Features

May/June 2011 The Real Enemy of Unions

Why organized labor should join with entrepreneurs to bust the corporate monopolies threatening them both.

By Barry C. Lynn

The question, then, is not whether the Democratic Party—or progressives in general—can survive without organized labor. The question is whether labor can radically change its thinking. More specifically, will organized workers notice that many other groups of American workers and entrepreneurs are also fighting for survival against the same powers that have fingered labor for extinction? And if so, will labor have the savvy to link up with these other groups to form a broad political alliance that can fight back effectively, over the long run?

The first big challenge is intellectual. The idea that labor should attack big business for being big strikes many in the movement as hypocritical, and potentially dangerous. After all, the basic premise of labor law is that workers can earn a license to cartelize some particular labor market. And among labor leaders, the standard response to the mere mention of the word “antitrust” tends to be “big is better for us.”

Indeed, labor leaders for decades have generally assumed it is easier to organize workers after they have been lined up in rows by capitalists using giant corporations. And labor leaders have also tended to assume that bosses who enjoy sufficient market power to charge higher prices for their products will also be willing to share some of this booty with their employees.

Yet it doesn’t take much sifting through America’s political economy to realize that far bigger dangers are posed by labor’s complete failure to account for the effects of the radical changes in the enforcement of anti-monopoly law over the last generation.

For 200 years, Americans used various forms of antimonopoly law—at the local, state, and federal levels—to disperse power, foster productive competition, and protect open markets. Americans used these laws, in essence, to extend the system of checks and balances into the political economy. Then, beginning in the late 1970s, an odd coalition of the consumerist (and Democratic Socialist) left and laissez-faire right—led by such Chicago School stalwarts as Robert Bork—imposed a new “consumer welfare” test for anti-monopoly enforcement.

The goal now was to promote greater “efficiency,” even if this meant outright monopoly. And corporate managers and financiers were quick to oblige, responding with the greatest merger frenzy in American history, a deal-making mania that has crested four times in the years since.

The revolutionary result, a generation later, is that the U.S. economy as a whole is, if anything, more concentrated today than during the age of John D. Rockefeller and J. P. Morgan. Back then, America’s citizens faced private corporate control over heavy industry, transport, and banking. Today, these sectors are often even more consolidated than a century ago. And we also face private dominion over retail (the sale of eyeglasses, for instance, is dominated by the Italian firm Luxottica, which controls such chains as LensCrafters and Pearle Vision); farming (more than 90 percent of all soybeans grown in America contain genes patented by one company, Monsanto); and information (one company, Intel, still makes and sells some 90 percent of all semiconductors used in personal computers). And to complicate matters, unlike a century ago, many of today’s powers are based overseas.

Arguably, this massive consolidation of power is the single biggest political economic story of the last thirty years. It is a story that helps to explain the extreme and growing concentration of wealth and power that is fast remaking our political system. It helps to explain the radical restructuring and relocation of huge amounts of manufacturing activity. Yet organized labor in America has all but willfully ignored this revolution, despite the fact that these changes have directly affected organized workers in innumerable ways.

Take jobs. In recent years, labor has devoted a huge amount of time and money to calling on the federal government and big business to create new jobs. Yet not once did labor question the laws that enable many of these same companies to engage in forms of consolidation that tend to result in fewer jobs in America.

The simple fact is that almost every large merger is followed by significant cuts in staff. The Pfizer takeover of Wyeth in 2009, for instance, resulted in the destruction of 19,000 jobs. Mergers also reduce the impulse for big business to create new jobs. Lack of competition means bosses can increase revenue simply by charging more for less. Giant firms today already boast of record profits, even without running the risk of investing in new lines of business. Mergers can also reduce the ability of smaller businesses to create new jobs. Not only does the fencing in of markets make it harder for up-and-coming entrepreneurs to launch new firms, it can prevent successful entrepreneurs from growing proven firms to scale (see “Who Broke America’s Jobs Machine?,” March/April 2010).

Or take the quality of jobs. Here again the equation is simple: the fewer the number of employers, the easier it is for bosses to exert power down onto workers, even when those workers are organized. As Stephen Ross, an antitrust attorney who has worked at the Justice Department and the Federal Trade Commission, says, “There’s a tipping point when … a more concentrated market is no longer good for workers.” A good example of this was the 2003 “mutual aid” pact in which three California supermarkets agreed to pool profits to fight a looming strike. In the years leading up to this deal, the employers had strengthened their hand through a long series of mergers. At least in this case, Ross says, unionized workers were “better off when they had six or seven big supermarkets than only three.”

