if 226 10 United States hull lthnployment Otiicc headed by a Job Guarantee ()flicer \vhose responsibility is to provide useful and rewarding emphrvment for any American. able and willing to work but not yet working. unable otherwise to obtain work and applying to such office for assistance. The Job (luarantcc (Afflice shall carry out its responsibilities under this Act in connection with the implementation of subsection (c) upon the reconuncndation and approval of the local planning councils. Nothing in this Act shall preclude the Job (fuarantee Office from contracting directly with the local planning councils for (I) the :uhninistratiim of individual public service and private employment projects or (:3) the overall administration of all or any part of such projects within the jurisdiction of the local planning councils. (d) Each {fob (luarantee Office in carrying out its re- sponsibilities shall insure that among projects planned that adequate consideration be given to such individuals and groups as may face special obstacles in finding and holding useful and rewarding employment and shall provide or have provided through the coordination of existing programs spe— cial assistance including but not limited to counseling, train— ing. and. where necessary, transportaton and migration assistance. Such individuals and groups shall include (1) those suffering from past or present discrimination or bias on the basis of sex. age, race, color, religion, or national origin. 1, 2t) ‘)‘) .4... (L) older workers aml retirees, (If) the physically or men- tallyliamlicapped, (4) ymithstoagc twenty—one, (5) poten- tially employable recipients of public assistance, ((3) the in- habitants of depressed areas, urban and rural, (T) veterans of the Armed Forces, (6) people unemployed because of the relocation, closing, or reduced operations in industrial or military facilities, and (5)) such other groups as the Pros- ident or the Congress may designate from time to time. (c) For the purpose of drawing on the reservoir of public service and private employment projects and pro— viding employment opportunities to applicants, each Job ttz'uarantec Office may, subject to the limitations specified in subsection (1')) enter into agreements with public agencies and private 9organizations operating on a profit, nonprofit, or limited—profit basis. Such agreements shall contain assur- ances that the agency or organization will— (1) provide an annual independent audit to the Job (htarantee Office. Such agency or organization shall at all times make its records and books available to rea— sonable review by agents of the .fob (iuarantce Office; (2) not discriminate on the grounds of sex, age, race. color, religion. or national origin in the administra- tion of any program encompassed within the agreement; (if) observe the prohibitions contained in chapter if) of title 5 of the United States Code (relating to political activities in federally funded projects) ; and (4) submit an annual report to the Job Guarantee Office detailing its activities under the agreement. (1) It is the responsibility of the Job Guarantee Oflice to insure that any person willing and able to work (a “job- seeker”) is provided the opportunity to be employed at a suitable and comparable job (as defined in subsection (3(1)) (2) below) . For the purpose of fulfilling this responsi— bility the Job (iuarantee. ()tlice shall, as appropriate— (1) refer johseelv'ers to the private sector amt general public sector employment placement facilities of the Full J‘hnploymcnt Service (other than as supple- mented by this Act) ; (:3) directly refer jobseelters for placement in positions on projects drawn from the reservoir of public service and private employment projects, and (3) register jobseekers in the standby Job Corps (as established in subsection (3 (a) below) . 'l‘he Secretary shall provide by regulation for procedures to assure that registration under clause (3) above shall occur upon presentation of the j‘obseelter to the Job (iuarantee Oflice unless a placement process is begun under clause (1) or (2) above which presents a high prolmhility of success within five days. 229 13 1 (g) For the purposes of this Act, any jobseeker who presents himself or herself in person at the Full En’iployment If) 3 Otlice shall be considered prima facie “willing and able” to .1 work. This specifically includes persons with impairments of ' sight, hearing, movement, coordination, mental retardation, t; or other harnlicaps. This subsection shall be implemented by 7 the Job (tuarantee Ollicer, pursuant to regulations issued by 5 the Secretary. Such regulations shall provide for— 9 (I) an initial determination by the Job Guarantee tt) (lilicer as to the 'ltlltst‘t'lit‘t'..