Our Descent Toward Third World Status

Stephen H. Unger
October 21, 2013

The long-term outlook for Americans who work for a living is indeed bleak. Doubtless, there will be some ups and downs, but an unprecedented combination of factors makes it likely that the downward trend will continue for them. For most people, the future promises lower quality jobs, at lower pay rates, with degraded working conditions, and fewer benefits. They can also anticipate reduced retirement income, and less comprehensive medicare. Financial insecurity and unemployment are likely to be regular features of their lives.

The prospects are quite different for big corporations and the super-rich. The beneficiaries of the factors hurting the general population, are doing just fine, and are likely to continue to prosper. In general, it seems likely that the US will increasingly resemble third world countries such as Mexico, characterized by a small, wealthy elite dominating a population of poor people, with a layer of people clinging to middle class status. One big difference is that we will probably remain the world's foremost military power.

If this appraisal is not dismal enough for some people, I could discuss the assault on the Bill of Rights and our democracy in general, the real danger of a US police state, ongoing US military actions all over the world, the grossly neglected climate change threat, and other environmental and health problems. But, in this essay, I will confine myself to justifying the assertions made in the opening paragraphs, and suggesting how we might be able to turn things around.

Some history

Initially, the situation for American workers was not too bad. In the early days, a large portion of Americans were independent farmers, an option open to many, since land was cheap. There were numerous small enterprises, each employing just a few people. Examples were stables, blacksmith shops, small general stores, barber shops, small stage coach companies. There was no great social gap between workers and employers. Dissatisfied employees were usually able to find other jobs. Those who failed in this could try farming.

Eventually, by the end of the 19th century, opportunities for starting minimal farms diminished significantly, and a large proportion of jobs were with large corporations operating railroads, mines, textile mills, steel mills, etc. Negotiations between a worker and a corporation over pay and working conditions were very different from what they had been between an apprentice and a master blacksmith. Immigration increased, bringing in people willing to work harder for less pay. The net result was not a happy one for most workers.

This led to the formation of unions, which employers did not take kindly to [Unger-unions]. Violence, to the point of gun battles, resulted when failed negotiations led to strikes. With the government almost always siding with employers, it was rough sledding for most workers and their unions. The fading out of the farming alternative did not help.

The onset of the great depression, and the birth of the New Deal, was a major turning point. Under the Roosevelt Administration, the government attitude toward organized labor changed from hostility to mild support, characterized by the NLRA (National Labor Relations--or Wagner--Act). This, combined with the industrial surge associated with WWII, led to a huge growth of effective labor unions, that resulted in relatively good times for working people. Even those not in unions (the majority) benefited, as many employers improved pay and working conditions in efforts to stave off the unionization of their employees.

The first step in the reversal of labor's good fortune was the 1947 passage of the Taft-Hartley Act, which undermined the beneficial effects of the NLRA. Gains for workers slowed, and then ceased. Things have been going downhill for workers ever since. Why?

What is going wrong?

The process of getting an employer to recognize a union has become increasingly difficult since 1947. In addition to the effect of the Taft-Hartley Act, appointees to the National Labor Relations Board have become increasingly unsympathetic to union organizers. Court decisions have weakened the union-supporting features of the NLRA. Employers routinely hire companies specializing in union busting, and such companies have developed a great deal of expertise. The result of these factors is that relatively few union organizing campaigns have succeeded during the past several decades. Union membership in the private sector (about 6.6%) is thus at a low not seen for over a century [Greenhouse][BLS].

So the great majority of American workers must negotiate with employers, often large corporations, as individuals. Public sector workers are better off (35.9% union membership--mainly teachers, police, and firefighters), but not by much; their unions are weak and increasingly under attack.

Advances in technology have always eliminated jobs via automation, and this continues to happen [Unger-benefits].

From the start of the industrial age, a standard technique for depressing wages has been the importing of workers from low-pay countries. This practice continues today and is an important factor in minimizing the income of workers ranging from hotel chamber maids and farm workers, to nurses and engineers [Unger-Immigration]. Congress is now debating legislation to further bolster this process, including an amnesty for millions of illegal (the politically correct term is "undocumented") immigrants, increasing immigration quotas, and further increasing the number of temporary visas and green cards for engineers, programmers, and others.

The combination of automation, increased immigration, and the demise of unions would suffice to put most workers back to their lowly status prior to WWI. But there is another, new, unprecedented, and powerful factor, not involving classic business cycle fluctuations, that is further exacerbating the downward plunge.

Until roughly the late seventies, manufacturing was a distinctive feature of the US economy. It grew continually (with fluctuations due to business cycles). The corporate elite then apparently decided that they could make more money by taking advantage of cheap labor in other countries, such as China. They began shutting down US factories, and either opening new factories in low-pay countries, or contracting to have products made for them by manufacturers in those countries.