Much of this consolidation has occurred right under the nose of labor leaders. The “Big Three” American automakers, for instance, have cut more than half a million jobs since 1980. Some firings were due to the loss of market share, and others to greater automation. Many, however, were due to consolidation, albeit not among the branded automakers whose labels we know so well. Rather, the consolidation took place down within the supply system, among, say, the companies that make dashboards and windshield wipers.

Over the last ten years organized labor has launched attack after attack on “outsourcing,” as the breaking apart of a vertically integrated corporation is often called. Yet during this period, labor appears not to have noticed that, in many instances, as fast as the carmakers spun off internal partsmaking operations, monopolists swooped in to roll up control. Or that, once in control, these new bosses used this more consolidated power to drive down wages and benefits and to speed the process of shifting work offshore.

Barry C. Lynn directs the Markets, Enterprise, and Resiliency Initiative at the New America Foundation.

Comments

  • Lou Siegel on May 13, 2011 10:23 AM:

    Great ideas Barry, but your piece lacks sensitivity about the enormous pressure unions face every day just to survive.

    Look, for example, at the Communications Workers of America active support for the AT&T / Team-Mobile merger, hoping that the anti-union Team-Mobile can be organized as a result.

    It's not that labor leaders don't understand the consequences of concentrated corporate power, it's just that, in the face of extinction, they're compelled to take expedient action.

    So please don't accuse us of failing to connect the dots.

    Make your case persuasively without condescension and you'll find a tremendously receptive audience at all levels of the labor movement.

  • fig8jam on May 17, 2011 4:05 PM:

    Great article Barry.

    Wondering if it will be pulled however, since Susan Chambers the ExecVP of WalMart sits on the Leadership Council of the New America Foundation.


    I think you did a good job of explaining how the monied interests/oligarchs in the country have successfully aligned and split the common laborer into two different camps so that they are opposing themselves to the benefit of big business.

    Reminds, me of the Southern Strategy.

    If we agree that this is about money and power we also know that the unions have an uphill battle convincing white collar they need to align with blue collar workers and that small businesses need to align with labor to ensure an open and competitive market.

    However, Governor Scott Walker and Governor Daniels have done a lot to take off the blinders in their states and show the teachers, nurses, and others just what side their bread is buttered on. This should make the unions job easier in 2012.

    Obama would be an individual who would sign a new low against these major conglomerates usurping the free market.

    Capitalism can't thrive with monopolies.

    Let's hope that 2012 is the beginning of major legislative acts that redesign and align the America market place in favor of labor and small businesses.

  • Robert Searle on May 18, 2011 11:56 AM:


    I think my project maybe of interest in connection with all this.

    http://www.p2pfoundation.net/Transfinancial_Economics

  • Norma Rae on June 12, 2011 1:38 PM:

    The ongoing travesty of this country is that too many people are too stupid to vote their own economic interests. What we need is a law to help union organizers encourage people to vote for unions. One good idea would be to give people a union card and ask them to sign it. Anybody who refuses to sign it, we will know immediately is a scab. We can then bring all kinds of encouragement for the scabs to vote for the union, like "gee, it would be a shame if something should fall on your head while you're working". Or we could visit their homes at night and talk to their children about it. Or we could just beat the crap out of them. Whatever. And if any of those filthy Republicans accuse us of intimadation, we can just say "who, us? we would never do that!" This is the kind of stuff our national unions need to favor.

  • John on June 23, 2011 6:04 PM:

    Many economists believe that a strong economy has a large middle class. In the modern society, that is skilled labor and small to medium business. They are the biggest contributor to a strong economy because of the number of them and because of their disposeable income. Without their spending, the economy suffers. An intelligent economy, indirectly managed by big business leaders and government leaders recognizes the economic sustainability of these two groups and control their own greed to maintain the financial balance of power. Of course, big labor must do the same. With capitalism, business can price themselves out of business and labor can price themselve out of a job.

  • Jessica Zembala on June 23, 2011 8:15 PM:

    John on June 23, 2011 6:04 PM:

    "Many economists believe that a strong economy has a large middle class."

    You know, Joe, you are so right. Your point reminds me of a story. During WWII, Americans built airstrips in the jungles of many aboriginal South Sea islands and brought in wealth beyond imagination of many of the South Sea islanders they encountered. When the war ended, these islanders wondered what went wrong when the Americans went home and the flow of wealth stopped. To address the issue of the missing wealth, they built airstrips of their own, and just waited for the planes to land. When they didn't land, they even constructed mockups of airplanes out of bamboo and palm fronds, kind of to attract airplanes. Your economic theories, would be much admired by these South Sea islanders.