\' ability to Work; 11 (22) compliance with section Ttl'o’ of the Civil Rights 12 Act of 196-1; 13 (3) such administrative appeal procedures as may 14 be zppropriate to review such determination where ad- }; \‘erse to the jobseeker; ](,' (7L) termination of such appeal procedures within 17 thirty days; and 15 (5')) placement of such jobseeker on the payroll of 19 the Standby Job Corps pending such appeal or any ju- 30 dicial review thereof. 31 (h) The district Courts of the United States shall have M jurisdiction of any action brought seeking relief pursuant to 23 this Act, including injunctive, declaratory, and other forms 2.; of relief as well as damages. Any person deprived of rights 230 14 secured by this Act shall be entitled in an action brought against the l'nited States to recover damages, together with costs amt attorneys’ fees. STANDBY JOB CORPS Sue. G. (a) There is hereby established a Standby Job Corps which shall consist of jobseekers registered pursuant to clause 5(1) (5}) above. Such Corps shall be available for public service work upon projects and activities that are approved as a part of community public service work res— ervoirs established by community boards pursuant to sec- tion 4 (c) (2) . (b) The Secretary, by regulation, shall provide for—— (l) a rmptircment that jobseekers registered in the Standby Job Corps (hereafter called Corps members) maintain a status of good standing, which status shall include attendance and performance standards; (2) a system of compensation for Corps members which shall: (A) provide that Corps members shall receive a monthly rated sum based upon their employment at a suitable and comparable job (as defined pur- suant to paragraph (B) below); (B) contain a definition of a “suitable and comparable job” which shall take into account, among other factors, the following: |\) (A) _s 15 (i) No Corps member shall be paid less than the minimum wage in effect in the area; and (ii) Corps members shall receive com— pensation (a) that bears a positive rela- tionship to their qualificatitms, experience, and training; and (b) that is such that will ef- fectively encourage them (from an economic standpoint) to advance from the Corps to other employment ; (2}) the fullest possible planning aml operational control of the local Standby Job Corps program at the community and neighborhood level (consistent with 4 (c) (I) (ll) above); (4) full and eti'ectivc prohibition of (A) discrim— ination on grounds of sex, age, race, color, religion. or national origin and (ll) improper political activity; (.3) reasonable oversight and reporting in respect to projects utilizing Corps members; and (t3) assurance that no activities undertaken pur- suant to this subsection shall adversely affect prevailing wage rates in the area. 232 16 eoxotuisstoxm. JUJNT t-LeoxoMte COMMITTEE Eric. 7. (a) In addition to its responsibilities under the Employment Act of 1946, as amended (13 U.S.C. 1022), the Joint Economic Committee shall—— (1) annually review the activities of the executive branch under all sections of this Act; (2) regularly conduct on its own behalf, or in cooperation with or through the facilities of the appro- priate legislative committees or subeonnnittees of the Senate aml the House, public hearings in as many labor nmrket areas as feasible, with special emphasis on opportunities for hearing petitions and complaints by individuals and groups who feel that they have been denied their rights to en'iployment opportunities 01' have been injured directly or indirectly by policies and pro- grams designed to guarantee the exercise of rights; and (3) annually report upon, with its own conclusions and recoinmendatious, the development and administra- tion of the policies and programs mandated by this Act. (b) (I) in addition to its responsibilities under subsec- tion (a), the Joint Economic Committee shall, within thirty days of the sulnnission of the biyearly full employment and production program as required pursuant to subsection 2} (a)— 233 17 (A) review such program and suggest whatever modifications the connnittec deems advisable; (B) submit such modified program to the respec- tive Houses of the Congress, together with the com- mittee’s comments on all parts thereof, including a justi- fication for all modifications made in the program as submitted by the executive; (C) submit a reconnnendation to both Houses of the Congress as to the stuns needed to be appropriated to finance such program ;is submitted pursuant to clause (l5) above (hereafter called the employment deficit rec— onmu-ndatiou) . (2) The full employment and production program, as modified pursuant to paragraph (1) above and as submitted pursuant to clause (b) (1) (B) above, and the employment deficit rcconnnendation sulnnittcd pursuant to clause (b) (1) (C) above shall be forthwith referred to the Appropria- tions Committees of the respective llonses for a period of thirty days. Said connnittees shall (1) recommend appro- priations consistent with