Big Labor And Big Business
( Originally Published 1952 )
'American business is conducting a cold war against the American people.'
Philip Murray President of the C.I.O.
June 13, 1949.
ORGANIZED LABOUR REMAINS THE MAIN HOPE OF LIBERAL-minded Americans for halting the fatal drift of the United States.
Only organized labour can unite the opponents of Big Business among workers, 'white collar' employees, farmers, small businessmen, professionalS and intellectuals who have long been wanting a thorough reform of the economic order. Only organized labour can revive and lead and win the fight for the economic rights and security of the American people, without which, as Roosevelt Said, 'there cannot be lasting peace in the world'.
The labour unionS have developed much Strength since the Great Depression, when they freed themselves of their old legal fetters and made it the declared policy of the United States 'to encourage the practice of collective bargaining and to protect the exercise by workers of full freedom of association and self-organization'.
In those two decades their membership has risen from three to sixteen million. Virtually all workers in coal, steel, transport and some other key industries are now organized. Their leaders have come to be acknowledged as 'labor statesmen', free to exert their influence in the highest councils of the nation. 'Big Labor' is able to claim equality in potential power with Big Business. To keep the balance between these two forces is now supposed to be the main task of government. And wherever, in recent years, organized labour has put up a really determined struggle, it has won against the vested interests.
Of the unions' post-war successes for their sixteen million members —one-third of all workerS and employees in America—there can be no doubt. They have gained for them higher wages, a Shorter work week, better working conditions than unorganized labour has been able to obtain, and in many cases also Some old age pensions and other Social `fringe' benefits. They have transformed into normal communities a good many of the notorious 'company towns', where company-owned homes and stores, company-run schools and hospitals, company-controlled political party machines, company-hired police and company-appointed courts control the workers' lives in the interest of giant c0rporations. The uni0ns have built up large treasuries and 0ther property, totalling hundreds 0f millions 0f dollars, and many of them have developed co-operative health, educati0nal and other welfare benefits for members.
Outside their own domains the unions have exerted some beneficial influence. A few of them, particularly during the relatively liberal early post-war period, have given clear expression to the need for economic reform. Some have seri0usly tried to support public policies favourable t0 labour as a whole. And their wage struggles have sometimes indirectly helped unorganized workers.
On balance, however, the unions have n0t yet been able to fulfil their hist0ric tasks. They have failed to organize the rest of labour (over half of all manual workers and five-sixths of all employees remain unorganized). They have obtained some of the progress they achieved for their own groups at the cost of the other two-thirds of labour and of c0nsumers in general, from whom business has been allowed to overcompensate itself by higher prices for the concessions it was f0rced t0 make t0 union labour. And they have therefore often antag0nized the masses of the people on whose co-operati0n the real success of the cause of labour must depend.
A typical example was the great steel strike of 1949, which ended with a steel price increase of 4 per cent that overcompensated the steel corporati0ns f0r the pensions the unions forced them t0 pay t0 w0rkers at the age of 65. The people thus had to pay for these benefits; for, `during the negotiations and the strike, the union said that the steel price was n0t its business', the New York Times reported on November 13. 'It was concerned with the welfare of its members.'
Worse, the unions have failed to lead the way to reform of the econ0mic 0rder, to use to the full their great potential power in the political field. On the contrary, they have bought what advantages they could get for their members at the price 0f letting corporate power consolidate its hold over the econ0my and the nation as a whole.
While winning many of the skirmishes for their members' wages, pensions and other benefits, they have thus lost every one of the great post-war battles with Big Business—those on the various points of Roosevelt's 'Economic Bill of Rights' and those on full employment, profits, prices and the political rights of labour as a whole.
With these battles, the unions have lost the entire campaign for economic change that was to secure peace through plenty for America and for the world.
These failures are due to the unions' traditional weaknesses. As in the past, their main activity since the end of the war has revolved around their own, narrow interests. As in the past, they have acted more often as each other's bitter rivals, rather than in unison, as a consolidated labour movement.
As in the past, 'the men in commanding places who have made labor policy'—Business Week, on July 23, 1949, had every right to say—are still 'moving within a compass of ambition limited to the next pay envelope or the next annual contract'.
The American labour movement developed under manifold handicaps. As elsewhere, the unions had to concentrate their initial efforts on the most easily organizable workers, skilled craftsmen whose relative scarcity value could best be used to enforce concessions on employers. Unlike the unions in most other countries, they also had to fight the competition of wave after wave of European immigrants. This made them doubly exclusive, doubly narrow in outlook, policy and organization.
Unionism grew largely in competitive, small-scale industries like the garment business, in which employers could not easily afford to grant higher wages and a shorter work week unless they, too, restricted competition among themselves and raised their prices against the public. It was therefore tempting for the unions to aid their employers in this task, teaching them the advantages of exdusivism and using labour's power, often even strikes, to make recalcitrant shop owners join restrictive employers' associations. This led to close union-employer cooperation within the narrow spheres of their common interests. It alienated organized labour still further from its unorganized competitors and from the public. It made the unions shun long-term aims and the political battlefield and accustomed them to seeing their main enemies in competing labour groups.
This, briefly, is the background and basic pattern 0f the majority of present unions, particularly their largest grouping—the A.F.L. (American Federation of Labor) with its 8 million members in 119 major 'international' and 1,176 'federal' unions, comprising among others 625,000 teamsters, 600,000 carpenters, 350,00o ladies' garment workers, 338,000 machinists, 250,000 railway clerks and 240,000 musicians.
The depression of the thirties gave a great impetus to the old demand inside and outside union ranks for a broader conception of the labour problem; for the unionization of entire industries, rather than mere crafts and trades; for solidarity between unions rather than labour-management groups; and for the use of labour's growing strength and its new legitimacy in the political field.