Since 1941, the US population has more than doubled (133 million to over 317 million). But the number of Americans employed in manufacturing is now the same as it was then: about 12 million. That number increased, roughly in proportion to the population increase, thru the mid seventies, peaking at just under 20 million in 1979. Then the long descent began. In the decade ending in 2010, about 5.5 million manufacturing jobs were lost via the ongoing de-industrialization of America. Since 2001, over 42 thousand American factories have been shut down [Snyder][Global]. And the factories closed were not producing buggy whips; e.g., computer manufacturing employment in the US was lower in 2010 than it was in 1975! It appears that this process will be halted only to the extent that compensation for America workers is further reduced.

In addition to factory work, US corporations are outsourcing research and design to other countries, mainly in Asia--again to cut payroll costs. IBM, Intel, GE, and other US companies have opened R&D facilities in China, thus exporting more high level jobs.

There are recent instances of new factory startups in the US. Some by foreign companies, and others by US Corporations, such as Motorola and GE. These are highly automated plants, employing relatively few workers, usually using many foreign-made components. Perhaps most significant is that the employees get minimal benefits and low wages [Weissmann].

The federal government is negotiating a new trade treaty involving a dozen nations, The Trans-Pacific Partnership (TPP) [Hightower]. In addition to matters directly concerning international trade, it will prohibit many kinds of laws designed to protect domestic jobs, the environment and human health. It is being put on a fast track for quick Senate approval, with no amendments. Negotiations took place in secret with corporations, but not the public, at the table. Ratification of the TPP will lead, among other ill effects, to even further hardship for American workers.

Quite apart from material issues, such as money and job security, people who work diligently at essential, but unglamorous, routine jobs, such as janitors, or sanitation workers are not given the respect they generally received in the past [Stephan].

The dominant philosophy

The socio-economic system in operation today in the US is generally called capitalism, or free enterprise, and the political system is claimed to be a democracy. But, if we forget the labels, and just look at how the system actually works, and the direction in which it is headed, we see an ugly picture.

According to conventional thinking, the major motivating force for people is the desire for unlimited income and wealth. This is supposed to inspire people to deepen our understanding of nature, to develop new techniques for harnessing nature, to create great works of art, to develop socially useful organizations, to organize enterprises to produce and market useful products and services. While there are, doubtless, cases where greed has had benign effects, these are not predominant. More commonly, those motivated by greed find ways to pervert all kinds of human activities into material gain for themselves, often at great cost to others. The dismantling of American factories, with the resulting harm to most American, as discussed above, is a good example of the effects of great power in the hands of the greedy.

Another, literally sickening, example is the way a branch of the pharmaceutical industry extorts, from asthmatic Americans, billions of dollars annually in grossly excessive profits [Rosenthal]. By exploiting their great political leverage, the industry managed to control the relevant government agencies, and influence legislation so as to ensure that drugs to treat asthma are available to Americans only at prices that are an order of magnitude greater than prices in Europe. An indication of their power is that it is actually illegal for Americans to import prescription medicines from abroad, or to purchase such products from mail-order pharmacies.

Can we do better?

There is something fundamentally wrong with a system that systematically mistreats the great majority of people. In what kind of democracy are the interests of the great majority of the population subordinated to the those of a small wealthy elite? Can anybody seriously claim that this group, in any reasonable sense, has truly earned their incredible wealth and incomes? Bear in mind that perhaps three fourths of the income of the most wealthy people comes from capital, usually inherited, and that much of the salaried income of those people is in the form of the huge amounts paid to top corporate executives [Domhoff].

Libertarians, who I generally agree with on the crucial issues of civil liberties and militarism, argue that the kinds of problems discussed above are due to too much government interference. While I agree that the government today is indeed a major part of the problem, I believe that this is not inherent in government per se, but rather a characteristic of the kinds of undemocratic governments that we have had for a long time.

The libertarian version of capitalism, with no government role in the economy, is unstable, self-contradictory. Without government interventions, the conditions for a truly free market capitalism can't exist [Unger-Reg]. I.e., cartels and monopolies would form to destroy the free market if we didn't have the government oversight--that is anathema to libertarians. This important function, implemented by anti-trust laws, has been deliberately neglected for many years as one of the consequences of the domination of government by wealthy corporate interests.

Furthermore, the free market does not protect society against polluters, or consumers from products with non-obvious, but serious, defects. Civil law suits, the libertarian answer to this [Rothbard], while useful in many cases, is often not an adequate defense.

While there are particular situations in which competition is very useful in promoting efficiency, it is a poor basis for governing most human relationships. E.g., the current trend to keep all kinds of technical information secret for commercial reasons is highly counterproductive. Cooperation is far superior. Traditional American examples include barn raising and volunteer firefighting departments. Cooperation involving modern technology includes engineering society standards committees, and free or open-source software [Stallman][Wikipedia-Open].