the employment deficit recommen- dation and (2) malie such other reconnnetulations as they deem advisable. (3) At, any time after the expiration of the thirty days specified in paragraph (2) above it shall be a highly privi- 10 17 18 19 2t) ()5 u 234 18 leged motion in both Houses of the Congress that may he made by a Member of either body for the innnediate consid— eration of the employment deficit reconnnendation of the Joint. Economic Committee submitted pursuant to clause (b) (l) (C) above as a joint resolution of the respective body appropriating the sums specified in the emplovment deficit rccommcndation. (4) After the making of the motion specified in para— graph (3) above, it shall immediately be in order to con- sider the reconnncmlations made by the .\ ppropriatioas Com- mittee pltl‘:~tt:t|tt to paragraph (3) above. (5) Three legislative days after the making of the mo- tion specified in paragraph (:5) above, there shall be upon motion made no further debate, amendments, or other pro— ceedings in regard to the employment deficit recommenda- tion and a vote on all pending amendments and final passage shall he ordered forthwith. s'raotcs ()r‘ IMl’LEMli.\"l‘A'l‘I().\' Side. 8. (a) The, (‘ongress hereby recognizes that (f) the full objectives of this .v\ct cannot be attained innuediately upon its enactment, (2) considerable time will be needed to develop the Full l‘itnploymenl and Production Program, the research work under the National Institute for Full Em- ployment, the local planning councils, the community boards. the (,‘onnnunity Public Service \‘i'ork lteservoirs, the Standby 235 19 Jobs Corps, the Reservoirs of Public Service and Private. l‘imployment Projects, the. United States Full Employment Service, the Job Guarantee Offices, and the additional re- sponsibilities of the Congressional Joint Economic Commit— tee, and (2}) the implementation of the Act therefore must be accomplished in a series of stages. (b) The President is authorized and directed to provide, by regulation, guidelines, and otherwise, for the full imple- mentation of this Act by the end of the fifth calendar year after its enactment. at which time the provisions of subsec- tions 5 (g) and (b) shall enter into effect. This subsection shall not be construed to prevent. the President from effecting full implementation of this Act by an earlier date, including the provision of the entering into effect of subsections 5 (g) and (h) by such earlier date. (C) It is the policy of the Federal Government that the full objectives of this Act be attained no later than the end of the fifth calendar year after its enactment, and toward this end the Full Employment and Production Programs sub- mitted to the Congress by the President shall include. his or 1101‘ specific quantitative and qualitative targets spelling out these objectives, and the local job councils shall spell out similar quantitative and qualitative targets for their reSpec- tive geographical areas. 236 20 NATIONAL Iiss'rt'rt'u‘ts 1°01: FULL EMPLOYMENT SEC. 9. (a) The Congress hereby recognizes that (1) in the absence of genuine full employment, as defined in this A et, many Federal policies and programs have been based on the presumption of the continuing lack of suitable employ- ment opportunities for large numbers of people able and willing to work, and (2) to early out their functions under this Act, the President, the Secretary of Labor, the local planning councils, the community boards, the Job Guaran- tee (ltlices, the Full l‘itnploylnettt Service, and the Congres- sional Joint Economic (,‘onnnittee need the support of long- range, continuing, serious, and objective studies of the many changes required in such Federal policies and programs to gear them more closely to the Full Employment and Pro— duction l’rogran'i, its continuing adjustment and improve- ment, and its implementation. (b) To develop and administer a long-range program of such studies, there is hereby established a National Institute for Full Employment (hereinafter referred to as the “Insti— tnto”) within the Department of Labor, under a director to be appointed by the Secretary of Labor, and to operate in continuing consultation with a National Commission for Full Employment Policy Studies. (c) The Director of the Institute shall—- q S t) to 237 21 (J) serve for a term of three years but shall be removable, with or without cause, by the Secretary; (:3) be (_-ontpcn.