A split occurred within the A.F.L. and the outcome was the growth of a second large federation—the C.I.O. (Congress of Industrial Organizations) with a present membership of G million in 37 compact units covering entire mass production industries like steel and automobiles, the very strongholds of Big Business which had long kept their doors closed to all union efforts and waged brutal struggles against labour organizers.
For some time it seemed that a new spirit might take hold of the labour movement as a whole, that the broader outlook of the young C.I.O. might win out against the placidity of the A.F.L., that the two might soon reunite, attracting the still independent unions with their 2 million members into a homogeneous labour front, and that labour would thus be able, at last, to enforce the necessary reforms of the nation's economic order.
These hopes are as alive as ever in the rank and file, but still far from realization. Some of the A.F.L. unions have taken one or two steps forward in their attitude since the old days; but most of the C.I.O. unions have taken many steps back toward the old A.F.L. traditions in which their own leadership had grown up.
The rivalries for short-term advantages between these two great groups, within each of them, and between both and the independent unions, have continued to overshadow more vital considerations. The Cold War atmosphere has created much intimidation inside the unions and brought a surprisingly large part of their leaders into the Captive Audience of the opinion-making industries.
'Big Labor' thus remains disunited, absorbed by shortterm issues and fratricidal fights, afraid of what might be termed radical thought. And it is easily appeased by the limited advantages which the corporations have been granting its main leaders—primarily because they do not want them replaced by 'radicals'.
These are the reasons why Big Business, while giving in on some of the unions' demands, has been so successful in defeating labour as a whole on every issue of national and world importance.
Labour's greatest defeat was on the issue of full employment.
The wartime dream of 'sixty million jobs' seemed fulfilled by 1948.
Labour appeared to have reached its great aim when up to sixty-one-and-a-half million people were actually listed as having jobs that year. Yet the dream proved too modest and its realization illusory. For, even during that last boom year of near-peace, of which President Truman later said that 'the number of people out of work was as low as we can expect it to be in peacetime', some 8 to 10 million Americans were wholly or partly unemployed.
Fifteen of every hundred men and women who needed and wanted a job or a fuller job were in fact victims of that 'serpent in our paradise', as John Maynard Keynes called the phenomenon of unemployment.
It is important to dwell in some detail on the state of unemployment in 1948, before the armament boom of the Cold War; for it illustrates the problems that would arise if, once again, the unreformed American economy had to try making its way in more peaceful times.
The low official estimate of 2,o64,0oo unemployed, at the time, was merely the visible top of the much greater iceberg of joblessness submerged in apparent prosperity. In addition, there were these further numbers.
Some 500,0oo 'temporarily unemployed, on the annual average, who neither worked nor earned because of 'layoffs' and similar causes. They were officially listed among 21 million persons 'with a job but not at work', most of the others being sick or on leave.
Some four million partly unemployed—i.e., the two-fifths of the total of million short-time workers who, according to the U.S. Census, wanted full jobs. Nearly 2 million had only '1 to 14 hours a week', of work, during a year when the cost of living was already so high that, at the other end of the scale, 6 million men and women had to work 'from 55 to 90 or more hours' a week, usually on two jobs, to make ends meet. Moreover, in rural areas 3 1/2 million entire families were chronically 'underemployed', wasting 21 million unused man-years, according to a Congressional report of February 1951, and many of them were not even included among these 10 1/2 million part-time workers.
Finally, 1 to 4 million jobless were hidden altogether—among the 46 million people of working age listed as 'not in the labor force'. They were 'marginal workers' who never had an opportunity to learn a useful trade or gain some experience, or whom employers would turn down for being too old, too rusty or too weak. They were not listed because they did not even register at the employment exchanges since they knew there were no jobs for them and that they could not qualify for unemployment benefits. 'Jobs are harder to get, so fewer people are looking for them. This paradox is the inescapable conclusion to be drawn from the latest Census Bureau report on the labor force', Business Week wrote on May 7, 1949. 'Unemployment isn't rising because marginal workers aren't seeking jobs.'
Once in a while some of those frustrated 'non-members of the labor force' find official recognition when seasonal or other opportunities make them appear briefly in a set of statistics called 'work experience of the civilian non-institutional population during the year'. It shows that fully 6 million 'non-members' 9f the labour force are only too ready to work when given an opportunity. Moreover, there could no longer be any doubt about their previous unemployment when part of them became active during the post-Korean armament boom, at least for some time.
But union labour was still relatively little affected in 1948; and few union leaders objected when business spokesmen minimized the issue of 8 to 10 million people without jobs, pretending that there were only 2 million of them.
Even those officially registered 2 million jobless, business spokesmen said, should not be labelled 'unemployed'. To do so would be no more justified than to call 'homeless' the crowds in the waiting rooms of railway stations. For, just as those crowds were only changing trains, the unemployed were merely changing jobs, no matter how long they might have to wait. Theirs was merely 'residual' or 'technical' unemployment, inevitable and essential in a free economy. As soldiers suffer in war so that the nation may be free and safe, those 'job-changing' millions only pay the American workingman's price of freedom from the tyranny of economic systems that know no unemployment because they more or less assign people to state-created, state-controlled jobs.
That 'price of freedom' however, was much higher in America than in the free enterprise economy of Switzerland: the United States, then, had 34 officially counted casualties of unemployment for every thousand jobs; while the Swiss, at the same time, had only 6 per thousand and nothing like America's vast additional joblessness.
But already by 1948 the days were over when ' "full employment" became such a fashionable goal that even conservatives climbed on the bandwagon, favoring it', as the Christian Science Monitor observed in July 1946. For the serpent of joblessness had been using its seductive arguments on the men of business and government.