Rather than privatizing more and more governmental functions such as schooling, prisons, water supplies, and highways, we should be going the other way and increasing the number of services provided by local, state, and national governments. A potentially valuable alternative is the worker co-op [Unger-Co-ops]. These should be encouraged via suitable legislation and tax rates. Same for co-op banks. Publicly run transit systems, electric power utilities, research and development laboratories, and even banking (as in North Dakota), should be encouraged. Education at all levels, including universities, should be publicly funded to enable everybody to be educated to the extent of their wishes and capabilities (as in the Nordic countries). A single-payer health insurance program, or a national health program, as in Great Britain, should replace the incredibly wasteful non-system that we have. A good case can be made for nationalizing the predatory pharmaceutical industry. Labor unions should be encouraged, with attention paid to keeping them democratically controlled by their members. Anti-trust laws should be strictly enforced to break up monster corporations. Manufacturing in the US should be revived using such means as appropriate tariff regulations [Unger-Jobs]. Steeply graded income taxes, inheritance taxes, wealth taxes, and transaction taxes should be used to reduce the obscene level of inequality that currently prevails. Commercial secrecy should be discouraged.

Clearly, the greater the role of government in our lives, the greater the importance of ensuring that it is democratically controlled by the people and not by some elite class of rulers. The Bill of Rights must be restored. The democratic political processes must be protected by minimizing money in politics--only individual humans (not corporations) should be allowed to contribute money to parties--and only limited amounts. We need to re-examine the election process to fix problems ranging from rigged e-voting systems, to spoilers due to plurality voting, gerrymandering, and the electoral college [Unger-BrokenDem]. Wide open discussion of political issues must be encouraged. A greater variety of news sources should be encouraged, and governmental secrecy reduced drastically to a bare minimum.

Is the above wish-list unrealistic, pie-in-the-sky? Not really. Many of the above ideas have been implemented, at least partially, in the Nordic countries, which, tho not without their own problems, seem to be far more egalitarian than the US. But, in terms of the current US political scene, we appear to be going in the wrong direction. None of the listed items are even discussed by the politicians comprising the two major parties. As I write this, we are just emerging from the exciting donkey-elephant show, in which lunatic Republicans, forcing a partial governmental shutdown, took the spotlight off both the revelations of the assault on our liberties being perpetrated by the Democratic administration, and the Syrian debacle.

In the usual election day scenario, the great majority of those most sympathetic to the above ideas, fearing a Republican victory, hold their noses and vote for the Democrats [Unger-Best]. But now, the Republicans may have antagonized so many people who normally vote for them that their chances at the polls have greatly faded. So there is at least a chance that those who usually vote on the basis of the lesser evil argument might feel that it is safe to vote for parties that come close to representing their views, without risking a victory by the party they most fear.


BLS, "Union Members Summary", U.S. Bureau of Labor Statistics, January 23, 2013

G. William Domhoff, " Wealth, Income, and Power", Power in America, 2005-2013

Global Macro Monitor, "Chart of the day: US Manufacturing Employment, 1960-2012", Global Macro Monitor, May 1, 2012

Steven Greenhouse, "Union Membership in U.S. Fell to a 70-Year Low Last Year", NY Times, January 21, 2011

Jim Hightower, "The Trans-Pacific Partnership Is a Corporate Coup in Disguise", Truthout, October 2, 2013

Elisabeth Rosenthal, "The Soaring Cost of a Simple Breath", NY Times, October 12, 2013, p.1

Murray N. Rothbard, "The Libertarian Manifesto on Pollution", Mises Daily, April 17, 2012

Michael Snyder, "19 Facts About The Deindustrialization Of America That Will Make You Weep", Business Insider, Sep. 27, 2010

Richard Stallman, "What is free software?", Gnu.org, 2013

Karl D. Stephan, "Engineers and Technological Unemployment: What Are People For?", Engineering Ethics Blog, September 23, 2013

Stephen H. Unger-benefits, "Where Did the Benefits of Technology Go?", Ends and Means, February 10, 2012

Stephen H. Unger-Best, "Should You Vote for the Best Candidate?", Ends and Means, August 7, 2012

Stephen H. Unger-BrokenDem, "Fixing Our Broken Democracy", Ends and Means, October 22, 2009

Stephen H. Unger-Co-ops, "Worker Co-Ops: A Plausible Solution to Some Big Problems", Ends and Means, July 11, 2011

Stephen H. Unger-Immigration, "The Immigration Issue: Good Folks on the Wrong Side", Ends and Means, October 19, 2011

Stephen H. Unger, "How to INsource American Jobs", Ends and Means, October 14, 2010

Stephen H. Unger, "Regulating the Invisible Hand: A Contradiction?", Ends and Means, January 15, 2008

Stephen H. Unger-unions, "The Demise of Unions and Why We Need to Revive Them", Ends and Means, September 11, 2013

Jordan Weissmann, "Motorola's New Smartphone: Made in the U.S.A., but Not for Much Pay", The Atlantic, Aug 1 2013

Wikipedia-Open, "Open-source software", Wikipedia

Comments are welcomed and can be sent to me at unger(at)cs(dot)columbia(dot)edu

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