~'atetl at the rate provided for grade t8 of the General Schedule set forth in section 5332 of title 5, tiuitcd States Code. The position created by this subsection shall be in addition to the number of positions placed in grade lb? of the General Schedule under section 5105‘ of title 5, United States Code; (:3) appoint a Deputy Director of the Institute; and (4) appoint. for terms not to exceed three years, without regard to the provisions of title 5 of the littitt‘tl States (‘otlc gchruing appointment in the ctmtpetiti\'e service and may compensate without regard to the pro— visions of chapter 51 and subehapter III of chapter 52} of such title relating to classification amt (ieneral Schedule pay rates, such technical or professional em- ployees of the Institute as he deems necessary to accom- plish its functions and also appoint and compensate without regard to such provisions not to exceed one-fifth of the number of full-time, regular technical or profes- sional employees of the Institute. (d) 'l‘he National t'onnnissiou for Full lthnployment Policy Studies shall— (I) be composed of “been members, which shall 18 15) 2t) 00 be broadly representative of labor, btlsiucss, education, the social and natural sciences, the humanities, local planning councils, eonnnunity boards, the professions, amt the general public amt which shall include the ('hairnnm of the (‘ouncil of Economic Advisors as an ex officio member. The members shall be appointed by the Secretary for terms of four years and shall serve at the pleasure of the Secretary; (2) be provided an executive secretary amt other Ht‘t‘tlt‘tl staff b_\' the Secretary. 'l‘lze Secretary shall also pay the members of the (’ommission per dicm. travel, amt other necessary expenses, together with compensa- tion at a rate not exceeding $551th per day while perform— ing the business of the Commission; (:1) meet at least once every three months aml at such other times as requested by the Director or the Secretary; (4) choose a (‘hairman amt such other officers as required to perform its business; (.3) advise and consult \\ith the llit'ector in respect to all programs aml activities conducted pursuant to this section; I ((3) regularly consult \\'ith the Council of Economic Advisers: amt 23 t (7) perform such other lunctions as are assigned 2 by the Secretary or by the Director. 3 (e) The Institute is authorized amt directed to make, or -t have made through grants to or contracts with imtividual .) researctu-rs and private or public research orgz'mizations, uni- (é versities amt other Government agencies, studies that shall 7 include, but need not be limited to. such subjects as— 8 (I) the policies amt programs needed to reduce it whatever inflationary pressures may result from full em- ttt ployment. to manage any such iItttationar_\' pressures It through appropriate tiscat policies and indirect amt direct 13 controls, and to protect the weaker groups in society ti} trom whatevcr inttationary trends t.‘;ltllttt be avoided or 14 controlled; 15') (1.) the. identitieation ol luunan potentialities that 16 are hidden, tltlttt‘\'(‘l()])(‘(t, or underdevetoped because. of 17 the lack of suitable job opportunities, eneouragement', 18 education, or trainingr amt of various ways of retez‘tsiugr 19 such potentialities; 't 20 (it) the forms of education amt training needed to 21 help provide people with the skills, knowledge, amt 2;! values required by existing”" employim-ut opportunities :23 amt techm'itogies amt needed to assist in developing such :34 New types of goods, services, technologies, amt employ- :33 ment opportunities as may better meet human needs: L’t) 240 24 {-t) the policies amt programs needed to substan- tially eliminate substandard employment, wages, amt working conditions and the techniques for establishing standards lor employment, wages, and working condi— tions in accordance with changing levels of national output amt resources, and regional variations in output, resources, and other relevant factors; (5) the improvement of the quality of employment, in both the private and the public sectors, in terms of (a) satistactions tor employees, (b) the etticiency amt productivity of work done, amt (c) the satist'actious of clients for and consumers of the goods or services provided; (0) such policies amt programs as may be needed to enable small amt independent business enterprises to benefit from the provisions of this Act and protect them against, any unfavorable consequences that may result from actions taken to implement it; (7) alternative organimtional forms amt operating methods tor the local planning eonm-its mandated umter section 4, as well as additional methods of encouraging participatory amt decentraliZed planning ot‘ etnpto_\'tm-nt policies amt programs; (H) the standards amt criteria to be used by the 25 .1 local planning councils (pursuant to section 4(1)) (22)) 3 to monitor amt evaluate programs under this Act; 3 (5)) the problems of the special priority individuals ‘1 amt groups referred to in section 5((1) ; 5 (10) the integration of existing programs of welfare 5 assistance, income maintenance, and unemployment 7 compensation with the payments made to people under W . , . . 5 section 0 ol this Act: 9 (11) improved methodologies for conducting studies ttt in all such areas, with special attention to the methodo— H logical problems involved in utilizing skills amt tecti- ‘) . - . . . 