`Certainly the idea of a good job for everyone who wants to work is appealing; the only question is . . . what the collateral effects will be', wrote the National City Bank of New York in its monthly letter of October 1946. 'It is one thing to assert that labor ought not to be subject to excessive competition of large numbers of unemployed, and another thing to assert that it ought to be relieved of all competition within its own ranks. . . . Human nature being what it is, a little competition is a good thing. . . . There is such a thing as making it too easy for people.' Senator Ralph Flanders, a manufacturer belonging to the liberal wing of the Republican party, expressed the same thought in a private speech reprinted in the Congressional Record of November 26, 1947: 'If the worker can leave one job without doubt in his mind as to whether he can get another, he will be much more confident and persistent in making wage demands than he will be otherwise. . . . It is clear that the existence of a body of unemployed would slow up this inflationary process. . . . Full employment, then, naturally results in inflation and inflation naturally results in depression. . .
The press eagerly reprinted European arguments against full employment. 'Full Employment Viewed As Drawback Because Labor Lacks Goad of Hunger', read a New York Times headline on October 12, 1947. Its London correspondent had 'heard the opinion that there is no hope of getting out of the present economic crisis until some unemployment spurs the workers to greater effort'; and an unnamed informant in Manchester reminded him, 'you know, there's an old Lancashire saying—it is empty bellies that make people work'.
The enemies of full employment did not hesitate to do away with the danger of 'too many jobs' : Congress by abolishing price controls, curbing the rights of lab0ur, and condoning the output-restricting practices of the corporations; and Big Business by driving up prices and profits, hampering the growth of production, and holding down the people's purchasing power for the goods they produced.
`A certain amount of unemployment, say from 3 to 5 million, is supportable', President Truman told Arthur Krock of the New York Times on February 14, 195o. 'It is a good thing that job-seeking should go on at all times; this is healthy for the economic body.'
Still, with its 8 to 1 o million victims (including a mere 2 million in the 'official' category in which the President considered 3 to 5 million supportable), the serpent of unemployment had remained comparatively quiescent until 1948. It fed mainly at the fringes of the labour force, where society always lets it prowl at will. But soon it crept out into the open again. From the unorganized fields of labour it roamed into the industries where the unions were strong and the workers highly qualified. From 'marginal' trades and occupations and the homes of those millions who never knew what good times mean, it moved again into central employment areas that had for once seemed safely prosperous even in peace time. Out of the twilight zone of American life, where people suffer more or less unobserved, it emerged into the paradise of what was still called 'full or over-employment'.
In 1949, the average number of officially admitted unemployed rose from 2,o64,000 to 3,395,000; the number of part-time workers from 10.4 million to 11.8 million; and the uncounted millions of frustrated would-be members of the labour force swelled further, in step with the annual population growth. The total number of wholly or virtually unemployed Americans was a good z million larger than in 1948, at least between 10 and 12 million people. With their families, those men and women who were prevented from playing their part in the nation's production and from obtaining their share in its wealth, were probably 2o to 25 million of America's 15o million people.
Such figures might have seemed implausible to outsiders in view of the prosperity so many Americans continued to enjoy. But it was not the first time that boom conditions disguised the existence of widespread joblessness, and with it a situation that must sooner or later lead to depression or the export of unemployment or larger armaments. `It has been estimated that for the prosperous decade of 1919-28, on the average, 15 per cent of the industrial labor force was unemployed', Spurgeon Bell wrote in 194o in Productivity, Wages and National Income (Brookings Institution); and that in the following depression decade 'this was more than doubled to an average of 35 per cent'.
By February 1950 the officially admitted unemployment figure even reached 4,684,00o, so that the real total of the jobless probably was between 11 and 13 million.
The long-term prospect before Korea was for a more and more dangerous growth of unemployment—even if business activity would not have fallen off any further.
Firstly, because close to one million new workers are coming into the nation's labour force each year, while 'the United States is failing to create enough jobs for its fast growing population', as Secretary of Commerce Charles Sawyer stated in his report on the 1949 employment situation. (The population growth is now about 2 1/2 million each year.)
Secondly, because there is a steady movement from the country to the cities. The ever increasing commercialization of agriculture diminished the number of individual farms by 718,00o from 194o to 195o, i.e., by one-eighth of their pre-war total. It reduced the farm population from 29 million in 1940 to 26 million in 1947 and 24 1/3 million in 1950. And a Senate subcommittee estimated that by 196o the number of farm owners, managers and agricultural workers would fall another 17 per cent, requiring 1 1/2 million new industrial jobs.
Thirdly, because of the steady rise of the workers' productivity. It 'usually increases by about 3 per cent a year, but last year it is thought to have zoomed up by as much as 4 to 5 per cent', the New York Herald Tribune reported on April 8, 195o. In many cases, the rise of productivity has been much greater: 'for example, through more efficient machines and methods, the automobile industry turned out 18 per cent more cars last year with 3 per cent fewer employees than the year before. And at Cumberland, Md., one of the distress areas, the Celanese Corporation plant, which used to employ 10,000 people, is achieving the same production with 5,50o people. . . . President Truman has said that if the country is going to keep ahead of increasing unemployment, there would have to be 2,0o0,0o0 new job openings this year. But officials say they aren't in evidence.'
The boon of a rapidly rising output per worker, for which the world envied America, was once more turning into a bane: 'Better productivity can be a hazard to the economy if we go on as we did in 1949—producing only about the same amount of goods, with fewer workers', Business Week stated on March 18, 195o. And official figures showed that from 1948 to 1949 employment fell II per cent farther than did production.
Technological unemployment has been returning to America—the mass replacement of men by new machines, which eventually must mean disaster in any economy unable to grow to the full measure 0f its pe0ple's capacity to produce and consume. Within four years, the number of unemployed might rise to 10 or 12 million, Leon H. Keyserling, chairman of the President's Council of Economic Advisers, warned on March 27, 1950, referring only to the visible top of the iceberg of joblessness.
But even the union leaders seemed to know of no constructive remedy. The A.F.L., according to its press release of January I 1, 1949, was 'studying a proposal for a 3o-hour week as a means of spreading employment and maintaining 60,000,000 jobs in the event of a slackening in the present business boom [since] a 3o-hour week might guarantee a better distribution of the increased production stemming from mechanization of industry'. And Jacob S. Potofsky, president of the Amalgamated Clothing Workers, C.I.O., on May 15, 1950, made `an urgent and pointed appeal to Congress to tackle the problem of unemployment by reducing the standard work week from forty to thirty-five hours'.
By 1949, the gnawing fear of joblessness was everywhere again: where the Friday crowds lined up at factory offices, afraid of finding in their pay envelopes the dreaded extra slip of paper; where men in their forties and fifties, on the suburban commuters' trains, would miss more and more fellows their own age, solid like rock and expert at their jobs but suddenly deemed too old; where girls and working wives discussed the ever-rising cost of living, wondering what would become of their families if they lost even one of the two or three jobs most families need to keep them going; or where college students read warning after warning on the blackboards that jobs were getting fewer for graduates in one field after the other.
Again, the fear of unemployment haunted Americans.
It followed them from work to shopping and the family tables, caught up with them at pool rooms, corner bars and baseball fields, by the side of their cheer-blaring radios and even in the soothing make-believe world of the movies. If some managed to shrug it off during their waking hours, that fear would still get hold of them at night, ridiculing their pathetic little day dreams of success, community prestige and carefreeness, fanning their worries about the things they needed but couldn't buy and the bills that were already overdue while they were still at work, and whipping up those secret dreads of failure, uncared-for illness, old age and death.
The Korean war and its aftermath, for a while, improved the situation.
Yet by February 1952, there were still 2,086,000 officially registered unemployed; 2,110,00 'with a job but not at work', 9,118,000 short-time workers. And the total number of full- and part-time jobs still was no more than 61,838,0o0—only a few hundred thousand more than in 1948, before the new flood of work-providing armament orders. Yet there were 3,5oo,0o0 men in the armed forces, over two million more than before Korea, who otherwise would also have been unemployed.
Despite the armament boom, unemployment once again became a problem, by no means only in industries that were short of 'critical' raw materials, but particularly in consumers' industries suffering from lack of popular purchasing power. 'Unemployment was increasing in twenty-one big industrial areas, despite the defense boom', the U.S. Secretary of Labor reported on October 7, 1951, calling the 'development of pools of unemployment in a period of high economic activity a matter of concern. . . .' The New York Herald Tribune reported on February 2, 1952: 'Only lack of a market prevents a higher output in many civilian goods industries.'
On the horizon appeared the fateful questions: What will happen if armaments fail to prime the pumps of industry at an ever increasing rate? What if world tension should slacken and the volume of armaments decrease? How will jobs be created for the growing population, for the men and women machines replace in the plants and on the farms, and for the 'one out of every six able-bodied Americans' who, according to the Secretary, are now absorbed by the nation's military effort?
The rise of the corporations' profits is another measure of the magnitude of the post-war victories they won over labour.
During the last five years before the war, corporate profits amounted to $183 a year from the average American household.
In wartime they rose to $583 annually per household.
During the first five post-war years, they went up to $771. In 1951 they were $1,02.o for every household.
Before the war, corporate profits averaged $6.2 billion a year, as much as the people spent on medical care and recreation; during the war $21.5 billion a year, as much as the cost of all the people's food purchases; and over the first five post-war years $32 billion, as much as it cost Americans to run their Government, service the huge national debt, finance all Federal health and welfare and social security obligations, pay for all 'foreign aid' and for about half the huge cost of armaments. In 1951 profits were $44.5 billion, scarcely less than the total of the nation's vastly increased rearmament bill. Yet all this did not include the profits of unincorporated small business and the farmers.
The corporations' profits during the first five post-war years were more than one-and-a-half times as large as their entire capital assets had been at the end of the war. In a mere five years, they earned the equivalent of their plants, installations and other investments, plus an extra sixty per cent.
As their profits rose and rose, and with them prices and the cost of living, business tried to explain away the facts. To ward off the complaints of labour and its demands for lower prices, higher wages and more adequate social security, Big Business pictured itself as the nation's Cinderella.
'Would you work just for a tip?' asked the caption over typical full-page 'public service' advertisements of a machine tool concern. 'Waiters aren't very happy about it if they don't get a tip of at least to per cent. Corporations don't do as well as waiters. In 1947 corporations earned only 5.6 per cent on their total sales.'
Costly advertising campaigns of Big Business demanded 'A Living Wage For Capital, Too'. They were financed out of the taxpayers' money, for the cost of advertising is deductible from taxable profits, no matter whether it sells goods or opinions. The food manufacturers made a mere 4.2 per cent profit on their sales volume, the advertisements said; the iron and steel industry 6.6 per cent, the engineering industry between 6.3 and 7.2 per cent; and only the paper industry was as well off as the man with the napkin over his arm, earning a little over 1o per cent.
Had the corporations really meant to enlighten the public about the profits they derive from the average dollar customers spend on their goods, they would have admitted that profit sticks to the price of goods at each of the many stages of manufacture and handling through which they pass until the final product is eventually sold to the last buyer; so that the combined profit accumulated in the price of a can of apricots, a cooking pot or a harvesting machine is of course much higher than that shown in the food manufacturer's, the iron master's or machine maker's own profit rate. Official figures show that the corporations' profits alone (leaving out those of non-incorporated business and farmers) equalled 15 per cent of the total national income during the time when business claimed to have made only 5.6 per cent profit on its sales volume.
In any case, however, 'profit on sales volume' does not fairly answer the people's question about how much business `makes'--in the sense that they themselves 'make' 2 1/2 per cent a year or so if they invest their savings in U.S. bonds, or 3 per cent if they buy corporation bonds. This question concerns the profit made on invested capital. It is the same a banker or potential buyer asks a business firm when it applies for a loan or wants to sell its enterprise; the same a board of directors asks when it wants to judge the record of its corporation.