1“ names that may transcemt established disciplinary bound~ 1" aries; and 1—1 . . (12) a comprehensive program for such economic t5 . . . . . . . and social indicators, both quantitative, amt qualitative, tti . . . . as may be needed tor the continuous amt objective t t . . . . . . . monitoring ot basic economic and social trends iii the 18 . . . performance, structure. amt environment ot the .\ inerican J9 . economy and society. 20 . . . l in deveto ring this ii'oe'rani the Institute shall en— I z-s n 21 . . . courage divergent approaches to each area of policy study, 2‘3 . . . . shall keep the local planning councils nitormed on the na- 23 - -1' d-iiid'~-~ ' v'divi ture of leseaic 1 in process an sia isseminate m 9) tie 124 results of all completed research. t-PCJN CI! 116 17 18 t»: 0‘! GENERAL l’uovisloxs Nondiscrimination SEC. 10. (a) No person in the United States shall on the ground of sex, age, race, color, religion, or national ori- gin be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with fttnds made avail— able under this Act. Labor Standards (b) (I) All laborers amt mechanics employed by con- tractors or subcontractors in any construction, alternation, or repair including painting and decorating or projects, build- ing, amt \vorks which are. federally assisted under this Act, shall be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Sec- retary in accordance with the Davis-Bacon Act, as amended (40 U.S.CC276-27tia—5). The Secretary of Labor shall have, with respect to such labor standards, the authority and functions set. forth in Reorganization Plan Numbered 14 of 1950 (15 tilt. 3176; (34 Stat. 1267) and section,2 of the. Act of June 1, 1934, as amended (48 Stat. 948, as amended; 40 U.S.C. 276 (e) ) . (2) The Job Guarantee Office shall not enter into any agreement under section .3 of the Act nor shall it develop any project for the reservoir of public service and private em- plovment projects until it has determined that such agree- ment or project shall provide— (.\) that appropriate standards for the health, safety, and other conditions applicable to the perform- ance of work and training on any project are established and will be maintained; (B) appropriate workmen’s compensation protec— tion; and (C) assurances that the project will not result in the displacement of employed \vorhers or impair existing contracts for services or result in the substitution of Fed- eral for other funds in connection with Work that would otherwise be performed. DEFINITIONS SEC. 11. For the purposes of this Act— (1) “Adult Americans” refers to all citizens and perma- nent residents of the United States who are sixteen years of age or ohler, plus such younger age. groups as may be expressly included by local, State, or Federal law and implemented by administrative regulations under this Act. (2) “Full employn‘tent” is a situation under which there are. useful and rewarding employment opportunities for all adult Americans able and willing to work. (:5) “Able and willing to work” means possessing the it) 11 12 capacity and motivation to perform for pay productive tasks creative of a useful social product. (4) “Opportunity” refers to an available and feasible choice. (5) “Fair rates of compensation” refers to ren'ium‘ration at wages reflecting regional levels of compensation, statutory minimum wages, or those wages established by prevailing collective—bmgaining agreements, whichever is highest, and under working conditions consistent with trade union or pre— vailingr standards, whichever is higher. (6) “Secretary” refers to the Secretary of Labor. At"rltomz.»\'r1o.\'s SEC. 12. There is hereby authorized to be appropriated for the fiscal year ending on June 30, 1977, and for each succeeding fiscal year such sums as may be needed to carry out the various sections of this Act. 245 .885 can coSaosom no ooESBoU 2: 2 cutouom E: .2 ”2:. affix 574 6:: c.2332: :7. km .EoEpdEEe mitts/i YE 3.3m: ._£ mogcstomao 22.3 .5 .z._.s.,.”..:~_:~.:" 2: v29: 3 “WE—:5 was of: 1:94.75}. :32” :a o. 9:98:553 .Ew Titiizz ctr/:85“: mesa .320; 1283a: : “Nazism; oh dun < $2.2 .m .= mm Twp/H5 omc Iv APPENDIX B FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 APPENDIX B PUBLIC LAW 95-523—OCT. 27, 1978 92 STAT. 1887 Public Law 95-523 95th Congress An Act To translate into practical reality the right of all Americans who are able, will- Oct 27, 1978 ing, and seeking to work to full opportunity for useful paid employment at [H R 50] fair rates of compensation; to assert the responsibility of the Federal Govern- ' ' ment to use all practicable programs and policies to promote full employment. production, and real income. balanced growth, adequate productivity growth. proper attention to national priorities, and reasonable price stability; to require the President each year to set forth explicit short-term and medium- term economic goals; to achieve a better integration of general and structural economic policies; and to improve the coordination of economic policymaking within the Federal Government. Be is enacted by the Senate and House of Representatives of the United States 0{ America in 00 r688 assembled, Full Employment Sec/nos: 1. T lls Act and the ollowing table of contents may be Ind Bdmced cited as the “Full Employment and Balanced Growth Act of 1978”. 