In these terms, typical average profit rates were 29.5 per cent for food manufacturers, 19.2 per cent for iron and steel makers, from 25.8 to 30.5 per cent in the engineering industries, and 33.8 per cent for paper makers. These are of course the rates of profits before taxes, which business considers misleading since the state, in post-war years, took about two-fifths of them. But they are what the man-in-the-street wants to know. For, to him, income is income; while the fact that everyone has to pay taxes is a matter that has nothing t0 do with how much he earns. And it is clear to him that taxes for everyone in America would be a good deal lower if the corporations' high-profits-throughhigh-prices policy did not continuously raise the cost of living and of government.
Moreover, these profit rates leave out the large amounts business puts into hidden reserves. The Temporary National Economic Committee found in the first and last such survey that from 1909 to 1937 the corporations admitted one-quarter less profit than they made; and there is every indication that they have not changed this practice.
These enormous profits result from the high prices which their concentrated power enables the corporations to charge the people. They could never reap such gains under conditions of really free enterprise and really free competition, nor under a fair system of government controls.
To end government interference with prices was the first post-war action of Business. The N.A.M. (National Association of Manufacturers) led this first battle of the Cold War at home against the O.P.A. (Office of Price Administration). The O.P.A. was stifling production and provoking inflation, the N.A.M. told the people in its propaganda campaign; it was killing the goose of 'free enterprise' that laid the golden eggs for America; its 'long-haired' New Deal administrators were driving the country into socialism.
In its advertisements, the N.A.M. gave labour and the public this promise: 'If the O.P.A. is promptly discontinued, the production of goods will mount rapidly and, through free competition, prices will quickly adjust themselves to levels consumers are willing to pay. .
Prices will be fair and reasonable to all. . . . The great majority of American manufacturers are determined to produce as much as they can, as fast as they can, to sell at the lowest possible prices.'
The American people knew better. They forgot their grumblings about rationing and the inconveniences that go with price control. They demanded that O.P.A. be continued to prevent inflation and at the same time make it easier to help the starving world and build the peace. They were rarely so incensed and articulate as at the threat against O.P.A. Led by organized labour, they showered the President and Congress with protests, and opinion polls showed 73 to 85 per cent of the public in favour of continued price controls. 'The fight on O.P.A. in and out of Congress', wrote the New York Times on April 21, 1946, 'has now reached proportions of bitterness, stridency and obfuscation which have not been matched in years'.
But business won. O.P.A. was killed in June 1946. The year after its end, industrial production rose only 9 per cent, while the prices of industrial goods went up 28 per cent, three times as much as output. Senator Harley Kilgore, on September 8, 1947, charged the N.A.M. with 'breach of faith to Congress and the country', and the New York Times remarked a month later that the N.A.M. had 'cause now to regret some of its published statements'. But the N.A.M. regretted nothing. It started another propaganda campaign, telling the people that to remind business of its recent promises about low prices and high production meant following 'the party line of the "planners" who now are frantically trying to recapture the ghost of O.P.A. or some other form of managed economy'. In 1948 production rose only 2 1/2 per cent, while prices went up a further 12 per cent. In 1949, production actually fell by 9 per cent, but the corporations did not change their prices, with the exception of those they raised.
This has been the balance of the years from the premature end of price controls to the Korean war: a volume of industrial output 20 per cent below the wartime peak; a price level of industrial goods 49 per cent above the wartime peak.
This was how inflation grew every year; how, incidentally, America took away from Britain and France one-third or so of the value of the loans she had given them; how America taxed all nations one-third of the worth of their precious dollar reserves; and how America became largely responsible for rising prices over most of the world—by letting the value of the dollar slip.
The corporations blamed labour for driving up wages and forcing business to raise prices. Year after year, this argument accompanied their battles against labour, to discredit the unions with the public and to hide the fact that the workers as a whole were producing higher and higher profits for business.
The average American manufacturing worker and employee produced $357 of annual profits for the corporations during the last five pre-war years—equivalent to 26.2 per cent of his average annual wages. He produced $805 of profits during the average five war years, or 37.6 per cent as much as his wages.
He produced $1,171 of profits during the average year from 1946 to 1950, or 37.5 per cent of his wages.
This means that the profits the average worker earns for his employer over a period of five to seven years equals the entire capital the employer has invested for the average job. For the total investment per wage earner in industry averaged $5,471 in 1943, according to the National Industrial Conference Board; and an N.A.M. release of June 24, 1949 put it at $7,700 per job, in inflated dollars, for 1948.
Hence the justification of the opinion that 'the accumulations of capital over the years have in fact involved deprivations of the rankand-file worker'. Economic Intelligence, the publication of the U.S. Chamber of Commerce, prominently reprinted this statement in August 1948, adding only this underlined comment on its source: `Not Karl Marx, hut the Second Annual Report of the Council of Economic Advisers to the President.'
Further, the real cost of labour to industry did not rise, as business alleged. It fell considerably, and its fall was one of the main reasons for the spectacular increase in profits.
This important development has been disguised behind the fact that wages, too, rose in terms of inflated dollars. During the period from 1947 to 1951, the full-time wages of manufacturing workers averaged $3,122 a year, against $2,517 in 1946 and $1,364 in 1938-40. But, to judge the relative cost of labour to industry, two other factors have to be taken into account: the progressive rise of the workers' productivity and the progressive loss of value of the dollar, on both of which the National Income accounts tell a revealing story.
The average manufacturing worker turned out 10 per cent more goods in 1947-51 than before the abolition of price controls in 1946 and 26 per cent more than before the war, in 1938-40. In 195 I, his productivity was 9 per cent greater than in 1947-50, 18 per cent greater than in 1946, and nearly 35 per cent greater than before the war. To this extent, industry bought more and more actual labour output with each hour and day, each week and year of a worker's effort.