0'0"“ A“ Of 1978. TABLE OF CONTENTS 15 USC 3101 See. 1. Short title; table of contents. 30‘3- See. 2. General findings. Sec. 3. Report. Sec. 4. National Employment Conference. TITLE l—ESTABIJSHMENT OF GOALS AND GENERAL ECONOMIC POLICIES Sec. 101. Statement of purpose. Sec. 1022. Declaration of policy. Sec. 103. Economic Report of the President and abort-term economic goals and policies Sec. 104. Full employment and balanced growth; medium-term economic goals and policies. Sec. 105. Provisions applicable to short—term and medium-term goals. . Sec. 106. National priority policies and programs required for full employment and balanced growth. Sec. 107. The President's budget. Sec. 108. Monetary policy. See. 109. Overcoming inflation. Sec. 110. Council of Economic Advisers. 1 Sec. 111. Advisory Board or Boards. TITLE II—STRUC’I‘URAL POLICIES AND PROGRAMS, INCLUDING TREATMENT OF RESOURCE RESTBAINTS Sec. 201. Statement of purpose. Sec. 202. Countercyclical employment policies. Sec. 203. Coordination with State and local government and private sector economic activity. Sec. 204. Regional and structural employment policies. Sec. 205. Youth employment policies. Sec. 200. Job training. counseling, and reservoirs of employment projects. Sec. 207. Capital formation—private and public. TITLE III—POLICIES AND PROCEDURES FOR CONGRESSIONAL BEVI EW Sec. 30]. Statement of purpose. Sec. 802. Committee review. Sec. 303. Review of Economic Report as part of the Budget process. See. 304. Modification of timetable for achieving unemployment goals. Sec. 305. Exercise of rulemaking powers. TITLE IV—GENERAL PROVISIONS Sec. 401. Nondiscrimination. Sec. 402. 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Post, p. 2012. 15 USC 3152. 29 USC 201. 257 PUBLIC LAW 95—523—0CI‘. 27. 1978 (d) To assist and evaluate the enforcement of this section, and the broader equal employment opportunity policies of this Act, the Secre- tary of Labor shall include, in the annual Employment and Training Report of the President provided under section 705(8) of CETA, a detailed analysis of the extent to which the enforcement of this section achievus positive results in both the uantity and quality of jobs, and for emp oymcnt opportunities generatily. LABOR STA N DARDS SEC. 402. (a) Any new program enacted and funded pursuant to the implementation of this Act shall, subject to any limitations on maximum annual compensation as may be provided in the law author- izing such pro vrams, provide that ersons employed are paid equal wages for equa work, and that suc 1 policies and programs create a net increase in employment through work that would not otherwise be done or are essential to fulfill national priority purposes. (b) Any person employed in any reServoir project enacted and funded pursuant to the implementation of section 206(c) (1), or in any other job created pursuant to implementation of this Act, shall, subject to any limitations on maximum annual compensation as may be provided in the law authorizing such programs, be paid not less than the pay received by others performing the same type of work for the same employer, and in no case less than the minimum wage under the Fair Labor Standards Act of 1938. No person employed in any reservoir project enacted and funded pursuant to implementation of section 206(0) (1) shall )erform work of the type to which the DavisoBacon Act (40 U.S.Cl. 276a—276a—5) applies, except as other- wise may be specifically authorized bv law. (c) Any recommendation by the President for legislation to imple- ment any program enacted pursuant to the provisions of this Act, requiring the use of funds under this Act, and submitted pursuant to the requirements. of this Act, shall contain appropriate wage provi- sions based upon existing wage standard legislation. Approved October 27. 1978. LEGISLATIVE HISTORY: HOUSE REPORTS: No. 95-895, Pt. I (Comm. on Education and hbor) and Pt. II ( mm. on Rules). SENATE REPORTS: No. 95—1177 acwmpanyip-[g S. 50 (Comm. on Human Resources) an ( mm. on Banking. ousing. and Urban Affairs). CONGRESSIONAL RECORD. Vol. 124(1978): Mar. 8. 9. 15, 16. considered and passed House. Oct. 10. II. 13. considered and passed Senate. amended. Oct. 15, House agreed to Senate amendment. WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS. Vol. 14. No. 43: Oct. 27. Presidential statement. 0