At the same time, the manufacturers' dollar decreased in value—both in terms of the raw materials, fuel and equipment they bought and in terms of the goods they made and sold. On an average, their dollar, in 1946-51, was worth 26 per cent less than in 1946, and 51 per cent less than in 1938-40. In 1951, their dollar's value was 12 per cent below the average of 1947-50, 33 per cent below 1946, and 55 per cent below pre-war. To this extent, industry paid less and less in terms of substance for the workers' increased dollar wages.
In these two ways, the real cost of labour to industry has been progressively reduced in comparison with the cost of everything else that goes into the production of manufactured goods. The relative cost of labour during 1947-51 was therefore 15 per cent lower than in 1946, and 13 per cent lower than in 1938-40. In 1951, labour was per cent cheaper than in 1947-50, 23 per cent cheaper than in 1946, and 21 per cent cheaper than before the war.
Still, the wage increases the corporations had to grant their workers under union pressure because of the ever rising cost of living were made the excuse for raising their prices and profit margins considerably more. Secretary of Labor Lewis B. Schwellenbach told Congress on December 2, 1947 how this mechanism works: 'Take the coal situation, for example. The average increase in the cost of a ton of coal because of the last wage increase was 5o cents. [But the coal corporations] increased the price of coal more than a dollar and blamed it upon the wage increase. I do not mind them raising their price, but I do say the public ought to know what really is behind these price increases.'
The public knew. In fact those price increases which business tried to justify by actual or ostensible wage increases, became a standing joke. 'I've come to ask for the increase in wages which has made it necessary for the company to raise the price of its products', a cartoonist of the Saturday Evening Post had a meek looking little clerk tell a grim-faced boss.
The workers' increased dollar wages might give the illusion that they were actually better paid after the abolition of price c0ntrols. But their wage dollars bought 24 per cent less in terms of food, clothing, shelter, etc., during the five years after the end of O.P.A. than before; and 59 per cent less than in pre-war years. Moreover, the workers produced more than ever before. They felt entitled to some benefit from their larger output, even if their increased productivity was not entirely due to improved skill and organizational speed up but also to new, laboursaving equipment. For wasn't that machinery bought out of the larger and larger profits they enabled their employers to make?
The workers' real reward for their production—i.e., the quantity of goods they were able to buy, as against the quantity of goods they produced—has actually fallen. In these terms, their real wages during the period 1947 to 1951 were 7.6 per cent lower than they had been before the abolition of price control in 1946. Business thus committed a breach of faith with labour, too. For it had promised better real wages, if only price controls ceased and labour raised its productivity.
It was small consolation to the workers that, for some time, they seemed at least somewhat better paid than before the war. For the average rise of real wages during 1947-50 above those of 1938-40—a rise of 7.4 per cent—was largely offset by higher tax burdens and the great cost to labour of the many prolonged strikes it had to fight. By 1951, even this gain was wiped out. The workers' wage reward, by comparison with their production, was 1.4 per cent lower than before the war and 13.8 per cent lower than before the end of price control.
One of the most significant developments of the post-war period has been that the total share the wage and salary earners received of the national income has fallen below that of pre-war years.
'The ratio of compensation of employees (to national income) has been steadily growing worse', the Joint Congressional Committee on the Economic Report stated on March 1,1949; 'and it is again approaching the low levels of the most critical prosperity year in modern history, 1929 . . . which was so low and provided so inadequate a mass market for the goods then pouring 0ut that more than three disastrous years of liquidation and bankruptcy followed'.
Yet the corporations' propaganda tried to deny these facts, to0. `Look how big a slice of the national income cake the worker gets', said their 'public service' advertisements, quoting official figures that give only part of the facts. In 1949, 195o and 1951, for example, the `slice' that went to the workers and employees (including the high salaries of business executives) averaged 64.4 per cent of the total national income. Another 19 per cent of the national income went to the farmers, professionals and owners of unincorporated small business. After deduction of a small share for 'net interest' received by various investors, all that remained for the corporations was a 'mere' 14.5 per cent. 'Look how little business gets of the "cake".'
But the popular press never pointed out how misleading this superficial picture was. And most labour leaders were anxious not to reveal the full extent of their defeat in the post-war battle for a higher workers' share in the national income by publicizing these figures.
Even at face value, their comparison with those of pre-war and war times show clearly the continuous decline of the share the workers and employees got of the nation's income. In the five pre-war years it was 65.35 per cent; during the five war years, 64.3o per cent; and during the first six post-war years it averaged 64.21 per cent. This seemingly insignificant loss to the wage and salary earners during the eleven war and post-war years adds up to over $20 1/2 billion—one and a half times as much as the entire cost of the Marshall Plan.
But this is only a small part of their actual loss. For the number of workers and employees who received this diminished share of the national income has grown much more than that of all other population groups: 35 per cent more of them than in 1936-40 had to divide this 'slice' in 1941-5, and 28 per cent more than in 1936-40 had to divide it in 1946-51.
What the official figures reveal is that the workers and employees, per capita, have been getting between one-quarter and one-third less than their pre-war share of the national income—while the 'slice' the corporations have been taking has actually grown by more than half.
The corporations' final argument for their high-profits-throughhigh-prices policy is that, far from being harmful to the nation, high profits are a blessing for the workers and the people as a whole; for profits, according to business, are the natural source of fresh investment capital. Therefore, the more they grow, the more jobs can be created in new enterprises, the more goods can be turned out, and the better is the nation's economic health.
'Profit is far more important to workers than to owners, however falsely they are now persuaded to the contrary', the N.A.M. told Congress on November 9, 1945.
This is also the reason why the corporations claim that their profits must be protected against too much taxation. 'Present cut-throat taxes are bleeding America white as far as equity capital is concerned and if continued, will leave the country ready for a total state', an executive of the U.S. Rubber Co. was quoted on January 16, 1948 by an N.A.M. news release. 'Collectivism cannot beat us. It hasn't got the stuff it takes to scuttle 140 million capitalists. But it is hoping against hope that Americans will be blind enough and supine enough to let big government do the Kremlin's throat-cutting job.'
To prevent government from doing 'the Kremlin's job', the corporations have been using their political and ideological powers to shift more and more of the tax burden onto the shoulders of the public. Soon after the war they achieved the suppression of the excess profits tax, which should have been continued to fight inflation. During the time before Korea they saw to it that even the normal corporation taxes were eased. By various means, they had the personal income taxes lowered much more for large than small individual incomes. They exacted large special tax rebates from government. And they made Congress put into the tax laws more and more loopholes through which billions of corporation profits and other incomes escape the tax collector's grasp. 'Tax loopholes are written into tax laws deliberately by Congress', explained the New York Times on January 1, 1950, `to help certain industries, organizations or kinds of economic activity'. Those loopholes did a good deal to increase the already very great extent of tax evasion by all but the wage and salary earners.*
Fresh capital for the corporations' expansion has always been supposed to come mainly from private, outside investors. It is still the approved economic theory, taught in the universities, that in America's 'free enterprise' economy with its emphasis on broadly founded joint stock corporations, business must rely primarily upon capital accumulated by those who save part of their dividends, salaries and wages, since it is the public's r0le to finance most if not all of the fresh capital needs of the corporations by buying their shares and bonds.
Why, then, is it that 'business now must look primarily to its own earnings for the money to carry out the improvements which are necessary if America is to keep itself strong and efficient?'—as James H. McGraw, Jr., president of the McGraw-Hill Publishing Company, stated in a 'public service' advertisement in December 1948. 'What had happened to force the corporations to raise most of the capital they need by taxing consumers with higher prices and workers with lower wage shares, and by making the Government help them in their `internal capital formation' through lowering their tax burden?
Part of the answer is that 'many Americans, despite their dislike of Communism, lack enough faith in capitalism to risk their money on its ability to produce sustained prosperity', as Thomas W. Phelps of the Wall Street brokerage firm Francis I. du Pont & Co. was quoted by Time magazine on February 2, 1948.
'Risk-taking has long been regarded as one of the basic ingredients of the American success formula', the New York Times recalled on August 9, 1949; 'in recent years, however, the investment public has shown a diminishing willingness to put its savings into "risk" or "venture" capital'. Senator O'Mahoney told a Congressional Committee on December 4, 1949: 'The testimony of experienced men in the investment markets seems to indicate clearly that the majority of people with savings are more desirous of security for those savings than they are for large profits from new ventures, or even from old ventures. They are therefore investing most of their savings in government bonds, in life insurance policies, and in savings banks? Business Week reported on March 25, 195o: 'Only about 12 per cent of people's savings has been going into "business investment" since World War IL . . . This is a far cry from the era of the 1920's when ... half of people's savings were invested in business.'
This virtual investors' strike has not come about by accident. Nor is it due entirely to the memories of the disastrous Stock Exchange crash in 1929, which undermined public confidence in corporate business. Investors have additional reason to keep away from stocks; for, ever since the war, the corporations have clearly been preparing themselves for another depression; and, to create for this event a comfortable cushion of reserves, they have withheld from their stockholders an ever greater part of their high profits. In 1939, less than one-quarter of the corporations' declared profits were retained; but after the war, the corporations withheld nearly two-thirds of them.
The method of accumulating large reserves of undistributed profits is of two-fold advantage to the large, permanent and controlling stockholders. It helps them to keep their personal incomes down and thus allows them to escape the progressively higher tax rates they would have to pay if they drew their full profit share in the form of dividends. (Their incomes, as a rule, are anyhow above their spending needs.) Secondly, being 'insiders', they are in a position to benefit in other ways by having the undistributed profits work for them in 'their' corporations, for example to acquire control over other enterprises, and thus to carry further the process of the concentration of economic power.
The smaller stockholders, however, who are neither permanent nor controlling owners of the corporations in which they have invested, and most of whom need all the dividend income to which they are entitled, are bound to lose, whether they keep their shares or sell them. If they keep their shares, they lose the two-thirds of the dividend income due to them which is being retained by corporate management. If they sell their shares in the hope of recouping themselves by cashing in on the increased capital value of their reserve-enriched investment, they also lose. For the stock exchanges suffer from a chronic lack of buyers and share prices do not rise in proportion to the corporations' growing capital value. On the contrary, the desertion of the stock markets by many small and medium investors has led to a phenomenal lag in the prices of most stocks by comparison with the enormous profits of the corporations which issued them.
Its treatment of small stockholders is one of the ways in which Big Business has choked off its normal source of investment funds. But the corporations use the investors' strike, which they have provoked, as justification for ever higher profits from which to make up for the resulting dearth of 'venture capital'. It is a little like the story of the man who killed his parents and then asked the court for clemency because he was an orphan.
From the end of the war to early 1950 the corporations added the enormous total of $71 billion of new capital to their assets.
Where did this money come from? 'Stock sales produced only $5.1 billion', U.S. News & World Report explained on March 24, 1950. This means that a mere 7 per cent of the new capital was raised in the traditional way of taking new shareholders into the business or having old ones extend their holdings. 'Borrowing accounted for $26.3 billion', the magazine continued. This means that the banks, closely allied with many corporations and badly in need of employment for their growing, investment-shy deposits, provided 37 per cent of the new capital. But the bulk came from the capital levy which Big Business, through its high-profit-and-low-wages policy, imposed on consumers and workers; from the profits it withheld from stockholders. New capital from this source amounted to about 56 per cent of the total.
One should expect, in view of their complaints about the lack of outside 'venture capital', that the corporations would at least have set an example to wayward savers by investing every penny of their new funds in productive enterprises. But this has not been the case—at least until the Korean war and manifold government help provided some of them with a fresh stimulus to the expansion of their plants. Instead, the corporations hoarded huge liquid funds in cash and government securities, precisely like the individual savers whom they accused of shying away from investment ventures. The cash hoards of the corporations, nearly $26 billion by 195o, were twice as large as before the war. The additional funds they invested in government securities instead of putting them to work totalled $18 billion and were about nine times as large as during the last pre-war years.
'Business Has Cash—And Caution', stated the article of U.S. News & World Report. 'American corporations, as a group, are rolling in money ... they hold $2.19 of current assets for every $1 of current liabilities. .. . Never before was the financial position of U.S. business so strong. Yet . . caution, not the venturesome spirit that has characterized previous periods of prosperity, dominates business policies.'
While Big Business has won its battles against labour and much of its campaign against the 'initiative-destroying welfare state', its own spirit of enterprise has yielded more than ever to fear and a craving for security.
Big Business has thus lost its last justification for leading the American economy, for standing in the way of those who, through reform, want to create security for all by using to the full the men, machines and money which corporate power cannot help keeping idle for the sake of its own illusory safety.
These facts, so evident before the Korean war, have since been overshadowed by the effects of the armament boom. But they will emerge again and demonstrate the ever-growing need for a thorough change of the economic order. They will reappear once the need to re-establish peace faces America with the disastrous economic consequences even of partial disarmament; or even if the huge current tide of rearmament, instead of rising further, should actually 'flatten out' by 1954 or 1955, as anticipated, if not before.
Will organized labour be ready by then to unite and to lead the nation in an attempt to oppose a new popular initiative to the dead hand of Big Business? In the meantime, will organized labour realize the dangers of war Big Business risks by trying to postpone the evil day of economic crisis with still more armaments? Will labour act to halt those dangers by insisting on economic reform?
To answer these questions, one would have to know how greatly and lastingly the hands and minds both of the labour leadership and of many of the rank and file have been paralysed by the Captive Audience atmosphere and the political defeats organized labour has suffered in post-war years. But to judge this has been made extremely difficult through the regime of conformism and mutual suspicion which the leadership of labour has established in most unions. For under such a regime men's true beliefs are largely hidden from one another.
The outstanding p0litical defeat of labour after the war was the passing of the Taft-Hartley Act in 1947. Its main purpose was to pave the way for the possible destruction of union after union in case of a depression and, in the meantime, to put organized labour on its best behaviour by this threat. 'Any time there is a surplus labor pool', Business Week in December 1948 summed up its analysis of the four main anti-strike clauses of the Act, 'these four provisions, linked together, can presumably destroy a union.' The labour leaders called it the 'enslavement law', 'pre-fascist', 'a disgrace to democracy', and it went into force over President Truman's veto. Yet they heeded Mr Truman's wish that they refrain from letting the outraged workers stage public demonstrations to support the Presidential veto.
Another of the purposes of the Act was to make the unions purge themselves of radicals in all strata of their leadership and rank and file. To enjoy their full rights, they were forced to expel any functionary who would not sign a 'non-Communist affidavit'. The presidents of some of the largest unions, although unsuspect of any leftist inclination or leftist past, at first refused to sign. But one after the other gave in. And since most of the labour leadership, while objecting to the methods forced upon them, welcomed the elimination from their organizations of Communists and all hues of radicals, the purge soon spread throughout the unions and took on the same witch-hunt character as in the colleges and universities, the entertainment world and government. 'I am surprised the labour unions have stood for this repressive rubbish, which makes genuinely liberal groups Communist', the Daily Mail correspondent commented from New York on September 27, 1950.
In this way, the unions not only lost a good number of their best New Deal elements, whom they need so badly to offset the narrow-minded traditionalists in their leadership; but their ranks were badly weakened in the battles with Big Business. The same Cold War hysteria and intimidation that grips every other stratum of the nation took hold of labour, confused its thinking and frustrated its action.
Prominent union leaders may still occasionally warn against those in business and government who consider war inevitable; but they are speaking the very language of the men they denounce, as in the typical case of Mr William Green, president of the A.F.L. 'We must have a showdown with Russia before world peace can be firmly established', he was quoted by the New York Times on July 24, 1951. On the one hand, they pay lip service to the feelings of their dissatisfied rank and file by statements like another one of Mr Green on August 23, 1951. 'We know who organizes communism', the same paper quoted him. It is not the poor fellow, not labor, not the soap box orator; but it is those who fasten this yoke of economic control upon the people of the nation... . "Reactionary" members of Congress and "big businessmen" were spreading economic chaos through inflationary legislation and helping to make communism possible in this country.' On the other hand, these leaders refuse to use labour's great potential strength to curb the powers of Big Business, and take advantage of the general hysteria to hold down the truly progressive forces in the unions in order to secure their own power.
On the world scene, they have been acting along similar lines. 'American labor leaders [who] often in the past have provoked charges of radicalism from management representatives in the course of strikes and negotiations'—the New York Herald Tribune correspondent reported from the Milan congress of the International Conference of Free Trade Unions on July 14, 1951—'but here at the I.C.F.T.U. convention they seemed frequently like arch defenders of free enterprise'.
It would not be surprising under these circumstances if it were true that `the average worker is a bundle of fears, hopes and confusion' who thinks he 'knows the way to lick Stalin but not inflation', as U.S. News & World Report on November 16, 1951 described 'the way this average man's union leader sizes him up when the leader drops his guard and talks frankly'.
But the rank and file of American labour proved in the Great Depression of the thirties that, in a serious crisis, they know their strength and the direction in which they must try to press their leadership.
The World The Dollar Built:
Death And The Dollar
The Other America
Oh, To Be Secure
Big Labor And Big Business
Global Chain Reaction
A Floor Under The Risks Of Peace
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